UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of registrant as specified in its charter)
|
|
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
|
(Address of principal executive offices) |
|
(ZIP Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
|
|
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
|
|
☒ |
|
|
|
|
|
Non-accelerated filer |
☐ |
|
Smaller reporting company |
|
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed be sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
The number of Common Shares of the registrant outstanding as of January 22, 2021 was
AGILYSYS, INC.
Index
|
|
|
|
|
|||
|
Item 1 |
3 |
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets – December 31, 2020 (Unaudited) and March 31, 2020 |
3 |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited) |
8 |
|
|
|
|
|
Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
|
|
|
|
|
Item 3 |
28 |
|
|
|
|
|
|
Item 4 |
28 |
|
|
|
|
|
|
|||
|
|
|
|
|
Item 1 |
29 |
|
|
|
|
|
|
Item 1A |
29 |
|
|
|
|
|
|
Item 2 |
29 |
|
|
|
|
|
|
Item 3 |
29 |
|
|
|
|
|
|
Item 4 |
29 |
|
|
|
|
|
|
Item 5 |
29 |
|
|
|
|
|
|
Item 6 |
30 |
|
|
|
|
|
|
|
31 |
2
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) |
|
December 31, 2020 Unaudited |
|
|
March 31, 2020 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
Accounts receivable, net of allowance for expected credit losses of $ |
|
|
|
|
|
|
|
|
Contract assets |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
Deferred income taxes, non-current |
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
Contract liabilities |
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
|
Operating lease liabilities, current |
|
|
|
|
|
|
|
|
Finance lease obligations, current |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes, non-current |
|
|
|
|
|
|
|
|
Operating lease liabilities, non-current |
|
|
|
|
|
|
|
|
Finance lease obligations, non-current |
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
|
Commitments and contingencies (see Note 8) |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, par value |
|
|
|
|
|
|
— |
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
Common shares, without par value, at $ shares authorized; and and March 31, 2020, respectively |
|
|
|
|
|
|
|
|
Treasury shares, and March 31, 2020, respectively |
|
|
( |
) |
|
|
( |
) |
Capital in excess of stated value |
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
Total shareholders' equity |
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
3
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
Nine Months Ended December 31, |
|
||||||||||
(In thousands, except share data) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Support, maintenance and subscription services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products (inclusive of developed technology amortization) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Support, maintenance and subscription services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal settlements, net |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
( |
) |
Total operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income), net |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Series A convertible preferred stock issuance costs |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
Series A convertible preferred stock dividends |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
Net (loss) income attributable to common shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share - basic: |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share - diluted: |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
See accompanying notes to unaudited condensed consolidated financial statements.
4
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
Three Months Ended December 31, |
|
|
Nine Months Ended December 31, |
|
||||||||||
(In thousands) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation adjustments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Total comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
See accompanying notes to unaudited condensed consolidated financial statements.
5
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine Months Ended December 31, |
|
|||||
(In thousands) |
|
2020 |
|
|
2019 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
|
$ |
( |
) |
Adjustments to reconcile income (loss) from operations to net cash provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
|
|
|
|
|
|
|
Amortization of developed technology |
|
|
— |
|
|
|
|
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Additional investments in corporate-owned life insurance policies |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
|
|
Repurchase of common shares to satisfy employee tax withholding |
|
|
( |
) |
|
|
( |
) |
Series A convertible preferred stock issuance proceeds, net of issuance costs |
|
|
|
|
|
|
— |
|
Payment of preferred stock dividends |
|
|
( |
) |
|
|
— |
|
Principal payments under long-term obligations |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
( |
) |
Effect of exchange rate changes on cash |
|
|
|
|
|
|
( |
) |
Net increase in cash and cash equivalents |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
6
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
|
|
Three Months Ended December 31, 2020 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
Capital in |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
excess of |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||||||
(In thousands) |
|
Shares |
|
|
Stated value |
|
|
Shares |
|
|
Stated value |
|
|
stated value |
|
|
Retained earnings |
|
|
comprehensive income (loss) |
|
|
Total |
|
||||||||
Balance at September 30, 2020 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Restricted shares issued, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Series A convertible preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2019 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
Capital in |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
excess of |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||||||
(In thousands) |
|
Shares |
|
|
Stated value |
|
|
Shares |
|
|
Stated value |
|
|
stated value |
|
|
Retained earnings |
|
|
comprehensive income (loss) |
|
|
Total |
|
||||||||
Balance at September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Restricted shares issued, net |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended December 31, 2020 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
Capital in |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
excess of |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||||||
(In thousands) |
|
Shares |
|
|
Stated value |
|
|
Shares |
|
|
Stated value |
|
|
stated value |
|
|
Retained earnings |
|
|
comprehensive income (loss) |
|
|
Total |
|
||||||||
Balance at March 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Restricted shares issued, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Series A convertible preferred stock issuance costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Series A convertible preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended December 31, 2019 |
|
|||||||||||||||||||||||||||||
|
|
Common Shares |
|
|
Capital in |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||||||||||
|
|
Issued |
|
|
In Treasury |
|
|
excess of |
|
|
|
|
|
|
other |
|
|
|
|
|
||||||||||||
(In thousands) |
|
Shares |
|
|
Stated value |
|
|
Shares |
|
|
Stated value |
|
|
stated value |
|
|
Retained earnings |
|
|
comprehensive income (loss) |
|
|
Total |
|
||||||||
Balance at March 31, 2019 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Restricted shares issued, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued upon exercise of SSARs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares withheld for taxes upon exercise of stock options, SSARs or vesting of restricted shares |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
7
AGILYSYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Table amounts in thousands, except per share data)
1. Nature of Operations and Financial Statement Presentation
Nature of Operations
Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, stadia, airport foodservice and healthcare. Agilysys offers the most comprehensive solutions in the industry, including point of sale (POS), property management systems (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey.
The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across the Americas, Europe, the Middle East, Africa, Asia-Pacific, and India with headquarters located in Alpharetta, GA.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all geographic regions in which we do business, and government authorities around the world have implemented extensive measures attempting to contain the spread and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, closures of non-essential businesses, and social distancing requirements. The global spread of COVID-19 and the actions taken in response have negatively impacted us, our customers, our suppliers and the many communities in which we do business. The overall extent and duration of economic and business disruption is not currently known. In response to these challenges, we quickly adjusted our business policies and practices for employees to work from home and have taken other measures to continue our operations with safety as our top priority.
We continuously monitor and assess the impact of the COVID-19 pandemic, including recommendations and orders from government and public health authorities. We are working to help our customers maintain their operations during this difficult time while managing our teams to be prepared for continuously changing demand for our products and services.
See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Recent Developments” of this report for a more detailed discussion of the impact of COVID-19 on our business.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2021 refers to the fiscal year ending March 31, 2021.
Our unaudited interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to the Quarterly Report on Form 10-Q (Quarterly Report) under the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10-01 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures normally included in the annual 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 December 31, 2020, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity for the three months and nine months ended December 31, 2020 and 2019, and Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2020 and 2019, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements, except for the recently adopted accounting pronouncements described below. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made.
These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2020, filed with the Securities and Exchange Commission (SEC) on May 22, 2020.
8
Use of estimates
Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.
Considering the currently unknown extent and duration of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply to certain of our significant accounting policies. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts COVID-19 as of December 31, 2020 and through the date of this report. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
2. Summary of Significant Accounting Policies
A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2020, included in our Annual Report on Form 10-K. We describe our accounting policy for Series A convertible preferred stock further below. There have been no other material changes to our significant accounting policies from those disclosed therein.
Adopted and Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently assessing the impact of adopting this standard on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, Income Taxes, and is meant to simplify and reduce the cost of accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently reviewing this standard but do not expect it will have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. We adopted ASU 2018-15 as of April 1, 2020 with no impact on our condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. We adopted ASU 2018-13 as of April 1, 2020 with no impact on our condensed consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We adopted ASU 2017-04 as of April 1, 2020 with no impact on our condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. This new standard requires entities to measure expected credit losses for certain financial assets held at the
9
reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets. We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements.
3. Revenue Recognition
Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each purchase order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund.
Typically, our customer contracts contain one or more of the following goods or services which constitute performance obligations.
Our software licenses typically provide for a perpetual right to use our software. Generally, our contracts do not provide significant services of integration, and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that the software license is distinct as the customer can benefit from the software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer.
Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer's final acceptance of the arrangement have been fulfilled. Hardware is purchased from suppliers and provided to the end-user customers via drop-ship or from inventory. We are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and we bear the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.
Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. These services represent a stand-ready obligation that is concurrently delivered and has the same pattern of transfer to the customer; we account for these support and maintenance services as a single performance obligation recognized over the term of the maintenance agreement.
Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.
Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer's ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation.
10
We use the market approach to drive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.
Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.
Disaggregation of Revenue
We derive and report our revenue from the sale of products (software licenses, third party hardware and operating systems), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled $
Contract Balances
Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to professional services. We expect billing and collection of our contract assets to occur within the next twelve months. We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract.
Revenue recognized from amounts included in contract liabilities at the beginning of the period was $
Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of December 31, 2020 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less.
Assets Recognized from Costs to Obtain a Contract
Sales commission expenses that would not have occurred absent the customer contracts are considered incremental costs to obtain a contract. We have elected to take the practical expedient available to expense the incremental costs to obtain a contract as incurred when the expected benefit and amortization period is one year or less. For subscription contracts that are renewed monthly based on an agreement term, we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. Other sales commission expenses have a period of benefit of one year or less and are therefore expensed as incurred in line with the practical expedient elected.
We had $
11
4. Intangible Assets and Software Development Costs
The following table summarizes our intangible assets and software development costs:
|
|
December 31 and March 31, 2020 |
|
|||||||||||||
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Net |
|
||
|
|
carrying |
|
|
Accumulated |
|
|
Accumulated |
|
|
carrying |
|
||||
(In thousands) |
|
amount |
|
|
amortization |
|
|
Impairment |
|
|
amount |
|
||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Non-competition agreements |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Developed technology |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Trade names |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Patented technology |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Trade names |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software development costs |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
As of March 31, 2020, management determined the net realizable value of the remaining capitalized software development costs for certain solutions within our rGuest suite of products no longer exceeded their carrying value, and as a result, recorded non-cash impairment charges of $
Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed was $
5. Additional Balance Sheet Information
Additional information related to the condensed consolidated balance sheets is as follows:
(In thousands) |
|
December 31, 2020 |
|
|
March 31, 2020 |
|
||
Accrued liabilities: |
|
|
|
|
|
|
|
|
Salaries, wages, and related benefits |
|
$ |
|
|
|
$ |
|
|
Payroll taxes deferred under CARES Act |
|
|
|
|
|
|
— |
|
Other taxes payable |
|
|
|
|
|
|
|
|
Accrued legal settlements |
|
|
|
|
|
|
— |
|
Severance liabilities |
|
|
|
|
|
|
|
|
Professional fees |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Other non-current liabilities: |
|
|
|
|
|
|
|
|
Uncertain tax positions |
|
$ |
|
|
|
$ |
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
Payroll taxes deferred under CARES Act |
|
|
|
|
|
|
— |
|
Employee benefit obligations |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
12
6. Supplemental Disclosures of Cash Flow Information
Additional information related to the condensed consolidated statements of cash flows is as follows:
|
|
Nine Months Ended December 31, |
|
|||||
(In thousands) |
|
|
2020 |
|
|
|
2019 |
|
Cash (receipts) for interest, net |
|
$ |
( |
) |
|
$ |
( |
) |
Cash payments for income taxes, net |
|
|
|
|
|
|
|
|
Cash payments for operating leases |
|
|
|
|
|
|
|
|
Cash payments for finance leases |
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
|
|
|
|
|
|
|
7. Income Taxes
The following table compares our income tax expense and effective tax rates for the three and nine months ended December 31, 2020 and 2019:
|
|
Three Months Ended December 31, |
|
|
Nine Months Ended December 31, |
|
||||||||||
(Dollars in thousands) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Income tax expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Effective tax rate |
|
|
( |
)% |
|
|
( |
)% |
|
|
|
% |
|
|
( |
)% |
For the three months ended December 31, 2020, the effective tax rate was different than the statutory tax rate due primarily to the recognition of net operating losses that were offset by increased valuation allowance in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the nine months ended December 31, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreased valuation allowance in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the three and nine months ended December 31, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses in the U.S. and certain foreign jurisdictions that were offset by increased valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.
Because of our losses in prior periods, we have recorded and maintain a valuation allowance offsetting substantially all of our deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes that it is more likely than not that we will not realize the benefits of these deductible differences. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
8. Commitments and Contingencies
Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. We provide 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 our 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 individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
On April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court of Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g. restaurant menus) for display on electronic devices and synchronizing the menu content between the devices. The case against us was consolidated with similar cases brought by Ameranth against more than 30 other defendants. All but one of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. In September 2018, the District Court found the one surviving Ameranth patent invalid and granted summary judgment in favor of the movant co-defendants. In November 2019, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court’s summary judgement with respect to all claims except for two, which were not asserted against Agilysys. Ameranth’s writ of certiorari to the United States Supreme Court was denied in October
13
2020. Subsequently, Ameranth filed further pleading amendments and discovery requests with the District Court, which were opposed by the defendants.
We were not a party to the appeal, and it is currently unclear what impact the summary judgement ruling may have on our case. Ameranth seeks monetary damages, injunctive relief, costs and attorneys' fees from us. At this time, we are not able to predict the outcome of this lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.
9. Income (Loss) per Share
The following data shows the amounts used in computing income (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.
|
Three Months Ended December 31, |
|
|
Nine Months Ended December 31, |
|
||||||||||
(In thousands, except per share data) |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Series A convertible preferred stock issuance costs |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Series A convertible preferred stock dividends |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net income (loss) attributable to common shareholders |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive SSARs |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Dilutive unvested restricted shares |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share - basic: |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Income (loss) per share - diluted: |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive stock options, SSARs, restricted shares, performance shares and preferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share is computed as net income (loss) attributable to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes
Diluted income (loss) per share includes the effect of all potentially dilutive securities on earnings per share. We have stock-settled appreciation rights ("SSARs"), unvested restricted shares, and preferred shares that are potentially dilutive securities. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation grants because doing so would be anti-dilutive.
10. Share-based Compensation
We may grant incentive stock options, non-qualified stock options, SSARs, restricted shares, and performance shares under our shareholder-approved 2020 Equity Incentive Plan ("2020 Plan") for up to
We may distribute authorized but unissued shares or treasury shares to satisfy share option and SSAR exercises or restricted share and performance share grants.
The fair value of restricted share and performance share grants is based on the closing price of our common shares on the grant date. For stock option and SSAR grants subject 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
14
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 record compensation expense for restricted shares and SSAR grants subject to a service condition utilizing the graded vesting method. For 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, exercise price, share price threshold, remaining contractual term and assumptions regarding the risk-free interest rate, suboptimal exercise factor, and expected volatility of our common shares based on historical volatility. We record compensation expense for SSAR grants subject to a market condition over the derived service period, which is an output of the lattice option pricing model.
The grant date is defined as the date all necessary approvals are obtained. All grants during the nine months ended December 31, 2020 were made under the 2020 Plan, which was approved by our shareholders on November 19, 2020. The Compensation Committee of our Board of Directors approved substantially all grants under the 2020 Plan for the nine months ended December 31, 2020 on June 2, 2020. The closing market price of our common stock was $
The following table summarizes the share-based compensation expense for SSARs, restricted and performance grants included in the condensed consolidated statements of operations:
|
|
Three Months Ended December 31, |
|
|
Nine Months Ended December 31, |
|
||||||||||
(In thousands) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Product development |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Stock-Settled Appreciation Rights
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.
The following table summarizes the activity during the nine months ended December 31, 2020 for SSARs awarded under the 2020 and 2016 Plans:
|
|
Number of Rights |
|
|
Weighted-Average Exercise Price |
|
|
Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
|
|
|
|
|
|
(per right) |
|
|
(in years) |
|
|
|
|
|
||
Outstanding at April 1, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Exercisable at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Vested and expected to vest at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
As of December 31, 2020, total unrecognized share-based compensation expense related to unvested service condition SSARs was $
As of December 31, 2020, total unrecognized share-based compensation expense related to unvested market condition SSARs was $
15
Restricted Shares
We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based.
|
|
Number of Shares |
|
|
Weighted-Average Grant-Date Fair Value |
|
||
|
|
|
|
|
|
(per share) |
|
|
Outstanding at April 1, 2020 |
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at December 31, 2020 |
|
|
|
|
|
$ |
|
|
The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. As of December 31, 2020, total unrecognized share-based compensation expense related to unvested restricted stock was $
Performance Shares
We awarded certain restricted shares to our Chief Executive Officer, the vesting of which is performance based. The number of shares that vested were based on relative attainment of a performance metric and any unvested shares were forfeited upon settlement of the bonus.
The following table summarizes the activity during the nine months ended December 31, 2020 for the performance shares awarded under the 2016 Plan:
|
|
Number of Shares |
|
|
Outstanding at April 1, 2020 |
|
|
|
|
Granted |
|
|
— |
|
Vested |
|
|
( |
) |
Forfeited |
|
|
( |
) |
Outstanding at December 31, 2020 |
|
|
— |
|
11. Preferred Stock
Series A Convertible Preferred Stock
On May 22, 2020, we completed the sale of
Accounting Policy
We classify convertible preferred stock as temporary equity in the condensed consolidated balance sheets due to certain contingent redemption clauses that are at the election of the Holders. We increase the carrying value of the convertible preferred stock to its redemption value (described below) for all undeclared dividends using the interest method.
The Convertible Preferred Stock has the following rights, preferences and restrictions (the Certificate of Amendment included as Exhibit 3.1 to our Current Report on Form 8-K, filed on May 26, 2020, defines all terms not otherwise defined below):
16
Voting
Liquidation Preference
Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price paid by the Purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.
Redemption
On and after the fifth anniversary of the date the Convertible Preferred Stock is initially issued, the Company will have the right, and the Holders will have the right to require the Company, in each case, at the initiating party’s election, to redeem all, but not less than all, of the then-outstanding Convertible Preferred Stock for an amount equal to the Liquidation Preference.
Conversion
Each Holder will have the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of common stock at a conversion price equal to $
Subject to certain conditions, the Company may, at its option, require conversion of all of the outstanding shares of Convertible Preferred Stock to common stock if, at any time after
Dividends
The Convertible Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the Liquidation Preference and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.
Change in Control Events
Standstill Restrictions
The Purchaser and its affiliates are subject to certain customary standstill provisions that restrict them from, among other actions, acquiring additional securities of the Company if such acquisition would result in the Purchaser beneficially owning in excess of
17
Stock is initially issued and the date on which the Purchaser no longer has record or beneficial ownership of common stock and Convertible Preferred Stock that constitute at least
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
In “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), management explains the general financial condition and results of operations for Agilysys and subsidiaries including:
— what factors affect our business;
— what our earnings and costs were;
— why those earnings and costs were different from the year before;
— where the earnings came from;
— how our financial condition was affected; and
— where the cash will come from to fund future operations.
The MD&A analyzes changes in specific line items in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows and provides information that management believes is important to assessing and understanding our consolidated financial condition and results of operations. This Quarterly Report on Form 10-Q updates information included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the Securities and Exchange Commission (SEC). This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes that appear in Item 1 of this Quarterly Report as well as our Annual Report for the year ended March 31, 2020. Information provided in the MD&A may include forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to be materially different from those contained in the forward-looking statements. See “Forward-Looking Information” on page 29 of this Quarterly Report, Item 1A "Risk Factors" in Part II of this Quarterly Report, and Item 1A “Risk Factors” in Part I of our Annual Report for the fiscal year ended March 31, 2020 for additional information concerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in Agilysys.
Overview
Recent Developments
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all geographic regions in which we do business, and government authorities around the world have implemented extensive measures attempting to contain the spread and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, closures of non-essential businesses, and social distancing requirements. The global spread of COVID-19 and the actions taken in response have negatively impacted us, our customers, our suppliers and the many communities in which we do business. The overall extent and duration of economic and business disruption is not currently known. In response to these challenges, we quickly adjusted our business policies and practices for employees to work from home and have taken other measures to continue our operations with safety as our top priority.
We continuously monitor and assess the impact of the COVID-19 pandemic, including recommendations and orders from government and public health authorities. We are working to help our customers maintain their operations during this difficult time while managing our teams to be prepared for continuously changing demand for our products and services.
During the first nine months of our fiscal 2021, revenue was negatively impacted by delays and reduced spending attributed to the impact of the COVID-19 pandemic on our customers’ operational priorities and as a result of various one-time recurring revenue related and other concessions we have given to customers to help them during this time of need. Due to the pandemic, we have seen a reduction or delay in customer contracts, and we have seen a significant reduction in face-to-face meetings with existing or prospective customers, in-person demonstrations of our solutions, and have been unable to host or attend in-person trade shows and conferences. Limitations on access to the facilities of our customers have also impacted our ability to deliver some of our products, complete certain implementations, and provide in-person consulting and training services, negatively impacting our ability to recognize revenue. We continued to experience high recurring revenue renewal rates during the first nine months of the fiscal year. We also have an expanded product base that includes new products which allow for contactless capabilities and other features which help promote social distancing and guest safety. Despite our strong first nine months of recurring renewal rates and new solution offerings, we cannot predict how the pandemic will impact our results in the short-term future, including to the extent that customers delay or miss payments, customers defer, reduce, or refrain from placing orders or renewing subscriptions or maintenance arrangements, or travel restrictions and site access restrictions remain necessary. We likewise cannot predict our results in the long-term future as our customers adapt to the lingering and perhaps more permanent impact of the pandemic on the hospitality industry.
19
We continue to conduct business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and mostly remote sales, implementation, and support activities, among other modifications. These modifications may continue to delay or reduce sales and harm productivity and collaboration. In addition, during the first nine months of our fiscal 2021, we reduced discretionary costs, implemented a hiring freeze on non-essential positions and reduced payroll and related costs through layoffs, employee furloughs, employee retirement benefit limitations, and temporary salary decreases for executive team members and certain other employees of the Company. Such actions may have an adverse impact on us, particularly those actions that remain in place for an extended period as we continue to manage through the uncertainties around the timing and extent of the pandemic’s impact.
We may take further actions or retract previous actions that alter our business operations as the situation continues to evolve. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. We deferred $1.8 million in employer payroll tax payments under the CARES Act as of December 31, 2020. The CARES Act did not have a material impact on our consolidated results of operations as of and for the nine months ended December 31, 2020.
MAK Capital Investment
In May 2020, we entered into an agreement to sell to MAK Capital One, LLC (“MAK Capital”) $35 million of convertible preferred stock carrying a 5.25% dividend that will be convertible into shares of the Company’s common stock. The transaction resulted in the issuance of 1,735,457 preferred shares which added $35 million in preferred stock to the Company’s balance sheet and increased our cash balance by the $35 million investment less closing costs of $1.0 million. The 5.25% dividends will accumulate and increase the liquidation preference of the preferred stock for any undeclared amounts.
Our Business
Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative cloud-native subscription and on-premise guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, stadia, airport foodservice and healthcare. Agilysys offers the most comprehensive solutions in the industry, including point of sale (POS), property management systems (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey. Agilysys is known for its leadership in hospitality, its broad product offerings and its customer-centric service. Some of the largest hospitality companies around the world use Agilysys solutions to help improve guest loyalty, drive revenue growth, increase operational efficiencies and support social distancing. The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across the Americas, Europe, the Middle East, Africa, Asia-Pacific, and India with headquarters located in Alpharetta, Georgia.
We strive to increase shareholder value by improving operating and financial performance and profitably growing the business through superior products and services. To that end, we expect to invest a certain portion of our cash on hand to fund enhancements to existing software products, to develop and market new software products, and to expand our customer breadth, both vertically and geographically.
Our strategic plan specifically focuses on:
|
• |
Putting the customer first with world class support and services |
|
• |
Accelerating our product development |
|
• |
Improving organizational efficiency and teamwork |
|
• |
Developing our employees and leaders |
|
• |
Growing revenue by improving the breadth and depth of our product set |
|
• |
Growing revenue through international expansion |
The primary objective of our ongoing strategic planning process is to create shareholder value by capitalizing on growth opportunities, turning profitable and strengthening our competitive position within the specific technology solutions and end markets we serve. Profitability and industry leading growth will be achieved through tighter management of operating expenses and sharpening the focus of our investments to concentrate on growth opportunities that offer the highest returns.
20
Revenue - Defined
As required by the SEC, we separately present revenue earned as products revenue, support, maintenance and subscription services revenue or professional services revenue in our condensed consolidated statements of operations. In addition to the SEC requirements, we may, at times, also refer to revenue as defined below. The terminology, definitions, and applications of terms we use to describe our revenue may be different from those used by other companies and caution should be used when comparing these financial measures to those of other companies. We use the following terms to describe revenue:
|
• |
Revenue - We present revenue net of sales returns and allowances. |
|
• |
Products revenue – Revenue earned from the sales of software licenses, third party hardware and operating systems. |
|
• |
Support, maintenance and subscription services revenue – Revenue earned from the sale of proprietary and remarketed ongoing support, maintenance and subscription services. |
|
• |
Professional services revenue – Revenue earned from the delivery of implementation, integration and installation services for proprietary and remarketed products. |
Results of Operations
Third Fiscal Quarter 2021 Compared to Third Fiscal Quarter 2020
Net Revenue and Operating (Loss)
The following table presents our consolidated revenue and operating results for the three months ended December 31, 2020 and 2019:
|
|
Three months ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, |
|
|
Increase (decrease) |
|
||||||||||
(In thousands) |
|
2020 |
|
|
2019 |
|
|
$ |
|
|
% |
|
||||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
7,599 |
|
|
$ |
12,126 |
|
|
$ |
(4,527 |
) |
|
|
(37.3 |
)% |
Support, maintenance and subscription services |
|
|
22,846 |
|
|
|
20,965 |
|
|
|
1,881 |
|
|
|
9.0 |
|
Professional services |
|
|
6,230 |
|
|
|
8,896 |
|
|
|
(2,666 |
) |
|
|
(30.0 |
) |
Total net revenue |
|
|
36,675 |
|
|
|
41,987 |
|
|
|
(5,312 |
) |
|
|
(12.7 |
) |
Cost of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products (inclusive of developed technology amortization) |
|
|
3,660 |
|
|
|
9,639 |
|
|
|
(5,979 |
) |
|
|
(62.0 |
) |
Support, maintenance and subscription services |
|
|
4,655 |
|
|
|
4,841 |
|
|
|
(186 |
) |
|
|
(3.8 |
) |
Professional services |
|
|
4,164 |
|
|
|
6,443 |
|
|
|
(2,279 |
) |
|
|
(35.4 |
) |
Total cost of goods sold |
|
|
12,479 |
|
|
|
20,923 |
|
|
|
(8,444 |
) |
|
|
(40.4 |
) |
Gross profit |
|
$ |
24,196 |
|
|
$ |
21,064 |
|
|
$ |
3,132 |
|
|
|
14.9 |
% |
Gross profit margin |
|
|
66.0 |
% |
|
|
50.2 |
% |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development |
|
$ |
12,376 |
|
|
$ |
11,285 |
|
|
$ |
1,091 |
|
|
|
9.7 |
% |
Sales and marketing |
|
|
3,327 |
|
|
|
4,918 |
|
|
|
(1,591 |
) |
|
|
(32.4 |
) |
General and administrative |
|
|
7,509 |
|
|
|
6,084 |
|
|
|
1,425 |
|
|
|
23.4 |
|
Depreciation of fixed assets |
|
|
722 |
|
|
|
854 |
|
|
|
(132 |
) |
|
|
(15.5 |
) |
Amortization of intangibles |
|
|
521 |
|
|
|
608 |
|
|
|
(87 |
) |
|
|
(14.3 |
) |
Severance and other charges |
|
|
1,552 |
|
|
|
11 |
|
|
|
1,541 |
|
|
nm |
|
|
Operating loss |
|
$ |
(1,811 |
) |
|
$ |
(2,696 |
) |
|
$ |
885 |
|
|
|
32.8 |
% |
Operating (loss) percentage |
|
|
(4.9 |
)% |
|
|
(6.4 |
)% |
|
|
|
|
|
|
|
|
nm - not meaningful
21
The following table presents the percentage relationship of our condensed consolidated statement of operations line items to our consolidated net revenues for the periods presented:
|
|
Three months ended |
|
|||||
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2019 |
|
||
Net revenue: |
|
|
|
|
|
|
|
|
Products |
|
|
20.7 |
% |
|
|
28.9 |
% |
Support, maintenance and subscription services |
|
|
62.3 |
|
|
|
49.9 |
|
Professional services |
|
|
17.0 |
|
|
|
21.2 |
|
Total net revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold: |
|
|
|
|
|
|
|
|
Products (inclusive of developed technology amortization) |
|
|
10.0 |
% |
|
|
23.0 |
% |
Support, maintenance and subscription services |
|
|
12.7 |
|
|
|
11.5 |
|
Professional services |
|
|
11.3 |
|
|
|
15.3 |
|
Total cost of goods sold |
|
|
34.0 |
% |
|
|
49.8 |
% |
Gross profit |
|
|
66.0 |
% |
|
|
50.2 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
Product development |
|
|
33.7 |
% |
|
|
26.9 |
% |
Sales and marketing |
|
|
9.1 |
|
|
|
11.7 |
|
General and administrative |
|
|
20.5 |
|
|
|
14.5 |
|
Depreciation of fixed assets |
|
|
2.0 |
|
|
|
2.0 |
|
Amortization of intangibles |
|
|
1.4 |
|
|
|
1.5 |
|
Severance and other charges |
|
|
4.2 |
|
|
|
0.0 |
|
Operating loss |
|
|
(4.9 |
)% |
|
|
(6.4 |
)% |
Net revenue. Total net revenue decreased $5.3 million, or 12.7%, during the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020. Products revenue decreased $4.5 million, or 37.3%, due to lower sales due to delayed customer purchasing decisions as the timing of the hospitality recovery from the COVID-19 pandemic remains unclear. Support, maintenance and subscription services revenue increased $1.9 million, or 9.0%, compared to the third quarter of fiscal 2020 driven by continued growth in subscription-based service revenue that increased 18.1% during the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020. Professional services revenue decreased $2.7 million, or 30.0%, due to lower sales due to delayed customer purchasing decisions as the timing of the hospitality recovery from the COVID-19 pandemic remains unclear.
Gross profit and gross profit margin. Our total gross profit increased $3.1 million, or 14.9%, for the third quarter of fiscal 2021 and total gross profit margin increased from 50.2% to 66.0% driven by changes in the composition of revenue by category and the absence of software development cost amortization during the third quarter of fiscal 2021. Products gross profit increased $1.5 million, or 58.4%, compared to the third quarter of fiscal 2020 and products gross profit margin increased from 20.5% to 51.8% due to the absence of software development cost amortization during the third quarter of fiscal 2021 and a higher proportion of proprietary software sales over third party products. Support, maintenance and subscription services gross profit increased $2.1 million and gross profit margin increased 272 basis points to 79.6%. The margin increase is the result of increased revenue on a relatively flat cost base. Professional services gross profit decreased $0.4 million due to the delay in professional service projects as customers continued to work towards re-opening their locations. Gross profit margin increased from 27.6% to 33.2% due to improved utilization rates and a slightly larger decrease in the percentage of professional services costs compared to professional services revenue as a result of employee furloughs and layoffs, lower incentive pay and employee benefits.
Operating expenses
Operating expenses, excluding legal settlements, severance and other charges, increased $0.7 million, or 3.0%, during the third quarter of fiscal 2021 compared with the third quarter of fiscal 2020.
Product development. Product development increased $1.1 million, or 9.7%, in the third quarter of fiscal 2021 due to lower cash-based incentive pay and employee benefits offset by higher share-based compensation.
Sales and marketing. Sales and marketing decreased $1.6 million, or 32.4%, in the third quarter of fiscal 2021 compared with the third quarter of fiscal 2020 due to layoffs, temporary reductions in employee benefits, and reduced commission expense due to lower sales levels. The decrease also includes the impact of significantly reduced travel, the absence of in-person trade shows and conference activity, and the ability to conduct more business remotely.
22
General and administrative. General and administrative increased by $1.4 million, or 23.4%, in the third quarter of fiscal 2021 compared with the third quarter of fiscal 2020 due to higher share-based compensation offsetting lower cash-based incentive pay and employee benefits.
Severance and other charges. Severance, and other charges increased $1.5 million in the third quarter of fiscal 2021 due to layoffs and other employee terminations.
Other (Income) Expenses
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, |
|
|
(Unfavorable) favorable |
|
||||||||||
(Dollars in thousands) |
|
2020 |
|
|
2019 |
|
|
$ |
|
|
% |
|
||||
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
(27 |
) |
|
$ |
(92 |
) |
|
$ |
(65 |
) |
|
|
(70.7 |
)% |
Interest expense |
|
|
9 |
|
|
|
25 |
|
|
|
16 |
|
|
|
(64.0 |
) |
Other expense (income), net |
|
|
95 |
|
|
|
(142 |
) |
|
|
(237 |
) |
|
nm |
|
|
Total other expense (income), net |
|
$ |
77 |
|
|
$ |
(209 |
) |
|
$ |
(286 |
) |
|
nm |
|
nm - not meaningful
Interest income. Interest income consists of interest earned through interest-bearing bank accounts and on cash equivalents including short-term investments in certificates of deposit, commercial paper, treasury bills and money market funds.
Interest expense. Interest expense consists of costs associated with finance leases.
Other expense. Other expense consists mainly of the impact of foreign currency due to movement of European and Asian currencies against the US dollar.
Income Taxes
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||
|
|
December 31, |
|
|
(Unfavorable) favorable |
|||||||||
(Dollars in thousands) |
|
2020 |
|
|
2019 |
|
|
$ |
|
|
% |
|||
Income tax expense |
|
$ |
182 |
|
|
$ |
95 |
|
|
$ |
(87 |
) |
|
nm |
Effective tax rate |
|
|
(9.6 |
)% |
|
|
(3.8 |
)% |
|
|
|
|
|
|
nm - not meaningful
For the three months ended December 31, 2020, the effective tax rate was different than the statutory tax rate due primarily to the recognition of net operating losses that were offset by increased valuation allowance in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the three months ended December 31, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses in the U.S. and certain foreign jurisdictions that were offset by increased valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.
Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months an immaterial reduction in unrecognized tax benefits may occur based on the outcome of tax examinations and as a result of the expiration of various statutes of limitations. We are consistently subject to tax audits; due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.
23
Because of our losses in prior periods, we have recorded a valuation allowance offsetting substantially all of our deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes that it is more likely than not that we will not realize the benefits of these deductible differences. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible.
Results of Operations
First Nine Months Fiscal 2021 Compared to First Nine Months Fiscal 2020
Net Revenue and Operating Income (Loss)
The following table presents our consolidated revenue and operating results for the nine months ended December 31, 2020 and 2019:
|
|
Nine months ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
December 31, |
|
|
Increase (decrease) |
|
||||||||||
(In thousands) |
|
2020 |
|
|
2019 |
|
|
$ |
|
|
% |
|
||||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
19,396 |
|
|
$ |
34,868 |
|
|
$ |
(15,472 |
) |
|
|
(44.4 |
)% |
Support, maintenance and subscription services |
|
|
65,647 |
|
|
|
61,377 |
|
|
|
4,270 |
|
|
|
7.0 |
|
Professional services |
|
|
15,797 |
|
|
|
24,854 |
|
|
|
(9,057 |
) |
|
|
(36.4 |
) |
Total net revenue |
|
|
100,840 |
|
|
|
121,099 |
|
|
|
(20,259 |
) |
|
|
(16.7 |
) |
Cost of goods sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products (inclusive of developed technology amortization) |
|
|
9,625 |
|
|
|
28,056 |
|
|
|
(18,431 |
) |
|
|
(65.7 |
) |
Support, maintenance and subscription services |
|
|
13,515 |
|
|
|
13,676 |
|
|
|
(161 |
) |
|
|
(1.2 |
) |
Professional services |
|
|
11,802 |
|
|
|
18,071 |
|
|
|
(6,269 |
) |
|
|
(34.7 |
) |
Total cost of goods sold |
|
|
34,942 |
|
|
|
59,803 |
|
|
|
(24,861 |
) |
|
|
(41.6 |
) |
Gross profit |
|
$ |
65,898 |
|
|
$ |
61,296 |
|
|
$ |
4,602 |
|
|
|
7.5 |
% |
Gross profit margin |
|
|
65.3 |
% |
|
|
50.6 |
% |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development |
|
$ |
28,900 |
|
|
$ |
32,127 |
|
|
$ |
(3,227 |
) |
|
|
(10.0 |
)% |
Sales and marketing |
|
|
8,278 |
|
|
|
14,307 |
|
|
|
(6,029 |
) |
|
|
(42.1 |
) |
General and administrative |
|
|
18,446 |
|
|
|
17,998 |
|
|
|
448 |
|
|
|
2.5 |
|
Depreciation of fixed assets |
|
|
2,160 |
|
|
|
1,774 |
|
|
|
386 |
|
|
|
21.8 |
|
Amortization of intangibles |
|
|
1,490 |
|
|
|
1,900 |
|
|
|
(410 |
) |
|
|
(21.6 |
) |
Severance and other charges |
|
|
2,762 |
|
|
|
438 |
|
|
|
2,324 |
|
|
nm |
|
|
Legal settlements, net |
|
|
50 |
|
|
|
(125 |
) |
|
|
175 |
|
|
nm |
|
|
Operating income (loss) |
|
$ |
3,812 |
|
|
$ |
(7,123 |
) |
|
$ |
10,935 |
|
|
|
153.5 |
% |
Operating income (loss) percentage |
|
|
3.8 |
% |
|
|
(5.9 |
)% |
|
|
|
|
|
|
|
|
nm - not meaningful
24
The following table presents the percentage relationship of our condensed consolidated statement of operations line items to our consolidated net revenues for the periods presented:
|
|
Nine months ended |
|
|||||
|
|
December 31, |
|
|||||
Net revenue: |
|
2020 |
|
|
2019 |
|
||
Products |
|
|
19.2 |
% |
|
|
28.8 |
% |
Support, maintenance and subscription services |
|
|
65.1 |
|
|
|
50.7 |
|
Professional services |
|
|
15.7 |
|
|
|
20.5 |
|
Total net revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold: |
|
|
|
|
|
|
|
|
Products (inclusive of developed technology amortization) |
|
|
9.5 |
% |
|
|
23.2 |
% |
Support, maintenance and subscription services |
|
|
13.5 |
|
|
|
11.3 |
|
Professional services |
|
|
11.7 |
|
|
|
14.9 |
|
Total cost of goods sold |
|
|
34.7 |
% |
|
|
49.4 |
% |
Gross profit |
|
|
65.3 |
% |
|
|
50.6 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
Product development |
|
|
28.7 |
% |
|
|
26.5 |
% |
Sales and marketing |
|
|
8.2 |
|
|
|
11.8 |
|
General and administrative |
|
|
18.3 |
|
|
|
14.9 |
|
Depreciation of fixed assets |
|
|
2.1 |
|
|
|
1.4 |
|
Amortization of intangibles |
|
|
1.5 |
|
|
|
1.6 |
|
Severance and other charges |
|
|
2.7 |
|
|
|
0.4 |
|
Legal settlements, net |
|
|
0.0 |
|
|
|
(0.1 |
) |
Operating income (loss) |
|
|
3.8 |
% |
|
|
(5.9 |
)% |
Net revenue. Total net revenue decreased $20.3 million, or 16.7%, during the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020. Products revenue decreased $15.5 million, or 44.4%, due to lower sales combined with delayed deliveries resulting from customer restrictions including temporary site closures in response to the COVID-19 pandemic. Support, maintenance and subscription services revenue increased $4.3 million, or 7.0%, compared to the first nine months of fiscal 2020 driven by continued growth in subscription-based service revenue that increased 17.0% during the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020. The growth rate in our support, maintenance and subscription services is significantly lower than we have reported in recent periods due to one-time COVID-19 related financial relief we provided to certain customers primarily during the first half of fiscal 2021 to help them as they dealt with temporary site closures. Professional services revenue decreased $9.1 million, or 36.4%, due to lower sales combined with delayed installations and integration of our software solutions resulting from travel and customer restrictions including temporary site closures in response to the COVID-19 pandemic.
Gross profit and gross profit margin. Our total gross profit increased $4.6 million, or 7.5%, for the first nine months of fiscal 2021 and total gross profit margin increased from 50.6% to 65.3% driven by changes in the composition of revenue by category and the absence of software development cost amortization. Products gross profit increased $3.0 million, or 43.4%, compared to the first nine months of fiscal 2020 and products gross profit margin increased from 19.5% to 50.4% due to the absence of software development cost amortization during the first nine months of fiscal 2021 along with a higher proportion of proprietary software sales over third party products. Support, maintenance and subscription services gross profit increased $4.4 million and gross profit margin increased 169 basis points to 79.4%. The margin increase is the result of increased revenue on a relatively flat cost base. Professional services gross profit decreased $2.8 million and gross profit margin decreased from 27.3% to 25.3% due to the drop in demand for professional services resulting from travel and customer restrictions including temporary site closures in response to the COVID-19 pandemic.
Operating expenses
Operating expenses, excluding legal settlements, severance and other charges, decreased $8.8 million, or 13.0%, during the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020.
Product development. Product development decreased $3.2 million, or 10.0%, in the first nine months of fiscal 2021 due to temporary salary reductions, lower incentive pay and employee benefits, lower recruiting fees, and significantly reduced travel and outside service expenses due to employees working from home.
Sales and marketing. Sales and marketing decreased $6.0 million, or 42.1%, in the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020 due to temporary reductions in salaries and employee benefits, furloughs, layoffs, and reduced commission expense due to lower sales levels. The decrease also includes the impact of significantly reduced travel, the absence of in-person trade shows and conference activity, and the ability to conduct more business remotely.
25
General and administrative. General and administrative increased by $0.4 million, or 2.5%, in the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020 due to increased share-based compensation offsetting decreased cash-based compensation including employee furloughs and layoffs, temporary salary reductions, lower incentive pay and employee benefits.
Severance and other charges. Severance, and other charges increased $2.3 million in the first nine months of fiscal 2021 due to layoffs and other employee terminations.
Other (Income) Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended December 31, |
|
|
(Unfavorable) favorable |
|
||||||||||
(Dollars in thousands) |
|
2020 |
|
|
2019 |
|
|
$ |
|
|
% |
|
||||
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
(76 |
) |
|
$ |
(287 |
) |
|
$ |
(211 |
) |
|
|
(73.5 |
)% |
Interest expense |
|
|
13 |
|
|
|
28 |
|
|
|
15 |
|
|
nm |
|
|
Other expense, net |
|
|
284 |
|
|
|
50 |
|
|
|
(234 |
) |
|
nm |
|
|
Total other expense (income), net |
|
$ |
221 |
|
|
$ |
(209 |
) |
|
$ |
(430 |
) |
|
nm |
|
nm - not meaningful
Interest income. Interest income consists of interest earned through interest-bearing bank accounts and on cash equivalents including short-term investments in certificates of deposit, commercial paper, treasury bills and money market funds.
Interest expense. Interest expense consists of costs associated with finance leases.
Other expense. Other expense consists mainly of the impact of foreign currency due to movement of European and Asian currencies against the US dollar.
Income Taxes
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|||||
|
|
December 31, |
|
|
(Unfavorable) favorable |
|||||||||
(Dollars in thousands) |
|
2020 |
|
|
2019 |
|
|
$ |
|
|
% |
|||
Income tax expense |
|
$ |
311 |
|
|
$ |
161 |
|
|
$ |
(150 |
) |
|
nm |
Effective tax rate |
|
|
8.7 |
% |
|
|
(2.3 |
)% |
|
|
|
|
|
|
nm - not meaningful
For the nine months ended December 31, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreased valuation allowance in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the nine months ended December 31, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses in the U.S. and certain foreign jurisdictions that were offset by increased valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences.
Liquidity and Capital Resources
Overview
Our operating cash requirements consist primarily of working capital needs, operating expenses, capital expenditures, payments on indebtedness outstanding, which primarily consists of lease obligations and preferred stock dividends.
At December 31, 2020, 100% of our cash and cash equivalents, of which 96% were located in the United States, were deposited in bank accounts. We believe credit risk is limited with respect to our cash and cash equivalents balances.
The MAK Capital investment increased our cash balance by $34.0 million after closing costs of $1.0 million. As described above under Recent Developments and further in Note 11 to the condensed consolidated financial statements, the transaction resulted in the issuance of 1,735,457 preferred shares with an annual dividend rate of 5.25%.
Our liquidity could be negatively impacted by a decrease in demand for our products and services, including the impact of changes in customer buying behavior due to circumstances over which we have no control, including, but not limited to, the effects of the
26
COVID-19 pandemic. If we require additional funding, for operating needs, a business acquisition or otherwise, we may need access to more capital, which could involve borrowings under a credit facility.
As of December 31, 2020, and March 31, 2020, our total debt was approximately $0.1 million, comprised of finance lease obligations in both periods.
We believe that cash flow from operating activities, cash on hand of $92.6 million as of December 31, 2020 and access to capital markets will provide adequate funds to meet our short- and long-term liquidity requirements.
Cash Flow
|
|
Nine Months Ended December 31, |
|
|
|||||
(In thousands) |
|
2020 |
|
|
2019 |
|
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
15,084 |
|
|
$ |
5,273 |
|
|
Investing activities |
|
|
(1,078 |
) |
|
|
(3,035 |
) |
|
Financing activities |
|
|
31,765 |
|
|
|
(1,071 |
) |
|
Effect of exchange rate changes on cash |
|
|
184 |
|
|
|
(33 |
) |
|
Net increase in cash and cash equivalents |
|
$ |
45,955 |
|
|
$ |
1,134 |
|
|
Cash flow provided by operating activities. Cash flow provided by operating activities was $15.1 million in the first nine months of fiscal 2021. The provision of cash was due primarily to the addition of $12.5 million in non-cash expense including depreciation, amortization, and share-based compensation, to our operating income of $3.3 million offset by a decrease of $0.7 million in net operating assets and liabilities.
Cash flow used in investing activities. Consists primarily of property and equipment purchases.
Cash flow provided by (used in) financing activities. During the first nine months of fiscal 2021, the $31.8 million provided by financing activities consisted primarily of $34.0 million in preferred stock issuance proceeds from the MAK Capital investment, net of issuance costs, offset by $1.1 million related to the repurchase of shares to satisfy employee tax withholding on share-based compensation and $1.1 million in preferred stock dividends.
Contractual Obligations
As of December 31, 2020, there were no significant changes to our contractual obligations as presented in our Annual Report for the year ended March 31, 2020.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies
A detailed description of our significant accounting policies is included in our Annual Report for the year ended March 31, 2020. Other than as described in Note 2 to the condensed consolidated financial statements, there have been no material changes in our significant accounting policies and estimates since March 31, 2020.
Forward-Looking Information
This Quarterly Report and other publicly available documents, including the documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences
27
or that might otherwise impact the business include the risk factors set forth in Item 1A in Part II of this Quarterly Report and Item IA of our Annual Report for the fiscal year ended March 31, 2020. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events, or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk affecting us, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report for the fiscal year ended March 31, 2020. There have been no material changes in our market risk exposures since March 31, 2020.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision of and with the participation of our Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Corporate Controller and Treasurer, management evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report. Based on that evaluation, the CEO, CFO and Corporate Controller and Treasurer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, that occurred during the nine months ended December 31, 2020, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Due to the COVID-19 pandemic, a significant number of our employees are now working from home. The design of our financial reporting processes, systems, and controls allows for remote execution with accessibility to secure data.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller and Treasurer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be achieved. Further, the design of a control system must reflect the impact of resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by individual acts, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all possible future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Other than as described below, there have been no material changes in the risk factors included in our Annual Report for the fiscal year ended March 31, 2020 that may materially affect our business, results of operations, or financial condition.
The full extent to which the COVID-19 pandemic will adversely affect our business and results of operations cannot be predicted at this time. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Recent Developments” of this report for a more detailed discussion of the impact of COVID-19 on our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
29
Item 6. Exhibits
|
|
|
|
|
|
|
|
|
|
|
|
*10.1 |
|
||
|
|
|
|
*10.2 |
|
||
|
|
|
|
*10.3 |
|
||
|
|
|
|
*10.4 |
|
||
|
|
|
|
*10.5 |
|
||
|
|
|
|
*10.6 |
|
Form of Restricted Stock Award Agreement for Non-Employee Directors |
|
|
|
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
|
|
|
|
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
|
|
|
|
|
31.3 |
|
Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller and Treasurer. |
|
|
|
|
|
32 |
|
||
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
* |
|
Denotes a management contract or compensatory plan or arrangement. |
30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
AGILYSYS, INC.
|
||
|
|
|
Date: |
January 27, 2021 |
/s/ William David Wood III |
|
|
William David Wood III |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer and Duly Authorized Officer) |
31
Exhibit 10.1
Agilysys, Inc.
2020 Equity Incentive Plan, as Amended and Restated
. The name of this plan is the Agilysys, Inc. 2020 Equity Incentive Plan. The purposes of the Plan are to (a) enable Agilysys, Inc., an Ohio corporation, and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business.
. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.
. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-Qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, (f) Cash Awards, and (g) Other Equity-Based Awards.
“Affiliate” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company.
“Applicable Laws” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Shares are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.
“Award” means any right granted under the Plan, including an Incentive Stock Option, a Non-Qualified Stock Option, a Stock Appreciation Right, a Restricted Award, a Performance Share Award, a Cash Award, or an Other Equity-Based Award.
“Award Agreement” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Board” means the Board of Directors of the Company, as constituted at any time.
“Cash Award” means an Award denominated in cash that is granted under Section 7.4 of the Plan.
“Cause” means, with respect to any Participant, unless otherwise provided in the applicable Award Agreement, (i) the Participant's conviction or misappropriation of money or other property or conviction of a felony, or a guilty plea or plea of nolo contendere by Participant with respect to a felony, (ii) conduct by the Participant that is in competition with the Company, conduct by a Participant that breaches the Participant's duty of loyalty to the Company or a Participant's willful misconduct, any of which materially injures the Company, (iii) a willful and material breach by the Participant of his or her obligations under any agreement entered into between the Participant and the Company that materially injures the Company, or (iv) the Participant's failure to substantially perform his or her duties with the Company (other than by reason of the Participant's Disability). For Participants subject to Section 16 of the Exchange Act, the determination of whether any conduct, action or failure to act constitutes "Cause" shall be made by the Committee in its sole discretion.
1
“Change in Control” with respect to any Participant shall have the meaning specified in the Participant’s Award Agreement or any employment agreement between the Participant and the Company or its Affiliates. In the absence of any such definition, a “Change in Control” shall mean the occurrence of any of the following:
(i)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 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;
(ii) there is a report filed on Schedule 13D or Schedule 14D-1, 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 and any employee benefit plan of the Company, including the trustee of any such plan, has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3) of securities representing 33-1/3% or more of the combined voting power of the then-outstanding Voting Stock of the Company; or
(iii)the individuals who, at the beginning of any period of two consecutive calendar years, constituted the directors of the Company cease for any reason to constitute at least a majority thereof unless either (A) the nomination for election by the Company's shareholders of each new director of the Company was approved by a vote of least two-thirds of the directors of the Company still in office who were directors of the Company at the beginning of any such period; or (B) to the extent adverse tax consequences under Section 409A of the Code would not be triggered, this clause (iii) is waived by a vote of at least two-thirds of the directors of the Company still in office who were directors of the Company at the beginning of any such period.
If required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.
|
|
“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.
“Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3.3 and Section 3.4, or any Officers of the Company to whom it has delegated authority as permitted under Section 3.3.
“Common Shares” means the common shares, without par value, of the Company, or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.
“Company” means Agilysys, Inc., an Ohio corporation, and any successor thereto.
“Consultant” means any individual or entity which performs bona fide services to the Company or an Affiliate, other than as an Employee or Director, and who may be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act or any successor form thereto.
“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service; provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence. The Committee or its delegate, in its
2
sole discretion, may determine whether a Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a termination of Continuous Service for purposes of affected Awards, and such decision shall be final, conclusive and binding.
“Deferred Stock Units” has the meaning set forth in Section 7.2 hereof.
“Director” means a member of the Board.
“Disability” means, unless the applicable Award Agreement says otherwise, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of whether an individual has a Disability shall be determined under procedures established by the Committee. Except in situations where the Committee is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates.
“Disqualifying Disposition” has the meaning set forth in Section 14.12.
“Effective Date” shall mean the date as of which this Plan is adopted by the Board.
“Employee” means any person, including an Officer or Director, employed by the Company or an Affiliate; provided, that, for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, as of any date, the value of the Common Shares as determined below. If the Common Shares are listed on any established stock exchange or a national market system, including without limitation, the New York Stock Exchange or the NASDAQ Stock Market, the Fair Market Value shall be the closing price of a Common Share (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the Wall Street Journal. In the absence of an established market for the Common Shares, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons. Notwithstanding the foregoing, the Committee may also determine the Fair Market Value upon the average selling price of the Common Shares during a specified period that is within thirty (30) days before or thirty (30) days after such date, provided that, with respect to the grant of an Option or Stock Appreciation Right, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified period and otherwise compliant with Section 409A of the Code.
“Fiscal Year” means the Company’s fiscal year.
“Free Standing Rights” has the meaning set forth in Section 7.1(a).
“Grant Date” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.
“Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option within the meaning of Section 422 of the Code and that meets the requirements set out in the Plan.
“Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3 and an “independent director” as defined in the Marketplace Rules of The NASDAQ Stock Market LLC.
“Non-Qualified Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
“Option” means an Incentive Stock Option or a Non-Qualified Stock Option granted pursuant to the Plan.
3
“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
“Option Exercise Price” means the price at which a Common Share may be purchased upon the exercise of an Option.
“Other Equity-Based Award” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Performance Share Award that is granted under Section 7.4 and is payable by delivery of Common Shares and/or which is measured by reference to the value of Common Shares.
“Participant” means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
“Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon business criteria or other performance measures determined by the Committee in its discretion.
“Performance Period” means the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Share Award or a Cash Award.
“Performance Share Award” means any Award granted pursuant to Section 7.3 hereof.
“Performance Share” means the grant of a right to receive a number of actual Common Shares or share units based upon the performance of the Company during a Performance Period, as determined by the Committee.
“Permitted Transferee” means a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests.
“Person” means a person as defined in Section 13(d)(3) of the Exchange Act.
“Plan” means this Agilysys, Inc. 2020 Equity Incentive Plan, as amended and/or amended and restated from time to time.
"Prior Plan" means the 2016 Stock Incentive Plan, as may be amended.
“Related Rights” has the meaning set forth in Section 7.1(a).
“Restricted Award” means any Award granted pursuant to Section 7.2(a).
“Restricted Period” has the meaning set forth in Section 7.2(a).
“Restricted Stock” has the meaning set forth in Section 7.2(a).
“Restricted Stock Units” has the meaning set forth in Section 7.2(a).
“Retirement” means retirement from the Company at or after age 65 or at or after the later of age 55 and seven years of service.
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“Securities Act” means the Securities Act of 1933, as amended.
“Stock Appreciation Right” means the right pursuant to an Award granted under Section 7.1 to receive, upon exercise, an amount payable in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (a) the Fair Market Value of a Common Share on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.
“Stock for Stock Exchange” has the meaning set forth in Section 6.4.
“Substitute Award” has the meaning set forth in Section 4.5.
4
“Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or of any of its Affiliates.
“Total Share Reserve” has the meaning set forth in Section 4.1.
. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:
(a)to construe and interpret the Plan and apply its provisions;
(b)to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c)to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d)to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act;
(e)to determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f)from time to time to select, subject to the limitations set forth in this Plan, those eligible Award recipients to whom Awards shall be granted;
(g)to determine the number of Common Shares to be made subject to each Award;
(h)to determine whether each Option is to be an Incentive Stock Option or a Non-Qualified Stock Option;
(i)to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j)to determine the target number of Performance Shares to be granted pursuant to a Performance Share Award, the performance measures that will be used to establish the Performance Goals, the Performance Period(s) and the number of Performance Shares earned by a Participant;
(k)to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;
(l)to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;
(m)to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
(n)to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and
(o)to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan
.
The Committee also may modify the purchase price or the exercise price of any outstanding Award, provided that if the modification effects a repricing, shareholder approval shall be required before the repricing is effective.
5
. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.
. The Committee or, if no Committee has been appointed, the Board may delegate administration of the Plan to a committee or committees of one or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.
. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3. However, if the Board intends to satisfy such exemption requirements, with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or the Committee may delegate to an Officer or Officers the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors.
. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after the institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
4.1Subject to adjustment in accordance with Section 11, the maximum aggregate number of Common Shares available for issuance under the Plan is 2,250,000, plus (i) the number of Common Shares that, on the Effective Date, are available to be granted under the Prior Plan but which are not then subject to outstanding awards under the Prior Plan, and (ii) the number of Common Shares subject to outstanding awards under the Prior Plan as of the Effective Date which thereafter are forfeited, settled in cash or cancelled or expire (the “Total Share Reserve”). During the terms of the Awards, the Company shall keep available at all times the number of Common Shares required to satisfy such Awards. Upon the approval of this Plan by Company shareholders, the Prior Plan will terminate; provided that all outstanding awards
6
under the Prior Plan as of such approval date shall remain outstanding and shall be administered and settled in accordance with the provisions of the Prior Plan.
4.2Common Shares available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
4.3Subject to adjustment in accordance with Section 11, no more than 2,250,000 Common Shares may be issued in the aggregate pursuant to the exercise of Incentive Stock Options (the “ISO Limit”).
4.4Any Common Shares subject to an Award that expires or is canceled, forfeited, or terminated without issuance of the full number of Common Shares to which the Award related will again be available for issuance under the Plan. Notwithstanding anything to the contrary contained herein, the following shares subject to an Award under the Plan shall not again be made available for future grants of Awards under the Plan: (i) shares that are tendered or withheld to satisfy tax withholding obligations with respect to an Award or to pay the exercise price of an Option; (ii) shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof; or (iii) shares purchased on the open market with cash proceeds from the exercise of Options. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the aggregate limitation of the Plan as provided herein.
4.5Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“Substitute Awards”). Substitute Awards shall not be counted against the Total Share Reserve; provided, that, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as Incentive Stock Options shall be counted against the ISO limit. Subject to applicable stock exchange requirements, available shares under a shareholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect such acquisition or transaction) may be used for Awards under the Plan and shall not count toward the Total Share Limit.
4.6Notwithstanding anything to the contrary in the Plan, no Award may vest, in the ordinary course, prior to the first anniversary of the date of grant of the Award. However, (a) up to 5% of the Total Share Reserve may be subject to Awards that do not meet such vesting requirements, and (b) the first vesting date of an Award subject to periodic vesting may be prior to the first anniversary date of grant of the Award provided that such first vesting date is no earlier than the fiscal year-end date of the fiscal year during which the Award was granted. Nothing in this Section 4.6 shall limit the Company's ability to grant Awards that contain rights to accelerated vesting on a termination of employment or service. In addition, the minimum vesting criteria set forth in this Section 4.6 shall not apply to Substitute Awards described in Section 4.6.
4.7No dividends will be paid to a Participant with respect to any shares subject to an Award of any Option or Stock Appreciation Right. No dividends will be paid to a Participant with respect to any shares subject to a Restricted Award, Performance Award or Other Equity-Based Award prior to the vesting of such Award. For the avoidance of doubt, as described in Section 7.2(b), any dividends that may be attributable to any particular share of Restricted Stock or any particular Restricted Stock Unit or Deferred Stock Unit shall only be distributed to a Participant upon the release of restrictions on such share of Restricted Stock or the settlement of such Restricted Stock Unit or Deferred Stock Unit, as applicable, and a Participant shall have no right to such dividends if such Award is forfeited.
5.1Eligibility for Specific Awards.
Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following the Grant Date.
. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Shares on the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.
7
. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-Qualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for Common Shares purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
. Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date. The term of a Non-Qualified Stock Option granted under the Plan shall be determined by the Committee; provided, however, no Non-Qualified Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
6.2Exercise Price of an Incentive Stock Option
. Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Shares subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
6.3Exercise Price of a Non-Qualified Stock Option
. The Option Exercise Price of each Non-Qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Shares subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-Qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.
. The Option Exercise Price of Common Shares acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be paid: (i) by delivery to the Company of other Common Shares, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific Common Shares that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and receives a number of Common Shares equal to the difference between the number of shares thereby purchased and the number of identified attestation Common Shares (a “Stock for Stock Exchange”); (ii) if the Common Shares are listed on any established stock exchange or a national market system, through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the exercise price (i.e., by means of a “cashless” exercise procedure); (iii) by reduction in the number of Common Shares otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise (i.e., by means of a “net exercise”); (iv) by any combination of the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Shares acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other Common Shares acquired, directly or indirectly from the Company, shall be paid only by Common Shares of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period for which the Common Shares are publicly traded (i.e., the Common Shares are listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.
8
6.5Transferability of an Incentive Stock Option
. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.6Transferability of a Non-Qualified Stock Option
. A Non-Qualified Stock Option may, in the sole discretion of the Committee, be transferable to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement. If the Non-Qualified Stock Option does not provide for transferability, then the Non-Qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.7Vesting of Options
. Each Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a Common Share.
6.8Termination of Continuous Service
. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.
6.9Extension of Termination Date
. An Optionholder’s Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance of Common Shares would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period after termination of the Participant’s Continuous Service that is three months after the end of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.
6.10Disability of Optionholder
. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date that is 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.
6.11Death of Optionholder
. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.
9
6.12Incentive Stock Option $100,000 Limitation
. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Shares with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-Qualified Stock Options.
6.13Reload Options. No Option may include provisions that "reload" the Option upon exercise.
7.Provisions of Awards Other Than Options.
. Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this Section 7.1, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Stock Appreciation Rights may be granted alone (“Free Standing Rights”) or in tandem with an Option granted under the Plan (“Related Rights”).
. Any Related Right that relates to a Non-Qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same time the Incentive Stock Option is granted.
(c)Term of Stock Appreciation Rights
. The term of a Stock Appreciation Right granted under the Plan shall be determined by the Committee; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.
(d)Vesting of Stock Appreciation Rights
. Each Stock Appreciation Right may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Stock Appreciation Right may be subject to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a Common Share.
. Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of Common Shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a Common Share on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right or related Option. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of Common Shares (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.
. The exercise price of a Free Standing Right shall be determined by the Committee. A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per Common Share subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 7.1(b) are satisfied.
(g)Reduction in the Underlying Option Shares
. Upon any exercise of a Related Right, the number of Common Shares for which any related Option shall be exercisable shall be reduced by the number of shares for which the Stock Appreciation Right has been exercised. The number of Common Shares for which a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of Common Shares for which such Option has been exercised.
.
10
. A Restricted Award is an Award of actual Common Shares (“Restricted Stock”) or hypothetical Common Share units (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of Common Shares, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”) as the Committee shall determine. Each Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in this Section 7.2 and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
(b)Restricted Stock and Restricted Stock Units
.
(i)Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and share dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash dividends or share dividends so withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in Common Shares having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.
(ii)The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No Common Shares shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside funds for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee may also grant Restricted Stock Units with a deferral feature, whereby settlement is deferred beyond the vesting date until the occurrence of a future payment date or event set forth in an Award Agreement (“Deferred Stock Units”). At the discretion of the Committee, each Restricted Stock Unit or Deferred Stock Unit (representing one Common Share) may be credited with an amount equal to the cash and share dividends paid by the Company in respect of one Common Share (“Dividend Equivalents”). Dividend Equivalents shall be withheld by the Company and credited to the Participant’s account, and interest may be credited on the amount of cash Dividend Equivalents credited to the Participant’s account at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit or Deferred Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in Common Shares having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit or Deferred Stock Unit and, if such Restricted Stock Unit or Deferred Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.
.
(i)Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the share certificate; (B) the shares shall be subject to the restrictions on
11
transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such shares are forfeited, the share certificates shall be returned to the Company, and all rights of the Participant to such shares and as a shareholder with respect to such shares shall terminate without further obligation on the part of the Company.
(ii)Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units or Deferred Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.
(d)Restricted Period. With respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement. No Restricted Award may be granted or settled for a fraction of a Common Share.
(e)Delivery of Restricted Stock and Settlement of Restricted Stock Units
. Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 7.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the share certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or share dividends credited to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one Common Share for each such outstanding vested Restricted Stock Unit or Deferred Stock Unit (“Vested Unit”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section 7.2(b)(ii) hereof and the interest thereon or, at the discretion of the Committee, in Common Shares having a Fair Market Value equal to such Dividend Equivalents and the interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Shares in lieu of delivering only Common Shares for Vested Units. If a cash payment is made in lieu of delivering Common Shares, the amount of such payment shall be equal to the Fair Market Value of the Common Shares as of the date on which the Restricted Period lapsed in the case of Restricted Stock Units, or the delivery date in the case of Deferred Stock Units, with respect to each Vested Unit.
. Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
.
(a)Grant of Performance Share Awards
. Each Performance Share Award granted under the Plan shall be evidenced by an Award Agreement. Each Performance Share Award so granted shall be subject to the conditions set forth in this Section 7.3, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. The Committee shall have the discretion to determine: (i) the number of Common Shares or share-denominated units subject to a Performance Share Award granted to any Participant; (ii) the Performance Period applicable to any Award; (iii) the conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.
(b)Earning Performance Share Awards
. The number of Performance Shares earned by a Participant will depend on the extent to which the performance goals established by the Committee are attained within the applicable Performance Period, as determined by the Committee.
7.4Other Equity-Based Awards and Cash Awards
. The Committee may grant Other Equity-Based Awards, either alone or in tandem with other Awards, in such amounts and subject to such conditions as
12
the Committee shall determine in its sole discretion. Each Equity-Based Award shall be evidenced by an Award Agreement and shall be subject to such conditions, not inconsistent with the Plan, as may be reflected in the applicable Award Agreement. The Committee may grant Cash Awards in such amounts and subject to such Performance Goals, other vesting conditions, and such other terms as the Committee determines in its discretion. Cash Awards shall be evidenced in such form as the Committee may determine.
8.Securities Law Compliance
. Each Award Agreement shall provide that no Common Shares shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell Common Shares upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Common Shares issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Shares under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Shares upon exercise of such Awards unless and until such authority is obtained.
9.Use of Proceeds from Shares. Proceeds from the sale of Common Shares pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.
10.1Acceleration of Exercisability and Vesting
. The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.
. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Common Shares subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Share certificate is issued, except as provided in Section 11 hereof.
10.3No Employment or Other Service Rights
. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
10.4Transfer; Approved Leave of Absence
. For purposes of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
10.5Withholding Obligations
. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Shares under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the
13
Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Common Shares from the Common Shares otherwise issuable to the Participant as a result of the exercise or acquisition of Common Shares under the Award, provided, however, that no Common Shares are withheld for such purpose with a value exceeding the maximum amount of tax required to be withheld by law; (c) delivering to the Company previously owned and unencumbered Common Shares of the Company; or (d) if the Common Shares are listed on any established stock exchange or a national market system, through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the tax required to be withheld by law (i.e., by means of a “cashless” exercise procedure).
11.Adjustments Upon Changes in Shares. In the event of changes in the outstanding Common Shares or in the capital structure of the Company by reason of any share or extraordinary cash dividend, share split, reverse share split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, the Performance Goals to which Performance Share Awards and Cash Awards are subject, the maximum number of Common Shares subject to all Awards stated in Section 4 will be equitably adjusted or substituted, as to the number, price or kind of a Common Share or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 11, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-Qualified Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification of such Non-Qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
12.Effect of Change in Control. Notwithstanding any other provision of the Plan to the contrary, immediately upon the occurrence of a Change in Control, the following provisions of this Section 12 shall apply except to the extent an Award Agreement provides for a different treatment (in which case the Award Agreement shall govern): all then-outstanding Awards held by a Participant and not previously vested shall become 100% vested; provided that if the achievement of the performance goals applicable to an Award have not been measured, then such performance goals shall be deemed satisfied as if target performance was achieved.
13.Amendment of the Plan and Awards.
. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Shares and Section 13.3, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder approval.
. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval.
. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance therewith.
. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
14
. The Committee at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
14.General Provisions.
. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.
. Notwithstanding any other provisions in this Plan, the Company may cancel any Award, require reimbursement of any Award by a Participant, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time (“Clawback Policy”). In addition, a Participant may be required to repay to the Company previously paid compensation, whether provided pursuant to the Plan or an Award Agreement, in accordance with the Clawback Policy. By accepting an Award, the Participant is agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).
14.3Other Compensation Arrangements
. Nothing contained in this Plan shall prevent the Board 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.
. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.
14.5Deferral of Awards
. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of Common Shares or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.
. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.
. Each Award Agreement shall contain provisions required to reflect the provisions of Section 11.
. Upon exercise of a right granted under this Plan, the Company shall issue Common Shares or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable period of time.
14.9No Fractional Shares
. No fractional Common Shares shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall
15
be issued or paid in lieu of fractional Common Shares or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
14.10Other Provisions
. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of Awards, as the Committee may deem advisable.
. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
14.12Disqualifying Dispositions
. Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of Common Shares acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the Common Shares acquired upon exercise of such Incentive Stock Option (a “Disqualifying Disposition”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such Common Shares.
. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 14.13, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.
. The costs of administering the Plan shall be paid by the Company.
. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.
14.17Plan Headings
. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.
14.18Non-Uniform Treatment
. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.
16
15.Effective Date of Plan. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a share Award, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
16.Termination or Suspension of the Plan. The Plan shall terminate automatically on tenth anniversary of the Effective Date. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 13.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
17.Choice of Law. The law of the State of Ohio shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.
17
Exhibit 10.2
AGILYSYS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1.Purpose. This Agilysys, Inc. Employee Stock Purchase Plan (the "Plan") is intended to provide employees of the Company and its Participating Subsidiaries with an opportunity to acquire a proprietary interest in the Company through the purchase of Common Shares. The Company intends that the Plan qualify as an "employee stock purchase plan" under Section 423 of the Code and the Plan shall be interpreted in a manner that is consistent with that intent.
"Board or Board of Directors" means the Board of Directors of the Company, as constituted from time to time.
"Code" means the U.S. Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.
"Committee" means the committee appointed by the Board to administer the Plan.
"Common Shares" means the common shares, without par value, of the Company.
"Company" means Agilysys, Inc., an Ohio corporation, including any successor thereto.
"Compensation" means base salary, wages, and annual bonuses paid to an Eligible Employee by the Company or a Participating Subsidiary as compensation for services to the Company or Participating Subsidiary, before deduction for any salary deferral contributions made by the Eligible Employee to any tax-qualified or nonqualified deferred compensation plan, including overtime, vacation pay, holiday pay, jury duty pay and funeral leave pay, but excluding education or tuition reimbursements, imputed income arising under any group insurance or benefit program, travel expenses, business and relocation expenses, and income received in connection with stock options or other equity-based awards.
"Corporate Transaction" means a merger, consolidation, acquisition of property or stock, separation, reorganization or other corporate event described in Section 424 of the Code.
"Designated Broker" means the financial services firm or other agent designated by the Company to maintain ESPP Share Accounts on behalf of Participants who have purchased Common Shares under the Plan.
"Effective Date" means the date as of which this Plan is adopted by the Board, subject to the Plan obtaining shareholder approval in accordance with Section 19.11 hereof.
601808354.21
"Employee" means any person who renders services to the Company or a Participating Subsidiary as an employee pursuant to an employment relationship with such employer. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on military leave, sick leave or other leave of absence approved by the Company or a Participating Subsidiary that meets the requirements of Treasury Regulation Section 1.421-1(h)(2). Where the period of leave exceeds three (3) months, or such other period of time specified in Treasury Regulation Section 1.421-1(h)(2), and the individual's right to re-employment is not guaranteed by statute or contract, the employment relationship shall be deemed to have terminated on the first day immediately following such three-month period, or such other period specified in Treasury Regulation Section 1.421-1(h)(2).
"Eligible Employee" means an Employee who (i) has been employed by the Company or a Participating Subsidiary for at least two (2) years, or such other shorter period of time designated by the Committee from time to time, and (ii) is customarily employed for at least twenty (20) hours per week and more than five (5) months in any calendar year. Notwithstanding the foregoing, the Committee may exclude from participation in the Plan or any Offering Employees who are "highly compensated employees" of the Company or a Participating Subsidiary (within the meaning of Section 414(q) of the Code) or a sub-set of such highly compensated employees.
"Enrollment Form" means an agreement pursuant to which an Eligible Employee may elect to enroll in the Plan, to authorize a new level of payroll deductions, or to stop payroll deductions and withdraw from an Offering Period.
"ESPP Share Account" means an account into which Common Shares purchased with accumulated payroll deductions at the end of an Offering Period are held on behalf of a Participant.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date, the value of the Common Shares as determined below. If the shares are listed on any established stock exchange or a national market system, including, without limitation, the New York Stock Exchange or the Nasdaq Stock Market, the Fair Market Value shall be the closing price of a share (or if no sales were reported, the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal. In the absence of an established market for the shares, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons.
"Offering Date" means the first Trading Day of each Offering Period as designated by the Committee.
"Offering or Offering Period" means a period of six months beginning each January 1st and July 1st of each year; provided, that, pursuant to Section 5, the Committee
may change the duration of future Offering Periods (subject to a maximum Offering Period of twenty-seven (27) months) and/or the start and end dates of future Offering Periods.
"Participant" means an Eligible Employee who is actively participating in the Plan.
"Participating Subsidiaries" means the Subsidiaries that have been designated as eligible to participate in the Plan, and such other Subsidiaries that may be designated by the Committee from time to time in its sole discretion.
"Plan" means this Agilysys Employee Stock Purchase Plan, as set forth herein, and as amended from time to time.
"Purchase Date" means the last Trading Day of each Offering Period.
"Purchase Price" means an amount per Common Share designated by the Committee from time to time; provided that the Purchase Price shall not be less than the lesser of (i) eighty-five percent (85%) (or such greater percentage as designated by the Committee) of the Fair Market Value of a Common Share on the Offering Date or (ii) eighty-five percent (85%) (or such greater percentage as designated by the Committee) of the Fair Market Value of a Common Share on the Purchase Date; provided further, that, the Purchase Price per Common Share will in no event be less than the par value of the Common Share.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation, domestic or foreign, of which not less than 50% of the combined voting power is held by the Company or a Subsidiary, whether or not such corporation exists now or is hereafter organized or acquired by the Company or a Subsidiary. In all cases, the determination of whether an entity is a Subsidiary shall be made in accordance with Section 424(f) of the Code.
"Trading Day" means any day on which the national stock exchange upon which the Common Shares are listed is open for trading or, if the Common Shares are not listed on an established stock exchange or national market system, a business day, as determined by the Committee in good faith.
3.Administration. The Plan shall be administered by the Committee which shall have the authority to construe and interpret the Plan, prescribe, amend and rescind rules relating to the Plan's administration and take any other actions necessary or desirable for the administration of the Plan including, without limitation, adopting sub-plans applicable to particular Participating Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code. The Committee may correct any defect or supply any omission or reconcile any inconsistency or ambiguity in the Plan. The decisions of the Committee shall be final and binding on all persons. All expenses of administering the Plan shall be borne by the Company.
4.Eligibility. Unless otherwise determined by the Committee in a manner that is consistent with Section 423 of the Code, any individual who is an Eligible Employee as of the
first day of the enrollment period designated by the Committee for a particular Offering Period shall be eligible to participate in such Offering Period, subject to the requirements of Section 423 of the Code.
Notwithstanding any provision of the Plan to the contrary, no Eligible Employee shall be granted an option under the Plan if (i) immediately after the grant of the option, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary or (ii) such option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined at the time the option is granted) for each calendar year in which such option is outstanding at any time.
5.Offering Periods. The Plan shall be implemented by a series of Offering Periods, each of which shall be six (6) months in duration, with new Offering Periods commencing on or about January 1 and July 1 of each year (or such other times as determined by the Committee). The Committee shall have the authority to change the duration, frequency, start and end dates of Offering Periods.
6.1Enrollment; Payroll Deductions. An Eligible Employee may elect to participate in the Plan by properly completing an Enrollment Form, which may be electronic, and submitting it to the Company, in accordance with the enrollment procedures established by the Committee. Participation in the Plan is entirely voluntary. By submitting an Enrollment Form, the Eligible Employee authorizes payroll deductions from his or her pay check in an amount equal to at least 1%, but not more than 10% of his or her Compensation on each pay day occurring during an Offering Period (or such other maximum percentage as the Committee may establish from time to time before an Offering Period begins). Payroll deductions shall commence on the first payroll date following the Offering Date and end on the last payroll date on or before the Purchase Date. The Company shall maintain records of all payroll deductions but shall have no obligation to pay interest on payroll deductions or to hold such amounts in a trust or in any segregated account.
6.2Election Changes. During an Offering Period, a Participant may decrease or increase his or her rate of payroll deductions applicable to such Offering Period only once. To make such a change, the Participant must submit a new Enrollment Form authorizing the new rate of payroll deductions at least fifteen days before the Purchase Date. A Participant may decrease or increase his or her rate of payroll deductions for future Offering Periods by submitting a new Enrollment Form authorizing the new rate of payroll deductions at least fifteen days before the start of the next Offering Period.
6.3Automatic Re-enrollment. The deduction rate selected in the Enrollment Form shall remain in effect for subsequent Offering Periods unless the Participant (a) submits a new Enrollment Form authorizing a new level of payroll deductions in accordance with
Section 6.2, (b) withdraws from the Plan in accordance with Section 10, or (c) terminates employment or otherwise becomes ineligible to participate in the Plan.
7.Grant of Option. On each Offering Date, each Participant in the applicable Offering Period shall be granted an option to purchase, on the Purchase Date, a number of Common Shares determined by dividing the Participant's accumulated payroll deductions by the applicable Purchase Price; provided, however, that in no event shall any Participant purchase more than 1,250 Common Shares during an Offering Period (subject to adjustment in accordance with Section 18 and the limitations set forth in Section 13 of the Plan).
8.Exercise of Option/Purchase of Shares. A Participant's option to purchase Common Shares will be exercised automatically on the Purchase Date of each Offering Period. The Participant's accumulated payroll deductions will be used to purchase the maximum number of whole shares that can be purchased with the amounts in the Participant's notional account. No fractional shares may be purchased but notional fractional Common Shares will be allocated to the Participant's ESPP Share Account to be aggregated with other notional fractional Common Shares on future Purchase Dates, subject to earlier withdrawal by the Participant in accordance with Section 10 or termination of employment in accordance with Section 11.
9.Transfer of Shares. As soon as reasonably practicable after each Purchase Date, the Company will arrange for the delivery to each Participant of the Common Shares purchased upon exercise of his or her option. The Committee may permit or require that the shares be deposited directly into an ESPP Share Account established in the name of the Participant with a Designated Broker and may require that the Common Shares be retained with such Designated Broker for a specified period of time. Participants will not have any voting, dividend or other rights of a shareholder with respect to the Common Shares subject to any option granted hereunder until such shares have been delivered pursuant to this Section 9.
10.1Withdrawal Procedure. A Participant may withdraw from an Offering by submitting to the Company a revised Enrollment Form indicating his or her election to withdraw at least fifteen days before the Purchase Date. The accumulated payroll deductions held on behalf of a Participant in his or her notional account (that have not been used to purchase Common Shares) shall be paid to the Participant promptly following receipt of the Participant's Enrollment Form indicating his or her election to withdraw and the Participant's option shall be automatically terminated. If a Participant withdraws from an Offering Period, no payroll deductions will be made during any succeeding Offering Period, unless the Participant re-enrolls in accordance with Section 6.1 of the Plan.
10.2Effect on Succeeding Offering Periods. A Participant's election to withdraw from an Offering Period will not have any effect upon his or her eligibility to participate in succeeding Offering Periods that commence following the completion of the Offering Period from which the Participant withdraws.
11.Termination of Employment; Change in Employment Status. Upon termination of a Participant's employment for any reason, including death, disability or retirement, or a change in
the Participant's employment status following which the Participant is no longer an Eligible Employee, which in either case occurs at least thirty days before the Purchase Date, the Participant will be deemed to have withdrawn from the Plan and the payroll deductions in the Participant's notional account (that have not been used to purchase Common Shares) shall be returned to the Participant, or in the case of the Participant's death, to the person(s) entitled to such amounts under Section 17, and the Participant's option shall be automatically terminated. If the Participant's termination of employment or change in status occurs within thirty days before a Purchase Date, the accumulated payroll deductions shall be used to purchase shares on the Purchase Date.
12.Interest. No interest shall accrue on or be payable with respect to the payroll deductions of a Participant in the Plan.
13.1Number of Shares. A total of 500,000 shares of Common Shares have been reserved as authorized for the grant of options under the Plan. The shares of Common Shares may be newly issued shares, treasury shares or shares acquired on the open market.
13.2Over-subscribed Offerings. The number of Common Shares which a Participant may purchase in an Offering under the Plan may be reduced if the Offering is over-subscribed. No option granted under the Plan shall permit a Participant to purchase Common Shares which, if added together with the total number of Common Shares purchased by all other Participants in such Offering would exceed the total number of Common Shares remaining available under the Plan. If the Committee determines that, on a particular Purchase Date, the number of Common Shares with respect to which options are to be exercised exceeds the number of Common Shares then available under the Plan, the Company shall make a pro rata allocation of the Common Shares remaining available for purchase in as uniform a manner as practicable and as the Committee determines to be equitable.
14.Transferability. No payroll deductions credited to a Participant, nor any rights with respect to the exercise of an option or any rights to receive Common Shares hereunder may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 17 hereof) by the Participant. Any attempt to assign, transfer, pledge or otherwise dispose of such rights or amounts shall be without effect.
15.Application of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose to the extent permitted by applicable law, and the Company shall not be required to segregate such payroll deductions or contributions.
16.Statements. Participants will be provided with statements at least annually which shall set forth the contributions made by the Participant to the Plan, the Purchase Price of any Common Shares purchased with accumulated funds, the number of Common Shares purchased, and any payroll deduction amounts remaining in the Participant's notional account.
17.Designation of Beneficiary. A Participant may file, on forms supplied by the Committee, a written designation of beneficiary who is to receive any Common Shares and cash in respect of any fractional Common Shares, if any, from the Participant's ESPP Share Account under the Plan in the event of such Participant's death. In addition, a Participant may file a written designation of beneficiary who is to receive any cash withheld through payroll deductions and credited to the Participant's notional account in the event of the Participant's death prior to the Purchase Date of an Offering Period.
18.Adjustments Upon Changes in Capitalization; Dissolution or Liquidation; Corporate Transactions.
18.1Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Common Shares, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Shares or other securities of the Company, or other change in the Company's structure affecting the Common Shares occurs, then in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, the Committee will, in such manner as it deems equitable, adjust the number of shares and class of Common Shares that may be delivered under the Plan, the Purchase Price per share and the number of Common Shares covered by each outstanding option under the Plan, and the numerical limits of Section 7 and Section 13.
18.2Dissolution or Liquidation. Unless otherwise determined by the Committee, in the event of a proposed dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a new Purchase Date and the Offering Period will end immediately prior to the proposed dissolution or liquidation. The new Purchase Date will be before the date of the Company's proposed dissolution or liquidation. Before the new Purchase Date, the Committee will provide each Participant with written notice, which may be electronic, of the new Purchase Date and that the Participant's option will be exercised automatically on such date, unless before such time, the Participant has withdrawn from the Offering in accordance with Section 10.
18.3Corporate Transaction. In the event of a Corporate Transaction, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a parent or Subsidiary of such successor corporation. If the successor corporation refuses to assume or substitute the option, the Offering Period with respect to which the option relates will be shortened by setting a new Purchase Date on which the Offering Period will end. The new Purchase Date will occur before the date of the Corporate Transaction. Prior to the new Purchase Date, the Committee will provide each Participant with written notice, which may be electronic, of the new Purchase Date and that the Participant's option will be exercised automatically on such date, unless before such time, the Participant has withdrawn from the Offering in accordance with Section 10.
19.1Equal Rights and Privileges. Notwithstanding any provision of the Plan to the contrary and in accordance with Section 423 of the Code, all Eligible Employees who are granted options under the Plan shall have the same rights and privileges.
19.2No Right to Continued Service. Neither the Plan nor any compensation paid hereunder will confer on any Participant the right to continue as an Employee or in any other capacity.
19.3Rights as Shareholder. A Participant will become a shareholder with respect to the Common Shares that are purchased pursuant to options granted under the Plan when the shares are transferred to the Participant's ESPP Share Account. A Participant will have no rights as a shareholder with respect to Common Shares for which an election to participate in an Offering Period has been made until such Participant becomes a shareholder as provided above.
19.4Successors and Assigns. The Plan shall be binding on the Company and its successors and assigns.
19.5Entire Plan. This Plan constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans with respect to the subject matter hereof.
19.6Compliance with Law. The obligations of the Company with respect to payments under the Plan are subject to compliance with all applicable laws and regulations. Common Shares shall not be issued with respect to an option granted under the Plan unless the exercise of such option and the issuance and delivery of the Common Shares pursuant thereto shall comply with all applicable provisions of law, including, without limitation, the Securities Act, the Exchange Act, and the requirements of any stock exchange upon which the shares may then be listed.
19.7Notice of Disqualifying Dispositions. Each Participant shall give the Company prompt written notice of any disposition or other transfer of Common Shares acquired pursuant to the exercise of an option acquired under the Plan, if such disposition or transfer is made within two years after the Offering Date or within one year after the Purchase Date.
19.8Term of Plan. The Plan shall become effective on the Effective Date and, unless terminated earlier pursuant to Section 19.9, shall have a term of ten years.
19.9Amendment or Termination. The Committee may, in its sole discretion, amend, suspend or terminate the Plan at any time and for any reason. If the Plan is terminated, the Committee may elect to terminate all outstanding Offering Periods either immediately or once Common Shares have been purchased on the next Purchase Date (which may, in the discretion of the Committee, be accelerated) or permit Offering Periods to expire in accordance with their terms (and subject to any adjustment in accordance with Section 18). If any Offering Period is terminated before its scheduled expiration, all amounts that have not been used to purchase Common Shares will be returned to Participants (without interest, except as otherwise required by law) as soon as administratively practicable.
19.10Applicable Law. The laws of the State of Ohio shall govern all questions concerning the construction, validity and interpretation of the Plan, without regard to such state's conflict of law rules.
19.11Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted by the Board.
19.12Section 423. The Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code. Any provision of the Plan that is inconsistent with Section 423 of the Code shall be reformed to comply with Section 423 of the Code.
19.13Withholding. To the extent required by applicable Federal, state or local law, a Participant must make arrangements satisfactory to the Company for the payment of any withholding or similar tax obligations that arise in connection with the Plan.
19.14Severability. If any provision of the Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and the Plan shall be construed as if such invalid or unenforceable provision were omitted.
19.15Headings. The headings of sections herein are included solely for convenience and shall not affect the meaning of any of the provisions of the Plan.
Exhibit 10.3
STOCK APPRECIATION RIGHTS AGREEMENT
Participant:
Grant Date:
Number of SARs:
Exercise Price per SAR:
Expiration Date:
THIS STOCK APPRECIATION RIGHTS AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Participant set forth above (“you” or the “Participant”).
1.Award. Effective as of the Grant Date set forth above, the Company grants to you stock appreciation rights (the “SARs”) that entitle you to receive, upon exercise, an amount equal to the excess of (a) the Fair Market Value of a Common Share on the date of exercise, over (b) the Exercise Price (the excess, the “Appreciation Value”). These SARs are granted to you in consideration of the services to be rendered by you to the Company and are subject to the Agilysys, Inc. 2020 Equity Incentive Plan, as amended from time to time (the “Plan”), and is subject to the terms and conditions set forth in this Agreement.
2.Term. The term of the SAR shall expire on the Expiration Date set forth above, and these SARs shall expire at the close of regular business hours at the Company’s principal office on the Expiration Date, or, if earlier, on the applicable expiration date provided for in Sections 4 and 5 hereof.
3.Vesting. The SARs will vest as follows, subject to the other terms and conditions of this Agreement, including that you remain employed as of the specified dates:
Number of Shares As to Which SAR May be Exercised |
Date as of Which SAR May be Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
Notwithstanding anything herein to the contrary, except as otherwise may be provided in Section 4 and 5, vesting hereunder is subject to you remaining employed by the Company or its subsidiaries, divisions or affiliated businesses as of the date vesting would otherwise occur hereunder.
4.Exercisability.
(a)To the extent that SARs have become exercisable with respect to a number of Common Shares, you may thereafter exercise the SARs either as to all or any part of such Common Shares at any time or from time-to-time prior to expiration or other termination of the SAR. Except as provided in Sections 4 and 5, the SARs may not be exercised at any time unless you are an Employee at such time.
(b)If your Continuous Service is terminated by reason of your Retirement, all vested SARs shall remain exercisable and your right to exercise vested SARs shall terminate upon the earlier of (i) the date that is three months following your Retirement or (ii) the Expiration Date.
(c)If your Continuous Service is terminated due to your Disability, the SARs shall be deemed vested with respect to all Common Shares then subject to the SARs, and your right to exercise the SARs shall terminate upon the earlier of (i) the date that is one year from the date of such termination or (ii) the Expiration Date.
(d)If your Continuous Service is terminated for Cause, the SARs (whether vested or unvested) shall immediately terminate and cease to be exercisable.
(e)If your Continuous Service is terminated for any reason other than Cause, your death, Disability, or Retirement, the SARs may be exercised only to the extent of the exercise rights, if any, which had accrued as of the date of such termination pursuant to Section 3 hereof and which have not theretofore been exercised. Upon any termination of Continuous Service, such accrued exercise rights shall in any event terminate upon the earlier of (i) the date that is 90 days from the termination of Continuous Service or (ii) the Expiration Date.
(f)Nothing contained in this Agreement shall confer upon you any right to continue in the employ of the Company or any of its Subsidiaries, or to limit or interfere in any way with the right of the Company or any such Subsidiary to terminate your employment at any time, with or without cause.
5.Death of Participant. If your Continuous Service terminates as a result of your death while an Employee, such person or persons as shall have acquired, by will or by the laws of descent and distribution, the right to exercise the SARs (the “Personal Representative”) shall be entitled to exercise the SARs as to all of the Common Shares then subject to the SARs. Such exercise rights shall terminate upon the earlier of (a) the date one year from the date of your death or (b) the Expiration Date. If, after Retirement, you die prior to the Expiration Date, the Personal Representative shall be entitled to exercise all unexercised SARs, and such SARs shall remain exercisable, for the greater of the remainder of the exercise period described in Section 4(b) above or one year from the date of your death, but in no event shall the SARs be exercisable
2
after the Expiration Date. If you die during the one-year period commencing on the date of your termination of Continuous Service due to your Disability, the Personal Representative shall be entitled to exercise the SARs, and such SARs shall remain exercisable until one year from the date of such death, but in no event shall the SARs be exercisable after the Expiration Date.
6.Change in Control.
(a)In the event of a Change in Control, notwithstanding any provision of the Plan or this Agreement to the contrary, all SARs which have not vested pursuant to Section 3 above shall become vested and exercisable contingent on your Continuous Service through the end of the 12 month period beginning on the date of the Change in Control, and at the end of such 12 month period, the Company will pay to the Participant a lump sum cash amount equal to the Appreciation Value of the SARs based upon the price per Common Share received by other shareholders of the Company in the Change in Control; provided, however, if your Continuous Service is terminated by the Company for any reason other than Cause, or by your death or Disability, during the 12 month period beginning on the date of the Change in Control, the SARs shall become immediately vested and exercisable, and upon such event the Company will pay to the Participant the Appreciation Value of the SARs based upon the price per Common Share received by other shareholders of the Company in the Change in Control.
(b)In the event of a Change in Control, the Committee may, in its discretion and upon at least 10 days’ advance notice to the Participant, cancel the SARs and pay to the Participant the Appreciation Value of the SARs based upon the price per Common Share received or to be received by other shareholders of the Company in the Change in Control. Notwithstanding the foregoing, if at the time of a Change in Control, the Exercise Price of the SAR equals or exceeds the price paid for a Common Share in connection with the Change in Control, the Committee may cancel the SAR without the payment of consideration therefor.
7.Waiver of Terms and Conditions. The Committee has the power and authority to waive or accelerate the vesting provisions of the SARs, or to waive or modify the other terms and conditions of and restrictions and limitations on the SARs, provided such waiver or modification is not (a) materially detrimental to you, nor (b) inconsistent with the terms of the Plan and any employment agreement with you then in effect.
8.Method of Exercise. The SARs may be exercised, in whole or in part, by delivery to the Legal Department of the Company a completed notice of exercise in the form prescribed by the Legal Department (obtainable from the Secretary of the Company) by or on behalf of the person entitled to exercise the SARs, setting forth the number of Common Shares with respect to which SARs are being exercised. SARs will be settled in the Company’s Common Shares, net of the Exercise Price and any elected tax withholding pursuant to Section 9(b).
9.Withholding; Tax Liability. Prior to the settlement of the SARs in connection with the exercise of the SARs, the Participant must make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Committee may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of any such means:
3
(a) tendering a cash payment; or (b) authorizing the Company to withhold Common Shares otherwise issuable or deliverable to the Participant as a result of the exercise of the SARs, provided, however, that no Common Shares shall be withheld with a value exceeding the maximum amount of tax required to be withheld by Applicable Law. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (x) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting or exercise of the SARs and (y) does not commit to structure the SARs to reduce or eliminate the Participant’s liability for Tax-Related Items.
10.Issuance of Shares. Upon receipt by the Company prior to expiration of the SARs of a duly completed notice of exercise and, with respect to any SARs exercised by any person other than you, by proof satisfactory to the Committee of the right of such person to exercise the SARs, the Company shall cause its transfer agent to enter in its books and records on your behalf the net number of Shares derived after accounting for the Exercise Price and any required tax withholding, if so elected. You or such other person exercising the SARs shall not have any of the rights of a shareholder with respect to the Shares covered by the SARs until such Shares are book-entered on behalf of you or such other person exercising the SAR.
11.Regulatory Compliance. You agree that the Company shall not be obligated to issue any Shares upon exercise of the SARs if such issuance would cause the Company to violate any federal or state law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission and the Nasdaq Stock Market) having jurisdiction over the affairs of the Company. You agree that you will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Shares complies with the provisions of this section.
12.Investment Representation.
(a)You represent to the Company that you understand that, unless at the time of exercise of the SARs a registration statement under the Securities Act is in effect covering the Shares, as a condition to the exercise of the SARs, the Company may require you to represent that you are acquiring the Shares for your own account only and not with a view to, or for sale in connection with, any distribution of the Shares.
(b)You understand and agrees that the certificate or certificates representing any Shares acquired hereunder may bear an appropriate legend relating to registration and resale under federal and state securities laws.
13.Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.
4
14.Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.
15.Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.
16. Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.
17.Severability. In the event of the invalidity of any part or provision of the Plan or this Agreement, such invalidity will not affect the enforceability of any other part or provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
18.Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.
19.Transferability. The SARs shall not be transferable by you other than by will or the laws of descent and distribution, and the SARs may be exercised during your lifetime only by you (or such other person as may be permitted to exercise SARs on your behalf). No assignment or transfer of the SARS, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except to a designated beneficiary upon death by will or the laws of descent and distribution) will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the SARs will terminate and become of no further effect.
20.No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.
21.No Impact on Other Benefits. The value of the Participant’s SARs is not part of your normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
5
22.Recoupment Right. You acknowledge that if the Board or the Committee determines that the Company’s financials are restated due directly or indirectly to the fraud, ethical misconduct, intentional misconduct or a breach of fiduciary duty by you, the Board or Committee shall have sole discretion to take such actions, as permitted by law, as it deems necessary to cancel the SAR and to recover all or a portion of any gains realized in respect of the SAR, provided such recovery cannot extend back more than three years.
23.Section 409A. The Plan and this Agreement are intended to comply with Section 409A of the Code to the extent subject thereto. The Company reserves the right to unilaterally amend or modify the Plan or this Agreement, to the extent the Company considers it necessary or advisable, in its sole discretion, to comply with, or to ensure that the SARs granted hereunder are not subject to, Section 409A of the Code.
24.The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns. All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written employment agreement with you then in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written employment agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.
25.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
[Signature page follows]
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof as of the date first above written.
Company
___________________________________
Ramesh Srinivasan
President and Chief Executive Officer
Participant
«First_Name» «Last_Name»
7
Exhibit 10.4
STOCK APPRECIATION RIGHTS AGREEMENT
Participant:
Grant Date:
Number of SARs:
Exercise Price per SAR:
Expiration Date:
THIS STOCK APPRECIATION RIGHTS AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Participant set forth above (“you” or the “Participant”).
1.Award. Effective as of the Grant Date set forth above, the Company grants to you stock appreciation rights (the “SARs”) that entitle you to receive, upon exercise, an amount equal to the excess of (a) the Fair Market Value of a Common Share on the date of exercise, over (b) the Exercise Price (the excess, the “Appreciation Value”) with respect to a target number of Common Shares. The number of SARs that the Participant actually earns for the Performance Period will be determined by the level of achievement of the Performance Goals in accordance with Exhibit A attached hereto. These SARs are subject to the Agilysys, Inc. 2020 Equity Incentive Plan, as amended from time to time (the “Plan”), and is subject to the terms and conditions set forth in this Agreement.
2.Term. The term of the SAR shall expire on the Expiration Date set forth above, and these SARs shall expire at the close of regular business hours at the Company’s principal office on the Expiration Date, or, if earlier, on the applicable expiration date provided for in Sections 4 and 5 hereof.
3.Performance Goals. The number of SARs earned by the Participant will be determined at the end of the Performance Period based on the level of achievement of the Performance Goals in accordance with Exhibit A. All determinations of whether Performance Goals have been achieved, the number of SARs earned by the Participant, and all other matters related to this Section 3 shall be made by the Committee in its sole discretion. Promptly following the completion of the Performance Period (and no later than 30 days following the end of the Performance Period), the Committee will review and certify in writing (a) whether and to what extent the Performance Goals for the Performance Period have been achieved, and (b) the number of SARs that the Participant shall earn, if any, subject to compliance with the requirements of Section 4. Such certification shall be final, conclusive and binding on the Participant and on all other Persons, to the maximum extent permitted by Applicable Laws.
4.Vesting. The SARs are subject to forfeiture until they vest. Except as otherwise provided herein, the SARs will vest and become nonforfeitable on the day after the achievement of the minimum threshold Performance Goals for payout set forth in Exhibit A hereto, subject to the Participant’s Continuous Service through such vesting date. The number of SARs that vest and become payable under this Agreement shall be determined by the Committee based on the level of achievement of the Performance Goals set forth in Exhibit A and shall be rounded to the nearest whole SAR.
5.Exercisability.
(a)To the extent that SARs have become exercisable with respect to a number of Common Shares, you may thereafter exercise the SARs either as to all or any part of such Common Shares at any time or from time-to-time prior to expiration or other termination of the SAR. Except as provided in Sections 4 and 5, the SARs may not be exercised at any time unless you are an Employee at such time.
(b)If your Continuous Service is terminated by reason of your Retirement, all previously earned and vested SARs shall remain exercisable and your right to exercise vested SARs shall terminate upon the earlier of (i) the date that is three months following your Retirement or (ii) the Expiration Date.
(c)If your Continuous Service is terminated due to your Disability, the Participant shall be deemed to have earned and vested on such date in a pro rata portion of the Target Number of SARs calculated by multiplying the Target Number of SARs by a fraction, the numerator of which equals the number of days that the Participant was employed during the Performance Period and the denominator of which equals the total number of days in the Performance Period. Your right to exercise the SARs shall terminate upon the earlier of (i) the date that is one year from the date of such termination or (ii) the Expiration Date.
(d)If your Continuous Service is terminated for Cause, the SARs (whether earned or not, vested or unvested) shall immediately terminate and cease to be exercisable.
(e)If your Continuous Service is terminated for any reason other than Cause, your death, Disability, or Retirement, the SARs may be exercised only to the extent of the exercise rights, if any, which had accrued as of the date of such termination pursuant to Section 3 hereof and which have not theretofore been exercised. Upon any termination of Continuous Service, such accrued exercise rights shall in any event terminate upon the earlier of (i) the date that is 90 days from the termination of Continuous Service or (ii) the Expiration Date.
(f)Nothing contained in this Agreement shall confer upon you any right to continue in the employ of the Company or any of its Subsidiaries, or to limit or interfere in any way with the right of the Company or any such Subsidiary to terminate your employment at any time, with or without cause.
6.Death of Participant. If your Continuous Service terminates as a result of your death while an Employee, you will be deemed to have earned and vested on such date in a pro rata
2
portion of the Target Number of SARs calculated by multiplying the Target Number of SARs by a fraction, the numerator of which equals the number of days that the Participant was employed during the Performance Period and the denominator of which equals the total number of days in the Performance Period. As a result of your death, such person or persons as shall have acquired, by will or by the laws of descent and distribution, the right to exercise the SARs (the “Personal Representative”) shall be entitled to exercise the SARs as to all of the Common Shares then subject to the SARs. Such exercise rights shall terminate upon the earlier of (a) the date one year from the date of your death or (b) the Expiration Date. If, after Retirement, you die prior to the Expiration Date, the Personal Representative shall be entitled to exercise all unexercised SARs, and such SARs shall remain exercisable, for the greater of the remainder of the exercise period described in Section 5(b) above or one year from the date of your death, but in no event shall the SARs be exercisable after the Expiration Date. If you die during the one-year period commencing on the date of your termination of Continuous Service due to your Disability, the Personal Representative shall be entitled to exercise the SARs, and such SARs shall remain exercisable until one year from the date of such death, but in no event shall the SARs be exercisable after the Expiration Date.
7.Change in Control.
(a)In the event of a Change in Control, notwithstanding any provision of the Plan or this Agreement to the contrary, the Target Number of SARs shall become vested and exercisable if the per share consideration payable in connection with the Change in Control is equal to or greater than $45 per share contingent on your Continuous Service through the end of the 12 month period beginning on the date of the Change in Control, and at the end of such 12 month period, the Company will pay to the Participant a lump sum cash amount equal to the Appreciation Value of the SARs based upon the price per Common Share received by other shareholders of the Company in the Change in Control. In the event of a Change in Control in which the per share consideration payable is less than $45 per share, then a portion of the Target Number of SARs will vest and become exercisable calculated by multiplying the Target Number of SARs by a fraction, the numerator of which is the Exercise Price per SAR and the denominator of which is the per share consideration payable on a Change in Control contingent on your Continuous Service through the end of the 12 month period beginning on the date of the Change in Control, and at the end of such 12 month period, the Company will pay to the Participant a lump sum cash amount equal to the Appreciation Value of such proportionate SARs based upon the price per Common Share received by other shareholders of the Company in the Change in Control. Notwithstanding the foregoing, if the Participant’s Continuous Service is terminated by the Company for any reason other than Cause, or by your death or Disability, during the 12 month period beginning on the date of the Change in Control, the Target Number of SARs, or the proportionate amount of SARs in the event of a Change in Control in which the per share consideration payable is less than $45 per share, shall become immediately vested and exercisable, and upon such event the Company will pay to the Participant the Appreciation Value of the SARs vesting pursuant to this Section 7(a) based upon the price per Common Share received by other shareholders of the Company in the Change in Control. Any SARs which do not vest upon a Change in Control pursuant to this Section 7(a) shall terminate effective as of the date of the Change in Control without any consideration payable therefor.
3
(b)In the event of a Change in Control, the Committee may, in its discretion and upon at least 10 days’ advance notice to the Participant, cancel the SARs and pay to the Participant the Appreciation Value of the SARs based upon the price per Common Share received or to be received by other shareholders of the Company in the Change in Control. Notwithstanding the foregoing, if at the time of a Change in Control, the Exercise Price of the SAR equals or exceeds the price paid for a Common Share in connection with the Change in Control, the Committee may cancel the SAR without the payment of consideration therefor.
8.Waiver of Terms and Conditions. The Committee has the power and authority to waive or accelerate the vesting provisions of the SARs, or to waive or modify the other terms and conditions of and restrictions and limitations on the SARs, provided such waiver or modification is not (a) materially detrimental to you, nor (b) inconsistent with the terms of the Plan and any employment agreement with you then in effect.
9.Method of Exercise. The SARs may be exercised, in whole or in part, by delivery to the Legal Department of the Company a completed notice of exercise in the form prescribed by the Legal Department (obtainable from the Secretary of the Company) by or on behalf of the person entitled to exercise the SARs, setting forth the number of Common Shares with respect to which SARs are being exercised. SARs will be settled in the Company’s Common Shares, net of the Exercise Price and any elected tax withholding pursuant to Section 10(b).
10.Withholding; Tax Liability. Prior to the settlement of the SARs in connection with the exercise of the SARs, the Participant must make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Committee may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of any such means: (a) tendering a cash payment; or (b) authorizing the Company to withhold Common Shares otherwise issuable or deliverable to the Participant as a result of the exercise of the SARs, provided, however, that no Common Shares shall be withheld with a value exceeding the maximum amount of tax required to be withheld by Applicable Law. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (x) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting or exercise of the SARs and (y) does not commit to structure the SARs to reduce or eliminate the Participant’s liability for Tax-Related Items.
11.Issuance of Shares. Upon receipt by the Company prior to expiration of the SARs of a duly completed notice of exercise and, with respect to any SARs exercised by any person other than you, by proof satisfactory to the Committee of the right of such person to exercise the SARs, the Company shall cause its transfer agent to enter in its books and records on your behalf the net number of Shares derived after accounting for the Exercise Price and any required tax withholding, if so elected. You or such other person exercising the SARs shall not have any of the rights of a shareholder with respect to the Shares covered by the SARs until such Shares are book-entered on behalf of you or such other person exercising the SAR.
4
12.Regulatory Compliance. You agree that the Company shall not be obligated to issue any Shares upon exercise of the SARs if such issuance would cause the Company to violate any federal or state law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission and the Nasdaq Stock Market) having jurisdiction over the affairs of the Company. You agree that you will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Shares complies with the provisions of this section.
13.Investment Representation.
(a)You represent to the Company that you understand that, unless at the time of exercise of the SARs a registration statement under the Securities Act is in effect covering the Shares, as a condition to the exercise of the SARs, the Company may require you to represent that you are acquiring the Shares for your own account only and not with a view to, or for sale in connection with, any distribution of the Shares.
(b)You understand and agrees that the certificate or certificates representing any Shares acquired hereunder may bear an appropriate legend relating to registration and resale under federal and state securities laws.
14.Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.
15.Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.
16.Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.
17. Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.
18.Severability. In the event of the invalidity of any part or provision of the Plan or this Agreement, such invalidity will not affect the enforceability of any other part or provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
5
19.Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.
20.Transferability. The SARs shall not be transferable by you other than by will or the laws of descent and distribution, and the SARs may be exercised during your lifetime only by you (or such other person as may be permitted to exercise SARs on your behalf). No assignment or transfer of the SARS, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except to a designated beneficiary upon death by will or the laws of descent and distribution) will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the SARs will terminate and become of no further effect.
21.No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.
22.No Impact on Other Benefits. The value of the Participant’s SARs is not part of your normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
23.Recoupment Right. You acknowledge that if the Board or the Committee determines that the Company’s financials are restated due directly or indirectly to the fraud, ethical misconduct, intentional misconduct or a breach of fiduciary duty by you, the Board or Committee shall have sole discretion to take such actions, as permitted by law, as it deems necessary to cancel the SAR and to recover all or a portion of any gains realized in respect of the SAR, provided such recovery cannot extend back more than three years.
24.Section 409A. The Plan and this Agreement are intended to comply with Section 409A of the Code to the extent subject thereto. The Company reserves the right to unilaterally amend or modify the Plan or this Agreement, to the extent the Company considers it necessary or advisable, in its sole discretion, to comply with, or to ensure that the SARs granted hereunder are not subject to, Section 409A of the Code.
25.The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns. All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written employment agreement with you then
6
in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written employment agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.
26.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof as of the date first above written.
Company
___________________________________
Ramesh Srinivasan
President and Chief Executive Officer
Participant
«First_Name» «Last_Name»
7
Exhibit 10.4
EXHIBIT A
Performance Period
The Performance Period shall commence on June 2, 2020 and end on June 30, 2023.
Performance Goals
All of the Target Number of SARs are earned if, at any time during the Performance Period, the closing price of a Common Share shall average $45 per share or higher for a period of at least ten (10) consecutive trading days (the “Price Target”). The Price Target shall be proportionately adjusted for any stock splits, reverse stock splits or stock dividends of the Common Shares in accordance with the terms of the Plan. The Committee reserves the right to adjust the Performance Goals in the event of or in response to the occurrence of unusual or infrequent items.
Exhibit 10.5
RESTRICTED STOCK AWARD AGREEMENT
Participant:
Date of Grant:
Common Shares:
THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Participant set forth above (“you” or the “Participant”).
1.Award. As of the Grant Date, and subject to the terms and conditions of this Agreement, the Company hereby grants you an award (the “Award”) of the number of Common Shares set forth above (the “Restricted Stock”). This Award is granted to you in consideration of the services you will render to the Company and is made pursuant to the Agilysys, Inc. 2020 Equity Incentive Plan, as amended from time to time (the “Plan”).
2.Terms of Award.
(a)Entry of Shares. The Restricted Stock subject to the Award shall be entered in your name in book-entry format (the “Book-Entry”) by the transfer agent of the Company (the “Transfer Agent”) subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.
(b)Restrictions. Until such time as the Restricted Stock has vested, you shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, alienate, attach, encumber or charge any Restricted Stock (including any Common Shares issued as the result of the investment of cash dividends attributable to the Restricted Stock) or any interest therein in any manner whatsoever, any attempt to so do shall be ineffective and your rights to the Restricted Stock shall immediately terminate and such shares shall be forfeited, and the Company shall not be required to transfer on its books any such Restricted Stock which purportedly shall have attempted to have been sold, assigned, transferred, conveyed, disposed of, pledged, hypothecated, burdened, alienated, attached, encumbered or charged in violation of this Agreement.
(c)Vesting. The Restricted Stock will vest as follows, subject to the other terms and conditions of this Agreement, including that you remain in Continuous Services as of the specified dates:
[_____________] on [_____________]
[_____________] on [_____________]
[_____________] on [_____________]
[_____________] on [_____________]
[_____________] on [_____________]
[_____________] on [_____________]
Notwithstanding anything herein to the contrary, except as otherwise may be provided in Sections 2 or 3 hereof, vesting hereunder is subject to you remaining an Employee as of the date vesting would otherwise occur hereunder.
(d)Vesting – Death or Disability. The foregoing vesting schedule notwithstanding, in the event of a Participant’s death or if the Participant’s Continuous Service is terminated due to the Participant’s Disability, 100% of the unvested Restricted Stock shall vest as of the date of such death or termination.
(e)Vested Shares - Removal of Restrictions; Payment. Upon the Restricted Stock becoming vested, the Company shall cause the Transfer Agent to move the Book-Entry representing such Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(g), to a non-restricted account, thereby removing all restrictions hereunder, and shall cause the Transfer Agent to notify you that the Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(g), are free and clear of all restrictions (but subject to any applicable securities law restrictions or other restrictions imposed upon Common Shares generally).
(f)Forfeiture. If your Continuous Service terminates prior to any portion of the Restricted Stock becoming vested, then the non-vested Restricted Stock as of the date of his or her termination of employment, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Stock, shall be forfeited, and you and all persons who might claim through him or her will have no further interests under this Agreement, the Restricted Stock or the Award of any kind whatsoever.
(g)Voting Rights and Dividends. You shall have all of the voting rights attributable to the Restricted Stock issued pursuant to this Agreement. Cash dividends declared and paid by the Company with respect to the Restricted Stock shall not be paid to you. Rather, those cash dividends shall be invested in Common Shares which shall be subject to the vesting provisions of Section 2(c) and the other terms and conditions of this Agreement. By executing this Agreement, you irrevocably consent to: (i) the Company’s withholding of the payment of those dividends; and (ii) the investment of those dividends in Common Shares issued in your name and held in book-entry format by the Transfer Agent subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement. If you forfeit any rights you have under this Agreement, you shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Restricted Stock and shall no longer be entitled to vote or receive dividends on such shares.
3.Change in Control. Upon a Change in Control prior to the termination of this Agreement, Restricted Stock which has not vested and has not otherwise been canceled or forfeited as of the date of the Change in Control, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Stock, shall vest as of the date of the Change in Control contingent on your Continuous Service through the end of the 12 month period beginning on the date of the Change in Control (and will remain subject to the restrictions
2
in Section 2(b) during such period). At the end of such 12 month period, the Company will pay to the Participant a lump sum cash amount equal to the Restricted Stock plus any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Stock multiplied by the price per Common Share received by other shareholders of the Company in the Change in Control; provided, however, if your Continuous Service is terminated by the Company for any reason other than Cause, or by your death or Disability, during the 12 month period beginning on the date of the Change in Control, the Restricted Stock shall become immediately vested, and upon such event the Company will pay to the Participant the price per Common Share received by other shareholders of the Company in the Change in Control. If the Participant’s Continuous Service is terminated by the Company for Cause within the 12 month period following the Change in Control, all Restricted Stock subject to the Award shall be forfeited, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Stock, and you and all persons who might claim through him or her will have no further interests under this Agreement, the Restricted Stock or the Award of any kind whatsoever.
4.Effect of Corporate Reorganization or Other Changes Affecting Number or Kind of Shares. The provisions of this Agreement will be applicable to the Restricted Stock, Common Shares or other securities, if any, which may be acquired by you related to the Restricted Stock as a result of a liquidation, recapitalization, reorganization, redesignation or reclassification, split-up, reverse split, merger, consolidation, dividend, combination or exchange of Restricted Stock or Common Shares, exchange for other securities, a sale of all or substantially all assets or the like. The Committee may appropriately adjust the number and kind of Restricted Stock, Common Shares or other securities described in this Agreement to reflect such a change.
5.Nontransferability of Shares. Upon the acquisition of any Common Shares pursuant to this Agreement, if the Common Shares have not been registered under the Securities Act, they may not be sold, transferred or otherwise disposed of unless a registration statement under the Act with respect to the Common Shares has become effective or unless you establish to the satisfaction of the Company that an exemption from such registration is available. You will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or this Agreement. The Participant understands that the Company is under no obligation to register the Common Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange.
6.Legend. If certificates representing the Restricted Stock subject to the Award are requested by you, the certificates for Restricted Stock, and any Common Shares issued as a result of the investment of cash dividends attributed to the Restricted Stock, shall contain the following or a substantially similar legend:
“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 AGILYSYS, INC. 2020 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY. A COPY OF THIS PLAN AND AWARD
3
AGREEMENT ARE ON FILE IN THE OFFICE OF THE SECRETARY OF THE COMPANY.”
7.Internal Revenue Code Section 409A. This Agreement, Award and the compensation and benefits hereunder are intended to meet the requirements for exemption from coverage under Code Section 409A for restricted property set forth in Treas. Reg. Section 1.409A-1(b)(6), as well as any other applicable exemption, and shall be construed and administered accordingly. If the Company determines that any compensation or benefits awarded or payable under this Agreement may be subject to taxation under Code Section 409A, the Company shall, after consultation with you, have the authority to adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to exempt the compensation and benefits payable under this Agreement from Code Section 409A or meet the requirements of Code Section 409A. In no event, however, shall this Section 7 or any other provisions of the Plan or this Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or awards or payments under, this Agreement, and the Company shall have no responsibility for tax consequences of any kind to you (or any other person or entity), whether or not such consequences are contemplated at the time of entry into this Agreement, or result from the terms or operation of this Agreement.
8.Withholding; Tax Liability.
(a)The Participant shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation payable to the Participant pursuant to the Plan, the amount of any required withholding taxes in respect of the Restricted Stock and to take all such other action as the Committee deems necessary to satisfy all obligations for the payment of such withholding taxes. The Committee may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of any such means: (i) tendering a cash payment; or (ii) authorizing the Company to withhold Common Shares otherwise issuable or deliverable to the Participant as a result of the vesting of the Restricted Stock, provided, however, that no Common Shares shall be withheld with a value exceeding the maximum amount of tax required to be withheld by Applicable Law.
(b)Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting of the Restricted Stock or the subsequent sale of any shares; and (ii) does not commit to structure the Restricted Stock to reduce or eliminate the Participant’s liability for Tax-Related Items.
(c)The Participant may make an election under Section 83(b) of the Code (an “83(b) Election”) with respect to the Restricted Stock. Any such election must be made within 30 days after the Grant Date. If the Participant elects to make an 83(b) Election, the Participant shall provide the Company with a copy of an executed version and satisfactory evidence of the filing of the executed 83(b) Election with the US Internal Revenue Service. The Participant agrees to
4
assume full responsibility for ensuring that the 83(b) Election is actually and timely filed with the US Internal Revenue Service and for all tax consequences resulting from the 83(b) Election.
9.No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed to grant you any right to remain an employee with the Company or its affiliates, or to be employed in any particular position therewith. The Plan and this Agreement do not constitute a contract of employment, and the Company and each affiliate expressly reserves the right, at any time, to terminate your employment free from liability, or any claim, under the Plan and this Agreement, except as may be specifically provided therein.
10.Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.
11.Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.
12.Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.
13.Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.
14.Severability. In the event of the invalidity of any part or provision of the Plan or this Agreement, such invalidity will not affect the enforceability of any other part or provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by Applicable Law.
15.Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.
16.Transferability. The Award shall not be transferable by you other than by will or the laws of descent and distribution.
17.No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with
5
respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.
18.No Impact on Other Benefits. The value of the Participant’s Restricted Stock is not part of your normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
19.Recoupment Right. You acknowledge that if the Board or the Committee determines that the Company’s financials are restated due directly or indirectly to the fraud, ethical misconduct, intentional misconduct or a breach of fiduciary duty by you, the Board or Committee shall have sole discretion to take such actions, as permitted by law, as it deems necessary to cancel the SAR and to recover all or a portion of any gains realized in respect of the SAR, provided such recovery cannot extend back more than three years.
20.The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns. All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written employment agreement with you then in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written employment agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.
21.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
[Signature page follows]
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof as of the date first above written.
Company
___________________________________
Ramesh Srinivasan
President and Chief Executive Officer
Participant
«First_Name» «Last_Name»
7
Exhibit 10.6
RESTRICTED STOCK AWARD AGREEMENT
Participant:
Date of Grant:
Common Shares:
THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into as of the Grant Date set forth above by and between Agilysys, Inc., an Ohio corporation (the “Company”), and the Participant set forth above (“you” or the “Participant”).
1.Award. As of the Grant Date, and subject to the terms and conditions of this Agreement, the Company hereby grants you an award (the “Award”) of the number of Common Shares set forth above (the “Restricted Stock”). This Award is granted to you in consideration of the services you will render to the Company and is made pursuant to the Agilysys, Inc. 2020 Equity Incentive Plan, as amended from time to time (the “Plan”).
2.Terms of Award.
(a)Entry of Shares. The Restricted Stock subject to the Award shall be entered in your name in book-entry format (the “Book-Entry”) by the transfer agent of the Company (the “Transfer Agent”) subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.
(b)Restrictions. Until such time as the Restricted Stock has vested, you shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, alienate, attach, encumber or charge any Restricted Stock (including any Common Shares issued as the result of the investment of cash dividends attributable to the Restricted Stock) or any interest therein in any manner whatsoever, any attempt to so do shall be ineffective and your rights to the Restricted Stock shall immediately terminate and such shares shall be forfeited, and the Company shall not be required to transfer on its books any such Restricted Stock which purportedly shall have attempted to have been sold, assigned, transferred, conveyed, disposed of, pledged, hypothecated, burdened, alienated, attached, encumbered or charged in violation of this Agreement.
(c)Vesting. The Restricted Stock will vest as follows, subject to the other terms and conditions of this Agreement, including that you remain in Continuous Services as of the specified dates:
[_____________] on [_____________]
(d)Vesting – Death or Disability. The foregoing vesting schedule notwithstanding, in the event of a Participant’s death or if the Participant’s Continuous Service is terminated due to the Participant’s Disability, 100% of the unvested Restricted Stock shall vest as of the date of such death or termination.
(e)Vested Shares - Removal of Restrictions; Payment. Upon the Restricted Stock becoming vested, the Company shall cause the Transfer Agent to move the Book-Entry representing such Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(g), to a non-restricted account, thereby removing all restrictions hereunder, and shall cause the Transfer Agent to notify you that the Common Shares, together with any Common Shares issued as a result of the investment of cash dividends attributable to such Common Shares pursuant to Section 2(g), are free and clear of all restrictions (but subject to any applicable securities law restrictions or other restrictions imposed upon Common Shares generally).
(f)Forfeiture. If your Continuous Service terminates for any reason other than Cause prior to any portion of the Restricted Stock becoming vested, then the non-vested Restricted Stock as of the date of termination, together with any Common Shares issued as a result of the investment of cash dividends attributable to the Restricted Stock, shall immediately vest on a pro-rata basis. The pro-rata basis shall be determined by multiplying the number of Restricted Stock subject to the Award times the number of full months of Continuous Service since your most recent election or appointment divided by twelve months.
(g)Voting Rights and Dividends. You shall have all of the voting rights attributable to the Restricted Stock issued pursuant to this Agreement. Cash dividends declared and paid by the Company with respect to the Restricted Stock shall not be paid to you. Rather, those cash dividends shall be invested in Common Shares which shall be subject to the vesting provisions of Section 2(c) and the other terms and conditions of this Agreement. By executing this Agreement, you irrevocably consent to: (i) the Company’s withholding of the payment of those dividends; and (ii) the investment of those dividends in Common Shares issued in your name and held in book-entry format by the Transfer Agent subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement. If you forfeit any rights you have under this Agreement, you shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Restricted Stock and shall no longer be entitled to vote or receive dividends on such shares.
3.Change in Control. Upon a Change in Control prior to the termination of this Agreement, Restricted Stock which has not vested and has not otherwise been canceled or forfeited as of the date of the Change in Control shall immediately vest.
4.Effect of Corporate Reorganization or Other Changes Affecting Number or Kind of Shares. The provisions of this Agreement will be applicable to the Restricted Stock, Common Shares or other securities, if any, which may be acquired by you related to the Restricted Stock as a result of a liquidation, recapitalization, reorganization, redesignation or reclassification, split-up, reverse split, merger, consolidation, dividend, combination or exchange of Restricted Stock or Common Shares, exchange for other securities, a sale of all or substantially all assets or the like. The Committee may appropriately adjust the number and kind of Restricted Stock, Common Shares or other securities described in this Agreement to reflect such a change.
5.Nontransferability of Shares. Upon the acquisition of any Common Shares pursuant to this Agreement, if the Common Shares have not been registered under the Securities Act, they may not be sold, transferred or otherwise disposed of unless a registration statement under the
2
Act with respect to the Common Shares has become effective or unless you establish to the satisfaction of the Company that an exemption from such registration is available. You will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or this Agreement. The Participant understands that the Company is under no obligation to register the Common Shares with the Securities and Exchange Commission, any state securities commission or any stock exchange.
6.Legend. If certificates representing the Restricted Stock subject to the Award are requested by you, the certificates for Restricted Stock, and any Common Shares issued as a result of the investment of cash dividends attributed to the Restricted Stock, shall contain the following or a substantially similar legend:
“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 AGILYSYS, INC. 2020 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY. A COPY OF THIS PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICE OF THE SECRETARY OF THE COMPANY.”
7.Internal Revenue Code Section 409A. This Agreement, Award and the compensation and benefits hereunder are intended to meet the requirements for exemption from coverage under Code Section 409A for restricted property set forth in Treas. Reg. Section 1.409A-1(b)(6), as well as any other applicable exemption, and shall be construed and administered accordingly. If the Company determines that any compensation or benefits awarded or payable under this Agreement may be subject to taxation under Code Section 409A, the Company shall, after consultation with you, have the authority to adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to exempt the compensation and benefits payable under this Agreement from Code Section 409A or meet the requirements of Code Section 409A. In no event, however, shall this Section 7 or any other provisions of the Plan or this Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or awards or payments under, this Agreement, and the Company shall have no responsibility for tax consequences of any kind to you (or any other person or entity), whether or not such consequences are contemplated at the time of entry into this Agreement, or result from the terms or operation of this Agreement.
8.Tax Liability. The ultimate liability for any or all income tax, social insurance, payroll tax, or other tax or tax-related withholding (“Tax-Related Items”) is and remains the Participant’s responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting of the Restricted Stock or the subsequent sale of any shares; and (ii) does not commit to structure the Restricted Stock to reduce or eliminate the Participant’s liability for Tax-Related Items.
3
9.Notices. All notices or other communications relating to the Plan and this Agreement as it relates to you shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to you at your address then on file with the Company. You are responsible for notifying the Company of a change in your address.
10.Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.
11.Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect your rights without your written consent. Notwithstanding the foregoing, the Company may, after consulting with you, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.
12.Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.
13.Severability. In the event of the invalidity of any part or provision of the Plan or this Agreement, such invalidity will not affect the enforceability of any other part or provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by Applicable Law.
14.Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and you and its and your respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.
15.Transferability. The Award shall not be transferable by you other than by will or the laws of descent and distribution.
16.No Further Liability. The liability of the Company, its affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third-party beneficiaries are intended.
17.The Plan. The Plan is hereby incorporated by reference and made a part of this Agreement for all purposes, and when taken together with this Agreement, shall govern the rights of you and the Company with respect to the Award. You irrevocably agree to, and accept, the terms, conditions and restrictions of the Plan and this Agreement on your own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns.
4
All capitalized terms used in this Agreement, unless otherwise defined, shall have the meaning ascribed to them under the Plan. In the event and to the extent of an express conflict or inconsistency among any of this Agreement, any written employment agreement with you then in effect, the provisions of the Plan, and any rules, regulations, and interpretations of the Plan adopted by the Committee, then the following order of priority shall control; (a) any written employment agreement then in effect, (b) the Plan, (c) any rules, regulations, and interpretations of the Plan adopted by the Committee, and (d) this Agreement; and to the extent that any other document controls this Agreement shall be deemed to be modified accordingly.
18.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
[Signature page follows]
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and agree to the terms hereof as of the date first above written.
Company
___________________________________
Ramesh Srinivasan
President and Chief Executive Officer
Participant
«First_Name» «Last_Name»
6
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Ramesh Srinivasan, 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 officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) 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
d) 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 officers 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.
Date: January 27, 2021
/s/ Ramesh Srinivasan |
|
|
Ramesh Srinivasan |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, William David Wood III, 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 officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) 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
d) 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 officers 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.
Date: January 27, 2021
/s/ William David Wood III |
|
|
William David Wood III |
|
Chief Financial Officer |
|
(Principal Financial Officer) |
Exhibit 31.3
CERTIFICATION OF THE CORPORATE CONTROLLER AND TREASURER
I, Chris J. Robertson, 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 officers 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) 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
d) 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 officers 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.
Date: January 27, 2021
By: |
/s/ Chris J. Robertson |
|
Chris J. Robertson |
|
Corporate Controller and Treasurer |
|
(Principal Accounting Officer) |
Exhibit 32
CERTIFICATION
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Ramesh Srinivasan, the Chief Executive Officer, William David Wood III, the Chief Financial Officer, and Chris J. Robertson, the Corporate Controller and Treasurer, of Agilysys, Inc. (the “Company”), hereby certify, that, to their knowledge:
1. |
The Quarterly Report on Form 10-Q of the Company for the period ended December 31, 2020 (the “ Report ”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: January 27, 2021
|
|
|
|
By: |
/s/ Ramesh Srinivasan |
|
Ramesh Srinivasan |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
|
|
|
/s/ William David Wood III |
|
William David Wood III |
|
Chief Financial Officer |
|
(Principal Financial Officer) |
|
|
|
/s/ Chris J. Robertson |
|
Chris J. Robertson |
|
Corporate Controller and Treasurer |
|
(Principal Accounting Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Mar. 31, 2020 |
---|---|---|
Allowance for doubtful accounts receivable | $ 1,334 | $ 1,634 |
Common stock, stated value | $ 0.30 | $ 0.30 |
Common stock, shares authorized | 80,000,000 | 80,000,000 |
Common stock, shares issued | 31,606,831 | 31,606,831 |
Common stock, shares outstanding | 23,637,552 | 23,609,398 |
Treasury shares | 7,969,279 | 7,997,433 |
Series A Convertible Preferred Stock [Member] | ||
Preferred Stock, No Par Value |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net (loss) income | $ (2,070) | $ (2,582) | $ 3,280 | $ (7,075) |
Other comprehensive (loss) income, net of tax: | ||||
Unrealized foreign currency translation adjustments | (64) | (31) | (213) | 30 |
Total comprehensive (loss) income | $ (2,134) | $ (2,613) | $ 3,067 | $ (7,045) |
Nature of Operations and Financial Statement Presentation |
9 Months Ended |
---|---|
Dec. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Nature of Operations and Financial Statement Presentation |
1. Nature of Operations and Financial Statement Presentation Nature of Operations Agilysys has been a leader in hospitality software for more than 40 years, delivering innovative guest-centric technology solutions for gaming, hotels, resorts and cruise, corporate foodservice management, restaurants, universities, stadia, airport foodservice and healthcare. Agilysys offers the most comprehensive solutions in the industry, including point of sale (POS), property management systems (PMS), inventory and procurement, payments, and related applications, to manage the entire guest journey. The Company has just one reportable segment serving the global hospitality industry. Agilysys operates across the Americas, Europe, the Middle East, Africa, Asia-Pacific, and India with headquarters located in Alpharetta, GA. COVID-19 Pandemic On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all geographic regions in which we do business, and government authorities around the world have implemented extensive measures attempting to contain the spread and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, closures of non-essential businesses, and social distancing requirements. The global spread of COVID-19 and the actions taken in response have negatively impacted us, our customers, our suppliers and the many communities in which we do business. The overall extent and duration of economic and business disruption is not currently known. In response to these challenges, we quickly adjusted our business policies and practices for employees to work from home and have taken other measures to continue our operations with safety as our top priority. We continuously monitor and assess the impact of the COVID-19 pandemic, including recommendations and orders from government and public health authorities. We are working to help our customers maintain their operations during this difficult time while managing our teams to be prepared for continuously changing demand for our products and services. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview— Recent Developments” of this report for a more detailed discussion of the impact of COVID-19 on our business. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include our accounts consolidated with our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on March 31st. References to a particular year refer to the fiscal year ending in March of that year. For example, fiscal 2021 refers to the fiscal year ending March 31, 2021. Our unaudited interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to the Quarterly Report on Form 10-Q (Quarterly Report) under the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10-01 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures normally included in the annual 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 December 31, 2020, as well as the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity for the three months and nine months ended December 31, 2020 and 2019, and Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2020 and 2019, are unaudited. However, these financial statements have been prepared on the same basis as those in the audited annual financial statements, except for the recently adopted accounting pronouncements described below. In the opinion of management, all adjustments of a recurring nature necessary to fairly state the results of operations, financial position, and cash flows have been made. These unaudited interim financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2020, filed with the Securities and Exchange Commission (SEC) on May 22, 2020. Use of estimates Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Considering the currently unknown extent and duration of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply to certain of our significant accounting policies. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts COVID-19 as of December 31, 2020 and through the date of this report. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. |
Summary of Significant Accounting Policies |
9 Months Ended |
---|---|
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies |
2. Summary of Significant Accounting Policies A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2020, included in our Annual Report on Form 10-K. We describe our accounting policy for Series A convertible preferred stock further below. There have been no other material changes to our significant accounting policies from those disclosed therein. Adopted and Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently assessing the impact of adopting this standard on our consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, Income Taxes, and is meant to simplify and reduce the cost of accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently reviewing this standard but do not expect it will have a material impact on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. We adopted ASU 2018-15 as of April 1, 2020 with no impact on our condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. We adopted ASU 2018-13 as of April 1, 2020 with no impact on our condensed consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We adopted ASU 2017-04 as of April 1, 2020 with no impact on our condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. This new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets. We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements. |
Revenue Recognition |
9 Months Ended |
---|---|
Dec. 31, 2020 | |
Revenue From Contract With Customer [Abstract] | |
Revenue Recognition |
3. Revenue Recognition Our customary business practice is to enter into legally enforceable written contracts with our customers. The majority of our contracts are governed by a master agreement between us and the customer, which sets forth the general terms and conditions of any individual contract between the parties, which is then supplemented by a customer purchase order to specify the different goods and services, the associated prices, and any additional terms for an individual contract. Performance obligations specific to each individual contract are defined within the terms of each purchase order. Each performance obligation is identified based on the goods and services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which we will be entitled and expect to receive in exchange for transferring goods or services to the customer. Typically, our contracts do not provide our customer with any right of return or refund; we do not constrain the contract price as it is probable that there will not be a significant revenue reversal due to a return or refund. Typically, our customer contracts contain one or more of the following goods or services which constitute performance obligations. Our software licenses typically provide for a perpetual right to use our software. Generally, our contracts do not provide significant services of integration, and customization and installation services are not required to be purchased directly from us. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that the software license is distinct as the customer can benefit from the software on its own. Software revenue is typically recognized when the software is delivered or made available for download to the customer. Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer's final acceptance of the arrangement have been fulfilled. Hardware is purchased from suppliers and provided to the end-user customers via drop-ship or from inventory. We are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and we bear the credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site. Support and maintenance revenue is derived from providing telephone and on-line technical support services, bug fixes, and unspecified software updates and upgrades to customers on a when-and-if-available basis. These services represent a stand-ready obligation that is concurrently delivered and has the same pattern of transfer to the customer; we account for these support and maintenance services as a single performance obligation recognized over the term of the maintenance agreement. Our subscription service revenue is comprised of fees for contracts that provide customers a right to access our software for a subscribed period. We do not provide the customer the contractual right to license the software at any time outside of the subscription period under these contracts. The customer can only benefit from the software and software maintenance when provided the right to access the software. Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance obligation to be recognized over the contract period. The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms. Professional services revenues primarily consist of fees for consulting, installation, integration and training and are generally recognized over time as the customer simultaneously receives and consumes the benefits of the professional services as the services are being performed. Professional services can be provided by internal or external providers, do not significantly affect the customer's ability to access or use other provided goods or services, and provide a measure of benefit beyond that of other promised goods or services in the contract. As a result, professional services are considered distinct in the context of the contract and represent a separate performance obligation. Professional services that are billed on a time and materials basis are recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time using an input method based on labor hours expended to date relative to the total labor hours expected to be required to satisfy the related performance obligation. We use the market approach to drive standalone selling price ("SSP") by maximizing observable data points (in the form of recently executed customer contracts) to determine the price customers are willing to pay for the goods and services transferred. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis. Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies. Disaggregation of Revenue We derive and report our revenue from the sale of products (software licenses, third party hardware and operating systems), support, maintenance and subscription services and professional services. Revenue recognized at a point in time (products) totaled $7.6 million and $19.4 million, and $12.1 million and $34.9 million for the first three and nine months ended December 31, 2020 and 2019, respectively. Revenue recognized over time (support, maintenance and subscription services and professional services) totaled $29.1 million and $81.4 million, and $29.9 million and $86.2 million for the three and nine months ended December 31, 2020 and 2019, respectively. Contract Balances Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time. The majority of our contract assets represent unbilled amounts related to professional services. We expect billing and collection of our contract assets to occur within the next twelve months. We receive payments from customers based upon contractual billing schedules and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract. Revenue recognized from amounts included in contract liabilities at the beginning of the period was $9.1 million and $8.6 million for the three months ended December 31, 2020 and 2019, respectively, and $38.1 million and $34.6 million for the nine months ended December 31, 2020 and 2019, respectively. Because the right to the transaction became unconditional, we transferred to accounts receivable from contract assets at the beginning of the period, $0.1 million and $0.2 million for the three months ended December 31, 2020 and 2019, respectively, and $1.8 million and $2.7 million for the nine months ended December 31, 2020 and 2019, respectively. Our arrangements are for a period of one year or less. As a result, unsatisfied performance obligations as of December 31, 2020 are expected to be satisfied and the allocated transaction price recognized in revenue within a period of 12 months or less. Assets Recognized from Costs to Obtain a Contract Sales commission expenses that would not have occurred absent the customer contracts are considered incremental costs to obtain a contract. We have elected to take the practical expedient available to expense the incremental costs to obtain a contract as incurred when the expected benefit and amortization period is one year or less. For subscription contracts that are renewed monthly based on an agreement term, we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals. Other sales commission expenses have a period of benefit of one year or less and are therefore expensed as incurred in line with the practical expedient elected. We had $3.0 million and $3.3 million of capitalized sales incentive costs as of December 31, 2020 and 2019, respectively. These balances are included in other non-current assets on our condensed consolidated balance sheets. During the three and nine months ended December 31, 2020, we expensed $0.7 million and $2.0 million, respectively, of sales commissions, which included amortization of capitalized amounts of $0.3 million and $1.1 million, respectively. During the comparable periods ending December 31, 2019, we expensed $1.3 million and $3.5 million, respectively, of sales commissions, which included amortization of capitalized amounts of $0.3 million and $1.0 million, respectively. These expenses are included in operating expenses – sales and marketing in our condensed consolidated statement of operations. All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred. |
Intangible Assets and Software Development Costs |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets and Software Development Costs |
4. Intangible Assets and Software Development Costs The following table summarizes our intangible assets and software development costs:
As of March 31, 2020, management determined the net realizable value of the remaining capitalized software development costs for certain solutions within our rGuest suite of products no longer exceeded their carrying value, and as a result, recorded non-cash impairment charges of $22.0 million for the year ended March 31, 2020. The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions that made it difficult to project future sales and revenue accurately for the related rGuest solutions. After evaluating the Company’s strategy for market development and continued costs to support the software, an impairment charge was required. The amount of impairment recognized during the year ended March 31, 2020 reduced the carrying value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.
Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed was $3.1 million and $9.4 million for the three and nine months ended December 31, 2019. These charges are included as costs of goods sold - products in our condensed consolidated statements of operations. |
Additional Balance Sheet Information |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Balance Sheet Information |
5. Additional Balance Sheet Information Additional information related to the condensed consolidated balance sheets is as follows:
|
Supplemental Disclosures of Cash Flow Information |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosures of Cash Flow Information |
6. Supplemental Disclosures of Cash Flow Information
Additional information related to the condensed consolidated statements of cash flows is as follows:
|
Income Taxes |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
7. Income Taxes The following table compares our income tax expense and effective tax rates for the three and nine months ended December 31, 2020 and 2019:
For the three months ended December 31, 2020, the effective tax rate was different than the statutory tax rate due primarily to the recognition of net operating losses that were offset by increased valuation allowance in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the nine months ended December 31, 2020, the effective tax rate was different than the statutory tax rate due primarily to the utilization of net operating losses that were offset by decreased valuation allowance in the U.S, certain foreign and state tax effects and other U.S. permanent book to tax differences. For the three and nine months ended December 31, 2019, the effective tax rate was different than the statutory rate due primarily to the recognition of net operating losses in the U.S. and certain foreign jurisdictions that were offset by increased valuation allowance, certain foreign and state tax effects and other U.S. permanent book to tax differences. Because of our losses in prior periods, we have recorded and maintain a valuation allowance offsetting substantially all of our deferred tax assets in the U.S. and certain foreign jurisdictions, as management believes that it is more likely than not that we will not realize the benefits of these deductible differences. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provides, among other provisions, for the deferral of the employer-paid portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. |
Commitments and Contingencies |
9 Months Ended |
---|---|
Dec. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies |
8. Commitments and Contingencies Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. We provide 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 our 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 individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. On April 6, 2012, Ameranth, Inc. filed a complaint against us in the U.S. District Court of Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g. restaurant menus) for display on electronic devices and synchronizing the menu content between the devices. The case against us was consolidated with similar cases brought by Ameranth against more than 30 other defendants. All but one of the patents at issue in the case were invalidated by the U.S. Court of Appeals for the Federal Circuit in 2016. In September 2018, the District Court found the one surviving Ameranth patent invalid and granted summary judgment in favor of the movant co-defendants. In November 2019, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court’s summary judgement with respect to all claims except for two, which were not asserted against Agilysys. Ameranth’s writ of certiorari to the United States Supreme Court was denied in October 2020. Subsequently, Ameranth filed further pleading amendments and discovery requests with the District Court, which were opposed by the defendants. We were not a party to the appeal, and it is currently unclear what impact the summary judgement ruling may have on our case. Ameranth seeks monetary damages, injunctive relief, costs and attorneys' fees from us. At this time, we are not able to predict the outcome of this lawsuit. However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter. |
Income (Loss) Per Share |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (Loss) Per Share |
9. Income (Loss) per Share The following data shows the amounts used in computing income (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.
Basic income (loss) per share is computed as net income (loss) attributable to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 204,009 and 416,960 of restricted shares at December 31, 2020 and 2019, respectively, as these shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic income (loss) per share at the balance sheet dates. Diluted income (loss) per share includes the effect of all potentially dilutive securities on earnings per share. We have stock-settled appreciation rights ("SSARs"), unvested restricted shares, and preferred shares that are potentially dilutive securities. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation grants because doing so would be anti-dilutive. |
Share-based Compensation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation |
10. Share-based Compensation We may grant incentive stock options, non-qualified stock options, SSARs, restricted shares, and performance shares under our shareholder-approved 2020 Equity Incentive Plan ("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 ("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 aggregate number of shares that may be granted under the 2020 Plan is 3,118,864. We may distribute authorized but unissued shares or treasury shares to satisfy share option and SSAR exercises or restricted share and performance share grants. The fair value of restricted share and performance share grants is based on the closing price of our common shares on the grant date. For stock option and SSAR grants subject 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 record compensation expense for restricted shares and SSAR grants subject to a service condition utilizing the graded vesting method. For 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, exercise price, share price threshold, remaining contractual term and assumptions regarding the risk-free interest rate, suboptimal exercise factor, and expected volatility of our common shares based on historical volatility. We record compensation expense for SSAR grants subject to a market condition over the derived service period, which is an output of the lattice option pricing model. The grant date is defined as the date all necessary approvals are obtained. All grants during the nine months ended December 31, 2020 were made under the 2020 Plan, which was approved by our shareholders on November 19, 2020. The Compensation Committee of our Board of Directors approved substantially all grants under the 2020 Plan for the nine months ended December 31, 2020 on June 2, 2020. The closing market price of our common stock was $39.65 and $20.02 on November 19, 2020 and June 2, 2020, respectively. The following table summarizes the share-based compensation expense for SSARs, restricted and performance grants included in the condensed consolidated statements of operations:
Stock-Settled Appreciation Rights 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. The following table summarizes the activity during the nine months ended December 31, 2020 for SSARs awarded under the 2020 and 2016 Plans:
As of December 31, 2020, total unrecognized share-based compensation expense related to unvested service condition SSARs was $21.1 million, which is expected to be recognized over a weighted-average vesting period of 2.2 years.
As of December 31, 2020, total unrecognized share-based compensation expense related to unvested market condition SSARs was $21.9 million, which is expected to be recognized over a weighted-average vesting period of 1.0 years. If the market condition for any SSARs is met prior to the end of their expected vesting period, all remaining unrecognized compensation expense for those SSARs will be recognized at that time. Restricted Shares We granted shares to certain of our Directors, executives and key employees, the vesting of which is service-based. The following table summarizes the activity during the nine months ended December 31, 2020 for restricted shares awarded under the 2020 and 2016 Plans:
The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. As of December 31, 2020, total unrecognized share-based compensation expense related to unvested restricted stock was $2.4 million, which is expected to be recognized over a weighted-average vesting period of 1.3 years. Performance Shares We awarded certain restricted shares to our Chief Executive Officer, the vesting of which is performance based. The number of shares that vested were based on relative attainment of a performance metric and any unvested shares were forfeited upon settlement of the bonus. The following table summarizes the activity during the nine months ended December 31, 2020 for the performance shares awarded under the 2016 Plan:
|
Preferred Stock |
9 Months Ended |
---|---|
Dec. 31, 2020 | |
Equity [Abstract] | |
Preferred Stock |
11. Preferred Stock Series A Convertible Preferred Stock On May 22, 2020, we completed the sale of 1,735,457 shares of our preferred stock, without par value, designated as “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”) to MAK Capital Fund L.P. and MAK Capital Distressed Debt Fund I, LP (the “Holders”) each, in its capacity as a designee of MAK Capital One LLC (the “Purchaser”), pursuant to the terms of the Investment Agreement, dated as of May 11, 2020, between the Company and the Purchaser, for an aggregate purchase price of $35 million. We incurred issuance costs of $1.0 million. We added all issuance costs that were netted against the proceeds upon issuance of the Convertible Preferred Stock to its redemption value. As disclosed in our Annual Report for the fiscal year ended March 31, 2020, Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital One LLC. Accounting Policy We classify convertible preferred stock as temporary equity in the condensed consolidated balance sheets due to certain contingent redemption clauses that are at the election of the Holders. We increase the carrying value of the convertible preferred stock to its redemption value (described below) for all undeclared dividends using the interest method. The Convertible Preferred Stock has the following rights, preferences and restrictions (the Certificate of Amendment included as Exhibit 3.1 to our Current Report on Form 8-K, filed on May 26, 2020, defines all terms not otherwise defined below): Voting The Holders will be entitled to one vote for each share of Convertible Preferred Stock upon all matters presented to the common shareholders of the Company, and except as otherwise provided by the Amended Articles of Incorporation of the Company or required by law, the Holders and common shareholders will vote together as one class on all matters. Additionally, certain matters specific to the Convertible Preferred Stock will require the approval of two-thirds of the outstanding Convertible Preferred Stock, voting as a separate class. Liquidation Preference Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price paid by the Purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock. Redemption On and after the fifth anniversary of the date the Convertible Preferred Stock is initially issued, the Company will have the right, and the Holders will have the right to require the Company, in each case, at the initiating party’s election, to redeem all, but not less than all, of the then-outstanding Convertible Preferred Stock for an amount equal to the Liquidation Preference. Conversion Each Holder will have the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of common stock at a conversion price equal to $20.1676 per share (as may be adjusted from time to time, as described in the Certificate of Amendment). Subject to certain conditions, the Company may, at its option, require conversion of all of the outstanding shares of Convertible Preferred Stock to common stock if, at any time after November 22, 2023, the daily volume-weighted average price of the Company’s common stock is at least 150% of the conversion price for at least 20 trading days during the 30 consecutive trading days immediately preceding the date the Company notifies the Holders of the election to convert. Dividends The Holders are entitled to dividends on the Liquidation Preference at the rate of 5.25% per annum, payable semi-annually either (i) 50% in cash and 50% in kind as an increase in the then-current Liquidation Preference or (ii) 100% in cash, at the option of the Company. The Holders are not entitled to participate in dividends declared or paid on the common stock on an as-converted basis; however, certain anti-dilution adjustments to the Convertible Preferred Stock may be made in the event of such dividends. The Convertible Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution. Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the Liquidation Preference and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock. Change in Control Events Upon certain change of control events involving the Company, the Company has the right, and each Holder has the right, in each case, at the initiating party’s election, to require the Company to repurchase all or a portion of its then-outstanding shares of Convertible Preferred Stock for cash consideration equal to (i) 150% of the then-current Liquidation Preference for a change of control occurring prior to the third anniversary of the date the Convertible Preferred Stock is initially issued, (ii) 125% of the then-current Liquidation Preference for a change of control occurring on or following the third anniversary and prior to the fifth anniversary of the date the Convertible Preferred Stock is initially issued and (iii) 100% of the then-current Liquidation Preference for a change of control occurring on or following the fifth anniversary of the date the Convertible Preferred Stock is initially issued. Standstill Restrictions The Purchaser and its affiliates are subject to certain customary standstill provisions that restrict them from, among other actions, acquiring additional securities of the Company if such acquisition would result in the Purchaser beneficially owning in excess of 25% of the outstanding shares of common stock of the Company until the later of the third anniversary of the date the Convertible Preferred Stock is initially issued and the date on which the Purchaser no longer has record or beneficial ownership of common stock and Convertible Preferred Stock that constitute at least 10% of the outstanding common stock. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
---|---|
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Adopted and Recently Issued Accounting Pronouncements |
Adopted and Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently assessing the impact of adopting this standard on our consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, Income Taxes, and is meant to simplify and reduce the cost of accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently reviewing this standard but do not expect it will have a material impact on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 addresses the treatment of implementation costs incurred in a hosting arrangement that is a service contract. The update does not impact the accounting for the service element of a hosting arrangement that is a service contract. We adopted ASU 2018-15 as of April 1, 2020 with no impact on our condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement. The disclosure requirements of the reasons for transfers between Level 1 and Level 2, the policy for timing transfers between levels, and the valuation process for Level 3 measurements have been removed. Certain modifications were made to required disclosures and additional requirements were established. We adopted ASU 2018-13 as of April 1, 2020 with no impact on our condensed consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We adopted ASU 2017-04 as of April 1, 2020 with no impact on our condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. This new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets. We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements. |
Intangible Assets and Software Development Costs (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets |
The following table summarizes our intangible assets and software development costs:
|
Additional Balance Sheet Information (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Additional information related to the Condensed Consolidated Balance Sheets |
Additional information related to the condensed consolidated balance sheets is as follows:
|
Supplemental Disclosures of Cash Flow Information (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flow information |
Additional information related to the condensed consolidated statements of cash flows is as follows:
|
Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective tax rates from continuing operations |
The following table compares our income tax expense and effective tax rates for the three and nine months ended December 31, 2020 and 2019:
|
Income (Loss) Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amounts used in computing income (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares |
The following data shows the amounts used in computing income (loss) per share and the effect on earnings and the weighted average number of shares of dilutive potential common shares.
|
Share-based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of share-based compensation expense for options |
The following table summarizes the share-based compensation expense for SSARs, restricted and performance grants included in the condensed consolidated statements of operations:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity related SSARs award |
The following table summarizes the activity during the nine months ended December 31, 2020 for SSARs awarded under the 2020 and 2016 Plans:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity related to restricted shares awarded by the Company | The following table summarizes the activity during the nine months ended December 31, 2020 for restricted shares awarded under the 2020 and 2016 Plans:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance shares awarded |
The following table summarizes the activity during the nine months ended December 31, 2020 for the performance shares awarded under the 2016 Plan:
|
Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | $ 36,675 | $ 41,987 | $ 100,840 | $ 121,099 |
Revenue recognized | 9,100 | 8,600 | 38,100 | 34,600 |
Transfers to accounts receivable | 100 | 200 | 1,800 | 2,700 |
Capitalized contract cost, net | 3,000 | 3,300 | 3,000 | 3,300 |
Capitalized Contract Cost, Amortization | 300 | 300 | 1,100 | 1,000 |
Sales Commissions and Fees | 700 | 1,300 | 2,000 | 3,500 |
Products | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 7,599 | 12,126 | 19,396 | 34,868 |
Support, Maintenance, Subscription Services, And Professional Services [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | $ 29,100 | $ 81,400 | $ 29,900 | $ 86,200 |
Intangible Assets and Software Development Costs (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended |
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2019 |
Mar. 31, 2020 |
|
Goodwill And Intangible Assets Disclosure [Abstract] | |||
Non-cash impairment charge | $ 22,000 | ||
Amortization of developed technology | $ 3,100 | $ 9,432 |
Additional Balance Sheet Information (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Mar. 31, 2020 |
---|---|---|
Current liabilities: | ||
Salaries, wages, and related benefits | $ 5,053 | $ 6,945 |
Payroll taxes deferred under CARES Act | 911 | |
Other taxes payable | 2,084 | 1,649 |
Accrued legal settlements | 50 | |
Severance liabilities | 329 | 32 |
Professional fees | 55 | 50 |
Other | 371 | 357 |
Total | 8,853 | 9,033 |
Liabilities Noncurrent: | ||
Uncertain tax positions | 1,123 | 1,103 |
Asset retirement obligations | 170 | 170 |
Payroll taxes deferred under CARES Act | 911 | |
Employee benefit obligations | 1,466 | 511 |
Other | 70 | 76 |
Total | $ 3,740 | $ 1,860 |
Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Supplemental Cash Flow Elements [Abstract] | ||
Cash (receipts) for interest, net | $ (63) | $ (259) |
Cash payments for income taxes, net | 195 | 252 |
Cash payments for operating leases | 4,039 | 3,560 |
Cash payments for finance leases | 21 | 27 |
Accrued capital expenditures | $ 64 | $ 48 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 182 | $ 95 | $ 311 | $ 161 |
Effective tax rate | (9.60%) | (3.80%) | 8.70% | (2.30%) |
Income Taxes (Details Textual) - CARES Act [Member] |
Mar. 27, 2020 |
---|---|
Operating Loss Carryforwards [Line Items] | |
Tax Credit Carryforward, Description | The CARES Act provides, among other provisions, for the deferral of the employer-paid portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022 |
Percentage of deferral of employer-paid portion of social security taxes due in December 31, 2021 | 50.00% |
Percentage of deferral of employer-paid portion of social security taxes due in December 31, 2022 | 50.00% |
Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Numerator: | ||||
Net income (loss) | $ (2,070) | $ (2,582) | $ 3,280 | $ (7,075) |
Series A convertible preferred stock issuance costs | (1,031) | |||
Series A convertible preferred stock dividends | (459) | (1,117) | ||
Net (loss) income attributable to common shareholders | $ (2,529) | $ (2,582) | $ 1,132 | $ (7,075) |
Denominator: | ||||
Weighted average shares outstanding - basic | 23,429 | 23,240 | 23,419 | 23,230 |
Dilutive SSARs | 377 | |||
Dilutive unvested restricted shares | 107 | |||
Weighted average shares outstanding - diluted | 23,429 | 23,240 | 23,903 | 23,230 |
Net (loss) income per share - basic: | $ (0.11) | $ (0.11) | $ 0.05 | $ (0.30) |
Net (loss) income per share - diluted: | $ (0.11) | $ (0.11) | $ 0.05 | $ (0.30) |
Earnings Per Share, Diluted [Abstract] | ||||
Anti-dilutive stock options, SSARs, restricted shares, performance shares and preferred shares | 3,389 | 1,469 | 2,692 | 1,414 |
Income (Loss) Per Share (Details Textual) - shares |
9 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Earnings Per Share [Abstract] | ||
Incremental common shares attributable to restricted shares (in shares) | 204,009 | 416,960 |
Share-based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based Payment Arrangement, Noncash Expense | $ 6,630 | $ 1,329 | $ 9,312 | $ 3,156 |
Product development [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Summary of share-based compensation expense for options | 3,362 | 639 | 3,773 | 1,579 |
Selling and marketing [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Summary of share-based compensation expense for options | 666 | 104 | 735 | 217 |
General and administrative [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Summary of share-based compensation expense for options | $ 2,602 | $ 586 | $ 4,804 | $ 1,360 |
Share-based Compensation (Details 3) |
9 Months Ended |
---|---|
Dec. 31, 2020
$ / shares
shares
| |
Restricted Stock [Member] | |
Activity Related to Restricted Shares Awarded by the Company | |
Number of Shares Outstanding at Beginning of Period | 178,462 |
Granted, Number of Shares | 56,527 |
Forfeited, Number of Shares | (30,980) |
Number of Shares Outstanding at End of Period | 204,009 |
Weighted Average Grant-Date Fair Value, Outstanding at Beginning of Period | $ / shares | $ 19.89 |
Granted, Weighted Average Grant Date Fair Value | $ / shares | 39.63 |
Forfeited, Weighted Average Grant-Date Fair Value | $ / shares | 20.65 |
Weighted Average Grant-Date Fair Value, Outstanding at End of Period | $ / shares | $ 25.24 |
Performance Share [Member] | |
Activity Related to Restricted Shares Awarded by the Company | |
Number of Shares Outstanding at Beginning of Period | 30,120 |
Forfeited, Number of Shares | (23,406) |
Vested, Number of Options | (6,714) |
Preferred Stock - (Details Textual) $ / shares in Units, $ in Millions |
9 Months Ended | |
---|---|---|
May 22, 2020
USD ($)
shares
|
Dec. 31, 2020
Day
$ / shares
|
|
Class Of Stock [Line Items] | ||
Trading days | Day | 20 | |
Consecutive trading days | Day | 30 | |
Minimum percentage of common stock price to conversion price | 150.00% | |
Debt Instrument, Convertible, Earliest Date | Nov. 22, 2023 | |
Preferred stock, dividend percentage | 5.25% | |
Dividends declaration and payment terms | The Holders are entitled to dividends on the Liquidation Preference at the rate of 5.25% per annum, payable semi-annually either (i) 50% in cash and 50% in kind as an increase in the then-current Liquidation Preference or (ii) 100% in cash, at the option of the Company. | |
Change of Control Event Description | Upon certain change of control events involving the Company, the Company has the right, and each Holder has the right, in each case, at the initiating party’s election, to require the Company to repurchase all or a portion of its then-outstanding shares of Convertible Preferred Stock for cash consideration equal to (i) 150% of the then-current Liquidation Preference for a change of control occurring prior to the third anniversary of the date the Convertible Preferred Stock is initially issued, (ii) 125% of the then-current Liquidation Preference for a change of control occurring on or following the third anniversary and prior to the fifth anniversary of the date the Convertible Preferred Stock is initially issued and (iii) 100% of the then-current Liquidation Preference for a change of control occurring on or following the fifth anniversary of the date the Convertible Preferred Stock is initially issued | |
Preferred stock convertible percentage of outstanding common stock | 10.00% | |
Percentage of owning in excess of outstanding share of common stock | 25.00% | |
Common Stock [Member] | ||
Class Of Stock [Line Items] | ||
Price per share | $ / shares | $ 20.1676 | |
Convertible Preferred Stock [Member] | ||
Class Of Stock [Line Items] | ||
Voting right description | The Holders will be entitled to one vote for each share of Convertible Preferred Stock upon all matters presented to the common shareholders of the Company | |
MAK Capital One, LLC [Member] | Convertible Preferred Stock [Member] | ||
Class Of Stock [Line Items] | ||
Preferred stock issued | shares | 1,735,457 | |
Preferred stock issued, value | $ | $ 35.0 | |
Payments of stock issuance costs | $ | $ 1.0 |
%Z(#0YTR7?$I#PT92IX0FDJ/]0;/;TE>?DEX5+92\&D-=>-
M@I%6(SVOD6E>NX^?=7-I$$.X*=-CTWZR6Q.3<>88XW $3T\Y9)IR[@5L E@%
MG5\UR"0ZP.E.H)R7^[FB K;*VYSMF[VR%9F%3_"P9=X0>@V^IQSR"Y1ST78]
M;/3?[*?6 Y-57!P&_M '4TQ/AQ'B)#W[$'?2B\UN1Y.Z(NA34N\ D)ZX*&EW
M ]"KVDDK L;.6>83SC
M1UX9N*04LFV-+E)89R*Z+)L5PVKM KT& D:Q^6(^IN0$U>05V2
MCU*81I,[44'UTC]$AA/-Y$QSE[P)> OE%4GC@"11$KV!ETZR4X>7OH+W4NL#
M<&J@(K=,EUSJ7H$F7[>%-@HOS;IQ%?Q)!!ZL>/5M^+5K*L53R'UV]6#[-3Q;I
MT?7R:KKHYNGR17F2
/O-=Q1:/)#;5[L6VG0/U^I?$)>]LTU.AT"?_E;??$>>Q'6[ +SG$+MHWO
M_!5UUC=TH.HT5:OJ6YWT8NJ/+%= [YO.VCXZGOCCZ,(CXK;7*H>!/YL&WG/;
M4L;?[HE1,/*#@"9]-.Y'(X\"?83P#JW??Q-BST='L;/4GTY6EOV[DJW6?^KU
MQZ_J%+<=4KF#=Y/\!M3'+F(KV7V39F))4]8AG/V^7,(K]3BLNR2V ^W3[]+J
M)F:/-.T9T1I/NG 8@VU$*&D?WQ.-9@)['3U$D]GU?"?=2FQ?_[G<. [4B"/[
M%[*L]"\O/5%='\^GT
MV5$MM3DX.^5G5^[LU+:ATD9=.>';NI9N\UI5=OWJ8';0/?BD5V6@!T=GIXU<
MJ<\J_-)<.;P[ZJT4NE;&:VN$4\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M+B!=M)3<(%(.((