We may grant incentive stock options, non-qualified stock options, SSARs, restricted shares, restricted stock units, and performance shares under our shareholder-approved 2020 Stock Incentive Plan (the 2020 Plan) for up to 2.25 million common shares, plus 868,864 common shares, the number of shares that were remaining for grant under the 2016 Stock Incentive Plan (the 2016 Plan) as of the effective date of the 2020 Plan, plus the number of shares remaining for grant under the 2016 Plan that are forfeited, settled in cash, canceled or expired. The maximum aggregate number of restricted shares or restricted stock units that may be granted under the 2020 Plan is 3.1 million.

We may distribute authorized but unissued shares or treasury shares to satisfy share option and SSAR exercises or grants of restricted shares, restricted stock units or performance shares.

For SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant. The maximum term of SSARs is seven years from the date of grant. The Compensation Committee of the Board of Directors establishes the period over which SSARs subject to a service condition vest and the vesting criteria for SSARs subject to a market condition.

Restricted shares and restricted stock units, whether time-vested or performance-based, may be issued at no cost or at a purchase price that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer. Performance-based grants may be conditioned upon the attainment of specified performance objectives and other conditions, restrictions, and

contingencies. Restricted shares have the right to receive dividends, if any, upon vesting, subject to the same forfeiture provisions that apply to the underlying grants.

We record compensation expense related to SSARs, restricted shares, restricted stock units, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted stock unit and restricted share grants subject only to a service condition is based on the closing price of our common shares on the grant date. For stock option and SSAR grants subject only to a service condition, we estimate the fair value on the grant date using the Black-Scholes-Merton option pricing model with inputs including the closing market price at grant date, exercise price and assumptions regarding the risk-free interest rate, expected volatility of our common shares based on historical volatility, and expected term as estimated using the simplified method. We used the simplified method for SSAR grants during the year ended March 31, 2021 because we believed historical exercise data did not provide a reasonable basis upon which to estimate the expected term. For restricted stock unit, restricted share, and SSAR grants subject to a market condition, we estimate the fair value on the grant date through a lattice option pricing model that utilizes a Monte Carlo analysis with inputs including the closing market price at grant date, share price threshold, performance period term and assumptions regarding the risk-free interest rate and expected volatility of our common shares based on historical volatility. Inputs for SSAR grants subject to a market condition also include exercise price, remaining contractual term, and suboptimal exercise factor.

We record compensation expense for restricted stock units, restricted shares, and SSAR grants subject to a service condition using the graded vesting method. We record compensation expense for SSAR grants subject only to a market condition over the derived service period, which is an output of the lattice option pricing model. Under the 2020 Plan, the fair value of performance shares is based on the closing price of our common shares on the settlement date of the performance award, for which we record compensation expense over the service period consistent with our annual bonus incentive plan as approved by the Compensation Committee of the Board of Directors.

The following table summarizes the share-based compensation expense for SSARs, restricted and performance grants included in the Consolidated Statements of Operations for fiscal 2023, 2022 and 2021:


	Year Ended March 31,
(In thousands)	2023		2022		2021
Product development		7,987		8,186		21,634
Sales and marketing		1,044		1,355		4,254
General and administrative		3,927		5,008		14,206
Total share-based compensation expense		12,958		14,549		40,093

SSARs are rights granted to an employee to receive value equal to the difference between the price of our common shares on the date of exercise and the exercise price. The value is settled in common shares of Agilysys, Inc.

We use a Black-Scholes-Merton option pricing model to estimate the fair value of service condition SSARs. There were no service condition SSARs granted in fiscal 2023 or 2022. The following table summarizes the principal assumptions utilized in valuing service condition SSARs granted in fiscal 2021:


	2021
Risk-free interest rate		0.31	%
Expected life (in years)	4
Expected volatility		42.99	%
Weighted-average grant date fair value	$	22.57

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury bond whose maturity period approximates the expected life of the SSARs. The expected life is estimated using historical data representing the period of time the awards are expected to be outstanding. The estimated fair value of the SSARs granted is recognized over the vesting period of the awards utilizing the graded vesting method. Under this method, the compensation cost related to unvested amounts begins to be recognized as of the grant date.

We use a lattice option pricing model to estimate the fair value of market condition SSARs. There were no market condition SSARs granted in fiscal 2023 or 2022. The following table summarizes the principal valuation assumptions utilized and the resulting fair value of market condition SSARs granted in fiscal 2021:


	2021
Risk-free interest rate over contractual term		0.60	%
Expected volatility		40.00	%
Suboptimal exercise factor	2.50x
Weighted-average grant date fair value	$	19.55

The following table summarizes the activity during fiscal 2023 for SSARs awarded under the 2020 and 2016 Plans:


(In thousands, except share and per share data)	Number of Rights			Weighted- Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
				(per right)		(in years)
Outstanding at April 1, 2022		2,172,939		$	24.02
Granted		—			—
Exercised		(573,016	)		18.70
Forfeited		(27,463	)		20.02
Cancelled/expired		—			—
Outstanding at March 31, 2023		1,572,460		$	26.04		3.2	$	88,804
Exercisable at March 31, 2023		1,572,460		$	26.04		3.2	$	88,804
Vested and expected to vest at March 31, 2023		1,572,460		$	26.04		3.2	$	88,804

The following table presents additional information related to SSARs activity during fiscal 2023, 2022 and 2021:


(In thousands)	2023		2022		2021
Compensation expense	$	3,188	$	10,030	$	35,808
Total intrinsic value of SSARs exercised	$	28,025	$	34,437	$	25,153
Total fair value of SSARs vesting	$	13,037	$	6,439	$	31,380

As of March 31, 2023, there was no unrecognized share-based compensation expense related to SSARs.

A total of 403,079 shares, net of 127,747 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the twelve months ended March 31, 2023. The shares withheld were returned to treasury shares.

We granted restricted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. Certain restricted shares are also subject to a market condition. The following table summarizes the activity during the twelve months ended March 31, 2023 for restricted shares awarded under the 2020 and 2016 Plans:


	Number of Shares			Weighted- Average Grant- Date Fair Value
				(per share)
Outstanding at April 1, 2022		147,973		$	43.56
Granted		342,761			48.77
Vested		(71,751	)		45.73
Forfeited		(11,659	)		45.35
Outstanding at March 31, 2023		407,324		$	47.53

The weighted-average grant date fair value of the restricted shares includes grants subject only to a service condition and certain grants subject to both a service condition and a market condition. As of March 31, 2023, a total of 407,324 shares were issued from treasury.

The following table presents additional information related to restricted share activity during fiscal years 2023, 2022, and 2021:


(In thousands)	2023		2022		2021
Compensation expense	$	9,274	$	4,339	$	4,105
Total fair value of restricted share vesting	$	2,952	$	3,297	$	7,554

As of March 31, 2023, total unrecognized share-based compensation expense related to non-vested restricted shares was $11.2 million, which is expected to be recognized over a weighted-average vesting period of 1.3 years. We do not include restricted shares in the calculation of earnings per share until the shares are vested.

We granted restricted stock units to our Chief Executive Officer, the vesting of which is service-based. Certain restricted stock units are also subject to a market condition. The following table summarizes the activity during the twelve months ended March 31, 2023 for restricted stock units awarded under the 2020 Plan:


	Number of Shares		Weighted- Average Grant- Date Fair Value
			(per share)
Outstanding at April 1, 2022		—	$	—
Granted		67,856		71.62
Vested		—		—
Forfeited		—		—
Outstanding at March 31, 2023		67,856	$	71.62

We use a lattice option pricing model to estimate the fair value of restricted stock units subject to a market condition. There were no restricted stock units subject to a market condition granted in fiscal 2022 or 2021. The following table summarizes the principal valuation assumptions utilized and the resulting fair value of restricted stock units subject to a market condition granted in fiscal 2023:

As of March 31, 2023, total unrecognized share-based compensation expense related to non-vested restricted stock units was $4.7 million, which is expected to be recognized over the weighted-average vesting period of 2.4 years.

Upon approval of the Compensation Committee of our Board of Directors, after achieving the performance conditions associated with our annual bonus plan, we grant common shares to our Chief Executive Officer that vest immediately. Once attainment of the performance conditions becomes probable, we recognize compensation expense related to performance shares ratably over the performance period. The number of performance shares granted will be based on the closing price of our common shares on the grant date and settlement date, which are the same under the 2020 plan.

Based on the performance conditions achieved as they relate to our annual bonus plan, management estimates a liability of $0.4 million as of March 31, 2023, to be settled through the granting and vesting of performance shares after March 31, 2023. We recognized compensation expense related to performance shares of $0.4 million in the fiscal year ending March 31, 2023 and $0.2 million in each of the fiscal years ending March 31, 2022 and 2021, respectively.