Exhibit 10.1

EPICOR SOFTWARE CORPORATION

MANAGEMENT RETENTION AGREEMENT

This Management Retention Agreement (the “Agreement”) is made and entered into
effective as of February 19, 2008 (the “Effective Date”), by and between Thomas
F. Kelly (the “Executive”) and Epicor Software Corporation (the “Company”).
Certain capitalized terms used in this Agreement are defined herein.

RECITALS

WHEREAS, Executive has agreed to accept employment with the Company as its Chief
Executive Officer (“CEO”); and

WHEREAS, Executive and Company wish to commemorate the terms and conditions of
Executive’s employment as Company CEO in a written agreement;

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
herein and for other good and valuable consideration, the receipt of and
sufficiency of which are hereby acknowledged, Company and the Executive agree as
follows:

1. Definitions. The following terms referred to in this Agreement shall have the
following meanings:

(a) “Cause” means (i) any act of personal dishonesty taken by Executive in
connection with his responsibilities as an employee which is intended to result
in substantial personal enrichment of Executive; (ii) Executive’s conviction of
a felony which the Board reasonably believes has had or will have a material
detrimental effect on the Company’s reputation or business; (iii) a willful act
by Executive which constitutes gross misconduct and is materially injurious to
the Company; or (iv) continued willful violations by Executive of Executive’s
obligations to the Company after there has been delivered to Executive a written
demand for performance from the Company which describes the basis for the
Company's belief that Executive has not substantially performed his duties and
after Executive has been given at least 10 business days in which to cure the
circumstances identified in such written demand.

(b) “Change of Control” means the occurrence of any of the following (i) the
sale, lease, conveyance or other disposition of all or substantially all of the
Company’s assets as an entirety or substantially as an entirety to any person,
entity or group of persons acting in concert, (ii) any transaction or series of
transactions that results in, or that is in connection with, any person, entity
or group acting in concert (other than existing affiliates of the Company),
acquiring “beneficial ownership” (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of such percentage of the
aggregate voting power of all classes of voting equity stock of the Company as
shall exceed fifty percent (50%) of such aggregate voting power, (iii) a merger
or consolidation in which the Company is not the surviving entity, except for a
transaction, the principal

 

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purpose of which is to change the state in which the Company is incorporated; or
(iv) any reverse merger in which the Company is a surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company’s outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such reverse merger; or (v) a liquidation of the Company.

(c) “Disability” means Executive’s inability due to any physical or mental
condition to perform a substantial portion of his employment duties to the
Company for twenty-four (24) or more consecutive weeks.

(d) “Involuntary Termination” means, without Executive’s express written
consent, (i) a significant reduction of Executive’s duties, position or
responsibilities relative to Executive’s CEO duties, position or
responsibilities in effect immediately prior to such reduction, or the removal
of Executive from such position, duties and responsibilities, unless Executive
is provided with comparable duties, position and responsibilities; (ii) a
reduction by the Company of Executive’s CEO base salary as in effect immediately
prior to such reduction unless such reduction is made pursuant to and
proportionately with any Company policy applicable to similarly-situated Company
executives; (iii) the relocation of Executive to a facility or a location more
than one hundred (100) miles from the Company’s current Irvine, California
location; (iv) any purported termination of Executive’s CEO title by the Company
which is not effected for Cause or for which the grounds relied upon are not
valid; (v) Executive’s death or Disability; or (vi) the failure of the Company
to obtain the assumption of this Agreement by any successors contemplated in
Section 14 below.

2. Term of Agreement. Executive hereby accepts employment with the Company as
Company CEO for a period beginning on the Effective Date and continuing
thereafter until Executive’s employment as Company CEO is terminated for any
reason, including through Executive’s voluntary termination, Involuntary
Termination, or termination for Cause, subject to the terms and conditions set
forth herein (the “Employment Term”). As specifically described in this
Agreement, the parties’ obligations under specific sections herein continue in
certain respects following the Employment Term.

3. At-Will Employment. The Company and Executive acknowledge that Executive’s
employment is and shall continue to be at-will, as defined under applicable law.
If Executive’s employment terminates for any reason, Executive shall not be
entitled to any payments, benefits, damages, awards or compensation other than
as provided by this Agreement, or as may otherwise be established under the
Company’s then existing employee benefit plans or policies at the time of
termination.

4. Base Salary. During the Employment Term, the Company will pay Executive a
salary at an annualized rate of $500,000 as compensation for his services (the
“Base Salary”). The Base Salary will be paid periodically in accordance with the
Company’s normal payroll practices and be subject to the usual, required
withholdings. Any increases to the Base Salary during the Employment Term may
only be authorized by and will be subject to the prior written approval of the
Company’s Board of Directors.

 

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5. Annual Incentive. Executive will be eligible to receive annual cash bonus
payments under the Company’s cash bonus plan for key employees beginning on the
Effective Date. The bonus will be paid on a fiscal year basis based on a
performance plan agreed to between the Executive and the Board of Directors of
the Company. The initial cash bonus plan to Executive to be entered into
following the Executive’s commencement as Company CEO shall provide for an on
target bonus amount equal to 60% of Executive’s Base Salary, or $300,000 (the
“Initial Target Bonus”). Payment of 50% of the Initial Target Bonus, or
$150,000, will be guaranteed for the 2008 fiscal year and will be paid to
Executive upon commencing employment as Company CEO, subject to the usual and
required withholdings. The remaining 50% of the Initial Target Bonus will be
subject to the terms and conditions of the initial cash bonus plan to Executive
to be entered into following the Executive’s commencement as Company CEO.

6. Restricted Stock Grant. Pursuant to the terms of the Agreement, Executive
shall be granted a total of two hundred twenty-eight thousand (228,000) shares
of restricted Company common stock, allocated equally (114,000) to each of the
2008 and 2009 fiscal years (the “Restricted Stock Grant”). The Restricted Stock
Grant shall provide that the restrictions on the stock shall lift based on
achievement of applicable Company performance goals during 2008 and 2009 as
determined in accordance with the terms of the Company’s Performance Based
Restricted Stock Program (the “Program”) approved by the Company’s Compensation
Committee and subject to the Executive’s continued service to the Company
through the 2008 and 2009 performance periods. Notwithstanding the foregoing,
for the 2008 fiscal year, all Company performance goals applicable to the
114,000 shares of restricted stock allocated to such fiscal year will be deemed
achieved at 100% target, subject to the Executive’s continued service to the
Company through the 2008 performance period. The Restricted Stock Grant is also
subject to the terms, definitions and provisions of the Company’s applicable
stock incentive plan, as may be amended from time to time (the “Plan”) and the
restricted stock agreement by and between Executive and the Company (the
“Restricted Stock Agreement”), both of which documents are incorporated herein
by reference.

7. Relocation Expenses. For the six (6) month period following the execution of
this Agreement, the Company will reimburse Executive for the actual reasonable
rental expense incurred by Executive in renting a residence in Orange County,
California while Executive searches for permanent housing for himself and his
family. During the same six (6) month period, Company shall reimburse Executive
for the actual reasonable commercial air travel expense incurred by Executive
and his spouse in traveling back and forth to Executive’s current Northern
California home. Additionally, the Company will reimburse Executive for his
actual reasonable expenses incurred in moving and relocating his family and
household to Southern California. Company will not pay or reimburse Executive
for any costs or expenses associated with Executive’s (i) sale of his current
residence, or (ii) purchase of a residence in Orange County. Executive agrees
that he will submit all such reimbursable expenses to the Company with
appropriate documentation as such expenses are incurred and the Company shall
reimburse Executive promptly thereafter in accordance with the Company’s expense
reimbursement policy. Notwithstanding the prior sentence, Executive agrees that
he shall have submitted all such expenses to Company by no later than
December 1, 2008 so that Company will be in a position to reimburse Executive
for all such expenses by no later than December 31, 2008.

 

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8. Country Club Membership. The Company will assist Executive in acquiring a
local to Orange County, Country Club/Golf Membership by reimbursing Executive
for actual Membership initiation fees incurred by Executive in joining such
Country Club up to a maximum reimbursement of $50,000. Executive shall be
responsible for payment of any monthly dues or fees associated with such
membership. In the event that Executive should voluntarily terminate his
position as Company CEO before the end of the three year period following the
Effective Date, Executive shall be required to pay back to Company the expense
reimbursement paid by Company to Executive upon Executive’s sale of his
membership in such Club.

9. Other. Upon Commencement as Company CEO, Executive shall be eligible to
participate in the Company's health plan, including the Exec-U-Care plan. After
meeting eligibility requirements, Executive will be able to participate in
various company benefit programs including the Company's 401(k) savings program,
Employee Stock Purchase Plan, Section 125 Reimbursement Account, Deferred
Compensation Program and the Confidential Employee Assistance Program (EAP).

10. Severance Benefits Upon Involuntary Termination.

Section 10(i) below governs severance benefits to be received by Executive upon
the occurrence of an Involuntary Termination at any time during the term of this
Agreement which Involuntary Termination does not occur within twelve months
following a Change of Control. Section 10(ii) below governs severance benefits
to be received by Executive upon the occurrence of an Involuntary Termination at
any time during the term of this Agreement which Involuntary Termination does
occur within twelve months following a Change of Control. The payment of
Severance benefits to Executive under this Section 10 is subject to Section 14
herein.

(i) Upon the occurrence of an Involuntary Termination at any time during the
term of this Agreement which Involuntary Termination does not occur within
twelve months following a Change of Control, Executive shall be entitled to only
the following benefits:

(a) An amount equal to twelve (12) months of Executive’s Base Salary as in
effect as of the date of the Involuntary Termination, to be paid periodically in
accordance with the Company’s normal payroll policies;

(b) An amount equal to 100% of the Executive’s target annual bonus as calculated
from the Executive’s bonus plan in effect at the time of the Executive’s
Involuntary Termination.

(c) For the twelve (12) month period following such Involuntary Termination,
Executive will have the right to continue his group health insurance (medical,
dental, and vision) under COBRA and the Company will reimburse Executive or pay
directly for the actual COBRA premiums for which Executive is responsible during
such 12 month period.

 

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(ii) Upon the occurrence of an Involuntary Termination at any time during the
term of this Agreement and which Involuntary Termination occurs within twelve
(12) months following a Change of Control, Executive shall be entitled to only
the following benefits:

(a) An amount equal to eighteen (18) months of Executive’s Base Salary as in
effect as of the date of the Involuntary Termination, to be paid periodically in
accordance with the Company’s normal payroll policies;

(b) An amount equal to 150% of the Executive’s target annual bonus as calculated
from the Executive’s bonus plan in effect at the time of the Executive’s
Involuntary Termination; and

(a) For the eighteen (18) month period following such Involuntary Termination,
Executive will have the right to continue his group health insurance (medical,
dental, and vision) under COBRA and the Company will reimburse Executive or pay
directly for the actual COBRA premiums for which Executive is responsible during
such 18 month period.

11. Other Termination. If the Executive's employment as CEO with the Company
terminates for any reason other than as a result of an Involuntary Termination
(whether or not within 12 months following a Change of Control), then subject to
the requirements of applicable law and Section 12 below, the Executive shall not
be entitled to receive any of the severance or other benefits hereunder, but
Executive may still be eligible for those benefits (if any) as may then be
established under the Company's then existing severance and benefits plans and
policies at the time of such termination.

12. Accrued Wages and Vacation; Expenses. Without regard to the reason for, or
the timing of Executive's termination of employment: (i) the Company shall pay
Executive any unpaid base salary due for periods prior to any termination of
employment; (ii) the Company shall pay Executive all of his accrued and unused
vacation, if any, through any termination of employment, as well as all earned
but as-yet unpaid bonuses; and (iii) following submission of proper expense
reports by Executive, the Company shall reimburse Executive for all expenses
reasonably and necessarily incurred by Executive in connection with the business
of the Company prior to any termination of employment. Executive acknowledges
that as mandated by established Company policy, the Company CEO position does
not accrue vacation/PTO time. These payments shall be made promptly upon
termination and within the period of time mandated by law.

13. Golden Parachute Excise Tax Gross-Up. In the event that any of the severance
and other benefits provided for in this Agreement constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and will be subject to the excise tax imposed by
Section 4999 of the Code, then Executive shall receive (i) a payment from the
Company sufficient to pay such excise tax, and (ii) an additional payment from
the Company sufficient to pay the excise tax and federal and state income taxes
arising from the payments made by the Company to Executive pursuant to this
sentence. Unless the Company and Executive otherwise agree in writing, the
determination of Executive's excise tax liability and the amount required to be
paid under this Section shall be made in writing by the Company’s independent
accountants (the “Auditors”). In the event that the excise tax incurred by
Executive is determined by the Internal Revenue Service to be greater or lesser
than the amount so determined by the Auditors, the Company and Executive agree
to promptly make such additional payment, including interest and any tax
penalties, to the other party as the Auditors reasonably determine is
appropriate to ensure that the net economic effect to Executive under this
Section, on an after-tax basis, is as if the Code Section 4999

 

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excise tax did not apply to Executive. For purposes of making the calculations
required by this Section, the Auditors may make reasonable assumptions and
approximations concerning applicable taxes and may rely on interpretations of
the Code for which there is a “substantial authority” tax reporting position.
The Company and Executive shall furnish to the Auditors such information and
documents as the Auditors may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the Auditors
may reasonably incur in connection with any calculations contemplated by this
Section.

14. Conditions to Receipt of Severance.

(a) Separation Agreement and Release of Claims. The receipt of any severance
pursuant to Section 10 will be subject to Executive signing and not revoking a
separation agreement and release of claims in a form reasonably acceptable to
the Company. No severance will be paid or provided until the separation
agreement and release agreement becomes effective and non-revocable.

(b) Nondisparagement. During the Employment Term and while the Executive is
receiving the benefits under Section 10 (“Severance Period”), Executive will not
knowingly disparage, criticize, or otherwise make any derogatory statements
regarding the Company, its directors, or its officers. The Company will instruct
its officers and directors to not knowingly disparage, criticize, or otherwise
make any derogatory statements regarding the Executive during the Employment
Term and Severance Period. Notwithstanding the foregoing, nothing contained in
this agreement will be deemed to restrict the Executive, the Company or any of
the Company’s current or former officers and/or directors from providing
information to any governmental or regulatory agency (or in any way limit the
content of any such information) to the extent they are requested or required to
provide such information pursuant to applicable law or regulation.

(c) Other Requirements. Executive’s receipt of continued severance payments will
be subject to Executive continuing to comply with the terms of the Company’s
Confidential/Proprietary Information Agreement and the provisions of this
Section 14.

15. Code Section 409A.

(a) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement,
if Executive is a “specified employee” within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended, and the final regulations and any
guidance promulgated thereunder (“Section 409A”) at the time of Executive’s
termination of employment (other than due to death), then the severance benefits
payable to Executive under this Agreement, if any, and any other severance
payments or separation benefits that may be considered deferred compensation
under Section 409A (together, the “Deferred Compensation Separation Benefits”)
otherwise due to Executive on or within the six (6) month period following
Executive’s termination of employment will accrue during such six (6) month
period and will become payable in a lump sum payment (less applicable
withholding taxes) on the date six (6) months and one (1) day following the date
of Executive’s termination of employment. All subsequent payments, if any, will
be payable in accordance with the payment schedule applicable to each payment or
benefit. Notwithstanding anything herein to the contrary, if Executive dies
following his or her termination of employment but

 

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prior to the six (6) month anniversary of his or her date of termination, then
any payments delayed in accordance with this paragraph will be payable in a lump
sum (less applicable withholding taxes) to Executive’s estate as soon as
administratively practicable after the date of Executive’s death and all other
Deferred Compensation Separation Benefits will be payable in accordance with the
payment schedule applicable to each payment or benefit.

(b) Amendments to this Agreement to Comply with Section 409A. This provision is
intended to comply with the requirements of Section 409A so that none of the
severance payments and benefits to be provided hereunder will be subject to the
additional tax imposed under Section 409A, and any ambiguities herein will be
interpreted to so comply. The Company and Executive agree to work together in
good faith to consider amendments to this Agreement and to take such reasonable
actions which are necessary, appropriate or desirable to avoid imposition of any
additional tax or income recognition prior to actual payment to the Employee
under Section 409A.

16. Successors.

(a) Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business and/or assets
shall assume the Company’s obligations under this Agreement and agree expressly
to perform the Company’s obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
“Company” shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
subsection or which becomes bound by the terms of this Agreement by operation of
law.

(b) Executive’s Successors. Without the written consent of the Company,
Executive shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity. Notwithstanding the
foregoing, the terms of this Agreement and all rights of Executive hereunder
shall inure to the benefit of, and be enforceable by, Executive’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

17. Notices.

(a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of Executive, mailed notices shall be
addressed to him at the home address that he most recently communicated to the
Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.

(b) Notice of Termination. Any termination by the Company for Cause or by
Executive as a result of a voluntary resignation or an Involuntary Termination
shall be communicated by a notice of termination to the other party hereto given
in accordance with this

 

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Section. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the termination date (which shall be not more than
30 days after the giving of such notice). The failure by Executive to include in
the notice any fact or circumstance which contributes to a showing of
Involuntary Termination shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder.

18. Arbitration.

(a) Any dispute or controversy arising out of, relating to, or in connection
with this Agreement, or the interpretation, validity, construction, performance,
breach, or termination thereof, shall be settled by binding arbitration to be
held in Orange County, California in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration
Association (the “Rules”). The arbitrator may grant injunctions or other relief
in such dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction.

(b) The arbitrator(s) shall apply California law to the merits of any dispute or
claim, without reference to conflicts of law rules. The arbitration proceedings
shall be governed by federal arbitration law and by the Rules, without reference
to state arbitration law. Executive hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.

(c) Executive understands that nothing in this Section modifies Executive’s
at-will employment status. Either Executive or the Company can terminate the
employment relationship at any time, with or without Cause.

(d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:

(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT,
BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING,
BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL
DISTRESS; NEGLIGENT OR

 

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INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH
CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE,
INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE
CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE
AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE
CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;

(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING
TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

19. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive shall not be required to mitigate the amount
of any payment contemplated by this Agreement, nor shall any such payment be
reduced by earnings that Executive may receive from any other source.

(b) Waiver. No provision of this Agreement may be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed
by Executive and by an authorized officer of the Company (other than Executive).
No waiver by either party of any breach of, or of compliance with, any condition
or provision of this Agreement by the other party shall be considered a waiver
of any other condition or provision or of the same condition or provision at
another time.

(c) Integration. This Agreement and any outstanding stock option agreements and
restricted stock purchase agreements referenced herein represent the entire
agreement and understanding between the parties as to the subject matter herein
and supersede all prior or contemporaneous agreements, whether written or oral,
with respect to this Agreement, including but not limited to any other offer
letter and any stock option agreement, restricted stock purchase agreement or
severance agreement. Executive agrees and acknowledges that in the event of any
conflict, redundancy or discrepancy between the terms and conditions of this
Agreement and any other agreement regarding the subject matter herein, the terms
and conditions of this Agreement shall govern.

(d) Choice of Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the internal substantive laws, but not the
conflicts of law rules, of the State of California.

(e) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

 

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(f) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable income and employment taxes.

(g) 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.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

 

COMPANY:     EPICOR SOFTWARE CORPORATION       By:   /s/ L. George Klauss      
Title:   Chairman EXECUTIVE:       /s/ Thomas F. Kelly       Signature      
Thomas F. Kelly       Printed Name

 

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