Exhibit 10.1
EPICOR SOFTWARE
CORPORATION
MANAGEMENT RETENTION
AGREEMENT
This Management Retention Agreement
(the “Agreement”) is made and entered into effective as
of January 19, 2009 (the “Effective Date”), by and
between L. George Klaus (the “Executive”) and Epicor
Software Corporation (the “Company”). Certain
capitalized terms used in this Agreement are defined
herein.
RECITALS
WHEREAS, Executive served as the
Executive Chairman of the Company’s Board of Directors (the
“Board”) from February 19, 2008, through
January 15, 2009;
WHEREAS, Executive’s
Employment as the Executive Chairman of the Board terminated
effective as of January 15, 2009 (the “Prior
Termination”), and the parties agree that such termination
constituted a “separation from service” within the
meaning of Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”), and the final regulations and
any guidance promulgated thereunder (“Section
409A”);
WHEREAS, subsequent to, and
unrelated to, the Prior Termination, the Company’s chief
executive officer terminated his employment with the Company, and
the Board determined that it was in the best interests of the
Company to appoint Executive as Chief Executive Officer, subject to
his acceptance of the appointment;
WHEREAS, Executive has agreed to
accept new employment with the Company as its Chief Executive
Officer;
WHEREAS, Executive and the Company
wish to commemorate the terms and conditions of Executive’s
new employment as Company Chief Executive Officer in a written
agreement;
WHEREAS, Executive and the Company
further wish to reflect that, notwithstanding Executive’s new
employment with the Company, Executive is entitled to certain
benefits in connection with his Prior Termination in accordance
with the terms and conditions of the Second Amended Management
Retention Agreement entered into effective as of December 31,
2008, by and between Executive and the Company (the “Second
Amended Agreement);
WHEREAS, the parties agree that,
subject to Executive’s compliance with Section 12 of the
Second Amended Agreement, including but not limited to Executive
timely signing and not revoking a separation agreement and release
of claims in a form reasonably acceptable to the Company, Executive
is entitled to continued participation in the Company’s group
medical and dental plans and to the transfer to Executive of any
and all rights, title, interest and claim that the Company may have
in the Membership (as defined in the Second Amended Agreement) in
accordance with the terms and conditions of Sections 7(i)(c) and
7(i)(d) of the Second Amended Agreement (the “Prior
Termination Benefits”);
WHEREAS, the parties agree that,
subject to Executive’s compliance with Section 12 of the
Second Amended Agreement, Executive is entitled to the Prior
Termination Benefits, notwithstanding Executive’s new
employment with the Company and notwithstanding any voluntary or
involuntary termination of Executive’s employment with the
Company for any reason following the Effective Date;
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) “ CEO ” means
the Executive’s position with the Company as Chief Executive
Officer or such other position approved by the Board and agreed to
by Executive.
(c) “ 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 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.
(d) “ 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.
(e) “ Involuntary
Termination ” means the Executive’s termination of
employment as a result of the occurrence of any of the following,
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 his current 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 for a period
beginning on the Effective Date and ending on December 31,
2010 (“Employment Term”) on the terms and conditions
set forth herein. The parties’ obligations under sections 8,
9, 10, 11, and 12 of this Agreement continue in certain respects
after an Involuntary Termination without Cause.
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 $736,403 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. The
Base Salary will not be increased during the Employment Term
without the prior written approval of the Board.
5. Annual Incentive .
Executive will be eligible to receive annual cash bonus payments
under the Company’s cash bonus plan for Company Executive
Management as in effect on the Effective Date and as amended from
time to time. Executive’s on-target bonus will be 70% of Base
Salary. The bonus will be paid on a fiscal year basis based on the
terms of the performance plan agreed to between the Executive and
the Board.
6. Equity Grants .
(a) Performance Based Restricted
Stock Grant . Pursuant to the terms of the Agreement, Executive
shall be granted a total of four hundred thousand
(400,000) shares of restricted Company common stock, allocated
equally (200,000) to each of the 2009 and 2010 fiscal years
(the “Performance Based Restricted Stock Grant”). The
Performance Base Restricted Stock Grant shall provide that the
restrictions on the stock shall lift based on achievement of
applicable Company performance goals during 2009 and 2010 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 2009 and 2010 performance periods. The
Performance Based Restricted Stock Grant will also be 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 “Performance Based
Restricted Stock Agreement”), both of which documents are
incorporated herein by reference.
(b) Time Based Restricted Stock
Grant . Pursuant to the terms of the Agreement, Executive shall
be granted a total of three hundred thousand (300,000) shares
of restricted Company common stock (the “Time Based
Restricted Stock Grant”). The Time Based Restricted Stock
Grant shall provide that the restrictions on the stock shall lift
based on the passage of time over the Employment Term and subject
to the Executive’s continued service to the Company through
each vesting date. Specifically, the vesting commencement date of
the Time Based Restricted Stock Grant shall be the date of grant
and the shares shall be scheduled to vest over the Employment Term
with one-half (150,000 shares) of the Time Based Restricted Stock
Grant vesting on December 31, 2009 and the remaining one-half
(150,000 shares) on December 31, 2010, subject to the
Executive’s continued service to the Company through each
vesting date. The Time Based Restricted Stock Grant will also be
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 “Time
Based Restricted Stock Agreement”), both of which documents
are incorporated herein by reference.
7. Other . Upon Commencement
as 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).
8. Severance Benefits Upon
Involuntary Termination .
Section 8(i) below governs
severance benefits to be received by Executive upon the occurrence
of an Involuntary Termination at any time during the Employment
Term which Involuntary Termination does not occur within twelve
months following a Change of Control. Section 8(ii) below
governs severance benefits to be received by Executive upon the
occurrence of an Involuntary Termination at any time during the
Employment Term which Involuntary Termination does occur within
twelve months following a Change of Control. For purposes of
clarity, notwithstanding the reason for Executive’s
termination and whether such termination is an Involuntary
Termination, Executive will, subject to Executive’s
compliance with Section 12 of the Second Amended Agreement,
including but not limited to Executive timely signing and not
revoking a separation agreement and release of claims in a form
reasonably acceptable to the Company, continue to be entitled to
receive the Prior Termination Benefits (provided that Executive
will continue to be entitled to receive the Prior Termination
Benefits attributable to the Membership only to the extent that
such benefits have not been fully provided in accordance with
Section 7(i)(d) of the Second Amended Agreement prior to the
Executive’s termination following the Effective
Date).
(i) Upon the occurrence of an
Involuntary Termination at any time during the Employment Term
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;
and
(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.
(ii) Upon the occurrence of an
Involuntary Termination at any time during the Employment Term 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;
and
(b) An amount equal to 150% of the
Executive’s
