¨

¨

x

¨

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Date:

Time:

Place:

Election of the Company’s five nominee directors, L. George Klaus, Michael Kelly, Thomas F. Kelly, Harold D. Copperman, and Robert H. Smith;

Approval of the Company’s 2007 Stock Incentive Plan;

Ratification of McGladrey & Pullen LLP as independent auditors for the fiscal year ending December 31, 2007; and

Any other matters that may properly be brought before the meeting.

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL INFORMATION ABOUT THE MEETING

Who May Vote

Voting Rights of Common Stock

Voting Your Proxy

Matters to be Presented

Changing Your Vote

Cost of This Proxy Solicitation

How Votes are Counted

Abstentions and Broker Non-Votes

Our Voting Recommendations

Deadline for Receipt of Stockholder Proposals

PROPOSAL ONE: ELECTION OF DIRECTORS

Nominees

Vote Required

Recommended Vote

EXECUTIVE OFFICERS

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

Board Independence

Committees of the Board of Directors

Audit Committee

Nominating and Governance Committee

Director Qualifications

Identification and Evaluation of Nominees for Directors

Compensation Committee

Role of our Compensation Committee

Compensation Committee Interlocks and Insider Participation

Annual Meeting Attendance

Communicating with the Board of Directors

Code of Ethics

DIRECTOR COMPENSATION

Cash Compensation

Equity Compensation

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PROPOSAL TWO: APPROVAL OF THE 2007 STOCK INCENTIVE PLAN

Description of the Plan

Background and Purpose of the Plan

Administration of the Plan

Eligibility to Receive Awards

Stock Options

Stock Appreciation Rights

Restricted Stock

Performance Units and Performance Shares

Performance Goals

Awards to be Granted to Certain Individuals and Groups

Limited Transferability of Awards

Change of Control

Federal Tax Aspects

Nonqualified Stock Options and Stock Appreciation Rights

Incentive Stock Options

Restricted Stock, Performance Units, and Performance Shares

Section 409A

Tax Effect for the Company

Amendment and Termination of the Plan

Summary

Vote Required

Recommended Vote

PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Fees Billed By Deloitte & Touche USA LLP and McGladrey & Pullen LLP During Last Two Fiscal Years

Vote Required

Recommended Vote

EXECUTIVE COMPENSATION AND OTHER MATTERS

Compensation Committee Report

Compensation Discussion and Analysis

Overview of Compensation Program and Philosophy

Role of Executive Officers and Consultants in Compensation Decisions

Benchmarking of Cash and Equity Compensation

2006 and 2007 Executive Compensation

2006 Executive Compensation Elements

Base Salary

Management Bonus Plan

Long-Term Incentive Compensation

Deferred Compensation Plan

Retirement Benefits under the 401(k) Plan, Executive Perquisites and Generally Available Benefit Programs

Stock Ownership Guidelines

Tax Deductibility of Executive Compensation

2006 Summary Compensation Table

CEO Compensation for Fiscal 2006

Other Executive Offer Compensation for Fiscal 2006

2006 Grants of Plan-Based Awards

2006 Outstanding Equity Awards at Fiscal Year-End

2006 Option Exercises And Stock Vested

2006 Nonqualified Deferred Compensation

Employment And Severance Agreements

2006 Potential Payments upon Termination or Change in Control

Chairman and CEO, L. George Klaus

2007 Amendment to Mr. Klaus Management Retention Agreement

Chief Operating Officer and President, Mark A. Duffell

Executive VP and Chief Financial Officer, Michael A. Piraino

Additional Potential Payments Upon Termination or a Change of Control

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Other Related Person Transactions

AUDIT COMMITTEE REPORT

APPENDIX A

Epicor Software Corporation 2007 Stock Incentive Plan

The enclosed Proxy is solicited on behalf of the Board of Directors of Epicor Software Corporation (“Epicor” or the “Company”), for use at the Annual Meeting of Stockholders to be held on May 22, 2007 at 10:00 a.m. local time, and at any postponement or adjournment thereof. The Annual Meeting will be held at the Irvine Marriott Hotel located at 18000 Von Karman Ave., Irvine, CA 92612. The purposes of the Annual Meeting are set forth in the accompanying Notice of Annual Meeting of Stockholders.

These proxy solicitation materials and the enclosed Annual Report on Form 10-K for the fiscal year ended December 31, 2006, including financial statements, were first mailed on or about April 24, 2007 to all stockholders entitled to vote at the meeting. Our principal executive offices are located at 18200 Von Karman Avenue, Suite 1000, Irvine, California 92612, and our telephone number is (949) 585-4000.

Who May Vote

Stockholders of record at the close of business on April 9, 2007 (“Record Date”) are entitled to notice of and to vote at the Annual Meeting of Stockholders. The Company has one (1) class of equity securities outstanding, designated Common Stock, $.001 par value (“Common Stock”). At the Record Date, 59,147,419 shares of Common Stock, which includes 1,071,819 shares of Common Stock held by the Company as treasury shares, were issued and outstanding.

Voting Rights of Common Stock

Each share of Common Stock outstanding at the record date will be entitled to one (1) vote with respect to each proposal herein and any other matter that properly may come before the Annual Meeting of Stockholders. A total of 58,075,600 votes, excluding 1,071,819 treasury shares, are eligible to be cast at the Annual Meeting.

Voting Your Proxy

If a broker, bank or other nominee holds your shares, you will receive instructions from them that you must follow in order to have your shares voted.

Internet and telephone voting may be available in the instructions from your broker, bank or other nominee. If a bank, broker or other nominee holds your shares and you wish to attend the meeting and vote in person, you must obtain a “legal proxy” from the record holder of the shares giving you the right to vote the shares.

If you hold your shares in your own name as a holder of record, you may instruct the proxy holders how to vote your common stock by using the toll free telephone number, the Internet voting site listed on the proxy card, or by signing, dating and mailing the proxy card in the postage paid envelope that we have provided. Of course, you may also choose to attend the meeting and vote your shares in person. Specific instructions for using the telephone and Internet voting systems are on the proxy card. The telephone and Internet

voting systems will be available until 11:59 p.m. (Central Time) on May 21, 2007. Whichever of these methods you select to transmit your instructions, the proxy holders will vote your shares in accordance with those instructions. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our Board of Directors.

Matters to be Presented

We are not aware of any matters to be presented other than those described in this Proxy Statement. If any matters not described in the Proxy Statement are properly presented at the meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have revoked your proxy instructions, as described below under “Changing Your Vote.”

Changing Your Vote

To revoke your proxy instructions if you are a holder of record, you must (i) advise our Corporate Secretary in writing before the proxy holders vote your shares, (ii) deliver later proxy instructions before the proxy holders vote your shares, or (iii) attend the meeting and vote your shares in person. If your shares are held by a bank, broker or other nominee, you must follow the instructions provided by the bank, broker or nominee.

Cost of This Proxy Solicitation

We will pay the cost of this proxy solicitation. We may, on request, reimburse brokerage firms and other nominees for their expenses in forwarding proxy materials to beneficial owners. In addition to soliciting proxies by mail, we expect that our directors, officers and employees may solicit proxies in person or by telephone or facsimile. None of these individuals will receive any additional or special compensation for doing this, although we will reimburse these individuals for their reasonable out-of-pocket expenses.

How Votes are Counted

The Annual Meeting will be held if a majority of the outstanding Common Stock entitled to vote is represented in person or by proxy at the meeting. If you have returned valid proxy instructions or attend the meeting in person, your Common Stock will be counted for the purpose of determining whether there is a quorum, even if you wish to abstain from voting on some or all matters at the meeting.

Abstentions and Broker Non-Votes

Shares that are voted “WITHHELD” or “ABSTAIN” are treated as being present for purposes of determining the presence of a quorum and as entitled to vote on a particular subject matter at the Annual Meeting. Accordingly, abstentions will have the same effect as a vote against the proposal. If you hold your shares through a broker, bank or other nominee and you do not provide instructions on how to vote, your broker or other nominee may have authority to vote your shares on certain matters, including Proposals 1 and 3. If you hold your common stock through a bank, broker or other nominee, the broker is prevented from voting shares held in your account on some proposals, including Proposal 2 (a “broker non-vote”), unless you have given voting instructions to the bank, broker or nominee. Shares that are subject to a broker non-vote are counted for purposes of determining whether a quorum exists but not for purposes of determining whether a proposal has passed.

Our Voting Recommendations

When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. However, if no specific

instructions are given, the shares will be voted in accordance with the following recommendations of our Board of Directors:

“FOR” the election of the Director nominees to the Board of Directors;

“FOR” Approval of the Company’s 2007 Stock Incentive Plan; and

“FOR” ratification of McGladrey & Pullen, LLP as our independent auditors for fiscal year ending December 31, 2007.

Deadline for Receipt of Stockholder Proposals

Stockholders may present proposals for action at a future meeting only if they comply with the requirements of the proxy rules established by the Securities and Exchange Commission (SEC) and our bylaws. Stockholder proposals that are intended to be included in our Proxy Statement and form of Proxy relating to the meeting for our 2008 Annual Meeting of Stockholders under rules set forth in the Securities Exchange Act of 1934, as amended (the Securities Exchange Act) must be received by us no later than December 26, 2007 to be considered for inclusion.

If a stockholder intends to submit a proposal or nomination for director for our 2008 Annual Meeting of Stockholders that is not to be included in Epicor’s Proxy Statement and form of Proxy relating to the meeting, the stockholder must give us notice in accordance with the requirements set forth in Epicor’s bylaws on the earlier of (i) 45 days after notice was sent to stockholders regarding the previous year’s annual meeting, or (ii) 90 days prior to the one year anniversary of the last year’s annual meeting; provided, however, if the annual meeting date is changed by more than 30 days before or 60 days after the anniversary date of the prior year’s annual meeting, then notice must be given not later than the later of (i) the 90^th day prior to such meeting and (ii) the 10^th day following the date on which public announcement of the date of such meeting is first made. Epicor’s bylaws require that certain information and acknowledgments with respect to the proposal and the stockholder making the proposal be set forth in the notice. A copy of the relevant bylaw provision is available upon written request to Epicor Software Corporation, 18200 Von Karman Avenue, Suite 1000, Irvine, California 92612, Attention: Corporate Secretary. You can also access our SEC filings, including our Annual Report on Form 10-K on our website at www.epicor.com.

Nominees

Currently, there are five (5) members of the Board of Directors. Accordingly, at the Annual Meeting of Stockholders, five (5) directors are to be elected by the holders of Common Stock. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s five (5) nominees named below. All nominees are currently directors of the Company. If any Company nominee is unable or declines to serve as a director at the time of the Annual Meeting of Stockholders, the proxies will be voted for a nominee designated by the present Board of Directors to fill the vacancy. The Company is not aware of any nominee who will be unable to or will decline to serve as a director. The term of office for each person elected as a director will continue until the next Annual Meeting of Stockholders or until the earlier of his death, resignation or removal.

Name

Position

L. George Klaus

Michael Kelly*

Thomas F. Kelly*

Harold D. Copperman

Robert H. Smith

The Board of Directors recommends a vote “FOR” the election of all of the nominees listed above.

L. George Klaus

George Klaus has been a director of the Company and has served as Chief Executive Officer of the Company since February 1996 and Chairman of the Board since September 1996. Mr. Klaus also served as President of the Company from February 1996 through November 1999 and from June 2001 to July 2005. Mr. Klaus is also a member of the Information and Computer Science CEO Advisory Board for the University of California, Irvine. Mr. Klaus received his Bachelor of Science in Mathematics from California State University, Northridge in 1963 and in 1964 studied at the graduate level in business and math.

Michael Kelly

Michael Kelly joined Epicor’s Board of Directors in September 2005. Since October 2005, Mr. Kelly has served as Chairman and CEO of Kinsale Associates, a merchant bank. From July 2005 to October 2005, Mr. Kelly served as CEO of Cape Semiconductor Inc., a fabless semiconductor company providing analog and mixed signal solutions to a variety of industries. Prior to that, from 1994 to 2005, Mr. Kelly was vice-chairman and senior managing director of Broadview International, LLC, an international technology investment banking firm and a division of Jefferies Inc. Mr. Kelly currently serves on the board of directors of Adept Technology, Inc. (NASDAQ: ADEP). Mr. Kelly holds a Bachelor of Arts degree in accounting from Western Illinois University, a Master of Business Administration from St. Louis University and is a certified public accountant.

Thomas F. Kelly

Thomas Kelly has been a director of the Company since January 2000 and is currently Chairman and CEO of Monte Vista Software, a provider of Linux

operating systems and tools for electronic systems and devices. Prior to that, from September 2004 through December 2005, Mr. Kelly was associated with Trident Capital as an EIR (Entrepreneur in Residence). During the period from March through September 2005, Mr. Kelly also held the title of Chief Executive Officer and member of the Board of Directors of Transware Limited and its holding company parent, Eastchase Limited. Prior to that, he was Chairman and Chief Executive Officer of BlueStar Solutions, Inc., an enterprise resource planning software hosting company, from January 2001 to September 2004, at which time BlueStar was acquired by ACS, Inc. Mr. Kelly is also a director of FEI Company (NASDAQ: FEIC), a manufacturer of particle and ion beam imaging and analysis solutions for the semiconductor and science markets and a director of Sendmail, Inc., a private email security company. Mr. Kelly received his Bachelor of Science in Economics from Santa Clara University.

Harold D. Copperman

Harold Copperman has been a director of the Company since July 2001. For the past five years, Mr. Copperman has been the CEO and President of HDC Ventures, Inc., a management and investment group focusing on enterprise systems, software and services. Prior to that, from 1993 through 1999, he served as Sr. Vice President and Group Executive of the Products Division at Digital Equipment Corporation. Mr. Copperman currently sits on the Board of Avocent Corporation (NASDAQ: AVCT), AXS-One Inc., (AMEX:AXO) and a number of other private companies in the information technology business. From 1989-1993 he sat on the Board of Directors of America Online, Inc. Mr. Copperman received his Bachelors of Science in Mechanical Engineering from Rutgers University in 1967 and served as a Captain in the U.S. Army.

Robert H. Smith

Mr. Smith has been a director of the Company since May 2003. From 1996 through 2002, Mr. Smith was the CFO and Exec. VP of finance and administration for Novellus Systems, Inc. Mr. Smith also served on the board of directors of Novellus until his retirement in 2002. Mr. Smith is a member of the board of directors of Cirrus Logic, Inc. (NASDAQ: CRUS). Mr. Smith is also on the board of directors of PLX Technology (NASDAQ: PLXT), Virage Logic (NASDAQ: VIRL), and ON Semiconductor (NASDAQ: ONNN). Mr. Smith holds a Bachelors degree in Business Administration from Oklahoma City University.

Vote Required

The five (5) nominees for director receiving the highest number of affirmative votes from holders of shares entitled to be voted for them shall be elected as directors. Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum, but have no other legal effect under Delaware law.

Recommended Vote

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF THE COMPANY’S FIVE (5) NOMINEE DIRECTORS. Unless otherwise marked, proxies solicited by the Company will be voted FOR the election of the Company’s FIVE (5) nominee directors.

Name

Position

Mark Duffell

Michael Piraino

Mark Duffell

Mr. Duffell has been employed by Epicor in a variety of management and executive roles since 1996. Since July 2005, Mark Duffell has served as Epicor’s President and COO. Prior to that time, he served as Epicor’s Executive Vice President and general manager for the Enterprise Solutions Group and International Operations. He also served as Vice President of EMEA and North American Sales. Mr. Duffell graduated with a first class honors degree in production engineering from Kingston University in 1984.

Michael Piraino

Michael Piraino joined Epicor as Senior Vice-President and Chief Financial Officer in May 2003, bringing 28 years experience in senior executive and financial roles. In July 2005, he was promoted to Executive Vice President. Prior to joining Epicor, Mr. Piraino founded CEO Resources L.L.C., a premier executive resource management company providing small to medium high-growth companies with interim CEO services, corporate finance and M&A advisory services and integration strategies. He currently serves on the Board of Directors for Buy.com. Mr. Piraino holds a Bachelor of Science degree in accounting from Loyola University of Los Angeles. He is a certified public accountant.

The Board of Directors held seven (7) meetings during fiscal year 2006. Each director attended or participated telephonically in 75% or more of the aggregate of (i) the total number of the meetings of the Board of Directors (held during the period for which such director was a director) and (ii) the total number of meetings of all committees on which such director served (held during the period for which such director served as a committee member) during fiscal year 2006.

Board Independence

The Board of Directors has determined that each of its current directors, including all nominee directors, except the Chief Executive Officer, has no material relationship with Epicor and is independent within the meaning of the NASDAQ Stock Market, Inc. director independence standards, as currently in effect.

Committees of the Board of Directors

The Board of Directors has Audit, Nominating and Corporate Governance, and Compensation Committees. Each of these committees has adopted a written charter. All members of the committees are appointed by the Board of Directors, and are non-employee directors. The following describes each committee and its function, its current membership and the number of meetings held during fiscal year 2006.

Audit Committee

The Audit Committee currently consists of Messrs. Thomas Kelly, Smith, and Copperman, each of whom is independent within the meaning of the NASDAQ Stock Market, Inc. director independence standards, as currently in effect. The Board of Directors has determined that Mr. Thomas Kelly is an “audit committee financial expert” as defined in SEC rules. The Audit Committee held ten (10) meetings during fiscal year 2006. Mr. Thomas Kelly serves as Chairman of the Audit Committee.

The Board of Directors has adopted a written charter for the Audit Committee, which is available on Epicor’s website at www.epicor.com under “Investors” and “Corporate Governance.” The audit committee reviews and reassesses the adequacy of the charter on an annual basis.

The Audit Committee oversees the accounting, financial reporting and audit processes; makes recommendations to the Board of Directors regarding the selection of independent auditors; reviews the results and scope of audit and other services provided by the independent auditors; reviews the accounting principles and auditing practices and procedures to be used in preparing our financial statements; and reviews our internal controls and procedures to ensure compliance with the Sarbanes-Oxley Act of 2002.

The Audit Committee works closely with management and our independent auditors. The Audit Committee also meets with our independent auditors in an executive session, without the presence of our management, on a quarterly basis, following completion of their quarterly reviews and annual audit and prior to our earnings announcements, to review the results of their work. The Audit Committee also meets with our independent auditors to approve the annual scope of the audit services to be performed.

The Audit Committee Report is included herein on page 55.

Nominating and Governance Committee

The Nominating and Governance Committee consists of Messrs. Thomas Kelly, Copperman and Smith, each of whom is independent within the meaning of the NASDAQ Stock Market, Inc. director independence standards, as currently in effect. Mr. Smith serves as chair of the Nominating and Governance Committee and also as the Lead Director.

The Nominating and Governance Committee held four (4) meetings during fiscal year 2006. The Board of Directors has adopted the Nominating and Governance Committee charter; which is available on Epicor’s website at www.epicor.com under “Investors” and “Corporate Governance”.

The Nominating and Governance Committee considers and periodically reports on matters relating to the identification, selection and qualification of the Board of Directors and candidates nominated to the Board of Directors and its committees; develops and recommends governance principles applicable to the Company and the Board of Directors; oversees the evaluation of the Board of Directors and management; and oversees and sets compensation for the Board of Directors.

The Nominating and Governance Committee considers properly submitted stockholder recommendations for candidates for membership on the Board of Directors as described below under “Identification and Evaluation of Nominees for Directors.” In evaluating such recommendations, the Nominating and Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board of Directors and to address the membership criteria set forth under “Director Qualifications.” Any stockholder recommendations proposed for consideration by the Nominating and Governance Committee should include the candidate’s name and qualifications for membership on the Board of Directors and should be addressed to our Corporate Secretary. In addition, procedures for stockholder direct nomination of directors are discussed above under the section “Deadline for Receipt of Stockholder Proposals” and are discussed in detail in our bylaws, which will be provided to you upon written request.

Director Qualifications

The Nominating and Governance Committee uses a variety of criteria to evaluate the qualifications and skills necessary for members of our Board of Directors. Under these criteria, members of the Board of Directors should have the highest professional and personal ethics and values, consistent with longstanding Epicor values and standards. They should have broad experience at the policy-making level in business, government, education, technology or public interest. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a reasonable number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of all stockholders.

Identification and Evaluation of Nominees for Directors

The Nominating and Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Nominating and Governance Committee regularly assesses the appropriate size of the Board of Directors, and whether any vacancies on the Board of Directors are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Governance Committee

considers various potential candidates for director. Candidates may come to the attention of the Nominating and Governance Committee through current members of the Board of Directors, professional search firms, stockholders or other persons. These candidates are evaluated at regular or special meetings of the Nominating and Governance Committee, and may be considered at any point during the year. As described above, the Nominating and Governance Committee considers properly submitted stockholder recommendations for candidates for the Board of Directors. In evaluating such recommendations, the Nominating and Governance Committee uses the qualifications standards discussed above and seeks to achieve a balance of knowledge, experience and capability on the Board of Directors.

All of the nominees for election to the Board this year have previously stood for election to the Board by the stockholders.

Compensation Committee

The Compensation Committee consists of Messrs. Thomas Kelly, Michael Kelly and Smith each of whom is independent within the meaning of the NASDAQ Stock Market, Inc. director independence standards, as currently in effect. The Compensation Committee held seven (7) meetings during fiscal year 2006 and acted by unanimous consent on several occasions. The Compensation Committee also met in January 2007, following the end of fiscal year 2006, to review fiscal year 2006 compensation and set fiscal year 2007 compensation. Mr. Smith serves as Chair of the Compensation Committee.

The Compensation Committee Report is included herein on page 26.

Role of our Compensation Committee

The Board of Directors has adopted a written charter for the Compensation Committee. A copy of the Compensation Committee charter is available at www.epicor.com/investors.

One of the primary responsibilities of the Compensation Committee is administering the Company’s executive compensation program. Specifically, the Compensation Committee oversees and makes recommendation to the Board of Directors regarding our compensation and benefit plans and policies, administer our stock plans and reviews and approves annually all compensation decisions relating to all executive officers, including our chief executive officer.

The Compensation Committee annually performs a review of our compensation policies, including policies and strategy relating to executive compensation, including the appropriate mix of base salary, bonuses and long-term incentive compensation. The Compensation Committee also reviews and approves all annual bonus, long-term incentive compensation, stock option, employee pension and welfare benefit plans (including our 401(k), long-term incentive plan and management incentive plan) for its executive officers.

Compensation Committee Interlocks and Insider Participation

During fiscal year 2006, no member of the Compensation Committee was an officer or employee of Epicor, and no member of the Compensation Committee has been at any time in the past an officer of Epicor. During fiscal year 2006, no member of the Compensation Committee or executive officer of Epicor served as a member of the Board of Directors or Compensation Committee of any entity that has an executive officer serving as a member of our Board of Directors or Compensation Committee.

Annual Meeting Attendance

The Company’s policy is to invite, but not require directors to attend annual meetings of Epicor stockholders. No directors attended the 2006 annual meeting of stockholders.

Communicating with the Board of Directors

Epicor’s policy is that stockholders may communicate with the Board of Directors, by submitting an email to bod@epicor.com, or by writing to us at Epicor Software Corporation, Attention: Board of Directors, 18200 Von Karman Avenue, Suite 1000, Irvine, California 92612. Stockholders who would like their submission directed to a member of the Board of Directors may so specify, and the communication will be forwarded. All other stockholder communications related to the Board and the Company’s business are forwarded directly to the entire Board of Directors by the General Counsel of the Company.

Code of Ethics

The Board of Directors has adopted a Worldwide Code of Business Conduct and Code of Ethics, which is applicable to the Company, including the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and all officers of the Company. The Board has also adopted separate Corporate Governance Guidelines, which contains provisions specifically applicable to directors.

We will provide a copy of the Worldwide Code of Business Conduct and Code of Ethics and/or the Corporate Governance Guidelines upon request made by email to investorrelations@epicor.com or in writing to Epicor Software Corporation, Attention: Investor Relations, 18200 Von Karman Avenue, Suite 1000, Irvine, California 92612. Epicor will disclose any amendment to the Worldwide Code of Business Conduct and Code of Ethics or the Corporate Governance Guidelines or waiver of a provision of the Worldwide Code of Business Conduct and Code of Ethics or the Corporate Governance Guidelines, including the name of the officer to whom the waiver was granted, on our website at www.epicor.com, on the Investor Relations page.

Name

Thomas F. Kelly (5)

Robert A. Smith (5)

Michael Kelly (5)

Harry Copperman (5)

non-employee director of the Company the following Cash and Equity compensation:

Cash Compensation

In 2006, the Company paid a $12,000 annual retainer fee and a $6,000 fee for physical attendance at a board meeting. The board meeting fee is $3,000 if attendance is via phone. Non-employee members of the Audit Committee, Nominating and Governance Committee and Compensation Committee were also paid a $3,000 fee for physical attendance at a committee meeting and $1,500 if such attendance was via phone. Additionally, the chairperson of the Audit Committee, Nominating and Governance Committee and Compensation Committee received yearly retainer fees of $12,000, $8,000 and $8,000, respectively for fulfilling such roles and which retainers were paid out quarterly. The Lead Director, Robert Smith, also receives an annual retainer fee of $10,000 for fulfilling such role.

Equity Compensation

With respect to director equity compensation in 2006, the Board of Directors approved each newly appointed director receiving 15,000 shares of restricted stock. In 2006 there were no new non-employee directors of the Company who commenced service on the Board of Directors in 2006. Furthermore, each director re-elected to the Board of Directors in 2006 received a grant of 5,000 shares of restricted Company stock upon such annual re-election. The re-elected directors paid par value of $0.001 for each share of restricted stock granted and the shares have a two-year “vesting” schedule. The 15,000 share initial commencement grant vests as to 5,000 on the day of the grant and the remaining 10,000 shares begin vesting quarterly thereafter in equal blocks such that they are fully vested within two years of the grant. The 5,000 share re-election grant upon re-election vests quarterly over two years.

In 2007, the Board of Directors approved the same director compensation as 2006 with the exception that each director re-elected to the Board of Directors in 2007 will receive a grant of 6,000 shares of restricted Company stock upon such annual re-election. The 6,000 share grant upon re-election will vest quarterly over the one year period following re-election.

The following table sets forth certain information as of April 9, 2007 regarding the beneficial ownership of the Common Stock of the Company by (i) each person known by management to be the beneficial owner of more than 5% of any class of the Company’s capital stock (based upon reports filed by such persons with the Securities and Exchange Commission), (ii) each director of the Company, (iii) each of the persons named in the Summary Compensation Table, and (iv) all current directors and executive officers of the Company as a group:

LeRoy C. Kopp

Kopp Investment Advisors, LLC

Kopp Holding Company, LLC

Kopp Holding Company

7701 France Avenue South Suite 500

Edina, MN 55435

Richard H. Pickup

Pickup Family Trust

Dito Devcar Corporation

TB Fund, LLC

Plus Four Equity Partners, LP

TD Investments, LLC

Dito Caree, LP

Dito Devcar, LP

Dito Devcar Foundation

Pickup CRUT II

2321 Alcova Ridge Dr.

Las Vegas, NV 89134

Royce & Associates, LLC

1414 Avenue of the Americas

New York, NY 10019

Mark Duffell

Michael A. Piraino

We are asking stockholders to approve the 2007 Stock Incentive Plan (the “Plan”) so that we can use the Plan to achieve the Company’s employee performance, recruiting, retention and incentive goals, as well as receive a federal income tax deduction for certain compensation paid under the Plan. On March 30, 2007, the Board of Directors approved the Plan, subject to stockholder approval at the Annual Meeting.

The Company currently grants stock options and performance-based stock purchase rights to the Company’s employees as an incentive to employees to increase long-term stockholder value. The Plan includes a variety of forms of equity awards, including stock options, stock appreciation rights, restricted stock, performance units, and performance shares to allow the Company to adapt its equity compensation program to meet the needs of the Company in the changing business environment in which the Company operates.

We strongly believe that the approval of the Plan is essential to our continued success. The Board of Directors and management believe that equity awards motivate high levels of performance, align the interests of employees and stockholders by giving employees the perspective of an owner with an equity stake in the Company, and provide an effective means of recognizing employee contributions to the success of the Company. The Board of Directors and management believe that equity awards are a competitive necessity in our high-technology industry, and are essential to recruiting and retaining the highly qualified technical and other key personnel who help the Company meet its goals, as well as rewarding and encouraging current employees. The Board of Directors and management believe that the ability to grant equity awards will be important to the future success of the Company.

Description of the Plan

The following paragraphs provide a summary of the principal features of the Plan and its operation. The Plan is set forth in its entirety as Appendix A to this Proxy Statement. The following summary is qualified in its entirety by reference to the Plan.

Background and Purpose of the Plan

The Plan permits the grant of the following types of incentive awards: (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) performance units, and (5) performance shares (individually, an “Award”). The Plan is intended to attract, motivate, and retain (1) employees of the Company and its subsidiaries, (2) consultants who provide significant services to the Company and its subsidiaries, and (3) directors of the Company who are employees of neither the Company nor any subsidiary. The Plan also is designed to encourage stock ownership by employees, directors, and consultants, thereby aligning their interests with those of the Company’s stockholders and to permit the payment of compensation that qualifies as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”).

Administration of the Plan

The Plan provides that it shall be administered by the Board of Directors or a committee of directors appointed by the Board of Directors (referred to herein as the “Administrator”). To the extent the Administrator determines it to be desirable to qualify Awards granted under the Plan as performance-based compensation within the meaning of Section 162(m), the

Plan shall be administered by a committee of two or more “outside directors” within the meaning of Section 162(m).

Subject to the terms of the Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who will receive Awards, determine the terms and conditions of Awards (for example, the exercise price and vesting schedule), and construe and interpret the terms of the Plan and Awards granted pursuant to the Plan.

Assuming stockholder approval, the Plan will be effective March 30, 2007. The number of shares of Company common stock (“Shares”) initially reserved for issuance under the Plan will equal (1) 6,000,000 Shares, plus (2) up to 653,770 shares still available for issuance under the 2005 Stock Incentive Plan (the “2005 Plan”) and the 1999 Nonstatutory Stock Option Plan (the “1999 Plan”) as of April 9, 2007. Thus, the actual increase in Shares available for grant under the Company’s equity incentive plans is only 6,000,000 (because the 653,770 additional shares that may be available for grant under the Plan will be derived from 3,000,000 shares of common stock previously approved for grant under the 2005 Plan and 6,000,000 shares of common stock previously approved for grant under the 1999 Plan). If stockholders approve the Plan, the Company currently expects that it will not ask stockholders to approve additional shares for the Plan until at least the 2010 Annual Meeting of Stockholders, depending on business conditions. To the extent any Shares otherwise would have returned to the 2005 Plan or 1999 Plan as a result of the expiration, cancellation, or forfeiture of awards granted under the 2005 or 1999 Plan, those Shares instead will go into the reserve of shares available under the Plan. The maximum number of Shares that could be returned in this manner is 3.933 million which is the number of options outstanding under the 1999 Plan and the number of options and restricted stock awards outstanding under the 2005 Plan as of April 9, 2007. However, the number of Shares that actually are added to the Plan on account of these expirations or forfeitures likely will be substantially smaller because it is unlikely that all of the outstanding options and restricted stock awards will expire, terminate or be forfeited. For example, as of April 9, 2007, only 397,700 options and 2,195,496 shares of restricted stock under the 1999 Plan and 2005 Plan were unvested or had exercise prices above the fair market value of the Company’s shares.

The number of Shares that remain available for issuance will be reduced by two Shares for each Share issued pursuant to an Award other than an option or stock appreciation right. If an Award expires, is surrendered pursuant to an exchange program or becomes unexercisable without having been settled in full, or if Shares subject to forfeiture or repurchase are forfeited or repurchased by the Company, then any such Shares that are reacquired or subject to such terminated Award will again become available for issuance under the Plan. Also, if the Company experiences a stock dividend, reorganization, or other change in capital structure, the Administrator has the discretion to adjust the number of Shares available for issuance under the Plan, the outstanding Awards, and the per-person limits on Awards, as appropriate to reflect the stock dividend or other change.

Eligibility to Receive Awards

The Administrator selects the employees, consultants, and directors who will be granted Awards under the Plan. The actual number of individuals who will

receive Awards cannot be determined in advance because the Administrator has the discretion to select the participants.

Stock Options

A stock option is the right to acquire Shares at a fixed exercise price for a fixed period of time. Under the Plan, the Administrator may grant nonqualified stock options and/or incentive stock options (which entitle employees, but not the Company, to more favorable tax treatment). The Administrator will determine the number of Shares covered by each option, but during any fiscal year of the Company, no participant may be granted options (and/or stock appreciation rights) covering more than 1,500,000 Shares. Notwithstanding the foregoing, during the fiscal year in which the participant first becomes an employee, he or she may be granted options (and/or stock appreciation rights) covering up to an additional 1,500,000 Shares. The exercise price of the Shares subject to each option is set by the Administrator but cannot be less than 100% of the fair market value (on the date of grant) of the Shares covered by the option. An exception would be made for any options that the Administrator grants in substitution for options held by employees of companies that the Company acquires (in which case the exercise price preserves the economic value of the employee’s cancelled option from his or her former employer).

In addition, the exercise price of an incentive stock option must be at least 110% of fair market value if (on the grant date) the participant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its subsidiaries. The aggregate fair market value of the Shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000.

Options become exercisable at the times and on the terms established by the Administrator. The Administrator also establishes the time at which options expire, but the expiration may not be later than ten years after the grant date. With respect to any participant who owns 10% of the voting power of all classes of the Company’s outstanding stock, the term of an incentive stock option may not exceed five years.

After a termination of service with the Company, a participant will be able to exercise the vested portion of his or her option for the period of time determined by the Administrator. In the absence of such a determination by the Administrator, the participant generally will be able to exercise his or her option for (1) three months following his or her termination for reasons other than death or disability, and (2) twelve months following his or her termination due to death or disability.

The exercise price of each option may be paid by (1) cash, (2) check, (3) promissory note, (4) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, (5) other Shares (in the case of Shares acquired upon exercise of an option, which have been owned by the participant for more than six months on the date of surrender) which have a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which the option shall be exercised, (6) a reduction in the amount of any Company liability to the participant, (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by applicable

laws, or (8) by any combination of the foregoing. At the time of exercise, a participant must pay any taxes that the Company is required to withhold.

Stock Appreciation Rights

Stock appreciation rights (“SARs”) are awards that grant the participant the right to receive an amount (in the form of cash, Shares of equal value, or a combination thereof, as determined by the Administrator) equal to (1) the number of shares exercised, times (2) the amount by which the Company’s stock price exceeds the exercise price. The exercise price is set by the Administrator, but cannot be less than 100% of the fair market value of the covered Shares on the grant date. A SAR may be exercised only if it becomes vested based on the vesting schedule established by the Administrator. SARs expire under the same rules that apply to options and are subject to the same per-person limits (1,500,000 covered Shares for SARs and/or options in any fiscal year plus an additional 1,500,000 Shares for SARs and/or options in the fiscal year in which the participant first becomes an employee).

Restricted Stock

Awards of restricted stock are Shares that vest in accordance with the terms and conditions established by the Administrator. The Administrator determines the number of Shares of restricted stock granted to any participant, but during any fiscal year of the Company, no participant may be granted more than 1,000,000 Shares of restricted stock (and/or performance shares). Notwithstanding the foregoing, a participant may be granted an additional 1,000,000 Shares of restricted stock (and/or performance shares) in the fiscal year in which he or she first becomes an employee.

In determining whether an Award of restricted stock should be made, and/or the vesting schedule for any such Award, the Administrator may impose whatever conditions to vesting it determines to be appropriate. Notwithstanding the foregoing, if the Administrator desires that the Award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals (see “Performance Goals” below for more information).

A holder of restricted stock will have full voting rights, unless determined otherwise by the Administrator. A holder of restricted stock also generally will be entitled to receive all dividends and other distributions paid with respect to Shares; provided, however, that dividends and distributions generally will be subject to the same vesting criteria as the Shares upon which the dividend or distribution was paid.

Performance Units and Performance Shares

Performance units and performance shares are awards that result in a payment to a participant (in the form of cash, Shares of equal value, or a combination thereof, as determined by the Administrator) only if performance goals and/or other vesting criteria established by the Administrator are achieved or the Awards otherwise vest. The applicable performance goals (which may be solely continued employment) will be determined by the Administrator, and may be applied on a company-wide, business unit or individual basis, as deemed appropriate in light of the participant’s specific responsibilities (see “Performance Goals” below for more information).

During any fiscal year of the Company, no participant may receive performance units having an initial value greater than $14,000,000. The Administrator establishes the initial value of each performance unit on the date grant. Additionally, grants of performance shares are subject to the same

per-person limits as restricted stock (1,000,000 Shares in any fiscal year plus an additional 1,000,000 Shares in the fiscal year in which the participant first becomes an employee).

Performance Goals

The Administrator (in its discretion) may make performance goals applicable to a participant with respect to an Award. If the Administrator desires that an Award qualify as performance-based compensation under Section 162(m) (discussed below), then at the Administrator’s discretion, one or more of the following performance goals may apply:

EBITDA;

Revenue;

Profit after tax;

Return on equity;

Free cash flow; and

Total shareholder return.

Each of these goals is defined in the Plan. Any criteria used may be measured, as applicable (1) in absolute terms, (2) in relative terms (including, but not limited to, passage of time and/or against another company or companies), (3) on a per-share basis, (4) against the performance of the Company as a whole or a business unit of the Company, and/or (5) on a pretax or after-tax basis.

By granting awards that vest upon achievement of performance goals, the Administrator may be able to preserve the Company’s deduction for certain compensation in excess of $1,000,000. Section 162(m) limits the Company’s ability to deduct annual compensation paid to the Company’s Chief Executive Officer or any other of the Company’s four most highly compensated executive officers to $1,000,000 per individual. However, the Company can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include stockholder approval of the Plan, setting limits on the number of Awards that any individual may receive, and for Awards other than stock options and stock appreciation rights, establishing performance criteria that must be met before the Award actually will vest or be paid. The performance goals listed above, as well as the per-person limits on shares covered by Awards, permit the Administrator to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting the Company to receive a federal income tax deduction in connection with such Awards.

Awards to be Granted to Certain Individuals and Groups

The number of Awards (if any) that an employee, consultant, or director may receive under the Plan is in the discretion of the Administrator and therefore cannot be determined in advance. Our executive officers and directors have an interest in this proposal because they are eligible to receive Awards under the Plan. The following table sets forth (a) the total number of Shares subject to options granted under the 1999 and 2005 Plans during the last fiscal year, (b) the weighted average per Share exercise price of such options, and (c) the total number of Shares issued pursuant to awards of stock purchase rights granted under the 1999 and 2005 Plans during the last fiscal year. No other type of Award was granted under the 1999 and 2005 Plans during the last

fiscal year. The last reported trade price for Shares on April 9, 2007, was $13.84. No options were issued by the Company during the last fiscal year including under the 1999 Plan or the 2005 Plan.

Name of Individual or Group

L. George Klaus

Chairman of the Board and Chief Executive Officer

Mark A. Duffell

President and Chief Operating Officer

Michael A. Piraino

Executive Vice President and Chief Financial Officer

All executive officers, as a group

All directors who are not executive officers, as a group

All employees who are not executive officers, as a group

Limited Transferability of Awards

Awards granted under the Plan generally may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution. Notwithstanding the foregoing, the Administrator may permit an individual to transfer an Award to an individual or entity. Any transfer shall be made in accordance with procedures established by the Administrator.

Change of Control

Except as otherwise provided in the applicable Award agreement, in the event of a change of control of the Company, the participant, immediately prior thereto, shall fully vest in and have the right to exercise all of his or her outstanding options and SARs, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on restricted stock, performance units and performances shares will lapse, and, with respect to Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% on-target levels and all other terms and conditions met. To the extent possible, the Administrator shall cause written notice of the change of control to be given to the persons holding Awards not less than ten days prior to the anticipated effective date of the change of control. In the event of a change of control of the Company, the Administrator may take such other action as is equitable and fair, in its sole discretion.

Federal Tax Aspects

The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and the Company of Awards granted under the Plan. Tax consequences for any particular individual may be different.

Nonqualified Stock Options and Stock Appreciation Rights

No taxable income is recognized when a nonqualified stock option or a stock appreciation right is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the Shares on the exercise date over the exercise price. Any additional gain or loss recognized upon later disposition of the Shares is capital gain or loss.

Incentive Stock Options

No taxable income is recognized when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for nonqualified stock options). If the participant exercises the option and then later sells or otherwise disposes of the Shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the Shares before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the Shares on the exercise date (or the sale price, if less) minus the exercise price of the option. Any additional gain or loss will be capital gain or loss.

Restricted Stock, Performance Units, and Performance Shares

A participant will not have taxable income upon grant of restricted stock, performance units, or performance shares. Instead, the participant will recognize ordinary income at the time of vesting or payout equal to the fair market value of the Shares on that date or the cash received minus any amount paid. For restricted stock only, a participant instead may elect to be taxed at the time of grant.

Section 409A

Section 409A of the Internal Revenue Code provides certain new requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. The Internal Revenue Service has not issued final regulations under Section 409A and, accordingly, the requirements of Section 409A and the application of those requirements to awards issued under the Plan are not entirely clear.

Tax Effect for the Company

The Company generally will be entitled to a tax deduction in connection with an Award under the Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonqualified stock option). As discussed above, special rules limit the deductibility of compensation paid to our Chief Executive Officer and to each of our four most highly compensated executive officers. However, the Plan has been designed to permit the Administrator to grant Awards that qualify as performance-based compensation under Section 162(m), thereby permitting the Company to receive a federal income tax deduction in connection with such Awards.

Amendment and Termination of the Plan

The Board generally may amend or terminate the Plan at any time and for any reason. However, no amendment, suspension, or termination may impair the rights of any participant without his or her consent. Also, stockholder approval will be required for certain material amendments to the Plan, as provided under Nasdaq rules.

Summary

We believe strongly that the approval of the Plan is essential to our continued success. Awards such as those provided under the Plan constitute an important incentive and help us to attract and retain people whose skills and performance are critical to our success. Our employees and directors are our most important asset. The Plan is vital to our ability to attract and retain outstanding and highly skilled individuals to work for the Company.

Vote Required

If a quorum is present, the affirmative vote of a majority of the shares present and entitled to vote at the Annual Meeting will be required to approve the Plan. Abstentions will have the effect of a vote “against” the approval of the Plan. All shares that you hold through a broker or other nominee will only be voted for approval of the Plan if you have provided specific voting instructions to your broker or other nominee to vote your shares on this proposal.

Recommended Vote

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE THE 2007 EQUITY INCENTIVE PLAN

during the year if the Board of Directors believes that such a change would be in the best interest of Epicor and its stockholders. If the stockholders do not ratify the appointment of M&P, the Board of Directors may reconsider its selection. The Board of Directors expects that representatives of M&P will be present at the Annual Meeting to respond to appropriate questions and to make a statement if they so desire.

Fees Billed By Deloitte & Touche USA LLP and McGladrey & Pullen LLP During Last Two Fiscal Years

The following tables set forth the approximate aggregate fees billed to Epicor during fiscal years 2006 and 2005 by D & T and M & P:

Deloitte & Touche USA LLP

Audit Fees (1)

Audit-Related Fees (2)

Tax Fees (3)

All Other Fees (4)

Total Fees

McGladrey & Pullen LLP

Audit Fees (1)

Audit-Related Fees (2)

Tax Fees (3)

All Other Fees (4)

Total Fees

The Audit Committee has established a policy governing our use of our independent auditors M & P for non-audit services. This policy was also in place during 2005 for D & T. Under the policy, management may use the independent auditors for non-audit services that are permitted under SEC rules and regulations, provided that management obtains the Audit Committee’s approval before such services are rendered. In fiscal 2006, all fees identified above under the captions “Audit-Related Fees”, “Tax Fees” and “All Other Fees” that were billed by D & T or M & P were approved by the Audit Committee pursuant to the Company’s pre-approval policies and procedures established by the Audit Committee.

The Audit Committee has determined the rendering of other professional services for tax compliance and tax advice by M & P (and in 2005 by D & T) is compatible with maintaining their independence.

Vote Required

If a quorum is present, the affirmative vote of a majority of the shares present and entitled to vote at the Annual Meeting will be required to ratify the appointment of M & P as our independent auditors. Abstentions will have the effect of a vote “against” the ratification of M & P as our independent auditors. Broker non-votes will have no effect on the outcome of the vote.

Recommended Vote

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF MCGLADREY & PULLEN LLP AS EPICOR’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Overview of Compensation Program and Philosophy

The Company’s compensation programs are designed to align the creation of stockholder value with the compensation earned by our executive officers by rewarding the achievement of both annual and longer term goals of the Company. Specifically, the Company’s objectives for its compensation programs are to:

Attract, motivate, reward and retain superior talent;

Encourage superior performance;

Ensure that compensation is commensurate with Company performance and stockholder returns;

Provide performance awards for the achievement of financial and operational targets and other strategic objectives that are critical to our long-term growth; and

Ensure that the executive officers have financial incentives to achieve substantial growth in stockholder value.

In order to achieve these objectives, the Compensation Committee has implemented and maintains compensation plans (both short and long term) that tie a substantial portion of the executives’ overall compensation to key financial and operational goals. The Company’s compensation programs reward executive officers for achieving these financial and operational goals, as well as achieving other objectives tied to individual performance. The Compensation Committee targets individual executive compensation at levels the Compensation Committee believes are comparable to and competitive with executives in other companies that are operating primarily in the high technology marketplace, including, specifically, competitors in the enterprise resource planning (ERP) software mid-market, all while taking into account the Company’s relative performance and strategic goals.

Role of Executive Officers and Consultants in Compensation Decisions

The Compensation Committee has the authority to engage its own independent advisors to assist in carrying out its responsibilities and has periodically done so. The Compensation Committee has not to date retained compensation consultants to assist in creating and administering Epicor’s compensation policies for its executives. However, to assist management and the Compensation Committee in assessing and determining competitive compensation packages, in 2005 and 2006, the Compensation Committee retained Pearl Meyer to conduct an annual benchmark review of our executive compensation against a Committee defined Peer Group as discussed in more detail below. Pearl Meyer has not provided any other services to Epicor and has received no compensation other than with respect to the services provided to the Compensation Committee.

The Compensation Committee meets periodically by invitation with Epicor’s Chief Executive Officer (CEO), Mr. Klaus, and/or other company executives such as the Chief Operating Officer (COO), Chief Financial Officer (CFO) and vice president (VP) of human resources (HR) to obtain information and/or recommendations with respect to Company compensation programs, practices and packages for executives and other employees, including base salaries, bonus targets and equity compensation. The Compensation Committee also regularly holds executive sessions, which are not attended by any members of management or non-independent directors. The Compensation Committee considers, but is not bound to and does not always accept, management’s recommendations with respect to executive compensation. The Compensation Committee weighs such management recommendations against the information from independent sources such as compensation survey data from such resources as Pearl Meyer and other such available resources prior to making any final determinations.

The Compensation Committee has the ultimate authority to make decisions with respect to the compensation of the Company’s officers, including its named executive officers, but may, if it chooses, delegate any of its responsibilities to subcommittees. For example, the Compensation Committee has delegated to Mr. Klaus, the Company CEO and Chairman of the Board, the authority to grant long-term incentive awards to employees below the level of executive vice president under Equity Granting guidelines set by the Compensation Committee. The Compensation Committee also has authorized Mr. Klaus to make salary adjustments and short-term incentive (bonus) decisions for employees other than executive officers under guidelines approved by the Compensation Committee. The Compensation Committee has not delegated any of its authority with respect to executive officer compensation and the Compensation Committee makes all determinations regarding executive officer compensation.

Benchmarking of Cash and Equity Compensation

The Compensation Committee believes it is important when making its compensation-related decisions to be informed as to current practices of similarly situated publicly held companies in the high technology industry. In 2005 and 2006 the Compensation Committee commissioned a benchmarking study conducted by an outside consulting firm, Pearl Meyer & Partners (“Pearl Meyer”), which specializes in executive compensation. At the Compensation Committee’s request, the Pearl Meyer study compiled, reviewed and compared the cash and equity compensation practices of a number of publicly and privately held companies each in the high technology

industry with emphasis on software companies (the “Peer group”) with the existing compensation program for the Company’s Executives. These companies were chosen for inclusion in the study based on certain business characteristics similar to ours, including revenues, stage of development, employee headcount and market capitalization. In addition to benchmarking studies, the Compensation Committee has historically taken into account input from other sources, including input from other independent members of the Company’s Board of Directors and publicly available data relating to the compensation practices and policies of other companies within and outside of our industry. While benchmarking may not always be appropriate as a stand-alone tool for setting compensation due to the aspects of our business and objectives that may be unique to us, the Compensation Committee believes that gathering this information is an important part of its compensation-related decision-making process.

2006 and 2007 Executive Compensation

The above policies guide the Compensation Committee in assessing the proper allocation between long-term compensation, current cash compensation, and short-term annual bonus compensation. Based in large part upon on the foregoing compensation objectives, the Compensation Committee has designed the Company’s annual and long-term incentive-based cash and non-cash executive compensation to both incentivize its executives to achieve the business goals set by the Company and reward them for attaining these goals.

In making its compensation decisions, the Compensation Committee has historically benchmarked its salary and short and long term equity and non-equity target incentive levels and practices as well as its performance results in relation to other comparable software industry companies and high technology companies of comparable size and performance in terms of revenue, market capitalization, number of employees, EPS, and other similar factors. This peer group of publicly and privately-held companies (collectively, the “Peer Group”) is annually reviewed and updated by the Compensation Committee and consists of companies against which the Compensation Committee believes the company competes for executive talent. Such Peer Group data is gathered with respect to base salary, bonus targets and all equity awards (including stock options, performance shares, restricted stock and long-term, cash-based awards). It does not generally include deferred compensation benefits or generally available benefits, such as 401(k) plans or health care coverage.

The companies comprising the 2006 Peer Group for Executive Compensation were:

Aspen Technologies, Inc.

Borland Software Corp.

Cognos, Inc.

CSG Systems Intl, Inc.

Dendrite Intl., Inc.

FileNet Corp.

Hyperion Solutions Corp.

Informatica Corp.

JDA Software Group, Inc.

Kronos, Inc.

Lawson Software, Inc.

Manhattan Associates, Inc.

NDS Group

Progress Software Corp.

QAD, Inc.

Quest Software, Inc.

Salesforce.com, Inc.

SSA Global Technologies, Inc.

Sybase, Inc.

The Trizetto Group, Inc.

TIBCO Software, Inc.

While the Peer Group is comprised of companies that are both smaller and larger than the Company with respect to size and performance criteria, the Company has in recent years begun to compete with many larger entities for its executive talent. Therefore, while historically Epicor’s goal had been to target its total compensation package for its executives at the median level (that is, 50th percentile) among its peer group, beginning with 2006 executive compensation and continuing into fiscal year 2007, the Compensation Committee decided to target base pay at the median level (that is, 50th percentile) among the Peer Group, but to target the executive’s total cash and equity compensation between the 50th and 75th percentiles of the Peer Group. This decision was made in part after considering factors such individual factors as job performance, skill set, experience, and the executive’s time in his or her position and/or with Epicor in general, as well as growing external pressures to attract and retain talent. Positioning base pay closer to the 50th percentile of peer companies assists the Company in controlling its fixed costs while designing a total compensation plan to target the higher 75th percentile of the Peer Group, provides higher incentive compensation opportunity based on the Company’s financial performance, rewards exceptional goal achievement and allows total compensation to be more competitive as a whole.

Except as described above, the Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between short and long-term and cash and non-cash compensation, or among different forms of compensation. This is due in part to the small size of our executive team and the need to tailor each executive’s award to attract and retain that executive. However, utilizing these broad goals, the Compensation Committee expects that, over the long term, the Company will be able to attract and retain top executive talent while continuing to generate stockholder returns in excess of the average of its peer group. Historically, and in both fiscal 2006 and 2007, the Compensation Committee granted a majority of total compensation to its executive officers in the form of performance based cash and equity incentive compensation.

2006 Executive Compensation Elements

For the fiscal year ended December 31, 2006, the primary components of compensation for the Company’s executive officers were:

base salary;

annual performance-based non equity incentive cash awards;

long-term equity incentive awards;

deferred compensation and other retirement benefits; and

executive perquisites and generally available benefit programs.

Each of these elements is necessary to meet one or more of the primary objectives of the Company’s compensation policy. For instance, base salary levels are set with the intent of attracting employees and adequately compensating and rewarding them on a day-to-day basis for the time spent and the services they perform. Our annual performance-based non equity incentive awards and long-term equity incentive awards are also geared toward providing an incentive and reward for the achievement of long-term business objectives and retaining key talent over the longer term. Epicor believes that these elements of compensation have proven effective, and will continue to be effective in assisting the Company to achieve the objectives of its compensation program.

The Compensation Committee reviews the compensation program on an annual basis, including each of the above elements, other than deferred compensation and retirement benefits, which are reviewed from time to time to ensure that benefit levels remain competitive but are not included in the annual determination of an executive’s compensation package. In setting compensation levels for a particular executive, the Compensation Committee takes into consideration the proposed compensation package as a whole and each element individually along with the individual executive’s past and expected performance and future contributions to our business.

Base Salary

Base salaries for our executives are generally established based on the scope of their responsibilities, historical pay levels, level of experience and individual performance, taking into account both external competitiveness and internal equity considerations. The goal for the base salary component is to compensate employees at a level that approximates the median salaries of individuals in comparable positions and markets. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. This review historically begins in the fourth quarter of each fiscal year and concludes in the first quarter of each fiscal year. Our Management Retention Agreement with our CEO provides for a set salary in each of the three years, 2006 through 2008, subject to the Compensation Committee’s ability to increase his salary upon such annual reviews.

For fiscal 2006, after taking into consideration the above compensation targets and Mr. Klaus’ recommendations, the Compensation Committee increased the base salaries of the Chief Operating Officer and Chief Financial Officer by approximately 8% to the levels indicated in the Summary Compensation Table. Mr. Klaus’ base salary was not increased in 2006 over 2005 due to the fact that his 2006 and 2007 base salaries were set under the terms of his May 2006 Management Retention Agreement, and because based on its analysis, the Compensation Committee believed that Mr. Klaus’ current level of compensation was in line with the Compensation Committee’s compensation objectives and the comparable market data. The fact that Mr. Klaus’ salary was unchanged did not reflect a negative view of his performance.

For fiscal 2007, the Compensation Committee increased the base salaries of each of the executive officers named in the Summary Compensation Table other than Mr. Klaus, in order to bring such salaries into conformance with

the Compensation Committee’s stated compensation objectives for Company Executives. Mr. Klaus made recommendations to the Compensation Committee with respect to proposed salaries for fiscal 2007 for each of the named executive officers other than himself. The Compensation Committee considered Mr. Klaus’ recommendations and then determined the increases that were appropriate to achieve the desired compensation objectives as stated herein for each executive. Specifically, for 2007, Mr. Piraino’s annual base salary was increased by 20.1% to $330,000 and Mr. Duffell’s base salary was increased by 6.1% to $420,000. Mr. Klaus’ base salary and bonus target percentages were not increased because Mr. Klaus’ salary and bonus targets for 2006 and 2007 were set under the terms of his Retention Agreement and because for 2006 and 2007 the Compensation Committee believed that his current level of compensation was adequate given the market data. The fact that his salary amount and bonus percentages were unchanged did not reflect a negative view of his performance.

Management Bonus Plan

Each year the Compensation Committee establishes a Management Bonus Plan (the “Bonus Plan”) to promote the achievement of company financial performance objectives based on various financial targets. The Bonus Plan is an annual cash incentive program. Annual incentive bonuses for executive officers and other officers of the Company are intended to reflect the Compensation Committee’s belief that a significant portion of the compensation of each executive officer should be contingent upon the performance of Epicor, as well as the individual contribution of each executive officer. The targets for the Bonus Plan are determined through our annual planning process, which generally begins in October before the beginning of the next fiscal year. This operating plan is developed by the Board of Directors of the Company, including Mr. Klaus, on the basis of (i) the Company’s performance for the prior fiscal year, (ii) estimates of sales revenue for the plan year based upon recent market conditions, trends and competition and other factors that, based on historical experience, are expected to affect the level of sales that can be achieved, (iii) historical operating costs and cost savings that management believes can be realized, (iv) competitive conditions faced by the Company, and (v) additional expenditures beyond prior fiscal years. By taking all of these factors into account, including market conditions, the earnings goal and revenue targets are determined. The Compensation Committee believes that achievement of these goals will require significant effort by Company Executives.

As a result of this Bonus Plan, the proportion of each executive’s total cash compensation that is represented by incentive based income, may increase in those years in which the Company’s profitability increases. The Bonus Plan is intended to motivate and reward executive officers by directly linking the amount of any incentive bonus to specific company-based performance targets and specific individual-based performance targets. The Compensation Committee evaluates the Company’s performance as well as that of its executive officers and approves a bonus percentage based upon the results of its evaluation after the end of each fiscal year. To help achieve Epicor’s goal of retaining key talent, an executive must remain an employee for the entire fiscal year in order to be eligible for any bonus under the Bonus Plan that relates to that fiscal year. Historically, bonuses have been payable in cash unless the executive elects to defer all or part of the bonus into the Company’s Deferred Compensation Plan described below.

Prior to the 2006 fiscal year, the Compensation Committee utilized the Company’s net income and revenue as the two equally weighted performance Compensation Committee began using an adjusted EBITDA measure along with revenue as targets under the Bonus Plan. The adjusted EBITDA measure excludes foreign currency, restructuring charges, and in process research and development. The Compensation Committee believes that adjusted EBITDA better facilitates comparisons of the Company’s operating performance from period to period by enhancing the understanding of our operating results from period to period and in comparing performance with Peer Group competitors. Adjusted EBITDA is believed to be a useful tool given the significant variation that can result from such factors as the timing of capital expenditures and the amount of intangible assets recorded, foreign currency exchange risk and such other “non-operating” results. Under the terms of the Bonus Plan, each of the two targets (adjusted EBITDA and revenue) are equally weighted at 50% of each executives potential plan payout and each goal operates independently of the other in terms of calculating payouts under the Bonus Plan. Target bonus opportunities are established as a percentage of base salary. Bonus amounts are intended to provide total cash compensation for executives between the 50th and 75th percentile for executives in comparable positions and markets in the Peer Group when target performance is achieved and at or above the 75th percentile when outstanding financial and operational results are achieved by the Company. If the target levels for one or both of the performance goals are not achieved, executives will earn less or no payments under the Bonus Plan.

Under the 2006 Bonus Plan, the Company was required to achieve at least 75% of the respective adjusted EBITDA or revenue targets established at the beginning of the year, in order for executives to begin to accrue a bonus under the plan. If the Company achieves 75% or more either the adjusted EBITDA or revenue targets, an eligible executive will receive a bonus under the Bonus Plan, which amount increases as the actual adjusted EBITDA and/or revenue results for the Company increase. The targets are set at levels in line with the Company’s budget and announced guidance and in 2006 required growth well in excess of average current growth amongst the Peer Group. If the adjusted EBITDA and revenue targets are achieved, the Bonus Plan pays out at 100% of the bonus target amount. If the company performance exceeds the adjusted EBITDA and revenue targets, participants in the plan receive amounts greater than their target bonuses. The bonuses are designed such that as actual adjusted EBITDA and revenue increases as a percentage of the targets, actual bonuses as a percentage of target bonus amounts increase by a greater percentage. The bonus opportunity for any executive is capped at 200% of the targeted bonus amounts.

In 2006, Mr. Klaus’ target bonus was 60% of his salary and target bonuses for Mr. Duffell and Mr. Piraino were set at 50% of their respective base salaries. Thus, under the formula approved by the Compensation Committee, the fiscal 2006 bonus for Mr. Klaus under the Bonus Plan ranged from zero to a maximum of 120% of his annual base salary. For Mr. Duffell and Mr. Piraino, the range was from zero to a maximum of 100% of their annual base salaries, respectively. In 2006, our named executive officers achieved above 100% of the target Revenue objectives and achieved just below 100% of the targeted EBITDA objectives. These achievements resulted in a combined payout of approximately 116% of target under the Bonus Plan.

Actual Bonuses paid to our named executive officers under the Bonus Plan for fiscal 2006 were:

Named Executive Officer

Mr. Klaus

Mr. Duffell

Mr. Piraino

In January 2007, the Compensation Committee decided to again utilize equally weighted adjusted EBITDA and revenue corporate performance goals in determining the executives’ bonuses for 2007. Whether any bonuses will be paid depends on actual performance during fiscal 2007 versus the predetermined goals. In January 2007, the Compensation Committee established target bonus awards (as a percentage of base salary) of 60% for Mr. Klaus, 55% for Mr. Duffell and 50% for Mr. Piraino. Actual bonuses will be determined by the results of the Company as of December 31, 2007 and, if earned, are expected to be paid early 2008, and may be above or below target bonus levels. 2007 bonus awards will again be capped at 200% of the target award, based on maximum goal achievement.

Long-Term Incentive Compensation

Historically, Epicor has also provided long-term incentive compensation to its Executive officers through awards of stock options and restricted stock that generally vest over multiple years. Epicor’s long-term compensation program is intended to align the interests of our officers with those of our stockholders by creating an incentive for our officers to maximize stockholder value, including through increased stock price. The equity compensation program utilizes vesting periods designed to encourage our officers to remain employed with Epicor despite an increasingly competitive labor market.

As indicated above, beginning in 2006 and 2007 Epicor targeted the value of its annual equity awards to its executives, in conjunction with salaries and non-equity incentive compensation to be between the 50th and 75th percentiles of the Peer Group. The Compensation Committee considers each equity award individually and subjectively at the time of the grant, reviewing factors such as the performance of the executive officer from year to year as well as historically, the anticipated future contribution toward the attainment of our long term strategic performance goals and the number of other equity awards held by each executive officer at the time of the new grant. Other factors in determining individual equity awards include including length of term with the Company, level of responsibility, skills and experience, and other compensation awards or arrangements.

Equity-based incentives are granted to our officers under Epicor’s stockholder-approved stock incentive plans. Historically, the Compensation Committee has granted equity awards at its scheduled meetings or by unanimous written consent. Grants approved during scheduled meetings become effective and are priced as of the date of approval or a designated date in the future (for example, promotion or new hire grants are effective as of the later of the date of approval or the respective promotion or start date). Grants approved by unanimous written consent become effective and are priced as of the date the last signature is obtained or as of a designated future date indicated in the consent. Historically, stock option grants have a per

share exercise price equal to the fair market value of Epicor’s common stock on the grant date. The Compensation Committee has not historically, nor does it intend in the future to time the granting of equity compensation awards to executives in anticipation of the release of material nonpublic information that is likely to result in changes to the price of Epicor common stock, such as a significant positive or negative earnings announcement. Similarly, the Compensation Committee has not timed, nor does it intend in the future to time, the release of material nonpublic information based on equity award grant dates. Also, because equity compensation awards typically vest over a three- or four-year period, the value to recipients of any immediate increase in the price of Epicor’s stock following a grant is expected to be attenuated.

Prior to 2006 and the advent of FAS 123R, the Company granted primarily stock options as its form of equity incentive compensation. The Company granted stock options because they were felt to be an effective tool for both meeting Epicor’s compensation goal of increasing long-term stockholder value and incentivizing employee performance by tying the value of the stock options to Epicor’s performance in the future. Employees were able to profit from stock options only if Epicor’s stock price increased in value over the stock option’s exercise price. Epicor believes that the options that were granted provided effective incentives to option holders to achieve increases in the value of Epicor’s stock. However, beginning in 2006, with the advent of FAS 123R requiring the Company to expense the cost of unvested stock options, the Compensation Committee decided to cease granting options and begin granting shares of restricted common stock. Restricted stock not only results in decreased expense to the Company under FAS 123R, thus maximizing stockholder value compared to options, but also provides a more predictable value to employees than stock options and therefore are efficient tools in retaining and motivating employees, while also serving as an incentive to increase the value of Epicor’s stock. Shares of restricted stock are also believed to be efficient with respect to the use of our equity plan share reserves because fewer restricted shares are needed to provide a retention and incentive value similar to stock options.

In order to continue to attract and retain highly skilled employees, the Compensation Committee approved changes to Epicor’s equity compensation program for fiscal 2006 that were designed to reward Epicor’s employees for their hard work and commitment to the long-term success and growth of Epicor. Specifically, beginning in fiscal 2006, the Company, with review and approval by the Compensation Committee, implemented its Performance Based Restricted Stock Program (the “PBRSP”).

The terms of the PBRSP provide for the grant of a right to purchase a number of shares of Company common stock subject to a vesting schedule. The recipients vest in the restricted stock, or a portion thereof, in three equal, annual installments depending upon achievement of targets with respect to the Company’s revenue and adjusted EBITDA for each of three performance years, 2006, 2007 and 2008. Recipients must pay a purchase price per share equal to the par value of Company common stock ($0.001). The recipient must also make satisfactory arrangements to cover applicable tax withholdings which may include, in the plan administrator’s sole discretion, cash, withholding a portion of the shares subject to the grant, delivering

already vested and owned shares of restricted stock, or selling a sufficient number of Company shares otherwise deliverable to the recipient through such means as the Company may determine in its sole discretion.

Shares of restricted stock are held in escrow and the Company’s reacquisition right does not lapse until vesting. Shares that have not vested upon the employee’s termination of service with the Company will be forfeited and automatically transferred to and reacquired by the Company. In addition, shares of restricted stock that do not vest as a result of the Company’s failure to achieve with respect to revenue and adjusted EBITDA targets will be forfeited and automatically transferred to and reacquired by the Company.

Epicor and the Compensation Committee believe that granting its executive officers only performance-based awards under the PBRSP demonstrates our commitment to using our equity compensation program wisely and to match executive pay to actual performance. The Compensation Committee approved these grants only after extensive deliberation and analysis of data and other information provided by independent compensation consultants such as Pearl Meyer and by management. Due in part to the three year horizon of the PBRSP, many of these grants were larger than the one year grants that the Compensation Committee had approved in prior years as part of Epicor’s regular long term incentive program. However, the Compensation Committee determined that making the grants was appropriate to help retain our key employees at an important time for Epicor.

For fiscal 2006, the Compensation Committee considered Mr. Klaus’ recommendations with respect to performance shares for the COO and CEO and other participants. Based upon such recommendations, and after independent consideration of the level to grant Mr. Klaus the Compensation Committee in 2006 granted 200,000 shares to Mr. Klaus and Messrs. Duffell and Mr. Piraino were granted 40,000 and 30,000 shares, respectively. Thus, under the PBRSP formula approved by the Compensation Committee, the possible grants to the executives were as follows:

Named Executive Officer

Mr. Klaus

Mr. Duffell

Mr. Piraino

In 2006, the Company achieved revenue and adjusted EBITDA results which, under the terms of the PBRSP, resulted in a share grant level just below the targeted amounts. Specifically our named executive officers under the PBRSP received the following shares:

Named Executive Officer

Mr. Klaus

Mr. Duffell

Mr. Piraino

For 2007 and 2008, under the terms of the PBRSP, the performance shares granted to the executives will again vest only upon the achievement of the targeted levels of revenue and adjusted EBITDA during each year. However, beginning in 2007, the compensation committee determined to amend the PBRSP to provide that each of the two targets (adjusted EBITDA and revenue) while remaining equally weighted at 50% of each executives potential Restricted Stock grant for that year, each goal now operates independently of the other in terms of calculating Restricted Stock vesting under the PBRSP. That is, failure to achieve target levels on one of the performance goals does not impact the number of shares received for achievement of the target levels on the other performance goal.

For fiscal 2007, Mr. Klaus made recommendations to the Compensation Committee with respect to additional 2007 and 2008 equity award grants under the PBRSP to the other executive officers based on the compensation analysis of the Peer Group. The additional share amounts were recommended in order to better align the grants with the Compensation Committee’s compensation goal of providing total compensation for executives between the 50th and 75th percentile for executives in comparable positions and markets in the Peer Group when target performance is achieved and at or above the 75th percentile when outstanding financial and operational results are achieved. Based on such recommendations, in January 2007 (after the end of fiscal 2006), the Compensation Committee granted additional PBRSP shares to our COO and CFO and to a number of our other key employees for the 2007 and 2008. Specifically, Mr. Duffell’s awards for 2007 and 2008 were increased by 22,500 shares to 62,500 shares maximum per year. Mr. Piraino’s awards for 2007 and 2008 were increased by 15,000 shares to 45,000 shares maximum per year. The awards to Mr. Duffell and Mr. Piraino

were 100% performance-based awards. That is, the awards vest based on achievement of the adjusted EBITDA and revenue targets established under the PBRSP.

Deferred Compensation Plan

In December 2004, the Board adopted the Epicor Software Deferred Compensation Plan (the “EDCP”). The EDCP provides selected officers and senior managers of the Company with the opportunity to enter into agreements to defer the receipt of up to seventy percent of future cash compensation from base salary and up to one hundred percent of future cash compensation from bonus awards and/or commissions. In addition, the EDCP gives the Company discretion to award additional employer contributions to participants at the Company’s discretion. The EDCP is offered to higher level employees in order to allow them to defer more compensation than they would otherwise be permitted to defer under a tax-qualified retirement plan, such as our Epicor 401K plan (the “401(k) Plan”). Further, Epicor offers the EDCP as a competitive practice to enable it to attract and retain top talent. The plan year for the EDCP is the calendar year. The Company has the authority to amend, modify or terminate the EDCP; provided no such amendment shall reduce amounts allocated to participant’s EDCP accounts.

Distributions under the EDCP are subject to certain restrictions, which vary depending on the circumstances of each participant, including the amount in the participant’s account, whether the participant is a key employee as defined under the EDCP, whether the participant has retired from the Company, whether the participant has terminated employment with the Company not due to retirement, whether the participant has elected a scheduled withdrawal date, whether the participant has suffered death or disability or whether a change of control has occurred.

including our 401(k) Plan against our peers, using various subscription services such as Radford or Towers Perrin’s data. Epicor generally targets its overall benefits programs, in the 50th percentile of this peer group, which Epicor believes allows us to remain competitive in attracting and retaining talent. We also evaluate the competitiveness of our 401(k) Plan as related to similar plans of our peer group members by analyzing the dollar value to an employee and the dollar cost to Epicor for the benefits under the applicable plan. We analyze changes to our benefits programs in light of the overall objectives of the program, including the effectiveness of the retention and incentive features of such programs and our targeted percentile range.

Stock Ownership Guidelines

To date, the Board has not adopted any stock ownership guidelines.

Tax Deductibility of Executive Compensation

Limitations on deductibility of compensation may occur under Section 162(m) of the Internal Revenue Code, as amended, which generally limits the tax deductibility of compensation paid by a public company to its chief executive officer and certain other highly compensated executive officers to $1 million in the year the compensation becomes taxable to the applicable executive officer. There is an exception to the limit on deductibility for qualifying performance-based compensation that meets certain requirements. Specifically, compensation in excess of $1 million may be deductible if the individual’s performance meets pre-established and stockholder approved goals based on identified performance criteria. The Company does not currently have a policy that requires or encourages the Compensation Committee to qualify stock options or restricted stock awarded to executive officers for deductibility under Section 162(m) of the Internal Revenue Code. Although deductibility of compensation is preferred and the Compensation Committee does consider the net cost to the Company in making all compensation decisions, in certain situations, the Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers. In this regard, for fiscal 2006, the amount of base salary in excess of $1,000,000 for any named executive officer was not deductible for federal income tax purposes. Furthermore, while all of the stock options granted to our Executive Officers qualify under Section 162(m) as performance-based compensation, to date, the restricted stock granted to our executive officers does not qualify as performance-based compensation under Section 162(m). We reserve the right to maintain flexibility in how we compensate our executive officers that may result in limiting the deductibility of amounts of compensation from time to time and the Compensation Committee is currently investigating the possibility of implementing programs that would allow for deductibility under Section 162(m).

We are asking stockholders to approve our 2007 Stock Incentive Plan, including changes that would permit us to continue granting Restricted Stock under the PBRSP to our executives and other employees and to take full advantage of the deductibility provisions of Section 162(m). Please see the section entitled “Proposal Two — Approval of the 2007 Stock Incentive Plan.” We believe that stockholder approval of the 2007 Stock Incentive Plan is important in order to allow us to continue attracting and retaining key talent and to motivate executives and other employees to achieve our goals.

Summary Compensation Table. The following table sets forth summary information concerning compensation paid or accrued for services rendered to the Company in all capacities to the Company’s Chief Executive Officer and our other executive officers.

Name and Principal

Position

Stock
Awards

($)(3)

Option
Awards

($)(4)

Total

($)

L. George Klaus,

Chairman of the Board

and Chief Executive

Officer

Michael A. Piraino,

Executive Vice-President

and Chief Financial

Officer

Mark A. Duffell,

President and Chief

Operating Officer

CEO Compensation for Fiscal 2006

The principal components of compensation for the Chief Executive Officer for fiscal 2006 included base salary and non-equity incentive cash award. L. George Klaus, the Company’s Chief Executive Officer, received a salary of $736,403 during fiscal 2006. Mr. Klaus’ base salary was negotiated as part of his compensation package when he joined the Company in February 1996 and has been subsequently increased on an annual basis through 2006 when it was locked in at $736,403 as part of his Management Retention Agreement subject to increases approved by the Compensation Committee.

Mr. Klaus also received Non Equity Incentive Compensation of $512,536 for fiscal 2006. Mr. Klaus’ bonus plan for fiscal 2006 provided for a target bonus of $441,842. As described above, one half of the target bonus was based on achieving an operating revenue goal for the Company, the other half was based upon the Company achieving an adjusted EBITDA goal and additional amounts could be earned if the Company exceeded 100 percent of the operating revenue and EBITDA goals. Bonuses are paid if 75 percent of either the operating revenue or EBITDA are met based on objective formulas. For 2006, Mr. Klaus received a bonus on achievements by the Company for both operating revenue and Adjusted EBITDA due to the Company’s strong financial performance in fiscal year 2006, which overall exceeded targeted expectations.

During the fiscal year 2006, the Compensation Committee evaluated Mr. Klaus’ holdings of Epicor stock, stock options and stock purchase rights, including an evaluation of previously granted stock options and stock purchase rights. Based on such analysis Mr. Klaus was granted 200,000 shares of restricted stock under the PBRSP for the fiscal year ending December 31, 2006.

President and Chief Operating Officer, Mark A. Duffell

The principal components of compensation for the President and Chief Operating Officer for fiscal 2006 included base salary and non-equity incentive cash award. Mark Duffell, the Company’s President and Chief Operating Officer received a salary of $395,806 during fiscal 2006. Mr. Duffell’s base salary was negotiated as part of his compensation package when he was promoted to his position in July 2005 and has been subsequently increased on an annual basis through 2006 as approved by the Compensation Committee.

Mr. Duffell also received Non Equity Incentive Compensation of $229,567 for fiscal 2006. Mr. Duffell’s bonus plan for fiscal 2006 provided for a target bonus of $197,903. As described above, one half of the target bonus was based on achieving an operating revenue goal for the Company, the other half was based upon the Company achieving an adjusted EBITDA goal and additional amounts could be earned if the Company exceeded 100 percent of the operating revenue and EBITDA goals. Bonuses are paid if 75 percent of either the operating revenue or EBITDA are met based on objective formulas. For 2006, Mr. Duffell received a bonus on achievements by the Company for both operating revenue and Adjusted EBITDA due to the Company’s strong financial performance in fiscal year 2006, which overall exceeded targeted expectations.

During the fiscal year 2006, the Compensation Committee evaluated Mr. Duffell’s holdings of Epicor stock, stock options and stock purchase rights, including an evaluation of previously granted stock options and stock purchase rights. Based on such analysis Mr. Duffell was granted 40,000 shares of restricted stock under the PBRSP for the fiscal year ending December 31, 2006.

Executive VP and Chief Financial Officer, Michael A. Piraino

The principal components of compensation for the Chief Financial Officer for fiscal 2006 included base salary and non-equity incentive cash award. Michael Piraino, the Company’s Executive Vice President and Chief Financial Officer received a salary of $274,684 during fiscal 2006. Mr. Piraino’s base salary was negotiated as part of his compensation package when he was promoted to Executive Vice President in July 2005 and has been subsequently increased on an annual basis through 2006 as approved by the Compensation Committee.

Mr. Piraino also received Non Equity Incentive Compensation of $159,316 for fiscal 2006. Mr. Piraino’s bonus plan for fiscal 2006 provided for a target bonus of $137,342. As described above, one half of the target bonus was based on achieving an operating revenue goal for the Company, the other half was based upon the Company achieving an adjusted EBITDA goal and additional amounts could be earned if the Company exceeded 100 percent of the operating revenue and EBITDA goals. For 2006, Mr. Piraino received a bonus on achievements by the Company for both operating revenue and Adjusted EBITDA due to the Company’s strong financial performance in fiscal year 2006, which overall exceeded targeted expectations.

During the fiscal year 2006, the Compensation Committee evaluated Mr. Piraino’s holdings of Epicor stock, stock options and stock purchase rights, including an evaluation of previously granted stock options and stock purchase rights. Based on such analysis Mr. Piraino was granted 30,000 shares of restricted stock under the PBRSP for the fiscal year ending December 31, 2006.

Estimated Future

Payouts under

Non-Equity Incentive Plan

Awards (1)

Estimated Future

Payouts under

Equity Incentive Plan

Awards (2)

Grant Date
Fair Value of
Stock and
Option
Awards

($) (3)

Name

Thresh-

old ($)

Maxi-

mum ($)

Thresh-

old (#)

Maxi-

mum (#)

L. George Klaus

Michael A. Piraino

Mark A. Duffell

Under the 2006 PBRSP, the Company was required to achieve at least 75% of the respective adjusted EBITDA and revenue targets established at the beginning of the year, in order for Executives to begin to accrue shares under the PBRSP. In 2006, the Company achieved just above 100% of the target revenue objectives and achieved approximately 100% of the targeted adjusted EBITDA objectives. Under the terms of the PBRSP, these achievements resulted in a share grant level just below the targeted amounts. In addition, for fiscal 2006, the Compensation Committee considered Mr. Klaus’ recommendations with respect to performance shares for the COO and CEO and other participants. Based upon such recommendations, and after independent consideration, the Compensation Committee in 2006 granted 200,000 shares to Mr. Klaus and Messrs. Duffell and Mr. Piraino were granted 40,000 and 30,000 shares, respectively, of the Company’s restricted stock.

Name

L. George Klaus

Michael A. Piraino

Mark A. Duffell