Paycom Software, Inc. (Form: S-1, Received: 03/10/2014 16:18:02)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

As filed with the Securities and Exchange Commission on March 10, 2014.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Paycom Software, Inc.

(Exact name of registrant as specified in its charter)

Delaware

7372

80-0957485

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

7501 W. Memorial Road

Oklahoma City, Oklahoma 73142

(405) 722-6900

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Craig E. Boelte

Chief Financial Officer

Paycom Software, Inc.

7501 W. Memorial Road

Oklahoma City, Oklahoma 73142

(405) 722-6900

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Greg R. Samuel, Esq.

Ryan R. Cox, Esq.

Haynes & Boone, LLP

2323 Victory Avenue, Suite 700

Dallas, TX 75219

(214) 651-5000

Fax: (214) 200-0577

Christian O. Nagler, Esq.

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

(212) 446-4800

Fax: (212) 446-4900

Barbara L. Becker, Esq.

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY 10166

(212) 351-4000

Fax: (212) 351-6202

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

CALCULATION OF REGISTRATION FEE



Title of each class of securities to be registered	Proposed maximum aggregate offering price ⁽¹⁾⁽²⁾	Amount of registration fee
Common Stock, $0.01 par value per share	$100,000,000	$12,880

(1)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.

(2)	Includes the offering price of shares subject to the underwriters’ option to purchase additional shares.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated March 10, 2014

Preliminary Prospectus

Shares

LOGO

Paycom Software, Inc.

Common Stock

This is the initial public offering of Paycom Software, Inc. We are offering shares of our common stock and the selling stockholders are offering shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. Currently, no public market exists for the shares. The estimated initial public offering price is between $ and $ per share.

We intend to list our common stock on the New York Stock Exchange, or the NYSE, under the symbol “PAYC.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements in future reports after the completion of this offering.

Investing in our common stock involves risks. See “ Risk Factors ” beginning on page 12.


	Per share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$
Proceeds, before expenses, to the selling stockholders	$	$

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares of common stock from the selling stockholders at the initial public offering price less underwriting discounts and commissions.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about , 2014.


Barclays		J.P. Morgan



Pacific Crest Securities	Stifel	Canaccord Genuity

Prospectus dated , 2014

LOGO

TABLE OF CONTENTS


P ROSPECTUS S UMMARY			1
R ISK F ACTORS			12
S PECIAL N OTE R EGARDING F ORWARD -L OOKING S TATEMENTS			29
M ARKET , I NDUSTRY AND O THER D ATA			30
T HE R EORGANIZATION			31
U SE OF P ROCEEDS			32
D IVIDEND P OLICY			33
C APITALIZATION			34
D ILUTION			35
S ELECTED C ONSOLIDATED F INANCIAL D ATA			37
U NAUDITED P RO F ORMA C ONDENSED C ONSOLIDATED F INANCIAL I NFORMATION			39
M ANAGEMENT ’ S D ISCUSSION AND A NALYSIS OF F INANCIAL C ONDITION AND R ESULTS OF O PERATIONS			47
B USINESS			65
M ANAGEMENT			79
E XECUTIVE C OMPENSATION			85
C ERTAIN R ELATIONSHIPS AND R ELATED P ARTY T RANSACTIONS			98
P RINCIPAL AND S ELLING S TOCKHOLDERS			102
D ESCRIPTION OF C APITAL S TOCK			104
S HARES E LIGIBLE FOR F UTURE S ALE			109
M ATERIAL U.S. F EDERAL I NCOME AND E STATE T AX C ONSIDERATIONS FOR N ON -U.S. H OLDERS			111
U NDERWRITING			114
L EGAL M ATTERS			120
E XPERTS			120
W HERE Y OU C AN F IND A DDITIONAL I NFORMATION			120
I NDEX TO C ONSOLIDATED F INANCIAL S TATEMENTS			F-1

You should rely only on the information contained in this prospectus or in any free writing prospectus we have prepared. We, the selling stockholders and the underwriters (and any of our or their affiliates) have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. We, the selling stockholders and the underwriters (and any of our or their affiliates), take no responsibility for and can provide no assurance as to the reliability of any other information that others may give you. We are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Until , 2014 (25 days after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in our initial public offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: We, the selling stockholders and the underwriters (and any of our or their affiliates), have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus, but it does not contain all of the information that you should consider before deciding to invest in our common stock. You should read the entire prospectus carefully before making an investment in our common stock, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto, which are included elsewhere in this prospectus. Some of the statements in this prospectus constitute forward-looking statements. For more information, see “Special Note Regarding Forward-Looking Statements.”

Unless we state otherwise or the context otherwise requires, the terms “Paycom,” “we,” “us,” “our” and the “Company” refer, prior to the Reorganization discussed in the section entitled “The Reorganization,” to Paycom Payroll Holdings, LLC, or Holdings, and its consolidated subsidiaries and, after the Reorganization, to Paycom Software, Inc., or Software, a recently formed Delaware corporation, and its consolidated subsidiaries, including Holdings. Software is a recently formed company that did not engage in any business or other activities prior to the Reorganization, except in connection with its formation. Accordingly, all financial and other information herein relating to periods prior to the Reorganization is that of, or derived from, Holdings. See “The Reorganization.”

Overview

We are a leading provider of a comprehensive, cloud-based human capital management, or HCM, software solution delivered as Software-as-a-Service, or SaaS. We provide functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including talent acquisition, time and labor management, payroll, talent management and human resources, or HR, management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.

Organizations need sophisticated, flexible and intuitive applications that can quickly adapt to their evolving HCM requirements, streamline their HR processes and systems and enable them to control costs. We believe that the HCM needs of most organizations are currently served either by legacy providers offering outdated on-premise products or multiple providers that partner together in an attempt to replicate a comprehensive product. These approaches often result in large up-front capital requirements, extended delivery times, high costs, low scalability and challenges with system integration. According to the International Data Corporation, or IDC, the U.S. markets for payroll services and HCM applications will collectively total approximately $22.5 billion in 2014, and we believe there is a substantial opportunity for our solution to address these HCM needs.

Because our solution was developed in-house and is based on a single platform, there is no need to integrate, update or access multiple databases, which are common issues with competitor offerings that use multiple third-party systems in order to link together their HCM offerings. Additionally, our solution maintains data integrity for accurate, actionable and real-time analytics and business intelligence and helps clients minimize the risk of compliance errors due to inaccurate or missing information. We deliver feature-rich applications while maintaining excellence in information security and quality management standards as evidenced by our International Organization for Standardization, or ISO, certifications. As a part of our client retention effort, a specialist within a dedicated team is assigned to each client to provide industry-leading, personalized service.

The key benefits of our differentiated solution as compared to competing products are:

•

Comprehensive HCM solution;

•

Core system of record enabling data analytics maintained on a single database;

•

Personalized support provided by trained personnel;

•

Software-as-a-Service delivery model;

•

Cloud-based architecture; and

•

Scalability to grow with our clients.

We sell our solution directly through our internally trained, client-focused and highly skilled sales force based in offices across the United States. We have over 10,000 clients, none of which constituted more than one-half of one percent of our revenues for the year ended December 31, 2013. We believe that as a result of our focus on client retention, we enjoy high client satisfaction as evidenced by an average annual revenue retention rate of 91% from existing clients for the three years ended December 31, 2013. We believe our revenue retention rate understates our client loyalty because this rate also includes former clients that were acquired or otherwise ceased operations.

Since our founding in Oklahoma City in 1998, we have focused on providing an innovative SaaS HCM solution. As of December 31, 2013, we had 840 employees across the United States. For the years ended December 31, 2013, 2012 and 2011, our revenues were $107.6 million, $76.8 million, and $57.2 million, respectively, representing year-over-year growth in revenues of 40% and 34%, respectively. We currently derive most of our revenues from our payroll and tax management applications, which we refer to as payroll processing. We realized net income of $7.7 million, $4.2 million and $1.4 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Industry Background

Large Market Opportunity for HCM Technologies

Economic and Technological Trends Are Driving Demand for HCM Solutions

Organizations operating in today’s global economy are continually under pressure to reduce operating costs in order to maintain or improve their competitive positions. As a result, businesses are increasingly making the strategic decision to leverage HCM technologies in order to improve the effectiveness and efficiency of their internal HR and accounting functions and capture opportunities for cost savings. According to IBISWorld, companies often outsource administrative services, such as time and labor management, after initially outsourcing payroll. We believe that businesses increasingly view data concerning their human capital as a critical strategic resource that can result in more informed decision-making.

Organizations are also managing internal costs and administrative burdens by transitioning technological assets from on-premise to the cloud. The rise of cloud computing has supported the SaaS delivery model. According to IDC, the global SaaS market is projected to grow from $23 billion in 2011 to $67 billion in 2016, at a compounded annual growth rate, or CAGR, of 24%.

Incumbent HCM Products Struggle To Meet the Needs of Businesses

incumbent payroll and HCM vendors offer product sets that are comprised of separate systems that require integration. In certain cases, this disparate product offering across several vendors is the result of several acquisitions which often leads to a loosely coupled product set that is marked by significant architectural differences and weak data integration. We believe that this type of offering increases the risk of user or system error and reduces overall effectiveness. Finally, we believe that vendors who pursue market segmentation strategies based on organization size or industry create difficulties for clients who grow, either in size or industry scope, beyond the confines of those vendors’ offerings. A scalable HCM solution based on a core system of record allows for an organization to grow in size and scope without transitioning to a new user interface or back-end database.

The Paycom Solution

We offer an end-to-end SaaS HCM solution that provides our clients and their employees with immediate access to accurate and secure information and analytics 24 hours a day, seven days a week from any location. We believe that our solution delivers the following benefits:

•

Comprehensive HCM Solution. Our solution offers functionality that manages the entire employment life cycle for employers and employees, from recruitment to retirement. Our user-friendly applications streamline client processes and provide clients and their employees with the ability to directly access and manage administrative processes, including applications that identify candidates, onboard employees, manage time and labor, administer payroll deductions and benefits, manage performance, offboard employees and administer post-termination health benefits such as COBRA.

•

Core System of Record. Our solution is based on a core system of record that contains payroll and HR information in one convenient database, thereby reducing costs and eliminating the need for multiple software products and vendors and the maintenance of employee data in numerous databases. In addition, our core system of record helps clients minimize the risk of compliance errors due to inaccurate or missing information that results from maintaining multiple databases.

•

Data Analytics. Our solution allows clients to analyze accurate employee information to make business decisions based upon actionable, real-time, point-and-click analytics provided through our client dashboard. This functionality helps our clients operate with a more complete and accurate picture of their organization as our solution’s embedded analytics capture the content and context of everyday business events, facilitating fast and informed decision-making from any location.

•

Personalized Support Provided by Trained Personnel. Our applications are supported by one-on-one personal assistance from trained specialists. We strive to provide our clients with high levels of service and support to ensure their continued use of our solution for all of their HCM needs. We have maintained high client satisfaction, as evidenced by an average annual revenue retention rate of 91% from existing clients for the three years ended December 31, 2013.

•

Software-as-a-Service Delivery Model. Our SaaS delivery model allows clients with a geographically dispersed and mobile workforce to operate more efficiently, and allows these clients to implement, access and use our client-oriented Internet solution on demand and remotely through standard web browsers, smart phones, tablets and other web-enabled devices.

•

Secure Cloud-Based Architecture. Our cloud-based architecture allows our solution to be implemented remotely with minimal client interaction, allowing our clients to make a smaller investment in hardware, personnel, implementation time and consulting.

•

Scalability to Grow with our Clients. Our solution is highly scalable. We have served a diversified client base ranging in size from one to more than 8,000 employees. Our clients are able to use the same solution while their businesses grow by deploying applications as-needed in real-time.

Our Strategy for Growth

Our strategy is to continue to establish our solution as the HCM industry standard. To accomplish this, we intend to:

•

Increase Our Presence in Existing Markets . Although we have clients in all 50 states, we believe a significant opportunity exists to expand our presence within markets where we currently have a sales office. We have a sales office in 24 of the 50 largest Metropolitan Statistical Areas, or MSAs, in the United States based on 2010 U.S. census data, only one of which is served by multiple sales teams. We believe that the 50 largest MSAs in the United States could collectively support at least 100 additional sales teams. Each sales office is typically staffed with one sales team, with each team comprised of approximately seven to nine sales professionals. We plan to increase our presence in our existing markets by adding sales offices and increasing the number of our sales teams to further penetrate and effectively capture these markets.

•

Expand Into Additional Markets. We plan to continue expanding our sales capability by opening sales offices in certain metropolitan areas where we currently have no sales teams. We have identified 50 untapped metropolitan areas where we can potentially open a new sales office staffed with at least one sales team. Since September 2012, we have opened sales offices in Baltimore, Detroit, Indianapolis, Minneapolis, New York, Philadelphia, San Francisco, Seattle and Silicon Valley. We intend to open six to eight additional offices over the next two years, as well as potentially expand over the longer term into international markets.

•

Enlarge our Existing Client Relationships. We believe a significant growth opportunity exists in selling additional applications to our current clients. During the year ended December 31, 2013, all of our clients, including our new clients, on average utilized 5.2 of our 18 then available applications. During that same period, however, new clients on average utilized 6.2 applications. We believe that there is a significant opportunity to sell additional applications to our existing clients. As we extend and strengthen the functionality of our solution, we will continue to invest in initiatives to increase the adoption of our solution and maintain our high levels of client satisfaction.

•

Target Larger Clients. We believe larger employers represent a substantial opportunity to increase the number of clients and to increase our revenue per client, with limited incremental cost to us. To further capitalize on this opportunity, we intend to target larger businesses opportunistically.

•

Maintain Our Leadership in Innovation by Strengthening and Extending our Solution. We intend to continue to use our in-house development efforts, which are heavily based upon proactive research and client input, to extend the functionality and range of our solution in the future.

Selected Risks Associated with Our Business

Our business is subject to a number of risks and uncertainties, including those highlighted in the section “Risk Factors” immediately following this prospectus summary. Some of these risks include:

•

Our business depends substantially on our clients’ continued use of our applications, their purchases of additional applications from us and our ability to add new clients.

•

The market in which we participate is highly competitive, and if we do not compete effectively, our business, operating results or financial condition could be adversely affected.

•

We have historically derived a majority of our revenue from payroll processing and our efforts to increase the use of our other HCM applications may not be successful and may reduce our revenue growth rate.

•

If our security measures are breached or unauthorized access to data of our clients or their employees is otherwise obtained, our solution may not be perceived as being secure, clients may reduce, limit or stop using our solution and we may incur significant liabilities.

•

If the SaaS market develops more slowly than we expect or declines, our growth may slow or stall, and our business could be adversely affected.

•

If we are not able to develop enhancements or new applications, keep pace with technological developments or respond to future disruptive technologies, our business could be adversely affected.

•

Our business and operations are experiencing rapid growth and organizational change and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of satisfaction or adequately address competitive challenges.

•

Our financial results may fluctuate due to many factors, some of which may be beyond our control.

Our Principal Stockholders

Following completion of this offering, Welsh, Carson, Anderson & Stowe X, L.P., or WCAS X, and WCAS Capital Partners IV, L.P., or WCAS Capital IV and together with WCAS X, the WCAS Funds, which are affiliates of Welsh, Carson, Anderson & Stowe, L.P., or Welsh, Carson, Anderson & Stowe, will own approximately % of our outstanding common stock, or % if the underwriters exercise in full their option to purchase additional shares. As a result of this ownership and the provisions of the Amended and Restated Stockholders Agreement, or the Stockholders Agreement, the WCAS Funds will have control over votes on fundamental and significant corporate matters and transactions.

So long as the parties to the Stockholder Agreement own a majority of our outstanding shares of common stock, we will be a “controlled company” within the meaning of corporate governance standards of the national securities exchange on which our common stock will be listed. Under these standards, a company of which more than 50% of the voting power for the election of directors is held by another company or group is a “controlled company” that is not required to comply with certain corporate governance requirements. We intend to rely on certain exemptions following the offering, and may rely on any of these exemptions for so long as we are a “controlled company.” See “Risk Factors—Risks Related to This Offering and Ownership of Our Common Stock” and “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Welsh, Carson, Anderson & Stowe is a leading U.S. private equity investor focused on information/business services and healthcare. Welsh, Carson, Anderson & Stowe has raised and managed $20 billion in capital and has a current portfolio of over 30 companies.

Corporate Information

We were founded in 1998. Software is a Delaware corporation that was formed in October 2013 to undertake this offering. Our principal executive offices are located at 7501 W. Memorial Road, Oklahoma City, Oklahoma 73142 and our telephone number is (405) 722-6900. Our website is www.paycom.com. Information contained on our website or that can be accessed through our website is not incorporated by reference in this prospectus.

“Paycom,” the Paycom logo and other trademarks or service marks of Paycom appearing in this prospectus are the property of Paycom. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders.

The Reorganization

Software is a newly formed Delaware corporation. In anticipation of this offering, we consummated the Reorganization (as defined herein), effective as of January 1, 2014. For additional information concerning the Reorganization, see “The Reorganization.”

The following diagram depicts our corporate structure immediately after the completion of this offering. We will directly or indirectly hold 100% of the ownership interests in each of our subsidiaries:

LOGO

THE OFFERING

Common stock offered by us

Common stock offered by the selling stockholders

Option to purchase additional shares of common stock

The selling stockholders have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase up to an additional shares of common stock.

Shares outstanding after the offering

Use of proceeds

We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering for (i) the repayment of a 10% Senior Note due 2022 issued by us to an affiliate of Welsh, Carson, Anderson & Stowe in the amount of approximately $18.8 million, (ii) the repayment of a 14% Note due 2017 issued by WCAS Paycom Holdings, Inc., or WCAS Holdings, that we assumed in connection with the Reorganization in the amount of approximately $46.2 million (including certain payments made pursuant to a contribution agreement) and (iii) general corporate purposes, including additions to working capital and capital expenditures. See “Use of Proceeds.”

We will not receive any proceeds from the sale of shares offered by the selling stockholders, who include a director and entities affiliated with members of our board of directors.

Dividend policy

We do not currently plan to pay a regular dividend on our common stock following this offering. See “Dividend Policy.”

Risk factors

See “Risk Factors” beginning on page 12 and the other information included elsewhere in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Directed Share Program

At our request, the underwriters have reserved for sale at the initial public offering price up to 5% of the shares offered hereby for our officers, directors, employees, clients, suppliers, vendors and friends and relatives of our employees. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the others offered hereby. Any participants will be prohibited from selling, pledging or assigning any shares sold to them pursuant to

this program for a period of 180 days after the date of this prospectus. The Directed Share Program will be arranged through our lead underwriter, Barclays Capital Inc.

Proposed NYSE symbol

“PAYC”

In this prospectus, unless otherwise indicated, the number of shares of common stock outstanding and the other information based thereon:

•

exclude 11,350,881 shares of our common stock reserved for future issuance under the Paycom Software, Inc. 2014 Long-Term Incentive Plan, or the 2014 Plan, that we adopted in connection with the Reorganization; and

•

do not reflect any exercise by the underwriters of their option to purchase additional shares of our common stock from the selling stockholders.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes our consolidated financial data as of the dates and for the periods indicated. We have derived the summary consolidated statements of income data for the years ended December 31, 2013, 2012 and 2011 and the summary consolidated balance sheet data as of December 31, 2013 and 2012 from our audited consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of results for any future period. We have derived the summary unaudited pro forma condensed consolidated financial data for the years ended December 31, 2013, 2012 and 2011 from the unaudited pro forma condensed consolidated financial statements set forth under “Unaudited Pro Forma Condensed Consolidated Financial Information.”

The summary consolidated financial data set forth below should be read together with “Capitalization,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Consolidated Financial Information” and our consolidated financial statements and the related notes thereto, which are included elsewhere in this prospectus. The following tables summarize our consolidated and pro forma results:


										Pro forma ⁽⁴⁾
	Year Ended December 31,									Year Ended December 31,
	2013			2012			2011			2013			2012			2011
				(in thousands, except per unit and share data)
Consolidated statement of income data:
Revenues	$	107,601		$	76,810		$	57,206		$	107,601		$	76,810		$	57,206

Expenses ⁽¹⁾
Cost of revenues:
Operating expenses		19,070			14,895			12,287			19,070			14,895			12,287
Depreciation		1,821			1,431			987			1,821			1,431			987

Total cost of revenues		20,891			16,326			13,274			20,891			16,326			13,274
Administrative expenses:
Sales and marketing		42,681			29,255			22,244			42,681			29,255			22,244
Research and development		2,146			1,632			1,225			2,146			1,632			1,225
General and administrative		28,884			19,450			14,707			29,191			19,452			14,714
Depreciation and amortization		3,682			4,092			4,300			3,682			4,092			4,300

Total administrative expenses		77,393			54,429			42,476			77,700			54,431			42,483

Operating income		9,317			6,055			1,456			9,010			6,053			1,449
Interest expense		(2,805	)		(2,171	)		(134	)		(683	)		(774	)		(134	)
Other income, net		1,199			354			108			553			36			108

Income before income taxes		7,711			4,238			1,430			8,880			5,315			1,423

Provision for income taxes		—			—			—			3,462			2,068			573

Net income		7,711		$	4,238		$	1,430			5,418		$	3,247		$	850

Less: Distribution to Series C Preferred Unitholder		(6,467	)		(4,806	)		—

Net income (loss) available to Series A Preferred Unitholders and common unit holders		1,244		$	(568	)	$	1,430

Net income (loss) per Series A Preferred Unit and common unit/share ⁽²⁾
Basic	$	1.30		$	(0.60	)	$	1.53		$			$			$

Diluted	$	1.22		$	(0.57	)	$	1.49		$			$			$

Weighted average units/shares outstanding ⁽²⁾
Basic		955,983			948,181			935,750

Diluted		1,018,305			1,004,436			960,611

Other financial data:
EBITDA ⁽³⁾	$	16,019		$	11,932		$	6,851		$	15,066		$	11,612		$	6,844

Adjusted EBITDA ⁽³⁾	$	19,700		$	12,751		$	7,016		$	18,747		$	12,431		$	7,009


	As of December 31,
	2013			2012
	(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	13,273		$	13,435
Restricted cash		369			368
Working capital (deficit) ⁽⁵⁾		(7,933	)		5,096
Property, plant and equipment, net		38,671			25,139
Deferred revenue		12,572			8,393
Long-term debt, including current portion		21,090			14,110
Long-term debt due to related party		14,682			14,440
Member’s capital		63,645			63,542
Common stock		—			—
Accumulated deficit		(13,385	)		(8,871	)
Total members’ equity		50,260			54,671

(1)	Incentive-based compensation expense included in the consolidated statements of income data above was as follows:


	Year Ended December 31,
	2013		2012		2011
	(in thousands)
Cost of revenues (operating expenses)	$	222	$	87	$	36
Sales and marketing		114		83		57
Research and development		345		100		25
General and administrative		253		233		47

	$	934	$	503	$	165

(2)

Net income (loss) per Series A Preferred Unit and common unit and weighted average units outstanding represent the earnings per unit reported in the consolidated statements of income for the years ended December 31, 2013, 2012 and 2011 that are included elsewhere in this prospectus. Pro forma net income per share of common stock and the weighted average shares of common stock outstanding reflect the estimated number of shares of common stock we expect to have outstanding upon the completion of this offering as discussed in Note (4) below.

(3)

We use earnings before interest, tax, depreciation and amortization, or EBITDA, and Adjusted EBITDA as supplemental measures to review and assess our performance. We define EBITDA as net income, plus interest expense and depreciation and amortization and Adjusted EBITDA as net income, plus interest expense, depreciation and amortization, incentive-based compensation expense and certain transaction expenses that are not core to the Company’s operations. EBITDA and Adjusted EBITDA are metrics that we believe are useful to investors in evaluating our operating performance and facilitating comparison with other peer companies, many of which use similar non-GAAP financial measures to supplement results under accounting principles generally accepted in the United States of America, or U.S. GAAP.

EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP, and should not be considered a substitute for net income, which we consider to be the most directly comparable U.S. GAAP measure. EBITDA and Adjusted EBITDA have limitations as analytical tools, and when assessing our operating performance, you should not consider EBITDA or Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated statements of income data prepared in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA may not be comparable to similar titled measures of other companies and other companies may not calculate such measures in the same manner as we do.

The following table reconciles net income to EBITDA and Adjusted EBITDA and pro forma net income to pro forma EBITDA and pro forma Adjusted EBITDA:


							Pro forma ⁽⁴⁾
	Year Ended December 31,						Year Ended December 31,
	2013		2012		2011		2013		2012		2011
Consolidated statements of income data:				(in thousands)
Net income	$	7,711	$	4,238	$	1,430	$	5,418	$	3,247	$	850
Interest expense		2,805		2,171		134		683		774		134
Taxes		—		—		—		3,462		2,068		573
Depreciation and amortization		5,503		5,523		5,287		5,503		5,523		5,287

EBITDA		16,019		11,932		6,851		15,066		11,612		6,844
Incentive-based compensation expense ^(a)		934		503		165		934		503		165
Transaction expenses ^(b)		2,747		316		—		2,747		316		—

Adjusted EBITDA	$	19,700	$	12,751	$	7,016	$	18,747	$	12,431	$	7,009

(a)

Represents incentive-based compensation expense reflected in Note (1) above. Pro forma incentive-based compensation expense is the same as that reported under the historical periods as there are no pro forma adjustments to incentive-based compensation expense recorded in our consolidated statements of income for the years ended December 31, 2013, 2012 and 2011.

(b)

Represents one-time transaction expenses associated with the April 2012 Corporate Reorganization (as defined herein) and indirect incremental legal and accounting costs and expenses included in general and administrative expenses in the anticipation of and planning for this offering.

(4)

The pro forma data reflects: (i) the Reorganization, and (ii) the effect of a portion of the net offering proceeds which will be used to repay the 10% Senior Note due 2022 issued by us to an affiliate of Welsh, Carson, Anderson & Stowe in the amount of approximately $18.8 million and the 14% Note due 2017 issued by WCAS Holdings that we assumed in connection with the Reorganization in the amount of approximately $46.2 million (including certain payments made pursuant to a contribution agreement). Any additional net offering proceeds have been excluded for the purposes of the pro forma financial information.

(5)	Working capital (deficit) is defined as current assets, excluding restricted cash, less current liabilities, excluding current portion of deferred revenue.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before making a decision to invest in our common stock. Our business, operating results or financial condition could be adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment. Before deciding whether to invest in our common stock, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and the related notes.

Risks Related to Our Business and Industry

Our business depends substantially on our clients’ continued use of our applications, their purchases of additional applications from us and our ability to add new clients. Any decline in our clients’ continued use of our applications or purchases of additional applications could adversely affect our business, operating results or financial condition.

In order for us to maintain or improve our operating results, it is important that our current clients continue to use our applications and purchase additional applications from us, and that we add additional clients. Our clients have no obligation to continue to use our applications, and may choose not to continue to use our applications at the same or higher level of service, if at all. In the past, some of our clients have elected not to continue to use our applications. Moreover, our clients generally have the right to cancel their agreements with us for any or no reason by providing 30 days prior written notice.

Our client retention rates may fluctuate as a result of a number of factors, including the level of client satisfaction with our applications, pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels. If our clients do not continue to use our applications, renew on less favorable terms, fail to purchase additional applications, or if we fail to add new clients, our revenue may decline, and our business, operating results or financial condition could be adversely affected.

The market in which we participate is highly competitive, and if we do not compete effectively, our business, operating results or financial condition could be adversely affected.

The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to intensify in the future with the introduction of new technologies and market entrants. Many of our current and potential competitors are larger and have greater brand name recognition, longer operating histories, more established relationships in the industry and significantly greater financial, technical and marketing resources than we do. As a result, some of these competitors may be able to:

•

adapt more rapidly to new or emerging technologies and changes in client requirements;

•

develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly;

•

bundle products and services that we may not offer or in a manner that provides our competitors with a price advantage;

•

take advantage of acquisition and other opportunities for expansion more readily;

•

maintain a lower cost basis;

•

adopt more aggressive pricing policies and devote greater resources to the promotion, marketing and sales of their products and services; and

•

devote greater resources to the research and development of their products and services.

Some of our principal competitors offer their products or services at a lower price, which has resulted in pricing pressures. Similarly, some competitors offer different billing terms, which has resulted in pressures on our billing terms. If we are unable to maintain our pricing levels and our billing terms, our operating results would be negatively impacted. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses or the failure of our solution to achieve or maintain widespread market acceptance, any of which could adversely affect our business, operating results or financial condition.

We compete with firms that provide HCM solutions by various means. Many providers continue to deliver legacy enterprise software, but as demand for greater flexibility and access to information grows, we believe there will be increased competition in the delivery of HCM cloud-based solutions by other SaaS providers. Our competitors offer HCM solutions that overlap with one, several or all categories of applications offered by our solution. Our talent acquisition and talent management applications compete primarily with Cornerstone OnDemand, Inc., Oracle Corporation, SAP AG and Workday, Inc. Our payroll applications, including payroll processing, compete primarily with Automatic Data Processing, Inc., or ADP, Ceridian Corporation, Concur Technologies, Inc., Intuit, Inc., Paychex, Inc. and The Ultimate Software Group, Inc. Our HR management applications compete primarily with ADP, Ceridian Corporation, Oracle Corporation, Paychex, Inc., SAP AG, and Workday, Inc. Our time and labor management applications compete primarily with ADP, Ceridian Corporation and The Ultimate Software Group, Inc. All of our larger competitors compete with us across multiple application categories. In addition, our HCM solution continues to face competition from in-house payroll and HR systems and departments as well as HR systems and software sold by third-party vendors.

Competition in the HCM solutions market is primarily based on service responsiveness, product quality and reputation, breadth of service and product offering and price. Many of our competitors are able to devote greater resources to the development, promotion and sale of their products and services. In addition, many of our competitors have established marketing relationships, access to larger client bases and major distribution agreements with consultants, software vendors and distributors. In addition, some competitors may offer software that addresses one or a limited number of HCM functions at a lower price point or with greater depth than our solution. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or client requirements. Further, some potential clients, particularly large enterprises, may elect to develop their own internal solutions. If we are unable to compete effectively, our business, operating results or financial condition could be adversely affected.

To date we have derived a majority of our revenue from payroll processing. For the years ended December 31, 2013, 2012 and 2011, payroll processing represented approximately 58%, 60% and 68% of our total revenues, respectively. Compared to payroll processing, our participation in other HCM applications markets is relatively new, and it is uncertain whether our revenue from other HCM applications will continue to grow. The relatively limited extent to which our other HCM applications have been adopted by our clients, and the uncertainty regarding the adoption of any new applications beyond our existing applications, may make it difficult to evaluate our business because the potential market for such applications remains uncertain. Our HCM solution may not achieve and sustain the high level of market acceptance that is critical for the success of our business. The failure to increase the use of our HCM applications and any new applications developed by us may reduce our revenue growth rate, which could adversely affect our business, operating results or financial condition.

If our security measures are breached, or unauthorized access to data of our clients or their employees is otherwise obtained, our solution may not be perceived as being secure, clients may reduce the use of or stop using our solution and we may incur significant liabilities.

Our solution involves the collection, storage and transmission of clients’ and their employees’ confidential and proprietary information, including personal or identifying information, as well as financial and payroll data. Unauthorized access or security breaches could result in the loss of information, litigation, indemnity obligations

and other liability. While we have security measures in place to protect client and employee information and prevent data loss and other security breaches, if these measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and someone obtains unauthorized access to our clients’ data, our reputation could be damaged, our business may suffer and we could incur significant liability. Because the techniques used to obtain unauthorized access or to sabotage systems change frequently, we may not be able to anticipate these techniques and implement adequate preventative measures. Cyber liability insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our cyber liability insurance policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention.

Any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business, operating results or financial condition.

If the SaaS market develops more slowly than we expect or declines, our growth may slow or stall, and our business could be adversely affected.

The SaaS market is not as mature as the market for on-premise enterprise software, and it is uncertain whether SaaS will achieve and sustain high levels of demand and market acceptance. Our success will depend not only on strong demand for HCM services in general, but also to a substantial extent on the widespread adoption of SaaS. Many companies have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to SaaS. It is difficult to predict client adoption rates and demand for our solution, the future growth rate and size of the SaaS market or the entry of competitive products. The expansion of the SaaS market depends on a number of factors, including the cost, performance and perceived value associated with SaaS, as well as the ability of SaaS providers to address security and privacy concerns. If other SaaS providers experience security incidents, loss of client data, disruptions in delivery or other problems, the market for SaaS applications as a whole, including our solution, may be negatively affected. If SaaS does not achieve widespread adoption, or there is a reduction in demand for SaaS caused by a lack of client acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and products, decreases in corporate spending or otherwise, our growth may slow or stall, and our business could be adversely affected.

Any interruption or failure of our data centers could impair our ability to effectively provide our solution and adversely affect our business.

We serve all of our clients from our two data centers located in Oklahoma and Texas. These locations are vulnerable to damage or interruption from severe weather, tornados, terrorist attacks, earthquakes, floods, fires, power loss, telecommunications failures, computer viruses or cyber-attacks. They are also subject to break-ins, sabotage, intentional acts of vandalism and other misconduct. Our solution depends on the continuing operation of our data centers and any damage to or failure of our data centers could result in interruptions in our services. Any interruption in our service could damage our reputation, cause our clients to terminate their use of our solution and prevent us from gaining new or additional business from current clients, which could have an adverse effect on our business, operating results or financial condition.

Any significant disruption in our SaaS network infrastructure could harm our reputation and expose us to significant costs.

Our SaaS network infrastructure is a critical part of our business operations. Our clients access our solution through standard web browsers, smart phones, tablets and other web-enabled devises, and depend on us for fast and reliable access to our solution. In the future, we may experience disruptions in our computing and communications infrastructure. Factors that may cause such disruptions include:

•

human error;

•

security breaches;

•

telecommunications failures or outages from third-party providers;

•

computer viruses or cyber-attacks;

•

acts of terrorism, sabotage or other intentional acts of vandalism;

•

unforeseen interruption or damages experienced in moving hardware to a new location;

•

tornados, fires, earthquakes, floods and other natural disasters; and

•

power loss.

If our SaaS network infrastructure or our clients’ ability to access to our solution is interrupted, client and employee data from recent transactions may be permanently lost and we could be exposed to significant claims by clients, particularly if the access interruption is associated with problems in the timely delivery of funds due to employees. Any significant instances of system downtime could negatively affect our reputation and ability to retain clients and sell our solution, which would adversely impact our revenue.

We have also experienced significant growth in the number of clients, transactions and client and employee data that our network infrastructure supports. We seek to maintain sufficient excess capacity in our network infrastructure to meet the needs of all of our clients and their employees and to facilitate the rapid provision of new client deployments and the expansion of existing client deployments. Any changes in the service levels at our data centers or any errors, defects, disruptions or other performance problems with our network infrastructure could adversely affect our reputation and may result in lengthy interruptions in the availability of our solution. Any interruptions in the availability of our solution might reduce our revenues, cause us to issue refunds to clients or adversely affect our retention of existing clients.

If our solution fails to perform properly, our reputation could be adversely affected and our market share could decline.

Our solution is inherently complex and may in the future contain, or develop, undetected defects or errors. Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred in correcting any application defects may be substantial and could adversely affect our business, operating results or financial condition. Any defects in functionality or that cause interruptions in the availability of our applications could result in:

•

loss or delayed market acceptance and sales of our applications;

•

termination of service agreements or loss of clients;

•

credits or refunds to clients;

•

breach of contract, breach of warranty or indemnification claims against us, which may result in litigation;

•

diversion of development and service resources; and

•

injury to our reputation.

Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our systems could result in data loss or corruption, or cause the information that we collect to be incomplete or contain inaccuracies that our clients regard as significant. Furthermore, the availability or performance of our solution could be adversely affected by a number of factors, including the failure of our network system or solution or security breaches. We may be liable to our clients for damages they may incur resulting from certain of these events. In addition to potential liability, if we experience interruptions in the availability of our solution, our reputation could be adversely affected and we could lose clients.

Our clients might assert claims against us in the future alleging that they suffered damages due to a defect, error, or other failure of our solution. Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention.

If we do not effectively expand and train our sales force and our support teams, we may be unable to add new clients and retain existing clients.

We need to continue to expand our sales force and support team members in order to grow our client base and increase our revenues. Identifying and recruiting qualified personnel and training them in the use of our solution requires significant time, expense and attention and it can take a substantial amount of time before our sales representatives and support team members are fully-trained and productive. We may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we currently, or intend in the future to do business, and our recent hires and planned hires may not achieve desired productivity levels in a reasonable period of time or become as productive as we expect. If these expansion efforts are unsuccessful or do not generate a corresponding increase in revenues, our business, operating results or financial condition could be adversely affected.

If we are not able to develop enhancements and new applications, keep pace with technological developments or respond to future disruptive technologies, we might not remain competitive and our business could be adversely affected.

Our future success will depend on our ability to adapt and innovate. To attract new clients and increase revenue from existing clients, we need to enhance, add new features and improve our existing applications and introduce new applications. The success of any enhancements or new features and applications depends on several factors, including timely completion, introduction and market acceptance. We may expend significant time and resources developing and pursuing sales of a particular application that may not result in revenues in the anticipated time frame or at all, or may not result in revenue growth sufficient to offset increased expenses. If we are unable to successfully develop enhancements, new features or new applications to meet client needs, our business and operating results could be adversely affected.

In addition, because our applications are designed to operate on a variety of network, hardware and software platforms using Internet tools and protocols, we will need to continuously modify and enhance our applications to keep pace with changes in Internet-related hardware, software, communication, browser and database technologies. If we are unable to respond in a timely and cost-effective manner to these rapid technological developments, our current and future applications may become less marketable and less competitive or even obsolete.

Our success is subject to the risk of future disruptive technologies. If new technologies emerge that are able to deliver HCM solutions at lower prices, more efficiently or more conveniently, such technologies could adversely impact our ability to compete.

The market for our solution among large companies may be limited if these companies demand customized features and functions that we do not offer.

Prospective clients, especially larger companies, may require customized features and functions unique to their business processes that we do not offer. In order to ensure we meet these requirements, we may devote a significant amount of support and services resources to larger prospective clients, increasing the cost and time required to complete sales with no guarantee that these clients will continue to use our solution. We may not be successful in implementing any customized features or functions. If prospective clients require customized features or functions that we do not offer, or that would be difficult for them to deploy themselves, then the market for our solution will be more limited and our business could be adversely affected.

Our business and operations are experiencing rapid growth and organizational change. If we fail to manage such growth and change effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.

We have experienced, and may continue to experience, rapid growth in our headcount and operations, which has placed, and may continue to place, significant demands on our management, operational and financial resources. For example, our headcount has grown from 523 employees as of December 31, 2011 to 840 employees as of December 31, 2013 and we have expanded from 18 offices as of December 31, 2011 to 24 offices as of December 31, 2013. We have also experienced significant growth in the number of clients, transactions and client and employee data that our infrastructure supports. Finally, our organizational structure and recording systems and procedures are becoming more complex as we improve our operational, financial and management controls. Our success will depend in part on our ability to manage this growth and organizational change effectively. To manage the expected growth of our headcount and operations, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Our ability to add additional offices may be constrained by the willingness and availability of qualified personnel to help staff and manage any new offices. The failure to effectively manage growth could result in difficulties or delays in obtaining clients, selling additional applications to our clients, declines in quality or client satisfaction of our applications, increases in costs, and difficulties in introducing new applications or other operational difficulties, any of which could adversely affect our ability to retain and attract clients or sell additional applications to our existing clients.

Our business, operating results or financial condition could be adversely affected if our clients are not satisfied with our deployment or technical support services.

Our business depends on our ability to satisfy our clients, both with respect to our applications and the technical support provided to help clients use the applications that address the needs of their businesses. We use our in-house deployment personnel to implement and configure our solution and provide support to our clients. If a client is not satisfied with the quality of our solution or the applications delivered or the support provided, we could be required to incur additional costs to address the situation, the profitability of our solution might be negatively affected, and the client’s dissatisfaction with our deployment service could damage our ability to sell additional applications to that client. In addition, our sales process is highly dependent on the reputation of our solution and applications and on positive recommendations from our existing clients. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our applications to existing and prospective clients, and our business, operating results or financial condition.

If we fail to retain key employees and recruit qualified technical and sales personnel, our business could be adversely affected.

We believe that our success depends on the continued services of our senior management and other key employees, including Chad Richison, Craig E. Boelte, Jeffrey D. York and William X. Kerber III. In addition, because our future success is dependent on our ability to continue to enhance and introduce new applications, we are heavily dependent on our ability to attract and retain qualified software developers and IT personnel with the requisite education, background and industry experience. To continue to execute our growth strategy, we must also attract and retain qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base. The loss of the services of a significant number of our developers or sales professionals could be disruptive to our development efforts or business relationships. In addition, if any of our key employees joins a competitor or decides to otherwise compete with us, we may experience a material disruption of our operations and development plans, which may cause us to lose clients or increase operating expenses or divert management’s attention to recruit replacements for the departed key employees.

Our financial results may fluctuate due to many factors, some of which may be beyond our control.

Our results of operations, including the levels of our revenues, costs of revenues, administrative expenses, operating income, cash flow and deferred revenue, may vary significantly in the future and the results of any one period should not be relied upon as an indication of future performance. Our financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in our financial results may negatively impact the value of our common stock. Factors that may cause our financial results to fluctuate from period to period include, without limitation:

•

our ability to attract new clients or sell additional applications to our existing clients;

•

the number of new clients and their employees, as compared to the number of existing clients and their employees in a particular period;

•

the mix of clients between small, mid-sized and large organizations;

•

the extent to which we retain existing clients and the expansion or contraction of our relationship with them;

•

the mix of applications sold during a period;

•

changes in our pricing policies or those of our competitors;

•

seasonal factors affecting payroll processing, demand for our applications or potential clients’ purchasing decisions;

•

the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;

•

the timing and success of new applications introduced by us and the timing of expenses related to the development of new applications and technologies;

•

the timing and success of current and new competitive products and services by our competitors;

•

economic conditions affecting our clients, including their ability to outsource HCM solutions and hire employees;

•

other changes in the competitive dynamics of our industry, including consolidation among competitors or clients;

•

our ability to manage our existing business and future growth, including expenses related to our data centers and the expansion of such data centers and the addition of new offices;

•

the effects and expenses of acquisition of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions;

•

network outages or security breaches; and

•

general economic, industry and market conditions.

Certain of our operating results and financial metrics are difficult to predict as a result of seasonality.

We have historically experienced seasonality in our revenues because a significant portion of our recurring revenues relate to the annual processing of payroll forms such as Form W-2 and Form 1099. Because these forms are typically processed in the first quarter of the year, first quarter revenues are generally higher than subsequent quarters. We expect this seasonality to continue in the future, which may cause fluctuations in certain of our operating results and financial metrics, and thus make such results and metrics difficult to predict.

If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenue or incur costly litigation to protect our rights.

Our success is dependent in part upon our intellectual property. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our applications and use information that we regard as proprietary to create products or services that compete with ours.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation may be necessary in the future to protect and enforce our intellectual property rights and to protect our trade secrets and such litigation could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. We may not be able to secure, protect and enforce our intellectual property rights or control access to, and the distribution of, our solution and proprietary information.

We may be sued by third parties for alleged infringement of their proprietary rights.

There is considerable intellectual property development activity in our industry, and we expect that software developers will increasingly be subject to infringement claims as the number of applications and competitors grows and the functionality of applications in different industry segments overlaps. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property in technology areas relating to our solution or applications. From time to time, third parties have asserted and may in the future assert that we are infringing on their intellectual property rights, and we may be found to be infringing upon such rights. A claim of infringement may also be made relating to technology that we acquire or license from third parties. However, we may be unaware of the intellectual property rights of others that may cover, or may be alleged to cover, some or all of our solution or applications.

For example, on July 29, 2013, Dr. Lakshmi Arunachalam filed a complaint against us in the U.S. District Court for the District of Delaware alleging that Paycom Payroll, LLC, or Payroll, infringes on at least one claim of U.S. Patent No. 8,244,833 assigned to her. In her complaint, Dr. Arunachalam seeks a permanent injunction, damages and attorneys’ fees.

The outcome of the foregoing litigation matter is inherently unpredictable, and therefore as a result of this litigation matter or any future claim of infringement, a claim could (i) cause us to enter into an unfavorable royalty or license agreement, pay ongoing royalties or require that we comply with other unfavorable terms, (ii) require us to discontinue the sale of our solution or applications, (iii) require us to indemnify our clients or third-party service providers or (iv) require us to expend additional development resources to redesign our solution or applications. Any of these outcomes could harm our business. Even if we were to prevail, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business and operations.

We employ third-party licensed software for use in our applications, and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels, which could adversely affect our business.

Our applications incorporate certain third-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools from third parties in

the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. In addition, integration of the software used in our applications with new third-party software may require significant work and substantial investment of our time and resources. Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications and harm our reputation.

The use of open source software in our applications may expose us to additional risks and harm our intellectual property rights.

Some of our applications use software covered by open source licenses. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate such software into their products or applications. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional development resources to change our applications. In addition, if we were to combine our applications with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our applications. If we inappropriately use open source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions.

The failure to develop our brand cost-effectively could have an adverse effect on our business.

We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving the widespread acceptance of our solution and is an important element in attracting new clients and retaining existing clients. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful applications at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business.

We might require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We have funded our operations since inception through equity financings and cash generated by operations. In the future, we may require additional capital to support our growth and respond to operational challenges, including the need to develop new features and applications or enhance our existing applications, improve our infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our growth and respond to challenges could be significantly limited.

We may acquire other businesses, applications or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

In the future, we may seek to acquire or invest in businesses, applications or technologies that we believe complement or expand our applications, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are ultimately consummated.

We do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully or to effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:

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the inability to integrate or benefit from acquired applications or services in a profitable manner;

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unanticipated costs or liabilities associated with the acquisition;

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the incurrence of acquisition-related costs;

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difficulty integrating the accounting systems, operations and personnel of the acquired business;

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difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;

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difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company;

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diversion of management’s attention from other business concerns;

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harm to our existing relationships with clients as a result of the acquisition;

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the potential loss of key employees;

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the use of resources that are needed in other parts of our business; and

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the use of substantial portions of our available cash to consummate the acquisition.

In addition, a significant portion of the purchase price of any companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations. Acquisitions could also result in issuances of equity securities or the incurrence of debt, which would result in dilution to our stockholders.

Our growth depends in part on the success of our relationships with third parties.

We rely on third-party financial and accounting processing systems, as well as various financial institutions, to perform financial services in connection with our applications, such as providing automated clearing house, or ACH, and wire transfers as part of our payroll and expense reimbursement services and to provide technology and content support, manufacture time clocks and process background checks. We anticipate that we will continue to depend on various third-party relationships in order to grow our business, provide technology and content support, manufacture time clocks and process background checks. Identifying, negotiating and documenting relationships with these third parties and integrating third-party content and technology requires significant time and resources. Our agreements with third parties are typically non-exclusive and do not prohibit them from working with our competitors. In addition, these third parties may not perform as expected under our agreements, and we may have disagreements or disputes with such third parties, which could negatively affect

our brand and reputation. A global economic slowdown could also adversely affect the businesses of our third party providers, particularly those financial institutions that process transactions through the ACH network, and it is possible that they may not be able to devote the resources we expect to our relationship.

If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our business, operating results or financial condition could be adversely affected. Even if we are successful, these relationships may not result in improved operating results.

Adverse economic conditions could adversely affect our business, operating results or financial condition.

Our business depends on the overall demand for HCM applications and on the economic health of our current and prospective clients. If economic conditions in the United States remain uncertain or deteriorate, clients may cease their operations or delay or reduce their HCM spending or the number of their employees. This could result in reductions in sales of our applications, longer sales cycles, slower adoption of new technologies and increased price competition. In addition, there has been reduced government spending in the United States during 2013. This might reduce demand for our applications from organizations that receive funding from the U.S. government and could negatively affect the U.S. economy, which could further reduce demand for our applications. Any of these events could adversely affect our business, operating results or financial condition. In addition, HCM spending levels may not increase following any recovery.

If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings.

We are required to test goodwill for impairment at least annually or earlier if events or changes in circumstances indicate the carrying value may not be recoverable. As of December 31, 2013, we had recorded a total of $51.9 million of goodwill and $6.7 million of other intangible assets. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates made in connection with the impairment testing of goodwill or intangible assets, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or other intangible assets. Any such material charges may have a negatively impact our operating results.

Because our long term success depends, in part, on our ability to expand the sales of our solution to customers located outside of the United States, our business will be subject to risks associated with international operations.

An element of our growth strategy is to expand our operations and client base. To date, we have not engaged in any operations outside of the United States. If we decide to expand our operations into international markets, it will require significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the United States. Because of our lack of experience with international operations, we cannot assure you that our international expansion efforts will be successful.

Risks Related to Legislation or Regulation

Privacy concerns and laws or other domestic regulations may reduce the effectiveness of our applications.

Our applications require the storage and transmission of the proprietary and confidential information of our clients and their employees, including personal or identifying information, as well as their financial and payroll data. Personal privacy has become a significant issue in the United States. The regulatory framework for privacy issues is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the Patient Protection and Affordable Care Act and state breach notification laws.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards. Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solution. As such, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our solution, which could have an adverse effect on our business, operating results or financial condition. Any inability to adequately address privacy concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business, operating results or financial condition.

Furthermore, privacy concerns may cause our clients’ employees to resist providing the personal data necessary to allow our clients or their employees to use our applications effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our applications in certain industries. All of these legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our applications.

Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may diminish the demand for our applications, and could have a negative impact on our business.

The future success of our business depends upon the continued use of the Internet as a primary medium for commerce, communication and business. Federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial medium. Changes in these laws or regulations could require us to modify our applications in order to comply with these changes. In addition, government agencies or private organizations may impose taxes, fees or other charges for accessing the Internet or commerce conducted via the Internet. These laws or charges could limit the growth of Internet-related commerce or communications generally, or result in reductions in the demand for Internet-based applications such as ours.

In addition, the use of the Internet as a means of conducting business could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease of use, accessibility, and quality of service. The performance of the Internet has been adversely affected by “viruses,” “worms” and similar malicious programs and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the Internet is adversely affected by these issues, demand for our applications could suffer.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering and in each year thereafter. Our auditors will also need to attest to the effectiveness of our internal control over financial reporting in the future to the extent we are no longer an emerging growth company, as defined by the Jumpstart Our Business Startups Act, or the JOBS Act, and are not a smaller reporting company.

If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing the internal control over financial reporting to comply with this obligation, which process will be time consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public

accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports we could become subject to investigations by the NYSE, the Securities and Exchange Commission, or the SEC, or other regulatory authorities and the market price of our common stock could be negatively affected.

We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act, as well as rules and regulations subsequently implemented by the SEC and the NYSE, including the establishment and maintenance of effective disclosure controls and procedures and internal control over financial reporting and changes in corporate governance practices.

We expect that complying with these rules and regulations will substantially increase our legal and financial compliance costs and make some activities more time-consuming and costly. In addition, our management team will have to adapt to the requirements of being a public company. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase to the extent we are no longer an emerging growth company, as defined by the JOBS Act, and are not a smaller reporting company. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs, which could adversely affect our operating results.

The increased costs associated with operating as a public company may decrease our net income or result in a net loss and may require us to reduce costs in other areas of our business or increase the prices of our solution. Additionally, if these requirements divert management’s attention from other business concerns, they could have an adverse effect on our business, operating results or financial condition.

As a public company, we also expect that it may be more difficult or more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Pursuant to Section 102 of the JOBS Act, we have reduced executive compensation disclosure and have omitted a Compensation Discussion and Analysis from this prospectus.

For as long as we continue to be an emerging growth company, we intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation, the frequency of the nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and the auditor attestation requirements of Section 404 of the

Sarbanes-Oxley Act. Investors may find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30th, (ii) the end of the fiscal year in which we have total annual gross revenues of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period and (iv) the end of the fiscal year following the five year anniversary of the date of this prospectus.

Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our clients, which could increase the costs of our solution and applications and could adversely affect our business, operating results or financial condition.

The application of federal, state and local tax laws to services provided electronically is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the Internet. These enactments could adversely affect our sales activity, due to the inherent cost increase the taxes would represent and ultimately could adversely affect our business, operating results or financial condition.

In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and interest for past amounts. If we are unsuccessful in collecting such taxes from our clients, we could be held liable for such costs, thereby adversely affecting our business, operating results or financial condition.

Risks Related to this Offering and Ownership of our Common Stock

There has been no prior public market for our common stock, the price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

There has been no public market for our common stock prior to this initial public offering. The initial public offering price for our common stock was determined through negotiations between the underwriters and us and may vary from the market price of our common stock following our initial public offering. If you purchase shares of our common stock in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. An active or liquid market in our common stock may not develop upon closing of our initial public offering or, if it does develop, it may not be sustainable. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

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our operating performance and the performance of other similar companies;

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the overall performance of the equity markets;

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announcements by us or our competitors of new applications or enhancements, acquisitions, applications, services, strategic alliances, commercial relationships, joint ventures or capital commitments;

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disruptions in our services due to hardware, software or network problems;

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recruitment or departure of key personnel;

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publication of unfavorable research reports about us or our industry or withdrawal of research coverage by securities analysts;

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trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock;

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the size of our public float;

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the economy as a whole, market conditions in our industry and the industries of our clients; and

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economic, legal and regulatory factors unrelated to our performance.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class actions following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, operating results or financial condition.

Substantial blocks of our total outstanding shares may be sold into the market when the “lock-up” period ends. If there are substantial sales of shares of our common stock, the price of our common stock could decline.

The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, or if there is a large number of shares of our common stock available for sale. Upon the completion of this offering, we will have shares of our common stock outstanding. All of the shares of common stock sold in this offering will be eligible for sale in the public market, unless they are held by our affiliates. Shares held by directors, executive officers and other affiliates will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and various restricted stock award agreements.

After our initial public offering, certain of our stockholders will be subject to lock-up agreements with the underwriters or us that restrict their ability to sell shares of common stock until 181 days after the date of this prospectus. After the lock-up agreements expire, an additional shares of common stock will be eligible for sale in the public market, subject in many cases to the limitations of either Rule 144 or Rule 701 under the Securities Act. Upon completion of this offering, stockholders owning an aggregate of up to shares of common stock will be entitled, under a registration rights agreement, to require us to register shares of our common stock owned by them for public sale in the United States. We also intend to register shares of common stock that we have issued and may issue under our employee equity incentive plans. Once we register these shares, they will be able to be sold freely in the public market upon issuance, subject to existing lock-up agreements.

Barclays Capital Inc. and J.P. Morgan Securities LLC, on behalf of the underwriters, may in their discretion permit our stockholders to sell shares prior to the expiration of the restrictive provisions contained in those lock-up agreements. The market price of the shares of our common stock could decline as a result of the sale of a substantial number of our shares of common stock in the public market, the availability of shares for sale or the perception in the market that the holders of a large number of shares intend to sell their shares. In addition, the sale of these shares by stockholders could impair our ability to raise capital through the sale of additional stock.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If no or few securities or industry analysts cover our company, the trading price for our common stock would be negatively impacted. If one or more of the analysts who covers

us downgrades our stock or publishes incorrect or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

Our principal stockholders will hold a controlling interest after this offering and may make business decisions with which you disagree and which may adversely affect the value of your investment.

After this offering, the parties to the Stockholders Agreement, which includes Chad Richison, Shannon Rowe, William X. Kerber, III, Jeffrey D. York, Robert J. Levenson and Richard Aiello and certain of their affiliates or related entities, and the WCAS Funds, or collectively, the Stockholders Agreement Parties, will beneficially own or control, directly or indirectly, in the aggregate shares of our common stock, or approximately % of our outstanding shares, or, if the underwriters’ option to purchase additional shares is exercised in full, shares of common stock in the aggregate equal to approximately % of our outstanding shares. As a result of this ownership and the provisions of the Stockholders Agreement, the WCAS Funds will have the ability to control matters submitted to our stockholders for approval, including the election and removal of directors, amendments to our certificate of incorporation and bylaws and the approval of any business combination. These actions may be taken even if they are opposed by other stockholders. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

Some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a longer period, they may be more interested in selling our company to an acquiror than other investors or may want us to pursue strategies that deviate from the interests of other stockholders.

We will be deemed a “controlled company” and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

After this offering, the Stockholders Agreement Parties will continue to own common stock representing a majority of our outstanding shares of common stock. So long as such persons collectively own a majority of our outstanding shares of common stock, we will be a “controlled company” within the meaning of corporate governance standards of the NYSE. Under those standards, a company of which more than 50% of the voting power for the election of directors is held by another company or group is a “controlled company” and need not comply with certain requirements, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that there be a nominating and corporate governance committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, (3) the requirement that there be a compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (4) the requirement of an annual performance evaluation of the nominating/corporate governance and compensation committees. We intend to rely on certain of these exemptions following the offering, and may rely on any of these exemptions for so long as we are a “controlled company.” As a result, we will not have a majority of independent directors on our board of directors, and our compensation committee will not consist entirely of independent directors. If we are no longer eligible to rely on the controlled company exception, we intend to comply with all applicable corporate governance requirements, but we will be able to rely on phase-in periods for certain of these requirements in accordance with the NYSE’s rules. Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all NYSE corporate governance requirements.

As a new investor, you will incur immediate and substantial dilution as a result of this offering.

The initial public offering price will be substantially higher than the pro forma net tangible book value per share of our outstanding common stock. As a result, investors purchasing common stock in this offering will incur immediate dilution of $ per share, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of the prospectus, and new investors will own approximately % of our outstanding common stock. This dilution is due in large part to earlier investors having generally paid substantially less than the initial public offering price when they purchased their shares. In addition, the vesting of restricted stock will, and future equity issuances may, result in further dilution to investors.

The issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholdings.

After this offering, our certificate of incorporation will authorize us to issue up to one hundred million shares of common stock and up to ten million shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue all of these shares that are not already outstanding without any action or approval by our stockholders. We intend to continue to evaluate strategic acquisitions in the future. We may pay for such acquisitions, partly or in full, through the issuance of additional equity securities.

Any issuance of shares in connection with our acquisitions, the exercise of stock options or warrants, the award of shares of restricted stock or otherwise would dilute the percentage ownership held by the investors who purchase our shares in this offering.

We have broad discretion in the use of a portion of the net proceeds from our initial public offering and may not use them effectively.

We cannot specify with any certainty the particular uses of a portion of the net proceeds that we will receive from our initial public offering. We will have broad discretion in the application of these proceeds, including working capital, possible acquisitions and other general corporate purposes, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management to apply these proceeds effectively could adversely affect our business, operating results or financial condition. Pending their use, we may invest these proceeds in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.

Our certificate of incorporation, bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. For information regarding these and other provisions, see “Description of Capital Stock.”

Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could affect the price that some investors are willing to pay for our common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. These statements include, but are not limited to, statements about our strategies, plans, objectives, expectations, intentions, expenditures, assumptions and other statements contained in this prospectus that are not historical facts. When used in this document, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan” and “project” and similar expressions as they relate to us are intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.

These forward-looking statements include, but are not limited to, statements concerning our business and strategy, possible or assumed future results of operations, cash flows and liquidity, trends, opportunities and risk affecting our business, industry and financial results, expansion or growth plans, technology, market opportunities and acceptance by new clients of our solution, and the amount, nature and timing of capital expenditures.

These forward-looking statements involve known and unknown risks, inherent uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Actual results and the timing of certain events may differ materially from those contained in these forward-looking statements.

All forward-looking statements speak only at the date of this prospectus. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this prospectus are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We do not undertake any obligation to update or revise any forward-looking statements except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.

MARKET, INDUSTRY AND OTHER DATA

This prospectus includes industry data and forecasts that we have prepared based, in part, upon data and forecasts obtained from industry publications, surveys and forecasts and internal studies. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable.

Although certain of the companies that compete in our markets are publicly held as of the date of this prospectus, others are not. Accordingly, only limited public information is available with respect to our relative market strength or competitive position. Unless we state otherwise, our statements about our relative market strength and competitive position in this prospectus are based on our management’s beliefs, internal studies and our management’s knowledge of industry trends. Although we believe that such information is reliable, we have not had this information verified by any independent sources.

THE REORGANIZATION

Software is a newly formed Delaware corporation that was an indirect wholly-owned subsidiary of Holdings prior to the Reorganization. In anticipation of this offering, Software consummated the Reorganization, as of January 1, 2014, pursuant to which (i) the owners of WCAS Holdings and WCAS CP IV Blocker, Inc., or CP IV Blocker, which are affiliates of Welsh, Carson, Anderson & Stowe, contributed WCAS Holdings and CP IV Blocker, which collectively own all of the Series A Preferred Units of Holdings, to Software in exchange for shares of common stock of Software and (ii) the owners of outstanding Series B Preferred Units of Holdings contributed their Series B Preferred Units for shares of common stock of Software.

Immediately after these contributions, a wholly-owned subsidiary of Software merged with and into Holdings with Holdings surviving the merger. Upon consummation of the merger, the remaining holders of outstanding common and incentive units of Holdings received shares of common stock of Software for their common and incentive units by operation of Delaware law and Holdings’ ownership interest in Software was cancelled. Outstanding common units, Series B Preferred Units and WCAS Holdings and CP IV Blocker were contributed to Software in exchange for, or converted into, 45,708,573 shares of common stock and 8,121,101 restricted shares of common stock of Software.

Following these transactions, all outstanding Series C Preferred Units were eliminated in an intercompany transaction between Holdings and WCAS Holdings, and we assumed the 14% Note due 2017 issued by WCAS Holdings, or the 2017 Note. Following the Reorganization, Software became a holding company with its principal asset being the units of Holdings. We refer to these transactions collectively as the Reorganization. Unless otherwise indicated, or the context otherwise requires, all information in this prospectus is presented giving effect to the Reorganization. For additional information concerning the conversion rates in the Reorganization, see “Unaudited Pro Forma Condensed Consolidated Financial Information, Note 1. Basis of Presentation,” which description is incorporated by reference herein.

LOGO

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the net proceeds to us from our initial public offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds we receive from this offering for (i) the repayment of a 10% Senior Note due 2022, or the 2022 Note, issued by us to an affiliate of Welsh, Carson, Anderson & Stowe, (ii) the repayment of the 2017 Note, assumed in the Reorganization and (iii) general corporate purposes, including additions to working capital and capital expenditures. We intend to use the following amounts of the net proceeds for the above uses:


	Amount (in millions)
Use of Net Proceeds
Contribution agreement payments ⁽¹⁾	$	0.1
Repayment of the 2022 Note ⁽²⁾		18.8
Repayment of the 2017 Note ⁽³⁾		46.1
General corporate purposes

Total net proceeds	$

(1)

We are required to direct a portion of any repayment of the 2017 Note to Messrs. Aiello and Levenson and certain of their affiliated or related entities pursuant to the terms of a Contribution Agreement entered into in connection with the Reorganization. See “Certain Relationships and Related Party Transactions— Contribution Agreement.”

(2)	As of December 31, 2013, we had $18.8 million outstanding under the 2022 Note. The 2022 Note accrues interest at 10% per annum and matures on April 3, 2022.

(3)

As of December 31, 2013, we had Series C Preferred Units outstanding. In connection with the Reorganization, we eliminated the Series C Preferred Units as an intercompany transaction, and assumed the 2017 Note. The 2017 Note accrues interest at 14% per annum and matures on April 3, 2017. Any amounts paid to Messrs. Aiello and Levenson and certain of their affiliated or related entities as described in Note (1) above will be deemed to have been paid to WCAS X and WCAS Management Corporation, and will reduce the amounts required to be paid under the 2017 Note.

Pending other uses, we intend to invest the proceeds in interest-bearing, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government, or we may hold the proceeds as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds we receive from our initial public offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.

We will not receive any proceeds from the sale of shares offered by the selling stockholders, who include a director and certain entities affiliated with members of our board of directors.

DIVIDEND POLICY

We do not currently plan to pay a regular dividend on our common stock following this offering. The declaration, amount and payment of any future dividends on shares of common stock will be at the sole discretion of our board of directors and we may reduce or discontinue entirely the payment of such dividends at any time. Our board of directors may take into account general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. Our Consolidated, Amended and Restated Loan Agreement, or the 2011 Consolidated Loan, and Loan Agreement, or the 2013 Consolidated Loan, with Kirkpatrick Bank each prohibit the payment of dividends while an event of default exists under the Consolidated Loan or the Construction Loan, respectively, and any future debt agreements that we may enter into the future may prohibit the payment of dividends.

We are a holding company that has no material assets other than our indirect ownership of all of the outstanding units of Holdings. In the event that we decide to pay dividends in the future, we intend to cause Holdings to make distributions to us in an amount sufficient to cover cash dividends, if any, declared by us. Any financing arrangements that we enter into in the future may include restrictive covenants that limit our or our subsidiaries’ ability to pay dividends.

In April 2011 and September 2011, we paid cash distributions of $432,000 and $1,300, respectively, to our common unit holders for the payment of taxes. In April 2012 and October 2012, we paid cash distributions of $120,000 and $2,000, respectively, to our common unit holders for the payment of taxes. We also paid a cash distribution of $18,807,000 to our common unit holders in April 2012 as part of the April 2012 Corporate Reorganization (as defined herein). In April 2013 and December 2013, we paid cash distributions of $1,766,000 and $4,000,000, respectively, to our common unit holders and Series A Preferred unit holders for the payment of taxes.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2013 as follows:

•

on an actual basis;

•

on a pro forma basis, giving effect to the Reorganization; and

•

on a pro forma as further adjusted basis, giving effect to (i) the issuance and sale by us of shares of common stock in this offering, assuming an initial public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus and (ii) the application of the net proceeds as described in “Use of Proceeds.”

You should read this table in conjunction with the sections entitled “The Reorganization,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and our consolidated financial statements and related notes as of December 31, 2013, 2012 and 2011 included elsewhere in this prospectus.


	As of December 31, 2013
	Actual			Pro forma as adjusted for the Reorganization			Pro forma as further adjusted ⁽¹⁾
	(in thousands, except share and per share data)
Cash and cash equivalents	$	13,273		$	13,364		$

Current portion of long-term debt		9,545			9,545
Long-term debt, less current portion		11,545			11,545
Long-term debt to related party		14,682			60,875
Members’ equity / stockholders’ equity
Common stock, $0.01 par value, no shares authorized, no shares issued and outstanding, actual; 100,000,000 shares authorized, 45,708,573 shares issued and outstanding, pro forma as adjusted for the Reorganization; shares authorized, shares issued and outstanding, pro forma as further adjusted		—			17,452
Additional paid in capital		—			(12,340	)
Members’ capital		63,645			—
Accumulated deficit		(13,385	)		(37	)

Total members’ equity / stockholders’ equity		50,260			5,075

Total capitalization	$	86,032		$	87,040		$

(1)

A $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions and estimated offering expense payable by us.

DILUTION

If you invest in our common stock, you will experience immediate and substantial dilution in the pro forma as adjusted net tangible book value of your shares. Dilution in pro forma as adjusted net tangible book value represents the difference between the public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after the offering.

Our net tangible book value as of December 31, 2013 was $ million, or $ per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of December 31, 2013, after giving effect to the Reorganization.

After giving effect to our sale in our initial public offering of shares of common stock at an assumed initial public offering price of $ per share, which is the midpoint of the price range on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2013 would have been approximately $ million, or $ per share of common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to investors purchasing shares in our initial public offering.

The following table illustrates this per share dilution:


Assumed initial offering price per share		$
Pro forma net tangible book value per share as of December 31, 2013	$
Increase in pro forma net tangible book value per share attributable to investors purchasing shares in our initial public offering	$

Pro forma as adjusted net tangible book value per share after our initial public offering		$

Dilution in pro forma as adjusted net tangible book value per share to investors in this offering		$

A $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma net tangible book value per share after our initial public offering by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes on a pro forma as adjusted basis as of December 31, 2013, after giving effect to the Reorganization, the differences between the number of shares of our common stock purchased from us, the total cash consideration paid and the average price per share paid by our existing stockholders and by our new investors purchasing shares in our initial public offering at the assumed initial public offering price of the common stock of $ per share, which is the midpoint of the price range on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

Shares Purchased

Total Consideration

Average Price
Per Share

Amount

Percent

Amount

Percent

Existing stockholders

New investors

Total

A $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the total consideration paid by new investors by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our common stock outstanding after our initial public offering.

The number of common shares shown above to be outstanding after this offering is based on shares of our common shares outstanding as of December 31, 2013 after giving effect to the Reorganization and excludes the following:

•

11,350,881 shares of our common stock reserved for future issuance under the 2014 Plan that we adopted in connection with the Reorganization; and

•

does not reflect any exercise by the underwriters of their option to purchase additional shares of our common stock from the selling stockholders.

SELECTED CONSOLIDATED FINANCIAL DATA

We have derived the consolidated statements of income data for the years ended December 31, 2013, 2012 and 2011 and the consolidated balance sheet data as of December 31, 2013 and 2012 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the consolidated statements of income data for the years ended December 31, 2010 and 2009 and the audited consolidated balance sheet data as of December 31, 2011, 2010 and 2009 from our audited consolidated financial statements not included in this prospectus. Historical results are not necessarily indicative of results for any future period.

Our selected consolidated financial data set forth below should be read together with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto, which are included elsewhere in this prospectus.


	Year Ended December 31,
	2013			2012			2011			2010			2009
	(in thousands, except per unit amounts)
Revenues:
Recurring	$	105,560		$	75,420		$	56,382		$	40,585		$	29,260
Implementation and other		2,041			1,390			824			716			618

Total revenues		107,601			76,810			57,206			41,301			29,878
Expenses:
Cost of revenues:
Operating expenses		19,070			14,895			12,287			8,927			5,880
Depreciation		1,821			1,431			987			675			457

Total cost of revenues		20,891			16,326			13,274			9,602			6,337
Administrative expenses:
Sales and marketing		42,681			29,255			22,244			15,743			11,212
Research and development		2,146			1,632			1,225			977			665
General and administrative		28,884			19,450			14,707			11,040			8,327
Depreciation and amortization		3,682			4,092			4,300			4,091			4,074

Total administrative expenses		77,393			54,429			42,476			31,851			24,278

Operating income (loss)		9,317			6,055			1,456			(152	)		(737	)
Interest expense		(2,805	)		(2,171	)		(134	)		—			(5	)
Other income, net		1,199			354			108			129			281

Net income (loss)	$	7,711		$	4,238		$	1,430		$	(23	)	$	(461	)

Less: Distribution to Series C Preferred Unitholder		(6,467	)		(4,806	)		—			—			—

Net income (loss) available to Series A Preferred Unitholders and common unitholders	$	1,244		$	(568	)	$	1,430		$	(23	)	$	(461	)

Net income (loss) per Series A Preferred Unit and common unit
Basic	$	1.30		$	(0.60	)	$	1.53		$	(0.02	)	$	(0.49	)

Diluted ⁽¹⁾	$	1.22		$	(0.57	)	$	1.49		$	(0.02	)	$	(0.49	)

Weighted average units outstanding
Basic		955,983			948,181			935,750			950,000			950,000

Diluted ⁽¹⁾		1,018,305			1,004,436			960,611			950,000			950,000


	As of December 31,
	2013			2012			2011			2010			2009
	(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	13,273		$	13,435		$	7,252		$	6,106		$	5,609
Restricted cash		369			368			251			—			—
Working capital (deficit) ⁽²⁾		(7,933	)		5,096			3,647			3,126			3,343
Property, plant and equipment, net		38,671			25,139			22,305			9,492			2,445
Total assets		571,567			425,857			347,575			249,153			226,449
Deferred revenue		12,572			8,393			5,614			3,430			2,203
Long-term debt		21,090			14,110			12,761			3,149			—
Long-term debt to related party		14,682			14,440			—			—			—
Members’ capital		63,645			63,542			79,373			80,208			80,075
Accumulated deficit		(13,385	)		(8,871	)		(8,143	)		(8,130	)		(7,137	)
Total members’ equity		50,260			54,671			71,230			72,078			72,938

(1)	Diluted impact of incentive units have not been included to determine the diluted net loss per Series A Preferred Unit and common unit for the years ended December 31, 2010 and 2009 as we reported a net loss for those reporting periods.

(2)	Working capital (deficit) is defined as current assets, excluding restricted cash, less current liabilities, excluding current portion of deferred revenue.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial information presents our unaudited pro forma condensed consolidated balance sheet and unaudited pro forma condensed consolidated statements of income based upon our historical financial statements, after giving effect to the Reorganization and the initial public offering described in the accompanying notes. The following unaudited pro forma condensed consolidated financial information was prepared using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial information and on a basis consistent with that used in preparing our audited consolidated financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of our financial position and results of operations for the unaudited periods. The unaudited pro forma condensed consolidated financial information was prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed consolidated balance sheet as of December 31, 2013 reflects the Reorganization and the initial public offering as if they occurred on December 31, 2013. The unaudited pro forma condensed consolidated statements of income for the years ended December 31, 2013, 2012 and 2011 reflect the Reorganization and the initial public offering as if they occurred January 1, 2011, the beginning of the earliest period presented.

The unaudited pro forma condensed consolidated financial information assumes that the shares of common stock to be sold in this offering are sold at $ per share of common stock, which is the midpoint of the price range indicated on the front cover of this prospectus.

The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Reorganization and initial public offering had been completed as of the dates set forth above, nor is it indicative of our future results or financial position of our company. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the sections of this prospectus entitled “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our historical consolidated financial statements and related notes thereto included elsewhere in this prospectus.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2013

(IN THOUSANDS, EXCEPT PER UNIT AND SHARE AMOUNTS)


	Historical			Pro forma adjustments for the Reorganization					Pro forma as adjusted for the Reorganization			Pro forma adjustments for the initial public offering					Pro forma as adjusted for the Reorganization and initial public offering
Assets
Current assets
Cash and cash equivalents	$	13,273		$	90		(2c	)	$	13,364		$	—				$	13,364
					1		(2d	)
Deferred tax asset		—			3,622		(2c	)		3,622			—					3,622
Other current assets before funds held for clients		4,785			—					4,785			—					4,785
Funds held for clients		455,779			—					455,779			—					455,779

Total current assets		473,837			3,713					477,550			—					477,550

Deferred tax asset		—			45		(2a	)		70			—					70
					25		(2d	)
Goodwill		51,889			—					51,889			—					51,889
Other long-term assets		45,841			—					45,841			—					45,841

Total assets	$	571,567		$	3,783				$	575,350		$	—				$	575,350

Liabilities and Member’s Equity / Stockholders’ Equity
Income tax payable	$	—		$	20		(2d	)	$	20		$	—				$	20
Other current liabilities before client funds obligations		27,204			—					27,204			—					27,204
Client fund obligation		455,779			—					455,779			—					455,779

Total current liabilities		482,983			20					483,003			—					483,003

Deferred tax liabilities		—			2,755		(2c	)		2,755			—					2,755
Long-term debt to related party		14,682			46,193		(2e	)		60,875			(60,875	)	(2f	)		—
Derivative liability		1,107			—					1,107			(1,107	)	(2f	)		—
Other long-term liabilities		22,535			—					22,535			—					22,535

Total long-term liabilities		38,324			48,948					87,272			(61,982	)				25,290

Members’ equity / Stockholders’ equity
Members’ capital		63,645			(17,452	)	(2b	)		—			—					—

					(46,193	)	(2e	)
Preferred stock, no shares authorized, no shares issued and outstanding, actual; 10,000,000 authorized, no shares issued and outstanding on a pro forma basis		—			—					—			—					—
Common stock, no shares authorized, no shares issued and outstanding, actual; 100,000,000 shares authorized, 45,708,573 shares issued and outstanding on a pro forma basis		—			17,452		(2b	)		17,452			—					17,452
Additional paid in capital		—			1,039		(2c	)		(12,340	)		65,000		(2f	)		52,660
					6		(2d	)
					(13,385	)	(2g	)
Accumulated deficit		(13,385	)		46		(2a	)		(37	)		(3,018	)	(2f	)		(3,055	)
					(83	)	(2c	)
					13,385		(2g	)

Total members’ equity / stockholders’ equity		50,260			(45,185	)				5,075			61,982					67,057

Total liabilities and members’ equity / stockholders’ equity	$	571,567		$	3,783				$	575,350		$	—				$	575,350

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2013

(IN THOUSANDS, EXCEPT PER UNIT AND SHARE AMOUNTS)


	Historical			Pro forma adjustments for the Reorganization					Pro Forma as adjusted for the Reorganization			Pro forma adjustments for the initial public offering				Pro forma as adjusted for the Reorganization and initial public offering
Revenues
Recurring	$	105,560		$	—					105,560		$	—			$	105,560
Implementation and other		2,041			—					2,041			—				2,041

Total revenues		107,601			—					107,601			—				107,601
Cost of revenues
Operating expenses		19,070			—					19,070			—				19,070
Depreciation		1,821			—					1,821			—				1,821

Total cost of revenues		20,891			—					20,891			—				20,891
Administrative expenses
Sales and marketing		42,681			—					42,681			—				42,681
Research and development		2,146			—					2,146			—				2,146
General and administrative		28,884			307		(3a	)		29,191			—				29,191
Depreciation and amortization		3,682			—					3,682			—				3,682

Total administrative expenses		77,393			307					77,700			—				77,700
Total operating expenses		98,284			307					98,591			—				98,591
Operating income (loss)		9,317			(307	)				9,010			—				9,010
Interest expense		(2,805	)		(6,467	)	(3c	)		(9,272	)		2,122		(3d)		(683	)
													6,467		(3c)
Other income (expense), net		1,199			14		(3a	)		1,213			(660	)	(3e)		553

Income before income taxes		7,711			(6,760	)				951			7,929				8,880
Provision for income taxes		—			3,007		(3b	)		370			3,092		(3f)		3,462
					(2,637	)	(3f	)

Net income (loss)	$	7,711		$	(7,130	)			$	581		$	4,837			$	5,418

Less: Distribution to Series C Preferred Unitholder		(6,467	)

Net income available to Series A Preferred Unitholders and common unitholders	$	1,244

Net income per Series A Preferred Units and common unit
Basic	$	1.30
Diluted	$	1.22
Weighted average units outstanding
Basic		955,983
Diluted		1,018,305
Pro forma net income per share
Basic							(3g	)	$	0.01						$

Diluted							(3g	)	$	0.01						$

Pro forma weighted average shares outstanding
Basic							(3g	)		47,686,326

Diluted							(3g	)		48,371,489

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2012

(IN THOUSANDS, EXCEPT PER UNIT AND SHARE AMOUNTS)


	Historical			Pro forma adjustments for the Reorganization					Pro Forma as adjusted for the Reorganization			Pro forma adjustments for the initial public offering					Pro forma as adjusted for the Reorganization and initial public offering
Revenues
Recurring	$	75,420		$	—					75,420		$	—				$	75,420
Implementation and other		1,390			—					1,390			—					1,390

Total revenues		76,810			—					76,810			—					76,810
Cost of revenues		—
Operating expenses		14,895			—					14,895			—					14,895
Depreciation		1,431			—					1,431			—					1,431

Total cost of revenues		16,326			—					16,326			—					16,326
Administrative expenses		—
Sales and marketing		29,255			—					29,255			—					29,255
Research and development		1,632			—					1,632			—					1,632
General and administrative		19,450			2		(3a	)		19,452			—					19,452
Depreciation and amortization		4,092			—					4,092			—					4,092

Total administrative expenses		54,429			2					54,431			—					54,431
Total operating expenses		70,755			2					70,757			—					70,757
Operating income (loss)		6,055			(2	)				6,053			—					6,053
Interest expense		(2,171	)		(6,467	)	(3c	)		(8,638	)		1,397		(3d	)		(774	)
													6,467		(3c	)
Other income (expense), net		354			15		(3a	)		369			(333	)	(3e	)		36

Income before income taxes		4,238			(6,454	)				(2,216	)		7,531					5,315
Provision for income taxes		—			1,653		(3b	)		(869	)		2,937		(3f	)		2,068
					(2,522	)	(3f	)

Net income (loss)	$	4,238		$	(5,585	)			$	(1,347	)	$	4,594				$	3,247

Less: Distribution to Series C Preferred unitholders		(4,806	)

Net loss available to Series A Preferred unitholders and common unitholders	$	(568	)

Net loss per Series A Preferred Unit and common unit
Basic	$	(0.60	)

Diluted	$	(0.57	)

Weighted average units outstanding
Basic		948,181

Diluted		1,004,436

Pro forma net loss per share
Basic							(3g	)	$	(0.03	)						$

Diluted							(3g	)	$	(0.03	)						$

Pro forma weighted average shares outstanding
Basic							(3g	)		47,686,326

Diluted							(3g	)		47,686,326

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2011

(IN THOUSANDS, EXCEPT PER UNIT AND SHARE AMOUNTS)


	Historical			Pro forma adjustments for the Reorganization					Pro Forma as adjusted for the Reorganization			Pro forma adjustments for the initial public offering				Pro forma as adjusted for the Reorganization and initial public offering
Revenues
Recurring	$	56,382		$	—					56,382		$	—			$	56,382
Implementation and other		824			—					824			—				824

Total revenues		57,206			—					57,206			—				57,206
Cost of revenues		—
Operating expenses		12,287			—					12,287			—				12,287
Depreciation		987			—					987			—				987

Total cost of revenues		13,274			—					13,274			—				13,274
Administrative expenses
Sales and marketing		22,244			—					22,244			—				22,244
Research and development		1,225			—					1,225			—				1,225
General and administrative		14,707			7		(3a	)		14,714			—				14,714
Depreciation and amortization		4,300			—					4,300			—				4,300

Total administrative expenses		42,476			7					42,483			—				42,483
Total operating expenses		55,750			7					55,757			—				55,757
Operating income (loss)		1,456			(7	)				1,449			—				1,449
Interest expense		(134	)		(6,467	)	(3c	)		(6,601	)		6,467	(3c	)		(134	)
Other income (expense), net		108			—					108			—				108

Income before income taxes		1,430			(6,474	)				(5,044	)		6,467				1,423
Provision for income taxes		—			558		(3b	)		(1,949	)		2,522	(3f	)		573
					(2,522	)	(3f	)
					15		(3a	)

Net income (loss)	$	1,430		$	(4,525	)			$	(3,095	)	$	3,945			$	850

Net income per Series A Preferred Unit and common unit
Basic	$	1.53

Diluted	$	1.49

Weighted average units outstanding
Basic		935,750

Diluted		960,611

Pro forma net loss per share
Basic							(3g	)	$	(0.06	)					$

Diluted							(3g	)	$	(0.06	)					$

Pro forma weighted average shares outstanding
Basic							(3g	)		47,686,326

Diluted							(3g	)		47,686,326

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

1.	Basis of Presentation

The historical financial information has been adjusted to give pro forma effect to events that are (i) directly attributable to the Reorganization and this offering, (ii) factually supportable, and (iii) with respect to the statements of income, expected to have a continuing impact on the future results.

Our historical results are derived from our audited consolidated statements of income of Holdings for the years ended December 31, 2013, 2012 and 2011 and audited consolidated balance sheet of Holdings as of December 31, 2013 under U.S. GAAP.

Description of the Transaction

In anticipation of this offering, Software consummated the Reorganization as of January 1, 2014, pursuant to which (i) the owners of WCAS Holdings and CP IV Blocker, which are affiliates of Welsh, Carson, Anderson & Stowe, contributed WCAS Holdings and CP IV Blocker, which collectively own all of the Series A Preferred Units of Holdings, to Software in exchange for shares of common stock of Software and (ii) the owners of outstanding Series B Preferred Units of Holdings contributed their Series B Preferred Units for shares of common stock of Software. Immediately after these contributions, a wholly-owned subsidiary of Software merged with and into Holdings with Holdings surviving the merger. Upon consummation of the merger, the remaining holders of outstanding common and incentive units of Holdings received shares of common stock of Software for their common and incentive units by operation of Delaware law and Holdings’ ownership in Software was cancelled. This resulted in Software controlling, directly or indirectly, Holdings, including Payroll, WCAS Holdings and CP IV Blocker. Outstanding common units, Series B Preferred Units, and incentive units of Holdings were converted into 45,708,573 common shares and 8,121,101 restricted shares of common stock of Software at the following conversion rates:

•

Outstanding common units, Series B Preferred Units, WCAS Holdings and CP IV Blocker were contributed to Software in exchange for, or converted into, the number of common shares determined by a ratio of common units, Series B Preferred Units and Series A Preferred Units to shares of common stock of approximately 1:47, resulting in issuance of 44,560,053 common shares.

•

Vested incentive units were converted to common shares and restricted shares at various conversion ratios, which ranged from approximately 1:0.2 to 1:24. Unvested incentive units were converted to restricted shares at various conversion ratios, which ranged from 1:24 to 1:47. The conversion to common shares versus restricted shares was determined based on the underlying conditions of the pre-conversion incentive units, reflecting any pre-existing vesting conditions. This resulted in issuance of 1,148,520 and 8,121,101 common shares and restricted shares, respectively.

The restricted shares were issued subject to various vesting conditions. A portion of the restricted shares is subject to a time-based vesting condition while the remaining is subject to a performance-based condition. The performance-based vesting is based on the Company’s total enterprise value exceeding certain specified thresholds.

Following these transactions, Series C Preferred Units of Holdings were eliminated as an intercompany transaction between Holdings and WCAS Holdings, and the 2017 Note, which was a 14% related party note issued by WCAS Holdings to its parent, WCAS Fund X L.P., was recorded upon the inclusion of WCAS Holdings. Following the Reorganization, Software became a holding company with its principal asset being the units in Holdings. Software was formed for purposes of this offering and has to date, engaged only in activities in contemplation of this offering. See “The Reorganization.”

WCAS Holdings and CP IV Blocker do not have any independent operations or any significant assets or liabilities and do not comprise a business. The acquisition of WCAS Holdings is deemed to be a reorganization

under common control and therefore its underlying assets and liabilities are not required to be re-measured at fair value on the acquisition date. The acquisition of CP IV Blocker is not deemed to be a reorganization under common control and therefore the underlying assets and liabilities are recorded at fair value on their acquisition date.

2.	Notes to unaudited pro forma condensed consolidated balance sheet

(a)

Reflects adjustments to deferred income tax assets and liabilities as a result of recognizing related deferred tax assets and liabilities assuming that the Reorganization occurred on December 31, 2013.

(b)

Represents the conversion of common units and Series A Preferred Units to common stock. The amount was estimated given that the Members’ Capital balance ceased to exist upon the Reorganization.

(c)

Reflects the inclusion of WCAS Holdings’ assets and liabilities accounted for as a transaction under common control.

(d)

Reflects the inclusion of CP IV Blockers’ assets and liabilities recorded at fair value as a result of the acquisition.

(e)

Reflects the assumption of the 2017 Note which replaced the Series C Preferred Units in connection with the Reorganization.

(f)

Reflects the effect of the net offering proceeds which will be used to repay the 2022 Note issued by us to an affiliate of Welsh, Carson, Anderson & Stowe in the amount of approximately $18.8 million and the 2017 Note issued by between WCAS Holdings in the amount of approximately $46.2 million (including certain payments made pursuant to a contribution agreement). Any additional net offering proceeds have been excluded for purposes of the pro forma financial information.

The 2022 Note was issued at a discount of $2.4 million and also contained a prepayment feature which was valued at $2.0 million. The prepayment feature was recorded as a derivative liability at inception and is recorded at fair value at December 31, 2013. Upon the settlement of the 2022 Note, the derivative liability would cease to exist and therefore a gain is recognized upon the settlement of the liability.

(g)

Reflects reclassification of historic accumulated deficit to additional paid in capital due to the Reorganization.

3.	Notes to unaudited pro forma condensed consolidated statements of income

(a)

Reflects the inclusion of the results of operations from WCAS Holdings assuming that the Reorganization took effect on January 1, 2011 and assuming the acquisition of CP IV Blocker occurred on January 1, 2011 and therefore gave rise to Software controlling these entities.

(b)

Represents adjustments to income tax expense in connection with the deferred income tax assets and liabilities recognized given the Reorganization, which assumed that Holdings was operating as a C-corporation effective January 1, 2011. The amount was determined using an estimated statutory rate of 39%.

(c)

Reflects the recording of interest expense upon assuming the 2017 Note which accrues interest at 14% per annum. The 2017 Note replaced the Series C Preferred Units in the Reorganization. The interest expense is removed in the initial public offering adjustment, assuming a portion of the net proceeds from this offering were used to repay the 2017 Note on January 1, 2011.

(d)

Reflects the removal of the amortization from the 2022 Note issued at discount and the related interest expense as a result of using a portion of the net proceeds from this offering to repay the 2022 Note.

(e)

Reflects the removal of the unrealized gains recognized for the derivative liability relating to the 2022 Note as a result of using a portion of the net proceeds from this offering to repay the 2022 Note.

(f)

Represents adjustments to income tax expense for the years ended December 31, 2013, 2012 and 2011 as a result of the tax impact on the pro forma adjustments relating to the Reorganization and this offering. The amount was determined using an estimated statutory tax rate of 39%.

(g)

Pro forma net income per weighted average basic and diluted shares outstanding reflects the conversion of all our common units, Preferred Units and incentive units into 45,708,573 and 8,121,101 of common shares and restricted shares, respectively, assuming those shares were issued January 1, 2011.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus. The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with those statements. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the section entitled “Risk Factors.”

Overview

We are a leading provider of a comprehensive, cloud-based HCM software solution delivered as SaaS. We provide functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including talent acquisition, time and labor management, payroll, talent management and HR management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.

We serve a diverse client base in terms of size and industry. We have over 10,000 clients, none of which constituted more than one-half of one percent of our revenues for the year ended December 31, 2013. We stored data for more than 1,000,000 persons employed by our clients during the year ended December 31, 2013.

Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives, or CRRs, who sell new applications to existing clients. We have 30 sales teams located in 20 states and plan to open additional sales offices to further expand our presence in the U.S. market. In recent years, we have opened three to four new sales offices in new cities per year and believe that we can increase this annual number to four to six new sales offices in the future.

Our continued growth depends on attracting new clients through geographic expansion, further penetration of our existing markets and the introduction of new applications to our existing client base. We also expect a portion of our growth to generally mirror improvements in the labor market. Our principal marketing programs include telemarketing and email campaigns, search engine marketing methods and national radio advertising.

During the last three years, we have developed several new applications. Our ability to continue to develop new applications and to improve existing applications will enable us to increase revenues in the future, and the number of our new applications adopted by our clients has been a significant factor in our revenue growth over the last three years.

The Reorganization

In anticipation of this offering, we consummated the Reorganization, as of January 1, 2014. Following the Reorganization, Software became a holding company, the principal asset of which is the units in Holdings. The following discussion and analysis of our financial condition and results of operations covers periods prior to the Reorganization and reflects the operations of Holdings and its consolidated subsidiary.

Trends, Opportunities and Challenges

While we currently derive most of our revenues from payroll processing, we expect an increasing percentage of our recurring revenues to come from our additional HCM applications over time. For example, approximately 58%, 60% and 68% of our revenues for the years ended December 31, 2013, 2012 and 2011,

respectively, were derived from payroll processing. Our payroll application is the foundation of our solution and all of our clients are required to utilize this application in order to access our other applications. As a result of our evolving revenue mix, coupled with the unique client benefits that our solution provides (e.g., enabling our clients to scale the number of HCM applications that they use on an as-needed basis), we are presented with a variety of opportunities, challenges and risks.

We generate revenues from (i) fixed amounts charged per billing period or (ii) fixed amounts charged per billing period plus a fee per employee or transaction processed. We do not require clients to enter into long-term contractual commitments with us. Our billing period varies by client based on when they pay their employees, which is either weekly, bi-weekly, semi-monthly or monthly.

We do not have a traditional subscription-based revenue model and do not enter into long-term contractual commitments with our clients. We believe that the traditional subscription model hinders the buying decision by requiring clients to make significant commitments at inception, as well as at the end of each subscription term. By allowing clients to discontinue the use of our solution with 30 days’ notice, our team of trained specialists must focus on providing the best client service. In contrast, a long-term contract often forces a client to continue using a product that may not entirely fit its needs or, in some cases, incur expensive termination fees. Because of our sales model and personalized service, we have maintained high client satisfaction, as evidenced by an average annual revenue retention rate of 91% from existing clients for the three years ended December 31, 2013.

For the year ended December 31, 2013, our gross margin was approximately 81%. We expect changes in our revenue mix to continue to improve gross margins as our current gross margin for our HCM applications is higher than our gross margin for payroll processing. We expect that our total gross margin will gradually improve over time as (i) we add additional clients, (ii) our existing clients deploy additional HCM applications and (iii) we reduce our costs of revenues and administrative expenses as a percentage of total revenues.

Growing our business has also resulted in, and will continue to result in, substantial investment in sales professionals, operating expenses, systems development and programming costs and general and administrative expenses, which has and will continue to increase our expenses. We intend to obtain new clients by (i) continuing to expand our presence in metropolitan areas where we currently have an existing sales office through adding sales teams or offices and increasing the number of our sales professionals and (ii) opening sales offices in new metropolitan areas. Our ability to increase revenues and improve operating results depend on our ability to add new clients.

As we have organically grown our operations and increased the number of our applications, the average size of our clients has also grown significantly. Based on our total revenues, we have grown at an approximately 38% CAGR since 2009. Because we charge our clients on a per employee basis for certain services we provide, any increase or decrease in the number of employees that our clients have will have a positive or negative impact on our results of operations. Our solution requires no adjustment to serve larger clients. We believe larger employers represent a substantial opportunity to increase the number of potential clients and to increase our revenue per client, with limited incremental cost to us. From January 1, 2011 through December 31, 2013, we increased our annualized recurring revenue per average client by 52.7% in part by targeting larger clients and enlarging our existing client relationships.

Throughout our history, we have built strong relationships with our clients. As the HCM needs of our clients evolve, we believe that we are well-positioned to gain additional share of their HCM spending of our clients, and we believe this opportunity is significant. To be successful, we must continue to demonstrate the operational and economic benefits of our solution, as well as effectively hire, train, motivate and retain qualified personnel and executive officers.

Key Metrics

In addition to the U.S. GAAP metrics that we regularly monitor, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business:


	Year Ended December 31,
	2013			2012			2011
	(dollars in thousands)
Key performance indicators:
Clients		10,792			9,233			7,955
Clients (based on parent company grouping)		6,788			5,904			5,130
Sales teams		26			22			20
Annualized New Recurring Revenue	$	38,236		$	27,686		$	23,011
Revenue retention rate		91	%		91	%		92	%

•

Clients. When we calculate the number of clients, we treat client accounts with separate taxpayer identification numbers as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients as it provides an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this prospectus refer to this metric.

•

Clients (based on parent company group ing ). When we calculate the number of clients based on parent company grouping, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers, which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping as it provides an alternate measure of the size of our business and clients.

•

Sales Teams . We monitor our sales professionals by the number of sales teams and each team is comprised of approximately seven to nine sales professionals. Certain larger metropolitan areas can support more than one sales team. We believe that the number of sales teams is an indicator of revenue for future periods.

•

Annualized New Recurring Revenue . While we do not enter into long-term contractual commitments with our clients, we monitor annualized new recurring revenue as we believe it is an indicator of revenue for future periods. Annualized new recurring revenue is an estimate based on the annualized amount of the first full month of revenue attributable to new clients that were added or existing clients that purchased additional applications during the period presented. Annualized new recurring revenue only includes revenues from these clients who have used our solution for at least one month during the period. Since annualized new recurring revenue is only recorded after a client uses our solution for one month, it includes revenue that has been recognized in historical periods.

•

Revenue Retention Rate . Our average annual revenue retention rate tracks the percentage of revenue that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenue for future periods.

Components of Results of Operations

Sources of Revenues

Revenues are comprised of recurring revenues, and implementation and other revenues. Recurring revenues are recognized in the period services are rendered. Implementation and other revenues includes implementation revenues that are recorded as deferred revenues and recognized over the life of the client which is estimated to be ten years and other revenues which are recognized upon shipment of time clocks. Implementation and other revenue comprised approximately 1.9% of our total revenues for the year ended December 31, 2013. We expect

our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenues, we expect our mix of recurring revenues, and implementation and other revenues to remain relatively constant.

Recurring. Recurring revenues include fees for our talent acquisition, time and labor management, payroll, talent management and HR management applications as well as fees charged for delivery of client payroll checks and reports. These revenues are derived from: (i) fixed amounts charged per processing period or (ii) fixed amounts charged per processing period plus a fee per employee or transaction processed. Because recurring revenues are based in part on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues increase as our clients hire more employees.

Implementation and Other. Implementation and other revenues are comprised of implementation fees for the deployment of our solution and other revenue from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees which are charged to new clients are generated at inception for a new client and upon the addition of certain incremental applications for existing clients. These fees range from 10% to 30% of the annualized value of the transaction.

Expenses

Cost of Revenues . Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation of certain owned computer equipment. These costs include employee-related expenses for client support personnel, bank charges for processing ACH transactions, along with delivery charges and paper costs. They also include our cost for clocks held for sale and ongoing technology and support costs related to our systems. Depreciation of owned computer equipment is allocated based upon an estimate of assets used to host and support our applications. We expect our cost of revenues to increase as we continue to invest in new applications and expand our client base, although we expect our overall cost of revenues to gradually decrease as a percentage of total revenues over time.

Administrative Expenses. Administrative expenses consist of sales and marketing, research and development, general and administrative and depreciation and amortization. Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff, commissions, bonuses, marketing expenses and other related costs. Research and development expenses consist primarily of employee-related expenses for our development staff, net of capitalized software costs for internally developed software. We expect to grow our research and development efforts as we continue to broaden our payroll and HR solution offerings and extend our technological solutions by investing in the development of new solutions and introducing them to new and existing clients. General and administrative expenses include employee-related expenses for finance and accounting, legal, human resources and management information systems personnel, legal costs, professional fees and other corporate expenses. Depreciation and amortization expenses include depreciation of owned computer equipment allocated based upon an estimate of assets used to support the selling, general and administrative functions, as well as amortization of intangible assets. We expect our administrative expenses to increase in absolute dollars due to additional costs associated with accounting, compliance, investor relations, and other costs associated with being a public company, although our administrative expenses may fluctuate as a percentage of total revenue.

Interest Expense

Interest expense includes interest on the debt incurred for the construction of our corporate headquarters and related party debt. The increase in interest expense for the year ended December 31, 2013 is primarily due to recognizing a full year of interest expense related to the related party debt entered into in connection with the April 2012 Corporate Reorganization in 2013 as opposed to a partial year expense in 2012. We expect our interest expense to remain consistent until the completion of this offering. We intend to use a portion of the net proceeds received from this offering for the repayment of the 2022 Note, at which point we expect our interest expense to decrease.

Other Income, net

Other income, net includes the gain or loss on the sale of fixed assets, interest on funds held for clients that are earned primarily on funds that are collected in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services and change in fair value of the derivative liability relating to the related party debt. We typically invest funds held for clients in money market accounts and certificates of deposit until they are paid to the applicable tax or regulatory agencies or to client employees. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We expect that interest on funds held for clients in other income will increase as we grow our cash and increase our funds held from clients as we introduce new applications, expand our client base and renew and expand relationships with existing clients.

Results of Operations

The following tables set forth selected consolidated statement of income data and such data as a percentage of total revenues for each of the periods indicated:


	Year Ended December 31,
	2013			2012			2011
	(in thousands)
Consolidated statement of income data:
Revenues:
Recurring	$	105,560		$	75,420		$	56,382
Implementation and other		2,041			1,390			824

Total revenues		107,601			76,810			57,206
Expenses:
Cost of revenues:
Operating expenses		19,070			14,895			12,287
Depreciation		1,821			1,431			987

Total cost of revenues		20,891			16,326			13,274
Administrative expenses:
Sales and marketing		42,681			29,255			22,244
Research and development		2,146			1,632			1,225
General and administrative		28,884			19,450			14,707
Depreciation and amortization		3,682			4,092			4,300

Total administrative expenses		77,393			54,429			42,476

Operating income		9,317			6,055			1,456
Interest expense		(2,805	)		(2,171	)		(134	)
Other income, net		1,199			354			108

Net income	$	7,711		$	4,238		$	1,430

Consolidated Statement of Income Data as a Percentage of Revenues


	Year Ended December 31,
	2013			2012			2011
Consolidated statement of income data:
Revenues:
Recurring		98.1	%		98.2	%		98.6	%
Implementation and other		1.9			1.8			1.4

Total revenues		100.0			100.0			100.0
Expenses:
Cost of revenues:
Operating expenses		17.7			19.4			21.5
Depreciation		1.7			1.9			1.7

Total cost of revenues		19.4			21.3			23.2
Administrative expenses:
Sales and marketing		39.7			38.1			38.9
Research and development		2.0			2.1			2.1
General and administrative		26.8			25.3			25.7
Depreciation and amortization		3.4			5.3			7.5

Total administrative expenses		71.9			70.9			74.3

Operating income		8.7			7.9			2.5
Interest expense		(2.6	)		(2.8	)		(0.2	)
Other income, net		1.1			0.5			0.2

Net income		7.2	%		5.5	%		2.5	%

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 and Year Ended December 31, 2012 compared to Year Ended December 31, 2011

Revenues


	Year Ended December 31,						% Change
	2013		2012		2011		2013 v 2012			2012 v 2011
	(in thousands)
Recurring	$	105,560	$	75,420	$	56,382		40.0	%		33.8	%
Implementation and other		2,041		1,390		824		46.8			68.7

Total revenues	$	107,601	$	76,810	$	57,206		40.1	%		34.3	%

Total revenues were $107.6 million for the year ended December 31, 2013, compared to $76.8 million for the year ended December 31, 2012, an increase of $30.8 million, or 40.1%. For the year ended December 31, 2013, our client count increased 16.9% and recurring revenue per average client (based on the average number of clients outstanding during the period) increased 17.7%, as compared to the year ended December 31, 2012. The increase in revenues was due to a combination of factors, including (i) the addition of clients in mature sales offices (those offices that have been open for at least 24 months), (ii) the addition of new clients in more recently opened sales offices, (iii) the introduction and sale of additional applications to our existing clients and (iv) the growth in the number of employees of our clients.

Total revenues were $76.8 million for the year ended December 31, 2012, compared to $57.2 million for the year ended December 31, 2011, an increase of $19.6 million, or 34.3%. For the year ended December 31, 2012, our client count increased 16.1% and recurring revenue per average client (based on the average number of

clients outstanding during the period) increased 14.9%, as compared to the year ended December 31, 2011. The increase in revenues was due to a combination of factors, including (i) the addition of clients in mature sales offices, (ii) the addition of new clients in more recently opened sales offices, (iii) the introduction and sale of additional applications to our existing clients and (iv) the growth in the number of employees of our clients.

Expenses

Cost of Revenues


	Year Ended December 31,						% Change
	2013		2012		2011		2013 v 2012			2012 v 2011
	(in thousands)
Operating expenses	$	19,070	$	14,895	$	12,287		28.0	%		21.2	%
Depreciation		1,821		1,431		987		27.3			45.0

Total cost of revenues	$	20,891	$	16,326	$	13,274		28.0	%		23.0	%

Cost of revenues was $20.9 million for the year ended December 31, 2013, compared to $16.3 million for the year ended December 31, 2012, an increase of $4.6 million, or 28.0%. The increase in cost of revenues was due primarily to increases of $2.1 million in employee costs related to additional operating personnel, $565,000 in bank fees related to increased sales, $521,000 in shipping and paper costs, $487,000 in technology expense and $249,000 related to our background check service and clock costs of $157,000, related to increased sales of time clocks. Depreciation expense increased $390,000, primarily due to additional assets purchased.

Cost of revenues was $16.3 million for the year ended December 31, 2012, compared to $13.3 million for the year ended December 31, 2011, an increase of $3.1 million, or 23.0%. The increase in cost of revenues was due primarily to increases of $1.9 million in employee costs related to additional operating personnel, $117,000 in paper costs, $258,000 in bank fees related to increased sales, $179,000 related to our background check service and $125,000 in clock costs, relating to increased sales of time clocks versus leased clocks. Depreciation expense increased $444,000, primarily due to entire year of depreciation on data center assets purchased in connection with the construction of our data center in Oklahoma, which was completed in July 2011.

Administrative Expenses


	Year Ended December 31,						% Change
	2013		2012		2011		2013 v 2012			2012 v 2011
	(in thousands)
Sales and marketing	$	42,681	$	29,255	$	22,244		45.9	%		31.5	%
Research and development		2,146		1,632		1,225		31.5			33.2
General and administrative		28,884		19,450		14,707		48.5			32.2
Depreciation and amortization		3,682		4,092		4,300		(10.0	)		(4.8	)

Total administrative expenses	$	77,393	$	54,429	$	42,476		42.2	%		28.1	%

Total administrative expenses were $77.4 million for the year ended December 31, 2013, compared to $54.4 million for the year ended December 31, 2012, an increase of $23.0 million, or 42.2%. Sales and marketing expenses increased primarily due to a $5.5 million increase in employee-related expenses, resulting from a 28.6% increase in the number of personnel, a $4.6 million increase in commission and bonuses, resulting from increased sales and an increase in marketing expense of $1.1 million primarily due to increased radio and print advertising. Research and development expenses increased primarily due to an increase of 55.0% in the number of development personnel, along with bonus expense. General and administrative expenses increased primarily due to a $4.1 million increase in employee-related expenses, resulting from a 52.5% increase in the number of personnel, along with $2.7 million of expenses related to the initial public offering.

Total administrative expenses were $54.4 million for the year ended December 31, 2012, compared to $42.5 million for the year ended December 31, 2011, an increase of $12.0 million, or 28.1%. Sales and marketing expenses increased primarily due to a $3.3 million increase in employee-related expenses, resulting from a 8.9% increase in the number of personnel, a $1.6 million increase in commission and bonuses, resulting from increased sales and an increase in marketing expense of $635,000 primarily due to increased radio and print advertising. Research and development expenses increased primarily due to an increase of 29.0% in the number of development personnel, along with bonus expense. General and administrative expenses increased primarily due to a $3.6 million increase in employee-related expenses, resulting from a 19.1% increase in the number of personnel, along with increases in administrative expenses related to travel, communication and transportation.

Expenditures for software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. The timing of the capitalized expenditures may affect the amount of development costs expensed in any given period. The table below sets forth the amounts of capitalized and expensed research and development expenses for the years ended December 31, 2013, 2012 and 2011.


	Year Ended December 31,						% Change
	2013		2012		2011		2013 v 2012			2012 v 2011
	(in thousands)
Capitalized portion of research and development	$	1,238	$	613	$	497		102.0	%		23.3	%
Expensed portion of research and development		2,146		1,632		1,225		31.5			33.2

Total research and development	$	3,384	$	2,245	$	1,722		50.7	%		30.4	%

Quarterly Results of Operations

The following tables set forth selected unaudited quarterly condensed consolidated statements of income data for each of the 12 quarters for the three years ended December 31, 2013. The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments, which includes only normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods in accordance with U.S. GAAP. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for a full year or any future period.


	Three Months Ended
	Dec 31, 2013			Sep 30, 2013			Jun 30, 2013			Mar 31, 2013			Dec 31, 2012			Sep 30, 2012			Jun 30, 2012			Mar 30, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011		Mar 30, 2011
	(in thousands)
Consolidated statement of income data:
Revenues
Recurring	$	29,752		$	25,211		$	23,393		$	27,204		$	20,835		$	18,246		$	16,817		$	19,522		$	15,377		$	13,721		$	12,553	$	14,731
Implementation and other		528			620			520			373			472			321			275			322			261			233			157		173

Total revenues		30,280			25,831			23,913			27,577			21,307			18,567			17,092			19,844			15,638			13,954			12,710		14,904
Expenses
Cost of revenues
Operating expenses		5,437			4,846			4,353			4,434			3,965			3,747			3,366			3,817			3,412			3,089			2,856		2,930
Depreciation		501			494			415			411			390			368			341			332			313			261			219		194

Total cost of revenues		5,938			5,340			4,768			4,845			4,355			4,115			3,707			4,149			3,725			3,350			3,075		3,124
Administrative expenses
Sales and marketing		13,768			10,339			8,716			9,858			8,480			6,860			6,649			7,266			6,719			5,653			4,641		5,231
Research and development		829			538			324			455			349			361			542			380			293			390			285		257
General and administrative		10,033			6,815			6,040			5,996			5,534			4,778			4,803			4,335			4,141			3,758			3,447		3,361
Depreciation and amortization		966			959			873			884			841			837			1,212			1,202			1,174			1,087			1,041		998

Total administrative expenses		25,596			18,651			15,953			17,193			15,204			12,836			13,206			13,183			12,327			10,888			9,414		9,847

Operating income (loss)		(1,254	)		1,840			3,192			5,539			1,748			1,616			179			2,512			(414	)		(284	)		221		1,933
Interest expense		(713	)		(699	)		(713	)		(680	)		(702	)		(683	)		(650	)		(136	)		(134	)		—			—		—
Other (expense) income, net		1,059			(133	)		(338	)		611			19			256			66			13			10			13			57		28

Net (loss) income	$	(908	)	$	1,008		$	2,141		$	5,470		$	1,065		$	1,189		$	(405	)	$	2,389		$	(538	)	$	(271	)	$	278	$	1,961

Quarterly Revenues Trends

Excluding changes in quarterly revenues due to seasonal factors, our quarterly revenues generally increased sequentially for the periods presented due to a combination of factors, including (i) the addition of clients in mature sales offices, (ii) the addition of new clients in more recently opened sales offices, (iii) the introduction and sale of additional applications to our existing clients and (iv) the growth in the number of employees of our clients. In addition, the annual processing of payroll forms were subject to a one-time price increase in conjunction with increased access and review functionality associated with these forms in 2012, which resulted in an increase of less than 1% of recurring revenues for the years ended December 31, 2013 and 2012.

There are also seasonal factors that affect our revenues. Recurring revenues include revenues relating to the annual processing of payroll forms such as Form W-2 and Form 1099, or Payroll Form Revenues. Because these forms are typically processed in the first quarter of the year, first quarter revenue and margins are generally higher than subsequent quarters. For example, Payroll Form Revenues accounted for 20.2% of total revenues for the three months ended March 31, 2013 and 5.5% of total revenues for the year ended December 31, 2013.

Quarterly Expenses Trends

Selling, general and administrative expenses are generally higher in the fourth and first quarters, due to overtime hours related to preparing client rollovers to the new year, and the preparation of annual client filings.

Liquidity and Capital Resources

As of December 31, 2013, our principal sources of liquidity were cash and cash equivalents totaling $13.3 million. Our cash and cash equivalents are comprised primarily of deposit accounts and money market funds.

We have primarily financed our operations from cash flows generated from operations and through the sale of equity securities. Since inception, we have raised $56.0 million of equity capital. We have also incurred debt to finance the expansion of our corporate headquarters that is currently under construction, as well as other previously constructed facilities, and incurred a related party debt as part of our April 2012 Corporate Reorganization. As of December 31, 2013, the outstanding principal amount of our debt was $35.8 million, which consisted of the 2011 Consolidated Loan, the 2013 Consolidated Loan and the 2022 Note, each of which are discussed in more detail below.

2011 Consolidated Loan. As of December 31, 2013, we had the 2011 Consolidated Loan with an outstanding principal amount of $12.0 million from Kirkpatrick Bank, due December 15, 2018. Under the 2011 Consolidated Loan, principal and interest are payable monthly based on a 20-year amortization at an annual rate of 5.0%. The 2011 Consolidated Loan is collateralized by a first mortgage covering our corporate headquarters and is secured by a first lien security interest in certain personal property relating to our corporate headquarters.

We are required to comply with certain financial and non-financial covenants under the Consolidated Loan, including maintaining a debt coverage ratio of EBITDA to indebtedness (defined as current maturities of long- term debt, interest expense and distributions) of not less than 1.5 to 1.0. As of December 31, 2013, the debt coverage ratio was 0.66 and we were not in compliance with the covenant. This was due to the short-term land loan outstanding as of December 31, 2012 and the 2013 Consolidated Loan being included in the calculation of the debt service ratio. The short-term land loan was paid in full from an advance from the 2013 Consolidated Loan during the year ended December 31, 2013. We obtained a letter of waiver from the lender that excluded these items from the calculation of the debt service ratio as of December 31, 2013, which remains in effect through January 15, 2015.

Pursuant to the terms of the 2011 Consolidated Loan, we may not, subject to certain exceptions, until amounts under the 2011 Consolidated Loan are repaid: (i) create any mortgages or liens, (ii) make any loans, advances or extensions of credit with any affiliate or enter into any other transaction with any affiliate, (iii) lease any mortgaged property, (iv) make any distributions to members as long as an event of default exists, (v) make any material change its methods of accounting, (vi) enter into any sale and leaseback arrangement, (vii) amend, modify, restate, cancel or terminate our organizational documents, (viii) sell, transfer or convey any mortgaged property or (ix) incur funded outside debt.

An event of default under the 2011 Consolidated Loan includes, among other events, (i) failure to pay principal or interest when due, (ii) breaches of certain covenants, (iii) the failure to meet the required financial covenants and (iv) the institution of a bankruptcy, reorganization, liquidation or receivership.

2013 Consolidated Loan. As of December 31, 2013, we also had the 2013 Consolidated Loan with an outstanding principal amount of $9.1 million and which allows for a maximum principal amount of $14.6 million under the modification agreement for future expansion from Kirkpatrick Bank, due May 1, 2015. Under the 2013 Consolidated Loan, interest accrues monthly at the Wall Street Journal U.S. Prime rate plus 0.5%, adjusted monthly, subject to a minimum interest rate of 4.0% per annum. Outstanding amounts under the 2013 Consolidated Loan are secured by a first mortgage covering all of the second headquarters building and a first lien security interest in certain personal property relating to our second headquarters building.

We are required to comply with certain financial and non-financial covenants under the 2013 Consolidated Loan, including maintaining a debt coverage ratio of EBITDA to indebtedness (defined as current maturities of long- term debt, interest expense and distributions) of not less than 1.5 to 1.0. As of December 31, 2013, the debt coverage ratio was 0.66 and we were not in compliance with the covenant. This was due to the short-term land loan and the 2013 Consolidated Loan being included in the calculation of the debt service ratio. The short-term land loan was paid in full from an advance from the 2013 Consolidated Loan during the year ended December 31, 2013. We obtained a letter of waiver from the lender that excluded these items from the calculation of the debt service ratio as of December 31, 2013, which remains in effect through January 15, 2015.

Pursuant to the terms of the 2013 Consolidated Loan, we may not, subject to certain exceptions, until amounts under the 2013 Consolidated Loan are repaid: (i) create any mortgages or liens, (ii) make any loans, advances or extensions of credit with any affiliate or enter into any other transaction with any affiliate, (iii) lease any mortgaged property, (iv) make any distributions to members as long as an event of default exists, (v) make any material change its methods of accounting, (vi) enter into any sale and leaseback arrangement, (vii) amend, modify, restate, cancel or terminate our organizational documents, (viii) sell, transfer or convey any mortgaged property or (ix) incur funded outside debt.

An event of default under the 2013 Consolidated Loan includes, among other events, (i) failure to pay principal or interest when due, (ii) breaches of certain covenants, (iii) the failure to meet the required financial covenants and (iv) the institution of a bankruptcy, reorganization, liquidation or receivership.

2022 Note. In connection with the April 2012 Corporate Reorganization, we entered into the 2022 Note with WCAS Capital IV, a related party. As of December 31, 2013, the outstanding principal amount of the 2022 Note was $14.7 million (which included an unamortized discount of $4.1 million). The 2022 Note is due on April 3, 2022 and interest is payable at an annual rate of 10%, payable semiannually in arrears on December 31 and June 30 of each year. We may, at our option, choose to defer all or a portion of the accrued interest on the note that is due and payable on any payment date, provided that such amount of accrued interest shall be multiplied by 1.3 and added to the principal amount of the note on such interest payment date (with the result that such interest shall have accrued at an effective rate of 13.0% instead of 10.0% through such payment date). As of December 31, 2013, such option has not been elected and all interest has been paid in cash.

Our cash flows from operating activities have historically been significantly impacted by profitability, implementation revenue received but deferred, and our investment in sales and marketing to drive growth. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. We believe our existing cash and cash equivalents and cash provided by this offering will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months. Failure to generate sufficient revenue and related cash flows or to raise additional capital could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives.

As part of our payroll and payroll tax filing services, we collect funds for federal, state and local employment taxes from our clients which we remit to the appropriate tax agencies. We invest these funds in short-term certificates of deposit and money market funds from which we earn interest income during the period between their receipt and disbursement. As our business grows, we expect our capital expenditures and our investment activity to continue to increase.

Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, acquisitions, technology and services, which may require the use of proceeds from this offering for such additional expansion and expenditures. Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business.

Cash Flows

The following table summarizes the consolidated statement of cash flows for the years ended December 31, 2013, 2012 and 2011:


	Year Ended December 31,									% Change
	2013			2012			2011			2013 v 2012			2012 v 2011
	(in thousands)
Net cash provided by (used in):
Operating activities	$	23,721		$	15,782		$	9,085			50.3	%		73.7	%
Investing activities		(148,442	)		(76,983	)		(102,299	)		(92.8	)		24.7
Financing activities		124,559			67,384			94,360			84.8			(28.6	)

Change in cash and cash equivalents	$	(162	)	$	6,183		$	1,146			(102.6	)%		439.5	%

Operating Activities

For the year ended December 31, 2013, cash flows provided by operating activities was $23.7 million. The cash flows provided by operating activities resulted primarily from net income of $7.7 million related to a 40.0% increase in recurring revenues over the comparable period in 2012, as well as depreciation and amortization of $5.5 million and an increase in deferred revenue of $4.2 million related to increased implementation fees.

For the year ended December 31, 2012, cash flows provided by operating activities was $15.8 million. The cash flows provided by operating activities resulted primarily from net income of $4.2 million related to an increase in recurring revenue, as well as depreciation and amortization of $5.5 million and an increase in deferred revenue of $2.8 million related to increased implementation fees.

Investing Activities

For the year ended December 31, 2013, cash used in investing activities was $148.4 million. The cash flows used in investing activities resulted primarily from an increase in funds from clients of $131.5 million related to collection of client taxes and capital expenditures related to investments in real property, software and development and facilities and equipment of $17.2 million.

For the year ended December 31, 2012, cash used in investing activities was $77.0 million. The cash flows used in investing activities resulted primarily from an increase in funds from clients of $71.0 million related to the collection of client taxes and capital expenditures related to investments in real property, software and development and facilities and equipment of $6.0 million.

Financing Activities

For the year ended December 31, 2013, cash flows provided by financing activities was $124.6 million. The cash flows provided by financing activities resulted primarily from an increase in client funds obligations of $131.5 million related to the collection of client taxes and advances received from the 2013 Consolidated Loan of $7.0 million, which were partially offset by distributions to members of $12.2 million.

For the year ended December 31, 2012, cash flows provided by financing activities was $67.4 million. The cash flows provided by financing activities resulted primarily from an increase in client funds obligations of $71.0 million related to the collection of client taxes and proceeds from the 2022 Note of $16.4 million, which were partially offset by distributions to members of $23.8 million.

Contractual Obligations

Our principal commitments primarily consist of long-term debt to a related party and other creditors and leases for office space. We disclose our long-term debt to a related party in Note 5 and our commitments and contingencies in Note 11 to our audited consolidated financial statements included elsewhere in this prospectus.

As of December 31, 2013, the future non-cancelable minimum payments under these commitments were as follows:


			Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Long-term debt obligations ⁽¹⁾	$	21,090	$	9,545	$	901	$	10,644	$	—
2022 Note		18,807		—		—		—		18,807
Interest on 2022 Note		15,515		1,881		3,761		3,761		6,112
Interest on the 2011 Consolidated Loan		6,304		597		1,129		1,031		3,547
Interest on the 2013 Consolidated Loan ⁽²⁾		30		30

Operating lease obligations:
Facilities space		8,304		2,222		3,859		2,170		53

Total	$	70,050	$	14,275	$	9,650	$	17,606	$	28,519

(1)	The amount represents principal amounts of 2011 Consolidated Loan and the 2013 Consolidated Loan at maturity.

(2)

As we have the option to repay for the principal amount of the 2013 Consolidated Loan prior to the maturity date, the amount represents unpaid interest due on the 2013 Consolidated Loan based on the drawn down amount of $9,127 as of December 31, 2013. Interest is accrued monthly at the Wall Street Journal U.S. Prime Rate plus 0.5%, subject to a minimum interest rate of 4% floor and will be paid first day of each month. The interest amount determined assumed the floor of 4% based on the 2013 interest rate and does not consider for potential future prepayments, draw downs and/or additional interest.

We have and we may continue to lease additional office space during the year ending December 31, 2014 to support our growth. In addition, many of our existing lease agreements provide us with the option to renew. Our future operating lease obligations include payments due during any renewal period provided for in the lease where the lease imposes a penalty for failure to renew.

Subsequent to December 31, 2013, we signed seven new leases for our sales offices and entered into one amendment to our existing leases thereby resulting in an additional $5.8 million in future commitments of noncancellable operating leases with initial or remaining terms of one year or more.

The 2022 Note as noted above will be paid in full from the net proceeds from this offering. Refer to “Use of Proceeds” for further details.

The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed minimum or variable price provisions, and the approximate timing of the transaction. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Off-Balance Sheet Arrangements

Through December 31, 2013, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Quantitative and Qualitative Disclosures about Market Risk

Interest rate sensitivity

We had cash and cash equivalents totaling $13.3 million as of December 31, 2013. We consider all highly liquid debt instruments purchased with a maturity of three months or less and money market mutual funds to be cash equivalents. This amount was invested primarily in deposit accounts and money market funds. The cash and cash equivalents are held for working capital purposes. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates, or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.

We do not believe that an increase or decrease in interest rates of 100-basis points would have a material effect on our operating results or financial condition with respect to our cash equivalents.

We are also exposed to changes in interest rates relating to our derivative liability. As of December 31, 2013 and December 31, 2012, we had recorded $1.1 million and $1.8 million, respectively, as derivative liability relating to our long-term debt to related party. Changes in interest rate can lead to fluctuations in the fair value of the instrument.

To perform the sensitivity analysis on the derivative liability, we assessed the risk of a change in fair value from the effect of an interest rate change of 100-basis points as of December 31, 2013, which is shown as follows:


	Fair Value		+100 basis Point Shift		-100 basis Point Shift
	(in thousands)
Derivative liability	$	1,107	$	1,885	$	270

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we continually evaluate our estimates and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results may differ from these estimates made by management under different assumptions and conditions.

Certain accounting policies that require significant management estimates, and are deemed critical to our results of operations or financial position, are described below. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Revenue Recognition

Our total revenues are comprised of recurring revenues, and implementation and other revenues. We recognize revenue in accordance with accounting standards for software and service companies when all of the following criteria have been met:

•

There is persuasive evidence of an arrangement;

•

The service has been or is being provided to the customer;

•

Collection of the fees is reasonably assured; and

•

The amount of fees to be paid by the customer is fixed or determinable.

Recurring revenues are derived primarily from our talent acquisition, time and labor management, payroll, talent management and HR management applications. These services are rendered during each client’s payroll period with the agreed-upon fee being charged and collected as part of the client’s payroll. Revenues are recognized at time of billing of each client’s payroll period. Collectability is reasonably assured as the fees are collected through an Automated Clearing House, or ACH, as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk. Our implementation and other revenues represent non- refundable conversion fees which are charged to new clients to offset the expense of new client set-up and revenues from sale of time clocks as part of our employee time and attendance services. Because these conversion fees and sale of time clocks relate to our recurring revenue, we have evaluated such arrangements under the accounting guidance that governs multiple element arrangements.

For arrangements with multiple elements, we evaluate whether each element represents a separate unit of accounting. In order to treat deliverables in a multiple element arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. If the deliverables have standalone value upon delivery, we account for each deliverable separately and revenue is recognized for the respective deliverables as they are delivered. If one or more of the deliverables does not have standalone value upon delivery, the deliverables that do not have standalone value are generally combined with the final deliverable within the arrangement and treated as a single unit of accounting.

For the years ended December 31, 2013, 2012 and 2011, we have determined that there is no standalone value associated with the upfront conversion fees as they do not have value to our clients on a standalone basis nor are they offered as an individual service; therefore, the conversion fees are deferred and recognized ratable over the estimated life of our clients, based on our historical client attrition rate, which we have estimated to be ten years. Revenues from the sale of time clocks are recognized when they are delivered.

Goodwill and Other Intangible Assets

Goodwill is not amortized, but we are required to test the carrying value of goodwill for impairment at least annually, or earlier if, at the reporting unit level, an indicator of impairment arises. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. If impairment exists, a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded. Our business is largely homogeneous and, as a result, goodwill is associated with one reporting unit. We have selected June 30 as our annual goodwill impairment testing date and determined there was no impairment as of June 30, 2013. For the years ended December 31, 2013, 2012 and 2011, there were no indicators of impairment. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets with finite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there is no impairment of long-lived assets for the years ended December 31, 2013, 2012 and 2011.

Incentive Units

Given the absence of a public trading market for our common units and in accordance with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Guide, our board of directors exercised reasonable judgment and considered numerous factors to determine the best estimate of the fair value of our incentive units, including:

•

Valuation analyses performed by unrelated third party specialist (including the application of appropriate valuation techniques and inputs);

•

Characteristics and specific terms of the units as noted in the equity grant agreements;

•

Value of the units as determined by the absence of a liquidation value on the date of grant, the ability to participate in our future profits, growth and appreciation and the lack of an exercise price for the units;

•

Lack of marketability of our common units;

•

Our actual operating and financial performance;

•

Our state of development;

•

Revenue and expense projection;

•

Likelihood of achieving a liquidating event;

•

Market performance of comparable publicly traded companies; and

•

Overall U.S. and global economic and capital market conditions.

The valuations that we used to determine the fair market value of grants issued during and prior to 2013 were based on information available at the time of, or prior to, the grant as the case may be, and were performed by an unrelated valuation specialist, as defined by the AICPA Practice Guide. All grants issued prior to 2013 were valued during June 2013. All grants that were issued during the year ended December 31, 2013 were valued during the fourth quarter of 2013.

Our simulation model requires various subjective assumptions as inputs, including expected life, volatility, risk-free interest rates, and the expected dividend yield. The assumptions used in the simulation model represent our best estimates, which involve inherent uncertainties and the application of our judgment as follows:

•

Risk-free interest rate —We base the risk-free interest rate used in the Monte Carlo simulation model on the implied yield available on 5 year U.S. Treasury securities with a remaining term equivalent to that of the respective units as of the valuation date.

•

Volatility —We determine the volatility factor based on the historical volatilities of comparable guideline companies. To determine the comparable guideline companies, we consider cloud-based application providers and select those that are similar to us in nature of services provided. We intend to continue to consistently apply this process using the same or similar public companies until information regarding the volatility of our own pricing becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

•

Expected term —The expected term represents the period that our incentive units are expected to be outstanding. We determined the expected term assumption based on the vesting terms and contractual terms of the units.

•

Expected dividend yield —We have not paid and do not expect to pay dividends in the future and therefore an expected dividend yield of 0% was applied. The directors of the Company will determine if and when dividends will be declared and paid in the future based on the Company’s financial position at the relevant time.

The following table presents a summary of the grant-date fair values of incentive units granted based on the Monte Carlo simulation model and the related assumptions for the years ended December 31, 2013, 2012 and 2011:


	Year Ended December 31,
	2013	2012	2011
Grant-date fair value
2009 Plan	—	$71.78	$51.16
2012 Management Incentive Units	$4.67 - $37.39	$8.03 - $14.29	—
2012 CEO Incentive Units	—	$6.78 - $9.35	—
Risk-free interest rate	0.71% - 1.41%	0.72%	1.74%
Volatility factor	50.0%	60.0%	60.0%
Expected life (in years)	5.0	5.0	5.0

In addition to assumptions used in the simulation model, we are required to estimate forfeitures and only record compensation costs for those awards that are expected to vest. Our forfeiture estimate is based on an analysis of our actual forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors.

We granted the following Management Incentive Units, or the Management Incentive Units, between October 1, 2012 and the date of this prospectus (in thousands, except per unit amounts):


Grant Date	Number of incentive units granted		Fair value per unit ⁽¹⁾⁽²⁾
November 19, 2012		200	$	11.16
January 7, 2013		610	$	7.92
January 17, 2013		3,000	$	8.08
March 28, 2013		700	$	14.04
April 17, 2013		3,000	$	14.13
October 14, 2013		18,493	$	16.46
December 3, 2013		150	$	17.08

(1)	Because our Management Incentive Units do not have an exercise price, the intrinsic value of the unit equals the fair value.

(2)	Represents the weighted average fair value per unit, incorporating both time-based and market-based vesting conditions.

There were no other equity instruments granted during the period from October 1, 2012 to the date of this prospectus. During 2012, Management Incentive Units were issued with a strike price that was based on a $400.0 million company enterprise value. During 2013, Management Incentive Units were issued with a strike price that was based on a $400.0 million and $550.0 million company enterprise value. The CEO Incentive Units, or the CEO Incentive Units, were issued with a strike price that was based on a $550.0 million company enterprise value during 2012. These strike prices are a vesting condition, by which the underlying incentive units do not vest unless the value of our company meets or exceeds the specified level. Our incentive units do not have an exercise price.

We believe that there is no single event that caused the change in the fair value of our incentive units between the grant dates, but rather a combination of factors described below for the significant difference noted in between certain grants as follow:

•

Increase in value between the value at the grant date and the value at the initial public offering is a result of improved operating results; and

•

Increase in the probability assumption of an initial public offering scenario as we approach the estimated initial date.

We believe that it is reasonable to expect that the completion of an initial public offering will increase the value of our shares of common stock (subsequent to the Reorganization) because they will have increased liquidity and marketability and believe that the estimates and factors noted above are a reasonable description of the value that market participants would place on the underlying common stock as of each valuation date.

Upon the sale of common stock in the initial public offering, the 2009 Incentive Units, or the 2009 Incentive Units, will automatically vest and are expected to be converted into approximately 232,692 shares of common stock. Total unrecognized compensation cost relating to these incentive units was approximately $30,585 as of December 31, 2013.

Under the Reorganization, our incentive units were converted into common shares and/or restricted shares of Software. Although there were modifications to the terms and conditions of the existing Incentive Units plans upon conversion, no additional compensation cost was recorded as the incremental value associated with the modifications was deemed insignificant.

Derivative Instruments

In April 2012, we entered into the 2022 Note with WCAS Capital IV, a related party. The note contains certain prepayment features related to mandatory redemption upon a liquidation event. As of December 31, 2012, we have identified the prepayment feature of the note as a derivative instrument which is required to be bifurcated and separately accounted for at fair value with changes in fair value recorded in earnings. Refer to Note 7 of our audited consolidated financial statements as of and for the years ended December 31, 2013 and 2012 for further discussion. The following are the significant inputs used to value the derivative instrument as of December 31, 2013 and 2012:


	2013	2012
Probability of exit	90%	90%
Remaining term	0.8 year - 8.3 years	3.3 years - 9.3 years
Yield Volatility	21.4% - 31.1%	20.4% - 28.5%
Credit Spread	8.90%	11.94%
Risk-free rate	0.13% - 2.45%	0.36% - 1.78%

There were no derivative instruments outstanding as of December 31, 2011.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which adds new disclosure requirements for items reclassified out of Accumulated Other Comprehensive Income (“AOCI”). The update requires that an entity present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of AOCI based on its source and the income statement line items affected by the reclassification. The amendment is effective for fiscal years and interim periods beginning on after December 15, 2012. We adopted this new guidance for the year ended December 31, 2013, which did not have a material impact on our disclosure in the consolidated financial statements.

In February 2013, the FASB issued authoritative guidance, which added new disclosure requirements to measure obligations resulting from joint and several liability arrangement for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date and disclose the arrangements and the total outstanding amount of obligation for all joint parties. These disclosures are in addition to existing related party disclosure requirements. The amendment is effective for fiscal years and interim periods beginning after December 15, 2013 and we do not expect the adoption of such guidance to affect our consolidated financial statements.

BUSINESS

Overview

We are a leading provider of a comprehensive, cloud-based HCM software solution delivered as Software-as-a-Service. We provide functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including talent acquisition, time and labor management, payroll, talent management and HR management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.

Because our solution was developed in-house and is based on a single platform, there is no need to integrate, update or access multiple databases, which are common issues with competitor offerings that use multiple third-party systems in order to link together their HCM offerings. Additionally, our solution maintains data integrity for accurate, actionable and real-time analytics and business intelligence and helps clients minimize the risk of compliance errors due to inaccurate or missing information. We deliver feature-rich applications while maintaining excellence in information security and quality management standards as evidenced by our ISO certifications. As part of our client retention effort, a specialist within a dedicated team is assigned to each client to provide industry-leading personalized service.

The key benefits of our differentiated solution as compared to competing products:

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Comprehensive HCM solution. Our solution offers functionality that manages the entire employment life cycle for employers and employees, from recruitment to retirement. Our user-friendly applications help clients identify candidates, onboard employees, manage time and labor, administer payroll deductions and benefits, manage performance, offboard employees and administer post-termination health benefits such as COBRA. Our solution also has the advantage of being built in-house by our highly trained and skilled team of software developers;

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Core system of record enabling data analytics maintained on a single database. Our solution is based on a core system of record that contains payroll and HR information in one convenient database, thereby reducing costs by eliminating the need for multiple software products and vendors and the maintenance of employee data in numerous databases that have to be merged or synchronized. This core system of record allows our clients the ability to access and analyze accurate employee information to make business decisions based upon actionable, real-time, point-and-click analytics provided on our client dashboard;

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Personalized support provided by trained personnel. Our solution is supported by one-on-one personal assistance from trained specialists. Services specialists are assigned to specific clients and are trained across all of our applications, ensuring they provide comprehensive, expert-level service;

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Software-as-a-Service delivery model. Our SaaS delivery model allows clients with a geographically dispersed workforce to operate more efficiently and allows these clients to access and use our client-oriented Internet solution on demand and remotely through a standard web browser, smart phones, tablets and other web-enabled devices, which lowers the total cost of ownership as compared to on-premise products;

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Cloud-based architecture. Our cloud-based architecture allows our solution to be implemented remotely and software enhancements and newly developed applications to be deployed without client disruption and involvement, which requires smaller investments in hardware, personnel, implementation time and consulting; and

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Scalability to grow with our clients . Our solution offers improved scalability as our clients are able to use the same solution as their businesses grow by deploying applications as-needed in real-time, which allows clients to align HCM spending with evolving HCM needs as compared to traditional HCM products that require clients to migrate to new software as they grow, but retain fixed costs even if the client shrinks in size.

We sell our solution directly through our internally trained, client-focused and highly skilled sales force based in offices across the United States. As a part of our client retention effort, a specialist within a dedicated team is assigned to each client to provide industry-leading, personalized service. We have over 10,000 clients, or over 6,000 clients based on parent company grouping, none of which constituted more than one-half of one percent of our revenues for the year ended December 31, 2013. We believe that as a result of our focus on client retention, we enjoy high client satisfaction as evidenced by an average annual revenue retention rate of 91% from existing clients for the three years ended December 31, 2013. We believe our revenue retention rate understates our client loyalty because this rate also includes former clients that were acquired or otherwise ceased operations.

We were founded in 1998. Software is a Delaware corporation that was formed in October 2013 to undertake this offering. Since our founding, we have focused on providing an innovative SaaS HCM solution. As of December 31, 2013, we had 840 employees across the United States. For the years ended December 31, 2013, 2012 and 2011, our revenues were $107.6 million $76.8 million and $57.2 million, respectively, representing year-over-year growth in revenues of 40% and 34%, respectively. We currently derive most of our revenues from payroll processing. We are able to determine revenues from payroll processing because all of our clients are required to utilize our payroll application in order to access our other applications. We do not separately track our revenues across our other applications because we often sell applications in various groupings and configurations for a single price. We realized net income of $7.7 million, $4.2 million and $1.4 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Industry Background

Large Market Opportunity for HCM Technologies

According to IDC, the U.S. market for HCM applications is comprised of software that automates business processes covering the entire span of an employee’s relationship with his or her employer. IDC estimates that this market, excluding payroll services, will total $5.8 billion in 2014. These applications include maintenance of HR records, recruiting applications, performance management, time and labor management tracking, compliance, compensation management and other HR functions. According to IDC, the U.S. market for payroll services will be an estimated $16.2 billion in 2014. The payroll services market includes transactional activities associated with paying employees, maintaining accounting records and administrating payroll taxes while payroll accounting applications offer the functionality to effectively track these various payments and transfers.

IDC estimates that the international market for HCM applications (excluding the United States) will be $4.1 billion in 2014.

Economic and Technological Trends Are Driving Demand for HCM Solutions

Organizations operating in today’s global economy are continually under pressure to reduce operating costs in order to maintain or improve their competitive positions. One tactic used by organizations is to utilize information technology, or IT, provided by external resources in order to automate internal processes, reduce internal administrative burdens and more effectively manage capital expenditures and labor costs. As a result, businesses are increasingly making the strategic decision to leverage HCM technologies in order to improve the

effectiveness and efficiency of their internal HR and accounting functions and capture opportunities for cost savings. According to IBISWorld, companies often outsource administrative services, such as time and labor management, after initially outsourcing payroll.

Organizations are also managing internal costs and administrative burdens by transitioning technological assets from on-premise to the cloud. By shifting HR systems to the cloud, businesses seek to avoid the difficulties associated with maintaining software and security updates, and storage needs as well as other maintenance issues. The rise of cloud computing has supported the SaaS delivery model. According to IDC, the global SaaS market is projected to grow from $23 billion in 2011 to $67 billion in 2016, at a CAGR of 24%.

We believe that businesses increasingly view data concerning their human capital as a critical strategic resource that can result in more informed decision-making concerning employee recruitment, retention and compensation. This revolution in data analytics and its extension to HR functions has increased the number of employees within an organization that can benefit from, and who regularly interface with, information technologies. As a result, organizations seek intuitive technologies that do not require extensive training or advanced technological credentials to be effectively utilized. The user experience of business applications is changing to emulate the consumer experience as HR buyers increasingly seek applications that are intuitive and available anywhere on any web-enabled device.

Incumbent HCM Products Struggle To Meet the Needs of Businesses

We believe that a majority of businesses and organizations in the United States are using multiple HCM systems from more than one vendor, thereby impeding their ability to share data across these systems. Several incumbent payroll and HCM vendors offer product sets that are comprised of separate systems that require integration. In certain cases, this disparate product offering across several vendors is the result of several acquisitions which often leads to a loosely coupled product set that is marked by significant architectural differences and weak data integration. We believe that this type of offering increases the risk of user or system error and reduces overall effectiveness.

A comprehensive HCM solution leverages the same data, process and workflow management, security model, reporting and analytics tools, and user portals to provide a uniform user experience. We believe that significant analytical power remains trapped within the data that organizations are accessing across multiple applications and databases but are unable to analyze in a unified context.

We believe that vendors who pursue market segmentation strategies based on organization size or industry create difficulties for clients who grow, either in size or industry scope, beyond the confines of those vendors’ offerings. A scalable HCM solution based on a core system of record allows for an organization to grow in size and scope without transitioning to a new user interface or back-end database.

The Paycom Solution

Comprehensive HCM Solution

Our solution offers functionality that manages the entire employment life cycle for employers and employees, from recruitment to retirement. Our user-friendly applications streamline client processes and provide clients and their employees with the ability to directly access and manage administrative processes, including applications that identify candidates, onboard employees, manage time and labor, administer payroll deductions and benefits, manage performance, offboard employees and administer post-termination health benefits such as COBRA. The widespread employee usage of our applications helps further integrate our solution into the

administrative processes of our clients. Our solution also has the advantage of being built in-house by our highly trained and skilled team of software developers, thereby minimizing data integrity issues across applications.

Core System of Record

Our solution is based on a core system of record that contains payroll and HR information in one convenient database, thereby reducing costs and eliminating the need for multiple software products and vendors and the maintenance of employee data in numerous databases. This core system of record enables our clients to input employee data one time and enjoy seamless functionality across our applications. When a revision is made to the file of an employee, all appropriate personnel have access to the change in real time. In addition, our core system of record helps clients minimize the risk of compliance errors due to inaccurate or missing information that results from maintaining multiple databases. Through accurate tracking and management of employee payroll and other HR data, such information can be compiled for comprehensive and consistent reporting for our clients.

Data Analytics

Our solution allows clients to analyze accurate employee information to make business decisions based upon actionable, real-time, point-and-click analytics provided through our client dashboard. This functionality helps our clients operate with a more complete and accurate picture of their organization as our solution’s embedded analytics capture the content and context of everyday business events, facilitating fast and informed decision-making from any location. The employees of our clients also benefit from our analytics platform as they are able to model in real-time the impact of their HCM decisions on their compensation, benefits and rewards.

Personalized Support Provided by Trained Personnel

Our applications are supported by one-on-one personal assistance from trained specialists. Services specialists are assigned to specific clients and are trained across all of our applications, ensuring they provide comprehensive, expert-level service. Our client service is ISO 9001:2008 certified on the basis of its quality and consistency. We strive to provide our clients with high levels of service and support to ensure their continued use of our solution for all of their HCM needs. We have maintained high client satisfaction, as evidenced by an average annual revenue retention rate of 91% from existing clients for the three years ended December 31, 2013.

Software-as-a-Service Delivery Model

Our SaaS delivery model allows clients with a geographically dispersed and mobile workforce to operate more efficiently, and allows these clients to implement, access and use our client-oriented Internet solution on demand and remotely through standard web browsers, smart phones, tablets and other web-enabled devices. Our SaaS solution reduces the time, risk, headcount and costs associated with installing and maintaining applications for on-premise products within the information technology infrastructure of our clients.

Secure Cloud-Based Architecture

Our cloud-based architecture allows our solution to be implemented remotely with minimal client interaction. Updates such as software enhancements and newly developed applications can be deployed without client interaction, disruption or involvement, allowing our clients to make a smaller investment in hardware, personnel, implementation time and consulting. Additionally, we own and maintain all of the infrastructure technology to host our solutions and to maximize system availability for clients. Our focus and investment in technology and data security has been recognized with ISO/IEC 27001:2005 certified security standards that provide our clients with a “best-in-class” level of data security.

Scalability to Grow with our Clients

Our solution is highly scalable. We have served a diversified client base ranging in size from one to more than 8,000 employees. We calculate the number of employees using clients based on parent company grouping.

Our clients are able to use the same solution while their businesses grow by deploying applications as-needed in real-time. Pricing is determined by employee headcount and the number of applications utilized, enabling our clients to align HCM spending with their evolving HCM needs as compared to traditional HCM products that require clients to migrate to new software as they grow but retain fixed costs even if the client shrinks in size.

Our Strategy for Growth

Our strategy is to continue to establish our solution as the HCM industry standard. To accomplish this, we intend to:

Increase Our Presence in Existing Markets

Although we have clients in all 50 states, we believe a significant opportunity exists to expand our presence within markets where we currently have a sales office. We have a sales office in 24 of the 50 largest MSAs in the United States based on 2010 U.S. census data, only one of which is served by multiple sales teams. We believe that the 50 largest MSAs in the United States could collectively support at least 100 additional sales teams. Each sales office is typically staffed with one sales team, with each team comprised of approximately seven to nine sales professionals. We plan to increase our presence in existing markets by adding sales offices and increasing the number of our sales teams to further penetrate and effectively capture these markets.

Expand Into Additional Markets

We plan to continue expanding our sales capability by opening sales offices in certain metropolitan areas where we currently have no sales teams. We have identified 50 untapped metropolitan areas where we could potentially open a new sales office staffed with at least one sales team. Since September 2012, we have opened sales offices in Baltimore, Detroit, Indianapolis, Minneapolis, New York, Philadelphia, San Francisco, Seattle and Silicon Valley. We intend to open six to eight additional offices over the next two years, as well as potentially expand over the longer term into international markets.

Enlarge our Existing Client Relationships

We dedicate our resources to helping our clients facilitate their goals, whether through helping them execute better hiring decisions, manage compensation more effectively or simply operate more efficiently. We believe a significant growth opportunity exists in selling additional applications to our current clients. Many clients have subsequently deployed additional applications as they recognize the benefits of our comprehensive solution. During the year ended December 31, 2013, all of our clients, including our new clients, on average utilized 5.2 of our 18 then available applications. During that same period, however, new clients on average utilized 6.2 applications. We believe that there is a significant opportunity to sell additional applications to our existing clients. As we extend and strengthen the functionality of our solution, we will continue to invest in initiatives to increase the adoption of our solution and maintain our high levels of client satisfaction.

Target Larger Clients

As we have organically grown our operations and increased the number of our applications, the average size of our clients has also grown significantly. Based on our total revenues, we have grown at an approximately 38% CAGR since 2009. Our solution requires no adjustment to serve larger clients. We believe larger employers represent a substantial opportunity to increase the number of clients and to increase our revenue per client, with limited incremental cost to us. From January 1, 2011 through December 31, 2013, we increased our annualized recurring revenue per average client by 52.7%, in part by targeting larger clients and enlarging our existing client relationships. To further capitalize on this opportunity, we intend to target larger businesses opportunistically where our current sales model is effective.

Maintain Our Leadership in Innovation by Strengthening and Extending our Solution

Our ability to develop and deploy new applications and updates rapidly and cost-effectively has been integral to the results that we have achieved to date. We intend to continue extending the functionality and range of our solution in the future. Our development efforts are performed exclusively in-house and are heavily based upon proactive research and client input. In the near-term, we intend to focus our investments on further developing applications within our higher margin HR and talent management applications. Over the long term, we intend to increase our investment in the development of new applications that are responsive to the needs of our clients, which are garnered through ongoing client interaction and collaboration.

Our Applications

Our HCM solution offers a full suite of applications that generally fall within the following categories: talent acquisition, time and labor management, payroll, talent management and HR management.

Talent Acquisition



		Applicant Tracking. Our applicant tracking application simplifies the recruiting processes needed to hire the most qualified employees. By using our all-in-one system, our clients can move candidates from the application process through new employee on-boarding without re-keying data.

		Employment Background Checks. Our employment background check application helps to ensure that prospective new hires are qualified candidates. We provide clients with the tools for authorizing background checks, creating pre-adverse and adverse action letters and securely storing results as required by the Fair Credit Reporting Act.

		On-Boarding/Off-Boarding . Our on-boarding/off-boarding application streamlines the hiring and termination processes for employees of our clients by creating online checklists of tasks to be assigned to an employee or group of employees.

		E-Verify ^® . Our E-Verify ^® application automates employment verification and reduces our clients’ exposure to audits and penalties that could result from I-9 violations.

		Tax Credit Services. Our tax credit services application helps employers process and calculate the available federal tax credits associated with hiring employees who meet various qualifications.

Time and Labor Management



		Time and Attendance . Our time and attendance application allows our clients to accurately and efficiently manage when, where and how employees report their hours worked. Clients can apply customized rules, use batch editing and use timecard management tools to manage complex time and attendance needs. Our web time clocks feature allows employees to clock in and out online, which automatically updates the payroll application when approved, eliminating the need to manually calculate timesheets and rekey information into payroll systems. We also offer several different types of hardware terminals that are ideal for single or multi-clock environments.

		Scheduling. The scheduling application helps managers with employee scheduling. This application’s automated functionality provides for a seamless workflow with the payroll and time and attendance applications. Cloud-based convenience also provides employees and managers access to their schedules at any time.



		Time-Off Requests . Our time-off requests application automates and standardizes the time off request procedure and helps employers remain effectively staffed. Managers can view an online time-off calendar to easily monitor and approve or deny time-off requests. Our employee self-service tool allows employees to view the time-off they have available, submit requests and view blackout dates, the status of requests and any manager comments.

		Labor Allocation. Our labor allocation application simplifies the process of setting up and tracking employee hours based on the job the employee is working.

		Labor Management Reports . Our labor management report application helps clients get up-to-the-minute reports on the information they need to better manage their labor force, such as overtime and labor distribution.

Payroll



		Payroll and Tax Management. Our payroll application is the foundation of our solution and all of our clients are required to utilize this application in order to access our other applications. Our payroll application is automatically updated with changes in employee information and offers other time saving functionality such as batch editing and effective dating. The application can be accessed at any time to make changes, run payroll and generate custom reports. We also help our clients by handling their payroll taxes and deposits, regulatory correspondence, amendments, and penalty and interest disputes.

		Paycom Pay. Our Paycom Pay application eliminates the tedious job of check reconciliation by issuing checks to our clients’ employees that clear from a Paycom bank account, which helps clients eliminate potential liability and simplifies the reconciliation process.

		Expense Management. This application eliminates the manual, paper-based processes associated with employee expense reimbursement and allows employers to control and monitor expenses by setting clearly-defined rules and parameters for reimbursement for employees. Employees can upload receipts when submitting their expenses and access an expense dashboard where they can view the status of their submitted expenses.

		Garnishment Management . This application allows us to handle communications with garnishment payees and agencies and to calculate and track garnishment payments.

Talent Management


		Employee Self-Service. Our employee self-service application improves employee engagement by empowering our clients’ employees to self-manage certain transactions, obtain quick answers to frequent payroll and HR questions, access their pay history and view performance goals and reviews and total compensation reports to review their compensation and benefits package. Benefits information and paid time off accruals also give employees the ability to make informed decisions regarding their benefit selections and time-off requests.

		Compensation Budgeting . With compensation and performance information in one system, our compensation budgeting tool provides clients with valuable workforce insight to help manage and formulate salary budgets and help establish merit-based compensation increases.



		Performance Management . This application allows for standardized positions across a company with set pay grades and performance goals. It also helps streamline the performance review process with online facilitation of the review process.

		Executive Dashboard. Our executive dashboard offers powerful workforce insight for executives to access information on demand in a variety of report formats. Because we offer an all-in-one solution in a single database, the comprehensive report data provides the workforce intelligence needed to drive human capital decisions at an executive level.

HR Management


		Document Management. Our document management application manages employee files, including the ability to have employees digitally sign and view company documents. We securely store client records to meet retention requirements and protect documents from unauthorized access and other disasters that can threaten businesses.

		Government and Compliance. Our government and compliance application helps clients reduce exposure to violations, audits and penalties with respect to the employment laws impacting their business, such as the Family Medical Leave Act, Equal Employment Opportunity Commission and other state and federal regulations. A single database keeps our clients’ employee data consistent and enhances reporting capabilities by providing better accuracy and real-time insight.

		Benefits Administration . Our benefits administration application allows clients to customize benefit plan setup, deduction amounts, enrollment dates and new-hire waiting periods. Employers are provided census and reconciliation reports to ensure they do not overpay for benefits and can update deduction amounts for all employees or groups of employees at once. This application also provides employees with online enrollment and helps educate them and drive informed enrollment decisions for greater employee satisfaction.

		COBRA Administration . Our COBRA administration application protects employers from COBRA violations and their associated fines and penalties by automatically initiating compliance measures with the entry of qualifying events into the application. This application also tracks important dates, collects and remits premiums and reports on all COBRA activity.

		Personnel Action Forms . This application helps our clients reduce the amount of time and paperwork required with employee changes such as pay rate, position and title changes by allowing managers to complete and approve online personnel action forms.

Our Clients

We serve a diverse client base in terms of size and industry. We have over 10,000 clients, or over 6,000 clients based on parent company groupings, none of which constituted more than one-half of one percent of our revenues for the year ended December 31, 2013. We stored data for more than 1,000,000 persons employed by our clients during the year ended December 31, 2013.

Based on parent company grouping, companies with fewer than 50 employees comprised approximately 10% of total revenues for the year ended December 31, 2013. Revenues for clients based on parent company grouping, with 50-2,000 employees and more than 2,000 employees represented approximately 86% and 4%, respectively, of total revenues for the year ended December 31, 2013. Many of our clients that are small to mid-sized companies can typically make the decision to adopt our solution more quickly than larger companies,

which we believe results in a shorter sales cycle. As a result of the nature and size of our clientele, we maintain a diversified client base and very low client concentration. We believe, however, larger employers represent a substantial opportunity to increase the number of clients and to increase our revenue per client with limited incremental cost.

Competition

The market for HCM solutions is rapidly evolving, highly competitive and subject to changing technology, shifting client needs and frequent introduction of new products and services. Our competitors range from small, regional firms to large, well-established international firms with multiple product offerings.

We compete with firms that provide HCM solutions by various means. Many providers continue to deliver legacy enterprise software, but as demand for greater flexibility and access to information grows, we believe there will be increased competition in the delivery of HCM cloud-based solutions by other SaaS providers. Our competitors offer HCM solutions that overlap with one, several or all categories of applications offered by our solution. Our talent acquisition and talent management applications compete primarily with Cornerstone OnDemand, Inc., Oracle Corporation, SAP AG and Workday, Inc. Our payroll applications, including payroll processing, compete primarily with ADP, Ceridian Corporation, Concur Technologies, Inc., Intuit, Inc., Paychex, Inc. and The Ultimate Software Group, Inc. Our HR management applications compete primarily with ADP, Ceridian Corporation, Oracle Corporation, Paychex, Inc., SAP AG, and Workday, Inc. Our time and labor management applications compete primarily with ADP, Ceridian Corporation and The Ultimate Software Group, Inc. Our larger competitors compete with us across multiple segments. In addition, our HCM solution continues to face competition from in-house payroll and HR systems and departments as well as HR systems and software sold by third-party vendors.

Competition in the HCM solutions market is primarily based on service responsiveness, product quality and reputation, breadth of service and product offering and price. The importance of these factors depends on the size of the business. Price tends to be the most important factor of competition for smaller businesses with fewer employees while the scope of features and customization is more important to larger businesses. We believe that our SaaS delivery model allows us to be most competitive in the HCM solutions market across this spectrum.

Sales and Marketing

We sell our solution exclusively through our sales force that included 218 sales professionals as of December 31, 2013, substantially all of whom have a four-year college degree. Our sales force is comprised of inside sales and field sales personnel who are organized geographically and CRRs, who sell additional applications to existing clients. We have 30 sales teams located in 20 states and plan to open additional sales offices to further expand our presence in the U.S. market. As of December 31, 2013, 23% of our sales force had achieved “executive sales representative” status by generating in excess of $300,000 of annualized new recurring revenue.

We provide our sales force with an intensive four-week training course that includes at least one week of training at our headquarters in Oklahoma City. Our unique training program includes instruction in accounting, business metrics, product features and tax matters relevant to our target market. Our training continues for our sales force through weekly in-office strategy sessions and leadership development training. Executive sales representatives are also required to attend in-person quarterly conferences to share best practices and receive legal and business updates.

When a new client processes with us for an entire month, our sales representative receives a commission based upon annualized new recurring revenue. This commission is only paid once per new customer. Executive sales representatives receive a higher commission rate and base salary based upon both current year and life-to-date realized sales, respectively.

We generate client leads, accelerate sales opportunities and build brand awareness through our marketing programs that target finance and HR executives, technology professionals and senior business leaders of companies that perform HCM functions in-house or outsource these functions to one of our competitors. Our principal marketing programs include:

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Direct mail campaigns, email campaigns, personalized URLs, industry-specific print advertising and tradeshow exhibiting;

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Search engine marketing methods that include site optimization and pay-per-click searches; and

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National radio advertising on Sirius/XM Radio and specifically on the Fox News, Fox Talk, Bloomberg and MSNBC stations.

Our 30 CRRs are focused on expanding the number of applications our clients purchase from us by introducing them to additional applications. Our CRRs call upon select clients periodically and are paid a non-recurring commission on any additional sales they generate.

Technology, Operations and Security

Technology

Our multi-tenant architecture enables us to deliver our solution across our client base with a single instance of our solution, while securely partitioning access to our clients’ respective application data. Because a single version of our solution is developed, supported and deployed across all of our clients, updates are delivered to all of our clients at the same time, making it easier to scale our solution as the number of our clients and their employees expands.

We maintain diverse load-balanced Internet lines serviced by multiple networks to provide our clients continuous access to our solution and their stored data. We back up our client data at regular intervals utilizing live replication, snapshots and cold archive methods of backup and manually monitor backup success and failure regularly. Our server cluster and database servers have redundant “hot swappable” disks to ensure continuous service in the event of a disk failure.

Operations

We physically host our solution for our clients in two secure data center facilities located in Oklahoma and Texas. All of our critical systems are fully redundant and backed-up in real-time to these facilities. Physical security includes ID-oriented access control, alarm systems and manned 24 hour a day camera monitoring by our security guards. Server facilities also have environmental monitoring and extensive environmental controls such as heat and fire protection, moisture, temperature, and humidity sensors, backup power supply and exterior reinforced concrete walls.

Security

We maintain a formal and comprehensive security program designed to ensure the confidentiality, integrity and availability of our clients’ data. During the regular course of business, we receive client data through our online system that we in turn process, record and store following ISO/IEC 270001:2005 certified controls and procedures. All communications with our servers that might contain sensitive information are encrypted before they leave the network and our servers are configured to only allow high-grade encryption algorithms.

We strictly regulate and limit all access to servers and networks at each of our facilities. Local network access is restricted by our authenticated server, using access control lists and remote network access is restricted by a firewall, which provides no accessible route from external networks to systems within our local network. We also employ network and host intrusion detection and prevention sensors throughout our infrastructure, systems that monitor and alert on insecure installations of third-party applications, a full system for managing

and installing patches for those applications and highly restricted access to the Internet for anyone who has access to client data. We retain a third-party penetration testing company to conduct penetration tests and periodic audits to identify and remediate any issues.

Our applications are secured using multiple libraries and secure coding practices. We engage in regular penetration testing performed by both our information security department as well as by a third party testing company. Our network infrastructure is secured and monitored using a number of best practices and tools at multiple layers of the physical and logical network. This security is also continually monitored by our information security department.

Software Development

As of December 31, 2013, we had 30 employees dedicated to our application development process. This team works closely with our clients to improve and enhance our application offerings and develop new applications. Our application development process consists of a focused innovation and development timeframe in order to deliver well-developed applications and enhancements desired by our clients. A key element of our development process is the one-on-one personal interaction between clients and our client relations representatives, through which our clients suggest new applications and features.

We develop our solution from the “ground up” with our internal development and engineering teams. Our development and engineering teams and our employees conceive of new applications and enhancements, review requests, schedule development in order of priority and subsequently develop the applications or enhancements. Our new applications and enhancements are independently reviewed by the quality assurance team, in accordance with our software development process, before being fully implemented. Any enhancements to our applications are released on a monthly scheduled release date to coordinate the communication and release to our clients.

Capitalized development expenses, which include compensation for employees directly associated with development projects, were $1,221,000, $585,000 and $497,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Client Service

We are committed to providing industry-leading, client-centered service. For this reason, we assign each client a specialist within a dedicated team. This one-to-one service is a key part of our client service model and helps to ensure that we are delivering an industry-leading solution and maintaining high client satisfaction. The primary elements of our client service model include the following:

Streamlined Setup and Onboarding

After a client elects to deploy our solution, that client goes through our onboarding process with assistance from a team of new client setup specialists and the sales professional responsible for obtaining the client’s business. This team works closely with the client until the client is capable of managing our solution independently, in which case it is transferred to our dedicated services specialists.

Dedicated Service Specialists

After completing the onboarding process, each client is assigned to a specialist within a dedicated team that provides primary support for the remainder of the client’s time with the Company. Clients can then contact their dedicated services specialist or a team member if any issues or questions arise. These specialists provide personalized service with actual knowledge of the clients’ business needs. When appropriate, client questions can be elevated to the specialists with the appropriate application, regulatory or tax expertise. In addition, our CRRs proactively contact our clients to ensure satisfaction with our solution and introduce additional applications.

Expert Level Service

Our client specialists are trained across all of our applications to ensure that they can provide comprehensive, expert-level service. Our client service is ISO 9001:2008 certified on the basis of its quality consistency and helps support a high client retention rate.

Regulatory and Certifications

We are subject to varying degrees of regulations in each of the jurisdictions in which we provide services. Local laws and regulations, and their interpretation and enforcement, differ significantly among those jurisdictions. These regulations and laws cover, among others, information disclosure.

Personal privacy has become a significant issue in the United States and in other countries. The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations affecting or regarding the collection, use and disclosure of personal information. In the United States, these include, among others, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the Patient Protection and Affordable Care Act and state breach notification laws.

We voluntarily obtain third party security examinations relating to security and data privacy in accordance with Statement on Standards for Attestation Engagements, or SSAE, No. 16, Reporting on Controls at a Service Organization. Our SSAE examination is conducted every six months by an independent third party auditor, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures.

In February 2011, we obtained a certification based on ISO/IEC 27001:2005 criteria, a security standard for Information Security Management Systems published by ISO covering our production, quality assurance and implementation environments. This independent assessment of our conformity to the ISO 27001 standard includes assessing security risks, designing and implementing comprehensive security controls and adopting an information security management process to meet security needs on an ongoing basis. The certification is valid for three years, with surveillance audits taking place annually.

In April 2011, we obtained a certification based on ISO/IEC 9001:2008 criteria, a standard for the implementation of quality management processes published by ISO, covering our activities required to create and deliver our solution. This independent assessment of our conformity to the ISO 9001 standard includes assessing the design and implementation of quality objectives to meet delivery standards on an ongoing basis. The certification is valid for three years, with surveillance audits taking place annually.

Intellectual Property

We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our intellectual property rights. We also have a number of registered and unregistered trademarks and will continue to evaluate the registration of additional trademarks as appropriate. We do not have any patents or patent applications pending.

Seasonality

Our revenues are seasonal in nature. Recurring revenues include revenues relating to the annual processing of payroll forms such as Form W-2 and Form 1099. Because these forms are typically processed in the first quarter of the year, first quarter revenue and margins are generally higher than in subsequent quarters. We believe this seasonality is driven by several factors, most notably the number of our clients that use our payroll application, as compared to the other applications that we offer. As our clients use additional applications in the future, we believe that the seasonality in revenues will diminish.

Legal Proceedings

From time to time, we are involved in various legal proceedings arising from the normal course of business activities, including the legal proceeding described below. Defending such proceedings is costly and can impose a significant burden on management and employees; we may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained.

On July 29, 2013, Dr. Lakshmi Arunachalam filed a complaint against us in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent No. 8,244,833, which is entitled “Real-Time Web Transaction Systems to Access On-Line Services Over the Web from Web Applications.” According to the patent, it provides a method and apparatus for providing real-time, two-way transactional capabilities on the Web. It is alleged that Payroll’s web services perform a series of steps that violate at least claim ten of the patent-in-suit. The steps purportedly include: (1) activate an OSI application layer on-line service network on the Web, wherein said on-line network is an on-line payroll processing service network on the Web; (2) display a Web application on a Web page, wherein the Web application is a payroll processing services Web application; (3) execute said Web application on a Web server comprising memory and a processor; (4) display a list of services accessible for performing real-time Web transactions from said payroll processing services Web application on the Web page; (5) perform real-time Web transactions from the Web application; (6) manage the connection between the Web application displayed on a multi-media device and a back office of a payroll processing service provider; (7) control the flow of one or more real-time Web transactions from the payroll processing Web application; and (8) complete a payroll processing Web transaction in real-time relating to a selected payroll processing service. At the early stage of this litigation, Dr. Arunachalam has not yet submitted infringement contentions so it cannot be determined why she believes her patent covers the products or services offered by us.

The complaint seeks a permanent injunction, damages, and attorneys’ fees should we be found to infringe. Dr. Arunachalam has asserted similar claims in Delaware for the alleged infringement of the same patent against other payroll processing companies. Dr. Arunachalam has also accused various other entities of infringing related U.S. patents. On October 4, 2013, we filed an answer, affirmative defenses and counterclaims to the complaint. We denied all claims made against us by Dr. Arunachalam in her complaint, asserted various defenses and counterclaims for non-infringement and challenged the validity and enforceability of U.S. Patent No. 8,244,833. Dr. Arunachalam filed a reply to our counterclaim on October 28, 2013 and denied non-infringement and invalidity. We believe that this litigation is without merit and intend to vigorously defend ourselves in this matter. Although we cannot predict the outcome of this litigation, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of this litigation could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Employees

Our ability to recruit and retain qualified employees is critical to our continued success. We invest heavily in our training and leadership development programs to encourage the development and promotion of our employees. As of December 31, 2013, we employed approximately 840 people. None of our employees were covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Facilities

Our corporate headquarters is located in Oklahoma City, Oklahoma and includes a 90,000 square foot processing center. We have begun construction on a second building to enlarge our corporate campus by an additional 80,000 square feet and we have a 2,271 square foot disaster recovery site located in Oklahoma City. We own over 30 acres in Oklahoma City upon which our facilities are located. We also own and operate a 1,500 square foot fully redundant data center located at our corporate headquarters in Oklahoma and lease a 300 square foot fully redundant data center in Texas.

We also lease offices in Arizona, California, Colorado, District of Columbia, Florida, Georgia, Illinois, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Texas and Washington. We believe that these facilities are suitable for our current operations and upon the expiration of the terms of the leases we believe we could renew these leases or find suitable space elsewhere on acceptable terms.

MANAGEMENT

Executive Officers and Directors

The following table provides information regarding our executive officers and directors as of March 10, 2014:


Name	Age		Position(s)
Chad Richison		43	President, Chief Executive Officer and Director
Craig E. Boelte		50	Chief Financial Officer
Jeffrey D. York		46	Chief Sales Officer
William X. Kerber III		38	Chief Information Officer
Robert J. Levenson ⁽¹⁾		72	Director
Robert Minicucci ^(1)(2)(3)		61	Chairman of the Board
Conner Mulvee		31	Director
Frederick C. Peters II ⁽¹⁾		64	Director
Sanjay Swani ⁽²⁾⁽³⁾		47	Director

(1)	Member of the Audit Committee.

(2)	Member of the Compensation Committee.

(3)	Member of the Nominating and Governance Committee.

Chad Richison has served as President and Chief Executive Officer since he founded Paycom in 1998. Mr. Richison has also served as a Director since 1998. He began his career in sales with ADP, and then moved to Payroll 1 prior to founding Paycom. Mr. Richison received his B.A. in Mass Communications—Journalism from the University of Central Oklahoma. Mr. Richison was selected to serve on our board of directors because of the leadership skills, strategic guidance and experience he brings as our President and Chief Executive Officer and operational expertise from his prior experience in the industry.

Craig E. Boelte has served as our Chief Financial Officer since February 2006. Before joining Paycom, Mr. Boelte owned an accounting practice serving over 600 clients including Paycom. Prior to that, Mr. Boelte spent nine years at Deloitte & Touche where he served as Senior Tax Manager. Mr. Boelte has over 26 years of experience in the workforce management and HR industry. Mr. Boelte is a member of the Oklahoma Society of CPA’s and the American Institute of CPA’s. Mr. Boelte received his B.S. in Business Administration and Masters in Science in Accounting from Oklahoma State University.

Jeffrey D. York has served as our Chief Sales Officer since 2007. Mr. York opened our Dallas location in 2002 prior to joining our corporate executive team. Before joining Paycom, Mr. York was employed by ADP from 1990 to 2002 where he held a variety of sales management positions including Vice President of Sales for the Major Accounts Division. Mr. York earned his MBA from Baylor University and his Bachelors of Business Administration from Texas Tech University.

William X. Kerber III has served as our Chief Information Officer since July 2007. Mr. Kerber joined us in 1999 while completing his B.S. in computer science. Mr. Kerber is a founding team member has over 17 years of software development and network design experience. Prior to serving as Chief Information Officer, Mr. Kerber served as a lead software developer and network architect. He attended the Oklahoma School of Science and Math (OSSM) and graduated from the University of Oklahoma’s Engineering/Computer Science program where he is currently a member of its board of advisors.

Robert J. Levenson has served as a member of our board of directors since July 2007. Mr. Levenson is a founder and Managing Member of LENOX Capital Group, LLC, a private venture capital investment company formed in 2000 which focuses primarily on early stage software technology and service company investments. From 1981 through 1990, Mr. Levenson held executive management positions with ADP, including Group

President—Employer Services, member of the Corporate Executive Committee and its Board of Directors. In late 1990, Mr. Levenson was named Chief Operating Officer, a member of Office of the President and was elected to the Board of Directors of Medco Containment Services, Inc., which was acquired by Merck & Co., Inc., or Merck, and later spun out to Merck shareholders. From 1992 until 2003, Mr. Levenson served on the Board of Directors of First Data Corporation, or FDC, and from 1993 until his retirement in 2000, he served as Executive Vice President of FDC. Thereafter, he served as a consultant to FDC and some of its joint venture affiliates until 2006. Mr. Levenson has served on boards of directors of public and private companies as well as civic and philanthropic organizations. These include: ADP, FDC, Medco, Central Data Systems, Inc., Comnet, Inc., Polyvision, Broadway & Seymour, Superior TeleCom Inc., Vestcom International, Emisphere Technologies, Inc., Ceridian Corp, and Elite Pharmaceuticals, Inc. He graduated from Kent State University with a B.S. in Business Administration. Mr. Levenson also serves or has served on boards of several private companies. Mr. Levenson was selected to serve on our board of directors because of his industry expertise and experience as a member of the board of directors of other companies.

Robert Minicucci has served as a member of our board of directors since July 2007. He was elected Chairman of the Board in December 2013. Mr. Minicucci joined Welsh, Carson, Anderson & Stowe in August 1993. He has served as a General Partner of Welsh, Carson, Anderson & Stowe and focused on the information/business services industry during his entire tenure with the firm. He continues to serve as a General Partner for certain funds affiliated with Welsh, Carson, Anderson & Stowe. Prior to joining Welsh, Carson, Anderson & Stowe, Mr. Minicucci served as Senior Vice President and Chief Financial Officer of First Data Corporation. Before joining First Data Corporation, he served as Senior Vice President and Treasurer of the American Express Company. He also spent 12 years at Lehman Brothers where he was a Managing Director. Mr. Minicucci currently serves on the board of directors of the following public companies, Alliance Data Systems, Inc. and Amdocs Limited, and previously served on the board of directors of Retalix, Ltd. Over the course of his career Mr. Minicucci has served on the board of directors for 15 publicly and privately held companies. Mr. Minicucci received a B.A. from Amherst College in 1975 and received an M.B.A. from Harvard Business School in 1979. Mr. Minicucci was selected to serve on our board of directors because of his financial and investment expertise and his industry experience with other software technology companies.

Conner Mulvee has served as a member of our board of directors since February 2014. Mr. Mulvee has served as a Vice President at Welsh, Carson, Anderson & Stowe since January 2011. Prior to that, Mr. Mulvee served as an Associate at Welsh, Carson, Anderson & Stowe from August 2008 until January 2011. He focuses on investments in the information/business services and healthcare industries. Prior to joining Welsh, Carson, Anderson & Stowe, he spent two years in the investment banking division of Lehman Brothers. He earned an undergraduate degree from Amherst College in 2005. Mr. Mulvee was selected to serve on our board of directors because of his financial and investment expertise.

Frederick C. Peters II has served as a member of our board of directors since February 2014. He currently serves as the Chairman, President and Chief Executive Officer of Bryn Mawr Bank Corporation, or BMTC, a publicly traded company, and its principal subsidiary, The Bryn Mawr Trust Company. BMTC has approximately $2.1 billion of banking assets and $7.3 billion of wealth assets under management and administration and is listed on the Nasdaq Stock Market. Prior to joining BMTC in 2001, Mr. Peters started two community banks: National Bank of the Main Line in 1985 and First Main Line Bank in 1995. Mr. Peters began his banking career at Philadelphia National Bank in 1976 and held lending and executive positions at Hamilton Bank and Industrial Valley Bank prior to starting his first community bank. Mr. Peters has served on numerous non-profit boards including Main Line Health where he served first as Chairman of the Audit Committee and later as Chairman of the Finance Committee. He currently serves on the board of directors of the National Association of Corporate Directors – Philadelphia Chapter and The Bryn Mawr Film Institute. In addition, Mr. Peters has been on the Board of Directors of the Federal Reserve Bank of Philadelphia since 2009 and is currently the Chairman of that bank’s Audit Committee. Mr. Peters graduated from Amherst College with a B.S. in Political Science. Mr. Peters was selected to serve on our board of directors because of his financial and investment expertise and his experience as a member of the board of directors of a public company.

Sanjay Swani has served as a member of our board of directors since April 2013. Mr. Swani is a member of the management committee of Welsh, Carson, Anderson & Stowe, having joined Welsh, Carson, Anderson & Stowe in 1999. He focuses on investments in the information/business services industry. Prior to joining Welsh, Carson, Anderson & Stowe, he was a Director with Fox Paine & Company, a San Francisco-based private equity firm. Mr. Swani also spent four years in the Mergers, Acquisitions & Restructuring Department and two years in the Debt Capital Markets Department of Morgan Stanley Dean Witter & Co. He earned an undergraduate degree from Princeton University in 1987 and concurrent degrees from the Harvard Law School and the MIT Sloan School of Management in 1994. Mr. Swani was selected to serve on our board of directors because of his financial and investment expertise.

Board of Directors Composition and Risk Oversight

Our board of directors consists of six members, two of whom qualify as “independent” according to the NYSE Listed Company Manual. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.

Our certificate of incorporation and bylaws provide that our board of directors is divided into three classes whose members serve three-year terms expiring in successive years. The terms of office of members of our board of directors are divided into three classes:

•

Class I directors, whose term will expire at the annual meeting of the stockholders to be held in 2014;

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Class II directors, whose term will expire at the annual meeting of the stockholders to be held in 2015; and

•

Class III directors, whose term will expire at the annual meeting of the stockholders to be held in 2016.

Our Class I director is Mr. Mulvee, our Class II directors are Messrs. Levenson and Peters and our Class III directors are Messrs. Minicucci, Richison and Swani. At each annual meeting of stockholders, the successors to the directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following such election. Any vacancies in our classified board of directors will be filled by the remaining directors and the elected person will serve the remainder of the term of the class to which he or she is appointed. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

In connection with the Reorganization, we and the Stockholders Agreement Parties entered into the Stockholders Agreement. Among other things, the Stockholders Agreement provides that upon the completion of this offering and for so long as the parties thereto continue to collectively hold 40% of our issued and outstanding shares of common stock, each party will vote and take all other necessary and desirable action within such party’s control to (i) cause the authorized number of directors of our board of directors to be established at seven and (ii) elect to our board of directors:

•

three representatives designated by the holders of a majority of the shares of common stock held by WCAS X and any of its affiliates to which shares of common stock are transferred pursuant to the Stockholders Agreement;

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one representative designated by the holders of a majority of the shares of common stock held by WCAS Capital IV and any of its affiliates to which shares of common stock are transferred pursuant to the Stockholders Agreement; and

•

subject to certain conditions, one representative designated by the holders of a majority of the shares of common stock held by Chad Richison, Shannon Rowe, William Kerber, Jeffrey York, Robert J. Levenson and Richard Aiello and any of their affiliates, or the Minority Holders, who shall be Chad Richison for so long as he is employed by us.

As such, Welsh, Carson, Anderson & Stowe and its affiliates have effectively designated four representatives to our initial board of directors. Messrs. Levenson, Swani and Minicucci were designated by WCAS X. Mr. Mulvee was designated by WCAS Capital IV.

Our board of directors is responsible for, among other things, overseeing the conduct of our business; reviewing and, where appropriate, approving our long-term strategic, financial and organizational goals and plans; and reviewing the performance of our chief executive officer and other members of senior management. Our board of directors, as a whole and, following the completion of this offering, through its committees, has responsibility for the oversight of risk management. Our senior management is responsible for assessing and managing our risks on a day-to-day basis. Our audit committee will discuss with management our policies with respect to risk assessment and risk management and our significant financial risk exposures and the actions management has taken to limit, monitor or control such exposures, and our compensation committee will oversee risk related to compensation policies. Both our audit and compensation committees will report to the full board of directors with respect to these matters, among others.

Because the Stockholders Agreement Parties hold more than 50% of the voting power for the election of our directors, we have elected to be a “controlled company” under the NYSE Listed Company Manual. As a controlled company, exemptions under the NYSE Listed Company Manual exempt us from compliance with certain corporate governance requirements, including the requirements:

•

that a majority of our board of directors consists of “independent directors,” as defined under the NYSE Listed Company Manual;

•

that any compensation committee or nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

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that any compensation committee or nominating and corporate governance committee have an annual performance evaluation.

These exemptions do not modify the independence requirements for our audit committee, and we intend to comply with the requirements of Rule 10A-3 of the Exchange Act and the NYSE Listed Company Manual within the applicable time frame.

Committees

Our board of directors will establish the following committees prior to the completion of this offering: an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee will have the composition and primary responsibilities described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit Committee

Our audit committee oversees the accounting and financial reporting processes of the Company and the audit of the Company’s financial statements. In that regard, our audit committee assists board oversight of: (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors. Among other matters, the audit committee is responsible for the retention of our independent auditors; evaluating the qualifications, performance and independence of our independent auditors; reviewing the Company’s annual and interim financial statements and discussing press releases, financial information and earnings guidance provided to analysts and rating agencies; discussing policies with respect to risk assessment and risk management; overseeing the Company’s internal audit function; reviewing and ensuring the adequacy of the Company’s internal control systems; reviewing and approving related party transactions; and annually reviewing the audit committee charter and the committee’s performance.

The current members of our audit committee are Messrs. Levenson, Minicucci and Peters with Mr. Peters serving as the chairman of the committee. All members of our audit committee meet the requirements for financial literacy under the NYSE Listed Company Manual and applicable SEC rules and regulations. Our board of directors has determined that Mr. Peters is an audit committee financial expert as defined under the applicable rules of the SEC, has the requisite financial management expertise as defined under the NYSE Listed Company Manual, Messrs. Levenson and Peters are also considered independent under applicable SEC rules and regulations and the NYSE Listed Company Manual. We expect to satisfy the independence requirements for the audit committee prior to the end of the transition period provided under applicable SEC rules and regulations and the NYSE Listed Company Manual for companies completing their initial public offering. The audit committee operates under a written charter that satisfies the applicable SEC rules and regulations and the NYSE Listed Company Manual.

Compensation Committee

Our compensation committee reviews and approves, or recommends that our board of directors approves, the compensation of our executive officers. Among other matters, the compensation committee reviews and approves corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and approves all stock option grants and other equity-related awards to our executive officers. The compensation committee also annually reviews the compensation committee charter and the committee’s performance.

The current members of our compensation committee are Messrs. Minicucci and Swani, with Mr. Minicucci serving as the chairman of the committee. None of the members of our compensation committee are independent under the applicable SEC rules and regulations and the NYSE Listed Company Manual and meet the definition of outside directors under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is responsible for identifying and recommending candidates for membership on our board of directors, including nominees recommended by stockholders, reviewing and recommending the composition of our committees, overseeing our code of business conduct and ethics, corporate governance guidelines and reporting and making recommendations to our board of directors concerning governance matters. The nominating and corporate governance committee also annually reviews the nominating and corporate governance committee charter and the committee’s performance. The current members of the nominating and corporate governance committee are Messrs. Minicucci and Swani, with Mr. Swani serving as chairman of the committee. None of the members of our nominating and corporate governance committee are independent under the NYSE Listed Company Manual and applicable SEC rules and regulations.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation or similar committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our chief executive officer, chief financial officer and other principal executive and senior officers responsible for financial reporting. The code of business conduct and ethics will be available on our website at . Our code of business conduct and ethics is a “code of ethics,” as defined in Item 406(b) of Regulation S-K. The information contained on, or accessible from, our website is not part of this prospectus by reference or otherwise. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our website.

Director Compensation

Upon completion of this offering, non-employee directors will receive annual fees for their service in the amount of $75,000 per year, payable two-thirds in shares of common stock and one-third in cash. The chairman of our board of directors receives an additional annual cash fee of $25,000. Audit committee members (other than the chairman) receive an additional annual cash fee $5,000 and the chairman of the audit committee receives an additional annual cash fee of $10,000. All directors are entitled to reimbursement for their reasonable out-of-pocket expenditures incurred in connection with their board or committee service.

Our directors received no compensation for their service as directors during the fiscal year ended December 31, 2013. At December 31, 2013, each of our non-employee directors held the following unit and option awards:


Name	Units Outstanding Subject to Unit Awards (#)		Shares Outstanding Subject to Option Awards (#)


Richard Aiello ⁽¹⁾		70		—
Robert J. Levenson		200		—
Robert Minicucci		—		—

(1)	Mr. Aiello ceased to serve as a member of our board of directors on February 28, 2014.

EXECUTIVE COMPENSATION

Overview of Executive Compensation

Our compensation committee makes the compensation decisions regarding our executive officers, including (i) Chad Richison, our chief executive officer, (ii) Craig E. Boelte, our chief financial officer, (iii) Jeffrey D. York, our chief sales officer and (iv) William X. Kerber III, our chief information officer, or collectively, the named executive officers.

We evaluate each executive officer’s performance for the prior year on an annual basis. Our chief executive officer, Mr. Richison, with respect to each executive officer other than himself, prepares a written evaluation of the executive officers with input from others within our company. The written evaluation focuses on the achievement of stated corporate and individual and performance criteria and the amount of contributions made to management and the leadership of our company. This process leads to a recommendation from the chief executive officer to the compensation committee with respect to each executive officer’s salary level, cash bonus, and whether or not equity incentive awards should be granted. The compensation committee (other than the chief executive officer) determines the salary level, cash bonus, and whether or not equity incentive awards should be granted to our chief executive officer.

Summary Compensation Table For Fiscal Years Ended December 31, 2013 and 2012

The following table contains information regarding compensation that was paid to our named executive officers for the fiscal years ended December 31, 2013 and 2012.


Name and Principal Position	Year		Salary ($)		Bonus ($)		Unit Awards ($) ⁽²⁾		Non-Equity Incentive Plan Compensation ($) ⁽³⁾		All Other Compensation ($) ⁽⁴⁾			Total ($)
Chad Richison ⁽¹⁾		2013		534,788		—		49,594		682,961		47,723	⁽⁵⁾		1,315,066
Director, President and Chief Executive Officer		2012		495,051		17,000		1,040,179		516,921		47,592	⁽⁵⁾		2,116,743

Craig E. Boelte		2013		280,954		—		49,380		358,798		12,575			701,707
Chief Financial Officer		2012		260,020		—		89,972		203,623		12,575			566,190

Jeffrey D. York		2013		343,363		—		42,390		315,710		12,925			714,388
Chief Sales Officer		2012		330,028		—		89,972		258,268		10,601			688,869

William X. Kerber III		2013		280,963		—		49,380		269,107		12,575			612,025
Chief Information Officer		2012		260,028		—		89,972		203,623		12,575			566,198

(1)	All amounts shown reflect compensation paid to Mr. Richison for his service as president and chief executive officer. Mr. Richison has elected not to receive additional compensation for his service as a director.

(2)

Amounts shown do not reflect compensation actually received by the named executive officers. Rather, the amounts represent the aggregate grant date fair value of incentive units granted to each named executive officer in 2013 and 2012 computed in accordance with Accounting Standards Codification, or ASC, 718, Compensation—Stock Compensation , with the exception that the amount shown assumes no forfeitures. A discussion of the assumptions used in the calculation of these amounts are included in Note 9. “Members’ Equity and Incentive Compensation” in Holding’s annual consolidated financial statements included in this prospectus.

(3)	Amounts shown in this column represent the cash payment made to the named executive officer as performance-based cash bonuses. See “—Narrative Discussion Regarding Summary Compensation Table—Performance-Based Cash Bonuses” for more details.

(4)

Amounts shown consist of insurance premiums paid by the Company, a monthly retainer for a supplemental medical plan and Company contributions to a 401(k) profit sharing plan for the benefit of the named executive officer. The amounts shown in this column also reflect the aggregate incremental cost of personal use of

corporate aircraft by the named executive officer. Spouses and invited guests of executives occasionally fly on the corporate aircraft as additional passengers on business flights. In those cases, the aggregate incremental cost to us is a de minimis amount, and as a result, no amount is reflected in the table.

(5)	In addition to the items listed in Note (4) above, the amounts shown also include country club dues and expenses and approximately $23,411 of lease payments for an automobile in each of 2013 and 2012.

Narrative Discussion Regarding Summary Compensation Table

Executive Compensation Program Overview

The primary elements of our executive compensation program include:

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base salary;

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cash bonuses;

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equity incentive units;

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performance-based cash bonuses;

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retirement and other benefits; and

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perquisites and personal benefits.

Our compensation committee, after reviewing compensation information it considers relevant, has determined what it believes to be the appropriate level and mix of the various compensation components for our named executive officers. Ultimately, the objective in allocating between long-term and short-term compensation is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize long-term value for our company and our stockholders.

Base Salary

We provide base salaries to our named executive officers to compensate them for services rendered during the fiscal year and to recognize their experience, skills, knowledge and responsibilities. Each of our named executive officers is currently party to an employment agreement. No formulaic base salary increases are provided to our named executive officers pursuant to the terms of their employment agreements. However, on an annual basis, our compensation committee reviews and evaluates, with input from our chief executive officer, the need for adjustment of the base salaries of our named executive officers. For additional information concerning the employment agreements, see “Compensation Arrangements Adopted in Connection with this Offering—Employment Agreements.”

For 2012, Mr. Richison received an annual base salary of $495,051, Mr. York received an annual base salary of $330,028 and Mr. Boelte and Mr. Kerber received an annual base salary of $260,020 and $260,028, respectively. For 2013, Mr. Richison received an annual base salary of $534,788, Mr. York received an annual base salary of $343,363, and Mr. Boelte and Mr. Kerber received an annual base salary of $280,954 and $280,963, respectively. For 2014, Mr. Richison receives an annual base salary of $555,197, Mr. York receives an annual base salary of $356,400, and Mr. Boelte and Mr. Kerber each receive an annual base salary of $291,600.

Cash Bonuses

We generally only award performance-based cash bonuses to our named executive officers. However, in 2012 we awarded cash bonuses on a discretionary basis to our executive officers, including our named executive officers. For the named executive officers other than the Company’s chief executive officer, the compensation committee, in consultation with the Company’s chief executive officer, recommended cash bonuses for the board’s approval. The compensation committee reviewed the performance of the Company’s chief executive officer and recommended the bonus for the Company’s chief executive officer to the board of directors. For 2012, the compensation committee awarded Mr. Richison a cash bonus in an amount equal to $17,000 or 3% of his base salary. None of the other named executive officers received a cash bonus for 2012. For 2013, the compensation committee did not award cash bonuses to any of our named executive officers.

Equity Incentive Units

Our award of equity incentive units is the primary vehicle for offering long-term incentives to our executive officers, including our named executive officers. While we do not have any equity ownership guidelines for our named executive officers, we believe that equity incentive unit grants provide our named executive officers with a strong link to our long-term performance, create an incentive to achieve long-range performance goals and objectives and help to align the interests of our named executive officers and our stockholders. In 2012 and 2013, we issued equity incentive units to each of our named executive officers.

Material Terms of Equity Incentive Unit Grants

We have historically granted awards of equity incentive units to our named executive officers with a portion of the units being subject to time-based vesting conditions and another portion being subject to performance-based vesting conditions. Prior to the vesting of equity incentive units, the holder has no rights as a stockholder with respect to the shares subject to such unit, including voting rights or the right to receive dividends, dividend equivalents or distributions.

The following table sets forth the number of equity incentive units granted to our named executive officers during the fiscal year ended December 31, 2012, each of which were granted on April 30, 2012:


Name	Number of Management Incentive Units		Number of CEO Incentive Units
Chad Richison		9,359		126,067
Craig E. Boelte		8,062		—
Jeffrey D. York		8,062		—
William X. Kerber III		8,062		—

The following table sets forth the number of equity incentive units granted to our named executive officers during the fiscal year ended December 31, 2013, each of which were granted on October 14, 2013 (except for the units granted to Mr. York, which were granted on April 17, 2013):


Name	Management Incentive Units (#)		CEO Incentive Units (#)
Chad Richison		3,013		—
Craig E. Boelte		3,000		—
Jeffrey D. York		3,000		—
William X. Kerber III		3,000		—

During 2012 and 2013, we granted management equity incentive units to each of our named executive officers and we granted CEO Incentive Units only to our chief executive officer only during 2012. 50% of the equity incentive units awarded to each of our named executive officers are subject to time-based vesting conditions and 50% of the units are subject to performance-based vesting conditions. The equity incentive units that are subject to time-based vesting conditions vest 20% on each of the first five anniversaries of the date of grant or upon the earlier sale of the Company. A sale of the Company includes (i) a transaction or series of transactions (including by way of merger, consolidation, or sale of equity) the result of which is that the holders of units of the Company immediately prior to such transaction, do not, after giving effect to such transaction, own, directly or indirectly, through one or more intermediaries, at least 50% of the units of the Company, or (ii) a sale, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the Company’s assets determined on a consolidated basis to a person that is not affiliated with WCAS Holdings.

The equity incentive units that are subject to performance-based vesting conditions vest when the amount of cash, including cash dividends, distributions and proceeds, but excluding management fees, transaction-related fees and expense reimbursements with respect to, or in exchange for equity securities, or collectively, the Inflows, received by WCAS Holdings exceeds $280.4 million, as adjusted for payments made by WCAS Holdings with respect to or in exchange for securities after April 3, 2012 through the determination date, or the Outflows as follows. The equity incentive units vest 33% on the date for which the Inflows equal at least 2.0 times the Outflows and 100% on the date for which the Inflows equal at least 3.5 times the Outflows; provided the named executive officer is employed by us on such date. For any date on which the Inflows equal more than 2.0 times and less than 3.5 times the Outflows, the number of equity incentive units that are vested will be determined by straight-line interpolation.

25% of the CEO Incentive Units are subject to time-based vesting conditions and 75% of the units are subject to performance-based vesting conditions. The CEO Incentive Units that are subject to time-based vesting conditions vest 20% on each of the first five anniversaries of the date of grant or upon the earlier sale of the Company. The CEO Incentive Units that are subject to performance-based vesting conditions vest when the amount of the Inflows received by WCAS Holdings exceeds $386.3 million, as adjusted for payments made by WCAS Holdings with respect to or in exchange for securities after April 3, 2012 through the determination date, or the CEO Award Outflows. The CEO Incentive Units vest 33% on the date for which the Inflows equal at least 1.5 times the Outflows and 100% on the date on which either the Inflows equal at least (i) 2.0 times the CEO Award Outflows for a date on or prior to the second anniversary of the grant date or (ii) 2.5 times the CEO Award Outflows for a date following the second anniversary of the grant date; provided the chief executive officer continues to remain employed by us on such date. For any date on which the Inflows equal more than (i) 1.5 times and less than 2.0 times the CEO Award Outflows on or prior to the second anniversary of the grant date or (ii) 1.5 times and less than 2.5 times the CEO Award Outflows following the second anniversary of the grant date, the number of CEO Incentive Units that are vested will be determined by straight-line interpolation.

Performance-Based Cash Bonuses

We award annual performance-based cash bonuses to certain members of our management, including our named executive officers, to emphasize pay-for-performance and to reward them for the achievement of specified corporate performance criteria. Each named executive officer is eligible to receive an annual performance-based cash bonus, which we refer to as an annual cash bonus, in an amount up to a fixed percentage of his base salary, or bonus percentage. Under the employment agreements, our named executive officers are eligible to receive a performance-based cash bonus equal to either 100% of their base salary (for Messrs. Richison and Boelte) or 75% of their base salary (for Messrs. York and Kerber).

Each of our compensation committee and our board of directors has authority, in its sole discretion, to adjust the bonus percentage and performance criteria each year in connection with its review of the executive’s performance and has authority to allow an executive to receive a bonus payment in excess of his or her annual cash bonus for exceptional performance. Further, our board of directors reviews the assessment of each executive’s performance conducted by the compensation committee with respect to the annual cash bonus and retains the authority, in its sole discretion, to modify the amount of the annual cash bonus above or below the amount recommended by the compensation committee.

Target Bonuses

For 2012, our chief executive officer was eligible for a bonus payout of up to 100% of his base salary, our chief financial officer, chief sales officer and chief information officer were each eligible for a bonus payout of up to 75% of their respective base salaries. For 2013, our chief executive officer and chief financial officer were each eligible for a bonus payout of up to 100% of their respective base salaries, our chief sales officer and chief information officer were each eligible for a bonus payout of up to 75% of their respective base salaries and other members of management were eligible for a bonus payout of between 25% and 50% of their respective base

salaries, each as adjusted by the compensation committee based on achievement of our corporate performance criteria, in the event of exceptional individual or functional performance. The following table shows the 2012 and 2013 target bonus amounts as a percentage of base salary for each of our named executive officers.


Name	2012 Target Bonus Amount (as a percentage of base salary)			2013 Target Bonus Amount (as a percentage of base salary)
Chad Richison		100	%		100	%
Craig E. Boelte		75	%		100	%
Jeffrey D. York		75	%		75	%
William X. Kerber III		75	%		75	%

Corporate Performance Criteria

The corporate performance criteria that was used in determining the amount of performance bonuses for our named executive officers for 2012 and 2013 was GAAP revenue budget growth, with the exception of Mr. York, whose corporate performance criteria was booked sales budget. For 2012 and 2013, the performance target for GAAP revenue budget growth was 31.4% and 31.4%, respectively, and the performance target for booked sales budget was $28.7 million and $37.2 million, respectively.

Our named executive officers are not awarded performance-based cash bonuses if less than 80% of the performance target is achieved. Our named executive officers are awarded performance-based cash bonuses equal to the amount of the performance target achievement when 80% or more of the performance target is achieved. For example, if 110% of the performance target is achieved, the named executive officer receives 110% of the cash bonus target.

Actual Bonuses

For 2012, the compensation committee determined that the actual performance achieved for GAAP revenue budget growth was 34.1% and for booked sales budget was $30.0 million. Based on these results, the compensation committee determined that the amount of the performance target achievement for the GAAP revenue budget growth was 108.6% and for booked sales budget was 104.4%. The actual bonuses paid by the compensation committee for 2012 were as follows.


Name	Target 2012 Bonuses		Actual 2012 Bonuses
Chad Richison	$	475,992	$	516,921
Craig E. Boelte	$	187,500	$	203,623
Jeffrey D. York	$	247,500	$	258,268
William X. Kerber III	$	187,500	$	203,623

For 2013, the compensation committee determined that the actual performance achieved for GAAP revenue budget growth was 40.1% and for booked sales budget was $45.6 million. Based on these results, the compensation committee determined that the amount of the performance target achievement for the GAAP revenue budget growth was 127.7% and for booked sales budget was 122.6%. The actual bonuses paid by the compensation committee for 2013 were as follows.


Name	Target 2013 Bonuses		Actual 2013 Bonuses
Chad Richison	$	534,788	$	682,961
Craig E. Boelte	$	280,954	$	358,798
Jeffrey D. York	$	257,522	$	315,710
William X. Kerber III	$	210,722	$	269,107

Retirement and Other Benefits

We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. We maintain broad-based benefits that are provided to all employees, including medical, dental, group life insurance, accidental death and dismemberment insurance, long and short term disability insurance, and a 401(k) plan. Our named executive officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. The compensation committee in its discretion may revise, amend or add to the named executive officer’s benefits and perquisites if it deems it advisable.

401(k) Plan

We maintain a 401(k) profit sharing plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401 of the Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to 100% of his or her pre-tax compensation, up to a statutory limit, which was $17,000 for 2012 and $17,500 for 2013. Participants who are at least 50 years old can also make “catch-up” contributions, which in 2012 and 2013 was limited to an additional $5,500 above the statutory limit. Under our 401(k) plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan’s trustee, subject to participants’ ability to give investment directions by following certain procedures. Our 401(k) plan also permits us to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule.

We do not maintain any defined benefit pension plans or any nonqualified deferred compensation plans.

Perquisites and Other Personal Benefits

We provided our named executive officers with perquisites and other personal benefits in 2012 and 2013 that the compensation committee believed were reasonable and consistent with our overall compensation program. The perquisites and personal benefits that we provide to our named executive officers include matching 401(k) contributions, a supplemental medical plan that provides for visits and benefits with a private physician, key man insurance premium payments, country club dues and car lease payments. On limited occasions, we also allow named executive officers that are authorized to use chartered aircraft for business travel to, if space allows, bring family members or guests along on the trip. Because we reimburse for use of the aircraft only for business travel and we pay for the aircraft based on the flight hours regardless of the passenger load, the aggregate incremental cost to us for the additional passengers is a de minimis amount. The compensation committee periodically reviews the levels of perquisites and other personal benefits provided to our named executive officers.

Attributed costs, if any, of the personal benefits described above for the named executive officers for the years ended December 31, 2012 and 2013 are included in the summary compensation table under the heading “All Other Compensation.”

2013 Fiscal Year Outstanding Equity Awards At Fiscal Year-End Table

The following table lists all of the outstanding stock awards held on December 31, 2013 by each of the Company’s named executive officers. The table also includes the value of the stock awards based on the estimated fair market value of our equity incentive units as of December 31, 2013:


Name	Grant Date		Stock Awards
Name	Grant Date		Number of Units of Stock That Have Not Vested ⁽¹⁾		Market Value of Units of Stock That Have Not Vested ($) ⁽²⁾
Chad Richison		10/14/2013		3,013	$	49,594
		4/30/2012		8,423	$	231,879
		4/30/2012		119,764	$	2,127,696
Craig E. Boelte		10/14/2013		3,000	$	49,380
		4/30/2012		7,256	$	199,744
Jeffrey D. York		4/17/2013		3,000	$	42,390
		4/30/2012		7,256	$	199,744
William X. Kerber III		10/14/2013		3,000	$	49,380
		4/30/2012		7,256	$	199,744

(1)	Equity incentive units vest in accordance with the terms described above and are rounded to the nearest whole unit. See “—Narrative Discussion Regarding Summary Compensation Table—Equity Incentive Units—Material Terms of Equity Incentive Units” for more details.

(2)	The market value of our equity incentive units that have not vested is based on the estimated fair market value of our equity incentive units as of December 31, 2013, which was as follows:


Management Time Vesting	$	37.39
Management Performance Vesting	$	19.64
CEO Time Vesting	$	23.75
CEO Performance Vesting	$	16.17

Compensation Arrangements Adopted in Connection with this Offering

Long-Term Incentive Plan

We adopted the 2014 Plan, effective January 1, 2014, which permits us to grant an array of equity-based incentive awards to our named executive officers and other key employees, key contractors and outside directors of the Company. The following is a summary of the material terms of the 2014 Plan.

Purpose . The purpose of the 2014 Plan is to:

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increase the interests of recipients of awards under the 2014 Plan in the Company’s welfare;

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advance the Company’s interests by attracting and retaining qualified employees, outside directors and other persons providing services to the Company and/or its related companies; and

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provide a means through which the Company may attract able persons as employees, contractors and outside directors.

Administration . The 2014 Plan generally will be administered by the compensation committee of the board of directors. The compensation committee shall determine the recipients of awards, the types of awards to be

granted and the applicable terms, provisions, limitations and performance requirements of such awards. The compensation committee will also have the authority to conclusively interpret the 2014 Plan and any award agreements under the plan. The compensation committee may delegate certain duties to one or more officers of the Company as provided in the 2014 Plan.

Types of Awards . The 2014 Plan will provide for grants of incentive stock options, or ISOs, nonqualified stock options, or NQSOs, stock appreciation rights, or SARs, restricted stock, restricted stock units, or RSUs, performance awards, dividend equivalent rights, and other awards.

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Stock Options . A stock option is a contractual right to purchase shares at a future date at a specified exercise price. The per share exercise price of a stock option will be determined by our compensation committee and many not be less than the fair market value of a share of our common stock on the grant date (or higher for certain employees receiving ISOs). The compensation committee will determine the date after which each stock option may be exercised and the expiration date of each option, which may not exceed ten years from the grant date. The compensation committee may grant either ISOs qualifying under Section 422 of the Code or NQSOs, provided that only employees of the Company and its subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs.

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SARs . SARs represent a contractual right to receive, in cash or shares, an amount equal to the appreciation of one share of our common stock from the grant date. The grant price of a SAR cannot be less than the fair market value of a share of our common stock on the grant date. The compensation committee will determine the date after which each SAR may be exercised and the expiration date of each SAR, which may not exceed ten years from the grant date.

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Restricted Stock . Restricted stock is an award of shares of our common stock that are subject to restrictions on transfer and a substantial risk of forfeiture because of termination of service or failure to achieve certain performance conditions. Shares of restricted stock may be subject to restrictions which do not permit the holder to sell, transfer, pledge or assign his shares. The compensation committee will determine the vesting and forfeiture conditions for each grant of restricted stock.

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RSUs . RSUs represent a contractual right to receive the value of a share of our common stock at a future date, subject to specified vesting and other restrictions determined by the compensation committee. The compensation committee will determine the vesting conditions, payment dates, and forfeiture conditions for each grant of RSUs.

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Performance Awards . Performance awards, which may be denominated in cash or shares, will be earned on the satisfaction of performance conditions specified by our compensation committee at the end of a specified performance period. The compensation committee will determine the length of the performance period, the maximum payment value of an award, and the minimum performance goals required before payment will be made, so long as such provisions are not inconsistent with the terms of the 2014 Plan, and to the extent an award is subject to Section 409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code and any applicable regulations or guidance. To the extent the Company determines that Section 162(m) of the Code shall apply to a performance award granted under the 2014 Plan, it is the intent of the Company that performance awards constitute “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations thereunder. Further, if complying with Section 162(m) of the Code, no participant may receive performance awards in any calendar year which have an aggregate value of more than $74,128,902, and if such awards involve the issuance of common stock, the aggregate value shall be based on the fair market value of such shares on the time of grant of such awards. In certain circumstances, the compensation committee may, in its discretion, determine that the amount payable with respect to certain performance awards will be reduced from the amount of any potential awards. However, the compensation committee may not, in any event, increase the amount of compensation payable to an individual upon the attainment of a performance goal intended to satisfy the requirements of Section 162(m) of the Code. With respect to a performance award that is not intended to satisfy the

requirements of Section 162(m) of the Code, if the compensation committee determines in its sole discretion that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, or for other reasons that the compensation committee deems satisfactory, it may modify the performance measures or objectives and/or the performance period.

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Dividend Equivalent Rights . Dividend equivalent rights represent the right of the participant to receive cash or stock equal in value to the dividends that would have been paid on the shares of common stock specified in the award if such shares were held by the participant.

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Other Awards . Our compensation committee is authorized to grant other forms of awards, based upon, payable in, or otherwise related to, in whole or in part, shares of common stock if the compensation committee determines that such other form of award is consistent with the purpose and restrictions of the 2014 Plan.

Performance Measures . Awards of restricted stock, RSUs, performance awards and other awards under the 2014 Plan may be made subject to the attainment of performance goals relating to one or more business criteria used to measure the performance of the Company as a whole or any business unit of the Company, which, where applicable, shall be within the meaning of Section 162(m) of the Code and consist of one or more or any combination of the following criteria: cash flow; cost; revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company’s common stock; return on assets, equity or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders, or the Performance Criteria. Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases, or (v) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under a methodology established by the compensation committee prior to the issuance of an award which is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code is applicable, the compensation committee may not in any event increase the amount of compensation payable to an individual upon the attainment of a performance goal.

Authorized Shares . The Company has reserved 11,350,881 of our shares of common stock for issuance pursuant to the 2014 Plan, of which 100% may be delivered pursuant to ISOs. In addition, the maximum number of shares of common stock with respect to which stock options or SAR’s may be granted to an officer of the Company subject to Section 16 of the Exchange Act of 1934, as amended, or a “covered employee” as defined in Section 162(m)(3) of the Code during any calendar year is limited to 5,323,907 shares of common stock. To the extent any award under the 2014 Plan is forfeited, expired or cancelled, then the number of shares of common stock covered by the award or stock option so forfeited, expired or canceled will again be available for awards under the 2014 Plan.

Capital Adjustments . In the event that any extraordinary dividend or other extraordinary distribution, recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of common stock or other securities of the

Company, issuance of warrants or other rights to purchase common stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an award, the compensation committee shall adjust any or all of the following so that the fair value of the award immediate after the transaction or event is equal to the fair value of the award immediately prior to the transaction or event:

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the number of shares and type of common stock (or the securities or property) which thereafter may be made the subject of awards;

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the number of shares and type of common stock (or other securities or property) subject to outstanding awards;

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the number of shares and type of Common Stock (or other securities or property) specified as the annual per-participant limitation specified in the 2014 Plan;

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the option price of each outstanding award;

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the amount, if any, the Company pays for forfeited shares of common stock; and

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the number of or SAR price of shares of common stock then subject to outstanding SARs previously granted and unexercised under the plan, to the end that the same proportion of the Company’s issued and outstanding shares of common stock in each instance shall remain subject to exercise at the same aggregate SAR price, provided that, the number of shares of common stock (or other securities or property) subject to any award shall always be a whole number.

Notwithstanding the foregoing, no adjustment shall be made or authorized to the extent that such adjustment would cause the 2014 Plan or any award to violate Section 422 of the Code or Section 409A of the Code. All such adjustments must be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject.

Eligibility . Any employees, contractors and outside directors whose judgment, initiative and efforts contributed or may be expected to contribute to the successful performance of the Company are eligible to receive awards under the 2014 Plan.

Vesting; Termination of Service . The compensation committee, in its sole discretion, may determine that an award will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its grant date, or until the occurrence of one or more specified events, subject in any case to the terms of the 2014 Plan. If the compensation committee imposes conditions upon vesting, then, except as otherwise provided below, subsequent to the grant date the compensation committee may, in its sole discretion, accelerate the date on which all or any portion of the award may be vested. “Full Value Awards” (i.e., restricted stock or RSUs) that constitute performance awards must vest no earlier than one year after the date of grant, and Full Value Awards that are payable upon the completion of future services must vest no earlier than over the three year period commencing on the date of grant. Notwithstanding the foregoing, the compensation committee may, in its sole discretion, accelerate the vesting or waive any applicable restriction period for such Full Value Awards, provided that the shares of common stock subject to such awards shall be “Exempt Shares” (as defined in the 2014 Plan), unless such acceleration or waiver occurs by reason of the participant’s death, disability, retirement, or occurrence of a change in control. The number of Exempt Shares is limited to 10% of the number of shares available for issuance under the 2014 Plan, plus the total number of shares subject to awards that are received in exchange for incentive units in Paycom Payroll Holdings, LLC. The compensation committee may impose on any award, at the time of grant or thereafter, such additional terms and conditions as the compensation committee determines, including terms requiring forfeiture of awards in the event of a participant’s termination of service. The compensation committee will specify the circumstances under which performance awards may be forfeited in the event of a termination of service by a participant prior to the end of a performance period or settlement of awards. Except as otherwise determined by the compensation committee, restricted stock will be forfeited upon a participant’s termination of service during the applicable restriction period.

Change in Control . Upon the effective date of any change in control (as defined in the 2014 Plan), merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the common stock or the rights thereof (or any rights, options, or warrants to purchase same), or any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, all awards granted under the 2014 Plan may be cancelled by the Company upon (i) notice and a ten (10) day period during which the participant is permitted to purchase such shares of common stock subject to such awards or (ii) payment to the holder of an amount equal to a reasonable estimate of the difference between the fair market value of a share of stock underlying such award and the price per share of such award to be paid by the participant, multiplied by the number of shares subject to the award.

Transferability . Awards under the plan generally may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution; provided, however, that the compensation committee may permit transfers to or for the benefit of the participant’s family.

Effective Date and Expiration; Termination and Amendment . The 2014 Plan became effective on January 1, 2014, subject to and conditioned upon stockholder approval, and will terminate on January 1, 2024, unless it is terminated earlier by our board of directors. No awards may be made under the 2014 Plan after its expiration date, but awards made prior thereto may extend beyond that date. Our board of directors may at any time and from time to time, without the consent of the participants, alter, amend, revise, suspend, or discontinue the 2014 Plan in whole or in part. Our board of directors does not need stockholder approval to amend our 2014 Plan unless required by any securities exchange or inter-dealer quotation system on which the common stock is listed or by applicable law. Unless required by law, no action by our board of directors regarding amendment or discontinuance of the 2014 Plan may adversely affect any rights of any participants or obligations of the Company to any participants with respect to any outstanding award under the 2014 Plan without the consent of the affected participant.

Employment Agreements

On December 30, 2013, we entered into employment agreements with each of our named executive officers, each of which were effective on, and not effective until, January 1, 2014. With the exception of the annual compensation (base salary and annual bonus potential), the material terms of the employment agreements of all four of our named executive officers are substantially the same. The summary of the employment agreements below does not contain complete descriptions of all provisions of the employment agreements of our named executive officers, copies of which will be included as exhibits to the registration statement of which this prospectus forms a part. See “Where You Can Find Additional Information.”

Under the employment agreements, Mr. Richison receives an annual base salary of $555,197, Mr. Boelte receives an annual base salary of $291,600, Mr. York receives an annual base salary of $356,400 and Mr. Kerber receives an annual base salary of $291,600. Each named executive officer is eligible to receive an annual bonus equal to 100% of his base salary (for Messrs. Richison and Boelte) or 75% of his base salary (for Messrs. York and Kerber), with the amount of such bonus to be determined by our compensation committee in accordance with the plans, policies and procedures adopted by the compensation committee from time to time.

The employment agreements also provide that each named executive officer is eligible to participate in, or receive benefits under, the Company’s executive benefit plan and any plan or arrangement made available to our employees, including any health, dental, vision, disability, life insurance, 401(k), or other retirement programs in accordance with the terms and conditions of such plans or arrangements. Each named executive officer is also entitled to vacation time, Company automobile and reimbursement of business expenses. In addition, we have agreed to provide Mr. Richison the use of a private aircraft, home security while he travels on Company business and a country club membership.

In connection with the employment agreements, each named executive officer agreed to confidentiality, noncompetition, noninterference and intellectual property protection provisions.

The employment agreements have initial terms of three (3) years following the consummation of this offering and automatically renew for successive one (1) year periods, unless earlier terminated by the Company or the named executive officer. Each named executive officer’s employment terminates upon death, disability, termination by the Company with or without “cause,” or termination by the named executive officer with or without “good reason.” In each case, the named executive officer is entitled to (i) payment of any earned but unpaid salary and accrued but unused vacation time and (ii) payment of any business expenses incurred but not reimbursed. In addition, if the named executive officer’s employment is terminated by the Company without cause or by the named executive officer with good reason, subject to the execution and return of a release of claims, the named executive officer is entitled to (i) continuation of his base salary for the length of the remaining “Restricted Period” following his termination, (ii) continuation of health insurance benefits for the length of the remaining Restricted Period, and (iii) a pro rata amount of the bonus the named executive officer would have earned as determined by the Compensation Committee for the year in which the termination occurred. For purposes of the employment agreements, after the offering, the “Restricted Period” will elapse upon the later of thirty-six (36) months following the consummation of the offering or twelve (12) months following the named executive officer’s date of termination of employment.

Each of the employment agreements define “cause” as (i) the repeated failure to perform such duties as are lawfully requested by the board of directors, (ii) the failure by named executive officer to observe material policies of the Company and its subsidiaries, (iii) gross negligence or willful misconduct in the performance of his duties, (iv) the material breach of employment or any non-competition, non-solicitation or similar restrictive agreement with the Company, (v) fraud, embezzlement, disloyalty or dishonesty with respect to the Company, (vi) use of illegal drugs or repetitive abuse of other drugs or alcohol which interferes with the performance of his duties, or (vii) the commission of any felony or of a misdemeanor involving dishonesty, disloyalty or moral turpitude. Each of the employment agreements define “good reason” as (i) any material reduction by the Company in the named executive officer’s base salary without prior consent, (ii) following a change in control, any change in the named executive officer’s status, reporting, duties or position that represents a demotion or diminution from such named executive officer’s prior status, or (iii) any material breach by the Company of the employment agreement between the Company and the named executive officer.

In connection with the employment agreements, we provided equity grants of restricted stock under our 2014 Plan to each of our named executive officers on January 1, 2014 to replace unvested limited liability company incentive units held by our named executive officers prior to the Reorganization. These grants are designed to provide our named executive officers with equity incentive awards equivalent in value to the incentive units they held prior to the Reorganization and are subject to the terms of the respective restricted stock award agreements with each officer. Our named executive officers were granted restricted stock awards in the following amounts:


Name	Shares Outstanding Subject to Time Vesting Awards (#)		Shares Outstanding Subject to Performance Vesting Awards (#)
Chad Richison		1,239,670		4,084,237
Craig E. Boelte		197,451		231,648
Jeffrey D. York		200,396		234,588
William X. Kerber III		197,451		231,648

The restricted stock awards have voting rights but do not have cash dividend rights and are subject to restrictions and possible forfeiture until such awards have vested. A portion of the restricted stock awards are subject to time-based vesting conditions and a portion are subject to performance-based vesting conditions. Upon completion of this offering, all unvested awards will become fully vested in the event of the named executive officer’s death while performing his duties and responsibilities for the Company. In the event of a termination of service of the named executive officer due to disability, by the named executive officer for good reason (as defined above), by the Company without cause (as defined above), or death (other than while performing his duties and responsibilities for the Company), the Board may, in its sole discretion, accelerate vesting of all or any

portion of the unvested awards. Further, if the chief executive officer’s employment is terminated by the Company without cause (as defined above), all unvested awards will remain outstanding and eligible for vesting for one year following such termination of employment, and the board of directors may accelerate the vesting of the other remaining unvested awards, in its discretion. In the event of a change in control (as defined in the 2014 Plan), all unvested awards not assumed by the surviving entity shall become fully vested immediately prior to the effective date of such change in control. Other than as provided above, all unvested awards shall be forfeited upon the named executive officer’s termination of service or upon engaging in certain forfeiture activities involving violations of noncompetition, noninterference, non-solicitation provisions of the employment agreement.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In addition to the executive officer and director compensation arrangements discussed above under “Executive Compensation,” we describe transactions since January 1, 2010 to which we have been a participant, in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest below.

The Reorganization

In anticipation of this offering, we consummated the Reorganization as described under “The Reorganization,” which description is incorporated by reference herein.

Stockholders Agreement

Election of Directors

•

subject to certain conditions, one representative designated by the holders of a majority of the shares of common stock held by the Minority Holders, who shall be Chad Richison for so long as he is employed by us.

Termination

The Stockholders Agreement will terminate upon the latest of the date on which: (i) Chad Richison ceases to be our chief executive officer, (ii) the date on which Chad Richison ceases to be a director and (iii) the parties to the Stockholders Agreement collectively cease to own less than 40% of our issued and outstanding shares of common stock.

Registration Rights Agreement

In connection with the Reorganization, we and Payroll, the WCAS Funds, WCAS Holdings, WCAS Management Corporation, Richard Aiello, Robert J. Levenson, Sue Ann Jordan, Jeffrey York and certain entities affiliated with these individuals and Chad Richison entered into a registration rights agreement, or the Registration Rights Agreement. After this offering, the parties to the Registration Rights Agreement will be entitled to certain rights with respect to registration of shares of our common stock under the Securities Act.

These shares are referred to as registrable securities. The holders of these registrable securities will possess the registration rights contained in the Registration Rights Agreement that are described in additional detail below.

Demand Registration Rights

Under the Registration Rights Agreement, upon the written request of the holders of a majority of the registrable securities owned by WCAS Holdings and its affiliates to register all or part of their registrable securities on a registration statement under the Securities Act, we will be obligated to register the sale of all registrable securities that holders may request in writing to be registered within 20 days of the mailing of a notice by us to all holders of such registration. The demand registration rights may not be exercised until six months after the date of the execution of the underwriting agreement. We are required to effect no more than four registration statements on Form S-1, subject to certain exceptions, and an unlimited number of registration statements on Form S-3. We may postpone the filing of a registration statement for up to 120 days once in a 12-month period if in the good faith judgment of our board of directors such registration would be materially harmful to our economic prospects, and we are not required to effect the filing of a registration statement within six months following the effective date of, a previous registration of the registrable securities.

Piggyback Registration Rights

If we register any of our securities for public sale, we will have to register all registrable securities that the holders of such securities request in writing be registered within 20 days of mailing of notice by us to all holders of the proposed registration, subject to certain exceptions. However, this right does not apply to this offering, a registration statement on Form S-8 or S-4 or a demand registration. The managing underwriter of any underwritten offering will have the right to limit, due to marketing reasons, the number of shares registered by these holders.

Form S-3 Registration Rights

To the extent we are eligible to use a registration statement on Form S-3, the holders of a majority of the registrable securities owned by WCAS Holdings and its affiliates can request that we register all or a portion of their shares on a registration statement on Form S-3. We are required to use our best efforts to file one or more registration statements on Form S-3 upon the exercise of these rights, subject to certain exceptions.

Registration Expenses

We are required to pay all expenses incurred in connection with each of the registrations described above, except for underwriting discounts and commissions. We have also agreed to pay the expenses incurred by WCAS Holdings and its affiliates in connection with the registration of shares of common stock in this offering, which is currently approximately $ .

Expiration of Registration Rights

The registration rights described above will survive our initial public offering and will terminate as to any stockholder as such time as the stockholder no longer holds shares of common stock.

April 2012 Corporate Reorganization

Corporate Reorganization

In April 2012, Holdings was created and acquired 100% of the equity interests in Payroll pursuant to a corporate reorganization, or the April 2012 Corporate Reorganization. The April 2012 Corporate Reorganization was accomplished through the following steps:

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Payroll formed a new wholly-owned limited liability company subsidiary, Holdings, and Holdings formed a new wholly-owned limited liability company subsidiary, Paycom Payroll Merger Sub, LLC, or Merger Sub;

•

Merger Sub merged with and into Payroll, with Payroll remaining as the surviving entity and a wholly-owned subsidiary of Holdings;

•

Holdings issued the 2022 Note, a $18.8 million note payable to WCAS Capital IV, an affiliate of Welsh, Carson, Anderson & Stowe, in exchange for cash of $16.4 million and a discount of approximately $2.4 million;

•

WCAS CP IV Blocker, Inc., a subsidiary of WCAS Capital IV, purchased 6,839 Series A Preferred Units of Holdings for $2,409,122; and

•

Holdings distributed to its members either (i) cash or (ii) equivalent value of new 14% Series C Preferred Units, as elected by the members.

Related Party Distribution

In connection with the April 2012 Corporate Reorganization, we paid a $18.8 million cash distribution to our common unit holders on a pro rata basis, including to our executive officers and certain of their affiliated entities.

Related Party Debt

In connection with the April 2012 Corporate Reorganization, we entered into the 2022 Note with WCAS Capital IV. WCAS Capital IV is an affiliate of Welsh, Carson, Anderson & Stowe. The 2022 Note is due on April 3, 2022 and interest accrues at an annual rate of 10% and is payable semiannually in arrears on December 31 and June 30 of each year. We may, at our option, choose to defer all or a portion of the accrued interest on the 2022 Note that is due and payable on any payment date, provided that such amount of accrued interest shall be multiplied by 1.3 and added to the principal amount of the note on such interest payment date (with the result that such interest will have accrued at an effective rate of 13.0% instead of 10.0% through such payment date). As of December 31, 2013, such option has not been elected and all interest had been paid in cash. As of December 31, 2013, the outstanding principal amount of the 2022 Note was $18.8 million.

Payables

At December 31, 2013 and 2012, Holdings owed $103,447 and $83,089, respectively, to Welsh, Carson, Anderson and Stowe and certain of their affiliates, representing tax distributions and travel expenses paid by Welsh, Carson, Anderson and Stowe and charged to Holdings.

Repurchase of Incentive Units

We entered into a Limited Liability Company Unit Redemption Agreement, effective as of January 26, 2013, pursuant to which we purchased 2,605 incentive units from John Kerber at a purchase price of $260.21 per unit, which price was based on a third party appraisal and an internal appraisal. The incentive units were purchased from John Kerber for an aggregate purchase price of approximately $677,847. John Kerber is one of our former employees and the brother of William X. Kerber III, our chief information officer.

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Lease of Office Space

During the years ended December 31, 2013, 2012 and 2011, we paid rent on our Dallas office space in the amounts of $254,000, $267,000 and $257,000, respectively. The Dallas office building is owned by 417 Oakbend, LP, a Texas limited partnership. Jeffrey D. York, our Chief Sales Officer, owns a .01% general partnership interest and a 10.49% limited partnership interest in 417 Oakbend, LP.

Real Property Agreements

During 2012 and 2013, we had the following related party transactions with Kilpatrick Partners, L.L.C., or Kilpatrick Partners. Mr. Richison, our President and Chief Executive Officer, is the manager of, and Mr. Richison and his wife own 100% of, Kilpatrick Partners.

•

We entered into a Real Property Purchase Agreement, dated November 28, 2012, with Kilpatrick Partners pursuant to which we purchased approximately 17.6 acres of land for the construction of a second building at our corporate headquarters in December 2012. The land was purchased from Kilpatrick Partners for a purchase price of approximately $2,324,084, which valuation was determined by a third party appraiser.

•

We entered into a Real Property Purchase Agreement, dated October 16, 2013, with Kilpatrick Partners pursuant to which we purchased approximately 18.3 acres of land adjacent to our corporate headquarters in November 2013. The land was purchased from Kilpatrick Partners for a purchase price of approximately $4,788,586, which valuation was determined by a third party appraiser.

•

We entered into a Right of First Refusal Agreement, dated October 4, 2013, or the Right of First Refusal Agreement, with Kilpatrick Partners pursuant to which we were granted a right of first refusal to purchase approximately 28.1 acres of land adjacent to our corporate headquarters. Pursuant to the Right of First Refusal Agreement, we have the right to purchase any portion of the covered property for ten days after Kilpatrick Partner’s receipt of a third party bona fide offer to purchase the property.

Indemnification of Directors and Officers

Prior to the consummation of this offering, we intend to enter into indemnification agreements with each of our current directors and executive officers. We also intend to enter into indemnification agreements with our future directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws will require us to indemnify our directors to the fullest extent permitted by Delaware law. We expect to increase our directors’ and officers’ liability insurance coverage prior to the completion of this offering.

Contribution Agreement

Under the terms of a contribution agreement that was entered into in connection with the Reorganization, we are required to direct a portion of any repayment of the 2017 Note to Messrs. Aiello and Levenson and certain of their affiliated or related entities. The amount of these cash payments will be deemed have been paid to WCAS X and WCAS Management Corporation. We anticipate being required to make an aggregate cash payment of approximately $82,000 to such persons that will be allocated based on their pro rata share of the total outstanding Series B Preferred Units of Holdings held immediately prior to the Reorganization. See “Use of Proceeds.”

Review, Approval or Ratification of Transactions with Related Parties

We have adopted a formal written policy that our executive officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us, in which the amount involved exceeds $120,000, without the prior review and approval of our audit committee. In approving or rejecting any such proposal, our audit committee will consider all of the relevant facts and circumstances of the related party transaction and the related party’s relationship and interest in the transaction. All of the transactions described above were entered into prior to the adoption of this policy, except for the entry into the Stockholders Agreement, Registration Rights Agreement, Real Property Purchase Agreement, dated October 16, 2013 and the Right of First Refusal Agreement. All of the transactions described above were either approved or ratified in accordance with the terms of this policy.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of , 2014, and as adjusted to reflect the sale of common stock offered by us in our initial public offering, for:

•

each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of our voting securities;

•

each of our directors;

•

each of our named executive officers;

•

all of our directors and executive officers as a group; and

•

each of the selling stockholders.

We have determined beneficial ownership in accordance with the rules of the SEC. Under such rules, a person is generally deemed to beneficially own a security if such person has sole or shared voting or investment power with respect to that security, including with respect to options and warrants that are currently exercisable or exercisable within 60 days. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to community property laws where applicable. Each of the persons and entities named in the table below acquired their shares of common stock pursuant to the Reorganization. See “The Reorganization” for additional information.

Applicable percentage ownership is based on 53,829,674 shares of common stock outstanding at , 2014. For purposes of the table below, we have assumed that shares of common stock will be issued by us in our initial public offering. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all unvested shares of restricted stock because holders of unvested restricted stock under the 2014 Plan hold the right to vote such stock.


	Shares Beneficially Owned Prior to Offering				Shares Being Offered		Shares Beneficially Owned After Offering
Name of Beneficial Owner ⁽¹⁾	Number		%		Shares Being Offered		Number	%
5% Stockholders:
Welsh, Carson, Anderson & Stowe X, L. P. ⁽²⁾		30,452,458		56.6
WCAS Capital Partners IV, L. P. ⁽²⁾		323,307		*
WCAS Management Corporation ⁽²⁾		136,015		*
Ernest Group, Inc. ⁽³⁾		7,170,999		13.3		—
Non-Employee Directors:
Robert J. Levenson ⁽⁴⁾		628,745		1.2
Rob Minicucci		—		—		—
Conner Mulvee		—		—		—
Frederick C. Peters II		—		—		—
Sanjay Swani		—		—		—
Named Executive Officers:
Chad Richison ⁽⁶⁾		13,018,729		24.2		—
Craig E. Boelte ⁽⁷⁾		545,769		1.0		—
Jeffrey D. York ⁽⁸⁾		1,367,391		2.5		—
William X. Kerber III ⁽⁹⁾		1,343,275		2.5		—
All directors and current executive officers as a group (9 persons)		16,903,909		31.4

*	Less than one percent of common stock outstanding.

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(1)	Unless otherwise indicated, the address of each beneficial owner in the table above is c/o Paycom Software, Inc., 7501 W. Memorial Road, Oklahoma City, Oklahoma 73142.

(2)

The stockholders are WCAS X, WCAS Capital IV and WCAS Management Corporation. WCAS X Associates LLC, or X Associates, is the general partner of WCAS X. The managing members of X Associates are Pat Welsh, Bruce Anderson, Russ Carson, Tony de Nicola, Paul Queally, Jon Rather, Sanjay Swani, Scott Mackesy, Sean Traynor, Eric Lee, Mike Donovan, Brian Regan, Tom Scully and Tony Ecock. As a result, and by virtue of the relationships described above, each of the managing members of X Associates may be deemed to share beneficial ownership of the shares owned by WCAS X. The managing member of WCAS Capital IV is WCAS CP IV Associates LLC, or CP Associates. The managing members of CP Associates are Pat Welsh, Bruce Anderson, Russ Carson, Tony de Nicola, Paul Queally, Jon Rather, Sanjay Swani, Scott Mackesy, Sean Traynor, Eric Lee, Mike Donovan, Brian Regan, Tom Scully and Tony Ecock. As a result, and by virtue of the relationships described above, each of the managing members of CP Associates may be deemed to share beneficial ownership of the shares owned by WCAS Capital IV. WCAS Management Corporation is an affiliate of Welsh, Carson, Anderson & Stowe. The members of the board of directors of WCAS Management Corporation are Jon Rather, Paul Queally, Tony de Nicola and Russ Carson. As a result, and by virtue of the relationships described above, each of the directors of WCAS Management Corporation may be deemed to share beneficial ownership of the shares owned by WCAS Management Corporation. The address of each of the entities identified in this footnote is 320 Park Avenue, Suite 2500, New York, New York 10022.

(3)	Ernest Group, Inc. is a private corporation that is wholly owned by Mr. Richison and certain trusts for Mr. Richison’s children, for which Mr. Richison serves as trustee. Mr. Richison may be deemed to beneficially own the shares of common stock owned by Ernest Group, Inc.

(4)

Includes 78,593 shares of common stock owned by the ELK II 2012 Descendants’ Trust u/a dated December 26, 2012 and 78,593 shares of common stock owned by the SLY II 2012 Descendants’ Trust u/a dated December 26, 2012, for which Mr. Levenson is the settlor of the trust. Also includes 157,373 shares of common stock owned by Lenox Capital Group, LLC, for which Mr. Levenson is the managing member.

(6)

Includes 7,170,999 shares of common stock owned by Ernest Group, Inc., 229,135 shares of common stock owned by The Ruby Group, Inc. and 5,323,907 shares of restricted stock. Mr. Richison is the sole director of Ernest Group, Inc. and Ernest Group, Inc. is wholly owned by Mr. Richison and certain trusts for Mr. Richison’s children, for which Mr. Richison serves as trustee. Mr. Richison may be deemed to beneficially own the shares of common stock owned by Ernest Group, Inc. Mr. Richison is the sole director and sole shareholder of The Ruby Group, Inc. and may be deemed to beneficially own the shares of common stock owned by The Ruby Group, Inc.

(7)	Includes 429,099 shares of restricted stock.

(8)	Includes 434,984 shares of restricted stock.

(9)

Includes 879,877 shares of common stock owned by WK-EGI, Inc. and 429,099 shares of restricted stock. Mr. Kerber is the sole director of WK-EGI, Inc. and WK-EGI, Inc. is wholly owned by Mr. Kerber and certain trusts for which Mr. Kerber serves as trustee. Mr. Kerber may be deemed to beneficially own the shares of common stock owned by WK-EGI, Inc.

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DESCRIPTION OF CAPITAL STOCK

General

The following summary describes our capital stock as it will be in effect upon the consummation of this offering. Upon consummation of this offering, our authorized capital stock will consist of one hundred million shares of common stock, par value $0.01 per share, and ten million shares of preferred stock, par value $0.01 per share. The following information reflects the filing of our certificate of incorporation. Immediately following the completion of this offering, there are expected to be shares of common stock and no shares of preferred stock outstanding.

Common Stock

Dividend Rights

Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. See “Dividend Policy.”

Voting Rights

Except as required by law or matters relating solely to the terms of preferred stock, each outstanding share of common stock will be entitled to one vote on all matters submitted to a vote of stockholders. Holders of shares of our common stock shall have no cumulative voting rights. Except in respect of matters relating to the election and removal of directors on our board of directors and as otherwise provided in our certificate of incorporation or required by law, all matters to be voted on by our stockholders must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter. In the case of election of directors, all matters to be voted on by our stockholders must be approved by a plurality of the votes entitled to be cast by all shares of our common stock.

Liquidation

In the event of the liquidation, dissolution or winding up of our company, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.

Rights and Preferences

Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate in the future.

Undesignated Preferred Stock

Our board of directors may, without further action by our stockholders, from time to time, direct the issuance of shares of preferred stock in series and may, at the time of issuance, determine the designations, powers, preferences, privileges, and relative participating, optional or special rights as well as the qualifications, limitations or restrictions thereof, including, but not limited to:

•

the designation of the series;

•

the number of shares of the series, which our board of directors may, except where otherwise provided in the preferred stock designation, increase or decrease, but not below the number of shares then outstanding;

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•

whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series;

•

the dates at which dividends, if any, will be payable;

•

the redemption rights and price or prices, if any, for shares of the series;

•

the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series;

•

the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of our company;

•

whether the shares of the series will be convertible into shares of any other class or series, or any other security, of our company or any other entity, and, if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates, any rate adjustments, the date or dates as of which the shares will be convertible and all other terms and conditions upon which the conversion may be made;

•

restrictions on the issuance of shares of the same series or of any other class or series; and

•

the voting rights, if any, of the holders of the series.

Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of our common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of our liquidation before any payment is made to the holders of shares of our common stock. Under specified circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the removal of incumbent management. We may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of our common stock and the market value of our common stock. Upon consummation of this offering, there will be no shares of preferred stock outstanding and we have no present intention to issue any shares of preferred stock.

Equity Grants

As of December 31, 2013, no shares of our common stock were issuable upon exercise of outstanding options and no shares of restricted common stock were outstanding under the 2014 Plan.

Stockholders Agreement

After this offering, the Stockholders Agreement Parties will beneficially own or control, in the aggregate shares of our common stock, or approximately % of our outstanding shares. For a description of the Stockholders Agreement, see “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Registration Rights Agreement

After this offering, the parties to the Registration Rights Agreement, including Payroll, the WCAS Funds, WCAS Capital IV, WCAS Holdings, Mr. Richison, Mr. York and certain entities affiliated with Mr. Richison, holding approximately shares of our common stock, will be entitled to certain registration rights with respect to such shares under the Securities Act. The holders of these registrable securities possess registration rights pursuant to the terms of the Registration Rights Agreement. For a description of the Registration Rights Agreement, see “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

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Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and Certain Provisions of Delaware Law

Our certificate of incorporation and our bylaws contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with the board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give the board of directors the power to discourage acquisitions that some stockholders may favor.

Classified Board of Directors

In accordance with the terms of our certificate of incorporation and bylaws, our board of directors will be divided into three classes, as nearly equal in number as practicable, with members of each class serving staggered three-year terms. Our bylaws will provide that the authorized number of directors shall be determined as set forth in the Stockholders Agreement, provided that following the time the Stockholders Agreement is terminated the number of directors shall be fixed exclusively from time to time solely by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes as the board of directors may determine in its discretion. Our certificate of incorporation and bylaws also provide that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors. Our classified board of directors could have the effect of delaying or discouraging an acquisition of us or a change in our management.

Undesignated Preferred Stock

The ability to authorize undesignated preferred stock under our certificate of incorporation will make it possible for our board of directors to issue preferred stock with super majority voting, special approval, dividend or other rights or preferences on a discriminatory basis that could impede the success of any attempt to acquire us or otherwise effect a change in control of us. These and other provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals

Our certificate of incorporation and bylaws provide that special meetings of the stockholders may be called only by the majority of our board of directors, the president or by the secretary at the request of the holders of 50% or more of the outstanding shares of common stock. Our bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

Our bylaws include advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply with advance notice requirements and provide us with certain information. Subject to the terms of the Stockholders Agreement, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders. Our bylaws allow the chairman of a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Our certificate of incorporation provides that the board of directors is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of not less than a majority of the total voting power of all outstanding securities of the Company entitled to vote generally in the election of directors.

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No Cumulative Voting

Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise and our certificate of incorporation will not expressly provide for cumulative voting.

Action by Written Consent

Pursuant to Section 228 of the Delaware General Corporation Law, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the Company’s certificate of incorporation provides otherwise. Our certificate of incorporation provides that stockholders may only act by written consent until such date that the parties to the Stockholder Agreement cease collectively to beneficially own (directly or indirectly) more than 50% of the outstanding shares of common stock, or the Trigger Date.

Amendment Provisions

The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed by a majority vote of our board of directors or the affirmative vote of the holders of a majority of the total voting power of all outstanding securities of the Company entitled to vote in an annual election of directors. In addition, the affirmative vote of the holders of a majority of the total voting power of all outstanding securities of the Company entitled to vote in an annual election of directors will be required to amend certain provisions of our certificate of incorporation prior to the Trigger Date. From and after the Trigger Date, the affirmative vote of the holders of at least 66 ² ⁄ ₃ % of the total voting power of all outstanding securities of the Company entitled to vote in annual election of directors will be required to amend certain provisions of our certificate of incorporation.

Authorized but Unissued Shares

The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the national securities exchange. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares at prices higher than prevailing market prices.

Section 203 of Delaware General Corporation Law

In our certificate of incorporation, we have elected not to be governed by Section 203 of Delaware General Corporation Law. However, our certificate of incorporation will contain provisions that are similar to Section 203. Specifically, our certificate of incorporation will provide that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the person became an interested stockholder, unless:

•

prior to the time the person became an interested stockholder, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

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•

upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the Company outstanding at the time the transaction commenced, excluding certain shares; or

•

at or subsequent to the time the person became an interested stockholder, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a person who, together with affiliates and associates, owns or, within the previous three years owned, 15% or more of our voting stock. However, in our case, the principal investors (meaning WCAS X and WCAS Capital IV, and their respective affiliates, employees and representatives, and Chad Richison and his affiliates) and any of their direct or indirect transferees receiving 15% or more of our voting stock will not be deemed to be interested stockholders regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions, subject to certain exceptions for the acquisition of additional shares of common stock. This provision could delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.

Choice of Forum

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by our directors, officers, or other employees to us or to our stockholders, (iii) any action asserting a claim against us or any director, officer or other employee arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or bylaws or (iv) any action asserting a claim against us or any director, officer or other employee that is governed by the internal affairs doctrine. It is possible that a court could rule that this provision is not applicable or is unenforceable. Any person or entity purchasing or otherwise acquiring shares of capital stock of the Corporation will be deemed to have notice of and consented to this provision of our certificate of incorporation.

Limitations of Liability and Indemnification

See “Certain Relationships and Related Party Matters—Indemnification of Directors and Officers.”

Listing

We intend to list our common stock on the NYSE under the symbol “PAYC.”

Transfer Agent and Registrar

Upon the closing of this offering, the transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been a public market for shares of our common stock. Future sales of substantial amounts of shares of our common stock, including shares issued upon the exercise of outstanding options, in the public market after our initial public offering, or the possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.

Upon the completion of this offering, a total of shares of our common stock will be outstanding, based on the number of shares outstanding as of , 2014. This includes shares of common stock that we are selling in this offering, which shares may be resold in the public market immediately without restriction or further registration under the Securities Act unless held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining outstanding shares of our common stock will be deemed “restricted securities” as that term is defined under Rule 144. Restricted securities may be sold in the public market only if registered under the Securities Act or if those securities qualify for an exemption from registration, including exemptions provided by Rules 144 and 701 under the Securities Act, which are summarized below.

As a result of the lock-up agreements described below and the provisions of Rules 144 and 701, and assuming no extension of the lock-up period and no exercise of the underwriters’ option to purchase additional shares, the shares of our common stock that are deemed “restricted securities” will be available for sale in the public market following the completion of this offering as follows:

•

shares will be eligible for sale on the date of this prospectus; and

•

additional shares will be eligible for sale upon expiration of the lock-up agreements described below 180 days after the date of this prospectus, subject in many cases to the limitations of either Rule 144 or Rule 701 under the Securities Act.

Lock-Up Agreements

Our officers, directors, and stockholders holding substantially all of our outstanding capital stock have agreed with the underwriters not to dispose of any of our common stock or securities convertible into or exchangeable for shares of our common stock during the 180-day period following the date of this prospectus, except with the prior written consent of Barclays Capital Inc. and J.P. Morgan Securities LLC. See “Underwriting.”

After the offering, our employees, including our executive officers, and/or directors may enter into written trading plans that are intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934. Sales under these trading plans would not be permitted until the expiration of the lock-up agreements relating to the offering described above.

See “Underwriting” for a more complete description of the lock-up agreements with the underwriters.

Rule 144

In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144.

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In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon the expiration of the lock-up agreements described below, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

•

1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after our initial public offering, or

•

the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

In general, under Rule 701 as currently in effect, any of our employees, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of our initial public offering that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 will, subject to the lock-up restrictions described below, be eligible to resell such shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.

Registration Rights

Upon the expiration of the lock-up agreements, the holders of approximately shares of our common stock, or their transferees, will be entitled to certain rights with respect to the registration of those shares under the Securities Act. For a description of these registration rights, see “Description of Capital Stock—Registration Rights.” After these shares are registered, they will be freely tradable without restriction under the Securities Act.

Stock Options

As soon as practicable after the effectiveness of the registration statement of which this prospectus forms a part, we intend to file a registration statement on Form S-8 under the Securities Act to register shares of our common stock subject to options outstanding or reserved for issuance under the 2014 Plan. This registration statement will become effective immediately upon filing, and shares covered by the Form S-8 registration statement will thereupon be eligible for sale in the public markets, subject to vesting restrictions, the lock-up agreements described above and Rule 144 limitations applicable to affiliates. For a more complete discussion of the 2014 Plan, see “Executive Compensation—Compensation Arrangements Adopted in Connection with this Offering.”

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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

The following is a general discussion of the material U.S. federal income and estate tax consequences to a non-U.S. holder of the acquisition, ownership and disposition of our common stock. For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common stock, other than a partnership (or entity or arrangement treated as a partnership for U.S. federal income tax purposes), that is not for U.S. federal income tax purposes any of the following:

•

an individual citizen or resident of the United States;

•

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any state or the District of Columbia;

•

an estate whose income is subject to U.S. federal income tax regardless of its source; or

•

a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election to be treated as a U.S. person.

If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, we urge partnerships that hold our common stock and partners in such partnerships to consult their own tax advisors regarding the tax treatment of acquiring, holding and disposing of our common stock.

This discussion assumes that a non-U.S. holder will hold our common stock as a capital asset (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation or any aspects of state, local or non-U.S. taxation, nor does it consider any U.S. federal income tax considerations that may be relevant to non-U.S. holders which may be subject to special treatment under U.S. federal income tax laws, including, without limitation, U.S. expatriates, controlled foreign corporations, passive foreign investment companies, insurance companies, tax-exempt or governmental organizations, dealers in securities or currency, banks or other financial institutions, and investors that hold our common stock as part of a hedge, straddle or conversion transaction. Furthermore, the following discussion is based on current provisions of the Code, and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect.

We urge each prospective investor to consult a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

Dividends on Common Stock

If we pay dividends on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those dividends exceed our current and accumulated earnings and profits, the dividends will constitute a return of capital and will first reduce a holder’s adjusted tax basis in its common stock, but not below zero, and then will be treated as gain from the sale of the common stock (see “—Gain on Disposition of Common Stock”).

Any dividend paid out of earnings and profits to a non-U.S. holder of our common stock generally will be subject to U.S. withholding tax at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder generally must provide us with an Internal Revenue Service, or IRS, Form W-8BEN (or other applicable form) certifying qualification for the reduced rate. A non-U.S. holder eligible for a reduced rate of U.S. federal withholding tax pursuant to an applicable income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

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Notwithstanding the foregoing, dividends received by a non-U.S. holder that are effectively connected with the conduct of a trade or business within the United States by the non-U.S. holder will be exempt from such withholding tax. To obtain this exemption, the non-U.S. holder must provide us with an IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, generally will be subject to U.S. federal income tax on a net income basis at the same graduated tax rates generally applicable to U.S. persons, subject to any applicable tax treaty providing otherwise. In addition to the income tax described above, dividends received by corporate non-U.S. holders that are effectively connected with the conduct of a trade or business in the United States by the corporate non-U.S. holder may be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

•

the gain is effectively connected with the conduct of a trade or business within the United States by the non-U.S. holder and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment maintained by such non-U.S. holder;

•

the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

•

we become a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes, and the non-U.S. holder holds or has held, directly or indirectly, at any time within the shorter of (i) the five-year period preceding the disposition and (ii) the non-U.S. holder’s holding period, more than 5% of our common stock. Generally, a corporation is a U.S. real property holding corporation if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business.

In the case of a non-U.S. holder described in the first bullet point immediately above, the gain will be subject to U.S. federal income tax on a net income basis generally in the same manner as if the non-U.S. holder were a U.S. person as defined under the Code (unless an applicable income tax treaty provides otherwise), and a non-U.S. holder that is a foreign corporation may be subject to an additional branch profits tax equal to 30% of its effectively connected earnings and profits attributable to such gain (or at such lower rate as may be specified by an applicable income tax treaty). In the case of an individual non-U.S. holder described in the second bullet point immediately above, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by certain U.S.-source capital losses, will be subject to a flat 30% tax.

We believe we are not and do not anticipate becoming a USRPHC for U.S. federal income tax purposes. If, however, we are or become a USRPHC, so long as our common stock is considered to be regularly traded on an established securities market, only a non-U.S. holder who actually or constructively holds or held (at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period) more than 5% of our common stock will be subject to U.S. federal income tax, under the third bullet point immediately above, on the disposition of our common stock. Each non-U.S. holder should consult with its tax advisor about the consequences that could result if we are, or become, a USRPHC.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS the amount of dividends paid to each non-U.S. holder, and the amount, if any, of tax withheld with respect to those dividends. A similar report is sent to each non-U.S. holder. These information reporting requirements apply even if withholding was not required. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.

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Payments of dividends to a non-U.S. holder may be subject to backup withholding (at a rate of 28%) unless the non-U.S. holder establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding also may apply if we have actual knowledge, or reason to know, that the beneficial owner is a U.S. person that is not an exempt recipient.

Payments of proceeds from the sale or other disposition by a non-U.S. holder of our common stock effected outside the United States by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting will apply to those payments if the broker does not have documentary evidence that the holder is a non-U.S. holder, an exemption is not otherwise established, and the broker has certain relationships with the United States.

Payments of proceeds from the sale or other disposition by a non-U.S. holder of our common stock effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at a rate of 28%) unless the non-U.S. holder establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, information reporting and backup withholding also may apply if the broker has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient.

Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.

Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act, or FATCA, imposes a 30% withholding tax on any “withholdable payment” to (i) a “foreign financial institution” (as specifically defined for this purpose), unless such institution enters into an agreement with the U.S. government to collect certain amounts and provide to the U.S. tax authorities substantial information regarding account holders or (ii) a foreign entity that is not a financial institution, unless such entity provides the withholding agent with a certification that the foreign entity does not have any substantial U.S. owners or provides the withholding agent with certain information relating to each of its substantial U.S. owners. Under certain limited circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes.

“Withholdable payments” include U.S.-source payments otherwise subject to nonresident withholding tax and the gross proceeds from the sale of any equity of U.S. issuers. The withholding tax will apply regardless of whether the payment would otherwise be exempt from U.S. nonresident withholding tax (e.g., as capital gain).

This withholding will apply to U.S.-source payments otherwise subject to nonresident withholding tax made on or after July 1, 2014 and to the payment of gross proceeds from the sale of any equity of U.S. issuers made on or after January 1, 2017.

Estate Tax

Our common stock owned or treated as owned by an individual who is not a citizen or resident of the United States (as specifically defined for U.S. federal estate tax purposes) at the time of death will be includible in the individual’s gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.

THE SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. POTENTIAL PURCHASERS OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK.

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UNDERWRITING

Barclays Capital Inc. and J.P. Morgan Securities LLC are acting as the representatives of the underwriters of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us and the selling stockholders the respective number of common stock shown opposite its name below:


Underwriters		Number of Shares
Barclays Capital Inc.
J.P. Morgan Securities LLC
Pacific Crest Securities LLC
Stifel, Nicolaus & Company, Incorporated
Canaccord Genuity Inc.

Total

The underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement including:

•

the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below), if any of the shares are purchased;

•

the representations and warranties made by us and the selling stockholders to the underwriters are true;

•

there is no material change in our business or the financial markets; and

•

we and the selling stockholders deliver customary closing documents to the underwriters.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we and the selling stockholders will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us and the selling stockholders for the shares.

Selling Stockholders

No Exercise

Full Exercise

No Exercise

Full Exercise

Per Share

Total

The representatives have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $ per share. After the offering, the representatives may change the offering price and other selling terms.

The expenses of the offering that are payable by us and the selling stockholders are estimated to be approximately $ (excluding underwriting discounts and commissions). We have agreed to pay expenses incurred by the selling stockholders in connection with the offering, other than the underwriting discounts and commissions.

Option to Purchase Additional Shares

The selling stockholders have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to an aggregate of shares from the selling stockholders at the public offering price less underwriting discounts and commissions. This option may be

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exercised to the extent the underwriters sell more than shares in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting Section.

Lock-Up Agreements

We, all of our directors and executive officers and our stockholders have agreed that, for a period of 180 days after the date of the final prospectus subject to certain limited exceptions as described below, we and they will not directly or indirectly, without the prior written consent of each of Barclays Capital Inc. and J.P. Morgan Securities LLC, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for, or that represent the right to receive shares of, common stock (other than shares that may be sold in this offering), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or other securities, in cash or otherwise, (3) cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible, exercisable or exchangeable into common stock or any of our other, or (4) publicly disclose the intention to do any of the foregoing.

Each of the lock-up agreements contain certain exceptions, including the disposition of shares of common stock purchased in open market transactions after the completion of this offering, bona fide gifts, sales, transfers or other dispositions of shares of any class of our common stock, including by will or intestacy, made exclusively between and among the undersigned and members of the undersigned’s family or certain other persons, and the adoption of a Rule 10b5-1 sales plan; provided, in each case, that no filing shall be required under the Exchange Act in connection with the transfer or disposition during the 180-day lock-up period.

Barclays Capital Inc. and J.P. Morgan Securities LLC, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether or not to release common stock and other securities from lock-up agreements, Barclays Capital Inc. and J.P. Morgan Securities LLC will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time. At least three business days before the effectiveness of any release or waiver of any of the restrictions described above with respect to an officer or director of the Company, Barclays Capital Inc. and J.P. Morgan Securities LLC will notify us of the impending release or waiver and we have agreed to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver, except where the release or waiver is effected solely to permit a transfer of common stock that is not for consideration and where the transferee has agreed in writing to be bound by the same terms as the lock-up agreements described above to the extent and for the duration that such terms remain in effect at the time of transfer.

As described below under “Directed Share Program,” any participant who had agreed to the lock-up provisions described above or any participant who is our employee, will be subject to a 180-day lock up with respect to any shares sold to them pursuant to that program, with the same restrictions and an identical extension provision as the lock-up agreement described above. Any shares sold in the directed share program to our directors or officers shall be subject to the lock-up agreement described above.

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Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price was negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives considered:

•

the history and prospects for the industry in which we compete;

•

our financial information;

•

the ability of our management and our business potential and earning prospects;

•

the prevailing securities markets at the time of this offering; and

•

the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

Indemnification

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities in connection with the directed share program referred to below, and to contribute to payments that the underwriters may be required to make for these liabilities.

Directed Share Program

At our request, the underwriters have reserved for sale at the initial public offering price up to 5% of the shares offered hereby for our officers, directors, employees, clients, suppliers, vendors and friends and relatives of our employees. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby. Any participants will be prohibited from selling, pledging or assigning any shares sold to them pursuant to this program for a period of 180 days after the date of this prospectus. The Directed Share Program will be arranged through our lead underwriter, Barclays Capital Inc.

Stabilization, Short Positions and Penalty Bids

The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act:

•

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•

A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

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•

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

•

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NYSE or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Listing

We intend to list our common stock on the NYSE under the symbol “PAYC.”

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Other Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they received or may in the future receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer or its affiliates. If the underwriters or their affiliates have a lending relationship with us, certain of those underwriters or their affiliates routinely hedge, and underwriters or their affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the shares of common stock offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the shares of common stock offered hereby. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

117

Selling Restrictions

This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the shares of common stock or possession or distribution of this prospectus or any other offering or publicity material relating to the shares of common stock in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly, offer or sell any shares of common stock or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of shares of common stock by it will be made on the same terms.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any common stock which are the subject of the offering contemplated herein may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

•

to legal entities which are qualified investors as defined under the Prospectus Directive;

•

by the underwriters to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or

•

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of common stock shall result in a requirement for us, the selling stockholders or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State who receives any communication in respect of, or who acquires any common stock under, the offers contemplated here in this prospectus will be deemed to have represented, warranted and agreed to and with each underwriter, the selling stockholders and us that:

•

it is a qualified investor as defined under the Prospectus Directive; and

•

in the case of any common stock acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the common stock acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in the circumstances in which the prior consent of the representatives of the underwriters has been given to the offer or resale or (ii) where common stock have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of such common stock to it is not treated under the Prospectus Directive as having been made to such persons.

For the purposes of this representation and the provision above, the expression an “offer of common stock to the public” in relation to any common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any common stock to be offered so as to enable an investor to decide to purchase or subscribe for the common stock, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member

118

State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000, or the FSMA, as received in connection with the issue or sale of the common stock in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA have been and will be complied with in respect to anything done in relation to the common stock in, from or otherwise involving the United Kingdom.

Notice to Residents of Canada

The common stock may be sold only to purchasers purchasing as principal that are both “accredited investors” as defined in National Instrument 45-106 Prospectus and Registration Exemptions and “permitted clients” as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations . Any resale of the common stock must be made in accordance with an exemption from the prospectus requirements and in compliance with the registration requirements of applicable securities laws.

119

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Haynes and Boone, LLP, Dallas, Texas. Certain legal matters will be passed upon for the selling stockholders by Kirkland & Ellis LLP, New York, New York. The underwriters are being represented by Gibson, Dunn & Crutcher LLP, New York, New York in connection with the offering.

EXPERTS

The audited financial statements included in this prospectus and elsewhere in this registration statement have been so included in reliance upon the report of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with the SEC. Upon closing of our initial public offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

120

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page
Paycom Software, Inc. and Subsidiary
Report of the Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheet as of December 31, 2013		F-3
Notes to Consolidated Balance Sheet		F-4

Paycom Payroll Holdings, LLC and Subsidiaries
Consolidated Annual Financial Statements
Report of the Independent Registered Public Accounting Firm		F-6
Consolidated Balance Sheets, December 31, 2013 and 2012		F-7
Consolidated Statements of Income, Years Ended December 31, 2013, 2012 and 2011		F-8
Consolidated Statements of Members’ Equity, Years Ended December 31, 2013, 2012 and 2011		F-9
Consolidated Statements of Cash Flows, Years Ended December 31, 2013, 2012 and 2011		F-10
Notes to Consolidated Financial Statements		F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Paycom Software, Inc.

We have audited the accompanying consolidated balance sheet of Paycom Software, Inc. (a Delaware corporation) and subsidiary (the “Company”) as of December 31, 2013. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statement referred to above presents fairly, in all material respects, the financial position of Paycom Software, Inc. and Subsidiary as of December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

March 10, 2014

F-2

PAYCOM SOFTWARE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2013


	December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	1,000

Total assets	$	1,000

Commitments and contingencies

Stockholder’s equity
Common stock, $0.01 par value—100,000,000 shares authorized, 1,000 shared issued and outstanding	$	10
Additional paid-in capital		990

Total stockholder’s equity	$	1,000

See accompanying notes to the consolidated financial statements.

F-3

PAYCOM SOFTWARE, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2013

1.	ORGANIZATION

Paycom Software, Inc. and its wholly-owned subsidiary, Paycom Software Merger Sub, LLC (collectively, “we”, “our,” “us” or “Software”) were incorporated as Delaware corporations on October 31, 2013 and December 24, 2013, respectively, in anticipation of an initial public offering (“IPO”) and was a wholly-owned subsidiary of Paycom Payroll, LLC (“Paycom”). Subsequent to year end, we effected a reorganization whereby we control directly or indirectly, Paycom Payroll Holdings, LLC (“Holdings”), Paycom, WCAS Paycom Holdings, Inc. (“WCAS Holdings”) and WCAS CP IV Blocker, Inc. (“CP IV Blocker”). As a result, we will consolidate the financial results of each of the above listed entities effective January 1, 2014.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America. Separate statements of income, changes in stockholders’ equity and cash flows have not been presented in the financial statements because we have had no business activities.

Our consolidated balance sheet includes Software and its wholly-owned subsidiary, Paycom Software Merger Sub, LLC. Intercompany balances and transactions are eliminated in consolidation.

Cash and Cash Equivalents

We consider all highly liquid debt instruments purchased with a maturity of three months or less and money market mutual funds to be cash equivalents. We maintain cash and cash equivalents in bank deposit accounts which may not be federally insured. The fair value of our cash and cash equivalents approximates carrying value. As of December 31, 2013, all amounts were held in deposit on demand. We have not experienced any losses in such accounts and do not believe there is exposure to any significant credit risk on such accounts.

3.	STOCKHOLDER’S EQUITY

We are authorized to issue 100,000,000 shares of common stock, par value $0.01 per share (“Common Stock”). We have issued 1,000 shares of Common Stock in exchange for $10, all of which were held by Paycom at December 31, 2013.

4.	COMMITMENTS AND CONTINGENCIES

In July 2013, Dr. Lakshmi Arunachalam filed a complaint against Paycom in the U.S. District Court for the District of Delaware alleging that Paycom infringes on U.S. Patent No. 8,244,833 assigned to her. The complaint seeks a permanent injunction, damages, and attorneys’ fees should Paycom be found to infringe. Dr. Arunachalam has asserted similar claims in Delaware for the alleged infringement of the same patent against other payroll processing companies. Dr. Arunachalam has also accused various other entities of infringing related U.S. patents. On October 4, 2013, Paycom filed an answer, affirmative defenses and counterclaims to the complaint. Paycom denied all claims made against us by Dr. Arunachalam in her complaint, asserted various defenses and counterclaims for non-infringement and challenged the validity and enforceability of U.S. Patent No. 8,244,833. Dr. Arunachalam filed a reply to Paycom’s counterclaim on October 28, 2013 and denied non-infringement and invalidity. Paycom believes that this litigation is without merit and intends to vigorously defend itself in this matter. Due to the nature of the claims for this litigation and the uncertainties of the litigation, we are unable to provide an estimate of the potential amount of any loss related to this litigation.

F-4

We are involved in various other legal proceedings in the ordinary course of business. Although we cannot predict the outcome of these proceedings, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows.

5.	SUBSEQUENT EVENTS

In anticipation of an initial public offering, Software consummated the reorganization as of January 1, 2014, pursuant to which, (i) the owners of WCAS Holdings and CP IV Blocker, which are affiliates of Welsh, Carson, Anderson & Stowe, contributed WCAS Holdings and CP IV Blocker to Software in exchange for shares of common stock of Software and (ii) the owners of outstanding Series B Preferred Units of Holdings contributed their Series B Preferred Units for shares of common stock of Software. Immediately after these contributions, our wholly-owned subsidiary merged with and into Holdings with Holdings surviving the merger. Upon consummation of the merger, the remaining holders of outstanding common and incentive units of Holdings received shares of common stock of Software for their common and incentive units by operation of Delaware law and Holdings’ ownership interest in Software was cancelled. Following these transactions, all outstanding Series C Preferred Units were eliminated in an intercompany transaction between Holdings and WCAS Holdings, and Software assumed a 14% note with a face value $46,193 due 2017 (“2017 Note”) (collectively, the “2014 Reorganization”). In connection with the 2014 Reorganization, Software authorized and reserved 11,350,881 shares of our common stock for future issuance under the 2014 Long-Term Incentive Plan (the “2014 Plan”), effective January 1, 2014. The 2014 Plan permits Software to grant an array of equity-based incentive awards to certain officers, employees, contractors and directors.

Effective March 10, 2014, Software adopted an Amended and Restated Certificate of Incorporation, as approved by its board of directors and the majority of its stockholders, which, among other things, increased the number of authorized shares of capital stock from 100,000,000 shares of consisting solely of common stock, $0.01 par value per share, to 110,000,000 shares of capital stock consisting of 100,000,000 shares of common stock, $0.01 par value per share, and 10,000,000 shares of undesignated preferred stock, $0.01 per share. Software’s board of directors may fix the voting powers, designations, powers, preferences and other rights, and any qualifications, limitations or restrictions thereof on each series of preferred stock.

We have evaluated subsequent events through March 10, 2014, the date on which this balance sheet was issued, and determined that no subsequent events had occurred that would require additional disclosure.

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Members

Paycom Payroll Holdings, LLC

We have audited the accompanying consolidated balance sheets of Paycom Payroll Holdings, LLC (a Delaware limited liability company) and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income, members’ equity, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Paycom Payroll Holdings, LLC and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

March 10, 2014

F-6

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND 2012

(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)


	Pro Forma December 31,			December 31,
	2013			2013			2012
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	13,273		$	13,273		$	13,435
Restricted cash		369			369			368
Accounts receivable		1,705			1,705			622
Prepaid expenses		2,133			2,133			686
Inventory		578			578			714
Deferred tax assets		423			—			—

Current assets before funds held for clients		18,481			18,058			15,825
Funds held for clients		455,779			455,779			324,266

Total current assets		474,260			473,837			340,091
Property, plant and equipment, net of accumulated depreciation of $11,540 and $8,015 respectively		38,671			38,671			25,139
Deposits and other assets		461			461			417
Goodwill		51,889			51,889			51,889
Intangible assets, net of accumulated amortization of $19,703 and $18,091, respectively		6,709			6,709			8,321

Total assets	$	571,990		$	571,567		$	425,857

Liabilities and Members’ Equity
Current liabilities:
Accounts payable	$	5,020		$	5,020		$	2,354
Accrued commissions and bonuses		3,598			3,598			1,953
Accrued payroll and vacation		3,087			3,087			1,925
Deferred revenue		1,582			1,582			1,037
Current portion of long-term debt		9,545			9,545			2,151
Accrued expenses and other current liabilities		4,372			4,372			1,978

Current liabilities before client fund obligation		27,204			27,204			11,398
Client funds obligation		455,779			455,779			324,266

Total current liabilities		482,983			482,983			335,664

Deferred tax liabilities		2,738			—			—
Long-term deferred revenue		10,990			10,990			7,356
Long-term debt, less current portion		11,545			11,545			11,959
Long-term debt to related party		60,875			14,682			14,440
Derivative liability		1,107			1,107			1,767

Total long-term liabilities		87,255			38,324			35,522

Commitments and contingencies
Members’ equity:
Common units, $0.00 par value (285,000 authorized, 270,750 issued and outstanding)		—			—			—
Series A Preferred Units, $0.00 par value (700,000 authorized, 671,839 issued and outstanding)		—			—			—
Series B Preferred Units, $0.00 par value (270 authorized, 270 issued and outstanding)		—			—			—
Series C Preferred Units, $0.00 par value (50,000 authorized, 46,193 issued and outstanding)		—			—			—
Members’ capital		—			63,645			63,542
Preferred stock (no shares authorized, no shares issued and outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding on a pro forma basis)		—			—			—
Common stock (no shares authorized, no shares issued and outstanding, actual 100,000,000 shares authorized, 45,708,573 shares issued and outstanding on a pro forma basis)		17,452			—			—
Additional paid in capital		(13,385	)		—			—
Accumulated deficit		(2,315	)		(13,385	)		(8,871	)

Total members’ equity		1,752			50,260			54,671

Total liabilities and members’ equity	$	571,990		$	571,567		$	425,857

See accompanying notes to the consolidated financial statements.

F-7

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)


	Year Ended December 31,
	2013			2012			2011
Revenues
Recurring	$	105,560		$	75,420		$	56,382
Implementation and other		2,041			1,390			824

Total revenues		107,601			76,810			57,206

Cost of revenues
Operating expenses		19,070			14,895			12,287
Depreciation		1,821			1,431			987

Total cost of revenues		20,891			16,326			13,274

Administrative expenses
Sales and marketing		42,681			29,255			22,244
Research and development		2,146			1,632			1,225
General and administrative		28,884			19,450			14,707
Depreciation and amortization		3,682			4,092			4,300

Total administrative expenses		77,393			54,429			42,476

Total operating expenses		98,284			70,755			55,750

Operating income		9,317			6,055			1,456
Interest expense		(2,805	)		(2,171	)		(134	)
Other income, net		1,199			354			108

Net income	$	7,711		$	4,238		$	1,430

Less: Distribution to Series C Preferred Unitholder		(6,467	)		(4,806	)		—

Net income (loss) available to Series A Preferred Unitholders and common unit holders	$	1,244		$	(568	)	$	1,430

Net income (loss) per Series A Preferred Unit and common unit:
Basic	$	1.30		$	(0.60	)	$	1.53

Diluted	$	1.22		$	(0.57	)	$	1.49

Weighted average units outstanding:
Basic		955,983			948,181			935,750

Diluted		1,018,305			1,004,436			960,611

Pro forma net income per share (unaudited):
Basic	$	0.02
Diluted	$	0.02
Pro forma weighted average shares outstanding (unaudited):
Basic		47,686,326
Diluted		48,371,489

See accompanying notes to the consolidated financial statements.

F-8

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)


	Number of units															Total Members’ Equity
	Common			Series A Preferred		Series B Preferred		Series C Preferred		Members’ Capital			Accumulated Deficit			Total Members’ Equity
Balances at December 31, 2010		285,000			665,000		270		—	$	80,208		$	(8,130	)	$	72,078
Distributions to members		—			—		—		—		—			(1,443	)		(1,443	)
Common units redeemed		(14,250	)		—		—		—		(1,000	)		—			(1,000	)
Incentive compensation		—			—		—		—		165			—			165
Net income		—			—		—		—		—			1,430			1,430

Balances at December 31, 2011		270,750			665,000		270		—	$	79,373		$	(8,143	)	$	71,230

Issuance of Series A Preferred Units		—			6,839		—		—		2,409			—			2,409
Issuance of Series C Preferred Units		—			—		—		46,193		—			—			—
Distribution paid to members as return of capital		—			—		—		—		(18,807	)		—			(18,807	)
Incentive compensation		—			—		—		—		567			—			567
Distributions to members		—			—		—		—		—			(4,966	)		(4,966	)
Net income		—			—		—		—		—			4,238			4,238

Balances at December 31, 2012		270,750			671,839		270		46,193	$	63,542		$	(8,871	)	$	54,671

Incentive units redeemed		—			—		—		—		(1,061	)		—			(1,061	)
Incentive compensation		—			—		—		—		1,164			—			1,164
Distributions to members		—			—		—		—		—			(12,225	)		(12,225	)
Net income		—			—		—		—		—			7,711			7,711

Balances at December 31, 2013		270,750			671,839		270		46,193	$	63,645		$	(13,385	)	$	50,260

See accompanying notes to the consolidated financial statements.

F-9

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS)


	Year Ended December 31
	2013			2012			2011
Operating activities
Net income	$	7,711		$	4,238		$	1,430
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		5,486			5,522			5,286
Gain on sale of property, plant and equipment		(248	)		—			—
Amortization of debt discount		241			143			—
Amortization of debt issuance costs		17			19			—
Incentive compensation		934			503			165
Change in fair value of derivative liability		(660	)		(333	)		—
Changes in operating assets and liabilities
Accounts receivable		(1,083	)		(133	)		(241	)
Prepaid expenses		(800	)		(395	)		256
Inventory		136			8			(75	)
Deposits and other assets		(44	)		(75	)		(204	)
Accounts payable		2,667			1,157			(597	)
Accrued commissions and bonuses		1,645			1,461			3
Accrued payroll and vacation		1,162			351			406
Deferred revenue		4,163			2,778			2,185
Accrued expenses and other liabilities		2,394			538			471

Net cash provided by operating activities		23,721			15,782			9,085


Investing activities
Increase in funds held for clients		(131,513	)		(71,001	)		(87,190	)
Increase in restricted cash		(1	)		(117	)		(251	)
Additions to property, plant and equipment		(17,176	)		(5,971	)		(14,867	)
Proceeds from sale of property, plant and equipment		248			106			9

Net cash used in investing activities		(148,442	)		(76,983	)		(102,299	)


Financing activities
Proceeds from issuance of long-term debt		6,979			1,750			9,612
Proceeds from issuance of long-term debt to related party		—			16,398			—
Payments on long-term debt		—			(401	)		—
Increase in client funds obligations		131,513			71,001			87,191
Proceeds from issuance of Series A Preferred Units		—			2,409			—
Common units redeemed		—			—			(1,000	)
Distributions paid to members as return of capital		—			(18,807	)		—
Incentive units redeemed		(1,061	)		—			—
Payments of deferred offering costs		(647	)		—			—
Distributions paid to members		(12,225	)		(4,966	)		(1,443	)

Net cash provided by financing activities		124,559			67,384			94,360

Change in cash and cash equivalents		(162	)		6,183			1,146

Cash and cash equivalents
Beginning of year		13,435			7,252			6,106


End of year	$	13,273		$	13,435		$	7,252


Supplemental cash flow disclosure
Cash paid for interest, net of amounts capitalized	$	2,831		$	2,028		$	134

Noncash financing and investing activities
Purchase of property, plant and equipment on account		368			167			45
Issuance of Series C Preferred Units as return of capital distribution		—			46,193			—

See accompanying notes to the consolidated financial statements.

F-10

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

1.	ORGANIZATION AND DESCRIPTION OF BUSINESS

Paycom Payroll Holdings, LLC (“Holdings”), formerly known as Paycom Payroll, LLC, and its wholly owned subsidiaries, Paycom Payroll, LLC (“Paycom”) and Paycom Benefits, LLC (collectively, “we” or “our”), is a leading provider of a cloud-based human capital management solution delivered as Software-as-a-Service. We are headquartered in Oklahoma City, Oklahoma, and have sales offices in 20 states nationwide.

Holdings was incorporated on April 3, 2012 for the purpose of acquiring Paycom and its subsidiary, Paycom Benefits, LLC. Holdings was initially created as a subsidiary of Paycom. As part of the reorganization process, Holdings formed a new wholly-owned subsidiary, Paycom Payroll Merger Sub, LLC (“Merger Sub”), which merged with and into Paycom, with Paycom remaining as the surviving entity. Paycom subsequently cancelled its ownership in Holdings, and became a wholly owned subsidiary of Holdings (“April 2012 Corporate Reorganization”). In connection with the April 2012 Corporate Reorganization, the four existing authorized classes of ownership interest of Paycom were contributed into Holdings and new ownership units were authorized by Holdings.

On October 31, 2013, we incorporated Paycom Software, Inc. (“Software”), which is an indirect wholly-owned subsidiary of Payroll, prior to a reorganization which was consummated on January 1, 2014.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The creation of Holdings and its acquisition of Paycom under the April 2012 Corporate Reorganization represented a transaction under common control, which was considered a change in reporting unit and was required to be retrospectively applied to the financial statements of all prior periods when the financial statements were issued for a period that included the date the transaction occurred. Therefore, the consolidated financial statements of Holdings are presented as if Holdings existed and controlled Paycom in periods prior to the creation of Holdings.

Our consolidated financial statements include the financial results of Holdings, Paycom and its wholly owned subsidiaries, Paycom Benefits, LLC and Software. Intercompany balances and transactions are eliminated in consolidation.

Reclassifications

Certain reclassifications were made to the 2012 and 2011 consolidated financial statements to conform to the 2013 presentation. These reclassifications were not material to the financial statements and had no effect on the consolidated members’ equity or net income.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Significant estimates include useful life for long lived and intangible assets, the average life of our clients, the fair market value of our employee incentive units and the fair values of our financial instruments. These estimates are based on historical experience where applicable and other assumptions that management believes are reasonable under circumstances. As such, actual results could differ from these estimates.

F-11

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

Segment Information

We operate in a single operating segment and a single reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. Our chief operating decision maker allocates resources and assesses performance based upon financial information at the consolidated level. Since we operate in one operating segment, all required financial segment information is presented in the consolidated financial statements.

Pro Forma Information (Unaudited)

In anticipation of an initial public offering (“IPO”), Software consummated the reorganization as of January 1, 2014 as described under Note 12 (the “2014 Reorganization”). The unaudited pro forma consolidated balance sheet and pro forma basic and diluted net income per share of common stock are not inclusive of all entities described under Note 12 to be reflected in the 2014 Reorganization as those entities are not reflected in our historical financial statements. The unaudited pro forma consolidated balance sheet is based upon the historical consolidated balance sheet as adjusted to reflect:

•

Adjustments to deferred income tax assets and liabilities as a result of recognizing related deferred tax assets and liabilities assuming that the 2014 Reorganization occurred on December 31, 2013.

•

The conversion of common units and Series A Preferred Units to common stock. The amount was estimated given that the Members’ Capital balance ceased to exist upon the 2014 Reorganization.

•

The assumption of the 14% note due 2017 which replaced the Series C Preferred Units in connection with the 2014 Reorganization.

•

The reclassification of historic accumulated deficit to additional paid in capital due to the 2014 Reorganization.

Cash and Cash Equivalents

We consider all highly liquid debt instruments purchased with a maturity of three months or less and money market mutual funds to be cash equivalents. We maintain cash and cash equivalents in bank deposit accounts and money market funds, which may not be federally insured. The fair value of our cash and cash equivalents approximates carrying value. As of December 31, 2013 and 2012, all amounts were held in deposit on demand. We have not experienced any losses in such accounts and do not believe there is exposure to any significant credit risk on such accounts.

Restricted Cash

Restricted cash in our consolidated balance sheets primarily consists of cash held in restricted accounts due to requirements under an existing office building lease and our corporate building loan agreements. As of December 31, 2013 and 2012, we had restricted cash of $369 and $368, respectively.

Accounts Receivable

We generally collect revenue from our customers via automatic deduction from clients’ bank accounts at the time processing occurs. Accounts receivable on our consolidated balance sheets consists primarily of revenue fees related to the last day of the period, which are collected on the following business day. Because

F-12

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

accounts receivable are collected via automatic deduction on the following business day, the Company has not recorded an allowance for doubtful accounts.

Deferred offering costs

Deferred offering costs represent legal, accounting and other direct costs related to our efforts to raise capital through an IPO. Future costs related to IPO activities will be deferred until the completion of the IPO, at which time they will be offset against the IPO proceeds. In the event that we terminate our plan for an IPO, any deferred offering costs would be expensed at that time.

As of December 31, 2013, we had capitalized $647 associated with IPO activities and included such amount in prepaid expenses on the consolidated balance sheets. There were no deferred offering costs capitalized as of December 31, 2012.

Inventory

Our inventory consists of five types of time clocks sold to clients as part of our time and attendance services and are stated at the lower of cost or market. Cost is determined using the FIFO cost method.

Time clocks are purchased as finished goods from a third party and as such we do not have any inventory classified as raw materials or work in process inventory. Rental clocks issued to clients under month-to-month operating leases are classified as property, plant, and equipment. We retain inventory in certain lines primarily as replacements for those clients who use the various clocks and have determined that no write-downs for obsolete items was required based on inventory turnover and our historical experience during the years ended December 31, 2013, 2012 and 2011.

Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation. Depreciation is determined using the straight line method over the estimated useful lives of the assets as follows:


Office equipment and furniture & fixtures			5 years
Computer equipment and software			3 years
Buildings			30 years
Leasehold improvements			3 years
Rental clocks			5 years
Vehicles			3 years

Our leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease terms. Costs incurred during construction of long-lived assets are recorded as construction in progress and are not depreciated until the asset is placed in service.

We capitalize interest incurred related to construction in progress. For the years ended December 31, 2013, 2012 and 2011, we incurred interest costs of $2,563, $2,028 and $439, respectively. For the years ended December 31, 2013, 2012 and 2011, interest expense of $95, $0 and $305, respectively, was capitalized.

Internal Use Software

Expenditures for major software purchases and software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. Capitalized costs include external

F-13

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

direct costs of materials and services associated with developing or obtaining internal use computer software and certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of payroll costs that are capitalized with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. We also expense internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities.

The total capitalized payroll costs related to internal use computer software projects was $1,221 and $585 as of December 31, 2013 and 2012, respectively which have been included in property, plant and equipment. Amortization expense related to capitalized software costs of $647, $429 and $436 was charged to expense for the years ended December 31, 2013, 2012 and 2011, respectively.

Goodwill and Other Intangible Assets

Goodwill is not amortized, but is instead tested for impairment annually, or earlier if, at the reporting unit level, an indicator of impairment arises. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. If impairment exists, a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded. Our business is largely homogeneous and, as a result, goodwill is associated with one reporting unit. We have selected June 30 as our annual goodwill impairment testing date and determined there was no impairment as of June 30, 2013. For the years ended December 31, 2013, 2012 and 2011, there were no indicators of impairment. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets with finite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there was no impairment of long-lived assets for the years ended December 31, 2013, 2012 or 2011.

Funds Held for Clients and Client Funds Obligation

As part of our payroll and tax filing application, we collect funds for federal, state and local employment taxes from clients, handle applicable regulatory tax filings, correspondence and amendments, remit the funds to appropriate tax agencies, and handle other employer-related services. Amounts collected by us from clients for their federal, state and local employment taxes earn interest during the interval between receipt and disbursement, as we invest these funds in money market funds and certificates of deposit. The interest earned from these investments is included in the consolidated statements of income as other income, net. These investments are shown in the consolidated balance sheets as funds held for clients, and the offsetting liability for the tax filings is shown as client funds obligation.

As of December 31, 2013 and 2012, the funds held for clients were invested in demand deposits, short-term certificates of deposit and money market funds.

F-14

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

Revenue Recognition

Our total revenue is comprised of recurring revenues and implementation and other revenues. We recognize revenue in accordance with accounting standards for software and service companies when all of the following criteria have been met:

•

There is persuasive evidence of an arrangement;

•

The service has been or is being provided to the customer;

•

Collection of the fees is reasonably assured; and

•

The amount of fees to be paid by the customer is fixed or determinable

Recurring

Recurring revenues are derived primarily from our talent acquisition, time and labor management, payroll, talent management and human resources applications. Talent acquisition includes application tracking, employment and background checks, on/off-boarding, e-verify and tax credit services. Time and labor management includes time and attendance, scheduling, time-off requests, labor allocation and labor management reports. Payroll includes payroll and tax management, paycom pay, expense management and garnishment management. Talent management includes employee self-service, compensation budgeting, performance management and executive dashboard. Human resources management includes document management, government and compliance, benefits and COBRA administration and personnel action forms.

The services related to recurring revenues are rendered during each client’s payroll period, with the agreed-upon fee being charged and collected as part of our processing of the client’s payroll. Recurring revenues are recognized at the conclusion of processing of each client’s payroll-period, when each respective payroll client is billed. Collectability is reasonably assured as the fees are collected through an Automated Clearing House (“ACH”) as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.

Implementation and other

Implementation and other revenues represent non-refundable conversion fees which are charged to new clients to offset the expense of new client set-up and revenue from the sale of time clocks as part of our employee time and attendance services. Because these conversion fees and sale of time clocks relate to our recurring revenue, we have evaluated such arrangements under the accounting guidance that governs multiple element arrangements.

For arrangements with multiple elements, we evaluate whether each element represents a separate unit of accounting. In order to treat deliverables in a multiple element arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. If the deliverables have stand-alone value upon delivery, we account for each deliverable separately and revenue is recognized for the respective deliverables as they are delivered. If one or more of the deliverables does not have stand-alone value upon delivery, the deliverables that do not have stand-alone value are generally combined with the final deliverable within the arrangement and treated as a single unit of accounting.

When multiple deliverables included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on their relative selling price. Multiple deliverable arrangements accounting guidance provides a hierarchy to use when

F-15

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

determining the relative selling price for each unit of accounting. Vendor-specific objective evidence (“VSOE”) of selling price, based on the price at which the item is regularly sold by the vendor on a stand-alone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence (“TPE”) of selling price is used to establish the selling price if it exists, and if not it would be based on our best estimate of selling price.

For the years ended December 31, 2013, 2012 and 2011, we have determined that there is no stand-alone value associated with the upfront conversion fees as they do not have value to our clients on a stand-alone basis nor are they offered as an individual service; therefore, the conversion fees are deferred and recognized ratably over the estimated life of our clients, which we have estimated to be ten years.

For the years ended December 31, 2013, 2012, and 2011, we have determined that the revenues from the employee time and attendance services, and the revenues from the sale of time clocks as part of our time and attendance services, have VSOE of selling price as they are sold on a stand-alone basis. Revenue is therefore recognized for the respective deliverables as they are delivered.

Cost of Revenues

Our costs and expenses applicable to total revenues represent total operating expenses and systems support and technology costs, including labor and related expenses, bank fees, shipping fees and costs of paper stock, envelopes, etc. In addition, costs included to derive gross margins are comprised of support labor and related expenses, related hardware costs and applicable depreciation costs.

Advertising Costs

Advertising costs are expensed the first time that advertising takes place. Advertising expense for the years ended December 31, 2013, 2012 and 2011 was $3,375, $2,309 and $1,674, respectively.

Sales Taxes

We collect and remit sales tax on sales of time and attendance clocks and on payroll services in certain states. These taxes are shown on a net basis, and as such, excluded from revenue. For the years ended December 31, 2013, 2012 and 2011, sales taxes paid were $2,194, $1,604 and $1,092, respectively.

Employee Incentive Units

All incentive unit awards to employees are recognized pro rata over the respective vesting period as compensation costs in the consolidated statements of income based on their fair values measured as of the date of grant.

Income Taxes

We operate as a limited liability company (“LLC”). An LLC combines a corporation’s protection from personal liability for business debts along with the pass-through tax structure of a partnership or sole proprietorship. Business income passes through the business to the LLC members, who report their share of profits or losses on their individual income tax returns. Accordingly, no provision for income taxes is reflected in our consolidated financial statements. Our tax returns are subject to examination by federal and state taxing authorities. If such examinations result in adjustments to the income amounts, the amounts allocated to the LLC members could be adjusted accordingly.

F-16

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

We file income tax returns in the U.S. and various state jurisdictions. We evaluate tax positions taken or expected to be taken in the course of preparing our tax returns and disallow the recognition of tax positions not deemed to meet a “more-likely-than-not” threshold of being sustained by the applicable tax authority. We do not believe there are any tax positions taken within the consolidated financial statements that would not meet this threshold. Our policy is to record interest and penalties, if any, related to uncertain tax positions as a component of general and administrative expenses. We are currently undergoing a sales tax audit in a certain jurisdiction and are not aware of any other potential examinations as of December 31, 2013. However, the tax years 2010 through 2013 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions.

Recently Adopted and Issued Accounting Pronouncements

3.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment and accumulated depreciation are as follows:


	December 31,
	2013			2012
Property, plant and equipment
Furniture, fixtures and office equipment	$	3,189		$	2,887
Computer equipment		4,832			3,498
Software and capitalized software costs		5,578			3,588
Rental clocks		4,865			3,480
Vehicles		421			468
Buildings		14,828			14,828
Leasehold improvements		135			135

		33,848			28,884
Less: accumulated depreciation		(11,540	)		(8,015	)

		22,308			20,869
Land		8,993			4,205
Construction in process		7,370			65

Property, plant and equipment, net	$	38,671		$	25,139

F-17

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

Rental clocks included in property, plant and equipment, net represent time clocks issued to clients under month-to-month operating leases. As such, these items are transferred from inventory to fixed assets and depreciated over their estimated useful lives.

In October 2012, we began the initial phase on construction of a second building/processing center at our headquarters. Estimated completion of the building is April 2014, and is financed with our funds, along with a construction note convertible to long-term notes payable, upon completion of the construction.

In November 2013 and December 2012, we purchased approximately 18.3 acres and 17.6 acres of land, respectively, from a related party for future expansion at our headquarters for total costs of $4,788 and $2,324, respectively. For more information see Note 10—“Related Party Transactions.”

Depreciation expense for property, plant and equipment, net was $3,873, $3,093 and $2,046 for the years ended December 31, 2013, 2012 and 2011, respectively.

4.	GOODWILL AND INTANGIBLE ASSETS, NET

We had goodwill of $51,889 as of December 31, 2013 and 2012. We performed the required impairment tests of goodwill for the years ended December 31, 2013, 2012 and 2011 and determined there was no impairment for each of those years then ended.

All of the intangible assets are considered to have finite lives and, as such, are subject to amortization. The components of intangible assets are as follows:


	December 31, 2013
	Weighted Avg. Remaining Useful Life		Gross		Accumulated Amortization			Net
	(Years)
Intangibles:
Customer relationships		3.5	$	13,997	$	(9,098	)	$	4,899
Trade name		8.5		3,194		(1,384	)		1,810

Total			$	17,191	$	(10,482	)	$	6,709


	December 31, 2012
	Weighted Avg. Remaining Useful Life		Gross		Accumulated Amortization			Net
	(Years)
Intangibles:
Customer relationships		4.5	$	13,997	$	(7,699	)	$	6,298
Trade name		9.5		3,194		(1,171	)		2,023

Total			$	17,191	$	(8,870	)	$	8,321

The weighted average remaining useful life of the intangible assets was 4.85 years as of December 31, 2013. Amortization of intangible assets for the years ended December 31, 2013, 2012 and 2011 totaled $1,613, $2,414 and $3,216, respectively.

F-18

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

Estimated amortization expense for our existing intangible assets for the next five years and thereafter is as follows:


Year Ending	Amortization
2014	$	1,613
2015		1,613
2016		1,613
2017		913
2018		213
Thereafter		744

	$	6,709

5.	LONG-TERM DEBT

Our long-term debt consists of the following:


	December 31,
	2013			2012
$12,761 term note to bank due December 15, 2018 ⁽¹⁾⁽⁴⁾	$	11,963		$	12,360
Land note to bank ⁽²⁾⁽⁴⁾		—			1,750
Construction note to bank ⁽³⁾⁽⁴⁾		9,127			—
$18,807 note to related party due April 3, 2022 ⁽⁵⁾		18,807			18,807
Less: Unamortized debt discounts		(4,125	)		(4,367	)

Total long-term debt (including current portion)		35,772			28,550
Less: Current portion		(9,545	)		(2,151	)

Total long-term debt, net	$	26,227		$	26,399

(1)

In December 2011, we consolidated pre-existing construction loans for the construction of a new corporate headquarters/processing center and gymnasium into a term note. As of December 31, 2013 and 2012, we had a term note with an outstanding principal amount of $11,963 and $12,360, respectively, from Kirkpatrick Bank, due December 15, 2018 (the “2011 Consolidated Loan”). Under the 2011 Consolidated Loan, principal and interest is payable monthly based on a 20 year amortization at an annual rate of 5.0%. The 2011 Consolidated Loan is collateralized by a first mortgage covering our corporate headquarters and is secured by a first lien security interest in certain personal property relating to our corporate headquarters.

(2)

In December 2012, we entered into a loan agreement for the purchase of approximately 17.6 acres for future expansion at our headquarters. As of December 31, 2012, the loan agreement had an outstanding principal amount of $1,750 from Kirkpatrick Bank, due April 21, 2013 (the “December 2012 Loan”). Under the December 2012 Loan, interest accrues monthly at the Wall Street Journal U.S. Prime Rate plus 0.5%, adjusted from time to time, but not more often than each day, on the 21st day of each month. As of December 31, 2012, this equated to a rate of 3.25%. Principal on the note was due in one payment on the maturity date, collateralized by a first mortgage covering our corporate headquarters and a first security interest in certain personal property relating to our corporate headquarters. The December 2012 Loan was paid in full during the year ended December 31, 2013 with an advance from the construction loan entered into on March 2013, which is described below.

(3)

In March 2013, we entered into a construction loan agreement for the construction of a second building at our corporate headquarters with Kirkpatrick Bank due May 1, 2015, which allowed for a maximum

F-19

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

principal amount of $12,271 (the “2013 Construction Loan”). Under the terms of the 2013 Construction Loan, the loan will be converted to long-term notes payable at the “Term Loan Commencement Date.” The “Term Loan Commencement Date” is defined as the first day of the first month after all of the following requirements are completed to the satisfaction of the lender: (i) the construction project has been substantially completed; (ii) we have delivered to the lender a final “as-built” survey of the mortgaged property, acceptable to the lender; (iii) we have delivered all necessary and required insurance covering the mortgaged property, acceptable to the lender; (iv) we have delivered the certificates of occupancy for the premises; and (v) we have accepted the building. Outstanding amounts under the 2013 Construction Loan are secured by a first mortgage covering all of the second headquarters building and a first lien security interest in certain personal property relating to the second headquarters building. Under the 2013 Construction Loan, interest accrues monthly at the Wall Street Journal U.S. Prime Rate plus 0.5%, adjusted monthly, subject to a minimum interest rate of 4.0% per annum. Interest on the 2013 Construction Loan will be paid monthly on the first day of each month. Estimated completion of the building is July 2014. During the year ended December 31, 2013, a portion of the advancement was drawn to repay the December 2012 Loan.

In November 2013, we entered into a loan agreement for the purchase of approximately 18.3 acres for future expansion at our headquarters with Kirkpatrick Bank, which allowed for a maximum principal amount of $3,000 (“2013 Land Loan”). Under the 2013 Land Loan, interest accrues monthly at the Wall Street Journal U.S. Prime Rate plus 0.5%, adjusted monthly, subject to a minimum interest rate of 4% per annum. Principal and interest on the 2013 Land Loan is due on February 1, 2014.

In December 2013, we consolidated the 2013 Construction Loan and the 2013 Land Loan (“2013 Consolidated Loan”) under a modification agreement whereby the combined maximum principal amount was increased to $14,631. The 2013 Consolidated Loan is collateralized by security interests in the construction mortgage, land mortgage and assignment of leases in property relating to the second building at our corporate headquarters. Under the 2013 Consolidated Loan, interest accrues monthly at the Wall Street Journal U.S. Prime rate plus 0.5%, adjusted monthly subject to a minimum interest rate of 4.0% per annum. As of December 31, 2013, the 2013 Consolidated Loan had an outstanding principal amount of $9,127 and availability of $5,504 for future construction from Kirkpatrick Bank.

(4)

The 2013 Consolidated Loan, December 2012 Loan, and 2011 Consolidated Loan are subject to certain financial covenants, as defined in the agreements, including, maintaining a debt coverage ratio of indebtedness (defined as current maturities of long-term debt, interest expense and distributions) to EBITDA of less than 1.5 to 1.0. As of December 31, 2013 and 2012, we were not in compliance with one of the financial covenants, related to the debt service ratio. This was due to the December 2012 Loan and the 2013 Consolidated Loan being included in the calculation of the debt service ratio. We obtained a letter of waiver from the lender that excludes these items from the calculation as of December 31, 2013 and 2012, which remains in effect through January 15, 2015.

(5)

In connection with the April 2012 Corporate Reorganization, we entered into a 10% Senior Note due 2022 with WCAS Capital Partners IV, L.P., a related party (the “2022 Note”). The 2022 Note is due on April 3, 2022 and interest is payable at an annual rate of 10%, payable semiannually in arrears on December 31 and June 30 of each year. We may, at our option, choose to defer all or a portion of the accrued interest on the notes that is due and payable on any payment date, provided that such amount of accrued interest shall be multiplied by 1.3 and added to the principal amount of the notes on such interest payment date (with the result that such interest shall have accrued at an effective rate of 13.0% instead of 10.0% through such payment date). As of December 31, 2013 and 2012, such option has not been elected and all interest has been paid in cash.

F-20

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

The note was issued at a discount of $2,409. We are amortizing the discount over the term of the note using the effective interest method. The note also contains certain features by which the holder, WCAS Capital Partners IV, L.P., may force redemption at principal amount plus any accrued interest upon our completion of a public offering or certain events of default. The note also provides for mandatory redemption upon a liquidation event. These features (collectively, the “Prepayment Features”) were determined to meet the definition of a derivative required to be bifurcated and separately accounted for at fair value with changes in fair value recorded in earnings. At inception, the Prepayment Features were valued at $2,100 and recorded as a derivative liability, which is re-measured to determine its fair value as of each reporting date.

The total unamortized discount related to this note was $4,125 and $4,367 as of December 31, 2013 and 2012, respectively.

As of December 31, 2013, the carrying value and fair value of our total long-term debt, including current portion were $35,772 and $38,667, respectively. As of December 31, 2012, the carrying value and fair value of our total long-term debt, including current portion were $28,550 and $29,697. The fair value of variable rate long-term debt approximates market value because the cost of borrowing fluctuates based upon market conditions. The fair value of fixed rate long-term debt is estimated based on the borrowing rates currently available to us for bank loans with similar terms and maturities.

Aggregate future maturities of long-term debt for the next five years and thereafter (including current portion) as of December 31, 2013 are as follows:


Year Ending December 31,
2014	$	9,545
2015		440
2016		461
2017		486
2018		10,158
Thereafter		14,682

	$	35,772

6.	EMPLOYEE SAVINGS PLAN

Under our 401(k) plan, employees are eligible to participate when they have attained the age of 21 and have completed 90 days of service. We have made a safe-harbor election whereby it makes a Qualified Automatic Contribution Arrangement (“QACA”) matching contribution equal to 100% of the first 1% of salary deferrals and 50% of deferrals between 2% and 6%, up to a maximum of 3.5% of salary each plan year. We are allowed to make additional discretionary matching contributions and discretionary profit sharing contributions. Employees are 100% vested in amounts attributable to salary deferrals and rollover contributions. The QACA matching contributions will be 100% vested after two full years of employment from hire date. If an employee terminates prior to completing two full years of employment, they will be 0% vested in these contributions. The discretionary contributions are vested over a six year period. Matching contributions amounted to $1,242, $985 and $702 for the years ended December 31, 2013, 2012 and 2011, respectively.

7.	FAIR VALUE OF FINANCIAL INSTRUMENTS

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, funds held for clients, client fund obligations, long-term debt and derivative liability. The carrying

F-21

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

amount of cash and cash equivalents, accounts receivable, accounts payable, funds held for clients and client fund obligations approximates fair value because of the short-term nature of the instruments.

We measure certain financial assets and liabilities at fair value at each reporting period. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value are as follow:

Level 1—Unadjusted observable inputs that reflect quoted prices in active markets

Level 2—Input other than quoted prices in active markets that are directly or indirectly observable

Level 3—Unobservable inputs that are supported by little or no market activity

We use observable data, when available. During the years ended December 31, 2013, 2012 and 2011, we did not have any transfers between level 1, 2 or 3 in the three-tier fair value hierarchy.

The following tables provide a summary of the fair value of financial instruments that are measured on a recurring basis using the above input categories:


	December 31, 2013
	Level 1		Level 2		Level 3		Total
Liabilities
Derivative	$	—	$	—	$	1,107	$	1,107

	$	—	$	—	$	1,107	$	1,107


	December 31, 2012
	Level 1		Level 2		Level 3		Total
Liabilities
Derivative					$	1,767	$	1,767

	$	—	$	—	$	1,767	$	1,767

The derivative liability related to long-term debt to related party is classified as a Level 3 derivative due to valuation based upon significant unobservable inputs.

The key inputs used to calculate the fair value of the embedded derivative are: probability of exit, remaining term, yield volatility, credit spread, and risk-free rate. In general, increases in the probability of exit, credit spread, and risk-free rate would increase the value of the embedded derivative. Conversely, increases in the remaining term and yield volatility would decrease the value of the embedded derivative.

F-22

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments as of December 31, 2013 and 2012 were as follows:


	December 31, 2013
	Valuation Technique		Key Inputs	Range
Derivative Liability		Lattice Model	Probability of exit	90%
			Remaining term	0.8 years - 8.3 years
			Yield Volatility	21.4% - 31.1%
			Credit Spread	8.90%
			Risk-free rate	0.13% - 2.45%


	December 31, 2012
	Valuation Technique		Key Inputs	Range
Derivative Liability		Lattice Model	Probability of exit	90%
			Remaining term	3.3 years - 9.3 years
			Yield Volatility	20.4% - 28.5%
			Credit Spread	11.94%
			Risk-free rate	0.36% - 1.78%

The following table summarizes the change in fair value of our Level 3 financial instruments for the years ended December 31, 2013 and 2012.


	2013			2012
Balance, beginning of year	$	1,767		$	—
Issuances		—			2,100
Change in fair value of derivative liability		(660	)		(333	)

Balance, end of year	$	1,107		$	1,767

Total change in fair value of derivative liability recognized as other income, net in the consolidated statements of income was $660 and $333 for the years ended December 31, 2013 and 2012, respectively. There was no change in fair value of derivative liability recognized during the year ended December 31, 2011.

8.	EARNINGS PER UNIT AND PRO FORMA NET INCOME PER SHARE

Earnings per unit

Earnings per unit (“EPU”) are based on the weighted average number of Series A Preferred Units and common units for the period. Diluted EPU is computed in a similar manner to basic EPU after assuming issuance of common units for all potentially dilutive common units whether or not they are exercisable. Series A Preferred Units and common units have been combined as a single class for purposes of basic and diluted EPU as Series A Preferred Units and common units contain the same rights and preferences.

F-23

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

The following is a reconciliation of net income (loss) available to Series A Preferred and common unitholders, and the units used in the computation of basic and diluted net earnings (loss) per unit:


	Year Ended December 31,
	2013			2012			2011
Basic earnings (loss) per unit:
Net income	$	7,711		$	4,238		$	1,430
Less: Distribution to Series C Preferred Unitholder		(6,467	)		(4,806	)		—

Net income (loss) available to Series A Preferred Unitholders and common unitholders		1,244			(568	)		1,430
Weighted-average common units outstanding		955,983			948,181			935,750

Basic earnings (loss) per unit	$	1.30		$	(0.60	)	$	1.53

Diluted earnings (loss) per unit:
Net income (loss) available to Series A Preferred Unitholders and common unitholders	$	1,244		$	(568	)	$	1,430
Weighted-average common units outstanding		955,983			948,181			935,750
Dilutive effect of Incentive Units		62,322			56,255			24,861

Total weighted-average common units outstanding, assuming dilution		1,018,305			1,004,436			960,611

Diluted earnings (loss) per unit	$	1.22		$	(0.57	)	$	1.49

Pro forma net income per Share (UNAUDITED)

Pro forma basic and diluted net income per share of common stock (unaudited) has been computed to give effect to the pro forma adjustments discussed below. On January 1, 2014, in anticipation of an IPO, we consummated a reorganization as described under Note 12 (the “2014 Reorganization”). Pro forma basic and diluted net income per share of common stock (unaudited) is not inclusive of all entities as described under Note 12 to be reflected in the 2014 Reorganization as those entities are not reflected in our historical financial statements.

Outstanding common units, Series B Preferred Units, and incentive units of Holdings were converted into 45,708,573 common shares and 8,121,101 restricted shares of common stock of Software at the following conversion rates:

•

F-24

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

A reconciliation of the numerators and denominators of the pro forma basic and diluted net income per share calculations is as follows (in thousands, except per share amounts):


Pro forma basic net income per share:
Historical net income available to Series A Preferred Unitholders and common unitholders	$	1,244
Distribution to Series C Preferred Unitholder		6,467

Historical net income	$	7,711
Income tax provision from conversion to a C-corporation ⁽¹⁾		(3,007	)
Interest expense from 14% Note due 2017, net of tax ⁽²⁾		(3,944	)

Pro forma net income available to common shareholders	$	760

Pro forma weighted average basic shares outstanding		47,686,326
Pro forma basic net income per share	$	0.02

Pro forma diluted net income per share:
Pro forma net income available to common shareholders	$	760

Pro forma weighted average shares outstanding		47,686,326
Dilutive effect of unvested restricted shares		685,163

Pro forma weighted average diluted shares outstanding		48,371,489

Pro forma weighted average diluted net income per share	$	0.02

The pro forma net income applied in computing the unaudited pro forma net income per share for the year ended December 31, 2013 is based upon the Company’s historical net income as adjusted to reflect:

(1)

Adjustment to income tax expense in connection with the deferred income tax assets and liabilities recognized, which assumed that Holdings was operating as a C-corporation. The amount was determined using an estimated statutory rate of 39%.

(2)

Inclusion of interest expense upon assuming 14% note with a face value of $46,193 due 2017 which accrues interest at 14% per annum (“2017 Note”). The 2017 Note replaced the Series C Preferred Units in the 2014 Reorganization. The adjustment was tax effected using an estimated statutory tax rate of 39%.

9.	MEMBERS’ EQUITY AND INCENTIVE COMPENSATION

Members’ Equity

Prior to the April 2012 Corporate Reorganization, Paycom had authorized four classes of limited liability company interests (each a “Unit”). Series A Preferred Units are voting units with first priority of distribution, which are entitled to a preferred yield (as defined within our LLC agreement) of 9% with

F-25

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

regard to certain future asset distributions, and conversion features. The Board of Directors authorized 700,000 Series A Preferred Units and as of December 31, 2013 and 2012, 671,839 were issued and outstanding.

Series B Preferred Units are non-voting units, of which 270 units were authorized and as of December 31, 2013 and 2012, 270 were issued and outstanding. These Series B Preferred Units are entitled to receive distributions only after certain conditions have been met. As of December 31, 2013, these conditions had not been met.

Common units are voting units with third priority of distribution. The Board of Directors authorized 285,000 common units and as of December 31, 2013 and 2012, 270,750 were issued and outstanding.

Incentive units are non-voting units reserved for issuance to our employees, officers, directors and other service providers. The Board of Directors authorized 50,000 incentive units. Upon consummation of the April 2012 Corporate Reorganization, all four classes of previously issued units of Paycom were exchanged for our units bearing identical terms. We authorized an additional 24,381 incentive units for the purpose of converting previously issued units.

In connection with the April 2012 Corporate Reorganization, Series C Preferred Units with a face value of $46,193 were issued to one of our members, and 50,000 Series C Preferred Units were authorized and 46,193 Series C Preferred Units were issued. Subsequent to the April 2012 Corporate Reorganization, the Series C Preferred Units holder has first priority to distribution and is entitled to a cumulative preferred yield of 14%. The distributions are paid semi-annually in cash and there were no distributions in arrears as of December 31, 2013 and 2012. These Series C Preferred Units are redeemable upon a deemed liquidation event, and the Series C Preferred Units holder has the ability to cause such liquidation event. Upon such deemed liquidation event, all equity holders are entitled to the same form of consideration. Upon our completion of a qualified initial public offering, the Series C Preferred Unitholders’ ability to cause a liquidation event would be eliminated.

Upon liquidation and following the distribution of the Series C Preferred Units liquidation preference of $46,193 plus any accrued but unpaid dividends, any remaining proceeds would be distributed to the holders of the Series A Preferred Units and common units on a pro rata basis. Series B Preferred Unitholders are entitled to receive distribution only after certain conditions are met.

Employee Incentive Units

2009 Incentive Units

We authorized 50,000 2009 Incentive Units (“2009 Incentive Units”) as part of the 2009 Incentive Units Plan (“2009 Plan”). We may award 2009 Incentive Units under the 2009 Plan to certain officers and employees of Paycom at the discretion of the compensation committee. The units vest 50% on the third annual anniversary of the date of issuance and 50% on the fourth annual anniversary of the date of issuance, provided there is no “Company Sale”. “Company Sale” is defined as (i) a transaction or series of transactions (including by way of merger, consolidation, or sale of the equity) the result of which is that the holders of the units immediately prior to such transaction(s), do not, after giving effect to such transaction(s), own directly or indirectly through one or more intermediaries, at least 50% of the units, (ii) a sale, transfer, conveyance or other disposition, in one or a series of related transaction, of all or substantially all of our assets determined on a consolidated basis, or (iii) the initial sale, in an underwritten public offering registered under the Securities Act of 1933, as amended, or our (or a successor corporation’s) equity securities. Any unvested units become immediately vested upon a Company Sale and would convert to

F-26

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

common units. In addition, all unvested units terminate upon the employee’s termination with us. We have the right, but not the obligation, to repurchase all or any portion of vested units upon termination. We authorized 24,381 units for purposes of converting previously issued units of Paycom into equivalent units of our company as previously discussed.

2012 Management Incentive Units

In connection with April 2012 Corporate Reorganization, we authorized 107,441 Management Incentive Units (“Management Incentive Units”), of which 25,953 and 57,057 were awarded to certain officers and employees of Paycom at the discretion of the Compensation Committee during the years ended December 31, 2013 and 2012, respectively. Vesting of the 2012 Management Incentive Units pool is 50% time based over five years and 50% market based. The market based vesting is based on a cash return on investment of our majority unitholder with a linear vesting scale. Vesting percentages range from 0% up to 2.0 times return on investment from grant value, up to 100% vesting at 3.5 times return on investment from grant value.

2012 CEO Incentive Units

In connection with April 2012 Corporate Reorganization, we authorized and issued 126,067 of CEO Incentive Units (“CEO Incentive Units”) during the year ended December 31, 2012. Vesting of the CEO Incentive Units is 25% time based over five years and 75% market based. The market based vesting is based on a cash return on investment of our majority unitholder with a linear vesting scale. Vesting percentage ranges from 0% up to 1.5 times return on investment from grant value, up to 100% vesting at 2.5 times return on investment from grant value.

We estimate the fair value of grants of all incentive units using a Monte Carlo simulation model. The model requires various assumptions as inputs, including expected life, volatility, risk free rate (based on U.S. Treasury rates as of the grant date), and no expected dividends. Annual volatility was estimated using the historical volatility of comparable guideline companies. We are required to estimate forfeitures and only record compensation costs for those awards that are expected to vest.

The following table presents a summary of the grant-date fair values of incentive units granted and the related assumptions:


	Year Ended December 31,
	2013	2012	2011
Grant-date fair value
2009 Plan	—	$71.78	$	51.16
2012 Management Incentive Units	$4.67 - $37.39	$8.03 - $14.29		—
2012 CEO Incentive Units	—	$6.78 - $9.35		—
Risk-free interest rates	0.71% - 1.41%	0.72%		1.74	%
Estimated Volatility	50.0%	60.0%		60.0	%
Expected life (in years)	5.0	5.0		5.0

F-27

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

The following table sets forth the compensation resulting from employee incentive unit arrangements for the years ended December 31, 2013, 2012 and 2011:


	Year Ended December 31,
	2013		2012		2011
Operating expenses	$	222	$	87	$	36
Sales and marketing		114		83		57
Research and development		345		100		25
General and administrative		253		233		47

	$	934	$	503	$	165

The capitalized non-cash incentive compensation expense related to software developed for internal use of $230 and $64 was included in software and capitalized software costs in property, plant and equipment, net in our consolidated balance sheets as of December 31, 2013 and 2012, respectively.

A summary of the status of our non-vested incentive units as of December 31, 2013 and 2012, and related changes during the years ended December 31, 2013, 2012 and 2011 are presented below:


	2009 Incentive Units
	2013					2012					2011
	Nonvested Units			Weighted Average Grant-Date Fair Value		Nonvested Units			Weighted Average Grant-Date Fair Value		Nonvested Units			Weighted Average Grant-Date Fair Value
Beginning of period		13,050		$	38.35		25,631		$	35.74		22,843		$	33.14
Awards		—			—		—			—		3,875		$	51.16
Modifications		—			—		3,405		$	71.78		—			—
Forfeitures		(128	)	$	47.34		(5,716	)	$	33.74		(1,087	)	$	36.19
Vesting		(7,981	)	$	33.22		(10,270	)	$	45.48		—			—

End of period		4,941		$	46.40		13,050		$	38.35		25,631		$	35.74


	2012 Incentive Units (including CEO)
	2013					2012
	Nonvested Units			Weighted Average Grant-Date Fair Value		Nonvested Units			Weighted Average Grant-Date Fair Value
Beginning of year		179,224		$	8.53		—			—
Awards		25,953		$	14.96		183,124		$	8.59
Forfeitures		(1,275	)	$	14.17		(3,900	)	$	11.16
Vesting		(11,564	)	$	9.47		—			—

End of year		192,338		$	9.31		179,224		$	8.53

Our incentive units do not have an exercise price and therefore the intrinsic value of the units equal the fair value.

During the year ended December 31, 2013, we redeemed some of our incentive units through total cash payments of $1,061, resulting in total incremental compensation cost of $796, of which $212 has been capitalized on the date of redemptions.

F-28

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

During the year ended December 31, 2012, there was one modification that affected two employees. The modification amended the vesting period from the original 50% on the third and 50% on the fourth anniversaries, to immediate vesting of 100% of the units. This modification resulted in total incremental compensation costs of $129 for the year ended December 31, 2012. There were no modifications to the incentive units during the years ended December 31, 2013 or 2011.

As of December 31, 2013 and 2012, there was $1,272 and $1,338 of total unrecognized compensation costs related to nonvested incentive units issued to employees, respectively. The unrecognized compensation cost is expected to be recognized over a weighted average of 3.7 years. The fair market value of the incentive unit awards shown in the preceding table are based on our estimated enterprise value at the date of grant, with consideration given to rights and terms of such units relative to other classes of units as appropriate. There were also no units converted during the years ended December 31, 2013, 2012 and 2011.

10.

RELATED-PARTY TRANSACTIONS

During the years ended December 31, 2013, 2012 and 2011, we paid Advantage Benefits Plus (“Advantage”) a total of $10, $11 and $13, respectively, for administering the Company’s employee cafeteria plan. Employee payroll deductions are sent to Advantage and we are billed monthly for an administrative fee. Advantage is owned by the spouse of our Chief Financial Officer.

In addition, during the years ended December 31, 2013, 2012 and 2011, we paid rent on our Dallas office space in the amounts of $254, $267 and $257, respectively. The Dallas office building is owned by 417 Oakbend, LP, a Texas limited partnership. Our Chief Sales Officer owns a .01% general partnership interest and a 10.49% limited partnership interest in 417 Oakbend, LP.

In November 2013 and December 2012, we purchased approximately 18.3 acres and 17.6 acres of land, respectively, for future expansion at our corporate headquarters. The land was purchased from Kilpatrick Partners, L.L.C., for a total cost of $4,788 and $2,324, respectively. The manager of Kilpatrick Partners, L.L.C. is our President and Chief Executive Officer.

In connection with the April 2012 Corporate Reorganization, we entered into the 2022 Note with WCAS Capital Partners IV, L.P., a related party as described in Note 5. The 2022 Note is due on April 3, 2022 and interest is payable at an annual rate of 10%, payable semiannually in arrears on December 31 and June 30 of each year.

11.

COMMITMENTS AND CONTINGENCIES

In March 2010, we entered into a funding agreement with the Oklahoma City Economic Development Trust (the “Trust”), and the city of Oklahoma City. The Trust provided $1,968 as an up-front job creation payment

F-29

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

for the construction of certain public infrastructure improvements to our new global headquarters in northwest Oklahoma City. In exchange for the funding, we agreed to create at least 492 jobs over a five year period, with an average first year wage in excess of $37 and make a minimum capital investment in the project of at least $15,000. We further agreed that we would be responsible for repayment of any amount that was not offset by earned job creation payments. As of December 31, 2013 and 2012, we had earned $1,529 and $899, respectively. We believe that we will fulfill the obligations under the agreement within the time frame specified.

In July 2013, Dr. Lakshmi Arunachalam filed a complaint against us in the U.S. District Court for the District of Delaware alleging that Paycom infringes on U.S. Patent No. 8,244,833 assigned to her. The complaint seeks a permanent injunction, damages, and attorneys’ fees should we be found to infringe. Dr. Arunachalam has asserted similar claims in Delaware for the alleged infringement of the same patent against other payroll processing companies. Dr. Arunachalam has also accused various other entities of infringing related U.S. patents. On October 4, 2013, we filed an answer, affirmative defenses and counterclaims to the complaint. We denied all claims made against us by Dr. Arunachalam in her complaint, asserted various defenses and counterclaims for non-infringement and challenged the validity and enforceability of U.S. Patent No. 8,244,833. Dr. Arunachalam filed a reply to our counterclaim on October 28, 2013 and denied non-infringement and invalidity. We believe that this litigation is without merit and intend to vigorously defend ourselves in this matter. Due to the nature of the claims for this litigation and the uncertainties of the litigation, we are unable to provide an estimate of the potential amount of any loss related to this litigation.

Operating Leases

We lease office space under several noncancellable operating leases with contractual terms expiring 2014 to 2019. Minimum rent expenses are recognized over the lease term. Lease term is defined as the fixed noncancellable term of the lease plus all periods, if any, for which failure to renew the lease imposes a penalty on us in such amount that a renewal appears, at the inception of the lease, to be reasonably assured. When a lease contains a predetermined fixed escalation of the minimum rent, we recognize the related rent expense on a straight-line basis and record the difference between the recognized rent expense and the amount payable under the lease as a liability.

Future annual minimum lease payments under noncancellable operating leases with initial or remaining terms of one year or more at December 31, 2013 are as follows:


Year Ending	Operating
2014	$	2,222
2015		2,092
2016		1,767
2017		1,465
2018		705
Thereafter		53

Total minimum
lease payments	$	8,304

F-30

PAYCOM PAYROLL HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013, 2012 AND 2011

(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

Rent expense under operating leases for the years ended December 31, 2013, 2012 and 2011 was $1,946, $1,487, and $1,644, respectively.

12.

SUBSEQUENT EVENTS

In anticipation of an IPO, Software consummated the reorganization as of January 1, 2014, pursuant to which, (i) the owners of WCAS Paycom Holdings Inc. (“WCAS Holdings”) and WCAS CP IV Blocker, Inc. (“CP IV Blocker”), which are affiliates of Welsh, Carson, Anderson & Stowe, contributed WCAS Holdings and CP IV Blocker to Software in exchange for shares of common stock of Software and (ii) the owners of outstanding Series B Preferred Units of Holdings contributed their Series B Preferred Units for shares of common stock of Software. Immediately after these contributions, a wholly-owned subsidiary of Software merged with and into Holdings with Holdings surviving the merger. Upon consummation of the merger, the remaining holders of outstanding common and incentive units of Holdings received shares of common stock of Software for their common and incentive units by operation of Delaware law and Holdings’ ownership interest in Software was cancelled. Following these transactions, all outstanding Series C Preferred Units were eliminated in an intercompany transaction between Holdings and WCAS Holdings, and Software assumed a 14% note with a face value $46,193 due 2017 (“2017 Note”) (collectively, the “2014 Reorganization”). In connection with the 2014 Reorganization, Software authorized and reserved 11,350,881 shares of our common stock for future issuance under the 2014 Long-Term Incentive Plan (the “2014 Plan”), effective January 1, 2014. The 2014 Plan permits Software to grant an array of equity-based incentive awards to certain officers, employees, contractors and directors.

Subsequent to December 31, 2013, we signed seven new leases for our sales offices and entered into one amendment to our existing leases thereby resulting in an additional $5,769 in future commitments of noncancellable operating leases with initial or remaining terms of one year or more.

Subsequent events were evaluated for disclosure through March 10, 2014, the date on which these consolidated financial statements were issued.

F-31

Shares

LOGO

Paycom Software, Inc.

Common Stock

Prospectus


Barclays		J.P. Morgan



Pacific Crest Securities	Stifel	Canaccord Genuity

, 2014

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution

The following table sets forth the expenses payable by the registrant expected to be incurred in connection with the issuance and distribution of the common stock being registered hereby (other than underwriting discounts and commissions). All of such expenses are estimates, except for the Securities and Exchange Commission, or the SEC, registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and the listing fee.


SEC registration fee	$	12,880
FINRA filing fee		15,500
Listing fee		*
Printing fees and expenses		*
Legal fees and expenses		*
Blue sky fees and expenses		*
Registrar and transfer agent fees		*
Accounting fees and expenses		*
Miscellaneous expenses		*

Total	$	*

*	To be completed by amendment.

Item 14.

Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act.

Our certificate of incorporation provides for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law, and our bylaws provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law.

We have entered into indemnification agreements with our directors and officers whereby we have agreed to indemnify our directors and officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which the director or officer was, or is threatened to be made, a party by reason of the fact that such director or officer is or was a director, officer, employee or agent of the registrant, provided that such director or officer acted in good faith and in a manner that the director or officer reasonably believed to be in, or not opposed to, the best interest of the registrant. At present, there is no pending litigation or proceeding involving a director or officer of the registrant regarding which indemnification is sought, nor is the registrant aware of any threatened litigation that may result in claims for indemnification.

We maintain insurance policies that indemnify our directors and officers against various liabilities arising under the Securities Act and the Exchange Act of 1934, as amended, that might be incurred by any director or officer in his capacity as such.

The underwriters are obligated, under certain circumstances, pursuant to the underwriting agreement to be filed as Exhibit 1.1 hereto, to indemnify us, our officers, directors and the selling stockholders against liabilities under the Securities Act.

II-1

Item 15.

Recent Sales of Unregistered Securities

During the past three years, our predecessors, Paycom Software Holdings, LLC, or Holdings, and Paycom Payroll, LLC, or Payroll, issued the following securities that were not registered under the Securities Act:

Incentive Units

During 2011, Payroll granted 3,875 incentive units to eligible officers and other employees under the 2009 Incentive Units Plan. These incentive units vest 50% on the third anniversary of the date of issuance and 50% on the fourth anniversary of the date of issuance. These incentive units were issued with a strike price that was based upon an $80.0 million company enterprise value.

During 2012, Holdings granted 57,057 Management Incentive Units to eligible officers and other employees under the 2012 Incentive Units Plan. These Management Incentive Units vest 50% over five years and 50% based on a cash return on investment to WCAS Paycom Holdings, Inc. with a linear vesting scale. These Management Incentive Units were issued with a strike price that was based upon a $400.0 million company enterprise value.

During 2012, Holdings granted 126,067 CEO Incentive Units to the Chief Executive Officer under the 2012 Incentive Units Plan. These CEO Incentive Units vest 25% over five years and 75% based on a cash return on investment to WCAS Paycom Holdings, Inc. with a linear vesting scale. These CEO Incentive Units were issued with a strike price that was based upon a $550.0 million company enterprise value.

During 2013, Holdings granted 25,953 Management Incentive Units to eligible officers and other employees under the 2012 Incentive Units Plan. These Management Incentive Units vest 50% over five years and 50% based on a cash return on investment of WCAS Paycom Holdings, Inc. with a linear vesting scale. These Management Incentive Units were issued with strike prices that were based upon a company enterprise values of $400.0 million and $550.0 million.

April 2012 Corporate Reorganization

On April 3, 2012, Holdings sold 6,839.0057 Series A Preferred Units to WCAS CP IV Blocker, Inc. for an aggregate purchase price of $2,409,122.44.

On April 3, 2012, pursuant to the Agreement and Plan of Merger by and among Holdings, Payroll and Paycom Payroll Merger Sub, LLC, by operation of Delaware law, all equity securities in Payroll were converted into equivalent equity securities in Holdings bearing identical terms. See “Related Party Transactions.”

On April 3, 2012, Holdings distributed 46,192.8934 Series C Preferred Units to WCAS Paycom Holdings, Inc. as part of the election of WCAS Paycom Holdings, Inc. to receive Series C Preferred Units instead of cash in connection with the recapitalization of Holdings set forth in the limited liability company agreement of Holdings.

The Reorganization

Effective January 1, 2014, we issued 30,452,458 and 136,015 shares of our common stock to WCAS X and WCAS Management Corporation, respectively, in exchange for the contribution of all of the shares of common stock of WCAS Paycom Holdings, Inc. to Software. In addition, we issued 323,307 shares of our common stock to WCAS IV in exchange for the contribution of all of the shares of common stock of WCAS CP IV Blocker, Inc. to Software.

Effective January 1, 2014, we issued 628,745 shares of our common stock to Robert J. Levenson (and certain affiliated entities) in exchange for his contribution of 200 Series B Preferred Units of Holdings to

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Software and we issued 220,060 shares of our common stock Richard Aiello in exchange for his contribution of 70 Series B Preferred Units of Holdings to Software.

Effective January 1, 2014, pursuant to the Agreement and Plan of Merger by and among Paycom, Holdings, Payroll and Paycom Software Merger Sub, LLC, or Software Merger Sub, Software Merger Sub merged with and into Holdings, with all outstanding common units and incentive units of Holdings being converted into shares of our common stock or restricted common stock by operation of Delaware law.

The sales of the above securities were deemed exempt from registration under Section 4(a)(2) or Regulation D of the Securities Act, and in certain circumstances, in reliance on Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. The recipients of securities in the transactions exempt under Section 4(a)(2) or Regulation D of the Securities Act represented their intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the units and instruments issued in such transactions.

Item 16.

Exhibits and Financial Statement Schedules

(a) Exhibits. The following exhibits are included herein or incorporated herein by reference:


Exhibit No.		Description

1.1*		Form of Underwriting Agreement.

2.1		Agreement and Plan of Merger, by and among Paycom Payroll, LLC, Paycom Payroll Holdings, LLC and Paycom Payroll Merger Sub, LLC, dated April 3, 2012.

2.2		Contribution Agreement, by and between WCAS Capital Partners IV, L.P. and WCAS CP IV Blocker, Inc., dated April 3, 2012.

2.3		Securities Purchase Agreement, by and among Paycom Payroll Holdings, LLC, WCAS Capital Partners IV, L.P. and WCAS CP IV Blocker, Inc., dated April 3, 2012.

2.4		Merger Agreement, by and among Paycom Software, Inc., Paycom Payroll Holdings, LLC, Paycom Payroll, LLC and Paycom Merger Sub, LLC, dated December 30, 2013.

2.5		Contribution Agreement, by and between WCAS Capital Partners, IV, L.P. and Paycom Software, Inc., dated December 30, 2013.

2.6		Contribution Agreement, by and among Welsh, Carson, Anderson & Stowe X, L.P., WCAS Management Corporation and Paycom Software, Inc., dated December 30, 2013.

2.7		Contribution Agreement, by and among Paycom Software, Inc. and each of the signatories thereto, dated December 30, 2013.

3.1		Certificate of Incorporation of the Registrant, as currently in effect.

3.2*		Form of Amended and Restated Certificate of Incorporation, to be in effect prior to the completion of this offering.

3.3		Bylaws of the Registrant, as currently in effect.

3.4*		Form of Amended and Restated Bylaws of the Registrant, to be in effect prior to the completion of this offering.

4.1*		Form of Common Stock Certificate.

4.2		Amended and Restated Stockholders’ Agreement.

4.3		Registration Rights Agreement.

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Exhibit No.		Description

5.1*		Opinion of Haynes and Boone, LLP.

10.1		Form of Indemnification Agreement between Paycom Software, Inc. and each of its directors and executive officers.

10.2		Paycom Software, Inc. 2014 Long-Term Incentive Plan.

10.3		Form of Restricted Stock Award Agreement.

10.4		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and Chad Richison, dated December 30, 2013.

10.5		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and Craig E. Boelte, dated December 30, 2013.

10.6		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and Jeffrey D. York, dated December 30, 2013.

10.7		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and William X. Kerber III, dated December 30, 2013.

10.8		Consolidated, Amended and Restated Loan Agreement, by and between Kirkpatrick Bank and Paycom Payroll, LLC, dated December 15, 2011.

10.9		Loan Agreement, by and between Kirkpatrick Bank and Paycom Payroll, LLC, dated March 28, 2013.

10.10		10% Senior Note due April 3, 2022, by and between WCAS Capital Partners IV, L.P. and Paycom Payroll Holdings, LLC, dated April 3, 2012.

10.11		14% Note due April 3, 2017, by and between WCAS Paycom Holdings, Inc. and Welsh, Carson, Anderson & Stowe X, L.P., dated April 3, 2012, to be assumed upon the completion of this offering.

10.12		Real Property Purchase Agreement by and between Paycom Payroll, LLC and Kilpatrick Partners, L.L.C., dated November 28, 2012.

10.13		Real Property Purchase Agreement by and between Paycom Payroll, LLC Kilpatrick Partners, L.L.C., dated October 16, 2013.

10.14		Right of First Refusal Agreement, by and between Kilpatrick Partners, L.L.C. and Paycom Payroll, LLC, dated October 4, 2013.

21.1		List of subsidiaries of the Registrant.

23.1		Consent of Grant Thornton LLP.

23.2		Consent of Grant Thornton LLP.

23.3*		Consent of Haynes and Boone, LLP (included in Exhibit 5.1).

24.1*		Power of Attorney (contained in the signature page to this registration statement).

*	To be filed by amendment.

Item 17.

Undertakings

The undersigned registrant hereby undertakes:

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

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ii.

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

iii.

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

We have agreed to indemnify our director and officer against certain liabilities, including liabilities under the Securities Act and the benefits of such indemnification are not waived by our director and officer. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Oklahoma City, State of Oklahoma, on March 10, 2014.


PAYCOM SOFTWARE, INC.

By:		/s/ Chad Richison
		Chad Richison Chief Executive Officer and Director

The undersigned directors and officers of Paycom Software, Inc. hereby constitute and appoint Chad Richison and Craig E. Boelte, and each of them, any of whom may act without joinder of the other, as the individual’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement and any or all amendments, including post-effective amendments to the Registration Statement, including a prospectus or an amended prospectus therein and any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act, and all other documents in connection therewith to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following person in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Chad Richison Chad Richison	Chief Executive Officer and Director (Principal Executive Officer)	March 10, 2014

/s/ Craig E. Boelte Craig E. Boelte	Chief Financial Officer (Principal Accounting and Financial Officer)	March 10, 2014

/s/ Robert J. Levenson Robert J. Levenson	Director	March 10, 2014

/s/ Rob Minicucci Rob Minicucci	Chairman of the Board	March 10, 2014

/s/ Conner Mulvee Conner Mulvee	Director	March 10, 2014

/s/ Frederick C. Peters II Frederick C. Peters II	Director	March 10, 2014

/s/ Sanjay Swani Sanjay Swani	Director	March 10, 2014

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EXHIBIT INDEX


Exhibit No.		Description

1.1*		Form of Underwriting Agreement.

2.1		Agreement and Plan of Merger, by and among Paycom Payroll, LLC, Paycom Payroll Holdings, LLC and Paycom Payroll Merger Sub, LLC, dated April 3, 2012.

2.2		Contribution Agreement, by and between WCAS Capital Partners IV, L.P. and WCAS CP IV Blocker, Inc., dated April 3, 2012.

2.3		Securities Purchase Agreement, by and among Paycom Payroll Holdings, LLC, WCAS Capital Partners IV, L.P. and WCAS CP IV Blocker, Inc., dated April 3, 2012.

2.4		Merger Agreement, by and among Paycom Software, Inc., Paycom Payroll Holdings, LLC, Paycom Payroll, LLC and Paycom Merger Sub, LLC, dated December 30, 2013.

2.5		Contribution Agreement, by and between WCAS Capital Partners, IV, L.P. and Paycom Software, Inc., dated December 30, 2013.

2.6		Contribution Agreement, by and among Welsh, Carson, Anderson & Stowe X, L.P., WCAS Management Corporation and Paycom Software, Inc., dated December 30, 2013.

2.7		Contribution Agreement, by and among Paycom Software, Inc. and each of the signatories thereto, dated December 30, 2013.

3.1		Certificate of Incorporation of the Registrant, as currently in effect.

3.2*		Form of Amended and Restated Certificate of Incorporation, to be in effect prior to the completion of this offering.

3.3		Bylaws of the Registrant, as currently in effect.

3.4*		Form of Amended and Restated Bylaws of the Registrant, to be in effect prior to the completion of this offering.

4.1*		Form of Common Stock Certificate.

4.2		Amended and Restated Stockholders’ Agreement.

4.3		Registration Rights Agreement.

5.1*		Opinion of Haynes and Boone, LLP.

10.1		Form of Indemnification Agreement between Paycom Software, Inc. and each of its directors and executive officers.

10.2		Paycom Software, Inc. 2014 Long-Term Incentive Plan.

10.3		Form of Restricted Stock Award Agreement.

10.4		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and Chad Richison, dated December 30, 2013.

10.5		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and Craig E. Boelte, dated December 30, 2013.

10.6		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and Jeffrey D. York, dated December 30, 2013.

10.7		Executive Employment Agreement by and between Paycom Payroll Holdings, LLC and William X. Kerber III, dated December 30, 2013.

10.8		Consolidated, Amended and Restated Loan Agreement, by and between Kirkpatrick Bank and Paycom Payroll, LLC, dated December 15, 2011


Exhibit No.		Description

10.9		Loan Agreement, by and between Kirkpatrick Bank and Paycom Payroll, LLC, dated March 28, 2013.

10.10		10% Senior Note due April 3, 2022, by and between WCAS Capital Partners IV, L.P. and Paycom Payroll Holdings, LLC, dated April 3, 2012.

10.11		14% Note due April 3, 2017, by and between WCAS Paycom Holdings, Inc. and Welsh, Carson, Anderson & Stowe X, L.P., dated April 3, 2012, to be assumed upon the completion of this offering.

10.12		Real Property Purchase Agreement by and between Paycom Payroll, LLC and Kilpatrick Partners, L.L.C., dated November 28, 2012.

10.13		Real Property Purchase Agreement by and between Paycom Payroll, LLC Kilpatrick Partners, L.L.C., dated October 16, 2013.

10.14		Right of First Refusal Agreement, by and between Kilpatrick Partners, L.L.C. and Paycom Payroll, LLC, dated October 4, 2013.

21.1		List of subsidiaries of the Registrant.

23.1		Consent of Grant Thornton LLP.

23.2		Consent of Grant Thornton LLP.

23.3*		Consent of Haynes and Boone, LLP (included in Exhibit 5.1).

24.1*		Power of Attorney (contained in the signature page to this registration statement).

*	To be filed by amendment.

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

Paycom Payroll Holdings, LLC, as Holdco,

Paycom Payroll, LLC, as the Company,

and

Paycom Payroll Merger Sub, LLC, as Merger Sub

Dated as of April 3, 2012

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of this 3rd day of April, 2012, by and among (i) Paycom Payroll, LLC, a Delaware limited liability company (the “ Company ”), (ii) Paycom Payroll Holdings, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“ Holdco ”), and (iii) Paycom Payroll Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Holdco (“ Merger Sub ”).

RECITALS

WHEREAS, the Company desires to facilitate the making of a distribution to its Securityholders (the “ Distribution ”) and in connection therewith, the Company formed Holdco as its direct wholly owned subsidiary and Merger Sub as Holdco’s direct wholly owned subsidiary;

WHEREAS, the Board of Directors of the Company (a) has determined that it is in the best interest of the Company, Merger Sub and the Securityholders for Merger Sub to merge with and into the Company, (b) approved and declared advisable the Merger (as defined below) upon the terms set forth herein and in accordance with the Delaware Limited Liability Company Act (the “ DLLCA ”), and (c) adopted this Agreement and approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby;

WHEREAS, pursuant to the Company LLC Agreement and the DLLCA, the holders of a majority of the Common Units and Preferred A Units, voting together as a single class, have approved this Agreement and the consummation of the transactions contemplated hereby;

WHEREAS, in furtherance thereof, upon the terms of this Agreement, Merger Sub will be merged with and into the Company (the “ Merger ”) in accordance with the DLLCA, with the Company surviving the Merger; and

WHEREAS, as a result of the Merger, (i) the Units of the Company held by each Securityholder will be converted into, and Holdco will issue to such Securityholder, units of Holdco that are identical to the Units of the Company held by such Securityholder, (ii) the Company’s ownership in Holdco will be cancelled and (iii) Holdco will become the holding company and the sole member of the Surviving Company (as defined below) and will make the Distribution.

NOW, THEREFORE, in consideration of the promises and of the mutual representations, warranties, covenants and agreements herein contained, and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

MERGER; CLOSING

1.1 The Merger . At the Effective Time and upon the terms and subject to the conditions of this Agreement and the LLCA, Merger Sub shall be merged with and into the Company, the separate existence of Merger Sub shall cease and the Company shall continue as the surviving company in the Merger (the “ Surviving Company ”), the Company’s ownership interest in Holdco will be cancelled and the Company will become a wholly owned subsidiary of Holdco.

1.2 Effective Time; Closing . Upon the terms and subject to the conditions hereof, the closing of the Merger and other transactions as provided herein (the “ Closing ”) will take place upon the execution and delivery of this Agreement on the date hereof, or such other time and place as the parties hereto may mutually agree (the “ Closing Date ”). As soon as practicable on the Closing Date, the parties hereto will cause the Merger to be consummated by filing a certificate of merger in the form attached hereto as Exhibit A (the “ Certificate of Merger ”), executed in accordance with the relevant provisions of the DLLCA, with the Delaware Secretary of State and make all other filings or recordings required by the DLLCA in connection with the Merger. The Merger shall become effective at such time as such Certificate of Merger is duly filed with the Delaware Secretary of State (the “ Effective Time ”).

1.3 Effects of the Merger; Subsequent Actions .

(a) The Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the applicable provisions of the DLLCA. All the properties, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Company, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Company.

(b) If, at or after the Effective Time, the Surviving Company shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Company its right, title or interest in, to or under any of the rights, properties or assets of the Company or Merger Sub acquired or to be acquired by the Surviving Company as a result of or in connection with the Merger, or otherwise to carry out the transactions contemplated by this Agreement, the officers and directors of the Surviving Company shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, as the case may be, all such deeds, bills of sale, assignments, assumption agreements and assurances and to take and do, in the name and on behalf of each of such companies or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets of the Surviving Company or otherwise to carry out this Agreement.

1.4 Directors . The directors of the Surviving Company shall initially be the directors of the Company as of immediately prior to the Closing, each to hold office in accordance with the certificates of formation and limited liability company agreement of the Surviving Company and until his or her successor is duly elected and qualified.

1.5 Officers . The officers of the Surviving Company shall initially be the officers of the Company as of immediately prior to the Closing, each to hold office in accordance with the certificates of formation and limited liability company agreement of the Surviving Company and until his or her successor is duly appointed and qualified.

1.6 Conversion of Equity . At the Effective Time, by virtue of the Merger and without any action on the part of Holdco, Merger Sub, the Company or the Securityholders:

(a) Conversion of Company Units . Each Common Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for one fully paid and non-assessable Holdco Common Unit. Each fraction of a Common Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for an identical fraction of one fully paid and non-assessable Holdco Common Unit. Upon the Merger, all of the Common Units (and all fractions of Common Units) shall automatically be canceled and retired and shall cease to exist, and shall thereafter represent only the right to receive the applicable number (or fractional number) of Holdco Common Units.

(b) Conversion of Preferred A Units . Each Preferred A Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for one fully paid and non-assessable Holdco Preferred A Unit. Each fraction of a Preferred A Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for an identical fraction of one fully paid and non-assessable Holdco Preferred A Unit. Upon the Merger, all of the Preferred A Units (and all fractions of Preferred A Units) shall automatically be canceled and retired and shall cease to exist, and shall thereafter represent only the right to receive the applicable number (or fractional number) of Holdco Preferred A Units.

(c) Conversion of Preferred B Units . Each Preferred B Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for one fully paid and non-assessable Holdco Preferred B Unit. Each fraction of a Preferred B Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for an identical fraction of one fully paid and non-assessable Holdco Preferred B Unit. Upon the Merger, all of the Preferred B Units (and all fractions of Preferred B Units) shall automatically be canceled and retired and shall cease to exist, and shall thereafter represent only the right to receive the applicable number (or fractional number) of Holdco Preferred B Units.

(d) Conversion of Incentive Units . Each Incentive Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for one fully paid and non-assessable Holdco Incentive Unit and each fraction of an Incentive Unit issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for an identical fraction of one fully paid and non-assessable Holdco Incentive Unit; provided , that, in each case, such Holdco Incentive Units, or fractions thereof,

shall be subject to the same terms and conditions set forth in the applicable grant agreement pursuant to which the Incentive Units, or such fractional Incentive Units, were originally issued. Upon the Merger, all Incentive Units (and all fractions of Incentive Units) shall automatically be exchanged and retired and shall cease to exist, and shall thereafter represent only the right to receive the applicable number (or fractional number) of Holdco Incentive Units.

(e) Cancellation of Certain Units .

(i) Each Common Unit, Class A Preferred Unit, Class B Preferred Unit and Incentive Unit (and any fractions thereof) authorized but not issued immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof and no payment shall be owed with respect thereto.

(ii) Upon the Merger, all units of Holdco held by the Company shall automatically be cancelled and extinguished without any conversion thereof and no payment shall be owed with respect thereto.

(f) Units of Merger Sub . Each unit of Merger Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, be converted into and exchanged for one (1) fully paid and non-assessable Common Unit of the Surviving Company.

(g) Joinder to Holdco LLC Agreement . Each Securityholder who receives Holdco Units pursuant to this Section 1.6 shall immediately be made party to the Holdco LLC Agreement as a member and shall be bound by, and subject to, all of the representations, covenants, terms and conditions of the Holdco LLC Agreement, and shall cease to be a party to the Company LLC Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1 Representations and warranties of the Company:

The Company hereby represents and warrants to Holdco and Merger Sub as follows:

(a) Due Organization . The Company is a limited liability company duly organized, validly existing and in good standing under the DLLCA. The Company has full power and authority necessary to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.

(b) Authorization; No Conflict .

(i) The Company has full legal right and all requisite power and authority to execute and deliver this Agreement and to perform the transactions contemplated hereby. The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(ii) The execution, delivery and performance of this Agreement by the Company, and the consummation of the transactions contemplated hereby, will not, with or without notice, lapse of time, or both: (a) conflict with or result in a breach or violation of the Company LLC Agreement or any resolution of the board of directors, securityholders, managers or members of the Company; (b) require, on the part of the Company, any filing with, or permit, authorization, consent or approval of, any Governmental Authority; or (c) violate any law to which the Company, or any of their respective properties, rights or assets are subject or bound.

2.2 Representations and warranties of Holdco and Merger Sub:

Each of Holdco and Merger Sub represents and warrants to the Company as follows:

(a) Due Organization . Each of Holdco and Merger Sub is a limited liability company duly organized, and validly existing under the DLLCA. Each of Holdco and Merger Sub has all requisite corporate power and authority necessary to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.

(b) Authorization; No Conflict .

(i) Each of Holdco and Merger Sub has full legal right and all requisite power and authority to execute and deliver this Agreement and to perform the transactions contemplated hereby. The execution and delivery by Holdco and Merger Sub of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Holdco or Merger Sub (as applicable). This Agreement has been duly and validly executed and delivered by Holdco and Merger Sub and constitutes a valid and binding obligation of Holdco and Merger Sub (as applicable), enforceable against such party in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(ii) The execution, delivery and performance of this Agreement by Holdco and Merger Sub, and the consummation of the transactions contemplated hereby, will not, with or without notice, lapse of time, or both: (a) conflict with or result in a breach or violation of such party’s limited liability company agreement or any resolution of the board of directors, securityholders, managers or members of Holdco or Merger Sub (as applicable); (b) require, on the part of Holdco or Merger Sub, any filing with, or permit, authorization, consent or approval of, any Governmental Authority; or (c) violate any law to which Holdco or Merger Sub, or any of their respective properties, rights or assets are subject or bound.

ARTICLE III

DEFINITIONS

3.1 Specific Definitions .

“ Common Units ” means the “Common Units” as such term is defined in the Company LLC Agreement.

“ Company LLC Agreement ” means the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as April 1, 2009, as amended, restated or otherwise modified from time to time.

“ Governmental Authority ” means any federal, state, local or foreign governmental or quasi-governmental entity or municipality or subdivision thereof or any authority, department, commission, board, bureau, agency, court, tribunal or instrumentality, or any applicable self-regulatory organization.

“ Holdco Common Units ” means the “Common Units” as such term is defined in the Holdco LLC Agreement.

“ Holdco Incentive Units ” means the “Incentive Units” as such term is defined in the Holdco LLC Agreement.

“ Holdco LLC Agreement ” means the Limited Liability Company Agreement of Holdco, dated as of the date hereof, as amended, restated or otherwise modified from time to time.

“ Holdco Preferred A Units ” means the “Preferred A Units” as such term is defined in the Holdco LLC Agreement.

“ Holdco Preferred B Units ” means the “Preferred B Units” as such term is defined in the Holdco LLC Agreement.

“ Holdco Units ” means each of the Holdco Common Units, Holdco Preferred A Units, Holdco Preferred B Units and Holdco Incentive Units.

“ Incentive Units ” means the “Incentive Units” as defined in the Company LLC Agreement.

“ Preferred A Units ” means the “Preferred A Units” as such term is defined in the Company LLC Agreement.

“ Preferred B Units ” means the “Preferred B Units” as such term is defined in the Company LLC Agreement.

“ Securityholders ” means, collectively, the holders of Common Units, Preferred A Units, Preferred B Units and Incentive Units.

ARTICLE IV

GENERAL

4.1 Entire Agreement; Amendment . This Agreement, including the exhibits hereto and the other documents referred to herein contain the entire understanding of the parties hereto, with respect to the subject matter contained herein and therein. This Agreement supersedes all prior and contemporaneous agreements, arrangements, contracts, discussions, negotiations, undertakings and understandings (whether written or oral) between the parties with respect to such subject matter. This Agreement may be amended only by a written instrument executed by all of the parties hereto.

4.2 Severability . Any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Agreement.

4.3 Counterparts . This Agreement may be executed in two or more counterparts (including by facsimile and electronic transmissions), each of which shall constitute an original, and all of which taken together shall constitute one instrument.

4.4 Governing Law; Waiver of Jury Trial

(a) The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware, without giving effect to any conflict of law provisions thereof.

(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

4.5 Assignment . The provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law and permitted assigns of the parties hereto. No assignment of this Agreement may be made by any party at any time, whether or not by operation of law, without the other parties’ prior written consent.

4 .6 No Third-Party Beneficiaries Nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

[SIGNATURE PAGES TO FOLLOW]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of Merger as of the day and year first written above.


MERGER SUB:	PAYCOM PAYROLL MERGER SUB, LLC

	By: Paycom Payroll Holdings, LLC Its: Member

	By:	/s/ Chad Richison
	Name:	Chad Richison
	Title:	Chief Executive Officer and President

SCHEDULE OF OMITTED EXHIBITS AND SCHEDULES

The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the

Commission upon request.

Exhibit A- Certificate of Merger

Exhibit 2.2

EXECUTION COPY

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of this 3rd day of April, 2012 by and between WCAS Capital Partners IV, L.P., a Delaware limited partnership (“ CP_IV ”), and WCAS CP IV Blocker, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, the Company is a wholly-owned subsidiary of CP IV; and

WHEREAS, CP IV desires to contribute to the Company, and the Company desires to accept from CP IV, $2,409,122.44 in cash (the “ Cash Contribution ”) in exchange for one hundred (100) shares of Common Stock of the Company (the “ Company Shares ”).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. Contributions . CP IV hereby contributes to the Company the Cash Contribution. In exchange for the Cash Contribution, the Company will issue CP IV the Company Shares, free and clear of any liens.

2. Entire Agreement; Amendment . This Agreement, including the other documents referred to herein, contain the entire understanding of the parties hereto, with respect to the subject matter contained herein and therein. This Agreement supersedes all prior and contemporaneous agreements, arrangements, contracts, discussions, negotiations, undertakings and understandings (whether written or oral) between the parties with respect to such subject matter. This Agreement may be amended only by a written instrument executed by all of the parties hereto.

3. Severability . Any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Agreement.

4. Counterparts . This Agreement may be executed in two or more counterparts (including by facsimile and electronic transmissions), each of which shall constitute an original, and all of which taken together shall constitute one instrument.

5. Governing Law; Waiver of Jury Trial .

(i) The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware, without giving effect to any conflict of law provisions thereof.

(ii) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

6. Assignment . The provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law and permitted assigns of the parties hereto. No assignment of this Agreement may be made by any party at any time, whether or not by operation of law, without the other parties’ prior written consent.

7. No Third-Party Beneficiaries . Nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Contribution Agreement as of the date first above written.


WCAS CAPITAL PARTNERS IV, L.P.

By:		WCAS CP IV Associates LLC,
		its General Partner



By:		/s/ John D. Clark
		Name:
		Title:


WCAS CP IV BLOCKER, INC.

By:		/s/ John D. Clark
		Name: John D. Clark Title: Vice President, Assistant Treasurer and Assistant Secretary

Exhibit 2.3

EXECUTION COPY

SECURITIES PURCHASE

AND CONTRIBUTION AGREEMENT

THIS SECURITIES PURCHASE AND CONTRIBUTION AGREEMENT (as from time to time amended, supplemented or modified, this “ Agreement ”), dated as of April 3, 2012, is entered into by and among (i) Paycom Payroll Holdings, LLC, a Delaware limited liability company (“ Holdings ”), (ii) WCAS Capital Partners IV, L.P., a Delaware limited partnership (“ WCAS CP IV ”), and (iii) WCAS CP IV Blocker, Inc., a Delaware corporation (the “ Unit Purchaser ”). Capitalized terms used and not defined elsewhere in this Agreement have the meanings provided for them in Article I hereof.

RECITALS

A. In order to provide liquidity for working capital requirements and other general corporate purposes (including the funding of a distribution to the equity holders of Holdings) of Holdings and its Subsidiaries, the Unit Purchaser has agreed to make, at the Closing, a cash capital contribution to Holdings in exchange for Series A preferred membership units of Holdings (the “ Preferred Units ”), and to become a member of Holdings and a signatory to the LLC Agreement, all on the terms and conditions set forth in this Agreement.

B. In order to provide liquidity for working capital requirements and other general corporate purposes (including the funding of a distribution to the equity holders of Holdings) of Holdings and its Subsidiaries, the Note Purchaser has agreed to purchase from Holdings, as of the date hereof, 10% senior notes due 2022 of Holdings (the “ Notes ”) in the aggregate principal amount of $18,807,106.60, in the form of Exhibit A hereto (together with the Preferred Units, the “ Securities ”), all on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

SECTION 1.01. Certain Definitions . In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings when used herein with initial capital letters:

“ Affiliate ” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” has the meaning provided in the preamble hereto.

“ AHYDO ” has the meaning provided in Section 3.01(c).

“ AHYDO Catch-up Payment ” has the meaning provided in Section 3.01(c).

“ Business Day ” means any weekday other than a weekday on which banks in New York, New York are authorized or required to be closed.

“ Change of Control ” means any of the following: (i) a transaction or series of transactions (including by way of merger, consolidation, or sale of equity) the result of which is that the holders of the Units (as such term is defined in the LLC Agreement) immediately prior to such transaction(s), do not, after giving effect to such transaction(s), own, directly or indirectly through one or more intermediaries, at least 50% of the Units, or (ii) a sale, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of Holdings’ assets determined on a consolidated basis.

“ Closing ” has the meaning provided in Section 2.03.

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended, or any successor federal statute, and the regulations promulgated thereunder, in each case, as the same may be amended from time to time.

“ Contingent Obligations ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person: (a) with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (c) under any swap agreements or other interest or currency exchange hedge agreements; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for the obligations of another Person through any agreement to purchase, repurchase or otherwise acquire such obligation or any Property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported

“ Default ” means any event or condition that constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“ Equity Securities ” means, as applicable, (a) any capital stock, membership interests or other share capital, (b) any securities directly or indirectly convertible into or exchangeable for any capital stock, membership interests or other share capital or containing any profit participation features, (c) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, membership interests, other share capital or securities containing any profit participation features or to subscribe for or to purchase any securities directly or indirectly

convertible into or exchangeable for any capital stock, membership interests, other share capital or securities containing any profit participation features, (d) any share appreciation rights, phantom share rights or other similar rights, or (e) any Equity Securities issued or issuable with respect to the securities referred to in clauses (a) through (d) above in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization.

“ Event of Default ” has the meaning provided in Section 10.01.

“ Financial Officer ” means, with respect to any specified Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person, in each case in his or her capacity as such.

“ GAAP ” means generally accepted accounting principles in the United States as in effect from time to time.

“ Governmental Authority ” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including any court, in each case, having jurisdiction over Holdings or any of its Subsidiaries or any of the property or other assets of Holdings or any of its Subsidiaries.

“ Holder ” means any holder of a Note, and its successors and assigns.

“ Holdings ” shall have the meaning assigned to such term in the preamble hereto.

“ Indebtedness ” of any Person means, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including earnouts (other than trade payables, accounts payable and accrued operating expenses, in each case, incurred or entered into in the ordinary course of business); (c) the face amount of all letters of credit issued for the account of such Person and without duplication, all drafts drawn thereunder and all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments issued by such Person; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to capital leases; (g) the principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off balance sheet financing product; (h) all obligations, whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own Equity Securities (or any Equity Securities of a direct or indirect parent entity thereof) prior to the date that is 180 days after the final scheduled installment payment date for the Maturity Date, valued at, in the case of redeemable preferred Stock, the greater of the voluntary liquidation preference and the involuntary liquidation preference of such Equity Securities plus accrued and unpaid dividends; (i) all indebtedness referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be

secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness; and (j) all Contingent Obligations described in clause (a) of the definition thereof in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above.

“ Interest Payment Date ” has the meaning provided in Section 3.01(a).

“ IPO Prepayment Notice ” has the meaning provided in Section 3.04(b).

“ IPO Repurchase Notice ” has the meaning provided in Section 3.04(b).

“ Liquidation Event ” means (a) a liquidation, dissolution or winding up of Holdings or (b) a Change of Control.

“ LLC Agreement ” means the Limited Liability Company Agreement of Holdings, dated as of the date hereof, as amended, restated, or otherwise modified from time to time.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations, assets, liabilities, financial condition or results of operations of Holdings and its Subsidiaries, taken as a whole, (b) the ability of Holdings to perform any obligation under the LLC Agreement or any of the Note Documents or (c) the rights of or benefits available to the Unit Purchaser or the Note Purchaser (or any Holder of Notes) under the LLC Agreement or any of the Note Documents.

“Maturity Date ”: means April 3, 2022.

“ Note Document ” means this Agreement, the Notes and any other document, certificate, instrument or agreement delivered in connection with this Agreement or the Notes.

“ Note Obligations ” means any principal, interest, penalties, fees, indemnifications, reimbursement obligations, damages and other liabilities payable under, or with respect to, this Agreement or the Notes.

“ Note Purchaser ” has the meaning provided in Section 2.02.

“ Notes ” has the meaning provided in the recitals hereto and shall include any Note from time to time issued under this Agreement.

“ Opco ” means Paycom Payroll, LLC, a Delaware limited liability company.

“ Organizational Documents ” means, with respect to any Person (other than an individual), (a) the certificate or articles of incorporation, organization or formation and any joint venture, limited liability company, operating or partnership agreement and other similar documents adopted or filed in connection with the creation, formation or organization of such Person and (b) all by-laws, voting agreements and similar documents, instruments or agreements relating to the organization or governance of such Person, in each case, as amended, modified or supplemented from time to time.

“ Person ” means any natural person, corporation, limited liability company, partnership, trust, joint stock company, business trust, unincorporated association, joint venture, governmental authority or other legal entity of any nature whatsoever.

“ PIK Interest ” has the meaning provided in Section 3.01(b).

“ Preferred Units ” shall have the meaning assigned to such term in the recitals hereto.

“ Public Offering ” means a public offering of common stock of any corporate entity into which Holdings is hereafter converted or other successor to Holdings or any shares of common stock of a Subsidiary of Holdings pursuant to an effective registration statement (other than on a Form S-4 or other similar form) under the Securities Act.

“ Register ” has the meaning provided in Section 9.05.

“ Regulation D ” has the meaning provided in Section 4.03.

“ Required Holders ” means Holders holding a majority in aggregate principal amount of the Notes at the time outstanding.

“ Requirements of Law ” means as to any Person, the Organizational Documents of such Person, and any law, treaty, rule or regulation, order or determination of an arbitrator or a court or other Governmental Authority, in each case, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“ Securities ” has the meaning provided in the recitals hereto.

“ Securities Act ” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, in each case, as the same may be amended from time to time.

“ Significant Subsidiary ” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof. For purposes of determining whether an Event of Default has occurred, if any group of Subsidiaries as to which a particular event has occurred and is continuing at any time would be, when taken as a whole, a “Significant Subsidiary” then such event shall be deemed to have occurred with respect to a Significant Subsidiary.

“ Subsidiary ” means, with respect to Holdings or any other Person, any Person of which Holdings (or such other Person) owns securities having a majority of the voting power in electing the board of directors (or similar governing body) directly or through one or more Subsidiaries (or, in the case of a partnership, limited liability company or other similar entity, securities conveying, directly or indirectly, a majority of the economic interests in such partnership or entity), including any Person of which Holdings (or such other Person) or any Subsidiary serves as general partner or managing member.

“ Tax ” or “ Taxes ” means (a) any and all federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, accumulated earnings, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including under the Federal Insurance Contributions Act), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind or any charge of any kind in the nature of (or similar to) taxes whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and (b) any liability for the payment of any amounts of the type described in clause (a) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, as a result of any tax sharing or tax allocation agreement, arrangement or understanding, or as a result of being liable for another person’s taxes as a transferee or successor, by contract or otherwise.

“ Unit Purchaser ” has the meaning provided in the preamble hereto.

“ WCAS CP IV ” has the meaning provided in the preamble hereto.

SECTION 1.02. Accounting Principles . The character or amount of any asset, liability, capital account or reserve and of any item of income or expense to be determined, and any consolidation or other accounting computation to be made, and the construction of any definition containing a financial term, pursuant to this Agreement shall be determined or made in accordance with GAAP, consistently applied, unless such principles are inconsistent with the express requirements of this Agreement.

SECTION 1.03. Other Definitional Provisions; Construction . The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Unless the context otherwise requires: (i) “or” is disjunctive but not exclusive, (ii) words in the singular include the plural, and in the plural include the singular, (iii) the words “hereof, “herein”, and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, (iv) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement, (v) the words “Article” and “Section” are references to the articles and sections of this Agreement unless otherwise specified and (vi) whenever the words “include”, “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation.” A Default or Event of Default shall “continue” or be “continuing” until such Default or Event of Default has been cured or waived in accordance with this Agreement. References in this Agreement to any Persons shall include such Persons’ successors and permitted assigns. Other terms contained in this Agreement (which are not otherwise specifically defined herein) shall have meanings provided in Article 9 of the New York Uniform Commercial Code as in effect on the date hereof to the extent the same are used or defined therein.

ARTICLE II

CONTRIBUTION; ISSUANCE AND SALE OF THE NOTES

SECTION 2.01. Contributions in Exchange for Preferred Units. Upon the terms and subject to the conditions of this Agreement, on the date hereof, at the Closing, the Unit Purchaser shall contribute to Holdings an amount in cash equal to $2,409,122.44 by means of wire transfer of immediately available funds to the account set forth on Schedule I hereto in exchange for 6,839.0057 Preferred Units. In connection with such transactions, Holdings and the Unit Purchaser shall execute and deliver the LLC Agreement, and the Unit Purchaser shall be admitted as a member of Holdings.

SECTION 2.02. Issuance, Sale and Delivery of the Notes . Upon the terms and subject to the conditions of this Agreement, on the date hereof, at the Closing, Holdings shall issue, sell and deliver to WCAS CP IV (the “ Note Purchaser ”) notes in the principal amount of $18,807,106.60 for a purchase price equal to $16,397,984.16. The Note Purchaser shall pay the purchase price for the Note being issued to the Note Purchaser by wire transfer of immediately available funds to the account set forth on Schedule I hereto.

SECTION 2.03. The Closing . The purchase and sale of the Securities (the “ Closing ”) will take place at the offices of Kirkland & Ellis LLP, 601 Lexington Avenue, New York, NY 10022 on the date hereof, subject to the satisfaction or waiver of the conditions set forth in Article VI. The failure to consummate the purchase and sale of the Securities provided for in this Agreement on the date and time and at the place specified herein will not relieve any party to this Agreement of any obligation under this Agreement.

SECTION 2.04. Value of Securities . The parties hereto acknowledge and agree that the value of the Note is equal to the purchase price therefor set forth in Section 2.02 above and that the value of the Preferred Units will be equal to the cash capital contributions made in respect thereof set forth in Section 2.01 above (with each Preferred Unit being valued at $352.26 per Unit) and, in each case, will be reported as such by each such party for federal, state and local Tax purposes.

ARTICLE III

REPAYMENT OF THE NOTES

SECTION 3.01. Interest .

(a) Subject to Section 3.01(b), Holdings covenants and agrees to make cash payments of accrued interest on the principal amount of the Notes, at the rate of 10.0% per annum and payable semiannually in arrears, on December 31 and June 30 of each year, commencing on June 30, 2012 (each such payment date being referred to as an “ Interest Payment Date ”). Holdings shall pay interest on overdue principal at the rate of 13.0% per annum (and shall pay interest on overdue installments of interest at the rate of 13.0% per annum to the extent lawful). Interest shall be computed on the basis of a 360-day year of twelve 30-day months and shall accrue from and after the date of issuance of the Notes. The parties agree that they will treat the Notes as indebtedness for U.S. federal income tax purposes, except upon a final determination by the applicable taxing authority.

(b) Notwithstanding anything to the contrary contained in Section 3.01(a), Holdings, upon not less than five Business Days’ notice to the Holders, may defer all or a portion of the accrued interest on the Notes that is due and payable on any Interest Payment Date, provided that such amount of accrued interest shall be multiplied by 1.3 (such product being referred to as the “ PIK Interest ”) and the PIK Interest shall be added to the principal amount of the Notes on such Interest Payment Date (with the result that such interest shall have accrued at an effective rate of 13.0% instead of 10.0% through such Interest Payment Date). For the avoidance of doubt, any interest that remains unpaid past the thirty day period provided in Section 10.01(b), shall be capitalized as PIK Interest in accordance with this Section 3.01(b).

(c) On the first Interest Payment Date following the fifth anniversary of the “issue date” as defined in Treasury Regulation Section 1.1273-2(a)(2) of the Notes, and on each Interest Payment Date thereafter Holdings shall prepay a portion of each then outstanding Note in an amount equal to the AHYDO Catch-Up Payment for such Interest Payment Date with respect to such Note. The “ AHYDO Catch-Up Payment ” for a particular Interest Payment Date with respect to each Note means the minimum payment on such Note sufficient to ensure that as of the close of such Interest Payment Date, the aggregate amount which would be includible in gross income with respect to such Note before the close of such Interest Payment Date (as described in Section 163(i)(2)(A) of the Code) does not exceed the sum (described in Section 163(i)(2)(B) of the Code) of (i) the aggregate amount of interest to be paid on such Note (including for this purpose any AHYDO Catch-Up Payments) before the close of such Interest Payment Date plus (ii) the product of the issue price of such Note as defined in Section 1273(b) of the Code and its yield to maturity (within the meaning of Section 163(i)(2)(B) of the Code), with the result that such Note is not treated as having “significant original issue discount” within the meaning of Section 163(i)(1)(C) of the Code; provided , however , for avoidance of doubt, that if the yield to maturity of such Note is less than the amount described in Section 163(i)(1)(B) of the Code, the AHYDO Catch-Up Payment shall be zero for each Interest Payment Date with respect to such Note. This Section 3.01(c) shall be interpreted consistently with the intent that no Note (or any portion thereof) shall be an “applicable high yield discount obligation” (an “ AHYDO ”) within the meaning of Section 163(i)(1) of the Code. The computations and determinations required in connection with any AHYDO Catch-Up Payment shall be made by Holdings in its good faith reasonable discretion and shall be binding upon the Note Purchaser absent manifest error

SECTION 3.02. Repayment . Holdings covenants and agrees to repay the unpaid principal balance of the Notes in full, together with all accrued and unpaid interest, fees and other amounts due hereunder and then outstanding, on the Maturity Date.

SECTION 3.03. Optional Prepayment . Holdings may prepay any or all amounts outstanding under the Notes, upon five Business Days prior written notice to the Holders, without premium or penalty.

SECTION 3.04. Mandatory Prepayment Upon a Public Offering .

(a) Upon the consummation of any Public Offering, the Holders shall have the right to require Holdings to prepay the Notes, in whole or in part, without penalty or premium, up to an aggregate amount equal to the net proceeds of such public offering. Such prepayment of the Notes shall be made in accordance with Section 3.04(b) below.

(b) No more than 10 days following the Public Offering, Holdings shall deliver to the Holders a written notice of such offer to prepay the Notes (an “ IPO Prepayment Notice ”). The Holders shall have 10 Business Days from the date of delivery of the IPO Prepayment Notice to exercise their right to require Holdings to prepay all or a specified amount of the Notes pursuant to Section 3.04(a) at a purchase price equal to the principal amount of such Notes plus all outstanding and accrued interest thereon by delivering a notice to Holdings to that effect (the “ IPO Repurchase Notice ”). Any purchase of Notes pursuant to this Section 3.04 shall be effected within two Business Days after the expiration of such 10 Business Day period.

SECTION 3.05. Mandatory Prepayment Upon a Liquidation Event . If a Liquidation Event occurs, Holdings shall prepay in full in cash the outstanding principal amount of the Notes, without penalty or premium, plus any accrued but unpaid interest thereon.

SECTION 3.06. Notice of Prepayment and Other Notices . Holdings shall give written notice of any prepayment of any of the Notes or any portion thereof pursuant to Section 3.05 not less than five Business Days prior to the date fixed for such prepayment. Holdings shall give such notice of prepayment and all other notices to be given to the Holders at the address designated for such Holders on the Register on the date of mailing such notice of prepayment or other notice. Upon notice of any such prepayment being given as aforesaid, Holdings shall be irrevocably obligated to prepay, on the date therein fixed for prepayment, the Notes or the portion thereof, as the case may be, so called for prepayment, at the principal amount thereof so called for prepayment, together with interest accrued thereon to the date fixed for such prepayment. A prepayment of less than all of the outstanding principal amount of the Notes shall not relieve Holdings of its obligation to make scheduled payments of interest in respect of the principal remaining outstanding on any Interest Payment Date.

SECTION 3.07. Surrender of Notes; Notation Thereon . Upon any prepayment of a portion of the principal amount of the Notes, the Holder, at its option, may require Holdings to execute and deliver at the expense of Holdings (except for Taxes or other governmental charges imposed in connection therewith), upon surrender of the Notes, new Notes registered in the name of the Holder or such other Persons as may be designated by the Holder for the principal amount of the Notes then remaining unpaid, dated as of the most recent date to which interest has been paid on the principal amount of the Notes then remaining unpaid (or the date hereof if prior to the first Interest Payment Date), or may present the Notes to Holdings for notation of the payment of the portion of the principal amount of the Notes so prepaid.

SECTION 3.08. Maximum Lawful Rate . This Agreement and the Notes are hereby limited by this Section 3.08. In no event, whether by reason of acceleration of the maturity of the amounts due hereunder or otherwise, shall interest and fees contracted for, charged, received, paid or agreed to be paid to the Holder exceed the maximum amount permissible under such applicable law. If, from any circumstance whatsoever, interest and fees would otherwise be payable to the Holder in excess of the maximum amount permissible under

such applicable law, the interest and fees shall be reduced to the maximum amount permitted under applicable law. If from any circumstance, the Holder shall have received anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excess of interest shall be applied to the reduction of the principal amount of the Notes, in such manner as may be determined by the Holder, and not to the payment of fees or interest, or if such excessive interest exceeds the unpaid balance of the principal amount of the Notes, such excess shall be refunded to Holdings.

SECTION 3.09. Certain Waivers . Holdings unconditionally waives (a) any rights to presentment, demand, protest or (except as expressly required hereby) notice of any kind, and (b) any rights of rescission, setoff, counterclaim or defense to payment under the Notes or otherwise that Holdings may have or claim against the Holder.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF HOLDINGS

In order to induce the Unit Purchaser and the Note Purchaser to enter into this Agreement and purchase the Securities, Holdings hereby represents and warrants for itself and its Subsidiaries to the Unit Purchaser and the Note Purchaser that:

SECTION 4.01. Existence and Power . Each of Holdings and its Subsidiaries is a limited liability company duly organized, validly existing and in good standing under the laws of its state of formation. Each of Holdings and its Subsidiaries has the limited liability company, power and authority necessary to (i) own its properties and assets, (ii) carry on its business as now being conducted and as proposed to be conducted immediately after the Closing and (iii) with respect to Holdings, execute and deliver this Agreement and each of the other agreements, instruments and certificates being executed and delivered in connection with this Agreement and each of the other Note Documents to which it is a party, and to perform its obligations hereunder and thereunder, including the issuance, sale and delivery of any and all Securities to be issued and sold by it hereunder.

SECTION 4.02. Authorization; Validity . The execution and delivery by Holdings of this Agreement and each of the other Note Documents to which it is a party and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of any and all Securities to be sold by it hereunder) and thereby have been duly authorized by all necessary corporate or limited liability company, as applicable, action on the part of Holdings. This Agreement has been duly executed and delivered by Holdings and each of the other Note Documents to which Holdings is a party will be duly executed and delivered by Holdings at the Closing. This Agreement constitutes, and each of the other Note Documents to which Holdings is a party, when executed and delivered by Holdings at the Closing, will constitute, a valid and binding agreement of Holdings, enforceable against Holdings in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.

SECTION 4.03. Authorization of Governmental Authorities . Assuming the accuracy of the Unit Purchaser’s representations and warranties set forth in Article V hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to Holdings or any of its Subsidiaries in connection with the execution, delivery and performance by Holdings or any of its Subsidiaries of this Agreement or any of the other Note Documents to which Holdings or any of its Subsidiaries is a party except (i) for such filings as may be required under Regulation D promulgated under the Securities Act (“ Regulation D ”), or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

SECTION 4.04. Noncontravention . The execution, delivery and performance by Holdings or any of its Subsidiaries of this Agreement and each of the other Note Documents to which any Holdings or any of its Subsidiaries is a party, do not and will not (i) violate the Organizational Documents of Holdings or any of its Subsidiaries, (ii) violate any law, rule, regulation, judgment, injunction, order or decree applicable to or binding upon Holdings or any of its Subsidiaries, (iii) violate any contract, agreement, license, lease or other instrument, arrangement, commitment, obligation, understanding or restriction of any kind to which Holdings or any of its Subsidiaries is a party or (iv) require any consent or other action by any person under, constitute a default under (with due notice or lapse of time or both), or give rise to any right of termination, cancellation or acceleration of any right or obligation of Holdings or any of its Subsidiaries or to a loss of any benefit to which Holdings or any of its Subsidiaries is entitled under any provision of any agreement or other instrument binding upon Holdings or any of its Subsidiaries or any of its assets or properties.

SECTION 4.05. Capitalization . Immediately following and after giving effect to the Closing, the equity capitalization of Holdings shall be as set forth on the schedules to the LLC Agreement and there will be no outstanding (i) securities of Holdings that are convertible into or exercisable or exchangeable for membership interests of Holdings or (ii) options or other rights to acquire from Holdings any of its membership interests. Schedule II hereto sets forth all of its Subsidiaries of Holdings.

SECTION 4.06. Litigation . There is no action, suit, investigation or proceeding pending against, or to the knowledge of Holdings or any of its Subsidiaries, threatened against or affecting Holdings or any of its Subsidiaries before any court or arbitrator or any other governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement or any of the other Note Documents.

SECTION 4.07. No Brokers . Neither Holdings nor any of its Subsidiaries has or will have any liability of any kind to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

SECTION 4.08. Valid Issuance of Preferred Units . At Closing, the Preferred Units will have been duly and validly authorized and when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be validly issued, fully paid and will be free and clear of all claims, liens and encumbrances (except those created under the LLC Agreement).

SECTION 4.09. Offer of Shares . Neither Holdings nor any person authorized to act on behalf of Holdings has taken or will take any action that would subject the transactions contemplated by this Agreement to the registration requirements of the Securities Act and, subject to the accuracy of the Unit Purchaser’s representations in Article V of this Agreement, the offer and sale of the Securities as contemplated hereunder constitute transactions exempt from the registration and qualification requirements of the Securities Act and all applicable state securities laws.

SECTION 4.10. Investment Company Act . Neither Holdings nor any of its Subsidiaries is an “investment company” (as the quoted term is defined or used in the Investment Company Act of 1940, as amended) that is required to be registered under such Act.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Unit Purchaser represents and warrants to Holdings that:

SECTION 5.01. Existence . The Unit Purchaser (if not a natural person) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

SECTION 5.02. Authorization; Power; Validity . The execution and delivery by the Unit Purchaser (if not a natural person) of this Agreement and each of the other Note Documents to which the Unit Purchaser is a party and the consummation of the transactions contemplated hereby and thereby are within the Unit Purchaser’s powers and have been duly authorized by all necessary action on the part of the Unit Purchaser. This Agreement has been duly executed and delivered by the Unit Purchaser and each of the other Note Documents to which the Unit Purchaser is a party and the LLC Agreement will be duly executed and delivered by the Unit Purchaser at Closing. This Agreement constitutes, and each of the other Note Documents to which the Unit Purchaser is a party, when executed and delivered by the Unit Purchaser at Closing will constitute, a valid and binding agreement of the Unit Purchaser, enforceable against the Unit Purchaser in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.

SECTION 5.03. Governmental Authorization . Assuming the accuracy of the representations and warranties of Holdings and its Subsidiaries set forth in Article IV above, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Unit Purchaser in connection with the execution, delivery and performance by the Unit Purchaser of this Agreement or any of the other Note Documents to which the Unit Purchaser is a party except (i) for such filings and notices of sale, if any, as may be required under Regulation D or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Unit Purchaser to perform the Unit Purchaser’s obligations hereunder or thereunder.

SECTION 5.04. Noncontravention . The execution, delivery and performance by the Unit Purchaser of this Agreement, the LLC Agreement and each of the other Note Documents to which the Unit Purchaser is a party do not and will not (i) violate, if the Unit Purchaser is not a natural person, the Organizational Documents of the Unit Purchaser, (ii) violate any law, rule, regulation, judgment, injunction, order or decree applicable to or binding upon the Unit Purchaser, (iii) violate any contract, agreement, license, lease or other instrument, arrangement, commitment, obligation, understanding or restriction of any kind to which the Unit Purchaser is a party, (iv) require any consent or other action by any Person under, constitute a default under (with due notice or lapse of time or both), or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Unit Purchaser under any provision of any agreement or other instrument binding upon the Unit Purchaser or any of its assets or properties or (v) result in the creation or imposition of any material lien, claim, charge, pledge, security interest or other encumbrance on or with respect to any Securities acquired hereunder

SECTION 5.05. Purchase for Investment . The Unit Purchaser is purchasing the Securities for investment for the Unit Purchaser’s own account and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act.

SECTION 5.06. Private Placement .

(a) The Unit Purchaser’s financial situation is such that the Unit Purchaser can afford to bear the economic risk of holding the Securities for an indefinite period of time, and the Unit Purchaser can afford to suffer the complete loss of the Unit Purchaser’s investment in the Securities.

(b) The Unit Purchaser’s knowledge and experience in financial and business matters are such that the Unit Purchaser is capable of evaluating the merits and risks of the Unit Purchaser’s investment in the Securities or the Unit Purchaser has been advised by a representative possessing such knowledge and experience.

(c) The Unit Purchaser understands that the Securities acquired hereunder are a speculative investment which involves a high degree of risk of loss of the entire investment therein, that there will be substantial restrictions on the transferability of the Securities and that following the date hereof there will be no public market for the Securities and that, accordingly, it may not be possible for the Unit Purchaser to sell or pledge the Securities, or any interest in the Securities, in case of emergency or otherwise.

(d) The Unit Purchaser and the Unit Purchaser’s representatives, including, to the extent the Unit Purchaser deems appropriate, the Unit Purchaser’s legal, professional, financial, tax and other advisors, have reviewed all documents provided to them in connection with the Unit Purchaser’s investment in the Securities, and the Unit Purchaser understands and is aware of the risks related to such investment.

(e) The Unit Purchaser and the Unit Purchaser’s representatives have been given the opportunity to examine all documents and to ask questions of, and to receive answers from, Holdings and its representatives concerning Holdings or its Subsidiaries, the Acquisition, the terms and conditions of the Unit Purchaser’s acquisition of the Securities and related matters and to obtain all additional information which the Unit Purchaser or the Unit Purchaser’s representatives deem necessary.

(f) The Unit Purchaser is an “accredited investor” as such term is defined in Regulation D.

(g) The Unit Purchaser does not have any plan or intention to sell, exchange, transfer or otherwise dispose of (including by way of gift) any of its Securities immediately after the purchase of the Securities.

SECTION 5.07. Absence of Related Litigation . There is no action, suit, investigation or proceeding pending against, or to the knowledge of the Unit Purchaser, threatened against or affecting the Unit Purchaser before any court or arbitrator or any other governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement or any of the other Note Documents.

ARTICLE VI

CONDITIONS

SECTION 6.01. Conditions to the Obligations of the Unit Purchaser and the Note Purchaser . The obligation of each of the Unit Purchaser and the Note Purchaser to consummate the transactions contemplated hereby is subject to the satisfaction (or waiver by WCAS CP IV) of the following conditions:

(a) The representations and warranties of Holdings contained in this Agreement and in any of the other Note Documents shall be true and correct in all material respects when made and as of the date hereof, as if made on such date.

(b) Each of the Note Documents shall have been executed and delivered by the other parties thereto.

SECTION 6.02. Conditions to the Obligations of Holdings . The obligations of Holdings to consummate the transactions contemplated hereby is further subject to the satisfaction (or waiver by Holdings) of the following conditions:

(a) The representations and warranties of the Unit Purchaser contained in this Agreement shall be true and correct in all material respects when made and as of the date hereof, as if made on such date.

(b) Each of the Note Documents shall have been executed and delivered by the other parties thereto.

ARTICLE VII

AFFIRMATIVE COVENANTS

Until the principal of and interest on the Notes and all fees, expenses and other amounts payable under this Agreement and Notes shall have been paid in full, Holdings covenants and agrees for the benefit of the Holders (but not the Unit Purchaser) that:

SECTION 7.01. Financial Statements and Other Information . Holdings will furnish to the Holders:

(a) a certificate of a Financial Officer certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto;

(b) promptly after obtaining knowledge thereof, written notice of the occurrence of any Default (accompanied by a statement of a Financial Officer or other executive officer of Holdings setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto); and

(c) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings and its Subsidiaries as the Holders may reasonably request;

provided , that the obligations of Holdings to provide the information required to be provided to any Holder under this Section 7.01 shall be subject to such Holder executing a customary confidentiality agreement in form and substance reasonably satisfactory to Holdings.

SECTION 7.02. Existence; Conduct of Business . Holdings will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, maintain, protect, renew and keep in full force and effect its legal existence and the rights, qualifications, permits, approvals, accreditations, authorizations, licenses, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business, except where the failure to do so is not reasonably likely to result in a Material Adverse Effect; provided , that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 8.01.

SECTION 7.03. Payment of Taxes . Holdings will, and will cause each of its Subsidiaries to, pay its Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends the enforcement of any lien securing such obligation and (d) the failure to make payment pending such contest is not reasonably likely to result in a Material Adverse Effect.

SECTION 7.04. Maintenance of Properties . Holdings will, and will cause each of its Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

SECTION 7.05. Insurance . Holdings will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurance companies (which may include self-insurance), insurance in such amounts (with no greater risk retention) and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations. Holdings will furnish to the Holders, upon request of the Required Holders or any representative designated by the Required Holders, information in reasonable detail as to the insurance so maintained.

SECTION 7.06. Books and Records; Inspection and Audit Rights . Holdings will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Holdings will, and will cause each of its Subsidiaries to, permit any representatives designated by the Required Holders, upon reasonable prior notice, to visit and inspect its properties during normal business hours, to examine and make extracts from its books and records and to discuss its affairs, finances and condition with its officers and independent accountants ( provided that Holdings shall be provided the opportunity to participate in any such discussions with its independent accountants), all at such reasonable times and as often as reasonably requested.

SECTION 7.07. Compliance with Laws . Holdings will cause each of its Subsidiaries to comply with all Requirements of Law applicable to it or its property, except where the failure to do so, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect.

ARTICLE VIII

NEGATIVE COVENANTS

Until the principal of and interest on the Notes and all fees, expenses and other amounts payable under this Agreement and the Notes shall have been paid in full, Holdings covenants and agrees for the benefit of the Holders (but not the Unit Purchaser) that:

SECTION 8.01. Fundamental Changes . Holdings will not permit Opco to merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, without the consent of the Required Holders except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, any Person may merge with or into Holdings in a transaction in which the surviving entity is a Person organized or existing under the laws of the United States of America, any State thereof or the District of Columbia and, if such surviving entity is not Holdings, such Person expressly assumes, in writing, all the obligations of Holdings under this Agreement and the Notes.

SECTION 8.02. Amendment of Material Documents . Holdings will not, and will not permit Opco to, amend, modify or waive any of its rights under its Organizational Documents to the extent such amendment, modification or waiver would be materially adverse to the Holders in their capacities as holders of Notes.

ARTICLE IX

TRANSFER OF NOTES

SECTION 9.01. Restricted Securities . The Note Purchaser acknowledges that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, and that Holdings is not required to register the Notes.

SECTION 9.02. Legends . Holdings may place an appropriate legend on the Notes owned by the Note Purchaser concerning the restrictions set forth in this Article IX.

SECTION 9.03. Transfer of Notes . Subject to Section 9.02 hereof and any restrictions under applicable law, a Holder may exchange such Note for Notes of different denominations, by surrendering such Note to Holdings together with written instructions for the issuance of one or more new Notes specifying the respective principal amounts of each new Note. Subject to Section 9.02 hereof and any restrictions under applicable law, with the prior written consent of WCAS CP IV, a Holder may transfer such Note to a new Holder, by surrendering such Note to Holdings duly endorsed for transfer or accompanied by a duly executed instrument of transfer naming the new Holder, together with written instructions for the issuance of one or more new Notes specifying the respective principal amounts of each new Note and the name of each new Holder and each address therefor. In each case, Holdings shall simultaneously deliver to such Holder or its designee such new Notes and shall mark the surrendered Notes as canceled. In lieu of the foregoing procedures, a Holder may, with the prior written consent of WCAS CP IV, assign a Note (in whole but not in part) to a new Holder by sending written notice to Holdings of such assignment specifying the new Holder’s name and address; in such case, Holdings shall promptly acknowledge such assignment in writing to both the old and new Holder. Holdings shall not be required to recognize any subsequent Holder of a Note unless and until Holdings has received reasonable assurance that all applicable transfer taxes have been paid.

SECTION 9.04. Replacement of Lost Securities . Upon receipt of evidence reasonably satisfactory to Holdings of the mutilation, destruction, loss or theft of any Notes and the ownership thereof, Holdings shall, upon the written request of the Holder of such Notes, execute and deliver in replacement thereof new Notes in the same form, in the same original principal amount and dated the same date as the Notes so mutilated, destroyed, lost or stolen; and such Notes so mutilated, destroyed, lost or stolen shall then be deemed no longer outstanding hereunder. If the Notes being replaced have been mutilated, they shall be surrendered to Holdings; and if such replaced Notes have been destroyed, lost or stolen, such Holder shall furnish Holdings with an indemnity in writing to save it harmless in respect of such replaced Notes.

SECTION 9.05. Register . Holdings shall establish and maintain a separate register (the “ Register ”) setting forth the name and address of each Holder, the dates and amount of any payment of principal and interest on the Notes and the unpaid principal and interest amounts owed to each Holder. The entries in the Register shall be conclusive, absent manifest error, and all parties shall treat each person whose name is recorded in the Register pursuant to the terms hereof as a Holder for all purposes of this Agreement, notwithstanding notice to the contrary. Holdings shall promptly record any assignment permitted or consented to pursuant to Section 9.03 above in the Register, and no assignment shall be effective unless and until reflected in the Register. This provision shall be construed so that the Notes are at all times maintained in “registered form” within the meaning of the Code and the United States Treasury Regulations promulgated thereunder.

SECTION 9.06. No Other Representations Affected . Nothing contained in this Article IX shall limit the full force or effect of any representation, agreement or warranty made herein or in connection herewith to the Note Purchaser.

ARTICLE X

EVENTS OF DEFAULT

SECTION 10.01. Events of Default . If any one or more of the following events (each, an “ Event of Default ”) occurs and is continuing:

(a) default in the payment of the principal of the Notes when and as the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise, or

(b) default in the payment of any interest or any other amount due under this Agreement or the Notes, when and as the same becomes due and payable, and such default continues for a period of thirty (30) days; or

(c) default in the due observance or performance covenant, condition or agreement with respect to Holdings or Opco contained in Article VIII; or

(d) default in the due observance or performance by Holdings of any covenant, condition or agreement contained in this Agreement or the Notes (other than those specified in 10.01(a), 10.01(b) or 10.01(c) above) and such Default continues unremedied for a period of 30 days after written notice thereof from the Required Holders to Holdings; or

(e) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Holdings or any of its Significant Subsidiaries in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar laws, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Holdings or any of its Significant Subsidiaries for any substantial part of any of their respective properties, or ordering the winding-up or liquidation of any of their affairs and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or

(f) the commencement by Holdings or any of its Significant Subsidiaries of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar laws, or the consent by any of them to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Holdings or any of its Significant Subsidiaries for any substantial part of their respective properties, or the making by any of them of any assignment for the benefit of creditors, or the failure of Holdings or any of its Significant Subsidiaries generally to pay its debts as such debts become due; or

(g) default occurs under the terms of any Indebtedness of Holdings or any of its Significant Subsidiaries (or the payment of which is guaranteed by Holdings or any of its Significant Subsidiaries) in an aggregate principal amount exceeding $300,000 and such default (i) consists of the failure to pay principal at the final stated maturity of such Indebtedness or (ii) results in the acceleration of the maturity of such Indebtedness; or

(h) one or more judgments for the payment of money in an aggregate amount (in each case to the extent not paid or covered by insurance provided by a carrier who has acknowledged coverage in writing and has the ability to perform) in excess of $300,000 is rendered against Holdings or any of its Significant Subsidiaries, or any combination thereof and the same remains undischarged for a period of 30 consecutive days during which execution is not effectively stayed, or any action is legally taken by a judgment creditor to levy upon assets or properties of Holdings or any of its Significant Subsidiaries to enforce any such judgment; or

(i) any Note Document shall cease, for any reason, to be in full force and effect;

then, the Required Holders may, at their option, by notice to Holdings, declare all the Notes to be forthwith due and payable, whereupon the principal of the Notes, together with accrued and unpaid interest thereon, shall become forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Holdings; provided , that in any event described in Sections 10.01(e) or 10.01(f) with respect to Holdings, all the Notes, together with interest accrued thereon, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Holdings.

At any time after any declaration of acceleration as to the Notes has been made as provided in this Section 10.01, the Required Holders may, by notice to Holdings, rescind such declaration and its consequences, if (a) Holdings has paid all overdue installments of interest on the Notes and all principal that has become due otherwise than by such declaration of acceleration and (b) all other Defaults and Events of Default under this Agreement and the Notes (other than nonpayments of principal and interest that have become due solely by reason of acceleration) have been remedied or cured or have been waived pursuant to this paragraph; provided , that no such rescission will extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon.

SECTION 10.02. Suits for Enforcement . If an Event of Default specified in Section 10.01(a) or 10.01(b) occurs and is continuing or the Notes become immediately due and payable in accordance with this Section, the Holders may proceed to protect and enforce their rights by suit in equity, action at law and/or by other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement, or may proceed to enforce the payment of the Notes or to enforce any other legal or equitable right of the Holders. In case of any Default under this Agreement, Holdings will pay to the Holders such amounts as shall be sufficient to cover the costs and expenses of the Holders due to said Default, including, without limitation, collection costs and reasonable attorneys’ fees.

ARTICLE XI

RESERVED

ARTICLE XII

MISCELLANEOUS

SECTION 12.01. Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except as provided below and pursuant to Section 9.03, no party hereto shall assign this Agreement or any of its rights, interests or obligations hereunder without the prior written consent of the other parties hereto. Notwithstanding the foregoing, after the Closing, a Unit Purchaser may assign its rights under this Agreement to any transferee of any Securities so long as, such transfer is made in compliance with the terms of this Agreement and, in connection with any transfer of Preferred Units, such transfer is made in compliance with the terms of the LLC Agreement.

SECTION 12.02. Amendments, Waivers and Consent . This Agreement may be amended, and the observance of any term hereof may be waived (either retroactively or prospectively) with (and only with) the written consent of (1) so long as it holds any Notes, WCAS CP IV, (2) the Required Holders and (3) Holdings. No amendment or waiver of this Agreement will extend to or affect any obligation, covenant, agreement, Default or Event of

Default not expressly amended or waived or thereby impair any right consequent thereon. If (a) any amendment or waiver of any provision or term of this Agreement and/or the Notes (including without limitation any amendment or waiver that reduces the principal of, or rate of interest on, any Note or postpones the date fixed for any payment of principal and/or interest on any Note) is proposed to be entered into with respect to the Notes, (b) such amendment or waiver would apply on the same relative basis to all Notes and (c) WCAS CP IV consents in writing to and/or executes and delivers such amendment or waiver with respect to all of its Notes, each Holder of a Note (if any) other than WCAS CP IV (each an “ Other Noteholder ”) hereby agrees that it shall promptly (and in any event not later than two Business Days after written request to take such action is given to such Other Noteholder by WCAS CP IV and the Company) consent in writing to and/or execute and deliver such amendment or waiver with respect to all Notes held by such Other Noteholder. In furtherance of the foregoing, each Other Noteholder hereby constitutes and appoints WCAS CP IV, with full power of substitution, such Other Noteholder’s true and lawful proxy and attorney-in-fact to execute and deliver any written consent, amendment and/or waiver in the manner and under the circumstances provided in the immediately preceding sentence. Each such Other Noteholder hereby affirms that this proxy and power of attorney is given as an inducement to WCAS CP IV and the Company to enter into this Agreement and to permit such Other Noteholder to purchase Notes hereunder and, as such, is coupled with an interest and is irrevocable.

SECTION 12.03. No Implied Waivers; Cumulative Remedies; Writing Required . No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that the Unit Purchaser or any Holders would otherwise have. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing.

SECTION 12.04. Transfer Taxes . All transfer taxes, fees and duties under applicable law incurred in connection with the sale and transfer of the Securities under this Agreement will be borne and paid by Holdings, shall promptly reimburse the holders of the Securities for any such tax, fee or duty which any of them is required to pay under applicable law.

SECTION 12.05. Reimbursement of Expenses . Holdings shall pay or reimburse on demand WCAS CP IV and/or the Affiliates thereof, for all fees and expenses incurred or payable by the Unit Purchaser (and/or the Affiliates thereof) (including, without limitation, reasonable fees and expenses of counsel for the Unit Purchaser (and/or the Affiliates thereof)), from time to time (a) arising in connection with the negotiation, preparation and execution of this Agreement and/or any of the other Note Documents and related instruments and documents to be delivered hereunder or thereunder or arising in connection with the transactions contemplated hereunder, (b) relating to any amendments, waivers or consents pursuant to the provisions hereof or thereof, and (c) arising in connection with the enforcement of this Agreement or any such Note Document or any collection of the Notes.

SECTION 12.06. Holidays . Whenever any payment or action to be made or taken hereunder or under the Notes shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action.

SECTION 12.07. Notices . Any notice or communication required or permitted hereunder shall be in writing and shall be delivered personally, delivered by nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, or (if a facsimile number is provided) sent by facsimile (subject to confirmation of such facsimile transmission). Any such notice or communication shall be deemed to have been given (i) when delivered, if personally delivered, (ii) three Business Days after it is deposited with a nationally recognized overnight courier service, if sent by nationally recognized overnight courier service, (iii) the day of sending, if sent by facsimile prior to 5:00 p.m. (EST) on any Business Day or the next succeeding Business Day if sent by facsimile after 5:00 p.m. (EST) on any Business Day or on any day other than a Business Day or (iv) five Business Days after the date of mailing, if mailed by certified or registered mail, postage prepaid, in each case, to the following address or facsimile number, or to such other address or addresses or facsimile number or numbers as such party may subsequently designate to the other parties by notice given hereunder:

if to Holdings, to it:

c/o WCAS Capital Partners IV, L.P.

320 Park Avenue, Suite 2500

New York, New York 10022

Attention: Brian Regan

Facsimile: (212) 893-9583

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 1002

Attention: Michael Movsovich

Ellen M. Snare

Ariel Yehezkel

Facsimile: (212) 446-6460

and to:

Paycom Payroll Holdings, LLC

7501 W. Memorial Road

Oklahoma City, OK 73142

Attn: Chief Executive Officer

Fax: 405-722-2015

If to the Unit Purchaser or the Note Purchaser, to the address set forth on their respective signature page hereto.

SECTION 12.08. Survival . All of the covenants, agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. All obligations relating to indemnification hereunder shall survive any termination of this Agreement and shall continue for the length of any applicable statute of limitations.

SECTION 12.09. Governing Law . This Agreement, and all claims arising hereunder or relating hereto, shall be governed by, and construed and enforced in accordance with, the laws of the State of New York.

SECTION 12.10. Jurisdiction . The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, any other Note Document or the transactions contemplated hereby or thereby may be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York County, New York, and each of the parties hereby consents to the jurisdiction of such courts in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, and each party agrees that, in addition to any method of service of process otherwise permitted bylaw, service of process on each party may be made by any method for giving such party notice as provided in Section 12.07, and shall be deemed effective service of process on such party.

SECTION 12.11. Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER NOTE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

SECTION 12.12. Counterparts; Third Party Beneficiaries . This Agreement may be executed in any number of counterparts, which may be delivered by facsimile or electronic delivery (i.e., by email of a PDF signature page) and each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. No provision of this Agreement shall confer upon any person other than the parties hereto and their respective successors and permitted assigns any rights or remedies hereunder.

SECTION 12.13. Entire Agreement . This Agreement (together with the other Note Documents) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, among the parties with respect to the subject matter hereof.

SECTION 12.14. Severability . If one or more provisions of this Agreement are finally held to be unenforceable under applicable law, such provision shall be deemed to be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforced in accordance with its terms to the maximum extent permitted by law.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Contribution Agreement as of the day and year first above written.


	PAYCOM PAYROLL HOLDINGS, LLC

HOLDINGS:	By:	/s/ Chad Richison
		Name: Chad Richison
		Title: Chief Executive Officer and President


WCAS CP IV:	WCAS CAPITAL PARTNERS IV, L.P.

	By:	WCAS CP IV ASSOCIATES LLC Its General Partner

	By:	/s/ John D.Clark
		Name:
		Title:
		Address:

UNIT PURCHASER:	WCAS CP IV BLOCKER, INC.

	By:	/s/ John D.Clark
		Name: John D.Clark
		Title: Vice President, Assistant Treasurer and Assistant Secretary
		Address:

[Signature Page to Securities Purchase and Contribution Agreement]

SCHEDULE OF OMITTED EXHIBITS AND SCHEDULES

The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the

Securities and Exchange Commission upon request.

Schedule I - Wire Instructions

Schedule II - Subsidiaries of Paycom Payroll Holdings, LLC

Exhibit 2.4

AGREEMENT AND PLAN OF MERGER

by and among

Paycom Software, Inc., as Holdco,

Paycom Payroll Holdings, LLC, as the Company,

Paycom Payroll, LLC, as Opco,

and

Paycom Software Merger Sub, LLC, as Merger Sub

Dated as of December 30, 2013

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of December 30, 2013, by and among (i) Paycom Payroll Holdings, LLC, a Delaware limited liability company (the “ Company ”), (ii) Paycom Payroll, LLC, a Delaware limited liability company (“ Opco ”), the sole member of which is the Company, (iii) Paycom Software, Inc., a Delaware corporation (“ Holdco ”) and a wholly-owned subsidiary of Opco, and (iv) Paycom Software Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Holdco (“ Merger Sub ”).

RECITALS

WHEREAS, the Board of Directors of the Company (a) has determined that it is in the best interest of the Company, Merger Sub and the Securityholders (as defined in the Company LLC Agreement) for Merger Sub to merge with and into the Company, (b) approved and declared advisable the Merger (as defined below) upon the terms set forth herein and in accordance with the Delaware Limited Liability Company Act (the “ DLLCA ”), and (c) adopted this Agreement and approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby;

WHEREAS , pursuant to the Company LLC Agreement and the DLLCA, the holders of a majority of the Common Units and Preferred A Units, voting together as a single class, have approved this Agreement and the consummation of the transactions contemplated hereby;

WHEREAS , Holdco, as the sole member of Merger Sub, has approved the entry into this Agreement by Merger Sub and the consummation of the transactions contemplated hereby;

WHEREAS , in furtherance thereof, upon the terms of this Agreement, Merger Sub will be merged with and into the Company (the “ Merger ”) in accordance with the DLLCA, with the Company surviving the Merger;

WHEREAS , the stock of the companies that own (i) the Preferred A Units and (ii) the Preferred C Units, plus the Preferred B Units will be contributed to Holdco immediately prior to the Effective Time of the Merger through separately executed contribution agreements; and

WHEREAS , as a result of the Merger, (i) the Common Units and Incentive Units of the Company held by each Securityholder will be converted into, and Holdco will issue to such Securityholder, the number of shares of Holdco Common Stock as provided for herein, (ii) the Preferred A Units, Preferred B Units and Preferred C Units issued and outstanding prior to the Effective Time will continue to be held directly or indirectly by Holdco after the Effective Time, (iii) Opco’s ownership in Holdco will be cancelled and (iv) Holdco and WCAS Paycom Holdings, Inc., a Delaware corporation, and WCAS CP IV Blocker, Inc., a Delaware corporation, each a wholly-owned subsidiary of Holdco, will be the only members of the Surviving Company (as defined below).

ARTICLE I

MERGER; CLOSING

1.1 The Merger . At the Effective Time and upon the terms and subject to the conditions of this Agreement and the DLLCA, Merger Sub shall be merged with and into the Company, the separate existence of Merger Sub shall cease and the Company shall continue as the surviving company in the Merger (the “ Surviving Company ”), OpCo’s ownership interest in Holdco will be cancelled and the Company will become a wholly owned subsidiary of Holdco.

1.2 Effective Time; Closing . Upon the terms and subject to the conditions hereof, the closing of the Merger and other transactions as provided herein (the “ Closing ”) will take place on January 1, 2014, or such other time and place as the parties hereto may mutually agree (the “ Closing Date ”). As soon as practicable following the execution of this Agreement, the parties hereto will file a certificate of merger in the form attached hereto as Exhibit A (the “ Certificate of Merger ”), executed in accordance with the relevant provisions of the DLLCA, with the Delaware Secretary of State and make all other filings or recordings required by the DLLCA in connection with the Merger. The Merger shall become effective on the Closing Date (the “ Effective Time ”).

1.3 Effects of the Merger; Subsequent Actions .

1.4 Directors . The directors of the Surviving Company shall initially be the directors of the Company as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of formation and limited liability company agreement of the Surviving Company and until his or her successor is duly elected and qualified.

1.5 Officers . The officers of the Surviving Company shall initially be the officers of the Company as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of formation and limited liability company agreement of the Surviving Company and until his or her successor is duly appointed and qualified.

1.6 Limited Liability Agreement . From and after the Effective Time, the Company LLC Agreement as in effect immediately prior to the Effective Time shall be the limited liability company agreement of the Surviving Company until thereafter amended in accordance with the provisions thereof and applicable Law.

1.7 Conversion of Equity . At the Effective Time, by virtue of the Merger and without any action on the part of Holdco, Merger Sub, the Company or the Securityholders:

(a) Conversion of Company Units . Each Common Unit (and each fraction of a Common Unit) issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for the portion (rounded down to the nearest number of whole shares with respect to each recipient of Holdco Common Stock) of the total number of the fully paid and non-assessable shares of Holdco Common Stock into which all of the Common Units collectively shall be converted based on the fair market value of the Holdco as of the Effective Time and the number of shares of common stock of Holdco representing the equity value of the Company derived from such fair market value, as determined by the Board of Directors of the Company, and allocated pursuant to the terms of the Company LLC Agreement in a manner consistent with Schedule I. Upon the consummation of the Merger, all of the Common Units (and all fractions of Common Units) shall automatically be canceled and retired and shall cease to exist, and shall thereafter represent only the right to receive the applicable number of shares of Holdco Common Stock as determined in accordance with the foregoing provisions of this Section 1.7(a).

(b) Conversion of Incentive Units . Each Incentive Unit (including each fraction of an Incentive Unit) issued and outstanding immediately prior to the Effective Time shall be converted into and become exchangeable for the pro rata portion (rounded down to the nearest number of whole shares with respect to each recipient of Holdco Common Stock) of the total number of fully paid and non-assessable shares of Holdco Common Stock into which all of the Incentive Units with the same Floor Amount as such Incentive Unit shall be converted based on the fair market value of the Holdco as of the Effective Time and the number of shares of common stock of Holdco representing the equity value of the Company derived from such fair market value, as determined by the Board of Directors of the Company, and allocated pursuant to the terms of the Company LLC Agreement in a manner consistent with Schedule I; provided that, each share of Holdco Common Stock received upon the conversion of and in exchange for unvested Incentive Units shall be subject to the terms and conditions set forth in a restricted stock award agreement in the form attached on either Schedule II (for non-executive officers) or Schedule III (for executive officers with employment agreements), as applicable, between the recipient of such common stock and Holdco (each, a “ Restricted Common Stock Award Agreement ”). The execution of a Restricted Common Stock Award Agreement by the holder of

such unvested Incentive Units shall be a condition precedent to the obligation of Holdco to issue such shares of Common Stock to such holder of unvested Incentive Units. Upon the consummation of the Merger, all Incentive Units (and all fractions of Incentive Units) shall automatically be cancelled and retired and shall cease to exist, and shall thereafter represent only the right to receive the applicable number of shares of Holdco Common Stock as determined in accordance with, and as applicable subject to the conditions described in, the foregoing provisions of this Section 1.7(b) .

(c) Units to Remain Outstanding . Each Preferred A Unit, Preferred B Unit and Preferred C Unit issued and outstanding prior to the Effective Time shall remain outstanding and shall not be converted or canceled by virtue of the Merger.

(d) Cancellation of Certain Units .

(i) Each Common Unit and Incentive Unit (and any fractions thereof) authorized but not issued immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof and no payment shall be owed with respect thereto.

(ii) Upon the Merger, all Holdco Common Stock held by Opco shall automatically be cancelled and extinguished without any conversion thereof and no payment shall be owed with respect thereto.

(e) Units of Merger Sub . Each unit of Merger Sub shall be automatically cancelled and extinguished without any conversion thereof and no payment shall be owed with respect thereto.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1 Representations and Warranties of the Company:

The Company hereby represents and warrants to Holdco and Merger Sub as follows:

(b) Authorization; No Conflict .

2.2 Representations and Warranties of Holdco and Merger Sub:

Each of Holdco and Merger Sub represents and warrants to the Company as follows:

(a) Due Organization . Holdco is a corporation duly organized and validly existing under the Delaware General Corporation Law. Merger Sub is a limited liability company duly organized, and validly existing under the DLLCA. Each of Holdco and Merger Sub has all requisite corporate or limited liability company, as applicable, power and authority necessary to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.

(b) Authorization; No Conflict .

(ii) The execution, delivery and performance of this Agreement by Holdco and Merger Sub, and the consummation of the transactions contemplated hereby, will not, with or without notice, lapse of time, or both: (a) conflict with or result in a breach or violation of Holdco’s certificate of incorporation or by-laws or Merger Sub’s certificate of formation or limited liability company agreement or any resolution of the board of directors, securityholders, managers or members of Holdco or Merger Sub (as applicable); (b) require, on the part of Holdco or Merger Sub, any filing with, or permit, authorization, consent or approval of, any Governmental Authority; or (c) violate any law to which Holdco or Merger Sub, or any of their respective properties, rights or assets are subject or bound.

ARTICLE III

DEFINITIONS

3.1 Defined Terms .

“ Common Units ” means the “Common Units” as such term is defined in the Company LLC Agreement.

“ Company LLC Agreement ” means the Limited Liability Company Agreement of the Company, dated as April 3, 2012, as amended, restated or otherwise modified from time to time.

“ Holdco Common Stock ” means the common stock, par value $0.001 per share, of Holdco.

“ Incentive Units ” means the “Incentive Units” as such term is defined in the Company LLC Agreement.

“ Preferred A Units ” means the “Preferred A Units” as such term is defined in the Company LLC Agreement.

“ Preferred B Units ” means the “Preferred B Units” as such term is defined in the Company LLC Agreement.

“ Preferred C Units ” means the “Preferred C Units” as such term is defined in the Company LLC Agreement.

“ Securityholders ” means, collectively, the holders of Common Units, Preferred A Units, Preferred B Units, Preferred C Units and Incentive Units.

ARTICLE IV

GENERAL

4.1 Indemnification and Reimbursement for Payments on Behalf of a Securityholder . If, as a direct or indirect result of the transactions contemplated by this Agreement, Holdco, Opco, the Company or the Surviving Company is required by applicable law to make any payment to a Governmental Authority that is specifically attributable to a Securityholder or a Securityholder’s status as such (including federal, state or local withholding taxes, state or local personal property taxes and state or local unincorporated business taxes), then such Securityholder shall indemnify, defend and hold harmless such person in full for the entire amount paid (including interest, penalties and related expenses). In the event the Securityholder fails to pay any such indemnification amount on demand, Holdco, Opco, the

Company and the Surviving Company may pursue all rights and remedies it may have against each Securityholder under this Section 4.1 , which shall include, without limitation, instituting a lawsuit to collect such indemnification, with interest calculated at a rate per annum equal to the prime rate as of the date such demand is made as such rate is as announced by Citibank, N.A.

4.2 Entire Agreement; Amendment . This Agreement, including the exhibits hereto and the other documents referred to herein contain the entire understanding of the parties hereto, with respect to the subject matter contained herein and therein. This Agreement supersedes all prior and contemporaneous agreements, arrangements, contracts, discussions, negotiations, undertakings and understandings (whether written or oral) between the parties with respect to such subject matter. This Agreement may be amended only by a written instrument executed by all of the parties hereto.

4.3 Severability . Any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Agreement.

4.4 Counterparts . This Agreement may be executed in two or more counterparts (including by facsimile and electronic transmissions), each of which shall constitute an original, and all of which taken together shall constitute one instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic transmission (including documents in PDF format) shall be effective as delivery of a manually executed counterpart to this Agreement.

4.5 Governing Law; Waiver of Jury Trial .

(b) EACH OF THE PARTIES SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN WILMINGTON, DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO IN ANY OTHER COURT. EACH OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

4.6 Assignment . The provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law and permitted assigns of the parties hereto. No assignment of this Agreement may be made by any party at any time, whether or not by operation of law, without the other parties’ prior written consent.

4.7 No Third-Party Beneficiaries . Nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

[SIGNATURE PAGES TO FOLLOW]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of Merger as of the day and year first written above.


HOLDCO:	PAYCOM SOFTWARE, INC.

	By:	/s/ Chad Richison
	Name:	Chad Richison
	Title:	Chief Executive Officer

THE COMPANY:	PAYCOM PAYROLL HOLDINGS, LLC

	By:	/s/ Chad Richison
	Name:	Chad Richison
	Title:	Chief Executive Officer

OPCO	PAYCOM PAYROLL, LLC

	By:	/s/ Chad Richison
	Name:	Chad Richison
	Title:	Chief Executive Officer

MERGER SUB:	PAYCOM SOFTWARE MERGER SUB, LLC

	By:	/s/ Chad Richison
	Name:	Chad Richison
	Title:	Chief Executive Officer

STOCKHOLDERS:	CHAD RICHISON /s/ Chad Richison

	CRAIG BOELTE /s/ Craig Boelte

JEFF YORK

/s/ Jeff York

WILLIAM KERBER

/s/ William Kerber

SCHEDULE OF OMITTED EXHIBITS AND SCHEDULES

The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the

Commission upon request.

Exhibit A- Certificate of Merger

Schedule I – Conversion of Company Units

Schedule II – Form of Restricted Common Stock Award Agreement for Non-Executive Officers

Schedule III – Forms of Restricted Common Stock Award Agreement for Executives with Employment Agreements

Exhibit 2.5

EXECUTION VERSION

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of this 30th day of December, 2013 by and between WCAS Capital Partners, IV, L.P., a Delaware limited partnership (“ CP IV ”), and Paycom Software, Inc, a Delaware corporation (the “ Company ”).

WHEREAS, in connection with the contribution referenced herein, the Company, Paycom Payroll Holdings, LLC (“ PPH ”), Paycom Payroll, LLC and Paycom Software Merger Sub, LLC will enter into an Agreement and Plan of Merger (the “ Merger Agreement ”);

WHEREAS, CP IV holds all of the shares of common stock (the “ CP IV Blocker Shares ”) of WCAS CP IV Blocker, Inc., a Delaware corporation; and

WHEREAS, CP IV desires to contribute to the Company, and the Company desires to accept from CP IV, all of the CP IV Blocker Shares (the “ Contribution ”) in exchange for 323,307 shares of common stock of the Company (the “ Company Shares ”).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. Contributions . CP IV hereby agrees to contribute, effective immediately prior to the Effective Time, to the Company the CP IV Blocker shares. In exchange for the Contribution, the Company hereby agrees to issue, effective immediately prior to the Effective Time, to CP IV the Company Shares, free and clear of any liens.

2. Representations and Warranties of the Company . The Company represents and warrants that when the Company Shares are issued to CP IV, the Company Shares will be duly and validly authorized and issued, fully paid and non-assessable.

3. Representations and Warranties of CP IV . CP IV represents and warrants that it is the record and beneficial owner of the CP IV Blocker Shares and following the execution of this Agreement and the consummation of the transactions contemplated under this Agreement, the Company will have good and marketable title to the CP IV Blocker Shares, free and clear of all liens.

4. Entire Agreement; Amendment . This Agreement, including the other documents referred to herein, contain the entire understanding of the parties hereto, with respect to the subject matter contained herein and therein. This Agreement supersedes all prior and contemporaneous agreements, arrangements, contracts, discussions, negotiations, undertakings and understandings (whether written or oral) between the parties with respect to such subject matter. This Agreement may be amended only by a written instrument executed by all of the parties hereto.

5. Severability . Any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Agreement.

6. Counterparts . This Agreement may be executed in two or more counterparts (including delivery by facsimile and electronic transmissions), each of which shall constitute an original, and all of which taken together shall constitute one instrument.

7. Governing Law; Waiver of Jury Trial .

(ii) Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated by this Agreement in any federal court sitting in Delaware, or to the extent such court does not have jurisdiction, then in any state court sitting in Delaware. Each Party hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(iii) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

8. Assignment . The provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law and permitted assigns of the parties hereto. No assignment of this Agreement may be made by any party at any time, whether or not by operation of law, without the other parties’ prior written consent.

9. No Third-Party Beneficiaries . Nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Contribution Agreement as of the date first above written.


WCAS Capital Partners, IV, L.P.

By:
		its General Partner

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

Paycom Software, Inc.

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: Chief Executive Officer

Exhibit 2.6

EXECUTION VERSION

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of this 30th day of December, 2013 by and between Welsh, Carson, Anderson & Stowe X, L.P., a Delaware limited partnership (“ WCAS X ”), WCAS Management Corporation, a Delaware corporation (“ WCASM ”) and Paycom Software, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, together, WCAS X and WCASM hold all of the shares of common stock (the “ WCPHI Shares ”) of WCAS Paycom Holdings, Inc., a Delaware corporation, in the respective amounts set forth on Schedule 1; and

WHEREAS, each of WCAS X and WCASM desires to contribute to the Company, and the Company desires to accept from each of WCAS X and WCASM, all of the WCPHI Shares (the “ Contribution ”) in exchange for 30,588,473 shares of common stock of the Company (the “ Company Shares ”), in the respective amounts set forth on Schedule 1.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. Contributions . Each of WCAS X and WCASM hereby agrees to contribute, effective immediately prior to the Effective Time, to the Company its WCPHI shares. In exchange for the Contribution, the Company hereby agrees to issue, effective immediately prior to the Effective Time, to WCAS X and WCASM the Company Shares, free and clear of any liens, in the respective amounts set forth on Schedule 1.

2. Representations and Warranties of the Company . The Company represents and warrants that when the Company Shares are issued to WCAS X and WCASM, the Company Shares will be duly and validly authorized and issued, fully paid and non-assessable.

3. Representations and Warranties of WCAS X . WCAS X represents and warrants that it is the record and beneficial owner of its WCPHI Shares and following the execution of this Agreement and the consummation of the transactions contemplated under this Agreement, the Company will have good and marketable title to such WCPHI Shares, free and clear of all liens.

4. Representations and Warranties of WCASM . WCASM represents and warrants that it is the record and beneficial owner of its WCPHI Shares and following the execution of this Agreement and the consummation of the transactions contemplated under this Agreement, the Company will have good and marketable title to such WCPHI Shares, free and clear of all liens

5. Entire Agreement; Amendment . This Agreement, including the other documents referred to herein, contain the entire understanding of the parties hereto, with respect to the subject matter contained herein and therein. This Agreement supersedes all prior and contemporaneous agreements, arrangements, contracts, discussions, negotiations, undertakings and understandings (whether written or oral) between the parties with respect to such subject matter. This Agreement may be amended only by a written instrument executed by all of the parties hereto.

6. Severability . Any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Agreement.

7. Counterparts . This Agreement may be executed in two or more counterparts (including delivery by facsimile and electronic transmissions), each of which shall constitute an original, and all of which taken together shall constitute one instrument.

8. Governing Law; Waiver of Jury Trial .

10. No Third-Party Beneficiaries . Nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Contribution Agreement as of the date first above written.


Welsh, Carson, Anderson & Stowe X, L.P.

By:
		its General Partner

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

Paycom Software, Inc.

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: Chief Executive Officer



WCAS Management Corporation

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

SCHEDULE OF OMITTED EXHIBITS AND SCHEDULES

The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the

Securities and Exchange Commission upon request.

Schedule I - WCPHI Shares and Common Shares

Exhibit 2.7

EXECUTION VERSION

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of this 30th day of December, 2013 by and among Paycom Software, Inc, a Delaware corporation (the “ Company ”) and each of the other parties signatory hereto (each, a “ Holder ”).

WHEREAS, in connection with the contribution referenced herein, the Company, Paycom Payroll Holdings, LLC, a Delaware limited liability company (“ PPH ”), Paycom Payroll, LLC and Paycom Software Merger Sub, LLC will enter into an Agreement and Plan of Merger (the “ Merger Agreement ”);

WHEREAS, reference is made to that certain Limited Liability Company Agreement (as amended from time to time, the “ PPH LLC Agreement ”) of PPH, dated as of April 3, 2012, by and among PPH, WCAS Paycom Holdings, Inc., a Delaware corporation (“ WCAS X Blocker ”), WCAS CP IV Blocker, Inc., a Delaware corporation and the other parties signatory thereto;

WHEREAS, Welsh, Carson, Anderson & Stowe X, L.P. (“ WCAS X ”) is the holder of that certain 14% Note, dated as of April 3, 2012 (the “ WCAS X Note ”), issued by WCAS X Blocker, and WCAS Management Corporation (“ WCASM ”) is the holder of that certain 14% Note, dated as of April 3, 2012 (together with the WCAS X Note, the “ Notes ”), issued by WCAS X Blocker;

WHEREAS, each Holder holds the number of Preferred B Units (as defined in the PPH LLC Agreement) as are set forth opposite such Holder’s name on Schedule A hereto (the “ Contributed Units ”); and

WHEREAS, each Holder desires to contribute to the Company, and the Company desires to accept from such Holder, all of the Contributed Units held by such Holder (the “ Contribution ”) in exchange for (i) the number of shares of common stock of the Company (the “ Company Shares ”) that will be set forth opposite such Holder’s name on an updated Schedule A hereto and that will be determined based on the fair market value of the Company as of the Effective Time (as defined in the Merger Agreement) and the number of shares of common stock of the Company representing the equity value of PPH derived from such fair market value, as determined by the Board of Directors of the Company, and allocated pursuant to the terms of the PPH LLC Agreement in a manner consistent with the examples set forth on Schedule A and (ii) his portion of the cash payments contemplated by Section 2 herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally bound hereby, the parties hereto hereby agree as follows:

1. Contributions . Each Holder hereby agrees to contribute, effective immediately prior to the Effective Time, to the Company the Contributed Units held by such Holder. In exchange for the Contribution, the Company hereby agrees to issue, effective immediately prior to the Effective Time, to such Holder the applicable number of Company Shares, free and clear of any liens.

2. Certain Cash Payments . In connection with any payment made by WCAS X Blocker with respect to the Notes (a “ Note Payment ”), the Company shall make, or shall cause WCAS X Blocker to make, an aggregate cash payment to the Holders in an amount equal to the product of (a) the difference of (i) the aggregate amount of cash distributions made by PPH to the holders of the Specified Preferred C Units (as defined in the PPH LLC Agreement) from the date of the issuance thereof through and including the date of the Note Payment to which Section 4.1(c) of the PPH LLC Agreement would have applied, but, for this purpose only and without duplication, treating amounts received in cash by WCAS X and WCASM on the Notes as amounts distributed by PPH with respect to the Specified Preferred C Units, minus (ii) $56,000,000.00, multiplied by (b) .027. Amounts paid to the Holders pursuant to this Section 2 shall be deemed to have been paid to WCAS X and WCASM or their respective successors with respect to the Notes such that the aggregate amount paid to WCAS X and WCASM or their respective successors with respect to the Notes and to the Holders pursuant to this Section 2 will equal the aggregate amount that would otherwise have been paid to WCAS X and WCASM or their respective successors with respect to the Notes. WCAS X and WCASM each hereby on its own behalf and for its successors consents to such payments under this Section 2 and agrees that any amounts paid to the Holders as provided above with respect to the Notes shall be deemed to have been paid to WCAS X and WCASM, as applicable, with respect to the Notes. Payments made to the Holders pursuant to this Section 2 shall be allocated between the Holders based on their pro rata share of the total outstanding Preferred B Units immediately prior to giving effect to this Agreement.

3. Representations and Warranties of the Company . The Company represents and warrants that when the Company Shares are issued to each Holder, the Company Shares will be duly and validly authorized and issued, fully paid and non-assessable.

4. Representations and Warranties of each Holder . Each Holder represents and warrants that it is the record and beneficial owner of the Contributed Units set forth opposite such Holders name on Schedule A hereto and following the execution of this Agreement and the consummation of the transactions contemplated under this Agreement, the Company will have good and marketable title to such Contributed Units, free and clear of all liens.

6. No Other Claims . Each Holder hereby agrees that, upon payment of the applicable amount to such Holder pursuant to Section 2 herein, and after giving effect to the contribution contemplated by Section 1 herein, such Holder will have no other rights, and PPH, WCAS, CP IV, the Company and its Subsidiaries will have no further obligations to such Holder, with respect to the Preferred B Units.

7. Severability . Any term or provision of this Agreement which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Agreement.

8. Counterparts . This Agreement may be executed in two or more counterparts (including delivery by facsimile and electronic transmissions), each of which shall constitute an original, and all of which taken together shall constitute one instrument.

9. Governing Law; Waiver of Jury Trial .

10. Assignment . The provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law and permitted assigns of the parties hereto. No assignment of this Agreement may be made by any party at any time, whether or not by operation of law, without the other parties’ prior written consent.

11. No Third-Party Beneficiaries . Nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Contribution Agreement as of the date first above written.


Paycom Software, Inc.

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: Chief Executive Officer

[Signature Page to Preferred B Unit Contribution Agreement]

Holder:

/s/ Robert Levenson

Name: Robert Levenson

[Signature Page to Preferred B Unit Contribution Agreement]

Holder:

/s/ Richard Aiello

Name: Richard Aiello

Title: Director

[Signature Page to Preferred B Unit Contribution Agreement]


ELK II 2012 DESCENDANTS’ TRUST U/A DATED DECEMBER 26, 2012

By:		/s/ Steven Elbaum
Name: Steven Elbaum, as Trustee


SLY II 2012 DESCENDANTS’ TRUST U/A DATED DECEMBER 26, 2012

By:		/s/ Steven Elbaum
Name: Steven Elbaum, as Trustee


LENOX CAPITAL GROUP, LLC

By:		/s/ Robert J. Levenson
Name: Robert J. Levenson Title: Managing Member

[Signature Page to Preferred B Unit Contribution Agreement]


Welsh, Carson, Anderson & Stowe X, L.P., solely for the purposes of Section 2

By:		WCAS X Associates LLC
		its General Partner

By:		/s/Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

WCAS Management Corporation, solely for the purposes of Section 2

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

[Signature Page to Preferred B Unit Contribution Agreement]

SCHEDULE OF OMITTED EXHIBITS AND SCHEDULES

The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the

Commission upon request.

Schedule A - Preferred B Units and Common Shares

Exhibit 3.1

CERTIFICATE OF INCORPORATION

PAYCOM SOFTWARE, INC.

ARTICLE ONE

The name of the corporation is Paycom Software, Inc. (hereinafter called the “ Corporation ”).

ARTICLE TWO

The address of the Corporation’s registered office in the state of Delaware is 1675 South State Street, Suite B, in the City of Dover, in the County of Kent, in the State of Delaware 19901. The name of its registered agent at such address is Capitol Services, Inc.

ARTICLE THREE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (the “ DGCL ”).

ARTICLE FOUR

The total number of shares which the Corporation shall have the authority to issue is one thousand (1,000) shares, all of which shall be shares of Common Stock, with a par value of one cent ($0.01) per share.

ARTICLE FIVE

The name and mailing address of the incorporator is as follows:


Name		Address

Stephanie Levy		Kirkland & Ellis LLP
		601 Lexington Avenue
		New York, NY 10022

ARTICLE SIX

The board of directors of the Corporation (the “ Board of Directors ”) shall have the power to adopt, amend or repeal By-Laws, except as may be otherwise be provided in the By-Laws.

ARTICLE SEVEN

The Corporation expressly elects not to be governed by Section 203 of the DGCL.

ARTICLE EIGHT

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of the DGCL or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of the DGCL, order a meeting of the creditors or class of creditors, and/or the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders, or class of stockholders, of the Corporation, as the case may be, and also on this Corporation.

ARTICLE NINE

Section 1. Limitation of Liability .

(a) To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders.

(b) Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

Section 2. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ proceeding ”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director, officer or other employee of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “ indemnitee ”), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or penalties and

amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided, however, that, except as provided in Section 3 of this Article Nine with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 2 of this Article Nine shall be a contract right and shall include the obligation of the Corporation to pay the expenses incurred in defending any such proceeding in advance of its final disposition. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same or lesser scope and effect as the foregoing indemnification of directors and officers.

Section 3. Procedure for Indemnification. Any indemnification of a director or officer of the Corporation or advance of expenses under Section 2 of this Article Nine shall be made promptly, and in any event within thirty days, upon the written request of the director or officer. If a determination by the Corporation that the director or officer is entitled to indemnification pursuant to this Article Nine is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advance of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty days, the right to indemnification or advances as granted by this Article Nine shall be enforceable by the director or officer in any court of competent jurisdiction. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of expenses where the undertaking required pursuant to Section 2 of this Article Nine, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The procedure for indemnification of other employees and agents for whom indemnification is provided pursuant to Section 2 of this Article Nine shall be the same procedure set forth in this Section 3 for directors or officers, unless otherwise set forth in the action of the Board of Directors providing indemnification for such employee or agent.

Section 4. Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee or agent of the Corporation or was serving at the request of the Corporation as a director, officer, employee

or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against any expense, liability or loss asserted against him or her and incurred by him or her in any such capacity, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under the DGCL.

Section 5. Service for Subsidiaries. Any person serving as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least 50% of whose equity interests are owned by the Corporation (a “ subsidiary ” for this Article Nine) shall be conclusively presumed to be serving in such capacity at the request of the Corporation.

Section 6. Reliance. Persons who after the date of the adoption of this provision become or remain directors or officers of the Corporation or who, while a director, officer or other employee of the Corporation, become or remain a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Article Nine in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this Article Nine shall apply to claims made against an indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof.

Section 7. Non-Exclusivity of Rights. The rights to indemnification and to the advance of expenses conferred in this Article Nine shall not be exclusive of any other right which any person may have or hereafter acquire under this Certificate of Incorporation or under any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

Section 8. Merger or Consolidation. For purposes of this Article Nine, references to the “ Corporation ” shall include, in addition to the resulting Corporation, any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article Nine with respect to the resulting or surviving Corporation as he or she would have with respect to such constituent Corporation if its separate existence had continued.

Section 9 . Savings Clause. If this Article Nine or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each person entitled to indemnification under Section 2 of this Article Nine as to all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, fines, Employment Retirement Income Security Act of 1974 excise taxes and penalties, penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person and for which indemnification is available to such person pursuant to this Article Nine to the full extent permitted by any applicable portion of this Article Nine that shall not have been invalidated and to the full extent permitted by applicable law.

Section 10. Indemnification Obligations Intended to be of a Primary Nature. It is the intent that with respect to all advancement and indemnification obligations under this Article Nine, the Corporation shall be the primary source of advancement, reimbursement and indemnification relative to any direct or indirect shareholder of the Corporation (or any affiliate of such shareholder, other than the Corporation or any of its direct or indirect subsidiaries). The Corporation shall have no right to seek contribution, indemnity or other reimbursement for any of its obligations under this Article Nine from any such direct or indirect shareholder of the Corporation (or any affiliate of such shareholder, other than the Corporation or any of its direct or indirect subsidiaries).

ARTICLE TEN

The Corporation hereby eliminates, to the fullest extent permitted by law (as contemplated by Section 102(b)(7) of the DGCL) the personal liability of any person who serves as a director of the Corporation to the Corporation and/or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this Article Ten shall not eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit; provided further, however, that if in the future the DGCL is amended or modified (including, but not limited to, Section 102(a)(7)) to permit the elimination of the personal liability of a director of the Corporation to a greater extent than contemplated above, then the provisions of this Article Ten shall be deemed to be automatically amended to provide for the elimination of the personal liability of the directors of the Corporation to such greater extent. This Article Ten shall not eliminate or limit the liability of a director for any act or omission occurring prior to the date when this Article Ten becomes effective.

ARTICLE ELEVEN

The Corporation reserves the right to amend or repeal any provisions contained in this Certificate of Incorporation from time to time and at any time in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred upon stockholders and directors are granted subject to such reservation.

I, the undersigned, being the sole incorporator hereinbefore named, for the purpose of forming a corporation in pursuance of the DGCL, do make and file this Certificate of Incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand this 31st day of October, 2013.

/s/ Stephanie Levy

Stephanie Levy

Sole Incorporator

Exhibit 3.3

BY-LAWS

PAYCOM SOFTWARE, INC.

A Delaware Corporation

( Adopted as of November 1, 2013 )

ARTICLE I

OFFICES

Section 1. Registered Office . The registered office of the corporation in the State of Delaware shall be located at 1675 South State Street, Suite B, in the City of Dover, in the County of Kent, in the State of Delaware 19901. The name of the corporation’s registered agent at such address shall be Capitol Services, Inc. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors.

Section 2. Other Offices . The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Place and Time of Meetings . An annual meeting of the stockholders shall be held each year for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting may be determined by resolution of the board of directors or as set by the chief executive officer of the corporation.

Section 2. Special Meetings . Special meetings of stockholders may be called for any purpose (including, without limitation, the filling of board vacancies and newly created directorships), and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by two or more members of the board of directors or the chief executive officer and shall be called by the chief executive officer upon the written request of holders of shares entitled to cast not less than fifty percent (50%) of the outstanding shares of any series or class of the corporation’s Capital Stock.

Section 3. Place of Meetings . The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation.

Section 4. Notice . Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the chief executive officer or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Section 5. Stockholders List . The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 6. Quorum . Except as otherwise provided by applicable law or by the Certificate of Incorporation, a majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time in accordance with Section 7 of this Article, until a quorum shall be present or represented.

Section 7. Adjourned Meetings . When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 8. Vote Required . When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Where a separate vote by class is required, the affirmative vote of the majority of shares of such class present in person or represented by proxy at the meeting shall be the act of such class.

Section 9. Voting Rights . Except as otherwise provided by the General Corporation Law of the State of Delaware or by the Certificate of Incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder.

Section 10. Proxies . Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him, her or it by proxy. Every proxy must be signed by the stockholder granting the proxy or by his, her or its attorney-in-fact. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.

Section 11. Action by Written Consent . Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than a majority of the shares entitled to vote, or, if greater, not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation’s principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested provided, however, that no consent or consents delivered by certified or registered mail shall be deemed delivered until such consent or consents are actually received at the registered office. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof.

ARTICLE III

DIRECTORS

Section 1. General Powers . The business and affairs of the corporation shall be managed by or under the direction of the board of directors.

Section 2. Number, Election and Term of Office . The number of directors which shall constitute the board as of the effective date of these by-laws shall be two (2). Thereafter, the number of directors shall be established from time to time by resolution of the board. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.

Section 3. Removal and Resignation . Any director or the entire board of directors may be removed at any time, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation’s Certificate of Incorporation, the provisions of this section shall apply, in respect to the removal without cause or a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon written notice to the corporation.

Section 4. Vacancies . Except as otherwise provided by the Certificate of Incorporation of the corporation or any amendments thereto, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority vote of the holders of the corporation’s outstanding stock entitled to vote thereon or by a majority of the members of the board of directors. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided.

Section 5. Annual Meetings . The annual meeting of each newly elected board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders.

Section 6. Other Meetings and Notice . Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the chief executive officer or president on at least 24 hours notice to each director, either personally, by telephone, by mail, or by telegraph; in like manner and on like notice the chief executive officer must call a special meeting on the written request of at least a majority of the directors.

Section 7. Quorum, Required Vote and Adjournment . A majority of the total number of directors then in office (without regard to any then vacancies on the board) shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 8. Committees . The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

Section 9. Committee Rules . Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. In the event that a member and that member’s alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member.

Section 10. Communications Equipment . Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting.

Section 11. Waiver of Notice and Presumption of Assent . Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.

Section 12. Action by Written Consent . Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all the then members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.

ARTICLE IV

OFFICERS

Section 1. Number . The officers of the corporation shall be elected by the board of directors and may consist of a chairman, a chief executive officer, a president, one or more vice presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable.

Section 2. Election and Term of Office . The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.

Section 3. Removal . Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4. Vacancies . Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office.

Section 5. Compensation . Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation.

Section 6. The Chairman of the Board . The Chairman of the Board, if one shall have been elected, shall be a member of the board, may be an officer of the corporation, and, if present, shall preside at each meeting of the board of directors or shareholders. He shall advise the chief executive officer, and in the chief executive officer’s absence, other officers of the corporation, and shall perform such other duties as may from time to time be assigned to him by the board of directors.

Section 7. The Chief Executive Officer . In the absence of the Chairman of the Board or if a Chairman of the Board shall have not been elected, the chief executive officer shall preside at all meetings of the stockholders and board of directors at which he or she is present; subject to the powers of the board of directors, shall have general charge of the business, affairs

and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these by-laws.

Section 8. President; Vice Presidents . The president shall, in the absence or disability of the chief executive officer, act with all of the powers and be subject to all of the restrictions of the chief executive officer. The president shall also perform such other duties and have such other powers as the board of directors, the chief executive officer or these by-laws may, from time to time, prescribe. The vice-president, if any, or if there shall be more than one, the vice-presidents in the order determined by the board of directors shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the president or these by-laws may, from time to time, prescribe.

Section 9. The Secretary and Assistant Secretaries . The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the chief executive officer’s supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the chief executive officer or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chief executive officer, or secretary may, from time to time, prescribe.

Section 10. The Treasurer and Assistant Treasurer . The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the chief executive officer and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the chief executive officer or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the

corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chief executive officer, the president or treasurer may, from time to time, prescribe.

Section 11. Other Officers, Assistant Officers and Agents . Officers, assistant officers and agents, if any, which officers may include officers of any division of the corporation, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors.

Section 12. Absence or Disability of Officers . In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer’s place during such officer’s absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select.

ARTICLE V

INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS

Section 1. Nature of Indemnity . Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or a person of whom he is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, fiduciary or agent or in any other capacity while serving as a director, officer, employee, fiduciary or agent, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expense, liability and loss (including attorneys’ fees actually and reasonably incurred by such person in connection with such proceeding and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers.

Section 2. Procedure for Indemnification of Directors and Officers . Any indemnification of a director or officer of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 3. Nonexclusivity of Article V . The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

Section 4. Insurance . The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V.

Section 5. Expenses . Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding’s final disposition unless otherwise determined by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.

Section 6. Employees and Agents . Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors.

Section 7. Contract Rights . The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing.

Section 8. Merger or Consolidation . For purposes of this Article V, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

ARTICLE VI

CERTIFICATES OF STOCK

Section 1. Form . Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the chairman of the board, the chief executive officer, the president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such chairman of the board, chief executive officer, president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued,

with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation.

Section 2. Lost Certificates . The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 3. Fixing a Record Date for Stockholder Meetings . In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

Section 4. Fixing a Record Date for Action by Written Consent . In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the

State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action.

Section 5. Fixing a Record Date for Other Purposes . In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

Section 6. Subscriptions for Stock . Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation.

ARTICLE VII

GENERAL PROVISIONS

Section 1. Dividends . Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created.

Section 2. Checks, Drafts or Orders . All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof.

Section 3. Contracts . The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

Section 4. Loans . The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

Section 5. Fiscal Year . The fiscal year of the corporation shall be fixed by resolution of the board of directors.

Section 6. Corporate Seal . The board of directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

Section 7. Voting Securities Owned By Corporation . Voting securities in any other corporation held by the corporation shall be voted by the chief executive officer, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.

Section 8. Inspection of Books and Records . Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business.

Section 9. Section Headings . Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

Section 10. Inconsistent Provisions . In the event that any provision of these by-laws is or becomes inconsistent with any provision of the Certificate of Incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

ARTICLE VIII

AMENDMENTS

These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers.

Exhibit 4.2

PAYCOM SOFTWARE, INC.

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “ Agreement ”) is made as of March 10, 2014 (the “Effective Date”) by and among (i) Paycom Software, Inc., a Delaware corporation (the “ Company ”), (ii) Welsh, Carson, Anderson & Stowe X, L.P., a Delaware limited partnership (“ WCAS ”), (iii) WCAS Management Corporation, a Delaware corporation (“ WCASM ”), (iv) WCAS Capital Partners, IV, L.P., a Delaware limited partnership (“ CP IV ”), (v) Chad Richison (“ Richison ”), (vi) Shannon Rowe (“ Rowe ”), (vii) William Kerber (“ Kerber ”), (viii) Jeff York (“ York ”), (ix) Robert Levenson (“ Levenson ”), (x) the ELK II 2012 Descendants’ Trust u/a dated December 26, 2012 (“ ELK Trust ”), (xi) the SLY II 2012 Descendants’ Trust u/a dated December 26, 2012 (“ SLY Trust ”), (xii) Lenox Capital Group, LLC (“ Lenox ” and, together with Richison, Rowe, Kerber, York, WCAS, WCASM, CP IV, Levenson, ELK Trust and SLY Trust, the “ Initial Stockholders ”) and (xi) each holder of Stockholder Shares acquired after the date of this Agreement pursuant to Section 6 hereof (the “ Additional Stockholders ,” and together with the Initial Stockholders, the “ Stockholders ”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in Section 1 hereof.

WHEREAS, on January 1, 2014, Paycom Software Merger Sub, LLC (“ MergerSub ”), a wholly owned subsidiary of the Company, merged with and into Paycom Payroll Holdings, LLC, a Delaware limited liability company (“ PPH ”), with PPH being the surviving corporation (the “ Merger ”), pursuant to the Agreement and Plan of Merger dated December 30, 2013, by and among the Company, MergerSub, Paycom Payroll, LLC, a Delaware limited liability company and PPH (the “ Merger Agreement ”);

WHEREAS, upon the Closing (as defined below), Common Stock and Restricted Stock were issued pursuant to the Merger Agreement and those certain Contribution Agreements (as defined below) and the Company and the Initial Stockholders entered into that certain Stockholders Agreement dated as of January 1, 2014 (the “ Stockholders Agreement ”); and

WHEREAS, the parties believe that it is in the best interests of the Company and the Stockholders to amend and restate the Stockholders Agreement in its entirety.

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, each intending to be legally bound, hereby agree as follows:

1. Definitions .

“ Additional Stockholder ” has the meaning set forth in the preamble.

“ Affiliate ” means, when used with reference to a particular Person, any other Person, directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with, such particular Person, where “control” means the possession,

directly or indirectly, of the power to direct the management and policies of a Person, whether by or through the ownership of voting securities, agency or otherwise, or pursuant to or in connection with any agreement, arrangement or other understanding (whether written or oral). The terms “controlling” and “controlled” shall have correlative meanings of the foregoing.

“ Agreement ” has the meaning set forth in the preamble.

“ Attorney-In-Fact ” has the meaning set forth in Section 3 .

“ Board ” has the meaning set forth in Section 2(a) .

“ Charter ” means that certain Amended and Restated Certificate of Incorporation of the Company, as in effect from time to time.

“ Closing ” means the date of the consummation of the transactions contemplated by the Merger Agreement and the Contribution Agreements.

“ Common Holders ” means Richison, Rowe, Kerber, York, Levenson and Aiello and any of their Affiliates holding, directly or indirectly, Common Stock (i) originally acquired by such Persons upon the Closing or (ii) that were Transferred to such Person in one or more Transfers occurring after the Closing (other than a public sale).

“ Common Stock ” means the shares of common stock of the Company, par value $0.001. Unless otherwise specified, the term “Common Stock” shall include Restricted Stock.

“ Company ” has the meaning set forth in the preamble.

“ Contribution Agreements ” means (i) the Preferred B Unit Contribution Agreement, by and among the Company, Aiello, Levenson and certain entities affiliated with Levenson, (ii) the WCAS Contribution Agreement by and between the Company, WCASM and WCAS, and (iii) the CP IV Contribution Agreement by and between the Company and CP IV.

“ CP IV Director ” has the meaning set forth in Section 2(a)(ii) .

“ CP IV ” has the meaning set forth in the recitals.

“ CP IV Holders ” means CP IV and any of its Affiliates holding Common Stock (i) originally acquired by CP IV upon the Closing or (ii) that were Transferred to such Person in one or more Transfers occurring after the Closing (other than a public sale).

“ Equity Securities ” of a Person means, as applicable, (i) any capital stock, membership interests or other share capital of such Person, (ii) any securities or indebtedness of such Person, directly or indirectly convertible into or exchangeable for any capital stock, options, warrants or membership interests or other share capital of such Person or containing any profit participation features with respect to such Person, (iii) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, membership interests, other share capital of such Person or securities containing any profit participation features with respect to such Person or directly or indirectly to subscribe for or to purchase any securities directly or indirectly

convertible into or exchangeable for any capital stock, membership interests, other share capital of such Person or securities containing any profit participation features with respect to such Person, (iv) any share appreciation rights, phantom share rights or other similar rights relating to such Person, and (v) any Equity Securities of such Person issued or issuable with respect to the securities referred to in clauses (i) through (iv) above in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization.

“ Initial Stockholders ” has the meaning set forth in the preamble.

“ Majority CP IV Holders ” means, at any time, the holders of a majority of the shares of Common Stock then held by the CP IV Holders (but not including any Common Stock held by the Common Holders or the WCAS Holders).

“ Majority Common Holders ” means, at any time, the holders of a majority of the shares of Common Stock then held by the Common Holders (but not including any Common Stock held by WCAS Holders or the CP IV Holders).

“ Majority WCAS Holders ” means, at any time, the holders of a majority of the Common Stock then held by the WCAS Holders (but not including any Common Stock held by the Common Holders or the CP IV Holders).

“ Merger ” has the meaning set forth in the recitals.

“ Merger Agreement ” has the meaning set forth in the recitals.

“ Merger Sub ” has the meaning set forth in the recitals.

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a cooperative, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity, or a governmental entity or any department, agency or political subdivision thereof, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person, as the context may require.

“ PPH LLC Agreement ” means that certain limited liability company agreement of PPH, dated as of April 3, 2012, by and among PPH, EGI, J&J Payroll Services, L.P., a Delaware limited partnership and the other parties signatory thereto as amended through and in effect as of the date of this Agreement immediately prior to the initial execution of the Stockholders Agreement.

“ PPH ” has the meaning set forth in the recitals.

“ Preferred Stock ” means any class of preferred stock of the Company.

“ Public Offering ” means an underwritten sale to the public of the Company’s Equity Securities (or its successor’s Equity Securities) pursuant to an effective registration statement filed with the SEC on Form S-1 (or any successor form adopted by the SEC) and after which the Company’s (or its successor’s) Equity Securities are listed on a national exchange; provided that a Public Offering shall not include any issuance of Equity Securities in any merger

or other business combination, and shall not include any registration of the issuance of Equity Securities to existing securityholders or employees of the Company and its Subsidiaries on Form S-4 or Form S-8 (or any successor form adopted by the SEC).

“ Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of December 30, 2014, by and among the Company and the Stockholders.

“ Restricted Stock ” means those shares of Common Stock subject to restrictions on ownership issued in connection with the Merger. For all purposes of this Agreement, Restricted Stock will be deemed to be owned and held by the recipient of those restricted shares.

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended from time to time.

“ Stockholder Shares ” means (i) such Shares as were issued at the Closing, (ii) any Common Stock issued to or otherwise acquired by any Stockholder, directly or indirectly, on or after January 1, 2014 and (iii) any Preferred Stock issued to or acquired by any Stockholder, directly or indirectly, on or after January 1, 2014. As to any particular shares constituting Stockholder Shares, such shares will cease to be Stockholder Shares when they have been sold in a public sale or repurchased by the Company or any of its Subsidiaries. For purposes of this Agreement, except as otherwise set forth herein, a Person (so long as such Person is an Affiliate of a Stockholder) will be deemed to be a holder of Stockholder Shares whenever such Person has the right to acquire, directly or indirectly, such Stockholder Shares (upon conversion or exercise (without duplication) in connection with a Transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected.

“ Stockholders ” has the meaning set forth in the preamble.

“ Sub Board ” means the Board of Directors of any Subsidiary.

“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing member, general partner or analogous controlling Person of such limited liability company, partnership, association or other business entity.

“ Transfer ” means any gift, sale, transfer, assignment, pledge, hypothecation, encumbrance or other disposition (whether with or without consideration, whether directly or indirectly and whether voluntarily, involuntarily or by operation of law), including any derivative transaction that has the effect of changing materially the economic benefits and risks of ownership (and the terms “ Transferee ,” “ Transferor ” and any other derivation thereof shall have correlative meanings of the foregoing).

“ WCAS Director ” has the meaning set forth in Section 2(a)(i) .

“ WCAS Holders ” means WCAS and any of its Affiliates (i) holding Common Stock originally acquired by WCAS upon the Closing or (ii) that were Transferred to such Person in one or more Transfers occurring after the Closing (other than a public sale).

2. Voting Agreement

(a) For so long as the Stockholders, directly or indirectly, on an aggregate basis, continue to hold forty percent (40%) of the issued and outstanding Common Stock entitled to vote in the election of directors of the Company, each Stockholder agrees that such Stockholder will vote, or cause to be voted, all voting securities of the Company over which such Stockholder has the power, directly or indirectly, to vote or direct the voting, and will take all other necessary or desirable action within such Stockholder’s control (whether in such Stockholder’s capacity as a Stockholder, officer, director, member of a committee of the board of directors of the Company (the “ Board ”) or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company will take all necessary and desirable actions within its control, to cause the authorized number of directors of the Company to be established at seven, or such greater number as is necessary to designate the individuals specified in Sections 2(a)(i) , Section 2(a)(ii) and Section 2(a)(iii) and also comply with applicable stock exchange listing rules and applicable law (with such additional directors being designated pursuant to the last sentence of this Section 2(a)), unless otherwise agreed by the Majority WCAS Holders, and to elect or cause to be elected to the Board, and cause to be continued in office, the following individuals:

(i) three representatives designated by the Majority WCAS Holders (each, a “ WCAS Director ”), who shall initially be Robert Levenson, Sanjay Swani and Robert Minicucci;

(ii) one representative designated by the Majority CP IV Holders, who shall initially be Conner Mulvee (the “ CP IV Director ”); and

(iii) one representative designated by the Majority Common Holders (a “ Common Director ”), who shall be (a) Chad Richison or (b) if Chad Richison is no longer willing to serve, such other person designated by such holders; provided that the Majority Common Holders shall have the right to designate such Director so long as Chad Richison and his Affiliates own, in the aggregate, at least 12% of the outstanding shares of Common Stock. If at any time the Majority Common Holders do not have the right to designate such Director, the Majority WCAS Holders shall have the right to designate such Director.

The parties hereto agree that the remaining Directors shall be independent Directors designated by the nominating committee of the Board.

(b) Any Director elected pursuant to Section 2(a)(i) - (iii) above shall be removed from the Board or any committee of the Board (with or without cause) at the written request of the holders or other Person that has the right to designate such Director under Section 2(a) , but only upon such written request and under no other circumstances. Each Stockholder agrees to vote, or cause to be voted, or provide a written consent with respect to, all voting securities of the Company over which such Stockholder has the power, directly or indirectly, to vote or direct the voting, and shall take all such other actions as shall be necessary or desirable, to cause the removal of such Director as requested by the Person who has the right to remove such Director.

(c) If any Director designated pursuant to Section 2(a) above for any reason ceases to serve as a member of the Board during such Director’s term of office, the resulting vacancy on the Board shall be filled, subject to the conditions of Section 2(a) above, by a Director designated by the Majority WCAS Holders, the Majority CP IV Holders or the Majority Common Holders, as applicable, with the right to appoint such director in accordance with Section 2(a) . Each Stockholder agrees to vote promptly, or cause to be voted promptly, or provide promptly a written consent with respect to, all voting securities of the Company over which such Stockholder has the power, directly or indirectly, to vote or direct the voting, and promptly shall take all such other actions as shall be necessary or desirable to cause the designated successor to be elected, to fill such vacancy as requested by the Person who has the right to remove such Director.

(d) So long as the CP IV Holders and the WCAS Holders, on an aggregate basis, continue to hold 40% of the issued and outstanding Common Stock, each Stockholder agrees to cast all votes to which such holder is entitled to vote, directly or indirectly, in respect of the shares of Common Stock, whether at any annual or special meeting, including by attending meetings in person or by proxy for purposes of obtaining a quorum, by written consent, or otherwise, in the same proportion as the shares of Common Stock held by the WCAS Holders are voted by the WCAS Holders for or against any sale, recapitalization, merger, consolidation, reorganization or any other transaction or series of transactions involving the Company or its Subsidiaries, and in the case of any proposed tender offer for the securities of the Company to tender or withhold his, her or its shares in the same proportion as are tendered and/or withheld by the WCAS Holders.

3. Irrevocable Proxy . In order to secure each Stockholder’s obligation to vote his, her or its Stockholder Shares and other voting securities of the Company or to deliver any written consent contemplated by or in accordance with the provisions of Sections 2 hereof, each Stockholder hereby appoints WCAS X Associates, LLC (the “ Attorney-In-Fact ”) as such Stockholder’s true and lawful proxy and attorney-in-fact, with full power of substitution, to vote at any annual or special meeting of the Stockholders, or to take any action by written consent in lieu of such meeting with respect to, or to otherwise take action in respect of, all of the Stockholder Shares and other voting securities of the Company directly or indirectly owned or held of record by such Stockholder for the election or removal of directors and all such other matters as expressly provided for in Sections 2 . The Attorney-In-Fact may exercise the irrevocable proxy granted to it hereunder at any time any Stockholder fails to comply with any of

the provisions of Sections 2 . Each of the proxies and powers granted by each Stockholder pursuant to this Section 3 is coupled with an interest and is given to secure the performance of such Stockholder’s obligations under this Agreement. Such proxies and powers shall be irrevocable, shall only terminate upon the termination of this Agreement and shall survive the death, incompetency, disability, bankruptcy or dissolution of such Stockholder and the subsequent holders of his, her or its Stockholder Shares. To effectuate the provisions of this Section 3 , the Secretary of the Company and of each of its Subsidiaries, or, if there shall be no Secretary, then such other officer or employee of the Company or such Subsidiary as the Board or such Sub Board, as applicable, may appoint to fulfill the duties of the Secretary, shall not record any vote or consent or other action contrary to the terms of this Agreement.

4. Representations and Warranties . Each Stockholder (as to himself, herself or itself only) represents and warrants to the Company and each other Stockholder that, effective as of the time such Stockholder becomes a party to this Agreement, (a) such Stockholder is the record owner, directly or indirectly through an Affiliate wholly-owned by such Stockholder, of the type and number of Stockholder Shares held by such Stockholder as of the Closing, free and clear of all liens and encumbrances, (b) this Agreement has been duly authorized, executed and delivered by such Stockholder and constitutes the valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, (c) such Stockholder has not granted and is not a party to, and such Stockholder shall not grant or become party to, any proxy, voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement, and (d) the execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both, (i) violate in any material respect any provision of law to which such Stockholder is subject, (ii) violate in any material respect any order, judgment or decree applicable to such Stockholder or (iii) conflict in any material respect with, or result in a material breach or default under, any term or condition of any agreement or other instrument to which such Stockholder is a party or by which such Stockholder or any of its assets or properties is bound.

5. Legend .

(a) In addition to any legend required by any other document, each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the Transfer of any Stockholder Shares (if such shares remain Stockholder Shares after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [ INSERT DATE OF ISSUANCE ] , HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY OTHER SECURITIES LAW, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS ON TRANSFER AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, DATED AS OF JANUARY 1, 2014,

BY AND AMONG PAYCOM SOFTWARE, INC. (THE “COMPANY”) AND THE COMPANY’S STOCKHOLDERS, AS THE SAME MAY BE AMENDED OR MODIFIED FROM TIME TO TIME, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.

(b) The Company shall imprint such legend on certificates evidencing Stockholder Shares. Upon the request of any Stockholder, the legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares. The Company shall remove the Securities Act portion of the legend when (a) in the opinion of Haynes & Boone, LLP or Kirkland & Ellis LLP, or other counsel reasonably acceptable to the Company, such legend is no longer required in order to assure compliance by the Company with the Securities Act or (b) such Stockholder Shares have been effectively registered under the Securities Act or transferred pursuant to Rule 144. Wherever (x) such requirement shall cease and terminate as to any Stockholder Shares or (y) such Stockholder Shares shall be transferable under paragraph (b)(1)(i) of Rule 144, the holder thereof shall be entitled to receive from the Company, without expense, new certificates not bearing Securities Act portion of the legend.

6. Transfer . Prior to transferring, in one transaction or a series of related transactions, any Stockholder Shares to an Affiliate of a Stockholder, the transferring Stockholder shall cause the prospective Transferee to be bound by this Agreement and the Registration Rights Agreement and to execute and deliver to the Secretary of the Company and the other Stockholders a joinder to this Agreement substantially in the form attached hereto as Exhibit A and a counterpart signature page to the Registration Rights Agreement prior to the effectiveness of such Transfer (unless such Transfer is pursuant to applicable laws of descent and distribution, in which case, such executed joinder and counterpart signature page shall be delivered to the Secretary of the Company as soon as reasonably possible after such Transfer). Any attempted Transfer of Shares not permitted under the terms of this Section 6 shall be null and void, and the Company shall not in any way give effect to any such impermissible Transfer.

7. Additional Provisions . Notwithstanding the foregoing, until the Company shall have consummated a Public Offering, the Parties agree to comply with the provisions set forth in Sections 9.1, 9.2, 9.5, 9.6, 9.9, 11.1, 11.2, 11.3, 11.4, 11.6 and 11.7 of the PPH LLC Agreement and agree that WCAS and CP IV shall have the rights afforded to the WCAS Holders (as defined in the PPH LLC Agreement) (including as the WCAS Majority Holder (as defined in the PPH LLC Agreement)), in each case as if those provisions applied to the Common Stock of the Company and the Stockholders, mutatis mutandis , as they apply to the Units and Unitholders (each as defined in the PPH LLC Agreement) under the PPH LLC Agreement.

8. Amendment and Waiver . This Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only by an agreement in writing signed by WCAS, CP IV and the Majority Common Holders. For so long as this Agreement shall be in effect, no reference to this Agreement contained in the Bylaws of the Company may be altered, amended, repealed, or made except by the affirmative vote of WCAS, CP IV and the Majority Common Holders.

9. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

10. Entire Agreement . Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

11. Successors and Assigns . Except as otherwise expressly set forth herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any subsequent holders of Stockholder Shares and the respective successors and assigns of each of them, so long as they hold Stockholder Shares (and hold or have received Stockholder Shares in accordance with the terms hereof).

12. Counterparts . This Agreement may be executed simultaneously in two or more separate counterparts, any one of which need not contain the signatures of more than one party, but each of which shall be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.

13. Remedies . The parties hereto shall be entitled to enforce their rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Company or any Stockholder may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.

14. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given or made when (a) delivered personally to the recipient, (b) sent by facsimile to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if sent by facsimile before 5:00 p.m. New York time on a Business Day, and otherwise on the next Business Day, or (c) one Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the address for such recipient set forth on Schedule I attached hereto, or in the Company’s books and records, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Any notice to the Board or the Company shall be deemed given if received by the Board at the principal office of the Company designated in the Charter.

15. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any dispute relating hereto shall be heard in the state or federal courts of Delaware, and the parties agree to jurisdiction and venue therein.

16. Mutual Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH PARTY TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION WILL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

17. Jurisdiction; Venue . EACH OF THE PARTIES SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN WILMINGTON, DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO IN ANY OTHER COURT. EACH OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO. EACH PARTY AGREES THAT SERVICE OF SUMMONS AND COMPLAINT OR ANY OTHER PROCESS THAT MIGHT BE SERVED IN ANY ACTION OR PROCEEDING MAY BE MADE ON SUCH PARTY BY SENDING OR DELIVERING A COPY OF THE PROCESS TO THE PARTY TO BE SERVED AT THE ADDRESS OF THE PARTY AND IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION 14 NOTHING IN THIS SECTION 17, HOWEVER, SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT A FINAL, NON- APPEALABLE JUDGMENT IN ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

18. Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

19. No Strict Construction . The parties to this Agreement have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties to this Agreement, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

20. No Third-Party Beneficiaries . This Agreement is for the sole benefit of the parties hereto and their permitted successors and assigns and nothing herein expressed or implied shall give or be construed to give any Person, other than the parties hereto and such permitted successors and assigns, any legal or equitable rights hereunder.

21. Further Assurances . The parties agree to execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement.

22. Delivery by Facsimile or Email . This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or email with scan or facsimile attachment, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or email as a defense to the formation or enforceability of a contract, and each such party forever waives any such defense.

23. Interpretative Matters . In this Agreement, unless otherwise specified or where the context otherwise requires (a) the headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement; (b) words importing any gender shall include other genders; (c) words importing the singular only shall include the plural and vice versa; (d) the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation”; (e) the words “hereof,” “herein,” “hereunder” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement; (f) references to “Sections,” “Exhibits,” or “Schedules” shall be to Sections, Exhibits or Schedules of or to this Agreement; (g) references to any Person include the successors and permitted assigns of such Person; (h) the use of the words “or,” “either” and

“any” shall not be exclusive; (i) wherever a conflict exists between this Agreement and any other agreement, this Agreement shall control but solely to the extent of such conflict; (j) references to “$” or “dollars” means the lawful currency of the United States of America; and (k) references to any law, regulation, rule, agreement, contract or schedule, unless otherwise stated, are to such law, regulation, rule, agreement, contract or schedule as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

24. Termination . This Agreement will terminate and be of no further force or effect upon the later to occur of (i) the date on which Chad Richison ceases to be the chief executive officer of the Company, (ii) the date on which Chad Richison ceases to be a Director of the Company, and (iii) the date on which the Stockholders collectively own less than forty percent (40%) of the issued and outstanding Common Stock. In the event that any party (together with its Affiliated Additional Stockholders) fails to own at least 25% of the shares of Common Stock held by such Persons, as applicable, as of the Closing as of such date, then such Person shall no longer be deemed to be a party to this Agreement.

[Signature pages follow ]

SIGNATURE PAGE TO AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Stockholders Agreement on the day and year first above written.


PAYCOM SOFTWARE, INC.

By:		/s/ Chad Richison
Name: Chad Richison
Title: Chief Executive Officer

WELSH, CARSON, ANDERSON & STOWE X, L.P.

By: WCAS X Associates LLC
Its: General Partner

By:		/s/ Jonathan Rather
Name: Jonathan Rather
Title: Managing Member

WCAS CAPITAL PARTNERS, IV, L.P.

By: WCAS CP IV Associates, LLC
Its: General Partner

By:		/s/ Jonathan Rather
Name: Jonathan Rather
Title: Managing Member

WCAS MANAGEMENT CORP.

By:		/s/ Jonathan Rather
Name: Jonathan Rather
Title: Treasurer

Signature Page to Amended and Restated Stockholders’ Agreement

/s/ Chad Richison

CHAD RICHISON

/s/ Shannon Rowe

SHANNON ROWE

/s/ William Kerber

WILLIAM KERBER

/s/ Jeff York

JEFF YORK

/s/ Robert Levenson

ROBERT LEVENSON

Signature Page to Amended and Restated Stockholders’ Agreement


ELK II 2012 DESCENDANTS’ TRUST U/A DATED DECEMBER 26, 2012

By:		/s/ Seven Elbaum
Name: Steven Elbaum, as Trustee

SLY II 2012 DESCENDANTS’ TRUST U/A DATED DECEMBER 26, 2012

By:		/s/ Steven Elbaum
Name: Steven Elbaum, as Trustee

LENOX CAPITAL GROUP, LLC

By:		/s/ Robert J. Levenson
Name: Robert J. Levenson
Title: Managing Member

Signature Page to Amended and Restated Stockholders’ Agreement

SCHEDULE I


Name of Stockholder		Address of Stockholder
Welsh, Carson, Anderson & Stowe X, L.P.		Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, NY 10022 Attention: Facsimile No.: (212) 735-0897 with a copy, which shall not constitute notice, to: Kirkland & Ellis LLP 601 Lexington Avenue New York, NY 10022 Attention: Michael Movsovich Drew Grabel Facsimile: (212) 446-6460

SR-EGI WK-EGI HB-EGI Ernest Group, Inc. The Ruby Group, Inc.		7501 W. Memorial Road Oklahoma City, OK 73142 Attention: Chad Richison Facsimile No.: (405) 722-2015 with a copy, which shall not constitute notice, to: Hartzog Conger Cason & Neville 201 Robert S. Kerr Avenue 1600 Bank of Oklahoma Plaza Oklahoma City, OK 73102 Attention: Steven C. Davis Armand Paliotta Facsimile No.: (405) 996-3403

Schedule I


Name of Stockholder		Address of Stockholder
Jeff York		417 Oakbend, Suite 300 Lewisville, Texas 75067 with a copy, which shall not constitute notice, to: Leggett & Clemons, PLLC 2745 Dallas North Parkway, Suite 310 Plano, Texas 75093 Attention: Steve H. Clemons Facsimile No.:(214) 473-8686

WCAS Capital Partners IV, L.P.		WCAS Capital Partners IV, L.P. c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, NY 10022 Attention: Facsimile No.: (212) 735-0897 with a copy, which shall not constitute notice, to: Kirkland & Ellis LLP 601 Lexington Avenue New York, NY 10022 Attention: Michael Movsovich Drew Grabel Facsimile No.:(212) 446-6460

Schedule I

EXHIBIT A

FORM OF JOINDER TO STOCKHOLDERS AGREEMENT

This JOINDER (the “ Joinder ”), to the Stockholders Agreement, dated as of [__], 2013, by and among Paycom Software, Inc., a Delaware corporation (the “ Company ”), and certain stockholders of the Company (the “ Agreement ”), is made and entered into as of by and between the Company and (“ Holder ”). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Agreement.

WHEREAS, Holder has acquired certain shares of capital stock of the Company (“ Holder Stock ”), and the Agreement and the Company require Holder, as a holder of such capital stock, to become a party to the Agreement, and Holder agrees to do so in accordance with the terms hereof.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder, each intending to be legally bound, hereby agree as follows:

1. Agreement to be Bound . Holder hereby agrees that upon execution of this Joinder, it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed an Additional Stockholder for all purposes thereof. In addition, Holder hereby agrees that all Holder Stock shall be deemed Stockholder Shares for all purposes of the Agreement and Holder will be deemed to be a [WCAS Holder][CP IV Holder][Common Holder].

2. Successors and Assigns . Except as otherwise provided herein, this Joinder shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and Holder and any subsequent holders of Holder Stock and the respective successors and assigns of each of them, so long as they hold any shares of Holder Stock.

3. Counterparts . This Joinder may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.

4. Notices . For purposes of Section 14 of the Agreement, all notices, demands or other communications to the Holder shall be directed to:

[Name]

[Address]

[Facsimile Number]

5. Governing Law . This Joinder shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any dispute relating hereto shall be heard in the state or federal courts of Delaware, and the parties agree to jurisdiction and venue therein.

Exhibit A

6. Descriptive Headings . The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder.

7. Waiver of Jury Trial . Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with the Agreement or any course of conduct, course of dealing, verbal or written statement or action of any party hereto.

8. Jurisdiction . Each of the parties hereto submits to the jurisdiction of any state or federal court sitting in Wilmington, Delaware, in any action or proceeding arising out of or relating to this Joinder and agrees that all claims in respect of the action or proceedings may be heard and determined in any such court and hereby expressly submits to the personal jurisdiction and venue of such court for the purposes hereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each of the parties hereby irrevocably consent to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address set forth in Section 21 such service to become effective 10 days after such mailing.

* * * * *

Exhibit A

IN WITNESS WHEREOF, the parties hereto have executed this Joinder as of the date written above.


[__]

By:
Name:
Title:

[HOLDER]

By:
Name:
Title:

Exhibit A

Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT, dated as of December 30, 2013, by and among Paycom Software, Inc. (the “ Company ”), Paycom Payroll, LLC, Welsh, Carson, Anderson & Stowe X, L.P., WCAS Management Corporation, WCAS Capital Partners IV, L.P., WCAS Paycom Holdings, Inc. (“ WCAS ”), each of the Persons listed on the signature pages attached hereto (the “ Other Investors ”) and each other Person who executes a joinder hereto (collectively with WCAS and the Other Investors, the “ Holders ,” and each a “ Holder ”). Capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in Section 1.

1. Definitions . As used herein, the following terms shall have the following meanings.

“ Common Stock ” means the Company’s common stock, par value $0.001 par value per share of the Company or any successor security thereto.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Free Writing Prospectus ” means a free-writing prospectus, as defined in Rule 405 of the Securities Act.

“ Holder ” has the meaning set forth in the preamble hereof.

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or other entity, or a governmental entity (or any department, agency or political subdivision thereof).

“ Registrable Securities ” means (i) any Common Stock issued or issuable to any Holder, (ii) any securities of the Company issued or issuable directly or indirectly with respect to the securities referred to in clause (i) immediately above and clause (iii) immediately below by way of dividend, split, combination, recapitalization, exchange, merger, consolidation or other reorganization, and (iii) any shares of Common Stock held by any Holder on the date hereof or thereafter. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they have been (a) distributed to the public pursuant to an offering registered under the Securities Act or (b) sold to the public through a broker, dealer or market maker in compliance with Rule 144. For purposes of this Agreement, a Person will be deemed to be a Holder whenever such Person has the right to acquire such Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise), whether or not such acquisition has actually been effected.

“ Registration Expenses ” has the meaning set forth in Section 6 below.

“ Rule 144 ” means Rule 144 under the Securities Act (or any similar rule then in force).

“ Securities Act ” means the Securities Act of 1933, as amended.

“ WCAS Registrable Securities ” means the Registrable Securities acquired by, issued or issuable to, or otherwise owned by WCAS and its Affiliates.

2. Demand Registrations .

(a) Requests for Registration . Subject to this Section 2, the Holders of a majority of the WCAS Registrable Securities may request registration, whether underwritten or otherwise, under the Securities Act of all or part of their Registrable Securities on Form S-1 or any similar long-form registration (“ Long-Form Registrations ”) or on Form S-2 or S-3 or any similar short-form registration (“ Short-Form Registrations ”), if available. Each request for a Long-Form Registration or Short-Form Registration shall specify the approximate number of Registrable Securities requested to be registered and the anticipated per share price range for such offering. Within twenty (20) days after receipt of any such request for a Long-Form Registration or Short-Form Registration, the Company will give written notice of such requested registration to all other Holders and will include (subject to the provisions of this Agreement including clause (d) below) in such registration (and in all related registrations or qualifications under blue sky laws or in compliance with other registration requirements and in any related underwriting) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) days after the receipt of the Company’s notice. All registrations requested pursuant to this Section 2 and any underwritten offerings with respect thereto, are referred to herein as “ Demand Registrations ”.

(b) Long-Form Registrations . The Holders of a majority of the WCAS Registrable Securities will be entitled to request four (4) Long-Form Registrations in which the Company will pay all Registration Expenses. A registration will not count as the permitted Long-Form Registration until it has become effective and unless the holders of WCAS Registrable Securities, are able to register and sell at least 90% of the WCAS Registrable Securities requested to be included in such registration; it being understood and agreed that the requisite Holders of WCAS Registrable Securities making a request for a Demand Registration hereunder may withdraw from such registration at any time prior to the effective date of such Demand Registration, in which case such request will not count as one of the permitted Demand Registrations for such Holders, irrespective of whether or not such registration is effected.

(c) Short-Form Registrations . The Holders of a majority of the WCAS Registrable Securities will be entitled to request an unlimited number of Short-Form Registrations in which the Company will pay all Registration Expenses. Demand Registrations will be Short-Form Registrations whenever the Company is permitted to use any applicable short form. After the Company has become subject to the reporting requirements of the Exchange Act, the Company will use its best efforts to make Short-Form Registrations available for the sale of Registrable Securities.

(d) Shelf Registration

(i) At any time that the Company is eligible to use Form S-3, upon the written request of any Holder of WCAS Registrable Securities (the “ Shelf Demand Notice ”), the Company shall use its best efforts to file with the Commission following the receipt of such Shelf Demand Notice, one or more registration statements with respect to the Registrable Securities under the Securities Act for

the offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement”). If such Shelf Registration Statement is not automatically declared effective by the Commission or does not automatically become effective, the Company shall use its best efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as practicable after the filing thereof. The Shelf Registration Statement shall be on an appropriate form and the registration statement and any form of prospectus included therein (or prospectus supplement relating thereto) shall reflect the plan of distribution or method of sale as the Holders may from time to time notify the Company of. Following the receipt by the Company of any Shelf Demand Notice, all of the WCAS Registrable Securities shall be included in the Shelf Registration Statement without any further action unless a smaller number is requested or a dollar amount is registered. If not all of the WCAS Registrable Securities are included, a Holder of WCAS Registrable Securities may submit subsequent Shelf Demand Notices. Other Holders shall be afforded seven (7) days to decide to include Registrable Securities in proportion to the WCAS Registrable Securities that are included.

(ii) Effectiveness. The Company shall use its best efforts to keep any Shelf Registration Statement continuously effective for the period beginning on the date on which such Shelf Registration Statement is declared effective and ending on the date that all of the Registrable Securities registered under the Shelf Registration Statement cease to be Registrable Securities. During the period that such Shelf Registration Statement is effective, the Company shall supplement or make amendments to the Shelf Registration Statement, if required by the Securities Act or if reasonably requested by the Holders (whether or not required by the form on which the securities are being registered), including to reflect any specific plan of distribution or method of sale, and shall use its best efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing.

(iii) Selection of Underwriters. If any offering pursuant to a Shelf Registration Statement is an underwritten offering, a majority-in-interest of the Holders participating in such underwritten offering shall have the right to select the managing underwriter or underwriters to administer any such offering.

(e) Priority on Demand Registrations . The Company will not include in any Demand Registration any securities which are not Registrable Securities without the prior written consent of the Holders of at least a majority of the WCAS Registrable Securities included in such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company will include in such registration, subject to the first sentence of this clause (e), (i) first, the number of Registrable Securities requested to be included in such registration and/or underwriting pro rata , if necessary, among the Holders based on the number of Registrable Securities requested to be included therein by each such Holder, and (ii) second, any other securities of the Company requested to be included in such registration pro rata , if necessary, on the basis of the number of shares of such other securities requested to be included therein by each such Holder.

(f) Restrictions on Demand Registrations . The Company will not be obligated to effect any Demand Registration within six months after the effective date of a previous Demand Registration (and in the case of an underwritten offering, the date the underwriting agreement is executed). In addition, (i) if in the opinion of outside counsel to the Company, any registration of Registrable Securities would require disclosure of information not otherwise then required by law to be publicly disclosed and, in the good faith judgment of the board of directors of the Company (the “ Board ”), such disclosure is reasonably likely to adversely affect any financing, acquisition, corporate reorganization or merger or other material transaction or event involving the Company or otherwise have a material adverse effect on the Company (a “ Valid Business Reason ”) or (ii) the Board determines for any reason, but in no event more than twice within any period of 365 consecutive days, that any registration of Registrable Securities would not be advisable, the Company may postpone or withdraw a filing of a registration statement relating to a request for Demand Registration until such Valid Business Reason no longer exists (under clause (i) above) or until the Board changes its determination (under clause (ii) above), but in no event shall the Company avail itself of such right for more than 120 days, in the aggregate, in any period of 365 consecutive days; and the Company shall give notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists or that the Board has changed its determination, in each case, promptly after the occurrence thereof.

(g) Selection of Underwriters . In the case of a Demand Registration, subject to Section 2(d)(iii) above, the Holders of a majority of the WCAS Registrable Securities included in such Demand Registration will have the right to select the investment banker(s) and manager(s) to administer the offering, which investment banker(s) and manager(s) will be nationally recognized and reasonably acceptable to the Company.

(h) Other Registration Rights . Except as provided in this Agreement, the Company will not grant to any Persons the right to request the Company to register any equity securities of the Company, without the prior written consent of a majority of the Holders of WCAS Registrable Securities.

3. Piggyback Registrations .

(a) Right to Piggyback . Whenever the Company proposes to register or offer pursuant to a registration statement any of its Common Stock in an underwritten offering under the Securities Act other than pursuant to (i) the Company’s initial public offering (if the applicable underwriters request that only securities owned by the Company be included in such offering), (ii) a Demand Registration (which will be governed by Section 2 above), or (iii) pursuant to a registration statement on Form S-8 or S-4 or any similar or successor form, and the registration form to be used may be used for the registration of Registrable Securities (a “ Piggyback Registration ”), the Company will give prompt written notice to all Holders of its intention to effect such a registration or underwriting and will, subject to the provisions of this Agreement including clauses (c) and (d) below, include in such registration or underwriting (and in all related registrations or qualifications under blue sky laws or in compliance with other registration requirements and in any related underwriting) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) days after the receipt of the Company’s notice thereof.

(b) Priority on Primary Registrations . If a Piggyback Registration is an underwritten primary registration on behalf of the Company, the Company will include in such registration all securities requested to be included in such registration; provided , that if the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the number of Registrable Securities requested to be included in such registration by the Holders, if necessary pro rata among the Holders on the basis of the number of such Registrable Securities requested to be included therein by such Holder, and (iii) third, other securities, if any, requested to be included in such registration.

(c) Priority on Secondary Registrations . If a Piggyback Registration is an underwritten secondary registration on behalf of Holders of the Company’s securities (which registration was granted in accordance with Section 2(g) above), the Company will include in such registration all securities requested to be included in such registration; provided , that if the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration the securities and Registrable Securities requested to be included therein pro rata , if necessary, among the Holders on the basis of the number of securities requested to be included in such registration.

(d) Selection of Underwriters . In case of a Piggyback Registration that is an underwritten offering, the Company will have the right to select the investment banker(s) and manager(s) to administer the offering, which investment banker(s) and manager(s) will be nationally recognized and reasonably acceptable to the Holders of a majority of the WCAS Registrable Securities included in such Piggyback Registration.

(e) Other Registrations . If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to Section 2 or this Section 3, and if such previous registration has not been withdrawn or abandoned, the Company will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Forms S-4 or S-8 or any similar or successor forms), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least six months has elapsed from the effective date of such previous registration.

(f) Obligations of Seller . During such time as any Holder may be engaged in a distribution of securities pursuant to an underwritten Piggyback Registration, such Holder shall distribute any Registrable Securities held by such Holder only under the registration statement and solely in the manner described in the registration statement.

4. Holdback Agreements .

(a) No Holder shall sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale (including sales pursuant to Rule 144) (a “ Sale Transaction ”) of any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for any such equity securities, for such period of time prior to and after the effective date of the Company’s initial public offering as the underwriters managing the offering require in their sole discretion (the “ IPO Holdback Period ”), except as part of such initial public offering. In connection with all underwritten Demand Registrations and underwritten Piggyback Registrations other than the Company’s initial public offering, no Holder shall effect any such Sale Transaction for such period of time prior to and after (x) the effective date of such registration, or (y) the date of the offering document use, as the underwriters managing the offering require in their sole discretion (each a “ Following Holdback Period ”), except as part of such underwritten registration, provided that such time period shall not extend beyond 90 days after the pricing of the offering. The Company may impose stop-transfer instructions with respect to the Common Stock (or other securities) subject to the foregoing restriction until the end of such period.

(b) The Company (i) shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during such period of time as may be required by the underwriters managing such underwritten registration following the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration, and (ii) shall cause each holder of at least 5% (on a fully-diluted basis) of its Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period, except as part of such underwritten registration, if otherwise permitted, unless the underwriters managing the registered public offering otherwise agree in writing.

5. Registration Procedures . Whenever the Holders have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company will as expeditiously as possible:

(a) in accordance with the Securities Act and all applicable rules and regulations promulgated thereunder, prepare and file with the Securities and Exchange Commission a registration statement, and all amendments and supplements thereto and related prospectuses, with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to one counsel selected by the Holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed), which documents shall be subject to the review and comment of such counsel, and include in any Short-Form Registration such additional information reasonably requested by a majority of the Registrable Securities registered under the applicable registration statement, or the underwriters, if any, for marketing purposes, whether or not required by applicable securities laws;

(b) notify each Holder of the effectiveness of each registration statement filed hereunder and prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the lesser of (x) 180 days and (y) such shorter period which will terminate when all Registrable Securities covered by the registration statement have been sold and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;

(c) furnish to each seller of Registrable Securities thereunder such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus), each Free Writing Prospectus and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;

(d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process ( i.e ., service of process which is not limited solely to securities law violations) in any such jurisdiction);

(e) notify each seller of such Registrable Securities, (i) promptly after it receives notice thereof, of the date and time when such registration statement and each post-effective amendment thereto has become effective or a prospectus or supplement to any prospectus relating to a registration statement has been filed and when any registration or qualification has become effective under a state securities or blue sky law or any exemption thereunder has been obtained, (ii) promptly after receipt thereof, of any request by the Securities and Exchange Commission for the amendment or supplementing of such registration statement or prospectus or for additional information, and (iii) at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will promptly prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

(f) prepare and file promptly with the Securities and Exchange Commission, and notify such Holders prior to the filing of, such amendments or supplements to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, when any event has occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to

state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, in case any of such Holders or any underwriter for any such Holders is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations promulgated thereunder, the Company shall use its best efforts to prepare promptly upon request of any such Holder or underwriter such amendments or supplements to such registration statement and prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations;

(g) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed;

(h) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;

(i) enter into and perform such customary agreements (including underwriting agreements in customary form) and take all such other actions as the Holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, participation in “road shows,” investor presentations and marketing events and effecting a unit split or a combination of unit);

(j) make available at reasonable times for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement subject to the applicable person(s) executing a nondisclosure agreement in reasonable form and substance if reasonably required by the Company;

(k) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(l) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earning statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the registration statement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(m) permit any Holder which Holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such Holder and its counsel should be included;

(n) use its best efforts to prevent the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, and in the event of the issuance of any such stop order or other such order the Company shall advise such Holders of such stop order or other such order promptly after it shall receive notice or obtain knowledge thereof and shall use its best efforts promptly to obtain the withdrawal of such order;

(o) use its reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Securities;

(p) obtain a “cold comfort” letter from the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the Holders being sold reasonably request;

(q) if Registrable Securities are to be sold in an Underwritten Offering, to include in the registration statement to be used, or in the case of a Shelf Registration, the prospectus supplement to be used, all such information as may be reasonably requested by the underwriters for the marketing and sale of such Registrable Securities; and

(r) provide a legal opinion of the Company’s outside counsel, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), with respect to the registration statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and such other documents relating thereto in customary form and covering such matters of the type customarily covered by legal opinions of such nature.

If any such registration or comparable statement refers to any Holder by name or otherwise as the holder of any securities of the Company and if, in its sole and exclusive judgment, such Holder is or might be deemed to be a controlling person of the Company, such Holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder and presented to the Company in writing, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company’s securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such Holder; provided , that with respect to this clause (ii) such Holder shall furnish to the Company an opinion of counsel to such effect, which opinion and counsel shall be reasonably satisfactory to the Company.

6. Registration Expenses . All expenses incident to the Company’s performance of or compliance with this Agreement, including without limitation all registration, qualification and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and any counsel chosen by the Holders of a majority of the WCAS Registrable Securities and all independent certified public accountants, underwriters (excluding underwriting discounts and commissions) and other Persons retained by the Company (all such expenses being herein called “ Registration Expenses ”), shall be borne as provided in this Agreement, except that the Company shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed. Notwithstanding anything contained herein, each Person that sells securities pursuant to a Demand Registration or Piggyback Registration hereunder shall bear and pay all underwriting discounts and commissions applicable to the securities sold for such Person’s account.

7. Indemnification .

(a) The Company agrees to indemnify, to the extent permitted by law, each Holder, its partners, members, officers and directors and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses arising out of or based upon any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Holder, partners, members, director, officer or controlling person for any legal or other expenses reasonably incurred by such Holder, partner, member, director, officer or controlling person in connection with the investigation or defense of such loss, claim, damage, liability or expense, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein or by such Holder’s failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders.

(b) In connection with any registration statement in which a Holder is participating, each such Holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will (i) indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any

untrue or alleged untrue statement of material fact relating to such Holder and provided by such Holder to the Company or the Company’s agent contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in, or based upon, any information or affidavit so furnished in writing by such Holder; provided , that the obligation to indemnify will be individual, not joint and several, to each Holder and will be limited to the net amount of proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration statement, and (ii) reimburse the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) for any legal or other expenses reasonably incurred by such Persons in connection with the investigation or defense of such loss, claim, damage, liability or expense, except insofar as the same are caused by or contained in any information furnished to such Holder by such Persons expressly for use therein. In connection with an underwritten offering in which a Holder is participating, each such Holder will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act).

(c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that failure to give such notice shall not affect the right of such Person to indemnification hereunder unless such failure is prejudicial to the indemnifying party’s ability to defend such claim) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its prior written consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim.

(d) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. The Company and each Holder also agree to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the indemnification provided for herein is unavailable for any reason.

(e) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party or is otherwise unenforceable with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage,

liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided that the maximum amount of liability in respect of such contribution shall be limited, in the case of each seller of Registrable Securities, to an amount equal to the net proceeds actually received by such seller from the sale of Registrable Securities effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just or equitable if the contribution pursuant to this Section 7(e) were to be determined by pro rata allocation or by any other method of allocation that does not take into account such equitable considerations. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to herein shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim which is the subject hereof. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

(f) No indemnifying party shall, except with the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(g) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an underwritten public offering conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

8. Participation in Underwritten Registrations . No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements (including pursuant to any over-allotment or “green shoe” option requested by the underwriters, provided that no Holder shall be required to sell more than the number of Registrable Securities such Holder has requested to include) and (b) completes and executes all customary questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; provided , that no Holder included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters other than representations and warranties regarding such Holder and such Holder’s intended method of distribution. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company and the lead managing underwriter(s) that are consistent with such Holder’s obligations under Section 4 or that are necessary to give further effect thereto.

9. Rule 144 Reporting . With a view to making available to the Holders the benefits of certain rules and regulations of the Securities and Exchange Commission which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

(a) make and keep current public information available, within the meaning of Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after it has become subject to the reporting requirements of the Exchange Act;

(b) file with the Securities and Exchange Commission, in a timely manner, all reports and other documents required of the Company under the Securities Act and Exchange Act (after it has become subject to such reporting requirements); and

(c) so long as any party hereto owns any Registrable Securities, furnish to such Person forthwith upon request, a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time commencing ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as such Person may reasonably request in availing itself of any rule or regulation of the Securities and Exchange Commission allowing it to sell any such securities without registration.

(d) The Company shall cooperate with the Holders in any sale and or transfer of Registrable Securities including by means not involving a registration statement.

10. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient accompanied by a certified or registered mailing. Such notices, demands and other communications will be sent to the applicable parties hereto at such address or to the attention of such other person as is specified in the Company’s books and records or such other address or to the attention of such other Person as the recipient party shall have specified by prior written notice to the sending party.

11. Miscellaneous .

(a) No Inconsistent Agreements . The Company will not enter into any agreement which is inconsistent with or violates the rights granted to the Holders in this Agreement.

(b) Remedies . Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement.

(c) Amendments and Waivers . Except as otherwise provided herein, no modification, amendment or waiver to or of this Agreement or any provision hereof shall be effective against the Company or the other Persons party hereto unless such modification, amendment or waiver is approved in writing by the Company and the Holders of not less than a majority of the Registrable Securities. Notwithstanding anything to the contrary, no modification, amendment or waiver to or of this Agreement or any provision hereof that adversely affects the rights or obligations hereunder of any particular Holder or group of Holders while not similarly affecting the rights or obligations hereunder of all Holders shall be effective against such Holder or group of Holders unless approved in writing by such Holder or the Holders of a majority of the Registrable Securities held by such group of Holders, as the case may be. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

(d) Successors and Assigns . All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or Holders are also for the benefit of, and enforceable by, any subsequent Holder.

(e) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

(f) Counterparts . This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.

(g) GOVERNING LAW . ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.

(h) Time is of the Essence; Computation of Time . Time is of the essence for each and every provision of this Agreement. Whenever the last day for the exercise of any privilege or the discharge of any duty hereunder shall fall upon a Saturday, Sunday, or any date on which banks in New York, New York are authorized to be closed, the party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular business day.

(i) Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

IN WITNESS WHEREOF , the parties hereto have executed this Registration Rights Agreement as of the date first above written.


Paycom Software, Inc.

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: CEO

Paycom Payroll, LLC

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: CEO

Welsh, Carson, Anderson & Stowe X, L.P.

By: WCAS X Associates LLC
Its: General Partner

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

WCAS Capital Partners IV, L.P.

By: WCAS CP IV Associates LLC
Its: General Partner

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

WCAS Paycom Holdings, Inc.

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

Signature Page to Registration Rights Agreement



Ernest Group, Inc.

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: President

The Ruby Group, Inc.

By:		/s/ Chad Richison
		Name: Chad Richison
		Title: President

Signature Page to Registration Rights Agreement



The James A. Jordan Family Bypass Trust

By:		/s/ Sue Ann Jordan
		Name: Sue Ann Jordan
		Title: Trustee

		/s/ Sue Ann Jordan
		Sue Ann Jordan

		/s/ Jeffrey D. York
		Jeff York

Signature Page to Registration Rights Agreement


WCAS Management Corporation

By:		/s/ Jonathan Rather
		Name: Jonathan Rather
		Title: Authorized Signatory

Signature Page to Registration Rights Agreement

/s/ Richard Aiello

Richard Aiello

/s/ Robert Levenson

Robert Levenson

Signature Page to Registration Rights Agreement


LENOX CAPITAL GROUP, LLC

By:		/s/ Robert J. Levenson
Name: Robert J. Levenson Title: Managing Member

Signature Page to Registration Rights Agreement


ELK II 2012 DESCENDANTS’ TRUST U/A DATED DECEMBER 26, 2012

By:		/s/ Steven Elbaum
Name: Steven Elbaum, as Trustee

SLY II 2012 DESCENDANTS’ TRUST U/A DATED DECEMBER 26, 2012

By:		/s/ Steven Elbaum
Name: Steven Elbaum, as Trustee

Signature Page to Registration Rights Agreement

Exhibit 10.1

FORM OF INDEMNIFICATION AGREEMENT

This Agreement, made and entered into as of the day of [ ], 2014 (“Agreement”), by and between Paycom Software, Inc., a Delaware corporation (“Company”), and [ ] (“Indemnitee”):

WHEREAS, highly competent persons may be reluctant to serve as directors, officers, employees, fiduciaries and other agents (“Representatives”)of corporations unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their service to and activities on behalf of such corporations; and

WHEREAS, the Board of Directors of the Company has determined that difficulties in attracting and retaining such persons are detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons as set forth herein so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and

WHEREAS, Indemnitee is willing to serve, continue to serve and/or to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified;

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement the following terms shall have the meaning given here:

1.01 “Board” shall mean the Board of Directors of the Company.

1.02 “Change of Control” shall mean the first of the following events to occur:

(a)

there is consummated a merger or consolidation to which the Company or any direct or indirect subsidiary of the Company is a party if the merger or consolidation would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) less than 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

(b)

the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) in the aggregate of securities of the Company representing fifty percent (50%) or more of the total combined voting power of the Company’s then issued and outstanding securities is acquired by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes hereof, the following acquisitions shall not constitute a Change of Control: (A) any acquisition by the Company or any of its subsidiaries, (B) any acquisition directly from the Company or any of its subsidiaries, (C) any acquisition by any employee benefit plan (or related trust or fiduciary) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities, (E) any acquisition by a corporation owned, directly or indirectly, by the members of the Company in substantially the same proportions as their ownership of stock of the Company, (F) any acquisition in connection with which, pursuant to Rule 13d-1 promulgated pursuant to the Exchange Act, the individual, entity or group is permitted to, and actually does, report its beneficial ownership on Schedule 13G (or any successor Schedule); provided that, if any such individual, entity or group subsequently becomes required to or does report its beneficial ownership on Schedule 13D (or any successor Schedule), then, for purposes of this paragraph, such individual, entity or group shall be deemed to have first acquired, on the first date on which such individual, entity or group becomes required to or does so report on Schedule 13D, beneficial ownership of all of the voting securities of the Company beneficially owned by it on such date, and (G) any acquisition in connection with a merger or consolidation which, pursuant to Section 1.02(a) above, does not constitute a Change of Control; or

(c)

there is consummated a transaction contemplated by an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by members of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale; or

(d)

the members of the Company approve any plan or proposal for the liquidation of the Company, or

(e)

a change in the composition of the Board such that the “Continuity Directors” cease for any reason to constitute at least a majority of the Board. For purposes of this clause, “Continuity Directors” means (A) those members of the Board who were directors on the date hereof and (B) those members of the Board (other than a director whose initial assumption of office was in connection with an actual or threatened

election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) who were elected or appointed by, or on the nomination or recommendation of, at least a majority of the then-existing directors who either were directors on the date hereof or were previously so elected or appointed;

(f)

such other event or transaction as the Board shall determine constitutes a Change of Control.

1.03 “Company” has the meaning set forth in the introductory paragraph above. For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting Company, any constituent Company (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Representatives, so that any person who is or was a Representative of such constituent Company, or is or was serving at the request of such constituent Company as a Representative of another Company, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving Company as he or she would have with respect to such constituent Company if its separate existence had continued.

1.04 “Corporate Status” describes the status of a person who is or was a Representative of the Company or, while a Representative of the Company, is or was serving at the express written request of the Company as a Representative of another Enterprise, including service with respect to an employee benefit plan.

1.05 “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

1.06 “Effective Date” means the date set forth in the introductory paragraph above.

1.07 “Enterprise” shall mean the Company and any other corporation, company, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the express written request of the Company as a Representative.

1.08 “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements, costs, expenses and obligations paid or incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding (including attorneys’ fees and related disbursements, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended from time to time (“ ERISA ”), and any other penalties and amounts paid or to be paid in settlement thereof). Expenses also shall include, without limitation, (i) expenses incurred in connection with any appeal resulting from, incurred by Indemnitee in connection with, arising out of, in respect of or relating to, any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, (ii) for

purposes of Section 8.05 of this Agreement only, expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise, (iii) any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement and (iv) any interest, assessments or other charges in respect of the foregoing.

1.09 “Good Faith” shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, in a manner in which Indemnitee would have had no reasonable cause to believe Indemnitee’s conduct was unlawful. Notwithstanding the foregoing definition, the Indemnitee shall not be deemed to have acted in “Good Faith” in instances where the Indemnitee has been finally adjudicated by a court of competent jurisdiction to have acted in a grossly negligent manner. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, have reasonable cause to believe that the person’s conduct was unlawful.

1.10 “Independent Counsel” means a law firm, or an attorney employed by or serving as a member of a law firm, that is experienced in matters of corporation law and/or limited liability company law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’ s rights under this Agreement.

1.11 “Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other threatened, pending or completed proceeding whether civil, criminal, administrative or investigative, other than one initiated by Indemnitee. For purposes of the foregoing sentence, a “Proceeding” shall not be deemed to have been initiated by Indemnitee where Indemnitee seeks to enforce Indemnitee’s rights under this Agreement pursuant to Article VIII of this Agreement.

1.12 “ Sponsor Entities ” shall mean the funds advised by Welsh, Carson, Anderson & Stowe, L.P. (“WCAS”) or any other person controlling, controlled by or under common control with WCAS; provided , however , that neither the Company nor any of its subsidiaries shall be considered Sponsor Entities under this Agreement.

ARTICLE II

TERM OF AGREEMENT

This Agreement shall continue until and terminate upon the later of: (i) 10 years after the date that Indemnitee shall have ceased to serve as a Representative of the Company or of any other Enterprise which Indemnitee served at the express written request of the Company; or (ii)

the final termination of all pending Proceedings in respect of which Indemnitee is granted rights of the indemnification or advancement of expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Article VIII of this Agreement relating thereto.

ARTICLE III

SERVICES BY INDEMNITEE, NOTICE OF PROCEEDINGS

3.01 Services . Indemnitee agrees to serve as a Representative. The duties and obligations of a Representative may be set forth in the Company’s Amended and Restated Bylaws, as may be amended from time to time (the “Bylaws”). Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law). Indemnitee, by his current and continuing Corporate Status, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Agreement in entering into or continuing such service.

3.02 Notice of Proceeding . Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder.

3.03 Duty of Cooperation and Disclosure . In any Proceeding in which Company is advancing Expenses or providing an indemnification to the Indemnitee, the Indemnitee shall fully cooperate with the person, persons, insurers or entities acting on the Company’s or Indemnitee’s behalf, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and relates to the subject Proceeding, and the Company’s indemnification and advancement obligations hereunder shall at all times be subject to the Indemnitee’ s duty of cooperation. At the time of Indemnitee’s request for indemnification, Indemnitee shall disclose to the Company all relevant facts and circumstances within the Indemnitee’s personal knowledge that pertain to the request and underlying dispute.

ARTICLE IV

INDEMNIFICATION

4.01 In General . Notwithstanding any amendment, modification or repeal of the indemnification provisions of the Delaware General Corporation Law, as amended, or other applicable law or the Bylaws after the date of this Agreement, and subject to the exceptions set forth in Section 4.05 herein, if Indemnitee was or is, or is threatened to be made, a party to any Proceeding by reason of Indemnitee’s (a) acts or omissions made in Good Faith and (b) his Corporate Status, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may thereafter from time to time permit. The rights to indemnification and to the advancement of expenses conferred in this Agreement shall apply to claims made against an Indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof. The rights to indemnification and to the advancement of expenses hereunder shall only apply to a Proceeding initiated by Indemnitee if such Proceeding has been authorized by the Board.

4.02 Proceedings Other Than Proceedings by or in the Right of the Company . Indemnitee shall be entitled to the rights of indemnification provided in this Section 4.02 if, by reason of Indemnitee’ s Corporate Status, Indemnitee was or is, or is threatened to be made, a party to or participant in any Proceeding, other than a Proceeding by or in the right of the Company. Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in Good Faith.

4.03 Proceedings by or in the Right of the Company . Indemnitee shall be entitled to the rights of indemnification provided in this Section 4.03 if, by reason of Indemnitee’s Corporate Status, Indemnitee was or is, or is threatened to be made, a party to or is otherwise involved in any Proceeding brought by or in the right of the Company to procure a judgment in its favor. Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in Good Faith. Notwithstanding the foregoing, no such indemnification shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State Delaware or such other court shall deem proper.

4.04 Indemnification of a Party Who is Wholly or Partly Successful . Subject to the exceptions set forth in Section 4.05 herein, to the extent that Indemnitee was or is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in defense of any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted by law, against all Expenses, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein. Subject to the exceptions set forth in Section 4.05, if Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee to the maximum extent permitted by law, against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’ s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Subsection 4.04 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter, so long as there has been no finding (either adjudicated or pursuant to Article VI) that Indemnitee did not act in Good Faith.

4.05 Exceptions . Notwithstanding anything to the contrary herein, the Company shall not be obligated to advance Expenses or indemnify the Indemnitee pursuant to this Agreement with respect to:

(a)

Expenses for which the Indemnitee is indemnified pursuant to any directors and officers insurance policy purchased and maintained by the Company (as provided in Article IX). It is specifically understood that the indemnity provided in this Agreement is in excess of any such directors and officers insurance policy and the Indemnitee will look first to the directors and officers insurance policy; or

(b)

Remuneration paid to the Indemnitee if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law; or

(c)

Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 or Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or

(d)

Expenses incurred on account of any Proceeding in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section l6(b) of the Securities Exchange Act of 1934 and amendments to it or similar provisions of any federal, state or local law; or

(e)

Expenses incurred on account of the Indemnitee’s conduct which is finally adjudged by a court of competent jurisdiction to have been, or which Indemnitee has admitted facts sufficient for the Independent Counsel or court to reasonably conclude that the Indemnitee’s conduct was: (1) a breach of the duty of loyalty owed to the Company, (2) an act or omission which was not in Good Faith, (3) an act or omission which involved intentional misconduct or, with respect to any criminal Proceeding, a knowing violation of law, or (4) a transaction from which the Indemnitee derived an improper personal benefit; or

(f)

If a final decision by a court of competent jurisdiction in the matter shall determine that such indemnification is not lawful as against public policy; or

(g)

Any income taxes, or any interest or penalties related to them, in respect of compensation received for services as a director and/or officer.

4.06 Indemnification for Expenses as a Witness . To the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness in any Proceeding, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

ARTICLE V

ADVANCEMENT OF EXPENSES

5.01 Statement of Expenses . The Company shall advance all reasonable Expenses which, by reason of Indemnitee’s Corporate Status, were incurred by or on behalf of Indemnitee in connection with any Proceeding, within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.

5.02 Assumption of Defense . In the event the Company (i) shall be obligated to advance the Expenses for any Proceeding against Indemnitee by a third party and (ii) acknowledges in writing the Company’s obligation to indemnify the Indemnitee with respect to such Proceeding (subject to the terms of this Agreement), the Company shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations, subject to exceptions set forth below in the event of a potential conflict of interest. Following delivery of written notice to Indemnitee of the Company’s election to assume the defense of such Proceeding and the Company’s acknowledgment of its indemnification obligation with respect to such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld) of counsel designated by the Company and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of separate counsel subsequently incurred by Indemnitee with respect to the same Proceeding so long as such Proceeding is diligently defended. For the avoidance of doubt, a potential conflict of interest shall be deemed a reasonable basis for the Indemnitee to withhold consent under this section. If (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have notified the Board in writing that Indemnitee has reasonably concluded that there is likely to be a conflict of interest between the Company (or any other co-clients as provided above) and Indemnitee in the conduct of any such defense, or (iii) the Company fails to employ counsel to assume the defense of such Proceeding, the fees and expenses of Indemnitee’s own counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such Proceeding at Indemnitee’s own expense.

ARTICLE VI

PROCEDURES FOR DETERMINATION OF ENTITLEMENT TO

INDEMNIFICATION

6.01 Initial Request . To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The President or any other officer of the Company shall promptly advise the Board in writing that Indemnitee has requested indemnification.

6.02 Method of Determination . A determination (if required by applicable law) with respect to Indemnitee’s entitlement to indemnification shall be made, as follows:

(a)

if a Change in Control has occurred, unless Indemnitee shall request in writing that such determination be made in accordance with clause (b) of this Section 6.02, the determination shall be made by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.

(b)

If a Change in Control has not occurred, and subject to Section 6.03, the determination shall be made by (i) a majority vote of the Disinterested Directors, even though less than a quorum; (ii) by a committee of Disinterested Directors designated by majority vote of such Disinterested Directors, even though less than a quorum; (iii) if there are no such Disinterested Directors, by the Independent Counsel in a written opinion to the Board, or (iv) by the Company’s stockholders.

6.03 Selection, Payment, Discharge, of Independent Counsel . In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6.02 of this Agreement, the Independent Counsel shall be selected, paid, and discharged in the following manner:

(a)

If a Change of Control has not occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected.

(b)

If a Change of Control has occurred, the Independent Counsel shall be selected the by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event clause (a) of this section shall apply) and approved by the Board, which approval shall not be unreasonably withheld, conditioned or delayed.

(c)

Following the initial selection described in clauses (a) and (b) of this Section 6.03, Indemnitee or the Company, as the case may be, may, within seven (7) days after such written notice of selection has been given, deliver to the other party a written objection to such selection. Such

objection may be asserted only on the ground that the Independent Counsel as defined in Section 1.10 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit.

(d)

Either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction if the parties have been unable to agree on the selection of Independent Counsel within (30) days after submission by Indemnitee of a written request for indemnification pursuant to Section 6.01 of this Agreement. Such petition may request a determination whether an objection to the party’s selection is without merit and/or seek the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate. A person so appointed shall act as Independent Counsel under Section 6.02 of this Agreement.

(e)

The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6.03, regardless of the manner in which such Independent Counsel was selected or appointed.

(f)

Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 8.01(c) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

6.04 Company Response . If a determination by the Company that Indemnitee is entitled to indemnification pursuant to this Agreement is required, and the Company fails to respond within sixty (60) days to a written request for indemnity, the Company shall be deemed to have approved the request.

6.05 Cooperation . Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification under this Agreement, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any expenses, costs, disbursements and obligations (including attorneys’ fees) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

6.06 Payment . If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination.

6.07 Reservation of Rights . Notwithstanding anything to the contrary herein, if it is determined that Indemnitee is entitled to indemnification hereunder, the Company shall have the obligation to advance to the Indemnitee any Expenses incurred by Indemnitee in connection therewith; provided, however, that all amounts advanced in respect of such Expenses shall be repaid to the Company by Indemnitee to the extent it shall be determined in a final judgment of a court of competent jurisdiction that Indemnitee is not entitled to be indemnified for such Expenses.

ARTICLE VII

PRESUMPTIONS

7.01 Effect of Other Proceedings . The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) be conclusive as to the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in Good Faith.

7.02 Reliance as Safe Harbor . For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or the expert selected with reasonable care by the Enterprise. The provisions of this Section 7.02 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

7.03 Service for Subsidiaries . If Indemnitee is serving as a director, officer, employee or agent of another Enterprise at least 50% of whose equity interests are owned by the Company shall, Indemnitee shall be conclusively presumed to be serving in such capacity at the request of the Company.

ARTICLE VIII

REMEDIES OF INDEMNITEE

8.01 Application . This Article VIII shall apply in the event of a Dispute. For purposes of this Article, “Dispute”, shall mean any of the following events:

(a)

a determination is made pursuant to Article VI of this Agreement that Indemnitee is not entitled to indemnification under this Agreement;

(b)

advancement of Expenses is not timely made pursuant to Article V of this Agreement; or

(c)

the determination of entitlement to be made pursuant to Section 6.02 of this Agreement has not been made within sixty (60) days after receipt by the Company of the request for indemnification;

(d)

payment of indemnification is not made pursuant to Section 4.06 of this Agreement within thirty (30) days after receipt by the Company of a written request therefore; or

(e)

payment of indemnification is not made within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification.

8.02 Adjudication . In the event of a Dispute, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’ s entitlement to such indemnification or advancement of Expenses. Indemnitee shall commence such proceeding seeking adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 8.02.

8.03 De Novo Review . In the event that a determination shall have been made pursuant to Article VI of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Article VIII shall be conducted in all respects as a de novo trial, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination.

8.04 Company Bound . If a determination shall have been made or deemed to have been made pursuant to Article VI of the Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding absent (i) a misstatement by Indemnitee of a material fact or an omission of a material fact necessary to make Indemnitee’ s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

8.05 Expenses of Adjudication . In the event that Indemnitee, pursuant to this Article VIII, seeks a judicial adjudication to enforce Indemnitee’s rights under, or to recover damages for breach of this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses actually and reasonably incurred by Indemnitee in such adjudication, but only if Indemnitee prevails therein. If it shall be determined in such adjudication that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the Expenses incurred by Indemnitee in connection with such adjudication shall be appropriately prorated.

ARTICLE IX

NON-EXCLUSIVITY, INSURANCE, SUBROGATION

9.01 Non-Exclusivity . The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under the Company’s Amended and Restated Certificate of Incorporation, the Bylaws, or under any agreement, vote of stockholders or

disinterested directors or otherwise. No amendment, alteration, rescission or replacement of this Agreement or any provision hereof shall be effective as to Indemnitee with respect to any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration, rescission or replacement. The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by a Sponsor Entity . The Company hereby acknowledges and agrees that (i) the Company shall be the indemnitor of first resort with respect to any Proceeding, Expense or matter that is the subject of this Agreement (i.e., the Company’s obligations are primary and any obligation of any Sponsor Entity with respect to any Proceeding, Expenses or matter that is the subject of this Agreement for the same Proceeding, Expenses or matters incurred by Indemnitee are secondary), (ii) any obligation of any Sponsor Entity to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any Proceeding shall be secondary to the obligations of the Company hereunder, (iii) the Company shall be required to indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any Sponsor Entity or insurer of any such person and (iv) the Company irrevocably waives, relinquishes and releases the Sponsor Entities from any claim of contribution, subrogation or any other recovery of any kind in respect of amounts paid by the Company hereunder. In the event that any Sponsor Entity or its insurers advance or extinguish any liability or loss which is the subject of this Agreement owed by the Company or payable under any insurance policy provided under this Agreement, the Sponsor Entity shall have a right of subrogation against the Company or its insurer or insurers for all amounts so paid which would otherwise be payable by the Company or its insurer or insurers under this Agreement. In no event will payment of an indemnity obligation of the Company under this Agreement by any Sponsor Entity or its insurers, affect the obligations of the Company hereunder or shift primary liability for any indemnity obligation of the Company under this Agreement to the Sponsor Entities. Any obligation to provide indemnification and/or insurance or advance Expenses provided by any Sponsor Entity shall be reduced by any amount that Indemnitee collects from the Company as an indemnification payment or advancement of Expenses pursuant to this Agreement.

9.02 Insurance . The Company shall maintain an insurance policy or policies against liability arising out of this Agreement or otherwise.

9.03 Subrogation . In the event of any payment under this Agreement, the Company shall be subrogated to any rights of recovery of Indemnitee (other than against any Sponsor Entity) who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

9.04 No Duplicative Payment . The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

ARTICLE X

GENERAL PROVISIONS

10.01 Binding Effect, Etc . This Agreement shall be binding upon and inure to the benefit of any be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or of any other enterprise at the Company’s request.

10.02 Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:

(a)

the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and

(b)

to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, which is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

10.03 No Adequate Remedy . The parties declare that it is impossible to measure in money the damages which will accrue to either party by reason of a failure to perform any of the obligations under this Agreement. Therefore, if either party shall institute any action or proceeding to enforce the provisions hereof, such party against whom such action or proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall not urge in any such action or proceeding the claim or defense that the other party has an adequate remedy at law.

10.04 Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

10.05 Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

10.06 Modification and Waiver . No supplement modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions thereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

10.07 Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:


If to Indemnitee, to:		As shown with Indemnitee’s Signature below.

If to the Company to:		Paycom Software, Inc. 7501 W. Memorial Road Oklahoma City, OK 73142 Attn: Chief Financial Officer

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

10.08 Governing Law . The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the state of Delaware without application of the conflict of laws principles thereof. No amendment, repeal, adoption or modification of law, shall adversely affect any right or protection of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification (regardless of when any Proceeding relating to such event, act or omission arises or is first threatened, commenced or completed).

10.09 Third-Party Beneficiaries . Except for the rights of the Sponsor Entities pursuant to Article IX (each of whom shall be an intended third-party beneficiary of this Agreement), nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any other person or persons other than the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligations or liability of any third persons to the Company. Except as expressly set forth in this Agreement, no provision of this Agreement shall give any third parties any right of subrogation or action over or against the Company.

10.10 Entire Agreement . This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior indemnification agreements or understandings between the Company, including any of its subsidiaries, and the Indemnitee, and any all such prior agreements or understandings are hereby rescinded by mutual agreement.

[Signature Page Follows]

IN WI1NESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.


COMPANY		PAYCOM SOFTWARE, INC.

		By:
		Name:
		Title:

INDEMNITEE
		Name:

		Indemnitee’s Address for Notices:

Exhibit 10.2

PAYCOM SOFTWARE, INC.

2014 LONG-TERM INCENTIVE PLAN

The Paycom Software, Inc. 2014 Long-Term Incentive Plan (the “ Plan ”) was adopted by the Board of Directors of Paycom Software, Inc., a Delaware corporation (the “ Company ”), as of January 1, 2014 (the “ Effective Date ”), subject to approval by the Company’s stockholders.

ARTICLE 1

PURPOSE

The purpose of the Plan is to attract and retain the services of key Employees, key Contractors, and Outside Directors of the Company and its Subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights, and Other Awards, whether granted singly, or in combination, or in tandem, that will:

(a) increase the interest of such persons in the Company’s welfare;

(b) furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and

With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void ab initio , to the extent permitted by law and deemed advisable by the Committee.

ARTICLE 2

DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

2.1 “ Affiliate ” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

2.2 “ Applicable Law ” means all legal requirements relating to the administration of equity incentive plans and the issuance and distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, and any other applicable law, rule or restriction.

2.3 “ Award ” means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, SAR, Restricted Stock Units, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem (each individually referred to herein as an “ Incentive ”).

2.4 “ Award Agreement ” means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award.

2.5 “ Award Period ” means the period set forth in the Award Agreement during which one or more Incentives granted under an Award may be exercised.

2.6 “ Beneficial Owner ” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

2.7 “ Board ” means the board of directors of the Company.

2.8 “ Change in Control ” means the occurrence of the event set forth in any one of the following paragraphs, except as otherwise provided herein:

(a) a transaction or series of transactions in which any Person becomes, after the Effective Date, the Beneficial Owner, directly or indirectly, of (i) securities representing thirty percent (30%) or more of the combined voting power of the Company’s then-outstanding securities or (ii) Common Stock representing thirty percent (30%) or more of the outstanding shares of Common Stock of the Company, other than a transaction described in clause (b) that does not constitute a Change in Control thereunder;

(b) any merger or consolidation, or series of related transactions, which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation;

(c) the sale or disposition of all or substantially all of the Company’s assets (or consummation of any transaction, or series of related transactions, having similar effect);

(d) during any consecutive twelve month period, individuals who, on the effective date of the Agreement, constitute the board of directors (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the board of directors or other governing body of the Company, its successor or survivor; provided that any individual becoming a director subsequent to the effective date of the Agreement but prior to any Change of Control, whose nomination or election was approved or recommended by a vote of the majority of the Incumbent Directors then on the Board, shall be considered an Incumbent Director;

(e) the dissolution or liquidation of the Company; or

(f) any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing.

Notwithstanding the foregoing provisions of this Section 2.8 , if an Award issued under the Plan is subject to Section 409A of the Code, then an event shall not constitute a Change in Control for purposes of such Award under the Plan unless such event also constitutes a change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets within the meaning of Section 409A of the Code.

2.9 “ Code ” means the United States Internal Revenue Code of 1986, as amended.

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2.10 “ Committee ” means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan.

2.11 “ Common Stock ” means the common stock, par value $0.001 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan (which, for avoidance of doubt, shall include Restricted Stock).

2.12 “ Company ” means Paycom Software, Inc., a Delaware corporation, and any successor entity.

2.13 “ Contractor” means any natural person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, with compensation, pursuant to a written independent contractor agreement between such person (or any entity employing such person) and the Company or a Subsidiary, provided that such services are not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

2.14 “ Corporation ” means any entity that (i) is defined as a corporation under Section 7701 of the Code and (ii) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a corporation under Section 7701 of the Code.

2.15 “ Date of Grant ” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement; provided that solely for purposes of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder, the Date of Grant of an Award shall be the date of stockholder approval of the Plan if such date is later than the effective date of such Award as set forth in the Award Agreement.

2.16 “ Dividend Equivalent Right ” means the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is made.

2.17 “ Employee ” means a common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company.

2.18 “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.

2.19 “ Executive Officer ” means an officer of the Company or a Subsidiary subject to Section 16 of the Exchange Act or a “covered employee” as defined in Section 162(m)(3) of the Code.

2.20 “ Fair Market Value ” means, as of a particular date, (a) if the shares of Common Stock are listed on any established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing sales price per share of Common Stock reported on the automated quotation system on that date, or, if there shall have been no such sale so

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reported on that date, on the last preceding date on which such a sale was so reported; (c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by the OTC Bulletin Board operated by the Financial Industry Regulation Authority, Inc. or the OTC Markets Group Inc., formerly known as Pink OTC Markets Inc.; or (d) if none of the above is applicable, such amount as may be determined by the Committee (acting on the advice of an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with Section 409A of the Code.

2.21 “ Incentive ” is defined in Section 2.3 hereof.

2.22 “ Incentive Stock Option ” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan.

2.23 “ Incumbent Directors ” is defined in Section 2.8 hereof.

2.24 “ Independent Third Party ” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties.

2.25 “ Nonqualified Stock Option ” means a nonqualified stock option, granted pursuant to this Plan, which is not an Incentive Stock Option.

2.26 “ Option Price ” means the price which must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock.

2.27 “ Other Award ” means an Award issued pursuant to Section 6.9 hereof.

2.28 “ Outside Director ” means a director of the Company who is not an Employee or a Contractor.

2.29 “ Participant ” means an Employee or Contractor of the Company or a Subsidiary or an Outside Director to whom an Award is granted under this Plan.

2.30 “ Performance Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof.

2.31 “ Performance Goal ” means any performance goal established by the Committee, consisting of the attainment of any one or more of the Performance Criteria set forth in Section 6.10 hereof.

2.32 “ Person ” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

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2.33 “ Plan ” means this Paycom Software, Inc. 2014 Long-Term Incentive Plan, as amended from time to time.

2.34 “ Principal Investors ” means Welsh, Carson, Anderson & Stowe and any controlled Affiliate thereof.

2.35 “ Reporting Participant ” means a Participant who is subject to the reporting requirements of Section 16 of the Exchange Act.

2.36 “ Restricted Stock ” means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement.

2.37 “ Restricted Stock Units ” means units awarded to Participants pursuant to Section 6.6 hereof, which are convertible into Common Stock at such time as such units are no longer subject to restrictions as established by the Committee.

2.38 “ Retirement ” means any Termination of Service solely due to retirement upon or after attainment of age sixty-five (65), or permitted early retirement as determined by the Committee.

2.39 “ SAR ” or “ S tock Appreciation Right ” means the right to receive an amount, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares.

2.40 “ SAR Price ” means the exercise price or conversion price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the SAR.

2.41 “ Stock Option ” means a Nonqualified Stock Option or an Incentive Stock Option.

2.42 “ Subsidiary ” means (i) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership listed in item (ii) above. “ Subsidiaries ” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies.

2.43 “ Termination of Service ” occurs when a Participant who is (i) an Employee of the Company or any Subsidiary ceases to serve as an Employee of the Company and its Subsidiaries, for any reason; (ii) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (iii) a Contractor of the Company or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be deemed to have occurred when a Participant who is an Employee becomes an Outside Director or

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Contractor or vice versa. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.43 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of “separation from service” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.

2.44 “ Total and Permanent Disability ” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease, or mental disorder, is unable to perform his or her duties of employment for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this Section 2.44 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.

ARTICLE 3

ADMINISTRATION

3.1 General Administration; Establishment of Committee. Subject to the terms of this Article 3 , the Plan shall be administered by the compensation committee of the Board or such committee of the Board as is designated by the Board to administer the Plan (the “ Committee ”). Membership on the Committee shall be limited to those members of the Board who are “outside directors” under Section 162(m) of the Code and “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act. As of the Effective Date, the Board designates the Compensation Committee of the Board to administer the Plan. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board.

3.2 Designation of Participants and Awards.

(a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination or two or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive results in cancellation of all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board.

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(b) Notwithstanding Section 3.2(a) , to the extent permitted by Applicable Law, the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the Company (an “ Authorized Officer ”) to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan, and (ii) determine the number of shares of Common Stock that will be subject to such Awards; provided that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards, and (z) not authorize an officer to designate himself as a recipient of any Award.

3.3 Authority of the Committee. The Committee, in its discretion, shall (i) interpret the Plan and Award Agreements, (ii) prescribe, amend, and rescind any rules and regulations, as necessary or appropriate for the administration of the Plan, (iii) establish performance goals for an Award and certify the extent of their achievement, and (iv) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary.

The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Committee.

With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the Exchange Act, Section 422 of the Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other Applicable Law, to the extent that any such restrictions are no longer required by Applicable Law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.

ARTICLE 4

ELIGIBILITY

Any Employee (including an Employee who is also a director or an officer), Contractor or Outside Director of the Company whose judgment, initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan.

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ARTICLE 5

SHARES SUBJECT TO PLAN

5.1 Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12 , the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is eleven million three hundred fifty thousand eight hundred eighty-one (11,350,881) shares, of which one hundred percent (100%) may be delivered pursuant to Incentive Stock Options. Subject to adjustment pursuant to Articles 11 and 12 , the maximum number of shares of Common Stock with respect to which Stock Options or SARs may be granted to an Executive Officer during any calendar year is five million three hundred twenty-three thousand nine hundred and seven (5,323,907) shares of Common Stock. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan.

5.2 Reuse of Shares. To the extent that any Award under this Plan shall be forfeited, shall expire or be canceled, in whole or in part, then the number of shares of Common Stock covered by the Award or stock option so forfeited, expired or canceled may again be awarded pursuant to the provisions of this Plan. In the event that previously acquired shares of Common Stock are delivered to the Company in full or partial payment of the exercise price for the exercise of a Stock Option granted under this Plan, the number of shares of Common Stock available for future Awards under this Plan shall be reduced only by the net number of shares of Common Stock issued upon the exercise of the Stock Option. Awards that may be satisfied either by the issuance of shares of Common Stock or by cash or other consideration shall be counted against the maximum number of shares of Common Stock that may be issued under this Plan only during the period that the Award is outstanding or to the extent the Award is ultimately satisfied by the issuance of shares of Common Stock. Awards will not reduce the number of shares of Common Stock that may be issued pursuant to this Plan if the settlement of the Award will not require the issuance of shares of Common Stock, as, for example, a SAR that can be satisfied only by the payment of cash. Notwithstanding any provisions of the Plan to the contrary, only shares forfeited back to the Company, shares canceled on account of termination, expiration or lapse of an Award, shares surrendered in payment of the exercise price of an option or shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of an option shall again be available for grant of Incentive Stock Options under the Plan, but shall not increase the maximum number of shares described in Section 5.1 above as the maximum number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options.

ARTICLE 6

GRANT OF AWARDS

6.1 In General.

(a) The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Incentive or Incentives being granted, the total number of shares of Common Stock subject to the Incentive(s), the Option Price (if applicable), the Award Period, the Date of Grant, the vesting terms, if any, and such other terms, provisions, limitations, and Performance Goals, as are approved by the Committee, but (i) not inconsistent with the Plan, (ii) to the extent an Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder, and (iii) to the extent the Committee

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determines that an Award shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years of the date of adoption of this Plan by the Board. The Plan shall be submitted to the Company’s stockholders for approval; however, the Committee may grant Awards under the Plan prior to the time of stockholder approval. Any such Award granted prior to such stockholder approval shall be made subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan.

(b) If the Committee establishes a purchase price for an Award, the Participant must accept such Award within a period of thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price.

(c) Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide for interest equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant.

6.2 Option Price. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any share of Common Stock may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant.

6.3 Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option stock on the Company’s stock transfer records.

6.4 Restricted Stock. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (iii) the time or times within which such Award may be subject to forfeiture, (iv) specified Performance Goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award, and (v) all other terms, limitations, restrictions, and conditions of the Restricted Stock, which shall be consistent with this Plan, to the extent applicable and in the event the Committee determines that an Award shall comply with

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the requirements of Section 162(m) of the Code, in compliance with the requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder and, to the extent Restricted Stock granted under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The provisions of Restricted Stock need not be the same with respect to each Participant.

(a) Legend on Shares. The Company shall electronically register the Restricted Stock awarded to a Participant in the name of such Participant, which shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, substantially as provided in Section 15.10 of the Plan. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, following the expiration of the Restriction Period (as defined in Section 6.4(b)(i)(a)(i) ) without forfeiture in respect of such shares of Common Stock, (i) the Participant requests delivery of the certificate or certificates by submitting a written request to the Committee (or such party designated by the Company) requesting delivery of the certificates, or (ii) the Committee elects to issue a certificate or certificates to the Participant. The Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request.

(b) Restrictions and Conditions. Shares of Restricted Stock shall be subject to the following restrictions and conditions:

(i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of the Award, such action is appropriate.

(ii) Except as provided in sub-paragraph (i) above or in the applicable Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock or after any other restrictions imposed on such shares of Common Stock by the applicable Award Agreement or other agreement have expired. Certificates for the shares of Common Stock forfeited under the provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that each Participant, in connection with the issuance of a certificate for Restricted Stock, shall endorse such certificate in blank or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.

(iii) The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, as specified in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on such Performance Goals, as may be determined by the Committee in its sole discretion.

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(iv) Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either (i) the Company shall be obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company.

6.5 SARs. The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option. SARs shall be subject to such terms and conditions as the Committee shall impose, provided that such terms and conditions are (i) not inconsistent with the Plan, (ii) to the extent a SAR issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder, and (iii) to the extent the Committee determines that a SAR shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) and the regulations and other guidance issued thereunder. The grant of the SAR may provide that the holder may be paid for the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of whole shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the SAR Price as set forth in such SAR (or other value specified in the agreement granting the SAR), by (ii) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of a SAR, but any such limitation shall be specified at the time that the SAR is granted.

6.6 Restricted Stock Units. Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions as shall be established by the Committee, provided that such terms and conditions are (i) not inconsistent with the Plan, (ii) to the extent a Restricted Stock Unit issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder, and (iii) to the extent the Committee determines that a Restricted Stock Unit award shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) and the regulations and other guidance issued thereunder. Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a requirement that the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of restriction.

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6.7 Performance Awards.

(a) The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period, and the maximum or minimum settlement values, provided that such terms and conditions are (i) not inconsistent with the Plan and (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at the time of the grant of the Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided that if shares of Common Stock are issued at the time of the grant of the Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other restrictions provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more Participants shall have its own terms and conditions.

To the extent the Committee determines that a Performance Award shall comply with the requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder, and if it is determined to be necessary in order to satisfy Section 162(m) of the Code, at the time of the grant of a Performance Award (other than a Stock Option) and to the extent permitted under Section 162(m) of the Code and the regulations issued thereunder, the Committee shall provide for the manner in which the Performance Goals shall be reduced to take into account the negative effect on the achievement of specified levels of the Performance Goals which may result from enumerated corporate transactions, extraordinary events, accounting changes and other similar occurrences which were unanticipated at the time the Performance Goal was initially established. In no event, however, may the Committee increase the amount earned under such a Performance Award, unless the reduction in the Performance Goals would reduce or eliminate the amount to be earned under the Performance Award and the Committee determines not to make such reduction or elimination.

With respect to a Performance Award that is not intended to satisfy the requirements of Code Section 162(m), if the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.

(b) Performance Awards may be valued by reference to the Fair Market Value of a share of Common Stock or according to any formula or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of Performance Goals or other specific financial, production, sales or cost performance objectives that the Committee believes to be relevant to the Company’s business and/or remaining in the employ of the Company or a Subsidiary for a specified period of time. Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable in

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shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee.

(c) Notwithstanding the foregoing, in order to comply with the requirements of Section 162(m) of the Code, if applicable, no Participant may receive in any calendar year Performance Awards intended to comply with the requirements of Section 162(m) of the Code which have an aggregate value of more than $74,128,902, and if such Performance Awards involve the issuance of shares of Common Stock, said aggregate value shall be based on the Fair Market Value of such shares on the time of the grant of the Performance Award. In no event, however, shall any Performance Awards not intended to comply with the requirements of Section 162(m) of the Code be issued contingent upon the failure to attain the Performance Goals applicable to any Performance Awards granted hereunder that the Committee intends to comply with the requirements of Section 162(m) of the Code.

6.8 Dividend Equivalent Rights. The Committee may grant a Dividend Equivalent Right to any Participant, either as a component of another Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently, at a later time specified in the Award or may be deemed to be reinvested in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other Award.

6.9 Other Awards. The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant. Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant.

6.10 Performance Goals. Awards of Restricted Stock, Restricted Stock Units, Performance Award and Other Awards (whether relating to cash or shares of Common Stock) under the Plan may be made subject to the attainment of Performance Goals relating to one or more business criteria which, where applicable, shall be within the meaning of Section 162(m) of the Code and consist of one or more or any combination of the following criteria: cash flow; cost; revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; or total return to

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stockholders (“ Performance Criteria ”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases, or (v) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an Award which is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code is applicable, the Committee may not in any event increase the amount of compensation payable to an individual upon the attainment of a Performance Goal.

6.11 Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “tandem Award,” so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to one hundred (100) shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock.

6.12 No Repricing of Stock Options. The Committee may not “reprice” any Stock Option. For purposes of this Section 6.12 , “reprice” means any of the following or any other action that has the same effect: (i) amending a Stock Option to reduce its exercise price, (ii) canceling a Stock Option at a time when its exercise price exceeds the Fair Market Value of a share of Common Stock in exchange for a Stock Option, award of Restricted Stock or other equity award, or (iii) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing in this Section 6.12 shall prevent the Committee from making adjustments pursuant to Article 11 , from exchanging or cancelling Incentives pursuant to Article 12 , or substituting Incentives in accordance with Article 14 .

ARTICLE 7

AWARD PERIOD; VESTING

7.1 Award Period. Subject to the other provisions of this Plan, the Committee may, in its discretion, provide that an Incentive may not be exercised in whole or in part for any period or periods of time or beyond any date specified in the Award Agreement. Except as provided in the Award Agreement, an Incentive may be exercised in whole or in part at any time during its term. The Award Period for an Incentive shall be reduced or terminated upon Termination of Service. No Incentive granted under the Plan may be exercised at any time after the end of its Award Period. No portion of any Incentive may be exercised after the expiration of ten (10) years from its Date of Grant. However, if an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant.

7.2 Vesting. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Incentive may be vested.

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ARTICLE 8

EXERCISE OR CONVERSION OF INCENTIVE

8.1 In General. A vested Incentive may be exercised or converted, during its Award Period, subject to limitations and restrictions set forth in the Award Agreement.

8.2 Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or shares of Common Stock issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished.

8.3 Exercise of Stock Option.

(a) In General. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option.

(b) Notice and Payment. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised and the date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (a) cash or check, bank draft, or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. Notwithstanding anything to the contrary, a Stock Option shall not be considered exercised until the Participant has paid or made arrangements satisfactory to the Company to pay all taxes required to be withheld in connection with such exercise.

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(c) Electronic Issuance; Issuance of Certificate. Except as otherwise provided in Section 6.4 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death), but shall not issue certificates for the Common Stock unless (i) the Participant or such other person requests delivery of the certificates for the Common Stock, in writing in accordance with the procedures established by the Committee, or (ii) the Committee elects to issue certificates for the Common Stock to the Participant. The Company shall deliver certificates to the Participant (or the person exercising the Participant’s Stock Option in the event of his or her death) as soon as administratively practicable following the Company’s receipt of a written request from the Participant or such other person for delivery of the certificates. Notwithstanding the forgoing, if the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate evidencing the shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the Code. Any obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.

(d) Failure to Pay. Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Participant.

8.4 SARs. Subject to the conditions of this Section 8.4 and such administrative regulations as the Committee may from time to time adopt, a SAR may be exercised by the delivery (including by facsimile transmission or e-mail) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award Agreement and only if permissible under Section 409A of the Code and the regulations or other guidance issued thereunder (or, if not so permissible, at such time as permitted by Section 409A of the Code and the regulations or other guidance issued thereunder), the Participant shall receive from the Company in exchange therefor in the discretion of the Committee, and subject to the terms of the Award Agreement:

(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered;

(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or

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The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award Agreement.

8.5 Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.

ARTICLE 9

AMENDMENT OR DISCONTINUANCE

Subject to the limitations set forth in this Article 9 , the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided that no amendment for which stockholder approval is required either (i) by any securities exchange or inter-dealer quotation system on which the Common Stock is listed or traded or (ii) in order for the Plan and Incentives awarded under the Plan to continue to comply with Sections 162(m), 421, and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant.

ARTICLE 10

TERM

The Plan shall be effective from the date that this Plan is adopted by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on January 1, 2024, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions.

ARTICLE 11

CAPITAL ADJUSTMENTS

In the event that any extraordinary dividend or other extraordinary distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse

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stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event is equal to the fair value of the Award immediately prior to the transaction or event (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other securities or property) specified as the annual per-participant limitation under Section 5.1 of the Plan, (iv) the Option Price of each outstanding Award, (v) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.4 , and (vi) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price; provided that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject.

Upon the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant.

ARTICLE 12

RECAPITALIZATION, MERGER AND CONSOLIDATION

12.1 No Effect on Company’s Authority. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any Change in Control, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

12.2 Conversion of Incentives Where Company Survives. Subject to any required action by the stockholders and except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled.

12.3 Exchange or Cancellation of Incentives Where Company Does Not Survive. Except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall

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be substituted for each share of Common Stock subject to the unexercised portions of outstanding Incentives, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms.

12.4 Cancellation of Incentives. Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, all Incentives granted hereunder may be canceled by the Company, in its sole discretion, as of the effective date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or of any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either:

(a) giving notice to each holder thereof or his personal representative of its intention to cancel those Incentives for which the issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase during the ten (10) day period next preceding such effective date of any or all of the shares of Common Stock subject to such outstanding Incentives, including in the Board’s discretion some or all of the shares as to which such Incentives would not otherwise be vested and exercisable; or

(b) paying the holder thereof an amount equal to a reasonable estimate of the difference between the Fair Market Value of a share of stock underlying such Incentive, and the price per share of such Incentive to be paid by the Participant (hereinafter the “ Spread ”), multiplied by the number of shares subject to the Incentive. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Incentives shall be made, such as deeming the Incentives to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Incentives as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed.

(c) An Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or exercisable for purposes of Section 12.4(a) hereof.

ARTICLE 13

LIQUIDATION OR DISSOLUTION

Subject to Section 12.4 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, net of the exercise price for such Incentive, if any, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution,

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liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof.

ARTICLE 14

INCENTIVES IN SUBSTITUTION FOR

INCENTIVES GRANTED BY OTHER ENTITIES

Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees, independent contractors or directors of a corporation, partnership, or limited liability company who become or are about to become Employees, Contractors or Outside Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Incentives in substitution for which they are granted.

ARTICLE 15

MISCELLANEOUS PROVISIONS

15.1 Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution.

15.2 No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary.

15.3 Indemnification of Board and Committee. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

15.4 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.

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15.5 Compliance With Other Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act and Section 162(m) of the Code); and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

15.6 Tax Requirements. The Company or, if applicable, any Subsidiary (for purposes of this Section 15.6 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, local, or other taxes required by law to be withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered settlement of the Award, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or desirable.

15.7 Assignability. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.7 that is not required for compliance with Section 422 of the Code.

Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution. The Committee may, in its discretion, authorize all or a portion of an Award to be granted to a Participant on terms which permit transfer by such Participant to (i) the spouse (or former spouse), children or grandchildren of the Participant (“ Immediate Family Members ”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any

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successor provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such Award is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Award shall be prohibited except those by will or the laws of descent and distribution.

Following any transfer, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term “ Participant ” shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which Award shall be exercisable or convertible by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of an Award of any expiration, termination, lapse or acceleration of such Award. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under an Award that has been transferred by a Participant under this Section 15.7 .

15.8 Section 409A . All Awards issued hereunder are intended to be exempt from, or comply with, Section 409A of the Code. In no event shall the Company have any liability or responsibility for taxes, penalties or interest imposed pursuant to Section 409A of the Code with respect to any Award.

15.9 Use of Proceeds. Proceeds from the Company’s sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company.

15.10 Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed):

On the face of the certificate:

“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”

On the reverse:

“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Paycom Software, Inc. 2014 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Oklahoma City, Oklahoma. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”

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The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:

“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”

ARTICLE 16

ACCELERATION OF AWARD VESTING

16.1 Application. The provisions of this Article 16 shall apply notwithstanding any provisions of this Plan to the contrary.

16.2 Definitions.

(a) “ Exempt Shares ” means shares of Common Stock designated as “Exempt Shares” pursuant to Section 16.3 .

(b) “ Full Value Award ” means any Award with a net benefit to the Participant, without regard to any restrictions such as those described in Section 6.4(b) , equal to the aggregate Fair Market Value of the total shares of Common Stock subject to the Award. Full Value Awards include Restricted Stock and Restricted Stock Units, but do not include Stock Options and SARs.

(c) “ Tenure Award” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, Common Stock that vests over time based upon the Participant’s continued employment with or service to the Company or its Subsidiaries.

16.3 Number of Shares Available for Awards. The total number of shares that may be designated as “Exempt Shares” shall not exceed the aggregate of (i) ten percent (10%) of the shares of Common Stock that may be delivered pursuant to Awards under Section 5.1 ; plus (ii) the total number of shares subject to Award that were received in exchange for incentive stock units in Paycom Payroll Holdings, LLC.

16.4 Full Value Award Vesting. Except as otherwise provided herein, the Committee must grant all Full Value Awards in accordance with the following provisions:

(a) All Full Value Awards granted by the Committee that constitute Performance Awards must vest no earlier than one (1) year after the Date of Grant.

(b) All Full Value Awards granted by the Committee that constitute Tenure Awards must vest no earlier than over the three (3) year period commencing on the Date of Grant on a pro rata basis.

(c) The Committee may not accelerate the date on which all or any portion of a Full Value Award may be vested or waive the Restriction Period on a Full Value Award except upon the Participant’s death, Total and Permanent Disability or Retirement or the occurrence of a Change in Control.

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Notwithstanding the foregoing, the Committee may, in its sole discretion, grant Full Value Awards with more favorable vesting provisions than set forth in this Section 16.4 or accelerate the vesting or waive the Restriction Period for Full Value Awards at any time, provided that the shares of Common Stock subject to such Awards shall be Exempt Shares.

A copy of this Plan shall be kept on file in the principal office of the Company at 7501 W. Memorial Road, Oklahoma City, OK 73142.

***************

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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of December 30, 2013, by its Chief Executive Officer and Secretary pursuant to prior action taken by the Board.


Paycom Software, Inc.

By:		/s/ Chad Richison
Name:		Chad Richison
Title:		Chief Executive Officer

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Exhibit 10.3

RESTRICTED STOCK AWARD AGREEMENT

(GENERAL POST-IPO)

PAYCOM SOFTWARE, INC.

2014 LONG-TERM INCENTIVE PLAN

1. Grant of Award . Pursuant to the Paycom Software, Inc. 2014 Long-Term Incentive Plan (the “ Plan ”) for Employees, Contractors, and Outside Directors of Paycom Software, Inc., a Delaware corporation (the “ Company ”), the Company grants to

(the “ Participant ”)

an Award of Restricted Stock in accordance with Section 6.4 of the Plan. The number of shares of Common Stock awarded under this Restricted Stock Award Agreement (the “ Agreement ”) is ( ) shares (the “ Awarded Shares ”). The “ Date of Grant ” of this Award is , 20 .

2. Subject to Plan . This Agreement is subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Agreement. To the extent the terms of the Plan are inconsistent with the provisions of the Agreement, this Agreement shall control. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. This Agreement is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.

3. Vesting . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Awarded Shares shall vest as follows:

a. of the total Awarded Shares shall vest on the first anniversary of the Date of Grant, provided the Participant is employed by (or if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.

b. of the total Awarded Shares shall vest on the second anniversary of the Date of Grant, provided the Participant is employed by (or if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.

c. of the total Awarded Shares shall vest on the third anniversary of the Date of Grant, provided the Participant is employed by (or if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.

Notwithstanding the foregoing, all Awarded Shares not previously vested shall immediately become vested in full upon a Termination of Service as a result of the Participant’s death or Total and Permanent Disability.

In the event that (i) a Change in Control occurs, and (ii) this Agreement is not assumed by the surviving corporation or its parent, or the surviving corporation or its parent does not substitute its own restricted shares, then immediately prior to the effective date of such Change in Control, all Awarded Shares not previously vested shall thereupon immediately become fully vested.

4. Forfeiture of Awarded Shares . Awarded Shares that are not vested in accordance with Section 3 shall be forfeited on the date of the Participant’s Termination of Service. Upon forfeiture, all of the Participant’s rights with respect to the forfeited Awarded Shares shall cease and terminate, without any further obligations on the part of the Company.

5. Restrictions on Awarded Shares . Subject to the provisions of the Plan and the terms of this Agreement, from the Date of Grant until the date the Awarded Shares are vested in accordance with Section 3 and are no longer subject to forfeiture in accordance with Section 4 (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge, hypothecate, margin, assign or otherwise encumber any of the Awarded Shares. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Awarded Shares whenever it may determine that, by reason of changes in applicable laws or changes in circumstances after the date of this Agreement, such action is appropriate.

6. Legend . The following legend shall be placed on all certificates issued representing Awarded Shares:

On the face of the certificate:

“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”

On the reverse:

All Awarded Shares owned by the Participant shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend.

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7. Delivery of Certificates; Registration of Shares . The Company shall deliver certificates for the Awarded Shares to the Participant or shall register the Awarded Shares in the Participant’s name, free of restriction under this Agreement, promptly after, and only after, the Restriction Period has expired without forfeiture pursuant to Section 4 . In connection with any issuance of a certificate for Restricted Stock, the Participant shall endorse such certificate in blank or execute a stock power in a form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.

8. Rights of a Stockholder . Except as provided in Section 4 and Section 5 above, the Participant shall have, with respect to his Awarded Shares, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Any stock dividends paid with respect to Awarded Shares shall at all times be treated as Awarded Shares and shall be subject to all restrictions placed on such Awarded Shares; any such stock dividends paid with respect to Awarded Shares shall vest as the related Awarded Shares become vested.

9. Voting . The Participant, as record holder of the Awarded Shares, has the exclusive right to vote, or consent with respect to, such Awarded Shares until such time as the Awarded Shares are transferred in accordance with this Agreement; provided that this Section 9 shall not create any voting right where the holders of such Awarded Shares otherwise have no such right.

10. Adjustment to Number of Awarded Shares . The number of Awarded Shares shall be subject to adjustment in accordance with Articles 11-13 of the Plan.

11. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.

12. Participant’s Representations . Notwithstanding any of the provisions hereof, the Participant hereby agrees that he or she will not acquire any Awarded Shares, and that the Company will not be obligated to issue any Awarded Shares to the Participant hereunder, if the issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The rights and obligations of the Company and the rights and obligations of the Participant are subject to all Applicable Laws, rules, and regulations.

13. Investment Representation . Unless the Awarded Shares are issued in a transaction registered under applicable federal and state securities laws, by his or her execution hereof, the Participant represents and warrants to the Company that all Common Stock which may be purchased and or received hereunder will be acquired by the Participant for investment purposes for his or her own account and not with any intent for resale or distribution in violation of federal or state securities laws. Unless the Common Stock is issued to him or her in a transaction registered under the applicable federal and state securities laws, all certificates issued with respect to the Common Stock shall bear an appropriate restrictive investment legend and shall be held indefinitely, unless they are subsequently registered under the applicable federal and state securities laws or the Participant obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.

14. Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his review by the Company, and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Award subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.

15. Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this agreement to the laws of another state).

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16. No Right to Continue Service or Employment . Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an Employee or as a Contractor or as an Outside Director, or interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an Employee, Contractor, or Outside Director at any time.

17. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.

18. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that are set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.

19. Entire Agreement . This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.

20. Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein. No person shall be permitted to acquire any Awarded Shares without first executing and delivering an agreement in the form satisfactory to the Company making such person or entity subject to the restrictions on transfer contained herein.

21. Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.

22. Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.

23. Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

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24. Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:

a. Notice to the Company shall be addressed and delivered as follows:

Paycom Software, Inc.

7501 W. Memorial Rd.

Oklahoma City, OK 73142

Attn: Chief Financial Officer

b. Notice to the Participant shall be addressed and delivered as set forth on the signature page.

25. Tax Requirements . The Participant is hereby advised to consult immediately with his or her own tax advisor regarding the tax consequences of this Agreement, the method and timing for filing an election to include this Agreement in income under Section 83(b) of the Code, and the tax consequences of such election. By execution of this Agreement, the Participant agrees that if the Participant makes such an election, the Participant shall provide the Company with written notice of such election in accordance with the regulations promulgated under Section 83(b) of the Code. The Company or, if applicable, any Subsidiary (for purposes of this Section 26 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock, other than (A) Restricted Stock, or (B) Common Stock that the Participant has acquired from the Company within six (6) months prior thereto, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting of this Award, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.

* * * * * * * * * *

[ Remainder of Page Intentionally Left Blank.

Signature Page Follows ]

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his or her consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.


COMPANY:

Paycom Software, Inc.

By:
Name:
Title:

PARTICIPANT:

Signature

Name:
Address:

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Exhibit 10.4

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“ Agreement ”) is entered into by and between Paycom Software, Inc. (the “ Company ”) and Chad Richison (“ Executive ”). This Agreement is entered on December 30, 2013 and, other than with respect to Article 7 which shall be effective upon execution of this Agreement by each of the parties hereto, is effective on, and not effective until January 1, 2014 (the “ Effective Date ”).

WHEREAS, the operations of the Company and its Affiliates (defined below) are a complex matter requiring direction and leadership in a variety of arenas;

WHEREAS, Executive possesses certain experience and expertise that qualify him to provide the direction and leadership required by the Company and its Affiliates;

WHEREAS, the Company has provided Executive with highly confidential information pertaining to the Company and its Affiliates and will continue to provide new confidential information after the execution of this Agreement;

WHEREAS, the Company and Executive acknowledge and confirm that this Agreement arises from and is integrally related to Executive’s sale of the goodwill of a business to the Company; and,

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company therefore wishes to employ Executive as an officer of the Company in the role as its Chief Executive Officer, and Executive wishes to accept such employment;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree:

1. Definitions . The following capitalized terms shall have the meanings set forth below.

1.1 “ Affiliates ” means, with respect to any particular Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such particular Person. As used in this definition, the term “control” shall mean (i) the ownership (directly or indirectly) of more than 50% of the ownership or voting interests of any particular Person or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

1.2 “ Board ” shall mean the Board of Directors of the Company.

1.3 “ Cause ” shall mean, with respect to Executive, any of the following: (a) the repeated failure of Executive to perform such duties as are lawfully requested by the Board or the board of directors of any subsidiary of the Company (to the extent such duties are consistent with Executive’s position with the Company or any of its subsidiaries), (b) the failure by such Executive to observe all reasonable, lawful material policies of the Company and its subsidiaries applicable to Executive and communicated to Executive in writing, (c) any action or omission

constituting gross negligence or willful misconduct of such Person in the performance of his or her duties, (d) the material breach by Executive of any provision of Executive’s employment or the breach by Executive of any non-competition, non-solicitation or similar restrictive agreement with the Company or any of its subsidiaries, (e) any act or omission by Executive constituting fraud, embezzlement, disloyalty or dishonesty with respect to the Company or its subsidiaries, (f) the use by Executive of illegal drugs or repetitive abuse of other drugs or repetitive excess consumption of alcohol interfering with the performance of Executive’s duties, or (g) the commission by Executive of any felony or of a misdemeanor involving dishonesty, disloyalty or moral turpitude.

1.4 “ Change in Control ” shall mean the following: (a) any Person other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of securities of the Company representing 50% or more of (i) the outstanding shares of common stock of the Company or (ii) the combined voting power of the Company’s then-outstanding securities (other than pursuant to a transaction described in clause (b) that does not constitute a Change in Control thereunder); (b) the Company is party to a merger or consolidation, or series of related transactions, which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation (or a parent company thereof); (c) the sale or disposition of all or substantially all of the Company’s assets (or consummation of any transaction, or series of related transactions, having similar effect); (d) there occurs a change in the composition of the Board of Directors of the Company within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors; (e) the dissolution or liquidation of the Company; or (f) any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing. Notwithstanding the foregoing, to the extent required to comply with Section 409A of the Code, no event shall be deemed a “Change in Control” unless such event also constitutes a change in ownership or control within the meaning of Section 409A of the Code.

1.5 “ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

1.6 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

1.7 “ Compensation Committee ” means the Compensation Committee of the Board.

1.8 “ Confidential Information ” shall mean trade secrets, confidential or proprietary information, and all other information, documents or materials owned, developed or possessed by the Company or its Affiliates that are not generally known to the public or within the industry of the Company. Confidential Information includes, but is not limited to, customer lists, preferences and contacts, financial information, business plans, product cost or pricing, information regarding future development, locations or acquisitions, personnel records (including records of the Company’s clients) and software programs. Confidential Information shall not include any information that is or becomes generally publicly available (other than as a result of violation of this Agreement by Executive).

1.9 “ Incumbent Director ” means each member of the Board on the Effective Date and each other member of the Board whose nomination or election to the Board is approved by a majority of the then Incumbent Directors.

1.10 “ Person ” has the meaning given in Section 7701(a)(1) of the Code. Person shall include more than one Person acting as a group as defined by the Final Treasury Regulations issued under Section 409A of the Code.

1.11 “ Public Offering ” shall mean an underwritten sale to the public of the Company’s equity securities (or its successor’s equity securities) pursuant to an effective registration statement filed with the SEC on Form S-1 (or any successor form adopted by the SEC) and after which the Company’s (or its successor’s) equity securities are listed on the New York Stock Exchange, the NYSE MKT or The NASDAQ Stock Market; provided , that a Public Offering shall not include any issuance of equity securities in any merger or other business combination, and shall not include any registration of the issuance of equity securities to existing securityholders or employees of the Company and its subsidiaries on Form S-4 or Form S-8 (or any successor form adopted by the SEC).

1.12 “ Restricted Period ” shall mean: (a) if the Termination Date is before the initial Public Offering, twelve (12) months following the Termination Date; or (b) if the Termination Date is after the initial Public Offering, thirty-six (36) months following the consummation of the initial Public Offering and twelve (12) months following the Termination Date (such twelve (12) month period to run concurrently with the aforementioned thirty-six (36) month period if both periods are applicable).

2. Term . This Agreement shall commence on the Effective Date and shall continue until three (3) years following the consummation of the initial Public Offering, subject to earlier termination as set forth in Section 5 below (“ Initial Term ”). The Agreement will automatically renew, subject to earlier termination as herein provided, for successive one (1) year periods (the “ Additional Terms ”), unless either Executive or the Company provide notice of non-renewal at least forty-five (45) days prior to the expiration of the Initial Term or the then Additional Term, whichever is applicable. The Initial Term and any Additional Term(s) shall be referred to collectively as the “ Term .”

3. Capacity and Performance .

3.1 During the Term, Executive shall serve the Company as its Chief Executive Officer and President and shall report directly to the Board. During the Term, Executive shall be employed by the Company on a full-time basis and shall perform such duties and responsibilities, consistent and customary with the positions of Chief Executive Officer and President, on behalf of the Company and its Affiliates as may reasonably be designated from time to time by the Board.

3.2 During his employment with the Company, Executive shall devote his full business time and commercially reasonable efforts, business judgment, skill, and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of his duties and responsibilities hereunder. Executive shall not engage in any other competitive business activity or serve in any competitive industry, trade, professional, governmental, or academic position during his employment with the Company, except as may be expressly approved by the Board in writing. The foregoing shall not limit Executive’s right to: (a) serve on civic or charitable boards or committees or up to two corporate boards that are not engaged in business competition with the Company; (b) engage in such activities as are reasonably necessary to monitor and protect his interests as a minority stockholder in other companies, to the extent a reasonably prudent minority stockholder would be expected to engage in such activities; and (c) invest Executive’s personal assets in such manner as will not require any material services by Executive in the operation of the entities in which such investments are made, to the extent such activities do not individually or in the aggregate interfere with the discharge of Executive’s duties hereunder in a matter so that such activities will not prevent Executive from fulfilling Executive’s obligations to the Company hereunder.

4. Compensation and Benefits . As compensation for all services performed by Executive during the Term, Executive shall receive the following:

4.1 Base Salary . During the Term, the Company shall pay Executive a base salary at a rate not less than Five Hundred Fifty-Five Thousand One Hundred Ninety-Seven Dollars and Zero Cents ($555,197.00) per year, less any and all lawful withholdings or deductions, payable in accordance with the payroll practices of the Company for its executives, and subject to increases from time to time as may be approved by the Board (“ Base Salary ”).

4.2 Bonus. Subject to the provisions of this Section 4.2, Executive shall be eligible to earn an annual bonus of 100% of his Base Salary (or such larger amount approved by the Compensation Committee) (the “ Target Bonus ”) in accordance with the Company’s bonus plan applicable to executive officers of the Company. The actual amount of the bonus payable with respect to a fiscal year (the “ Bonus ”) shall be determined by the Compensation Committee, in its sole discretion, and shall be paid in accordance with the plans, policies and procedures adopted by the Compensation Committee from time to time.

4.3 Vacation . During the Term, Executive shall receive and be entitled to take vacation in accordance with the policies of the Company as in effect from time to time, and subject to the reasonable business needs of the Company. Executive shall not be entitled to payment for any accrued but unused vacation pay if the Company terminates Executive for Cause. However, if Executive’s employment is terminated for any other reason, Executive shall be entitled to receive payment for all accrued but unused vacation pay.

4.4 Aircraft . During the Term, the Company shall either: (i) contract with NetJets or a similar private business jet charter company to provide 24 hour-per-day, 365 day-per-year access to a Light Cabin private aircraft for Executive’s business or personal travel; or (ii) purchase, lease or charter, and provide 24 hour-per-day, 365 day-per-year access to, a Light Cabin private aircraft for Executive’s business or personal travel. Executive shall be entitled to

up to 25 hours of personal flight time per calendar year pursuant to this Section, for which Executive shall not be required to reimburse the Company. The Company will withhold any required taxes or withholding with respect to the benefits described in this Section 4.4 from Executive’s Base Salary.

4.5 Company Automobile. During the Term, the Company shall provide Executive use of a Company automobile with a lease value of up to Two Thousand Dollars ($2,000.00) per month for Executive’s business or personal use, less any required taxes or withholdings.

4.6 Home Security . During the Term, the Company shall pay the reasonable expenses for Executive of a security guard for Executive’s home when Executive is away from home on business.

4.7 Country Club . During the Term, the Company shall provide Executive with a Country Club membership in any country club or recreational sports club of Executive’s choosing at a cost of up to Seven Hundred Fifty Dollars ($750.00) per month, less any required taxes or withholdings.

4.8 Other Benefits . Executive shall be entitled to participate in or receive benefits under the Company’s Executive Benefit Plan and any plan or arrangement made available from time to time by the Company to its employees generally (including any health, dental, vision, disability, life insurance, 401k, or other retirement programs) (“ Benefits ”). Any such plan or arrangement shall be revocable and subject to termination or amendment at any time only in accordance with the terms and conditions of such plans or arrangements, without recourse by Executive, provided that no such termination or amendment shall disadvantage Executive or his wife or dependents disproportionately to any other participants therein (except as may be required by laws or regulations, such as those related to “top-heavy” or “top hat” plans).

4.9 Business Expenses . The Company shall pay or reimburse Executive for all reasonable, customary and necessary business expenses incurred or paid by Executive in the performance of his duties and responsibilities hereunder, subject to any maximum annual limit and other restrictions on such expenses set by the Board and to such reasonable substantiation and documentation as may be specified by the Company from time to time.

4.10 Clawback. Executive acknowledges and agrees that any compensation or benefits paid to Executive by the Company, pursuant to this Agreement or otherwise, shall be subject to recovery by the Company in accordance with Section 304 of the Sarbanes-Oxley Act of 2002 or any other clawback law or regulation applicable to executives of the Company, if any, as amended from time to time.

5. Termination of Employment and Severance Benefits During the Term . Notwithstanding the provision of Section 2 hereof and subject to the provisions of Section 20 below, Executive’s employment may terminate prior to or at the expiration of the Term under the following circumstances (each, a “ Termination Date ”):

5.1 Death . In the event of Executive’s death during the Term, Executive’s employment hereunder shall immediately and automatically terminate. In such event, the Company, shall pay to Executive’s designated beneficiaries or, if no beneficiaries have been designated by Executive, to his estate, (i) the Base Salary earned but not paid through the Termination Date; (ii) the amount of any accrued but unused vacation calculated as of the Termination Date; and (iii) any business expenses incurred by Executive but un-reimbursed on the Termination Date, provided that such expenses and required substantiation and documentation are submitted within ninety (90) days of termination and that such expenses are reimbursable under Company policy (all of the foregoing, “ Final Compensation ”). The Final Compensation shall be paid by the Company on the next regular payroll period following his death (or, if later, on the next regular payroll period after the Company receives notice of Executive’s death).

5.2 Disability .

(a) If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been absent from Executive’s duties with the Company on a full-time basis for one hundred eighty (180) consecutive calendar days or two hundred seventy (270) non-consecutive days in any eighteen (18) month period, and within thirty (30) days after written notice of termination Executive shall not have returned to the full-time performance of his duties, with or without reasonable accommodations, the Company may thereafter notify Executive of termination. In the event of such termination, the Company shall pay to Executive the Final Compensation on the next regular payroll period following his Termination Date.

(b) The Board may designate another employee to act in Executive’s place during any period of Executive’s disability which shall not constitute Good Reason hereunder. Notwithstanding any such designation, Executive shall continue to receive his compensation and benefits in accordance with Section 4, to the extent permitted by the then-current terms of the applicable benefit plans, until Executive becomes eligible for disability income benefits under the Company’s disability income plan or until the termination of his employment, whichever shall first occur.

5.3 By the Company for Cause . During the Term, the Company may terminate Executive’s employment for Cause as defined in Section 1.3 above. If Executive’s employment is terminated for Cause as defined in Section 1.3 above, then the Company shall have no further obligation to Executive other than to pay his Final Compensation on the next regular payroll period following his Termination Date.

the effective date of the Release (defined below) (provided that if the 60-day time period for the Release begins in one taxable year and ends in a subsequent taxable year, the first payment shall be paid in the subsequent taxable year (for example, if Executive terminates on December 1, then the first payment shall not be paid until on or after January 1 of the next year, regardless of when the Release is returned)); (b) continue Executive’s health insurance benefits for the Restricted Period (at a cost no less favorable than that paid by Executive immediately prior to the Termination Date) or the economic equivalent thereto if such continuation is not permissible under the terms of the Company’s health insurance plan or would otherwise expose the Company to tax or other penalties; and (c) pay Executive an amount equal to the pro rata amount of the Bonus Executive would have earned for the year in which the termination occurred, based on the Company’s performance for the entire fiscal year in which the termination occurred relative to the performance measurements that were pending at the time of termination and to be used to determine Executive’s bonus for such year. Any such prorated Bonus shall be payable at such time or times as bonuses are payable to the other executives of the Company (the benefits, which the parties acknowledge are not required by law, outlined in Section(s) 5.4(a), (b) and (c) are collectively referenced as the “ Severance ”). Any obligation of the Company to provide Executive the Severance is conditioned on Executive signing, delivering to the Company and not revoking a release, in a form acceptable to the Company (the “ Release ”), within sixty (60) days of his Termination Date, which Release in any event will require Executive to reaffirm his obligations and commitments to the Company under Section 7 of this Agreement.

5.5 By Executive for Good Reason . During the Term, Executive may terminate his employment at any time for Good Reason. The following shall constitute “ Good Reason ” for termination by Executive:

(a) any material reduction by the Company in Executive’s Base Salary without Executive’s prior consent;

(b) following a Change in Control, any change in Executive’s status, reporting, duties or position that represents a demotion or diminution from Executive’s status, reporting, duties or position in effect before such Change in Control; or

Executive shall not be deemed to have been terminated for Good Reason pursuant to Section(s) 5.5(a), (b) or (c) above unless Executive delivers to the Company a written notice of termination for Good Reason specifying the alleged Good Reason within thirty (30) days after Executive first learns of the existence of the circumstances giving rise to Good Reason, within thirty (30) days following delivery of such notice, the Company has failed to cure the circumstances giving rise to Good Reason, and Executive resigns within fifteen (15) days after the end of the cure period.

If Executive’s employment is terminated by Executive for Good Reason following the initial Public Offering then, in addition to immediately paying Executive the Final Compensation, Executive shall be paid the Severance at the same time and subject to the same terms and conditions as described in Section 5.4 hereof. Any obligation of the Company to provide Executive the Severance is conditioned on Executive signing, delivering the Release to the Company and not revoking the Release as provided therein within sixty (60) days of his Termination Date.

5.6 By Executive Other than for Good Reason . During the Term, Executive may terminate his employment at any time upon sixty (60) days’ written notice to the Company. In the event of termination of Executive pursuant to this Section 5.6, the Board may elect to waive the period of notice, or any portion thereof, and, if the Board so elects, the Company shall pay Executive his Base Salary for the notice period (or for any remaining portion of the period). If Executive’s employment is voluntarily terminated by him other than for Good Reason, then the Company shall pay Executive the Final Compensation on the next regular payroll period following his Termination Date.

5.7 By Expiration of the Term . Upon expiration of the Term, if Executive’s employment with the Company terminates at the expiration of the Term, Executive shall be paid the Final Compensation on the next regular payroll period following his Termination Date. If the expiration of the Term was the result of the Company issuance of a notice of non-renewal to Executive pursuant to Section 2, then, in addition to paying Executive the Final Compensation, Executive shall be paid the Severance at the same time and subject to the same terms as described in Section 5.4 hereof. Any obligation of the Company to provide Executive the Severance is conditioned on Executive signing, delivering the Release to the Company and not revoking the Release as provided therein within sixty (60) days of his Termination Date.

6 . Effect of Termination

6.1 Benefits. Benefits shall terminate pursuant to the terms of the applicable benefit plans based on the date of the termination of Executive’s employment without regard to any continuation of Base Salary or other payment to Executive following such Termination Date.

6.2 Restricted Stock Grants. The restricted stock grants made pursuant to that certain Restricted Stock Award Agreement by and between the Company (or its successor or affiliate) and Executive dated as of January 1, 2014 shall vest in accordance with the terms of such agreement.

6.3 Survival of Obligations. Provisions of this Agreement shall survive any termination of Executive’s employment hereunder, including termination of this Agreement upon the expiration of the Term, if so provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions, including without limitation the obligations of Executive under Sections 7 and 8 hereof and the obligations of the Company under Section 5.

7. Confidential Information, Ownership of Information, Inventions, Work Product, and Restricted Covenants .

employment. Executive will comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any person or entity or use, other an as required by applicable law or for the proper performance of his duties and responsibilities to the Company and its Affiliates, any Confidential Information obtained by Executive incident to his employment by the Company or any of its Affiliates.

7.2 Safeguard and Return of Documents . All documents, records, tapes, and other media of every kind and description relating to the business, present or otherwise, of the Company or its Affiliates, and any copies, in whole or in part, thereof (the “ Documents ”), whether or not prepared by Executive, shall be the sole and exclusive property of the Company and its Affiliates. Executive shall safeguard all Documents and shall surrender to the Company at the time his employment terminates all Documents then in Executive’s possession or control with the exception of this Agreement or other documents related to Executive’s compensation or benefits.

7.3 Ownership of Information, Inventions and Original Work . Executive agrees that any creative works, discoveries, developments, designs, software, computer programs, inventions, improvements, modifications, enhancements, know-how, formulation, concept, methods, processes, or idea which is made, conceived, created, developed or reduced to practice by Executive, either alone or with others (collectively referred to as “ Work Product ”) is the exclusive property of the Company if:

(a) It was conceived or developed in any part on Company time;

(b) Any equipment, facilities, materials, or Confidential Information of the Company was used in its conception or development; or

(c) It (i) relates, at the time of conception or reduction to practice, to the Company’s business, (ii) relates, at the time of conception or reduction of practice, to a research or development project of the Company that was demonstrably anticipated or existed prior to or at the time of the termination of Executive’s service to the Company and/or its subsidiaries, or (iii) results from any work performed by Executive for the Company. Notwithstanding Section 7.3(c)(i), if the foregoing intellectual property described in Section 7.3(c)(i) is conceived, developed or reduced to practice entirely after the latest to occur of the time at which: (A) the Executive is no longer employed by the Company and (B) the Executive is no longer serving as a director on the Board, then such intellectual property shall not constitute Work Product.

Executive agrees to assist the Company in obtaining a patent or copyrights on such Work Product and to provide such documentation and assistance as is necessary for the Company to obtain such patent or copyright. Executive shall maintain adequate written records of such Work Product in such format as may be specified by the Company. Such records will be available to and remain the sole property of the Company at all times.

7.4 Restrictive Covenants . Executive acknowledges that, in order to effectuate the promise to hold Confidential Information in trust for the Company and in order to protect the Company’s legitimate business interests (which include, but are not limited to, continuation of contracts and relationships with its customers, its reputation, its competitive advantage and its goodwill), it is necessary to enter into the following restrictive covenants. Without the prior written consent of the Company, Executive shall not, during the Restricted Period:

(a) directly or indirectly manage, operate, control, participate in, consult with, render services for or in any manner engage in any business or enterprise (including any division, group or franchise of a larger organization), whether as a proprietor, owner, member, partner, stockholder, director, officer, employee, consultant, joint venturer, investor, sales representative or other participant, in which the Company or any of its subsidiaries engaged at any time during the two year period immediately preceding the date Executive’s employment with the Company and its subsidiaries terminates (or the date of determination if the date of determination is prior to the date Executive’s employment with the Company and its subsidiaries terminated) or engages or proposes to engage as of such termination date (or the date of determination if the date of determination is prior to the date Executive’s employment with the Company and its subsidiaries terminated), in each case, anywhere in any State where the Company or one of its subsidiaries maintained an office immediately preceding such termination date (or the date of determination if the date of determination is prior to the date Participant’s employment with the Company and its subsidiaries terminated);

(b) directly or indirectly induce or attempt to induce any employee of the Company or any of its subsidiaries to leave the employ of such entity;

(c) subject to the restrictions of any applicable law, directly or indirectly induce or attempt to induce any established customer of the Company or any of its subsidiaries to cease doing business with, or materially alter its business relationship with, such entity;

(d) directly or indirectly solicit the sale of goods or services, or a combination thereof, to established customers of the Company or any of its subsidiaries; or

(e) make or solicit or encourage others to make or solicit directly or indirectly any derogatory or negative statement or communication about the Company, its subsidiaries or any of their respective businesses, products, services or activities; provided , however , that the restriction set forth in this clause (e) will not prohibit truthful testimony compelled by valid legal process. Notwithstanding the foregoing, the Executive shall not be prohibited from owning up to one percent of the outstanding stock of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation.

limitation, execute and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Work Product to the Company and to permit the Company to enforce any patents, copyrights, or other proprietary rights to the Work Product. All copyrightable works that Executive creates in the course of his employment by the Company shall be considered “work made for hire.”

9. Enforcement of Covenants . Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its subsidiaries and their trade secrets and Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent Executive from obtaining other suitable employment during the period in which Executive is bound by the restraints. Executive agrees that, before providing services, whether as an employee or consultant, to any entity during the Restricted Period, Executive will provide a copy of Articles 7, 9, and 18 to such entity. Executive acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and its subsidiaries, that Executive has sufficient assets and skills to provide a livelihood while such covenants remain in force and that, as a result of the foregoing, in the event that Executive breaches such covenants, monetary damages would be an insufficient remedy for the Company and equitable enforcement of the covenant would be proper. Executive therefore agrees that the Company, in addition to any other remedies available to it, will be entitled to preliminary and permanent injunctive relief against any breach by Executive of any of those covenants, without the necessity of showing actual monetary damages or the posting of a bond or other security. Executive and the Company further agree that, in the event that any provision of Article 7 is determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, that provision will be deemed to be modified to permit its enforcement to the maximum extent permitted by law. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in Article 7 and that Executive will reimburse the Company and its subsidiaries for all costs (including reasonable attorneys’ fees) incurred in connection with any action to enforce any of the provisions of Article 7 if Executive challenges the reasonability or enforceability of any of the provisions of Article 7, it being understood and agreed that a dispute as to whether Executive’s conduct in fact violates or violated the terms of Article 7 is not, by itself, a challenge regarding the reasonableness or enforceability of Article 7. It is also agreed that each of the Company’s subsidiaries will have the right to enforce all of Executive’s obligations to that subsidiary under this Agreement, including without limitation pursuant to Article 7.

10. Assignment and Succession .

10.1 No Assignment by Executive . This Agreement is personal to Executive and shall not be assignable by Executive.

10.2 Succession . This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

11 . Notices . All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if given in writing and (i) delivered personally, (ii) mailed by certified or registered mail, return receipt requested and postage prepaid, (iii) sent via a nationally recognized overnight courier or (iv) sent via facsimile confirmed in writing as follows:

If to the Company:

Paycom Software, Inc.

7501 W. Memorial Road, MS 320

Oklahoma City, OK 73142

Attention: Board of Directors

If to Executive:

Mr. Chad Richison

23700 N. Pennsylvania Ave.

Edmond, OK 73025

or to such other address or addresses as either party shall have designated in writing to the other party hereto, provided, however, that any notice sent by certified or registered mail shall be deemed delivered on the date of delivery as evidenced by the return receipt.

12. Severability . If any portion or provision of this Agreement shall, to any extent, be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application or such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

13. Waiver . No waiver of such provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

14 . Entire Agreement . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of Executive’s employment, including Section 5(e) of the Securities Purchase Agreement dated July 2, 2007 by and among WCAS Paycom Holdings, Inc., Paycom Payroll, LLC, Ernest Group, Inc., The Ruby Group, Inc., Executive, Shannon Rowe, William Kerber and Henry J. Binkowski and excluding only any agreements governing the rights and obligations of the Company and Executive with respect to the securities of the Company, and any Company-provided separate benefit or severance plans, all of which remain in full force and effect in accordance with their terms.

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by Executive and by an expressly authorized representative of the Board.

16. Headings . The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

17. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

18. Governing Law and Forum Selection . This Agreement shall be construed, and the legal relations between the parties determined, in accordance with the laws of the State of Delaware, without regard to its conflicts of law rules. To the extent that a court of competent jurisdiction concludes that application of Delaware law to all or part of Section 7.4 is contrary to Oklahoma public policy or statutes, Executive acknowledges that this Agreement relates to Executive’s sale of the goodwill of the Company, as defined in 15 O.S. § 218, and agrees to comply with Sections 7.4(a)-(b) to the fullest extent permitted by law.

19. Attorney’s Fees . The Company agrees to pay or reimburse Executive for the reasonable attorney fees incurred by Executive in connection with the review of this Agreement and any related documents, up to a maximum of Fifteen Thousand Dollars and Zero Cents ($15,000.00). Such payment will be made promptly following the date Executive executes this Agreement with the Company, upon receipt by the Company of an appropriate invoice from the attorney for the fees with respect to such review

20. Section 409A of the Code .

(a) To the extent (i) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code; (ii) Executive is deemed at the time of his separation from service to be a “specified employee” under Section 409A of the Code; and (iii) at the time of Executive’s separation from service the Company is publicly traded (as defined in Section 409A of Code), then such payments (other than any payments permitted by Section 409A of the Code to be paid within six (6) months of Executive’s separation from service) shall not be made until the earlier of (x) the first day of the seventh month following Executive’s separation from service or (y) the date of Executive’s death following such separation from service. During any period that payment or payments to Executive are deferred pursuant to the foregoing, Executive shall be entitled to interest on the deferred payment or payments at a per annum rate equal to Federal-Funds rate as published in The Wall Street Journal on the date of Executive’s termination of employment with the Company. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this Section 19 (together with accrued interest thereon) shall be paid to Executive or Executive’s beneficiary in one lump sum.

(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Section 409A of the Code).

(c) For purposes of Section 409A of the Code, each payment under Section 5 hereof (and each other severance plan payment) will be treated as a separate payment.

(d) Any reimbursement of expenses made under this Agreement. shall only be made for eligible expenses incurred during the Term, and no reimbursement of any expense shall be made by the Company after December 31st of the year following the calendar year in which the expense was incurred. Any amount eligible for reimbursement under this Agreement during a taxable year may not affect expenses eligible for reimbursement in any other taxable year, and any right to reimbursement under this Agreement is not subject to liquidation or exchange for another benefit.

(e) It is intended that this Agreement comply with the provisions of Section 409A of the Code and the regulations and guidance of general applicability issued thereunder so as to not subject Executive to the payment of additional interest and taxes under Section 409A of the Code, and in furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions.

*************

IN WITNESS WHEREOF, the parties have executed this Executive Employment Agreement as of the date first set forth above.


EXECUTIVE				PAYCOM SOFTWARE, INC.

/s/ Chad Richison				/s/ Robert Minicucci
Chad Richison				By: Robert Minicucci
				Title: Chairman of the Board of Directors

Exhibit 10.5

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“ Agreement ”) is entered into by and between Paycom Software, Inc. (the “ Company ”) and Craig Boelte (“ Executive ”). This Agreement is entered on December 30, 2013 and, other than with respect to Article 7 which shall be effective upon execution of this Agreement by each of the parties hereto, is effective on, and not effective until January 1, 2014 (the “ Effective Date ”).

WHEREAS, the operations of the Company and its Affiliates (defined below) are a complex matter requiring direction and leadership in a variety of arenas;

WHEREAS, Executive possesses certain experience and expertise that qualify him to provide the direction and leadership required by the Company and its Affiliates;

WHEREAS, the Company and Executive acknowledge and confirm that this Agreement arises from and is integrally related to Executive’s sale of the goodwill of a business to the Company; and,

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company therefore wishes to employ Executive as an officer of the Company in the role as its Chief Financial Officer, and Executive wishes to accept such employment;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree:

1. Definitions . The following capitalized terms shall have the meanings set forth below.

1.2 “ Board ” shall mean the Board of Directors of the Company.

1.3 “ Cause ” shall mean, with respect to Executive, any of the following: (a) the repeated failure of Executive to perform such duties as are lawfully requested by the Chief Executive Officer, (b) the failure by such Executive to observe all reasonable, lawful material policies of the Company and its subsidiaries applicable to Executive and communicated to Executive in writing, (c) any action or omission constituting gross negligence or willful misconduct of such Person in the performance of his or her duties, (d) the material breach by

Executive of any provision of Executive’s employment or the breach by Executive of any non-competition, non-solicitation or similar restrictive agreement with the Company or any of its subsidiaries, (e) any act or omission by Executive constituting fraud, embezzlement, disloyalty or dishonesty with respect to the Company or its subsidiaries, (f) the use by Executive of illegal drugs or repetitive abuse of other drugs or repetitive excess consumption of alcohol interfering with the performance of Executive’s duties, or (g) the commission by Executive of any felony or of a misdemeanor involving dishonesty, disloyalty or moral turpitude.

1.5 “ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

1.6 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

1.7 “ Compensation Committee ” means the Compensation Committee of the Board.

3. Capacity and Performance .

3.1 During the Term, Executive shall serve the Company as its Chief Financial Officer and shall report directly to the Chief Executive Officer. During the Term, Executive shall be employed by the Company on a full-time basis and shall perform such duties and responsibilities, consistent and customary with the position of Chief Financial Officer, on behalf of the Company and its Affiliates as may reasonably be designated from time to time by the Chief Executive Officer.

any other competitive business activity or serve in any competitive industry, trade, professional, governmental, or academic position during his employment with the Company, except as may be expressly approved by the Board in writing. The foregoing shall not limit Executive’s right to: (a) serve on civic or charitable boards or committees or up to two corporate boards that are not engaged in business competition with the Company; (b) engage in such activities as are reasonably necessary to monitor and protect his interests as a minority stockholder in other companies, to the extent a reasonably prudent minority stockholder would be expected to engage in such activities; and (c) invest Executive’s personal assets in such manner as will not require any material services by Executive in the operation of the entities in which such investments are made, to the extent such activities do not individually or in the aggregate interfere with the discharge of Executive’s duties hereunder in a matter so that such activities will not prevent Executive from fulfilling Executive’s obligations to the Company hereunder.

4. Compensation and Benefits . As compensation for all services performed by Executive during the Term, Executive shall receive the following:

4.1 Base Salary . During the Term, the Company shall pay Executive a base salary at a rate not less than Two Hundred Ninety-One Thousand Six Hundred Dollars and Zero Cents ($291,600.00) per year, less any and all lawful withholdings or deductions, payable in accordance with the payroll practices of the Company for its executives, and subject to increases from time to time as may be approved by the Board (“ Base Salary ”).

4.4 Company Automobile. During the Term, the Company shall provide Executive use of a Company automobile with a lease value of up to One Thousand Five Hundred Dollars and Zero Cents ($1,500.00) per month for Executive’s business or personal use, less any required taxes or withholdings.

4.5 Other Benefits . Executive shall be entitled to participate in or receive benefits under the Company’s Executive Benefit Plan and any plan or arrangement made available from time to time by the Company to its employees generally (including any health, dental, vision, disability, life insurance, 401k, or other retirement programs) (“ Benefits ”). Any such plan or

arrangement shall be revocable and subject to termination or amendment at any time only in accordance with the terms and conditions of such plans or arrangements, without recourse by Executive, provided that no such termination or amendment shall disadvantage Executive or his wife or dependents disproportionately to any other participants therein (except as may be required by laws or regulations, such as those related to “top-heavy” or “top hat” plans).

4.6 Business Expenses . The Company shall pay or reimburse Executive for all reasonable, customary and necessary business expenses incurred or paid by Executive in the performance of his duties and responsibilities hereunder, subject to any maximum annual limit and other restrictions on such expenses set by the Board and to such reasonable substantiation and documentation as may be specified by the Company from time to time.

4.7 Clawback. Executive acknowledges and agrees that any compensation or benefits paid to Executive by the Company, pursuant to this Agreement or otherwise, shall be subject to recovery by the Company in accordance with Section 304 of the Sarbanes-Oxley Act of 2002 or any other clawback law or regulation applicable to executives of the Company, if any, as amended from time to time.

5.2 Disability .

5.4 By the Company Without Cause . During the Term, the Company may terminate Executive’s employment without Cause at any time. If Executive’s employment is terminated by the Company without Cause following the initial Public Offering then, in addition to paying Executive the Final Compensation and subject to Executive’s compliance with Article 7 in all material respects, the Company shall: (a) continue to pay Executive the Base Salary at the rate in effect on the Termination Date during the Restricted Period, with the first payment being on the Company’s next regular payroll period which is at least eight (8) business days following the effective date of the Release (defined below) (provided that if the 60-day time period for the Release begins in one taxable year and ends in a subsequent taxable year, the first payment shall be paid in the subsequent taxable year (for example, if Executive terminates on December 1, then the first payment shall not be paid until on or after January 1 of the next year, regardless of when the Release is returned)); (b) continue Executive’s health insurance benefits for the Restricted Period (at a cost no less favorable than that paid by Executive immediately prior to the Termination Date) or the economic equivalent thereto if such continuation is not permissible under the terms of the Company’s health insurance plan or would otherwise expose the Company to tax or other penalties; and (c) pay Executive an amount equal to the pro rata amount of the Bonus Executive would have earned for the year in which the termination occurred, based on the Company’s performance for the entire fiscal year in which the termination occurred relative to the performance measurements that were pending at the time of termination and to be used to determine Executive’s bonus for such year. Any such prorated Bonus shall be payable at such time or times as bonuses are payable to the other executives of the Company (the benefits, which the parties acknowledge are not required by law, outlined in Section(s) 5.4(a), (b) and (c) are collectively referenced as the “ Severance ”). Any obligation of the Company to provide Executive the Severance is conditioned on Executive signing, delivering to the Company and not revoking a release, in a form acceptable to the Company (the “ Release ”), within sixty (60) days of his Termination Date, which Release in any event will require Executive to reaffirm his obligations and commitments to the Company under Section 7 of this Agreement.

(a) any material reduction by the Company in Executive’s Base Salary without Executive’s prior consent;

6 . Effect of Termination

7. Confidential Information, Ownership of Information, Inventions, Work Product, and Restricted Covenants .

7.1 Confidential Information . Executive acknowledges that the Company and its Affiliates continually develop Confidential Information, that Executive may develop Confidential Information for the Company or its Affiliates, and that the Company has and will continue to provide Executive with Confidential Information during the course of his employment. Executive will comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any person or entity or use, other an as required by applicable law or for the proper performance of his duties and responsibilities to the Company and its Affiliates, any Confidential Information obtained by Executive incident to his employment by the Company or any of its Affiliates.

(a) It was conceived or developed in any part on Company time;

(b) Any equipment, facilities, materials, or Confidential Information of the Company was used in its conception or development; or

(b) directly or indirectly induce or attempt to induce any employee of the Company or any of its subsidiaries to leave the employ of such entity;

(d) directly or indirectly solicit the sale of goods or services, or a combination thereof, to established customers of the Company or any of its subsidiaries; or

8. Assignment of Rights to Work Product . Executive shall promptly and fully disclose all Work Product to the Company. Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) Executive’s full right, title and interest in and to all Work Product. Executive agrees to execute any and all applications for domestic and foreign patents, copyrights, or other proprietary rights and to do such other acts (including, without limitation, execute and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Work Product to the Company and to permit the Company to enforce any patents, copyrights, or other proprietary rights to the Work Product. All copyrightable works that Executive creates in the course of his employment by the Company shall be considered “work made for hire.”

those covenants, without the necessity of showing actual monetary damages or the posting of a bond or other security. Executive and the Company further agree that, in the event that any provision of Article 7 is determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, that provision will be deemed to be modified to permit its enforcement to the maximum extent permitted by law. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in Article 7 and that Executive will reimburse the Company and its subsidiaries for all costs (including reasonable attorneys’ fees) incurred in connection with any action to enforce any of the provisions of Article 7 if Executive challenges the reasonability or enforceability of any of the provisions of Article 7, it being understood and agreed that a dispute as to whether Executive’s conduct in fact violates or violated the terms of Article 7 is not, by itself, a challenge regarding the reasonableness or enforceability of Article 7. It is also agreed that each of the Company’s subsidiaries will have the right to enforce all of Executive’s obligations to that subsidiary under this Agreement, including without limitation pursuant to Article 7.

10. Assignment and Succession .

10.1 No Assignment by Executive . This Agreement is personal to Executive and shall not be assignable by Executive.

10.2 Succession . This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

If to the Company:

Paycom Software, Inc.

7501 W. Memorial Road, MS 320

Oklahoma City, OK 73142

Attention: Board of Directors

If to Executive:

Mr. Craig Boelte

16812 Conifer Lane

Edmond, OK 73012

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by Executive and by an expressly authorized representative of the Board.

16. Headings . The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

17. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

20. Section 409A of the Code .

(c) For purposes of Section 409A of the Code, each payment under Section 5 hereof (and each other severance plan payment) will be treated as a separate payment.

*************

IN WITNESS WHEREOF, the parties have executed this Executive Employment Agreement as of the date first set forth above.


EXECUTIVE				PAYCOM SOFTWARE, INC.

/s/ Craig Boelte				/s/ Robert Minicucci
Craig Boelte				By: Robert Minicucci
				Title: Chairman of the Board of Directors

Exhibit 10.6

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“ Agreement ”) is entered into by and between Paycom Software, Inc. (the “ Company ”) and Jeffrey York (“ Executive ”). This Agreement is entered on December 30, 2013 and, other than with respect to Article 7 which shall be effective upon execution of this Agreement by each of the parties hereto, is effective on, and not effective until January 1, 2014 (the “ Effective Date ”).

WHEREAS, the operations of the Company and its Affiliates (defined below) are a complex matter requiring direction and leadership in a variety of arenas;

WHEREAS, Executive possesses certain experience and expertise that qualify him to provide the direction and leadership required by the Company and its Affiliates;

WHEREAS, the Company and Executive acknowledge and confirm that this Agreement arises from and is integrally related to Executive’s sale of the goodwill of a business to the Company; and,

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company therefore wishes to employ Executive as an officer of the Company in the role as its Chief Sales Officer, and Executive wishes to accept such employment;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree:

1.	Definitions . The following capitalized terms shall have the meanings set forth below.

1.2 “ Board ” shall mean the Board of Directors of the Company.

1.5 “ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

1.6 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

1.7 “ Compensation Committee ” means the Compensation Committee of the Board.

3. Capacity and Performance .

3.1 During the Term, Executive shall serve the Company as its Chief Sales Officer and shall report directly to the Chief Executive Officer. During the Term, Executive shall be employed by the Company on a full-time basis and shall perform such duties and responsibilities, consistent and customary with the position of Chief Sales Officer, on behalf of the Company and its Affiliates as may reasonably be designated from time to time by the Chief Executive Officer.

4. Compensation and Benefits . As compensation for all services performed by Executive during the Term, Executive shall receive the following:

4.1 Base Salary . During the Term, the Company shall pay Executive a base salary at a rate not less than Three Hundred Fifty-Six Thousand Four Hundred Dollars and Zero Cents ($356,400.00) per year, less any and all lawful withholdings or deductions, payable in accordance with the payroll practices of the Company for its executives, and subject to increases from time to time as may be approved by the Board (“ Base Salary ”).

4.2 Bonus. Subject to the provisions of this Section 4.2, Executive shall be eligible to earn an annual bonus of 75% of his Base Salary (or such larger amount approved by the Compensation Committee) (the “ Target Bonus ”) in accordance with the Company’s bonus plan applicable to executive officers of the Company. The actual amount of the bonus payable with respect to a fiscal year (the “Bonus” ) shall be determined by the Compensation Committee, in its sole discretion, and shall be paid in accordance with the plans, policies and procedures adopted by the Compensation Committee from time to time.

5.2 Disability .

(a) any material reduction by the Company in Executive’s Base Salary without Executive’s prior consent;

6 . Effect of Termination

7. Confidential Information, Ownership of Information, Inventions, Work Product, and Restricted Covenants .

(a) It was conceived or developed in any part on Company time;

(b) Any equipment, facilities, materials, or Confidential Information of the Company was used in its conception or development; or

(b) directly or indirectly induce or attempt to induce any employee of the Company or any of its subsidiaries to leave the employ of such entity;

(d) directly or indirectly solicit the sale of goods or services, or a combination thereof, to established customers of the Company or any of its subsidiaries; or

10. Assignment and Succession .

10.1 No Assignment by Executive . This Agreement is personal to Executive and shall not be assignable by Executive.

10.2 Succession . This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

If to the Company:

Paycom Software, Inc.

7501 W. Memorial Road, MS 320

Oklahoma City, OK 73142

Attention: Board of Directors

If to Executive:

Mr. Jeffrey York

255 Whistling Duck Lane

Double Oak, TX 75077

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by Executive and by an expressly authorized representative of the Board.

16. Headings . The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

17. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

20. Section 409A of the Code .

(c) For purposes of Section 409A of the Code, each payment under Section 5 hereof (and each other severance plan payment) will be treated as a separate payment.

*************

IN WITNESS WHEREOF, the parties have executed this Executive Employment Agreement as of the date first set forth above.


EXECUTIVE				PAYCOM SOFTWARE, INC.

/s/ Jeffrey York				/s/ Robert Minicucci
Jeffrey York				By: Robert Minicucci
				Title: Chairman of the Board of Directors

Exhibit 10.7

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“ Agreement ”) is entered into by and between Paycom Software, Inc. (the “ Company ”) and William Kerber (“ Executive ”). This Agreement is entered on December 30, 2013 and, other than with respect to Article 7 which shall be effective upon execution of this Agreement by each of the parties hereto, is effective on, and not effective until January 1, 2014 (the “ Effective Date ”).

WHEREAS, the operations of the Company and its Affiliates (defined below) are a complex matter requiring direction and leadership in a variety of arenas;

WHEREAS, Executive possesses certain experience and expertise that qualify him to provide the direction and leadership required by the Company and its Affiliates;

WHEREAS, the Company and Executive acknowledge and confirm that this Agreement arises from and is integrally related to Executive’s sale of the goodwill of a business to the Company; and,

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company therefore wishes to employ Executive as an officer of the Company in the role as its Chief Informational Officer, and Executive wishes to accept such employment;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree:

1. Definitions . The following capitalized terms shall have the meanings set forth below.

1.2 “ Board ” shall mean the Board of Directors of the Company.

1.5 “ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

1.6 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

1.7 “ Compensation Committee ” means the Compensation Committee of the Board.

3. Capacity and Performance .

3.1 During the Term, Executive shall serve the Company as its Chief Informational Officer and shall report directly to the Chief Executive Officer. During the Term, Executive shall be employed by the Company on a full-time basis and shall perform such duties and responsibilities, consistent and customary with the position of Chief Informational Officer, on behalf of the Company and its Affiliates as may reasonably be designated from time to time by the Chief Executive Officer.

4. Compensation and Benefits . As compensation for all services performed by Executive during the Term, Executive shall receive the following:

4.2 Bonus. Subject to the provisions of this Section 4.2, Executive shall be eligible to earn an annual bonus of 75% of his Base Salary (or such larger amount approved by the Compensation Committee) (the “ Target Bonus ”) in accordance with the Company’s bonus plan applicable to executive officers of the Company. The actual amount of the bonus payable with respect to a fiscal year (the “ Bonus ”) shall be determined by the Compensation Committee, in its sole discretion, and shall be paid in accordance with the plans, policies and procedures adopted by the Compensation Committee from time to time.

5.2 Disability .

(a) any material reduction by the Company in Executive’s Base Salary without Executive’s prior consent;

6 . Effect of Termination

7. Confidential Information, Ownership of Information, Inventions, Work Product, and Restricted Covenants .

(a) It was conceived or developed in any part on Company time;

(b) Any equipment, facilities, materials, or Confidential Information of the Company was used in its conception or development; or

(b) directly or indirectly induce or attempt to induce any employee of the Company or any of its subsidiaries to leave the employ of such entity;

(d) directly or indirectly solicit the sale of goods or services, or a combination thereof, to established customers of the Company or any of its subsidiaries; or

10. Assignment and Succession .

10.1 No Assignment by Executive . This Agreement is personal to Executive and shall not be assignable by Executive.

10.2 Succession . This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

If to the Company:

Paycom Software, Inc.

7501 W. Memorial Road, MS 320

Oklahoma City, OK 73142

Attention: Board of Directors

If to Executive:

Mr. William Kerber

4201 W. Memorial Road, Apt. 7208

Oklahoma City, OK 73134

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by Executive and by an expressly authorized representative of the Board.

16. Headings . The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

17. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

20. Section 409A of the Code .

(c) For purposes of Section 409A of the Code, each payment under Section 5 hereof (and each other severance plan payment) will be treated as a separate payment.

*************

IN WITNESS WHEREOF, the parties have executed this Executive Employment Agreement as of the date first set forth above.


EXECUTIVE				PAYCOM SOFTWARE, INC.

/s/ William Kerber				/s/ Robert Minicucci
William Kerber				By: Robert Minicucci
				Title: Chairman of the Board of Directors

Exhibit 10.8

CONSOLIDATED, AMENDED AND

RESTATED LOAN AGREEMENT

between

KIRKPATRICK BANK,

an Oklahoma banking association,

as Lender,

and

PAYCOM PAYROLL, LLC,

a Delaware limited liability company,

as Borrower

TABLE OF CONTENTS


			Page

1.	DEFINITIONS			2

	1.1	Account Security Agreements		2
	1.2	Affiliate		2
	1.3	Agreement		2
	1.4	Annual Debt Service		2
	1.5	Architect		2
	1.6	Assignment		2
	1.7	Buildings		2
	1.8	Business Day		2
	1.9	Code		2
	1.10	Collateral Assignments		2
	1.11	Construction Account		3
	1.12	Construction Consultant		3
	1.13	Construction Contract		3
	1.14	Construction Project		3
	1.15	Contractor		3
	1.16	Dollars		3
	1.17	ERISA		3
	1.18	Event of Default		3
	1.19	Financing Statements		3
	1.20	Fixed Charge		3
	1.21	Governmental Authority		3
	1.22	Hazardous Substances Indemnity Agreement and HSIA		3
	1.23	Indebtedness		3
	1.24	Liability		4
	1.25	Loan		4
	1.26	Loan Documents		4
	1.27	Mortgage		4
	1.28	Mortgaged Property		4
	1.29	Note		4
	1.30	OERB		4
	1.31	PBGC		4
	1.32	Person		4
	1.33	Project Budget		4
	1.34	Project Cost		4
	1.35	Real Property		5
	1.36	Request for Funds		5
	1.37	Subordination Agreements		5
	1.38	Substantial Completion		5
	1.39	Term Loan Commencement Date		5
	1.40	UCC		5
	1.41	$12,761,000.00 Loan		5

2.	LENDING AGREEMENT			5

3.	BORROWER’S NOTE			6

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4.	COLLATERAL SECURITY		6

	4.1	Security Documents Covering Mortgaged Property	6
	4.2	Security Agreements Covering Borrower’s Pledged Accounts With Lender	6
	4.3	Assignment and Subordination of Architectural Agreement and Construction Contract	6
	4.4	Additional Documents	7

5.	CONDITIONS OF LENDING		7

	5.1	No Events of Default	7
	5.2	Loan Documents and HSIA	7
	5.3	Existence and Authority of Borrower	7
	5.4	Recording of Security Documents	7
	5.5	Establishment of Construction Account	8
	5.6	Title Evidence	8
	5.7	Survey	8
	5.8	Flood Hazard Certification	8
	5.9	Appraisal	8
	5.10	Insurance	9
	5.11	Zoning and Use	11
	5.12	Permits	11
	5.13	Plans and Specifications	11
	5.14	Financial Information	11
	5.15	Environmental Site Assessments; Hazardous Substances Indemnity Agreement	11
	5.16	Geotechnical Report	12
	5.17	Loan Fees	12
	5.18	Architectural Agreement and Construction Contract	12
	5.19	Opinion of Borrower’s Counsel	12
	5.20	Construction Schedule; Subcontractors and Suppliers	12
	5.21	Compensating Balance	12

6.	REPRESENTATIONS AND WARRANTIES		13

	6.1	Existence and Authority of Borrower	13
	6.2	Conflicting Agreements and Restrictions	13
	6.3	Actions and Proceedings	13
	6.4	Financial Condition	13
	6.5	Full Disclosure	14
	6.6	No Violation of Applicable Law	14
	6.7	Permits	14
	6.8	Place of Business and Certain Records	14
	6.9	No Defaults	14
	6.10	Ownership of Mortgaged Property; Liens	14
	6.11	ERISA	14
	6.12	Taxes	15
	6.13	Compliance with Federal Reserve Board Regulations	15
	6.14	Investment Company Act; Public Utility Holding Company Act	15
	6.15	Availability of Utility Services	15
	6.16	Survival of Representations	15

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7.	BORROWER’S AFFIRMATIVE COVENANTS		15

	7.1	Financial Statements	15
	7.2	Taxes	15
	7.3	Maintenance	16
	7.4	Compliance with Laws	16
	7.5	Further Assurances	16
	7.6	Performance of Obligations	16
	7.7	Payment of Taxes	16
	7.8	Lender’s Access	16
	7.9	Litigation	16
	7.10	Notification of Liens	16
	7.11	Events with Respect to ERISA	17
	7.12	Other Notifications	17
	7.13	Post-Foundation and Post-Completion Surveys	17
	7.14	Use of Funds in Construction Account	17
	7.15	Testing of Materials	17

8.	BORROWER’S NEGATIVE COVENANTS		18

	8.1	Creation or Existence of Liens	18
	8.2	Loans to and Transactions With Affiliates	18
	8.3	Restriction on Leasing of Mortgaged Property	18
	8.4	Limitation on Dividends, Loans and Distributions of Funds	18
	8.5	Limitation on Contingent Liabilities	18
	8.6	Changes to Method of Accounting	18
	8.7	Sale-Leaseback Transactions	18
	8.8	Construction Issues	19
	8.9	Modification of Limited Liability Company Documents	19
	8.10	Transfer of Property	19
	8.11	Funded Debt Limitation	19
	8.12	Debt Coverage Ratio	19

9.	ADMINISTRATION OF LOAN		19

	9.1	Purpose	19
	9.2	Compliance with Project Budget	19
	9.3	Request for Funds	20
	9.4	Additional Information	20
	9.5	Lender’s Inspection	20
	9.6	Disbursements	21
	9.7	Termination of Advances	21

10.	EVENTS OF DEFAULT		21

	10.1	Nonpayment of Note	21
	10.2	Other Nonpayment	21
	10.3	Breach of Covenants	21
	10.4	Default Under Funded Debt Limitations or Ratio of EBITDA/(CMLTD + Interest Expense + Distributions	21
	10.5	Bankruptcy	22
	10.6	Governmental Requirements	22
	10.7	Representation	22
	10.8	Event of Default Under Other Loan Documents	22

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11.	REMEDIES		22

	11.1	Acceleration of Note	22
	11.2	Selective Enforcement	22

12.	GENERAL PROVISIONS		23

	12.1	Expenses	23
	12.2	Notices	23
	12.3	Amendment and Waiver	24
	12.4	Non-Waiver; Cumulative Remedies	24
	12.5	Assignment	24
	12.6	Financing Publicity	24
	12.7	No Partnership	24
	12.8	Descriptive Headings	24
	12.9	Integrated Agreement	24
	12.10	Time of Essence	24
	12.11	Binding Effect	25
	12.12	Third-Party Beneficiary	25
	12.13	Right to Defend	25
	12.14	Loan Participation Agreement	25
	12.15	Indemnity	25
	12.16	Survival of Representations and Warranties	26
	12.17	No Waiver; Consents	26
	12.18	Counterparts	26
	12.19	Incorporation of Recital Paragraphs	26
	12.20	Incorporation of Exhibits	26
	12.21	Government Regulations	26
	12.22	Applicable Law	27
	12.23	Consent to Jurisdiction	27
	12.24	Waiver of Jury Trial	28

Exhibits

“A” - Description of Real Property

“B” - Description of $12,220,000 Loan Documents

“C” - Description of $541,000 Loan Documents

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CONSOLIDATED, AMENDED AND RESTATED LOAN AGREEMENT

THIS CONSOLIDATED, AMENDED AND RESTATED LOAN AGREEMENT is made and entered into effective as of (but not necessarily on) the 15 day of December, 2011, by and between KIRKPATRICK BANK, an Oklahoma banking association (“Lender”), and PAYCOM PAYROLL, LLC , a Delaware limited liability company (“Borrower”), with reference to the following:

(a) Lender has previously signed and delivered to Borrower (i) that certain Loan Agreement, dated May 7, 2010, under which Lender loaned to Borrower $12,220,000.00 to finance (A) the Borrower’s acquisition of fourteen (14) acres of land located North of Kilpatrick Turnpike and East of Council Road in Oklahoma City, Oklahoma, and more particularly described on Exhibit “A” attached to this Loan Agreement and incorporated herein by this reference to Exhibit “A,” and (B) Borrower’s construction of a 90,000 square foot office building situated on the above-referenced fourteen (14) acres of land (the “$12,220,000.00 Loan”), (ii) that certain $12,220,000.00 Promissory Note, dated May 7, 2010 (the “$12,220,000.00 Promissory Note”), and (iii) that certain Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated May 7, 2010, securing the $12,220,000.00 Promissory Note, and recorded in Book 11362, beginning at page 174, of the real property records of the County Clerk of Oklahoma County, Oklahoma. The 90,000 square foot office building has been completed and is occupied. The documents which evidence and secure the $12,220,000.00 Loan are listed on Exhibit “B” attached to this Agreement and incorporated herein by this reference to Exhibit “B.”

(b) Lender has also previously signed and delivered to Borrower (i) that certain Loan Agreement dated March 23, 2011, under which Lender loaned to Borrower $541,000.00 to finance the Borrower’s construction of an 11,500 square foot free standing gymnasium building (the “$541,000.00 Loan”), (ii) that certain $541,000.00 Promissory Note, dated March 23, 2011 (the “$541,000.00 Promissory Note”), and (iii) that certain Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated March 23, 2011, securing the $541,000.00 Promissory Note, and recorded in Book 11598, beginning at page 580, of the real property records of the County Clerk of Oklahoma County, Oklahoma. The documents which evidence and secure the $541,000.00 Loan are (A) listed on Exhibit “C” attached to this Agreement and incorporated herein by this reference to Exhibit “C,” and (B) the terms of financing of the gymnasium building continue under this Agreement and the other loan documents signed concurrently with this Agreement.

(c) Lender and Borrower have agreed (i) to consolidate the $12,220,000.00 Promissory Note (which has an unpaid principal balance of $11,183,536.28) and the $541,000.00 Promissory Note (which has an unpaid principal balance of $69,742.55) into a $12,761,000.00 Consolidated, Amended and Restated Promissory Note (the “$12,761,000.00 Promissory Note”), for all purposes set forth in this Agreement, and (ii) to amend, as needed, the terms and provisions of the Loan Documents listed on Exhibits “B” and “C” attached to this Agreement.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower covenant and agree as follows:

1. DEFINITIONS . Unless the context otherwise requires and except as otherwise may be provided herein, (i) accounting and financial terms used in this Agreement shall have the meanings ascribed to such terms by generally accepted accounting principles in effect from time to time, applied on a consistent basis, as set forth in opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or Statements of the Financial Accounting Standards Board which may be applicable in the circumstances as of the date involved, (ii) definitions contained in the Code (herein defined) shall apply to terms, words and phrases used herein, except that in case of any conflict between definitions contained in Article 9 of the Code and other definitions in the Code, the Article 9 definitions shall apply, (iii) the singular shall be deemed to include the plural and the plural shall be deemed to include the singular, and (iv) the terms as used herein shall be construed and controlled by the following definitions:

1.1 Account Security Agreements . “Account Security Agreements” shall have the meaning assigned to that term in paragraph 4.2 of this Agreement.

1.2 Affiliate . “Affiliate” shall mean any person or entity (including, without limitation, an individual, a corporation, a limited liability company, a partnership, a trust, or an incorporated association), which has a relationship with Borrower whereby either such person or Borrower directly or indirectly controls or is controlled by or is under common control with the other, or holds or beneficially owns five percent (5%) or more of the equity interest in the other or five percent (5%) or more of any class of voting securities of the other, and shall, in addition, include all members in Borrower.

1.3 Agreement . “Agreement,” and such terms as “herein,” “hereof,” “hereto,” “hereby,” “hereunder” and the like shall mean and refer to this Loan Agreement, together with any and all Exhibits attached hereto, and any and all supplements, modifications or amendments hereof.

1.4 Annual Debt Service . “Annual Debt Service” shall mean the required annual principal and interest payments for a loan.

1.5 Architect . “Architect” shall mean HSE Architects PLLC, an Oklahoma professional limited liability company.

1.6 Assignment . “Assignment” shall have the meaning ascribed to such term in paragraph 4.1 of this Agreement.

1.7 Buildings . “Buildings” shall mean the completed 90,000 square foot office building situated on the Real Property and an 11,500 square foot free standing gymnasium building which is to be completed on the northeast comer of the Real Property. The Real Property and the Buildings are owned by Borrower.

1.8 Business Day . Business Day shall have the meaning assigned to that term in the Note.

1.9 Code . “Code” shall mean the Uniform Commercial Code of Oklahoma, as the same may from time to time be in effect.

1.10 Collateral Assignments . “Collateral Assignments” shall have the meaning assigned to that term in paragraph 4.3 of this Agreement.

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1.11 Construction Account . “Construction Account” shall have the meaning assigned to that term in paragraph 5.5 of this Agreement.

1.12 Construction Consultant . “Construction Consultant” shall mean the individual or entity selected by Lender, in Lender’s sole discretion and at Borrower’s cost, to inspect the Construction Project, review all plans, construction budgets, time lines, permits, contracts, supporting documentation and information, and to advise Lender in regard to all aspects of the Construction Project.

1.13 Construction Contract . “Construction Contract” shall mean the contract between Borrower and the Contractor, for the Construction Project, which contract is subject to Lender’s review and approval.

1.14 Construction Project . “Construction Project” shall mean construction of an 11,500 square foot free standing gymnasium building, and related improvements, pursuant to plans and specifications and the Project Budget approved by Lender, and located on the Real Property.

1.15 Contractor . “Contractor” shall mean Clyde Riggs Construction, L.L.C., an Oklahoma limited liability company, which shall serve as Borrower’s general contractor for the Construction Project.

1.16 Dollars . “Dollars” and “$” shall mean lawful money of the United States of America.

1.17 ERISA . “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and as in effect from time to time.

1.18 Event of Default . “Event of Default” shall mean the occurrence of any of the events specified in paragraph 10 of this Agreement.

1.19 Financing Statements . “Financing Statements” shall have the meaning ascribed to that term in paragraph 4.1 of this Agreement.

1.20 Fixed Charge . “Fixed Charge” shall mean the coverage ratio defined as EBITDA/(CPLTD+Int Expt Distributions).

1.21 Governmental Authority . “Governmental Authority” shall mean any nation or government, any federal, state, local or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

1.22 Hazardous Substances Indemnity Agreement and HSIA . “Hazardous Substances Indemnity Agreement” and “HSIA” shall each mean the Hazardous Substances Indemnity Agreement which will be signed pursuant to paragraph 4.4 of this Agreement.

1.23 Indebtedness . “Indebtedness” shall mean and include all liabilities, obligations or indebtedness of Borrower to Lender of every kind and description, now existing or hereafter incurred, direct or indirect, absolute or contingent, due or to become due, matured or unmatured, and whether or not of the same or a similar class or character as the Loan and whether or not contemplated by Lender or Borrower, together with future

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advances and all extensions and renewals, and including (without limiting the generality of the foregoing) all indebtedness of Borrower to Lender arising out of or related to the Loan, the Note, this Agreement or any other of the Loan Documents.

1.24 Liability . “Liability” shall mean any claim on the assets of a Person, excluding ownership equity.

1.25 Loan . “Loan” shall mean the $12,761,000.00 loan to be made to Borrower by Lender as provided in paragraph 2 of this Agreement.

1.26 Loan Documents . “Loan Documents” shall mean collectively this Agreement, the Note, the Mortgage, the Financing Statements, the Account Security Agreements, the Account Financing Statements, the Assignment, the Collateral Assignments, the Subordination Agreement, the Assignment of Permits, and all other instruments and documents executed or issued or to be executed or issued pursuant to this Agreement or any of said documents or in connection with the Loan, and all amendments, modifications, extensions and renewals of any of the foregoing documents.

1.27 Mortgage . “Mortgage” shall have the meaning ascribed to that term in paragraph 4.1 of this Agreement.

1.28 Mortgaged Property . “Mortgaged Property” shall have the meaning ascribed to such term in the Mortgage, and includes, without limitation, the Real Property described on Exhibit “A” attached to this Agreement and incorporated herein. The Mortgaged Property does not include the property or funds of Borrower’s unaffiliated clients and/or customers.

1.29 Note . “Note” shall mean the Promissory Note in the principal amount of Twelve Million Seven Hundred Sixty-One Thousand and No/100 Dollars ($12,761,000.00) to be executed by Borrower to the order of Lender to evidence the Loan, as provided in paragraph 3 of this Agreement, which Note shall be in the form prescribed by Lender.

1.30 OERB . “OERB” shall mean Oklahoma Energy Resources Board.

1.31 PBGC . “PBGC” shall mean the Pension Benefit Guaranty Corporation as established pursuant to Section 4002 of ERISA or any successor thereto or substitute therefor under ERISA.

1.32 Person . “Person” shall mean any individual, corporation, company, joint venture, association, partnership, trust, unincorporated organization, Governmental Authority or other entity.

1.33 Project Budget . “Project Budget” shall mean Borrower’s detailed budget for financing of the Real Property, for design and construction of the gymnasium on the Real Property, and for all other costs related to or associated with the Construction Project, a copy of which Project Budget is attached to this Agreement as Exhibit “B” and incorporated herein.

1.34 Project Cost . “Project Cost” shall mean the total cost of the Construction Project.

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1.35 Real Property . “Real Property” shall mean the certain real property located in Oklahoma County, Oklahoma, which is more particularly described on Exhibit “A” attached to this Agreement and incorporated herein by reference.

1.36 Request for Funds . “Request for Funds” shall mean the Request of Funds described in paragraph 9.3 of this Agreement.

1.37 Subordination Agreements . “Subordination Agreements” shall mean the Subordination Agreements described in paragraphs 4.3 and 4.4 of this Agreement.

1.38 Substantial Completion . “Substantial Completion” or “Substantially Complete” shall mean completion of the Construction Project to the point that it is legally ready for occupancy and use, as evidenced by all required governmental permits, licenses and final certificates of occupancy and by certificates of substantial completion signed by Borrower, the Architect, the Contractor, the Construction Consultant and any inspector that Lender may, in its discretion, retain at Borrower’s expense.

1.39 Term Loan Commencement Date . “Term Loan Commencement Date” shall be the date on which the Note evidencing the Loan converts to a so-called “mini-term loan.” The Term Loan Commencement Date for the Loan shall be the first (1 ^st ) day of the first (1 ^st ) month after all of the following requirements are completed to the satisfaction of Lender: (i) the Construction Project has been substantially completed, (ii) Borrower has delivered to Lender a final “as-built” survey of the Mortgaged Property which is in form, scope and substance acceptable to Lender, (iii) Borrower has delivered to Lender prepaid property, liability, business interruption, worker’s compensation insurance, and other required insurance covering the Mortgaged Property, all in amount, form, scope and substance satisfactory to Lender, (iv) Borrower has delivered to Lender Certificates of Occupancy issued for the Construction Project and for occupancy of the premises, and (v) Borrower has accepted the free standing gymnasium. The Borrower’s failure to satisfy, prior to December 2, 2011, the requirements for the Term Loan Commencement Date, will result in termination of the Lender’s obligation to provide an eighty-four (84) month mini-perm loan. In addition, Borrower’s failure to satisfy all of the conditions required to achieve the Term Loan Commencement Date as of the date set forth above shall constitute an Event of Default under this Agreement, the Note and the other Loan Documents; and the unpaid principal balance of the Note, all accrued and unpaid interest, after default interest, late charges and other fees, costs and expenses payable by Borrower to Lender, including, but not limited to, reasonable attorney’s fees and costs, shall be due and payable.

1.40 UCC . “UCC” shall mean the Uniform Commercial Code of the State of Oklahoma.

1.41 $12,761,000.00 Loan . “$12,761,000.00 Loan” shall mean that certain $12,761,000.00 Loan, between Lender and Borrower, and evidenced by this Agreement, and all of the other documents identified in this Agreement which evidence, secure and otherwise support the $12,761,000.00 Loan.

2. LENDING AGREEMENT . Subject to the terms, provisions, covenants and agreements set forth in this Agreement, Lender and Borrower hereby consolidate the $12,220,000.00 Loan and the $541,000.00 Loan into a $12,761,000.00 Loan, which will be

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evidenced by a $12,761,000.00 Promissory Note, which $12,761,000.00 Loan shall be used by Borrower for the purpose of (i) continuing the refinance of the 90,000 square foot office building, (ii) paying contractors, architects, engineers, mechanics, materialmen, laborers, service agencies and suppliers pursuant to the terms of contracts for construction of the Construction Project, i.e. the gymnasium, for services in fact performed and materials purchased for and either incorporated into the Construction Project or suitably stored on the Real Property for later incorporation, (iii) reimbursing Lender for expenses incurred by Lender pursuant to this Agreement, and (iv) paying other costs which are incidental or related to the cost of completing or financing the Construction Project; provided , however , notwithstanding any other language set forth in this Agreement or any of the other Loan Documents, Loan proceeds shall not be used (a) to pay more than $541,000.00 for the gymnasium and its parking areas and driveways, or (b) to pay interest, Loan fees, late charges, after default interest and/or any other similar costs, as determined by Lender.

3. BORROWER’S NOTE . The Loan shall be evidenced by the Note, which Note shall be signed by Borrower and delivered to Lender concurrently with execution of this Agreement.

4. COLLATERAL SECURITY . The performance of all covenants and agreements contained in this Agreement and in the other documents executed or delivered as a part of this transaction, and the payment of the Note shall be secured as follows:

4.1 Security Documents Covering Mortgaged Property . Borrower shall grant to Lender a mortgage covering all of the Mortgaged Property and a security interest in all personal property relating to such Mortgaged Property, including, without limitation, all generators located on the Mortgaged Property, which mortgage and security interest shall be evidenced by a Consolidated, Amended and Restated Mortgage, Security Agreement, Assignment of Leases, Rents & Profits and Fixture Filing (the “Mortgage”) in the form prescribed by Lender. Borrower authorizes Lender to complete and file in appropriate records Financing Statements (the “Financing Statements”), in the form prescribed by Lender, in order to perfect the security interest granted in the Mortgage. Borrower shall assign to Lender all leases of the Mortgaged Property and all of the rents, issues and profits of the Mortgaged Property, which assignment shall be evidenced by an Assignment of Leases, Rents and Profits (the “Assignment”) in the form prescribed by Lender.

4.2 Security Agreements Covering Borrower’s Pledged Accounts With Lender . Borrower shall grant to Lender (i) a security interest in the Construction Account, which security interest shall be evidenced by a Security Agreement (the “Security Agreement-Construction Account”) in the form prescribed by Lender, and (ii) a security interest in that certain Liquidity Account No. 10234777 having a minimum balance of $250,000.00 (the “Security Agreement-Liquidity Account”).

4.3 Assignment and Subordination of Architectural Agreement and Construction Contract . Borrower previously signed, and caused the Architect to sign, and delivered to Lender a Collateral Assignment of Architectural Agreement in the form prescribed by Lender; and Borrower signed, and caused the Contractor to sign, and delivered to Lender a Collateral Assignment of Construction Contract in the form prescribed by Lender (collectively, the “Collateral Assignments”). Borrower also previously provided to Lender (i) a Subordination Agreement in the form prescribed by Lender, signed and acknowledged by the Architect for the Construction Project, and (ii) a Subordination Agreement in the form prescribed by Lender, signed and acknowledged by the Contractor. Borrower shall provide Affirmations of the Architect and the Contractor relating to all of their respective agreements referenced in this paragraph 4.3.

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4.4 Additional Documents . Borrower shall sign and deliver to Lender a Hazardous Substances Indemnity Agreement in the form prescribed by Lender. Borrower shall also sign and deliver an Assignment of Permits, Licenses and Approvals, an Assignment of Service Agreements and Maintenance Contracts, a Security Agreement covering the Borrower’s Construction Account with Lender, a Closing Certificate, and such other documents as may be required by Lender to evidence and secure the Loan, all of which will be in the forms prescribed by Lender. In addition, Borrower shall cause its manager of the Mortgaged Property to sign a Subordination Agreement in form prescribed by Lender. Any and all collateral documents executed by Borrower in favor of Lender as security for any indebtedness of Borrower to Lender shall also expressly secure Borrower’s obligations hereunder and under the Note and all documents which secure payment of the Note.

5. CONDITIONS OF LENDING . The obligation of Lender to perform this Agreement and to make an initial or any future advance under the Note is subject to the performance and satisfaction of the conditions precedent listed below:

5.1 No Events of Default . There shall not have occurred and be continuing any Event of Default, and the representations and warranties set forth in the Loan Documents shall be true and accurate in all material respects.

5.2 Loan Documents and HSIA . This Agreement, the Note, the Mortgage, the Financing Statements, the Assignment, the Account Security Agreements, the Assignment of Permits, Licenses and Approvals, the Assignment of Contracts and Maintenance Agreements, the Collateral Assignments, the Subordination Agreements and all other Loan Documents required by Lender and the HSIA, in order to make the initial advance or any future advance under the Note, shall be duly authorized, executed and delivered to Lender.

5.3 Existence and Authority of Borrower . Borrower shall provide to Lender the following documents relating to Borrower: (i) a Certificates of Good Standing from the Secretary of State of Delaware and the Secretary of State of Oklahoma, (ii) a Delaware Secretary of State certified copy of the transcript of the Certificate of Limited Liability Company of Borrower, together with all amendments thereto, (iii) an Oklahoma Secretary of State certified copy of the qualification of Borrower to transact business in Oklahoma, (iv) a certified copy of the Operating Agreement of Borrower and all amendments thereto, and (v) a Certificate of Limited Liability Company Authority evidencing, in a manner and with text acceptable to Lender, the authority of the President of Borrower to sign this Agreement and all other Loan Documents and to perform its obligations hereunder and thereunder.

5.4 Recording of Security Documents . The Mortgage, the Financing Statement for recording in Oklahoma County, Oklahoma, and the Assignment shall be recorded in the real property records of the County Clerk of Oklahoma County, Oklahoma. The Financing Statement for filing in the “central” UCC records of the State of Oklahoma shall be filed in the UCC records of the County Clerk of Oklahoma County, Oklahoma. Borrower shall provide to Lender UCC search report on Borrower and/or such other evidence as Lender may require to evidence that the priority of the security interest perfected by the Financing Statements are second only to the UCC financing Statements which were filed and recorded by Lender in connection with the $12,761,000.00 Loan.

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5.5 Establishment of Construction Account . All funding under the Loan shall be advanced through the account (“Construction Account”) which Borrower has established with Kirkpatrick Bank before the date of this Agreement, into which the proceeds of the Lender’s Loan to Borrower (but no other funds) shall be deposited as such proceeds are advanced and from which Borrower shall make only payments permitted under the terms of this Agreement.

5.6 Title Evidence . Prior to closing of the Loan, Borrower shall provide to Lender (i) a Commitment for Title Insurance, together with copies of all documents listed in Schedule (or part) I and all documents listed in Schedule (or Part) II of the Commitment for Title Insurance, (ii) a proforma loan policy of title insurance, together with proforma endorsements required by Lender, (iii) a Closing Protection Letter from the title insurance company which is to provide a loan policy of title insurance covering Lender’s Mortgage, (iv) an ALTA Loan Policy of Title Insurance 2006, in form and substance acceptable to Lender, issued by a title insurance company acceptable to Lender, evidencing that Borrower has good and marketable fee simple title to the Mortgaged Property, subject only to those matters described in Exhibit “B” attached to the Mortgage. The loan policy of title insurance shall not include an exception based upon mechanics’ and materialmen’s liens, or any exceptions based on discrepancies, conflicts in boundary lines, shortage in area, encroachments or other facts which would be disclosed by a proper survey. The loan policy of title insurance must be accompanied by such endorsements thereto as may be required by Lender or its counsel, including, but not limited to, an access and entry endorsement, a comprehensive endorsement, a contiguity endorsement, an endorsement deleting the arbitration provision, an environmental lien endorsement, a subdivision endorsement, a survey endorsement, a variable rate endorsement, and a zoning endorsement. The premiums for the loan policy of title insurance and all endorsements shall be paid by Borrower prior to or at the time of the advancement under the Note.

5.7 Survey . Borrower shall deliver to Lender a current ALTA/ACSM Land Title Survey (2005) of the Real Property, prepared by a surveyor approved by Lender, which survey shall delineate all property lines, shall locate all improvements on the Real Property, shall show easements benefitting and/or affecting the Real Property and identify them by book and page of recording, shall show adjoining streets and access ways, and shall show all other physical matters affecting the title and use of the Real Property. The form of surveyor’s certificate shall be acceptable to Lender and shall enable the issuer of the required loan policy of title insurance to delete all survey exceptions.

5.8 Flood Hazard Certification . Borrower shall provide to Lender a flood hazard certificate in form, scope and substance acceptable to Lender and evidencing that the Mortgaged Property does not lie in a flood hazard area.

5.9 Appraisal . Borrower shall pay for an independent appraisal of the Mortgaged Property by an appraiser selected and approved by Lender’s appraisal committee, which appraisal must (i) comply with the standards set forth by the Oklahoma Banking Department and (ii) reflect that the Loan does not exceed eighty percent (80%) of the appraisal value of the Mortgaged Property or eighty-five percent (85%) of the cost of the Construction Project, whichever is less. (Additional appraisals may be required by Lender due to changes in regulatory policies and/or changes in the Mortgaged Property.)

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5.10 Insurance . Prior to commencement of the Construction Project, Borrower shall obtain, and furnish to Lender satisfactory evidence of insurance on the Mortgaged Property and evidence of payment of all premiums for such insurance, which insurance shall at all times comply with all of the requirements set forth in the Mortgage. Specifically, Borrower shall maintain Borrower’s builder’s risk insurance for the full completed project insurable value of the Construction Project (“Builder’s Risk Insurance”), which Builder’s Risk Insurance (i) shall meet the same requirements as Special Perils Insurance (herein defined), with whatever limits and coverage extensions Lender requires, (ii) shall be written on a “Completed Value” Form (100% non-reporting) or its equivalent and shall include an endorsement granting permission to occupy and (iii) shall cover loss of materials, equipment, machinery, and supplies whether on-site, in transit, or stored off-site, or of any temporary structure, hoist, sidewalk, retaining wall or underground property, all soft costs, plans, specifications, blueprints and models, and demolition and increased costs of construction, including costs arising from changes in laws at the time of restoration, and coverage for operation of building at the time of restoration, all subject to a sublimit satisfactory to Lender. Upon completion of the Construction Project, Borrower shall furnish to Lender satisfactory evidence of insurance on the Mortgaged Property and evidence of payment of all premiums for such insurance, which insurance shall at all times comply with all of the requirements set forth in the Mortgage. Borrower covenants and agrees to deposit with Lender and to maintain throughout the term of the Note original policies of insurance, issued by insurance companies satisfactory to Lender, in such amounts and against such risks as required by Lender, including but not limited to the following: (a) Borrower shall maintain a policy against all risks of loss to the Mortgaged Property customarily covered by “All Risk” or “Special Perils Form” policies as available in Oklahoma County, Oklahoma (collectively, “Special Perils Insurance’), in amounts and with insurers acceptable to Lender, in its sole discretion, but not less than the greater of the Secured Indebtedness (as defined in the Mortgage) or one hundred percent (100%) of the full replacement value of the Mortgaged Property, all improvements thereon, and all improvements, betterments and contents thereof, including, but not limited to, all fixtures, furnishings and equipment located in or about such improvements, which Special Perils Insurance (i) shall cover at least the following perils: building collapse, fire, flood, hurricane, impact of vehicles and aircraft, lightning, malicious mischief, mudslide, subsidence, terrorism, vandalism, water damage, windstorm, hail and such other insurable perils as, under good insurance practices, other commercial property owners from time to time insure against for property and building(s) similar to the Mortgaged Property in height, location, nature, type of construction, and use, as evidenced by written advice from Lender’s insurance advisor; and (ii) shall contain an agreed amount endorsement or a coinsurance waiver and a replacement cost value endorsement without deduction for depreciation; (b) equipment and machinery (generally referred to as boiler and machinery) insurance covering all mechanical and electrical equipment against physical damage, rent loss, extra expense and expediting expense covering the Mortgaged Property and any insured leasehold property, which equipment and machinery insurance shall be maintained on a replacement cost value basis; (c) if required by Mortgagee, Borrower shall maintain a policy of business or rent interruption insurance on an “actual sustained basis” (“Business Interruption Insurance”), providing coverage against any loss of income by reason of any hazard referred to in this paragraph; in an amount sufficient to avoid any coinsurance penalty, but in any event for not less than at least twelve (12) months of (i) Borrower’s actual gross receipts from all sources of income from the Building located on the Mortgaged Property and (ii) all

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amounts which Borrower is required to pay to Lender or third parties pursuant to this Agreement, the Note, the Mortgage or any of the other Loan Documents; (d) Borrower shall maintain the following insurance for personal injury, bodily injury, death, accident and property damage: (i) public liability insurance, including commercial general liability insurance, (ii) owned (if any), hired, and non-owned automobile liability insurance, and (iii) umbrella liability insurance as necessary (collectively, “Liability Insurance”), which Liability Insurance shall provide coverage of at least $1,000,000.00 per occurrence and $2,000,000.00 in annual aggregate, per location, and if any Liability Insurance also covers other locations, with a shared aggregate limit, the minimum Liability Insurance shall be increased to $5,000,000.00; and in any event, the Liability Insurance shall include coverage for liability arising from premises and operations, elevators, escalators, independent contractors, contractual liability (including liability assumed under contracts and leases), and products and completed operations; (e) Borrower shall at all times maintain a policy of workers’ compensation and employers liability as required by applicable state law, together with satisfactory evidence of compliance with applicable state law requirements for workers’ compensation coverage; (f) Borrower shall at all times maintain a policy of flood and mudslide insurance in an amount equal to the lesser of the outstanding principal balance of the indebtedness secured hereby or the maximum amount of coverage made available with respect to the Mortgaged Property under the National Flood Insurance Program (or evidence satisfactory to Lender that the Mortgaged Property is not located in an area designated by the Secretary of Housing and Urban Development or any other governmental department agency, bureau, board or instrumentality as an area having special flood or mudslide hazards and that flood insurance is not required for this loan under the terms of any law, regulation or rule governing Lender’s activities); and (g) when and to the extent required by the Lender, Borrower shall maintain a policy or policies of insurance against any other risk or risks insured against by persons operating like properties in the locality of the Mortgaged Property. All insurance policies shall be issued by an insurance company having a rating of “A” VII or better by A.M. Best Co., in Best’s Rating Guide. Whenever any required insurance specifies any dollar amount, Lender may increase it periodically to reflect Lender’s reasonable estimate of inflation. All deductibles, coinsurance provisions, exceptions to coverage and policy forms must be acceptable to Lender in its sole subjective discretion. Each policy shall be a so-called “occurrence” policy of insurance. No insurance hereunder shall be a part of a “blanket” policy maintained by Borrower or any third party unless the policy expressly provides that the amount of insurance required under the Mortgage will in no way be prejudiced by other losses covered by such policy. Each policy of insurance required under this paragraph 5.10 shall provide that (i) the interest of Lender shall be insured regardless of any act or negligence by Borrower or any breach or violation by Borrower of any warranties, declarations or conditions of such policy, and (ii) the insurer under each policy of insurance required hereunder shall agree that any cancellation of its insurance policy or any endorsement of its insurance policy to effect a change in coverage for any reason shall not be effective until thirty (30) days after receipt by Lender of notice of such cancellation or such endorsement to effect a change in coverage. The Borrower further covenants and agrees that, regardless of the types or amounts of insurance required and approved by the Lender, Borrower will cause the Lender to be named as an additional insured in each policy of builder’s risk insurance and all policies of Liability Insurance, which shall be evidenced by endorsements acceptable to Lender; and the Borrower will assign and deliver to the Lender all policies of insurance which insure against any loss or damage to the Mortgaged Property, as collateral and further security for the Secured Indebtedness, which policies shall contain a mortgage clause in favor of Lender, naming Lender as “Mortgagee and Loss Payee” on a standard noncontributory mortgagee endorsement (or its equivalent) naming Lender or its designee

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as the party to receive insurance proceeds, and shall otherwise be in form, scope and substance acceptable to Lender. In addition, Borrower shall furnish to Lender duplicate copies of each policy of insurance at execution hereof, and copies of each renewal policy, together with receipts or other evidence that premiums have been paid. In the event of a casualty to the Mortgaged Property, all hazard insurance proceeds shall be paid to the Lender. Proceeds of insurance paid to the Lender shall, at the option of the Lender, be applied to payment of the Secured Indebtedness or made available to Borrower to pay for repair, restoration and rebuilding of the Mortgaged Property, as described in the Mortgage.

5.11 Zoning and Use . Borrower shall furnish to Lender satisfactory written evidence that the Real Property is presently zoned for its intended use and that the Real Property is in full compliance with all municipal ordinances, codes, rules or regulations. The Borrower’s confirmation of zoning shall include, without limitation, a title insurance Zoning Endorsement (ALTA 3.1-06) in form, scope and substance acceptable to Lender.

5.12 Permits . Borrower shall obtain and provide to Lender copies of all permits required for the Construction Project or any part thereof, including, without limitation, building permits issued by the City of Oklahoma City or Oklahoma County. Specifically, Borrower shall provide to Lender and its Construction Consultant, all required City of Oklahoma City Building Permits for the Construction Project, all in form, scope and substance acceptable to Lender and its Construction Consultant.

5.13 Plans and Specifications . Borrower shall submit for approval by Lender copies of the final plans and specifications for the Construction Project which have been approved in writing by Borrower, Borrower’s architect, Borrower’s contractor, and all applicable governmental authorities. Following approval by Lender, such plans and specifications shall not be substantially changed, without the prior written consent of Lender. Regardless of its review and approval of the plans and specifications, Lender shall have no responsibility, obligation or liability to Borrower or any other individual or entity based on, arising from or relating to any such review or approval, and Borrower shall at all times have exclusive control over its work on the Construction Project and sole responsibility for compliance with all governmental, quasi-governmental and private laws, rules, regulations, ordinances, codes, covenants, restrictions, easements and other matters which control, burden or apply to or otherwise affect the Mortgaged Property and/or the Construction Project.

5.14 Financial Information . Borrower shall submit to Lender in writing a satisfactory Project Budget which shall show all sources and uses of funds, and shall detail by line item all costs of acquisition of the Real Property and all costs of designing, constructing, franchising, and completing the Construction Project, and all costs of finishing, furnishing, equipping and opening the completed Construction Project for business. The Project Budget shall contain, without limitation, an interest reserve, a contingency reserve and a working capital reserve.

5.15 Environmental Site Assessments: Hazardous Substances Indemnity Agreement . Borrower has provided to Lender a Phase I Environmental Site Assessment of the Real Property, which identified surface contamination around a plugged oil well site; Borrower submitted for review and approval by Lender a Phase II Environmental Site Assessment of the Real Property directed to Lender; and Borrower has provided to Lender an OERB action plan for remediation of the contamination. Notwithstanding any

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language in this Agreement or any of the other Loan Documents, Lender shall not be obligated to fund any part of the Loan under this Agreement until all contamination of the Real Property has been remediated, as evidenced by a certification from the OERB and from an environmental engineer. Both the certification of remediation and the environmental engineer must be acceptable to Lender, and Borrower shall be responsible for payment of all environmental site assessments, the OERB action plan, all remediation of the contamination on the Real Property and all further inspections and certifications by an environmental engineer acceptable to Lender. In addition, Borrower shall sign and deliver to Lender a Hazardous Substances Indemnity Agreement on a form provided by Lender.

5.16 Geotechnical Report . Borrower shall submit for review and approval by Lender a geotechnical report covering the Real Property, which geotechnical report shall be in form, scope and substance acceptable to Lender.

5.17 Loan Fees . Borrower shall pay to Lender a loan origination fee of $95,707.50 at the closing of the Loan, which fee shall be deemed fully earned by Lender and nonrefundable at the time Lender signs the Loan Agreement to Borrower.

5.18 Architectural Agreement and Construction Contract . Borrower shall deliver to Lender for its review and approval the architectural agreement between Borrower, as owner, and the Architect for the Construction Project, which architectural agreement (i) must be in form, scope and substance acceptable to Lender, and (ii) must be subordinated to the Loan and the Loan Documents as described in paragraph 4.3 of this Agreement. Borrower shall deliver to Lender for its review and approval the fixed price Construction Contract between Borrower, as owner, and the Contractor for the Construction Project, which Construction Contract (i) must be in form, scope and substance acceptable to Lender, must be collaterally assigned to Lender as described in paragraph 4.3 of this Agreement, and (ii) must be subordinated to the Loan and Loan Documents as described in paragraph 4.3 of this Agreement by a Subordination Agreement.

5.19 Opinion of Borrower’s Counsel . Borrower shall provide Lender with a legal opinion from its counsel as to: (i) the due organization, powers and good standing of Borrower; (ii) to the best knowledge of Counsel after inquiry, the absence of any suits, proceedings or investigations pending, threatened against or affecting Borrower, any of which if adversely determined, would have a materially adverse effect on the financial condition, the business or the properties of Borrower; (iii) that Borrower has fully complied with all local, state, and federal requirements relative to the location and operation of the project as an office building; (iv) that the documents executed and provided by the Borrower pursuant to this Loan Commitment are fully authorized under all documents which evidence the creation, existence and good standing of the Borrower; and (v) that all Loan Documents have been duly executed by the Borrower, are the legal, valid and binding obligations of Borrower and are enforceable according to their respective terms. Closing of the Loan will evidence that Lender has received an acceptable opinion letter frm Borrower’s counsel.

5.20 Construction Schedule: Subcontractors and Suppliers . Within fourteen (14) days after the date of this Agreement, Borrower shall deliver to Lender (i) a complete, written construction schedule for the Construction Project, (ii) a list of all subcontractors and material suppliers, together with their respective addresses and main contracts, and (iii) a copy of every subcontract and material purchase order of $10,000.00 or more.

5.21 Compensating Balance . Borrower shall maintain with Lender, throughout the term of the Loan, a minimum balance of $4,000,000.00 in an account with Lender.

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6. REPRESENTATIONS AND WARRANTIES . In addition to all other representations and warranties of Borrower to Lender, Borrower represents and warrants that:

6.1 Existence and Authority of Borrower . Borrower is and will continue to be a limited liability company duly formed and validly existing under the laws of the State of Delaware, and is duly qualified to transact business in the State of Oklahoma; Borrower has full power, authority and legal right to own, manage and hold title to the Mortgaged Property and to occupy the Building, and Borrower has full and legal right, power and authority to enter into and carry out the provisions of this Agreement and all documents signed by Borrower pursuant to this Agreement, to borrow money, to give security for borrowing as required by this Agreement, and to consummate the transaction contemplated by this Agreement.

6.2 Conflicting Agreements and Restrictions . Borrower is not a party to any contracts or agreements or subject to any other restrictions which materially adversely affect its business, property, assets or financial condition. To the best of Borrower’s knowledge, neither the execution and delivery of the Loan Documents nor fulfillment and compliance with the terms and provisions thereof, (i) will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of any agreement, instrument, undertaking, judgment, decree, order, writ, injunction, statute, law, rule or regulation to which Borrower is subject or by which the Mortgaged Property is bound or affected, or (ii) will require any authorization, consent, license, approval or authorization of or other action by, or notice or declaration to, or registration with, any court or administrative or governmental department, commission, board, bureau, authority, agency or body (domestic or foreign), or, to the extent that any such consent or other action may be required, it has been validly procured or duly taken.

6.3 Actions and Proceedings . Borrower has not received notice of any action or proceeding against or investigation of Borrower, pending or threatened, which questions the validity of the Loan Documents, or which is likely to result in any material adverse change in the business or operations of Borrower or which in any way materially impairs or adversely affects the ability of Borrower to perform its obligations thereunder.

6.4 Financial Condition . The financial statements of Borrower which have been furnished to Lender, are correct and complete in all material respects and fairly reflect the financial condition of the Borrower as of the dates thereof. Said financial statements have been prepared in accordance with generally accepted accounting principles consistently applied through the periods involved therein, and to the best of Borrower’s knowledge, there has occurred no material adverse change in the financial condition of Borrower from the effective dates of said financial statements to the date hereof. Borrower does not have any contingent obligations, unusual or long-term commitments, unrealized or anticipated losses from any unfavorable commitment or liabilities for taxes not reflected in such financial statements which are individually or in the aggregate substantial in relation to the financial condition of Borrower.

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6.5 Full Disclosure . Neither the Loan Documents nor any statement or documents referred to therein, contemplated thereby or delivered to Lender by Borrower or any other party on its behalf contains or will contain any materially untrue statement, or omits or will omit to state a material fact necessary to make the statements therein not misleading.

6.6 No Violation of Applicable Law . To the best of its knowledge, information and belief, Borrower has not violated and is not violating any applicable statute, regulation or ordinance of the United States of America or any foreign country, or of any state, municipality or any other jurisdiction, or of any agency thereof in any respect materially adversely affecting its business, property, assets, operations or condition, financial or otherwise. To the best of its knowledge, information and belief, Borrower is in compliance with all statutes, rules, and regulations relating to environmental standards and controls in all jurisdictions where it is presently doing business.

6.7 Permits . To the best of its knowledge, Borrower has, or will be able to obtain, as needed, all governmental and private permits, certificates, consents and franchises which in any respect (i) are required for construction of the Building, completion of improvements in the Building, and the occupancy of the Building, (ii) are material to its business, property, assets, operations or condition, financial or otherwise, (iii) are necessary for it to carry on its business as now being conducted or as contemplated to be conducted, or (iv) are necessary for it to own, lease and operate the Mortgaged Property. All such governmental and private permits, certificates, consents and franchises are valid and subsisting, and to the best of its knowledge, information and belief, Borrower is not in violation thereof.

6.8 Place of Business and Certain Records . Borrower (i) presently keeps all of its records concerning its accounts and contract rights in its office at 7501 West Memorial Road, Oklahoma City, Oklahoma; (ii) intends to continue to keep the location of said records in its office in said city, county and state; and (iii) shall continue to keep said records in its office within said city, county and state or give Lender ten (10) days’ prior written notice of any relocation of its principal office to a location outside of Oklahoma City, Oklahoma, or concurrent written notice of any relocation of its principal office within Oklahoma City, Oklahoma.

6.9 No Defaults . To the best of its knowledge, information and belief, Borrower is not in default of or in breach in any respect under any material contract, agreement or instrument to which such Borrower is a party or by which it or any of its properties may be bound.

6.10 Ownership of Mortgaged Property; Liens . Borrower has good and marketable title to the Mortgaged Property, free and clear of all liens and encumbrances except as listed on Exhibit “B” attached to the Mortgage.

6.11 ERISA . To the best of its knowledge, information and belief, Borrower has not incurred any “accumulated funding deficiency” within the meaning of Section 302(a)(2) of ERISA with respect to any employee pension or other benefit plan or trust maintained by or related to Borrower. Borrower has not incurred any material liability to PBGC or otherwise under ERISA in connection with any such plan. No reportable event described in Sections 4042(a) or 4043(b) of ERISA with respect to any such plan has occurred.

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6.12 Taxes . Borrower has filed all federal, state, local, county and foreign tax returns required by law to be filed, and have paid all taxes, assessments and similar charges shown to be due and payable on said returns. At the date of this Agreement, no extensions of time are in effect to assessments of deficiencies for Federal income taxes of Borrower.

6.13 Compliance with Federal Reserve Board Regulations . No part of the proceeds of the Loan will be used, and no part of any loan repaid or to be repaid with the proceeds of the Loan was or will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or margin stock within the meaning of Regulations G or U of the Board of Governors of the Federal Reserve System, or in any manner or under any circumstances which would cause a violation by any person or entity of Regulations G, T, U or X of said Board. The assets of Borrower do not include any margin securities or margin stock and Borrower does not have any present intention of acquiring any such security or stock.

6.14 Investment Company Act; Public Utility Holding Company Act . Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and Borrower is not a “holding company,” a “subsidiary company” thereof or an “affiliate” of a “holding company” or of such a “subsidiary company,” each within the meaning of the Public Utility Holding Company Act of 1935, as amended.

6.15 Availability of Utility Services . All utility services necessary for the Mortgaged Property and for the use of the Real Property for the above-described Building. Such utility services include, without limitation, water supply, sanitary and storm sewers, and electric, gas, and telephone.

6.16 Survival of Representations . All representations and warranties made herein or in any other Loan Documents will survive the delivery of the Note and the making of the Loan, and any investigation at any time made by or on behalf of Lender shall not diminish Lender’s right to rely thereon. All statements contained in any certificate or other instrument delivered by or on behalf of Borrower under or pursuant to this Agreement or any other Loan Documents or in connection with the transactions contemplated hereby or thereby shall constitute representations and warranties made hereunder.

7. BORROWER’S AFFIRMATIVE COVENANTS . Until the payment in full of the Loan and unless Lender shall otherwise consent in writing, Borrower agrees to perform or cause to be performed the following:

7.1 Financial Statements . Borrower will maintain adequate and accurate books and records of account in accordance with sound accounting principles. Lender shall have the right to examine and copy such books and records, including all books and records relating to all or any part of the Mortgaged Property, to discuss the affairs, finances and accounts of Borrower and to be informed as to the same from time to time as Lender might reasonably request, but in any event quarterly. Borrower will furnish Lender with all of the financial statements, tax returns and other financial information as and when required under the terms of paragraph 11 of the Mortgage.

7.2 Taxes . Borrower will pay prior to delinquency all taxes, assessments, governmental charges or levies, and all claims for labor, materials, supplies,

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rent and other obligations which, if unpaid, might become a lien against its property, except to the extent Borrower is challenging any of the foregoing in good faith and with due diligence, and has posted all required bonds or has paid the contested items “under protest,” so that there shall not occur a foreclosure of any such liens.

7.3 Maintenance . Borrower will maintain its existence, remain in good standing in each jurisdiction in which it is required to be qualified or licensed, maintain all franchises, permits, intellectual properties and licenses necessary or useful in the operation of its business heretofore operated and as to be operated as contemplated hereby, maintain or cause to be maintained its properties in good and workable condition, repair, and appearance, and protect the same from deterioration, other than normal wear and tear, at all times.

7.4 Compliance with Laws . Borrower will comply with all statutes, laws, rules or regulations to which Borrower is subject or by which the Mortgaged Property is bound or affected, including without limitation, (i) ERISA, (ii) all Environmental Laws (as defined in the Mortgage), (iii) those pertaining to occupational health and safety standards, (iv) those pertaining to equal employment and credit practices and civil rights, and (v) those pertaining to its business or operations.

7.5 Further Assurances . Borrower will, from time to time, promptly cure any defects or omissions in the execution and delivery of, or the compliance with the Loan Documents, or the conditions described in paragraph 5 hereof, including the execution and delivery of additional documents reasonably requested by Lender.

7.6 Performance of Obligations . Borrower will pay the Note according to the reading, tenor and effect thereof and will do and perform every act and discharge all of the obligations provided to be performed and discharged under the Loan Documents at the time or times and in the manner therein specified.

7.7 Payment of Taxes . All taxes, assessments and governmental charges or levies imposed on Borrower or on Borrower’s assets, income or profits, will be paid on or prior to the delinquency date thereof.

7.8 Lender’s Access . Borrower will, during normal business hours and as often as Lender may reasonably request, permit any of Lender’s officers, and any authorized representatives of Lender, to visit and inspect any part of the Mortgaged Property.

7.9 Litigation . Borrower will promptly furnish Lender with written notice of any litigation of which Borrower receives actual notice involving Borrower as a defendant where the amount sued for or the value of property involved is in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00), or which, if the outcome were adverse to Borrower, could reasonably be expected to materially adversely affect the financial condition, business or operations of Borrower.

7.10 Notification of Liens . Borrower will notify Lender of the existence or asserted existence of any mortgage, pledge, lien, charge or encumbrance on any part of the Mortgaged Property, forthwith upon Borrower’s receiving actual notice thereof, excluding only: (i) encumbrances in favor of Lender; (ii) deposits to secure payment of worker’s compensation, unemployment insurance and similar benefits; and (iii) statutory liens arising in the ordinary course of Borrower’s business which secure current obligations of Borrower which are not in default.

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7.11 Events with Respect to ERISA . As soon as possible and in any event within thirty (30) days after Borrower knows or has reason to know that any reportable event described in Sections 4042(a) or 4043(b) of ERISA with respect to any employee pension or other benefit plan or trust maintained by or related to Borrower has occurred, or that PBGC has instituted or will institute proceedings under ERISA to terminate any such plan, Borrower will deliver to Lender (i) a certificate of a manager of Borrower setting forth details as to such event and the action which Borrower proposes to take with respect thereto, and (ii) a copy of any notice delivered by PBGC evidencing its intent to institute such proceedings. For all purposes of this covenant, Borrower shall be deemed to have all knowledge or knowledge of all facts attributable to the plan administrator of such plan under ERISA. Borrower will furnish to Lender (or cause such plan administrator to furnish to Lender) the annual report for each plan covered by ERISA maintained by or related to Borrower as filed with the Secretary of Labor not later than ten (10) days after the receipt of a request from Lender in writing for such report.

7.12 Other Notifications . Borrower will notify Lender as soon as practicable, but in any event within ten (10) days after Borrower knows that any of the following has occurred: (i) an Event of Default, (ii) any material adverse change in the nature of or any material part of the property comprising the Mortgaged Property, (iii) any material change in the accounting practices and procedures of Borrower, including a change in Borrower’s fiscal year, and (iv) any other event, occurrence or circumstance which indicates the reasonable likelihood of the occurrence of a material adverse change in the financial condition, business or operations of Borrower.

7.13 Post-Foundation and Post-Completion Surveys . Immediately after completion of the foundations of the Construction Project, Borrower shall furnish to Lender, in form and substance acceptable to Lender, a survey of the Real Property, conforming to Lender’s survey criteria, showing the location of all such foundations on the Real Property in addition to those items which are required to be shown by the Lender’s survey criteria, and showing no encroachment by such foundations over easements or property lines on the Property. Immediately after completion of the Construction Project, Borrower shall furnish to Lender, in form and substance acceptable to Lender, an update of the survey required in paragraph 5.7 of this Agreement, showing the location of all improvements on the Real Property in addition to those items which are required to be shown in the initial survey described in paragraph 5.7 and showing no encroachments of easements or property lines on the Real Property.

7.14 Use of Funds in Construction Account . Funds in the Construction Account shall be used solely for the purposes set forth in this Agreement.

7.15 Testing of Materials . Borrower shall cause Contractor to have all site, concrete and materials tested, and Borrower shall provide copies of all such tests to Lender together with Borrower’s Request for Funds.

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8. BORROWER’S NEGATIVE COVENANTS . Until payment in full of the Loan and unless Lender shall otherwise consent in writing, Borrower will not perform or permit to be performed any of the following acts:

8.1 Creation or Existence of Liens . Borrower will not create, assume or suffer to exist any mortgage, pledge, lien, charge or encumbrance on any of the properties of Borrower, personal or real, tangible or intangible, including without limitation the Mortgaged Property, excluding only: (i) encumbrances in favor of Lender; (ii) deposits to secure payment of workmen’s compensation, unemployment insurance and similar benefits; (iii) statutory liens, against which there are established reserves in accordance with generally accepted accounting principles; and (iv) liens covering tangible personal property which arise in the ordinary course of Borrower’s business and secure current obligations of Borrower which are not in default.

8.2 Loans to and Transactions With Affiliates . Except as previously disclosed in writing to Lender, and approved by Lender, Borrower will not make any loan, advance or other extension of credit, directly or indirectly, to or for the benefit of any Affiliate and will not enter into any other transaction, including, without limitation, the purchase, sale or exchange of property with any Affiliate. Borrower will not make any payments to an Affiliate for services performed or equipment or materials provided to the Mortgaged Property except to reimburse the Affiliate for its actual cost of performing such services or providing such equipment or materials, which actual cost shall not, in any event, exceed the amount that would be charged by a non-Affiliate under a bona fide, arm’s-length contract for performance of such services or provision of such equipment and materials. Borrower may retain an Affiliate to manage the Mortgaged Property under a management agreement or market and lease the property pursuant to a brokerage agreement on market terms, each of which is (i) expressly subordinate to the Mortgage and other Loan Documents and (ii) in form and substance reasonably acceptable to Lender.

8.3 Restriction on Leasing of Mortgaged Property . Notwithstanding any language in this Agreement or any of the other Loan Documents, Borrower shall not lease any part of the Mortgaged Property to a third party without the prior written consent of Lender.

8.4 Limitation on Dividends, Loans and Distributions of Funds . So long as an Event of Default exists under this Agreement or any of the other Loan Documents, Borrower will not, directly or indirectly, make, or become obligated to make, any distributions to members or set apart any sum or any of its assets for distributions to members, or make any loans or any other distribution of funds, by reduction of capital, or otherwise.

8.5 Limitation on Contingent Liabilities . Borrower will not, directly or indirectly, guarantee, agree to purchase or repurchase or provide funds in respect, or otherwise become or remain liable with respect to indebtedness of any character of any other person or entity.

8.6 Changes to Method of Accounting . Borrower will not make any material change in its methods of accounting for purposes of the reporting requirements of this Agreement, except as may be mandated by sound accounting principles.

8.7 Sale-Leaseback Transactions . Borrower will not make or permit the occurrence of any sale, transfer or disposition of any of the Mortgaged Property followed by Borrower’s leasing or rental of such property, or any portion thereof, as lessee.

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8.8 Construction Issues . Borrower shall not (i) incur or suffer to exist any delays in completion of the Construction Project, (ii) agree to any change order which would increase the cost of the Construction Project by $20,000.00 or more, or any change order(s) which, in the aggregate, would increase the cost of the Construction Project by $50,000.00 or more, or (iii) make any changes in the Construction Project to achieve cost savings without the prior written approval of Lender.

8.9 Modification of Limited Liability Company Documents . Borrower shall not participate in, suffer or permit the amendment, modification, restatement, cancellation or termination of any organizational document now or hereafter evidencing or relating to Borrower without the prior written consent of Lender in each case.

8.10 Transfer of Property . Until all indebtedness of Borrower to Lender is paid in full, Borrower shall not sell, transfer or convey all or any part of the Mortgaged Property or any interest therein, except Borrower’s leasing or rental of such property in the ordinary course of business, and Borrower shall not permit any change in the ownership of Borrower.

8.11 Funded Debt Limitation . Prior to the Term Loan Commencement Date, Borrower shall not incur funded outside debt (except for the $12,761,000.00 Loan provided under this Agreement. After the Term Loan Commencement Date, Borrower shall not incur funded debt in excess of $1,500,000.00 without the prior written approval of Lender.

8.12 Debt Coverage Ratio . The debt coverage ratio shall not exceed 1.5:1.00 EBITDA/(CMLTD + Interest Expense + Distributions).

9. ADMINISTRATION OF LOAN . Notwithstanding any language in this Agreement seemingly to the contrary, Borrower shall not be entitled to any disbursement of Loan proceeds hereunder unless and until Borrower has satisfied all of the conditions of lending set forth in paragraph 5 of this Agreement, including paragraph 5.19. Upon satisfaction of such conditions of lending to the satisfaction of Lender, Lender will make Loan disbursements up to the principal amount of the Loan provided that (i) Lender’s Construction Consultant shall have completed periodic inspection(s) of the Construction Project and shall have advised Lender in writing that work to date on the Construction Project is satisfactory, (ii) there is no uncured Event of Default under any of the Loan Documents, and (iii) all of the other requirements set forth in this Loan Agreement for advancement of loan proceeds are satisfied.

Subject to all of the terms, conditions and provisions of this Agreement, Lender shall make disbursements under the Loan in the following manner:

9.1 Purpose . The principal sum to be disbursed under the Note shall be used for the purposes set forth in paragraph 2 of this Agreement. The advance procedure set forth in this Agreement, including, without limitation all Requests for Funds signed by Borrower, shall apply to both the principal sum to be advanced under the Note and to any funds escrowed with Lender pursuant to an Escrow Agreement.

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the direct construction costs, plus the cost of the improvements and the estimated non- construction costs, exceed the amount of the Loan, then at the request of Lender, Borrower shall explain to Lender how the overage will be paid and will make arrangement for such payment in a manner satisfactory to Lender, before additional advances are made to Borrower. Such arrangements may include an additional cash investment by Borrower in the Construction Project. If an investment or deposits by the Borrower are required, such investment or deposits shall be made prior to any advance or additional advance by Lender of Loan proceeds.

9.3 Request for Funds . Disbursements will be made no more frequently than one (1) time per month and upon satisfactory inspection of the Construction Project by the Construction Consultant. Borrower shall deliver to Lender and the Construction Consultant a Request for Funds stating the amount of disbursement requested under the Note.

9.3.1 The Request for Funds (i) shall be made on the latest versions of the AIA G702 and G703 forms, (ii) shall be properly completed and signed by Borrower, Borrower’s general contractor and Borrower’s inspecting architect, and (iii) shall be delivered to Lender and the Construction Consultant at least five (5) days before the requested date of disbursement. The Request for Funds must be approved first by the Construction Consultant and then by Lender. All Requests for Funds shall be supported by copies of invoices or bills for all expenses for which a disbursement is requested, and all funding under the Loan shall be advanced through the Borrower’s Construction Account with Lender.

9.4 Additional Information . On request by Lender, each Request for Funds shall be accompanied by:

9.4.1 proof, satisfactory to Lender, that all invoices for labor and materials have been paid, except those contained in the current Request for Funds covering “hard costs;” and

9.4.2 lien waivers from all architects, professional engineers, landscape architects, land surveyors, contractors, mechanics, materialmen, landscapers and laborers; and

9.4.3 title information, in the form of an endorsement to the loan policies of title insurance held by Lender, which increases the amount of coverage to $12,761,000.00 and which confirms the first mortgage lien priority of the Mortgage, without additional matters affecting title to the Mortgaged Property.

All of the above information shall be obtained and submitted to Lender at Borrower’s expense.

9.5 Lender’s Inspection . If, for any reason, Lender deems it necessary to cause the Construction Project to be examined by the Construction Consultant or any other representative of Lender prior to making any advance, it shall have a reasonable time [not exceeding ten (10) Business Days] within which to do so, at Borrower’s cost, and Lender shall not be required to make any advance until such examination has been made. Regardless of inspections by the Construction Consultant or any other representative of Lender, Lender shall have no responsibility, obligation or liability to Borrower or any other individual or entity based on, arising from or relating to any such

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inspections, and Borrower shall at all times have exclusive control over work on the Construction Project and sole responsibility for compliance with all governmental, quasi- governmental and private laws, ordinances, rules, regulations, codes, covenants, restrictions, easements and other matters which control, burden, apply to or otherwise affect either part of the Mortgaged Property and/or the Construction Project.

9.6 Disbursements . Lender shall, on the date the requested advance is to be made or as soon thereafter as all conditions precedent to such advance have been satisfactorily met, deposit such advance in the Construction Account. Advances under the Note may, at the option of Lender, be recorded on the Note and/or by deposits to the Construction Account, and such records shall be conclusive evidence of all advances made under the Note. Borrower shall prepare checks on the Construction Account payable to the general contractor, subcontractors, and other vendors, for work completed to date on the Construction Project and covered by the Request for Funds, and Borrower will mail checks to vendors. Notwithstanding the foregoing disbursement procedure, upon the occurrence of an Event of Default hereunder or under the terms of any of the documents executed pursuant to this Agreement, Lender may, at its discretion, until such Event of Default is cured or for so long as required by the title company issuing the loan policy of title insurance required hereunder, make disbursements to itself for all sums payable by Borrower to Lender, make disbursements to the appropriate taxing authority to pay all unpaid taxes, make payments directly to insurers for all premiums due on insurance policies required hereunder, and make all other disbursements to a title company escrow account, and such title company will draw checks on such account for payment of the items approved by Lender. Any expense incurred because of the disbursement through a controlled title company escrow account shall be paid by Borrower.

9.7 Termination of Advances . At the option of Lender, advances shall not be made under the Note unless (i) this Agreement, the Note and the other Loan Documents are in full force and effect, and (ii) an Event of Default does not exist under the terms of this Agreement, the Note or any of the other Loan Documents.

10. EVENTS OF DEFAULT . The Events of Default listed in the Mortgage are incorporated in this Agreement by reference and made a part of this Agreement and shall constitute “Events of Default” hereunder and under each of the other Loan Documents. These Events of Default include, but are not limited to, the following:

10.1 Nonpayment of Note . Default in payment when due of any interest on or principal of the Note.

10.2 Other Nonpayment . Default in payment when due of any amount (other than principal and interest) payable to Lender under the terms of this Agreement or any amount payable to Lender under the terms of any other agreement between Borrower and Lender.

10.3 Breach of Covenants . Default by Borrower in the performance or observance of any covenant contained in this Agreement or any of the other Loan Documents, any other instrument delivered to Lender in connection with this Agreement, including, without limitation, the falsity or breach of any representation, warranty or covenant.

10.4 Default Under Funded Debt Limitations or Ratio of EBITDA/(CMLTD + Interest Expense + Distributions . Any failure of Borrower to comply with the funded debt limitations set forth in paragraph 8.11 of this Agreement or with the debt coverage ratio described in paragraph 8.12 of this Agreement.

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10.5 Bankruptcy . The institution of bankruptcy, reorganization, liquidation or receivership proceedings by or against Borrower.

10.6 Governmental Requirements . The issuance of any order, decree or judgment pursuant to any judicial or administrative proceeding declaring that all or any part of the Mortgaged Property is in violation of any law, ordinance, rule or regulation of any agency, department, commission, board, bureau or instrumentality of the municipality or county in which the Mortgaged Property is located.

10.7 Representation . Any representation, warranty, statement, certificate, schedule or report made or furnished to Lender by Borrower proves to be false or erroneous in any material respect at the time of the making thereof.

10.8 Event of Default Under Other Loan Documents . Any Event of Default occurs under the Note, the Mortgage, the Assignment, the Subordination Agreements or any of the other Loan Documents.

11. REMEDIES . Notwithstanding any language in this Agreement or in any of the other Loan Documents seemingly to the contrary, Lender will give to Borrower such notice of each Event of Default for which the Lender intends to take action under this Agreement or any of the other Loan Documents, and such opportunity to cure the Event of Default as may be required by the Note; provided , however , if Lender is required by any applicable law to provide notice of an Event of Default and opportunity to cure the Event of Default, the statutory cure period shall run concurrently with the above-referenced contractual provision for notice and opportunity to cure. Upon the occurrence of an Event of Default and the failure by Borrower to cure such Event of Default after such notice of the Event of Default and such opportunity to cure the Event of Default as may be required by the Note, Lender may, at its option:

11.1 Acceleration of Note . Declare the Note to be immediately due and payable whereupon the Note shall become forthwith due and payable without presentment, demand, protest or further notice of any kind, and Lender shall be entitled to proceed simultaneously or selectively and successively to enforce its rights under the Note, this Agreement and any of the other Loan Documents, or any one or all of them. Nothing contained herein shall limit Lender’s rights and remedies available under applicable laws.

11.2 Selective Enforcement . In the event Lender shall elect to selectively and successively enforce its rights under any of the Loan Documents, such action shall not be deemed a waiver or discharge of any other lien, encumbrance or security instrument securing payment of the Note until such time as Lender shall have been paid in full all sums advanced under the Note. The foreclosure of any lien provided pursuant to this Agreement without the simultaneous foreclosure of all such liens shall not merge the liens granted which are not foreclosed with any interest which Lender might obtain as a result of such selective and successive foreclosure.

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12. GENERAL PROVISIONS . Lender and Borrower agree as follows:

12.1 Expenses . Borrower agrees to pay all fees, expenses and charges in respect to the Loan contemplated by this Agreement, including, without limiting the generality thereof, the following:

12.1.1 reasonable fees and expenses of counsel employed by Lender in connection with closing or administration of the Loan and all fees and expenses actually incurred by counsel employed by Lender in regard to any litigation arising out of or relating to this transaction, each of the foregoing charged at such counsel’s customary billing rates and without regard to any statutory presumptions;

12.1.2 title insurance premiums and all expenses incidental to title insurance and title evidence;

12.1.3 recording and filing fees required by applicable law;

12.1.4 all fees and expenses of the Lender identified in the Mortgage, and any successor to the Lender;

12.1.5 fees and expenses of any appraisers who appraise the Mortgaged Property for Lender; and

12.1.6 other reasonable fees and expenses involved in the closing of this loan and the reasonable fees and expenses payable by Lender which are incidental to the enforcement or defense of this Agreement or any of the other Loan Documents.

12.2 Notices . Any notices or other communications required or permitted hereunder shall be in writing and sufficiently delivered and received for all purposes when delivered in person or deposited in the United States mail, by registered or certified mail, postage prepaid, return receipt requested and addressed as listed below or to such other address as the party concerned may substitute by written notice to the other. All notices shall be deemed received on the earlier of actual receipt or within three (3) days (excluding Saturdays, Sundays and holidays recognized by Oklahoma banking corporations headquartered in Oklahoma City, Oklahoma) after being mailed.


To Borrower:		Paycom Payroll, LLC
		7501 West Memorial Road
		Oklahoma City, Oklahoma 73142
		Attn: Mr. Chad Richison

With copy to:		Cheek & Falcone, PLLC
		6301 Waterford Boulevard
		Suite 320
		Oklahoma City, Oklahoma 73118
		Attn: Mr. John P. Falcone

To Lender:		Kirkpatrick Bank
		15 East 15 ^th Street
		Edmond, Oklahoma 73013
		Attn: Mr. John F. Meyers
		Senior Vice President

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With copy to:		Mock, Schwabe, Waldo, Elder, Reeves & Bryant
		14 ^th Floor, Two Leadership Square
		211 North Robinson
		Oklahoma City, Oklahoma 73102
		Attn: Mr. James C. Elder

12.3 Amendment and Waiver . This Agreement may not be amended or modified in any way, except by an instrument in writing executed by both parties hereto; provided, however, Lender may, in writing: (i) extend the time for performance of any of the obligations of Borrower; (ii) waive any Event of Default by Borrower; and (iii) waive the satisfaction of any condition that is precedent to the performance of Lender’s obligations under this Agreement. In the event of Lender’s waiver of an Event of Default, such specific Event of Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other Event of Default or impair any consequence of such subsequent or other Event of Default.

12.4 Non-Waiver; Cumulative Remedies . No failure on the part of Lender to exercise and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Lender of any right hereunder preclude any other or further right of exercise thereof. The remedies herein provided are cumulative and not alternative.

12.5 Assignment . Neither this Agreement, nor the loan proceeds hereunder, shall be assignable by Borrower without the prior written consent of Lender.

12.6 Financing Publicity . Lender shall be permitted to obtain publicity in connection with the financing of the Mortgaged Property through press releases and any special events relating to the Mortgaged Property. Borrower will give Lender ample advance notice of such events and will give Lender as much assistance as possible in connection with obtaining such publicity as Lender desires. Lender’s publicity shall be subject to the reasonable approval of Borrower, which approval shall not be unreasonably withheld or delayed.

12.7 No Partnership . Nothing in this Agreement shall be construed to constitute Lender as joint venturer with Borrower, or to constitute a partnership between the parties.

12.8 Descriptive Headings . The descriptive headings of the paragraphs of this Agreement are for convenience only and shall not be used in the construction of the terms hereof.

12.9 Integrated Agreement . This Agreement and the Loan Documents signed and/or delivered pursuant to this Agreement or any of the other Loan Documents supercede and replace the Loan Commitment signed by Lender and Borrower, and they collectively constitute the entire agreement between Lender and Borrower, and there are no agreements, understandings, warranties or representations between the parties regarding the financing of the Mortgaged Property other than those set forth herein.

12.10 Time of Essence . Time is of the essence of this Agreement.

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12.11 Binding Effect . This Agreement shall be binding upon and inure to the benefit of Lender and Borrower and their respective successors, legal representatives and assigns.

12.12 Third-Party Beneficiary . Nothing in this Agreement, express or implied, is intended to confer upon any person, other than Lender and Borrower and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.

12.13 Right to Defend . Lender shall have the right, but not the obligation, at Borrower’s expense, to commence, to appear in or to defend any action or proceeding (initiated by a third party against Borrower) purporting to affect the rights or duties of the parties hereunder and in connection therewith pay out of proceeds of the Loan all necessary expenses, including fees of counsel, if Borrower fails to so commence, appear in or defend any such action or proceeding with counsel satisfactory to Lender.

12.14 Loan Participation Agreement . Notwithstanding any language in this Agreement or any of the Loan Documents, Lender’s obligation to fund the Loan pursuant to the terms of this Agreement and the Loan Documents is conditioned upon Lender (i) securing a participant (acceptable to Lender) in the Loan and (ii) the execution by Lender and its participant of a Participation Agreement, in form and substance acceptable to Lender. Borrower authorizes Lender to disclose to any Purchaser or Participant or any individual or entity acquiring an interest in the Loan Documents by operation of law (each a “Transferee”), and any prospective Transferee, any and all information in such Lender’s possession concerning the credit worthiness of the Borrower and all relevant information relating to the Loan Documents and the extensions of credit evidenced and secured thereby. Closing of the Loan will evidence that Lender has a loan participant acceptable to Lender.

12.15 Indemnity . Borrower hereby agrees to indemnify and hold harmless Lender and its directors, officers, agents and employees (collectively the “Indemnitees”) from and against, and agrees to defend the Indemnitees, by counsel satisfactory to the Indemnitees, against:

(a) all claims, demands and causes of action asserted against any Indemnitee by any Person if the claim, demand or cause of action directly or indirectly relates to (i) a claim, demand or cause of action that the Person has or asserts against the Borrower in connection with the Mortgaged Property, except those arising out of the acts or omissions of Lender; (ii) the payment of any commission, charge or brokerage fee incurred in connection with any of the Loan Documents; (iii) any act or omission by the Borrower, any contractor, subcontractor or material supplier, or other Person (other than Lender, its agents, servants and employees) with respect to the Mortgaged Property; (iv) the ownership, occupancy or use of the Mortgaged Property; and

(b) all liabilities, losses and other costs (including court costs and reasonable attorneys’ fees) incurred by any Indemnitee as a result of any claim, demand or cause of action described in subparagraph (a).

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responsible under any theory of any kind for any act or omission by the Borrower or any other Person other than Lender, its agents, servants or employees. BORROWER ACKNOWLEDGES AND AGREES THAT ITS INDEMNIFICATION OBLIGATIONS HEREUNDER COVER AND RELATE TO, WITHOUT LIMITATION, ANY NEGLIGENT ACTION OR OMISSION OF INDEMNITIES; PROVIDED, NOTWITHSTANDING THE FOREGOING, BORROWER SHALL NOT BE OBLIGATED TO INDEMNIFY LENDER WITH RESPECT TO ANY INTENTIONAL TORT OR ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH LENDER IS PERSONALLY DETERMINED BY THE JUDGMENT OF A COURT OF COMPETENT JURISDICTION (SUSTAINED ON APPEAL, IF ANY) TO HAVE COMMITTED. Borrower’s obligations under this paragraph 12.15 shall survive the repayment of the Loan and the release of the Mortgage and the other Loan Documents.

12.16 Survival of Representations and Warranties . All representations and warranties of Borrower in this Agreement and the other Loan Documents shall survive the execution and delivery of this Agreement and the Note, are material, and have been or will be relied on by Lender notwithstanding any investigation made by or on behalf of Lender. All such representations and warranties of Borrower shall be deemed to be remade as of the date of each disbursement of the proceeds of the Loan.

12.17 No Waiver; Consents . Each waiver by Lender must be in writing, and no waiver may be construed as a continuing waiver. No waiver will be implied from Lender’s delay in exercising or failure to exercise any right or remedy against the Borrower or any security. Lender’s consent to any act or omission by the Borrower may not be construed as a consent to any other or subsequent act or omission or as a waiver of the requirement for Lender’s consent to be obtained in any future or other instance. All Lender’s rights and remedies are cumulative.

12.18 Counterparts . This Agreement may be executed in multiple counterparts each of which shall be deemed an original and all of which executed counterparts shall together constitute a single document. Signature pages may be detached from the counterparts and attached to a single copy of this Agreement to physically form one document.

12.19 Incorporation of Recital Paragraphs . The recital paragraphs set forth on page 1 of this Agreement are hereby incorporated as representations, warranties, covenants and agreements by borrower to Lender.

12.20 Incorporation of Exhibits . All Exhibits and Schedules identified in this Agreement as exhibits to or schedules to this Agreement are hereby incorporated into this Agreement and made integral parts of it.

12.21 Government Regulations . The Borrower represents, warrants and covenants to Lender as follows, and acknowledges that such representations, warranties and covenants shall be continuing representations, warranties and covenants from Borrower to Lender:

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executive orders relating thereto, and the Uniting and Strengthening America By Providing Appropriate Tools Required To Intercept and Obstruct Terrorism Act (USA Patriot Act of 2001), as amended, and any other enabling legislation, regulations or executive orders relating thereto;

(ii) The Borrower is and shall remain in compliance with 31 U.S.C., Section 5313, as amended, 31 CFR Section 103.22, as amended, and any similar laws or regulations involving currency transaction reports or disclosures relating to transactions in currency of more than $10,000.00, or of more than any other minimum amount specified by any laws or regulations; and

(iii) Borrower (A) is not a party whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (B) does not engage in any dealings or transactions prohibited by Section 2 of such executive order, and are not otherwise associated with any such person in any manner violative of Section 2, or (C) is not a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury”s Office of Foreign Assets Control regulation or executive order.

The Borrower covenants and agrees with Lender that no part of any loan proceeds or advances evidenced by or referenced in this Agreement, and no part of any other amounts or sums derived from any property which secures repayment of such loan proceeds or advances, including, without limitation any accounts, payment intangibles, money, rents, issues or profits, will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

12.22 Applicable Law . THIS AGREEMENT AND THE DOCUMENTS ISSUED AND EXECUTED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF OKLAHOMA AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA, EXCEPT, AND WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES AND EXCEPT TO THE EXTENT PREEMPTED BY THE LAWS OF THE UNITED STATES OF AMERICA.

12.23 Consent to Jurisdiction . BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL COURT OR OKLAHOMA STATE COURT HAVING THE MORTGAGED PROPERTY WITHIN ITS JUDICIAL DISTRICT, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS AND ANY OTHER DOCUMENTS EVIDENCING, SECURING OR RELATING TO THE LOAN, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION ANY OF THEM MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.

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NOTHING HEREIN SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BROUGHT BY BORROWER AGAINST LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE LOAN OR ANY LOAN DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT IN OKLAHOMA.

12.24 Waiver of Jury Trial . TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE LOAN, ANY LOAN DOCUMENT OR ANY RELATIONSHIP ESTABLISHED THEREUNDER.

IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be duly executed effective as of the day and year first above written.


“Lender”:	KIRKPATRICK BANK,
	an Oklahoma banking corporation

	By	/s/ John F. Meyers

		John F. Meyers, Senior Vice President

“Borrower”:	PAYCOM PAYROLL, LLC,
	a Delaware limited liability company

	By	/s/ Chad Richison

		Chad Richison, President

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EXHIBIT “A”

Description of Real Property

A tract of land being a part of the Southwest Quarter (SW/4) of Section Eight (8), Township Thirteen (13) North, Range Four (4) West of the Indian Meridian, Oklahoma City, Oklahoma County, Oklahoma, and being more particularly described as follows: Commencing at the Southeast Comer (SE/C) of said Southwest Quarter (SW/4); Thence North 00°15’38” West (measured) (North 00°15’26” West record), along and with the East line of said Southwest Quarter (SW/4), said East line also being the East line of a tract of land owned by the Oklahoma Turnpike Authority, recorded in Book 7536, Page 339, a distance of 575.51 feet (measured) (575.66 feet record) to a found #4 bar with a SRB cap; Thence North 88°41’40” West (measured) (North 88°42’11” West record), departing said East line, along and with the North line of said Oklahoma Turnpike Authority tract, a distance of 671.88 feet; Thence North 00°01’27” West, departing said North line, a distance of 900.43 feet; Thence North 89°35’06” East, a distance of 667.91 feet to a point on the East line of said Southwest Quarter (SW/4); Thence South 00°15’38” East, along and with the East line of said Southwest Quarter (SW/4), a distance of 920.59 feet to the point of beginning.

Now platted and known as:

All of Lot One (1), Block One (1) and Common Area A, of Paycom, an Addition to the City of Oklahoma City, Oklahoma County, Oklahoma, according to the recorded plat thereof

EXHIBIT “B”

Description of $12.220.000.00 Loan Documents

1.	Loan Agreement, dated May 7, 2010, signed by Kirkpatrick Bank, an Oklahoma banking corporation (“Lender”), and Paycom Payroll, LLC, a Delaware limited liability company (“Borrower”).

2.	$12,220,000.00 Promissory Note, dated May 7, 2010, signed by Borrower to Lender.

3.	Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated May 7, 2010, signed by Borrower, as mortgagor, to Lender, as mortgagee, and recorded in Book 11362, beginning at page 174, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

4.	Assignment of Leases, Rents and Profits, dated May 7, 2010, signed by Borrower to Lender, and recorded in Book 11362, beginning at page 204, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

5.	Financing Statement identifying Borrower, as debtor, and Lender, as secured party, recorded on May 10, 2010, in Book 11362, beginning at page 214, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

6.	Financing Statement identifying Borrower, as debtor, and Lender, as secured party, filed on May 10, 2010, as instrument number 20100510020461110, in the Uniform Commercial Code records of the County Clerk of Oklahoma County, Oklahoma.

7.	Assignment of Permits, Licenses and Approvals, dated May 7, 2010, signed by Borrower to Lender.

8.	Assignment of Service Agreement and Maintenance Contracts, dated May 7, 2010, signed by Borrower to Lender.

9.	Security Agreement (Account), dated May 7, 2010, signed by Borrower to Lender.

10.	Financing Statement identifying Borrower, as debtor, and Lender, as secured party, filed on May 10, 2010, as instrument number 20100510020455880, in the Uniform Commercial Code records of the County Clerk of Oklahoma County, Oklahoma.

11.	Closing Certificate, dated May 7, 2010, signed by Borrower to Lender.

12.	Hazardous Substances Indemnity Agreement, dated May 7, 2010, signed by Borrower to Lender.

13.	Collateral Assignment of Architectural Agreement dated May 7, 2010, signed on behalf of Lender, Borrower and HSE Architects PLLC.

14.	Subordination Agreement (Architect) dated as of May 7, 2010, signed on behalf of HSE Architects PLLC and recorded in Book 11387, beginning at page 1506, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

15.	Collateral Assignment of Construction Contract dated May 7, 2010, signed on behalf of Lender, Borrower and Clyde Riggs Construction, L.L.C.

16.	Subordination Agreement (Contractor) dated as of May 7, 2010, signed on behalf of Clyde Riggs Construction, L.L.C. and recorded in Book 11387, beginning at page 1509, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

17.	Collateral Assignment of Engineering Agreement dated May 7, 2010, signed on behalf of Lender, Borrower and Johnson and Associates, Inc.

18.	Subordination Agreement (Engineer) dated as of May 7, 2010, and signed on behalf of Johnson and Associates, Inc. and recorded in Book 11387, beginning at page 1512, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

19.	Collateral Assignment of Engineering Agreement dated May 7, 2010, signed on behalf of Lender, Borrower and Darr & Collins, L.L.C.

20.	Subordination Agreement (Engineer) dated as of May 19, 2010, and signed on behalf of Darr & Collins, L.L.C. and recorded in Book 11387, beginning at page 1515, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

21.	Notice of Title Protection Document dated as of May 7, 2010, signed by Lender and Borrower.

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EXHIBIT “C”

Listing of $541,000 Loan Documents

1.	Loan Agreement, dated March 23, 2011, signed by Kirkpatrick Bank, an Oklahoma banking corporation (“Lender”), and Paycom Payroll, LLC, a Delaware limited liability company (“Borrower”).

2.	$541,000.00 Promissory Note, dated March 23, 2010, signed by Borrower to Lender.

3.	Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated March 23, 2011, signed by Borrower, as mortgagor, to Lender, as mortgagee, and recorded in Book 11596, beginning at page 580, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

4.	Assignment of Leases, Rents and Profits, dated March 23, 2010, signed by Borrower to Lender, and recorded in Book 11596, beginning at page 610, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

5.	Financing Statement identifying Borrower, as debtor, and Lender, as secured party, recorded on March 31, 2011, in Book 11601, beginning at page 515, in the real property records of the County Clerk of Oklahoma County, Oklahoma.

6.	Financing Statement identifying Borrower, as debtor, and Lender, as secured party, filed on March 28, 2011, as instrument number 20110328020280050, in the Uniform Commercial Code records of the County Clerk of Oklahoma County, Oklahoma.

7.	Assignment of Permits, Licenses and Approvals, dated March 23, 2011, signed by Borrower to Lender.

8.	Assignment of Service Agreement and Maintenance Contracts, dated March 23, 2011, signed by Borrower to Lender.

9.	Security Agreement (Account), dated March 23, 2011, signed by Borrower to Lender.

10.	Financing Statement identifying Borrower, as debtor, and Lender, as secured party, filed on March 30, 2011, as instrument number 201103300202096880, in the Uniform Commercial Code records of the County Clerk of Oklahoma County, Oklahoma.

11.	Closing Certificate, dated March 23, 2011, signed by Borrower to Lender.

12.	Hazardous Substances Indemnity Agreement, dated March 23, 2011, signed by Borrower to Lender.

13.	Notice of Title Protection Document dated as of March 23, 2011, signed by Lender and Borrower.

Exhibit 10.9

LOAN AGREEMENT

between

KIRKPATRICK BANK,

an Oklahoma banking association,

as Lender,

and

PAYCOM PAYROLL, LLC,

a Delaware limited liability company,

as Borrower

TABLE OF CONTENTS


			Page

1.	DEFINITIONS			2

	1.1	Account Security Agreement		2
	1.2	Affiliate		2
	1.3	Agreement		2
	1.4	Annual Debt Service		2
	1.5	Appraisal		2
	1.6	Architect		2
	1.7	Assignment		2
	1.8	Building		2
	1.9	Business Day		3
	1.10	Code		3
	1.11	Collateral Assignments		3
	1.12	Construction Account		3
	1.13	Construction Consultant		3
	1.14	Construction Contract		3
	1.15	Construction Project		3
	1.16	Contractor		3
	1.17	Dollars		3
	1.18	Engineer		3
	1.19	ERISA		3
	1.20	Event of Default		3
	1.21	Financing Statements		3
	1.22	Governmental Authority		3
	1.23	Hazardous Substances Indemnity Agreement and HSIA		4
	1.24	Indebtedness		4
	1.25	Liability		4
	1.26	Liquidity Account		4
	1.28	Loan Documents		4
	1.29	Mortgage		4
	1.30	Mortgaged Property		4
	1.31	Note		4
	1.32	OERB		4
	1.33	PBGC		4
	1.34	Person		4
	1.35	Project Budget		5
	1.36	Project Cost		5
	1.37	Real Property		5
	1.38	Request for Funds		5
	1.39	Subordination Agreements		5
	1.40	Substantial Completion		5
	1.41	Term Loan Commencement Date		5
	1.42	UCC		5

2.	LENDING AGREEMENT			6

3.	BORROWER’S NOTE			6

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4.	COLLATERAL SECURITY		7

	4.1	Security Documents Covering Mortgaged Property	7
	4.2	Security Agreements Covering Borrower’s Accounts With Lender	7
	4.3	Assignment and Subordination of Architectural Agreement and Construction Contract	7
	4.4	Second Mortgage (With Power of Sale), Security Agreement and Financing Statement	7
	4.5	Additional Documents	7

5.	CONDITIONS OF LENDING		8

	5.1	No Events of Default	8
	5.2	Loan Documents and HSIA	8
	5.3	Existence and Authority of Borrower	8
	5.4	Recording of Security Documents	8
	5.5	Land Purchase Documents	8
	5.6	Establishment of Construction Account and the Liquidity Account	8
	5.7	Other Debt	9
	5.8	Title Evidence	9
	5.9	Survey	9
	5.10	Flood Hazard Certification	9
	5.11	Appraisal	9
	5.12	Insurance	10
	5.13	Zoning and Use	12
	5.14	Permits	12
	5.15	Plans and Specifications	12
	5.16	Financial Information	12
	5.17	Environmental Site Assessments; Hazardous Substances Indemnity Agreement	13
	5.18	Geotechnical Report	13
	5.19	Loan Fees	13
	5.20	Architectural Agreement and Construction Contract	13
	5.21	Opinion of Borrower’s Counsel	13
	5.22	Construction Schedule; Subcontractors and Suppliers	14

6.	REPRESENTATIONS AND WARRANTIES		14

	6.1	Existence and Authority of Borrower	14
	6.2	Conflicting Agreements and Restrictions	14
	6.3	Actions and Proceedings	14
	6.4	Financial Condition	14
	6.5	Full Disclosure	15
	6.6	No Violation of Applicable Law	15
	6.7	Permits	15
	6.8	Place of Business and Certain Records	15
	6.9	No Defaults	15
	6.10	Ownership of Mortgaged Property; Liens	15
	6.11	ERISA	15
	6.12	Taxes	16
	6.13	Compliance with Federal Reserve Board Regulations	16
	6.14	Investment Company Act; Public Utility Holding Company Act	16
	6.15	Availability of Utility Services	16
	6.16	Survival of Representations	16

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7.	BORROWER’S AFFIRMATIVE COVENANTS		16

	7.1	Financial Statements	16
	7.2	Taxes	17
	7.3	Maintenance	17
	7.4	Compliance with Laws	17
	7.5	Further Assurances	17
	7.6	Performance of Obligations	17
	7.7	Payment of Taxes	17
	7.8	Lender’s Access	17
	7.9	Litigation	17
	7.10	Notification of Liens	18
	7.11	Events with Respect to ERISA	18
	7.12	Other Notifications	18
	7.13	Post-Foundation and Post-Completion Surveys	18
	7.14	Use of Funds in Construction Account	18
	7.15	Testing of Materials	18

8.	BORROWER’S NEGATIVE COVENANTS		19

	8.1	Creation or Existence of Liens	19
	8.2	Loans to and Transactions With Affiliates	19
	8.3	Restriction on Leasing of Mortgaged Property	19
	8.4	Limitation on Dividends, Loans and Distributions of Funds	19
	8.5	Limitation on Contingent Liabilities	19
	8.6	Changes to Method of Accounting	19
	8.7	Sale-Leaseback Transactions	20
	8.8	Construction Issues	20
	8.9	Modification of Limited Liability Company Documents	20
	8.10	Transfer of Property	20
	8.11	Funded Debt Limitation	20
	8.12	Debt Coverage Ratio	20

9.	ADMINISTRATION OF LOAN		20

	9.1	Purpose	20
	9.2	Compliance with Project Budget	21
	9.3	Request for Funds	21
	9.4	Additional Information	21
	9.5	Lender’s Inspection	21
	9.6	Disbursements	22
	9.7	Termination of Advances	22

10.	EVENTS OF DEFAULT		22

	10.1	Nonpayment of Note	22
	10.2	Other Nonpayment	22
	10.3	Breach of Covenants	22
	10.4	Default Under Funded Debt Limitations or Ratio of EBITDA/CMLTD plus Interest and Other Distribution	23
	10.5	Bankruptcy	23

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	10.6	Governmental Requirements	23
	10.7	Representation	23
	10.8	Event of Default Under Other Loan Documents	23

11.	REMEDIES		23

	11.1	Acceleration of Note	23
	11.2	Selective Enforcement	23

12.	GENERAL PROVISIONS		24

	12.1	Expenses	24
	12.2	Notices	24
	12.3	Amendment and Waiver	25
	12.4	Non-Waiver; Cumulative Remedies	25
	12.5	Assignment	25
	12.6	Financing Publicity	25
	12.7	No Partnership	25
	12.8	Descriptive Headings	25
	12.9	Integrated Agreement	25
	12.10	Time of Essence	26
	12.11	Binding Effect	26
	12.12	Third-Party Beneficiary	26
	12.13	Right to Defend	26
	12.14	Loan Participation Agreement	26
	12.15	Indemnity	26
	12.16	Survival of Representations and Warranties	27
	12.17	No Waiver; Consents	27
	12.18	Counterparts	27
	12.19	Incorporation of Exhibits	27
	12.20	Government Regulations	28
	12.21	Applicable Law	28
	12.22	Consent to Jurisdiction	28
	12.23	Waiver of Jury Trial	29

Exhibits

“A” - Description of Real Property

“B” - Request for Funds

“C” - Required Performance Bonds and Payment Bonds

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LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into effective as of (but not necessarily on) March 28, 2013, by and between KIRKPATRICK BANK , an Oklahoma banking association (“Lender”), and PAYCOM PAYROLL, LLC, a Delaware limited liability company (“Borrower”), with reference to the following:

(a) Borrower has requested that Lender lend to Borrower Twelve Million Two Hundred Seventy-One Thousand Ninety-Six and No/100 Dollars ($12,271,096.00) to finance the construction of an 81,000 square foot office building to be situated on a portion of thirty-two (32) acres of land located north of Kilpatrick Turnpike and east of Council Road in Oklahoma City, Oklahoma.

(b) The thirty-two (32) acres of land consist of: (A) approximately 17 acres (more or less) of land (the “17 Acres Tract,” as more particularly described as Tract 2 on Exhibit “A” attached hereto and made a part hereof) previously mortgaged to Lender under that certain Mortgage dated December 21, 2012, securing a $1,750,000.00 Promissory Note, dated December 21, 2012, and recorded in Book 12120, beginning at page 1496, of the real property records of the County Clerk of Oklahoma County, Oklahoma, and (B) approximately 14 acres (more or less) of land (the “14 Acres Tract,” as more particularly described as Tract 1 on Exhibit “A” attached hereto and made a part hereof) previously mortgaged to Lender under (i) that certain that certain Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated May 7, 2010, securing a $12,220,000.00 Promissory Note, and recorded in Book 11362, beginning at page 174, of the real property records of the County Clerk of Oklahoma County, Oklahoma, (ii) that certain Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated March 23, 2011, securing the $541,000.00 Promissory Note, and recorded in Book 11596, beginning at page 580, of the real property records of the County Clerk of Oklahoma County, Oklahoma, and (iii) that certain Consolidated, Amended and Restated Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated December 15, 2011, securing a $12,761,000.00 Consolidated, Amended and Restated Promissory Note, and recorded in Book 11805 beginning at page 1581, of the real property records of the County Clerk of Oklahoma County, Oklahoma.

(c) Borrower has agreed to pay in full Lender’s $1,750,000.00 Promissory Note, dated December 21, 2012, executed by Borrower, upon initial advance of Lender’s $12,271,096.00 loan to Borrower, and upon receipt by Lender of such payment, Lender will release the Mortgage dated December 21, 2012, and recorded in Book 12120, beginning at page 1496, of the real property records of the county Clerk of Oklahoma County, Oklahoma.

(d) Borrower has also agreed to collateralize Lender’s $12,761,000.00 loan to Borrower which is evidenced and secured by, among other documents, the Consolidated, Amended and Restated Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated December 15, 2011, and recorded in Book 11805, beginning at page 1581, of the real property records of the County Clerk of Oklahoma County, Oklahoma, which document encumbers the real property described as Tract 1 on Exhibit “A”. The collateralization will be obtained by means of a Second Mortgage (With Power of Sale), Security Agreement and Financing Statement signed by Borrower and encumbering the real property described as Tract 2 on Exhibit “A” attached hereto.

(e) Subject to the terms, provisions, covenants and agreements hereinafter set forth, Lender has agreed to make the requested extensions of credit.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and the loan to be made hereunder, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Lender and Borrower hereby covenant and agree as follows:

1.1 Account Security Agreement . “Account Security Agreement” shall have the meaning assigned to that term in paragraph 4.2 of this Agreement.

1.4 Annual Debt Service . “Annual Debt Service” shall mean the required annual principal and interest payments for a loan.

1.5 Appraisal . “Appraisal” shall mean a new appraisal on the thirty- two (32) acres of land, together with all existing improvements and all future improvements, as more particularly described in paragraph 5.11 of this Agreement. The Loan will be limited to eighty percent (80%) loan to value (“LTV”).

1.6 Architect . “Architect” shall mean HSE Architects PLLC, an Oklahoma professional limited liability company.

1.7 Assignment . “Assignment” shall have the meaning ascribed to such term in paragraph 4.1 of this Agreement.

1.8 Building . “Building” shall mean an 81,000 square foot office building to be situated on a portion of thirty-two (32) acres of land located north of Kilpatrick Turnpike and east of Council Road in Oklahoma City, Oklahoma.

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1.9 Business Day . Business Day shall have the meaning assigned to that term in the Note.

1.10 Code . “Code” shall mean the Uniform Commercial Code of Oklahoma, as the same may from time to time be in effect.

1.11 Collateral Assignments . “Collateral Assignments” shall have the meaning assigned to that term in paragraph 4.3 of this Agreement.

1.12 Construction Account . “Construction Account” shall have the meaning assigned to that term in paragraph 5.6 of this Agreement.

1.13 Construction Consultant . “Construction Consultant” shall mean the individual or entity selected by Lender, in Lender’s sole discretion and at Borrower’s cost, to inspect the Construction Project, review all plans, construction budgets, time lines, permits, contracts, supporting documentation and information, and to advise Lender in regard to all aspects of the Construction Project.

1.14 Construction Contract . “Construction Contract” shall mean the contract between Borrower and the Contractor, for the Construction Project, which contract is subject to Lender’s review and approval.

1.15 Construction Project . “Construction Project” shall mean construction of an 81,000 square foot office building to be situated on a portion of thirty-two (32) acres of land located north of Kilpatrick Turnpike and east of Council Road in Oklahoma City, Oklahoma, and related improvements, pursuant to plans and specifications and the Project Budget approved by Lender and located on the Real Property.

1.16 Contractor . “Contractor” shall mean Clyde Riggs Construction, L.L.C., an Oklahoma limited liability company, which shall serve as Borrower’s general contractor for the Construction Project.

1.17 Dollars . “Dollars” and “$” shall mean lawful money of the United States of America.

1.18 Engineer . “Engineer” shall mean Johnson and Associates, Inc., an Oklahoma corporation.

1.19 ERISA . “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and as in effect from time to time.

1.20 Event of Default . “Event of Default” shall mean the occurrence of any of the events specified in paragraph 10 of this Agreement.

1.21 Financing Statements . “Financing Statements” shall have the meaning ascribed to that term in paragraph 4.1 of this Agreement.

1.22 Governmental Authority . “Governmental Authority” shall mean any nation or government, any federal, state, local or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

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1.23 Hazardous Substances Indemnity Agreement and HSIA . “Hazardous Substances Indemnity Agreement” and “HSIA” shall each mean the Hazardous Substances Indemnity Agreement which will be signed pursuant to paragraph 4.5 of this Agreement.

1.24 Indebtedness . “Indebtedness” shall mean and include all liabilities, obligations or indebtedness of Borrower to Lender of every kind and description, now existing or hereafter incurred, direct or indirect, absolute or contingent, due or to become due, matured or unmatured, and whether or not of the same or a similar class or character as the Loan and whether or not contemplated by Lender or Borrower, together with future advances and all extensions and renewals, and including (without limiting the generality of the foregoing) all indebtedness of Borrower to Lender arising out of or related to the Loan, the Note, this Agreement or any other of the Loan Documents.

1.25 Liability . “Liability” shall mean any claim on the assets of a Person, excluding ownership equity.

1.26 Liquidity Account . “Liquidity Account” shall have the meaning ascribed to such term in paragraph 5.6 of this Agreement.

1.27 Loan . “Loan” shall mean the $12,271,096.00 loan to be made to Borrower by Lender as provided in paragraph 2 of this Agreement.

1.28 Loan Documents . “Loan Documents” shall mean collectively this Agreement, the Note, the Mortgage, the Financing Statements, the Account Security Agreements, the Account Financing Statement, the Assignment, the Collateral Assignments, the Subordination Agreements, the Assignment of Permits, and all other instruments and documents executed or issued or to be executed or issued pursuant to this Agreement or any of said documents or in connection with the Loan, and all amendments, modifications, extensions and renewals of any of the foregoing documents.

1.29 Mortgage . “Mortgage” shall have the meaning ascribed to that term in paragraph 4.1 of this Agreement.

1.30 Mortgaged Property . “Mortgaged Property” shall have the meaning ascribed to such term in the Mortgage, and includes, without limitation, the Real Property described on Exhibit “A” attached to this Agreement and incorporated herein. The Mortgaged Property does not include the property or funds of Borrower’s unaffiliated clients and/or customers.

1.31 Note . “Note” shall mean the Promissory Note in the principal amount of Twelve Million Two Hundred Seventy-One Thousand Ninety-Six and No/100 Dollars ($12,271,096.00) to be executed by Borrower to the order of Lender to evidence the Loan, as provided in paragraph 3 of this Agreement, which Note shall be in the form prescribed by Lender.

1.32 OERB . “OERB” shall mean Oklahoma Energy Resources Board.

1.33 PBGC . “PBGC” shall mean the Pension Benefit Guaranty Corporation as established pursuant to Section 4002 of ERISA or any successor thereto or substitute therefor under ERISA.

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1.34 Person . “Person” shall mean any individual, corporation, company, joint venture, association, partnership, trust, unincorporated organization, Governmental Authority or other entity.

1.35 Project Budget . “Project Budget” shall mean Borrower’s detailed budget for financing of the Real Property, for design and construction of the Building on the Real Property, and for all other costs related to or associated with the Construction Project, a copy of which Project Budget is attached to this Agreement as Exhibit “B” and incorporated herein.

1.36 Project Cost . “Project Cost” shall mean the total cost of acquisition of the Real Property and the cost of the Construction Project.

1.37 Real Property . “Real Property” shall mean the certain real property located in Oklahoma County, Oklahoma, which is more particularly described on Exhibit “A” attached to this Agreement and incorporated herein by reference.

1.38 Request for Funds . “Request for Funds” shall mean the Request for Funds described in paragraph 9.3 of this Agreement.

1.39 Subordination Agreements . “Subordination Agreements” shall mean the Subordination Agreements described in paragraphs 4.3 and 4.5 of this Agreement.

1.40 Substantial Completion . “Substantial Completion” or “Substantially Complete” shall mean completion of the Construction Project to the point that it is legally ready for occupancy and use, as evidenced by all required governmental permits, licenses and final certificates of occupancy and by certificates of substantial completion signed by Borrower, the Architect, the Contractor, the Construction Consultant and any inspector that Lender may, in its discretion, retain at Borrower’s expense.

1.41 Term Loan Commencement Date . “Term Loan Commencement Date” shall be the date on which the Note evidencing the Loan converts to a so-called, “term loan.” The Term Loan Commencement Date for the Loan shall be the first (1 ^st ) day of the first (1 ^st ) month after all of the following requirements are completed to the satisfaction of Lender: (i) the Construction Project has been substantially completed, (ii) Borrower has delivered to Lender a final “as-built” survey of the Mortgaged Property which is in form, scope and substance acceptable to Lender, (iii) Borrower has delivered to Lender prepaid property, liability, business interruption, worker’s compensation insurance, and other required insurance covering the Mortgaged Property, all in amount, form, scope and substance satisfactory to Lender, (iv) Borrower has delivered to Lender Certificates of Occupancy issued for the Construction Project and for occupancy of the premises, and (v) Borrower has accepted the Building. The Borrower’s failure to satisfy, within twenty-four (24) months as of the date of this Agreement, the requirements for the Term Loan Commencement Date, will result in termination of the Lender’s obligation to provide a term loan. In addition, Borrower’s failure to satisfy all of the conditions required to achieve the Term Loan Commencement Date as of the date set forth above shall constitute an Event of Default under this Agreement, the Note and the other Loan Documents; and the unpaid principal balance of the Note, all accrued and unpaid interest, after default interest, late charges and other fees, costs and expenses payable by Borrower to Lender, including, but not limited to, reasonable attorney’s fees and costs, shall be due and payable.

1.42 UCC . “UCC” shall mean the Uniform Commercial Code of the State of Oklahoma.

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2. LENDING AGREEMENT . Subject to the terms, provisions, covenants and agreements set forth in this Agreement, Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender, up to the principal sum of Twelve Million Two Hundred Seventy-One Thousand Ninety-Six and No/100 Dollars ($12,271,096.00), which Loan shall be used by Borrower for the purpose of (i) paying to Lender all principal and interest in connection with Borrower’s $1,750,000.00 Promissory Note dated December 21, 2012, in favor of Lender, (ii) paying contractors, architects, engineers, mechanics, materialmen, laborers, service agencies and suppliers pursuant to the terms of contracts for construction of the Construction Project, for services in fact performed and materials purchased for and either incorporated into the Construction Project or suitably stored on the Real Property for later incorporation, (iii) reimbursing Lender for expenses incurred by Lender pursuant to this Agreement and (iv) paying other costs which are incidental or related to the cost of completing or financing the Construction Project; provided , however , notwithstanding any other language set forth in this Agreement or any of the other Loan Documents, Loan proceeds shall not be used to pay interest, Loan fees, late charges, after default interest and/or any other similar costs, as determined by Lender.

3. BORROWER’S NOTE . The Loan shall be evidenced by the Note, which Note shall be signed by Borrower and delivered to Lender concurrently with execution of this Agreement. Interest only, accrued under the Note shall be paid on the first day of each month, commencing on May 1, 2013 and on the first (1 ^st ) day of each month thereafter to and including April 1, 2015. There will be a 0.50% origination fee and a 0.50% exit fee. The exit fee will be waived if the Borrower places its term financing at the time of conversion on the property with Lender. Thereafter, if Borrower agrees in writing to Lender’s approved terms, i.e. Floating : WSJP + 0.5% (currently 3.50%) for up to ten (10) years; OR Five (5) Year Fixed : 5 year FHLB + 240 bps (currently 3.60%); OR Seven (7) Year Fixed : 7 year FHLB + 240 bps (currently 4.02%) each over a twenty (20) year amortization, and Borrower pays to Lender any out-of-pocket costs of Lender, then, commencing on June 1, 2015 (the “Term Loan Commencement Date”), principal and interest (on a 20-year amortization) shall be paid on the first day of each month, commencing on May 1, 2015, and on the first day of each month thereafter to and including the maturity date of the term loan.

In addition, Borrower has previously delivered to Lender a $12,761,000.00 Consolidated, Amended and Restated Promissory Note dated December 15, 2011, which is secured by, among other documents, a Consolidated, Amended and Restated Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated December 15, 2011, and recorded in Book 11805, beginning at page 1581, of the real property records of the County Clerk of Oklahoma County, Oklahoma, and encumbering Tract 1 on Exhibit “A” attached hereto. Therefore, Borrower shall sign and deliver to Lender a Second Mortgage (With Power of Sale), Security Agreement and Financing Statement further securing the $12,761,000.00 Consolidated, Amended and Restated Promissory Note by adding to the description of collateral Tract 2 on Exhibit “A” attached hereto.

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4.1 Security Documents Covering Mortgaged Property . Borrower shall grant to Lender a first mortgage covering all of the Mortgaged Property and a first security interest in all personal property relating to such Mortgaged Property, which mortgage and security interest shall be evidenced by a Construction Mortgage (With Power of Sale), Security Agreement and Financing Statement (the “Mortgage”) in the form prescribed by Lender. Borrower authorizes Lender to complete and file in appropriate records Financing Statements (the “Financing Statements”), in the form prescribed by Lender, in order to perfect the security interest granted in the Mortgage. Borrower shall assign to Lender all leases of the Mortgaged Property and all of the rents, issues and profits of the Mortgaged Property, which assignment shall be evidenced by an Assignment of Leases, Rents and Profits (the “Assignment”) in the form prescribed by Lender.

4.2 Security Agreements Covering Borrower’s Accounts With Lender . Borrower shall grant to Lender a first security interest in the Construction Account and a first security interest in the Liquidity Account. Each of the security interests shall be evidenced by a Security Agreement (collectively, the “Account Security Agreements”) in the forms prescribed by Lender.

4.3 Assignment and Subordination of Architectural Agreement and Construction Contract . Borrower shall sign, and shall cause the Architect to sign, and deliver to Lender a Collateral Assignment of Architectural Agreement in the form prescribed by Lender and Borrower shall sign, and cause the Contractor to sign, and deliver to Lender a Collateral Assignment of Construction Contract in the form prescribed by Lender (collectively, the “Collateral Assignments”). Borrower shall also provide to Lender (i) a Subordination Agreement in the form prescribed by Lender, which shall be properly signed and acknowledged by the Architect for the Construction Project, and (ii) a Subordination Agreement in the form prescribed by Lender, which shall be properly signed and acknowledged by the Contractor (collectively, the “Subordination Agreements”). If the Collateral Assignments and the Subordination Agreements are not available prior to or at the time of execution of this Agreement, Lender and Borrower agree that the Collateral Assignments and Subordination Agreements must be provided to Lender prior to any funding of the Loan.

4.4 Second Mortgage (With Power of Sale), Security Agreement and Financing Statement . Borrower shall sign and deliver to Lender a Second Mortgage (With Power of Sale), Security Agreement and Financing Statement (the “Second Mortgage”) to further secure Lender’s $12,761,000.00 loan to Borrower [which is evidenced and secured by, among other documents, the Consolidated, Amended and Restated Mortgage (With Power of Sale), Security Agreement and Financing Statement, dated December 15, 2011, and recorded in Book 11805, beginning at page 1581, of the real property records of the County Clerk of Oklahoma County, Oklahoma], which Second Mortgage encumbers the real property described as Tract 2 on Exhibit “A.”

4.5 Additional Documents . Borrower shall sign and deliver to Lender a Hazardous Substances Indemnity Agreement in the form prescribed by Lender. Borrower shall also sign and deliver (i) an Assignment of Permits, Licenses and Approvals, (ii) an Assignment of Service Agreements and Maintenance Contracts, (iii) Security Agreements covering the Borrower’s Construction Account with Lender and Borrower’s Liquidity Account with Lender, (iv) a Closing Certificate, and (v) such other documents as may be required by Lender to evidence and secure the Loan, all of which will be in the forms prescribed by Lender. In addition, Borrower shall cause its manager

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of the Mortgaged Property to sign a Subordination Agreement in form prescribed by Lender. Any and all collateral documents executed by Borrower in favor of Lender as security for any indebtedness of Borrower to Lender shall also expressly secure Borrower’s obligations hereunder and under any of the Note(s) signed by Borrower in favor of Lender and all documents which evidence and secure payment of any of the Note(s).

5.2 Loan Documents and HSIA . This Agreement, the Note, the Mortgage, the Financing Statements, the Assignment, the Account Security Agreement, the Assignment of Permits, Licenses and Approvals, the Assignment of Contracts and Maintenance Agreements, the Security Agreements covering Borrower’s Construction Account and the Borrower’s Liquidity Account, the Collateral Assignments, the Subordination Agreements and all other Loan Documents required by Lender and the HSIA, in order to make the initial advance or any future advance under the Note, shall be duly authorized, executed and delivered to Lender.

5.3 Existence and Authority of Borrower . Borrower shall provide to Lender the following documents relating to Borrower: (i) Certificates of Good Standing from the Secretary of State of Delaware and the Secretary of State of Oklahoma, (ii) a Delaware Secretary of State certified copy of the transcript of the Certificate of Limited Liability Company of Borrower, together with all amendments thereto, (iii) an Oklahoma Secretary of State certified copy of the qualification of Borrower to transact business in Oklahoma, (iv) a certified copy of the Operating Agreement of Borrower and all amendments thereto, and (v) a Certificate of Limited Liability Company Authority evidencing, in a manner and with text acceptable to Lender, the authority of the President of Borrower to sign this Agreement and all other Loan Documents and to perform its obligations hereunder and thereunder.

5.4 Recording of Security Documents . The Mortgage, the Financing Statement for recording in Oklahoma County, Oklahoma, the Assignment and the Second Mortgage shall be recorded in the real property records of the County Clerk of Oklahoma County, Oklahoma. The Financing Statement for filing in the “central” UCC records shall be filed in the UCC records of the Secretary of State of Delaware. Borrower shall provide to Lender UCC search report on Borrower and/or such other evidence as Lender may require to evidence the first priority of the security interest perfected by the Financing Statements.

5.5 Land Purchase Documents . Borrower shall have delivered to Lender the original land purchase contract(s) under which Borrower purchased the Mortgaged Property and a copy(ies) of the Deed(s) which conveyed to Borrower title to the Real Property, all of which documents must be reasonably acceptable to Lender.

5.6 Establishment of Construction Account and the Liquidity Account . All funding under the Loan shall be advanced through an account (“Construction

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Account”) which Borrower shall establish with Lender on or before the date of this Agreement, into which the proceeds of the Loan (but no other funds) shall be deposited as such proceeds are advanced and from which Borrower shall make only payments permitted under the terms of this Agreement. Borrower shall also establish with Lender on or before the date of this Agreement an account (the “Liquidity Account”) with Kirkpatrick Bank into which the Borrower shall deposit and maintain not less than Two Million and No/100 Dollars ($2,000,000.00) from the date of the Note through maturity. As of the date of this Agreement, Borrower maintains a $4,000,000.00 compensating balance, with $250,000.00 pledged.

5.7 Other Debt . Borrower shall not incur any debt exceeding $1,500,000.00 without the prior approval of Lender.

5.8 Title Evidence . Prior to closing of the Loan, Borrower shall provide to Lender (i) a Commitment for Title Insurance, together with copies of all documents listed in Schedule (or Part) I and all documents listed in Schedule (or Part) II of the Commitment for Title Insurance, (ii) a proforma loan policy of title insurance, together with proforma endorsements required by Lender, (iii) a Closing Protection Letter from the title insurance company which is to provide a loan policy of title insurance covering Lender’s Mortgage, (iv) an ALTA Loan Policy of Title Insurance 2006, in form and substance acceptable to Lender, issued by a title insurance company acceptable to Lender, evidencing that Borrower has good and marketable fee simple title to the Mortgaged Property and that the Mortgage will constitute a valid first Mortgage on the Mortgaged Property, subject only to those matters described in Exhibit “B” attached to the Mortgage. The loan policy of title insurance shall not include an exception based upon mechanics’ and materialmen’s liens, or any exceptions based on discrepancies, conflicts in boundary lines, shortage in area, encroachments or other facts which would be disclosed by a proper survey. The loan policy of title insurance must be accompanied by such endorsements thereto as may be required by Lender or its counsel, including, but not limited to, an access and entry endorsement, a comprehensive endorsement, a contiguity endorsement, an endorsement deleting the arbitration provision, an environmental lien endorsement, a subdivision endorsement, a survey endorsement, a variable rate endorsement, and a zoning endorsement. The premiums for the loan policy of title insurance and all endorsements shall be paid by Borrower prior to or at the time of the advancement under the Note.

5.9 Survey . Borrower shall deliver to Lender a current ALTA/ACSM Land Title Survey (2011) of the Real Property, prepared by a surveyor approved by Lender, which survey shall delineate all property lines, shall locate all improvements on the Real Property, shall show easements benefitting and/or affecting the Real Property and identify them by book and page of recording, shall show adjoining streets and access ways, and shall show all other physical matters affecting the title and use of the Real Property. The form of surveyor’s certificate shall be acceptable to Lender and shall enable the issuer of the required loan policy of title insurance to delete all survey exceptions.

5.10 Flood Hazard Certification . Borrower shall provide to Lender a flood hazard certificate in form, scope and substance acceptable to Lender and evidencing that the Mortgaged Property does not lie in a flood hazard area.

5.11 Appraisal . Borrower shall pay for an independent appraisal of the Mortgaged Property by an appraiser selected and approved by Lender’s appraisal

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committee, which appraisal must (i) comply with the standards set forth by Lender’s appraisal committee and (ii) reflect that the Loan does not exceed eighty percent (80%) of the appraisal value of the Mortgaged Property or ninety percent (90%) of the cost of the Construction Project, whichever is less. (Additional appraisals may be required by Lender due to changes in regulatory policies and/or changes in the Mortgaged Property.) If the appraisal is not available prior to the execution of this Agreement and in the event the appraisal does not support the conditions identified in this paragraph, Lender and Borrower agree that the Loan will be “remargined” in order to comply with the requirements of Lender.

5.12 Insurance . Prior to commencement of the Construction Project, Borrower shall obtain, and furnish to Lender satisfactory evidence of insurance on the Mortgaged Property and evidence of payment of all premiums for such insurance, which insurance shall at all times comply with all of the requirements set forth in the Mortgage. Specifically, Borrower shall maintain Borrower’s builder’s risk insurance for the full completed project insurable value of the Construction Project (“Builder’s Risk Insurance”), which Builder’s Risk Insurance (i) shall meet the same requirements as Special Perils Insurance (herein defined), with whatever limits and coverage extensions Lender requires, (ii) shall be written on a “Completed Value” Form (100% non-reporting) or its equivalent and shall include an endorsement granting permission to occupy and (iii) shall cover loss of materials, equipment, machinery, and supplies whether on-site, in transit, or stored off-site, or of any temporary structure, hoist, sidewalk, retaining wall or underground property, all soft costs, plans, specifications, blueprints and models, and demolition and increased costs of construction, including costs arising from changes in laws at the time of restoration, and coverage for operation of building at the time of restoration, all subject to a sublimit satisfactory to Lender. Upon completion of the Construction Project, Borrower shall furnish to Lender satisfactory evidence of insurance on the Mortgaged Property and evidence of payment of all premiums for such insurance, which insurance shall at all times comply with all of the requirements set forth in the Mortgage. Borrower covenants and agrees to deposit with Lender and to maintain throughout the term of the Note original policies of insurance, issued by insurance companies satisfactory to Lender, in such amounts and against such risks as required by Lender, including but not limited to the following: (a) Borrower shall maintain a policy against all risks of loss to the Mortgaged Property customarily covered by “All Risk” or “Special Perils Form” policies as available in Oklahoma County, Oklahoma (collectively, “Special Perils Insurance’), in amounts and with insurers acceptable to Lender, in its sole discretion, but not less than the greater of the Secured Indebtedness (as defined in the Mortgage) or one hundred percent (100%) of the full replacement value of the Mortgaged Property, all improvements thereon, and all improvements, betterments and contents thereof, including, but not limited to, all fixtures, furnishings and equipment located in or about such improvements, which Special Perils Insurance (i) shall cover at least the following perils: building collapse, fire, flood, hurricane, impact of vehicles and aircraft, lightning, malicious mischief, mudslide, subsidence, terrorism, vandalism, water damage, windstorm, hail and such other insurable perils as, under good insurance practices, other commercial property owners from time to time insure against for property and building(s) similar to the Mortgaged Property in height, location, nature, type of construction, and use, as evidenced by written advice from Lender’s insurance advisor; and (ii) shall contain an agreed amount endorsement or a coinsurance waiver and a replacement cost value endorsement without deduction for depreciation; (b) equipment and machinery (generally referred to as boiler and machinery) insurance covering all mechanical and electrical equipment against physical damage, rent loss, extra expense and expediting expense covering the Mortgaged Property and any insured leasehold property, which

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equipment and machinery insurance shall be maintained on a replacement cost value basis; (c) if required by Mortgagee, Borrower shall maintain a policy of business or rent interruption insurance on an “actual sustained basis” (“Business Interruption Insurance”), providing coverage against any loss of income by reason of any hazard referred to in this paragraph; in an amount sufficient to avoid any coinsurance penalty, but in any event for not less than at least twelve (12) months of (i) Borrower’s actual gross receipts from all sources of income from the Building located on the Mortgaged Property and (ii) all amounts which Borrower is required to pay to Lender or third parties pursuant to this Agreement, the Note, the Mortgage or any of the other Loan Documents; (d) Borrower shall maintain the following insurance for personal injury, bodily injury, death, accident and property damage: (i) public liability insurance, including commercial general liability insurance, (ii) owned (if any), hired, and non-owned automobile liability insurance, and (iii) umbrella liability insurance as necessary (collectively, “Liability Insurance”), which Liability Insurance shall provide coverage of at least $1,000,000.00 per occurrence and $2,000,000.00 in annual aggregate, per location, and if any Liability Insurance also covers other locations, with a shared aggregate limit, the minimum Liability Insurance shall be increased to $5,000,000.00; and in any event, the Liability Insurance shall include coverage for liability arising from premises and operations, elevators, escalators, independent contractors, contractual liability (including liability assumed under contracts and leases), and products and completed operations; (e) Borrower shall at all times maintain a policy of workers’ compensation and employers liability as required by applicable state law, together with satisfactory evidence of compliance with applicable state law requirements for workers’ compensation coverage; (f) Borrower shall at all times maintain a policy of flood and mudslide insurance in an amount equal to the lesser of the outstanding principal balance of the indebtedness secured hereby or the maximum amount of coverage made available with respect to the Mortgaged Property under the National Flood Insurance Program (or evidence satisfactory to Lender that the Mortgaged Property is not located in an area designated by the Secretary of Housing and Urban Development or any other governmental department agency, bureau, board or instrumentality as an area having special flood or mudslide hazards and that flood insurance is not required for this loan under the terms of any law, regulation or rule governing Lender’s activities); and (g) when and to the extent required by the Lender, Borrower shall maintain a policy or policies of insurance against any other risk or risks insured against by persons operating like properties in the locality of the Mortgaged Property. All insurance policies shall be issued by an insurance company having a rating of “A” VII or better by A.M. Best Co., in Best’s Rating Guide. Whenever any required insurance specifies any dollar amount, Lender may increase it periodically to reflect Lender’s reasonable estimate of inflation. All deductibles, coinsurance provisions, exceptions to coverage and policy forms must be acceptable to Lender in its sole subjective discretion. Each policy shall be a so-called “occurrence” policy of insurance. No insurance hereunder shall be a part of a “blanket” policy maintained by Borrower or any third party unless the policy expressly provides that the amount of insurance required under the Mortgage will in no way be prejudiced by other losses covered by such policy. Each policy of insurance required under this paragraph 5.12 shall provide that (i) the interest of Lender shall be insured regardless of any act or negligence by Borrower or any breach or violation by Borrower of any warranties, declarations or conditions of such policy, and (ii) the insurer under each policy of insurance required hereunder shall agree that any cancellation of its insurance policy or any endorsement of its insurance policy to effect a change in coverage for any reason shall not be effective until thirty (30) days after receipt by Lender of notice of such cancellation or such endorsement to effect a change in coverage. The Borrower further covenants and agrees that, regardless of the types or amounts of insurance required and approved by the Lender, Borrower will cause the

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Lender to be named as an additional insured in each policy of builder’s risk insurance and all policies of Liability Insurance, which shall be evidenced by endorsements acceptable to Lender; and the Borrower will assign and deliver to the Lender all policies of insurance which insure against any loss or damage to the Mortgaged Property, as collateral and further security for the Secured Indebtedness, which policies shall contain a mortgage clause in favor of Lender, naming Lender as “Mortgagee and Loss Payee” on a standard noncontributory mortgagee endorsement (or its equivalent) naming Lender or its designee as the party to receive insurance proceeds, and shall otherwise be in form, scope and substance acceptable to Lender. In addition, Borrower shall furnish to Lender duplicate copies of each policy of insurance at execution hereof, and copies of each renewal policy, together with receipts or other evidence that premiums have been paid. In the event of a casualty to the Mortgaged Property, all hazard insurance proceeds shall be paid to the Lender. Proceeds of insurance paid to the Lender shall, at the option of the Lender, be applied to payment of the Secured Indebtedness or made available to Borrower to pay for repair, restoration and rebuilding of the Mortgaged Property, as described in the Mortgage.

5.13 Zoning and Use . Borrower shall furnish to Lender satisfactory written evidence that the Real Property is presently zoned for its intended use and that the Real Property is in full compliance with all municipal ordinances, codes, rules or regulations. The Borrower’s confirmation of zoning shall include, without limitation, a title insurance Zoning Endorsement (ALTA 3.1-06) in form, scope and substance acceptable to Lender.

5.14 Permits . Borrower shall obtain and provide to Lender copies of all permits required for the Construction Project or any part thereof, including, without limitation, building permits issued by the City of Oklahoma City or Oklahoma County. Specifically, Borrower shall provide to Lender and its Construction Consultant, all required City of Oklahoma City Building Permits for the Construction Project, all in form, scope and substance acceptable to Lender and its Construction Consultant. If any permit(s) is not available prior to or at the time of execution of this Agreement, Lender and Borrower agree that such permit(s) must be provided to Lender prior to any funding of the Loan.

5.15 Plans and Specifications . Borrower shall submit for approval by Lender copies of the final plans and specifications for the Construction Project which have been approved in writing by Borrower, Borrower’s architect, Borrower’s contractor, and all applicable governmental authorities. Following approval by Lender, such plans and specifications shall not be substantially changed, without the prior written consent of Lender. Regardless of its review and approval of the plans and specifications, Lender shall have no responsibility, obligation or liability to Borrower or any other individual or entity based on, arising from or relating to any such review or approval, and Borrower shall at all times have exclusive control over its work on the Construction Project and sole responsibility for compliance with all governmental, quasi-governmental and private laws, rules, regulations, ordinances, codes, covenants, restrictions, easements and other matters which control, burden or apply to or otherwise affect the Mortgaged Property and/or the Construction Project.

5.16 Financial Information . Borrower shall submit to Lender in writing a satisfactory Project Budget which shall show all sources and uses of funds, and shall detail by line item all costs of acquisition of the Real Property and all costs of designing, constructing, franchising, and completing the Construction Project, and all costs of

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finishing, furnishing, equipping and opening the completed Construction Project for business. The Project Budget shall contain, without limitation, an interest reserve, a contingency reserve and a working capital reserve.

5.17 Environmental Site Assessments; Hazardous Substances Indemnity Agreement . Borrower has provided to Lender a Phase I Environmental Site Assessment of the Real Property identified as Tract 1 on Exhibit “A” attached hereto. Borrower confirms that all remediation of the contamination identified in the Phase I Environmental Site Assessment in regard to Tract 1 has been performed and is evidenced by certification from the OERB and from an environmental engineer. Borrower shall provide to Lender an environmental assessment report covering the Real Property identified as Tract 2 on Exhibit “A” attached hereto, which report shall be prepared by an environmental engineering firm acceptable to Lender and shall be in form, scope and substance acceptable to Lender. In addition, Borrower shall sign and deliver to Lender a Hazardous Substances Indemnity Agreement on a form provided by Lender.

5.18 Geotechnical Report . Borrower shall submit for review and approval by Lender a geotechnical report covering the Real Property, which geotechnical report shall be in form, scope and substance acceptable to Lender.

5.19 Loan Fees . Borrower shall pay to Lender a loan commitment fee of $61,355.00 for the twenty-four (24) month “construction loan” at the closing of the Loan, which fee shall be deemed fully earned by Lender and nonrefundable at the time Lender signs the Loan Agreement to Borrower.

5.20 Architectural Agreement and Construction Contract . Borrower shall deliver to Lender for its review and approval the architectural agreement between Borrower, as owner, and the Architect for the Construction Project, which architectural agreement (i) must be in form, scope and substance acceptable to Lender, and (ii) must be subordinated to the Loan and the Loan Documents as described in paragraph 4.3 of this Agreement. Borrower shall deliver to Lender for its review and approval the fixed price Construction Contract between Borrower, as owner, and the Contractor for the Construction Project, which Construction Contract (i) must be in form, scope and substance acceptable to Lender, must be collaterally assigned to Lender as described in paragraph 4.3 of this Agreement, and (iii) must be subordinated to the Loan and Loan Documents as described in paragraph 4.3 of this Agreement by a Subordination Agreement.

5.21 Opinion of Borrower’s Counsel . Borrower shall provide Lender with a legal opinion from its counsel as to: (i) the due organization, powers and good standing of Borrower; (ii) to the best knowledge of Counsel after inquiry, the absence of any suits, proceedings or investigations pending, threatened against or affecting Borrower, any of which if adversely determined, would have a materially adverse effect on the financial condition, the business or the properties of Borrower; (iii) that Borrower has fully complied with all local, state, and federal requirements relative to the location and operation of the project as an office building; (iv) that the documents executed and provided by the Borrower pursuant to this Agreement are fully authorized under all documents which evidence the creation, existence and good standing of the Borrower; and (v) that all Loan Documents have been duly executed by the Borrower, are the legal, valid and binding obligations of Borrower and are enforceable according to their respective terms. Closing of the Loan will evidence that Lender has received an acceptable opinion letter from Borrower’s counsel.

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5.22 Construction Schedule; Subcontractors and Suppliers . Within fourteen (14) days after the date of this Agreement, Borrower shall deliver to Lender (i) a complete, written construction schedule for the Construction Project, (ii) a list of all subcontractors and material suppliers, together with their respective addresses and main contracts, (iii) a copy of every subcontract and material purchase order of $10,000.00 or more, and (iv) copies of all of the Performance Bonds and Payment Bonds listed on Exhibit “C” attached to this Agreement and incorporated herein by reference.

6. REPRESENTATIONS AND WARRANTIES . In addition to all other representations and warranties of Borrower to Lender, Borrower represents and warrants that:

6.2 Conflicting Agreements and Restrictions . Borrower is not a party to any contracts or agreements or subject to any other restrictions which materially adversely affect its business, property, assets or financial condition. To the best of Borrower’s knowledge, neither the execution and delivery of the Loan Documents nor fulfillment and compliance with the terms and provisions thereof, (i) will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of any agreement, instrument, undertaking, judgment, decree, order, writ, injunction, statute, law, rule or regulation to which Borrower is subject or by which the Mortgaged Property is bound or affected, (ii) will result in the creation or imposition of any lien, charge or encumbrance on, or security interest in, any property now or hereafter included in the Mortgaged Property pursuant to the provisions of any mortgage, indenture, security agreement, contract, undertaking or other agreement other than the liens and security interests in favor of Lender created by the Loan Documents, or (iii) will require any authorization, consent, license, approval or authorization of or other action by, or notice or declaration to, or registration with, any court or administrative or governmental department, commission, board, bureau, authority, agency or body (domestic or foreign), or, to the extent that any such consent or other action may be required, it has been validly procured or duly taken.

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condition of Borrower from the effective dates of said financial statements to the date hereof. Borrower does not have any contingent obligations, unusual or long-term commitments, unrealized or anticipated losses from any unfavorable commitment or liabilities for taxes not reflected in such financial statements which are individually or in the aggregate substantial in relation to the financial condition of Borrower.

6.8 Place of Business and Certain Records . Borrower (i) presently keeps all of its records concerning its accounts and contract rights in its office at 7501 West Memorial Road, Oklahoma City, Oklahoma, 73142; (ii) intends to continue to keep the location of said records in its office in said city, county and state; and (iii) shall continue to keep said records in its office within said city, county and state or give Lender ten (10) days’ prior written notice of any relocation of its principal office to a location outside of Oklahoma City, Oklahoma, or concurrent written notice of any relocation of its principal office within Oklahoma City, Oklahoma.

6.11 ERISA . To the best of its knowledge, information and belief, Borrower has not incurred any “accumulated funding deficiency” within the meaning of

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Section 302(a)(2) of ERISA with respect to any employee pension or other benefit plan or trust maintained by or related to Borrower. Borrower has not incurred any material liability to PBGC or otherwise under ERISA in connection with any such plan. No reportable event described in Sections 4042(a) or 4043(b) of ERISA with respect to any such plan has occurred.

6.15 Availability of Utility Services . All utility services necessary for the Mortgaged Property and for the use of the Real Property for the above-described Building are connected to the Mortgaged Property. Such utility services include, without limitation, water supply, sanitary and storm sewers, and electric, gas, and telephone.

7. BORROWER’S AFFIRMATIVE COVENANTS . Until the payment in full of the Loan and unless Lender shall otherwise consent in writing, Borrower agrees to perform or cause to be performed the following:

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time as Lender might reasonably request, but in any event quarterly. Borrower will furnish Lender with all of the financial statements, tax returns and other financial information as and when required under the terms of paragraph 11 of the Mortgage.

7.2 Taxes . Borrower will pay prior to delinquency all taxes, assessments, governmental charges or levies, and all claims for labor, materials, supplies, rent and other obligations which, if unpaid, might become a lien against its property, except to the extent Borrower is challenging any of the foregoing in good faith and with due diligence, and has posted all required bonds or has paid the contested items “under protest,” so that there shall not occur a foreclosure of any such liens.

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7.13 Post-Foundation and Post-Completion Surveys . Immediately after completion of the foundations of the Construction Project, Borrower shall furnish to Lender, in form and substance acceptable to Lender, a survey of the Real Property, conforming to Lender’s survey criteria, showing the location of all such foundations on the Real Property in addition to those items which are required to be shown by the Lender’s survey criteria, and showing no encroachment by such foundations over easements or property lines on the Property. Immediately after completion of the Construction Project, Borrower shall furnish to Lender, in form and substance acceptable to Lender, an update of the survey required in paragraph 5.9 of this Agreement, showing the location of all improvements on the Real Property in addition to those items which are required to be shown in the initial survey described in paragraph 5.9 and showing no encroachments of easements or property lines on the Real Property.

7.14 Use of Funds in Construction Account . Funds in the Construction Account shall be used solely for the purposes set forth in this Agreement.

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8.1 Creation or Existence of Liens . Borrower will not create, assume or suffer to exist any mortgage, pledge, lien, charge or encumbrance on any of the properties of Borrower, personal or real, tangible or intangible, including without limitation the Mortgaged Property, in excess of $1,500,000.00, excluding only: (i) encumbrances in favor of Lender; (ii) deposits to secure payment of workmen’s compensation, unemployment insurance and similar benefits; (iii) statutory liens, against which there are established reserves in accordance with generally accepted accounting principles; and (iv) liens covering tangible personal property which arise in the ordinary course of Borrower’s business and secure current obligations of Borrower which are not in default.

8.4 Limitation on Dividends . Loans and Distributions of Funds. So long as an Event of Default exists under this Agreement or any of the other Loan Documents, Borrower will not, directly or indirectly, make, or become obligated to make, any distributions to members or set apart any sum or any of its assets for distributions to members, or make any loans or any other distribution of funds, by reduction of capital, or otherwise.

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8.8 Construction Issues . Borrower shall not (i) incur or suffer to exist any delays in completion of the Construction Project, (ii) agree to any change order which would increase the cost of the Construction Project by $20,000.00 or more, or any change order(s) which, in the aggregate, would increase the cost of the Construction Project by $100,000.00 or more, or (iii) make any changes in the Construction Project to achieve cost savings without the prior written approval of Lender.

8.11 Funded Debt Limitation . Prior to the Term Loan Commencement Date, Borrower shall not incur funded outside debt (except for the Loan provided under this Agreement). After the Term Loan Commencement Date, Borrower shall not incur funded debt in excess of $ 1,500,000.00 without the prior written approval of Lender.

8.12 Debt Coverage Ratio . The debt coverage ratio shall not be less than 1.5:1.00 (EBITDA/CMLTD + Interest Expense + Distributions).

9. ADMINISTRATION OF LOAN . Notwithstanding any language in this Agreement seemingly to the contrary, Borrower shall not be entitled to any disbursement of Loan proceeds hereunder unless and until Borrower has satisfied all of the conditions of lending set forth in paragraph 5 of this Agreement, including paragraph 5.21. Upon satisfaction of such conditions of lending to the satisfaction of Lender, Lender will make Loan disbursements up to the principal amount of the Loan provided that (i) Lender’s Construction Consultant shall have completed periodic inspection(s) of the Construction Project and shall have advised Lender in writing that work to date on the Construction Project is satisfactory, (ii) there is no uncured Event of Default under any of the Loan Documents, and (iii) all of the other requirements set forth in this Loan Agreement for advancement of loan proceeds are satisfied.

Subject to all of the terms, conditions and provisions of this Agreement, Lender shall make disbursements under the Loan in the following manner:

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9.2 Compliance with Project Budget . All disbursements under this Agreement and the Note shall be made in accordance with the Project Budget. Material deviations from the Project Budget must be approved in advance in writing by Lender. If Lender determines, in its sole judgment, at any time while the Loan is outstanding, that the direct construction costs, plus the cost of the improvements and the estimated non-construction costs, exceed the amount of the Loan, then at the request of Lender, Borrower shall explain to Lender how the overage will be paid and will make arrangement for such payment in a manner satisfactory to Lender, before additional advances are made to Borrower. Such arrangements may include an additional cash investment by Borrower in the Construction Project. If an investment or deposits by the Borrower are required, such investment or deposits shall be made prior to any advance or additional advance by Lender of Loan proceeds.

9.3.1 The Request for Funds (i) shall be made on the latest versions of the ALA G702 and G703 forms, (ii) shall be properly completed and signed by Borrower, Borrower’s general contractor and Borrower’s inspecting architect, and (iii) shall be delivered to Lender and the Construction Consultant at least five (5) days before the requested date of disbursement. The Request for Funds must be approved first by the Construction Consultant and then by Lender. All Requests for Funds shall be supported by copies of invoices or bills for all expenses for which a disbursement is requested, and all funding under the Loan shall be advanced through the Borrower’s Construction Account with Lender.

9.4 Additional Information . On request by Lender, each Request for Funds shall be accompanied by:

9.4.1 proof, satisfactory to Lender, that all invoices for labor and materials have been paid, except those contained in the current Request for Funds covering “hard costs;” and

9.4.2 lien waivers from all architects, professional engineers, landscape architects, land surveyors, contractors, mechanics, materialmen, landscapers and laborers; and

9.4.3 title information, in the form of an endorsement to the loan policies of title insurance held by Lender, which increases the amount of coverage and which confirms the first lien priority of the Mortgage, without additional matters affecting title to the Mortgaged Property.

All of the above information shall be obtained and submitted to Lender at Borrower’s expense.

-21-

and Lender shall not be required to make any advance until such examination has been made. Regardless of inspections by the Construction Consultant or any other representative of Lender, Lender shall have no responsibility, obligation or liability to Borrower or any other individual or entity based on, arising from or relating to any such inspections, and Borrower shall at all times have exclusive control over work on the Construction Project and sole responsibility for compliance with all governmental, quasi-governmental and private laws, ordinances, rules, regulations, codes, covenants, restrictions, easements and other matters which control, burden, apply to or otherwise affect either part of the Mortgaged Property and/or the Construction Project.

10.1 Nonpayment of Note . Default in payment when due of any interest on or principal of the Note.

-22-

10.4 Default Under Funded Debt Limitations or Ratio of EBITDA/CMLTD plus Interest and Other Distribution . Any failure of Borrower to comply with the funded debt limitations set forth in paragraph 8.11 of this Agreement or with the debt coverage ratio described in paragraph 8.12 of this Agreement.

10.5 Bankruptcy . The institution of bankruptcy, reorganization, liquidation or receivership proceedings by or against Borrower.

10.8 Event of Default Under Other Loan Documents . Any Event of Default occurs under the Note, the Mortgage, the Assignment, the Subordination Agreements or any of the other Loan Documents.

-23-

12. GENERAL PROVISIONS . Lender and Borrower agree as follows:

12.1 Expenses . Borrower agrees to pay all fees, expenses and charges in respect to the Loan contemplated by this Agreement, including, without limiting the generality thereof, the following:

12.1.2 title insurance premiums and all expenses incidental to title insurance and title evidence;

12.1.3 recording and filing fees required by applicable law;

12.1.4 all fees and expenses of the Mortgagee identified in the Mortgage, and any successor to the Mortgagee;

12.1.5 fees and expenses of any appraisers who appraise the Mortgaged Property for Lender; and


To Borrower:		Paycom Payroll, LLC 7501 West Memorial Road Oklahoma City, Oklahoma 73142 Attn: Mr. Chad Richison

With copy to:		Cheek & Falcone, PLLC 6301 Waterford Boulevard Suite 320 Oklahoma City, Oklahoma 73118 Attn: Mr. John P. Falcone

-24-


To Lender:		Kirkpatrick Bank 15 East 15 ^th Street Edmond, Oklahoma 73013 Attn: Mr. David L. Sutter, Executive Vice President

With copy to:		Mock, Waldo, Elder, Reeves & Bryant 14 ^th Floor, Two Leadership Square 211 North Robinson Oklahoma City, Oklahoma 73102 Attn: Mr. James C. Elder

12.5 Assignment . Neither this Agreement, nor the loan proceeds hereunder, shall be assignable by Borrower without the prior written consent of Lender.

12.7 No Partnership . Nothing in this Agreement shall be construed to constitute Lender as joint venturer with Borrower, or to constitute a partnership between the parties.

12.8 Descriptive Headings . The descriptive headings of the paragraphs of this Agreement are for convenience only and shall not be used in the construction of the terms hereof.

-25-

12.10 Time of Essence . Time is of the essence of this Agreement.

12.11 Binding Effect . This Agreement shall be binding upon and inure to the benefit of Lender and Borrower and their respective successors, legal representatives and assigns.

-26-

Lender’s rights of indemnity shall not be directly or indirectly limited, prejudiced, impaired or eliminated in any way by any finding or allegation that Lender’s conduct is active, passive or subject to any other classification or that Lender is directly or indirectly responsible under any theory of any kind for any act or omission by the Borrower or any other Person other than Lender, its agents, servants or employees. BORROWER ACKNOWLEDGES AND AGREES THAT ITS INDEMNIFICATION OBLIGATIONS HEREUNDER COVER AND RELATE TO, WITHOUT LIMITATION, ANY NEGLIGENT ACTION OR OMISSION OF INDEMNITIES; PROVIDED, NOTWITHSTANDING THE FOREGOING, BORROWER SHALL NOT BE OBLIGATED TO INDEMNIFY LENDER WITH RESPECT TO ANY INTENTIONAL TORT OR ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH LENDER IS PERSONALLY DETERMINED BY THE JUDGMENT OF A COURT OF COMPETENT JURISDICTION (SUSTAINED ON APPEAL, IF ANY) TO HAVE COMMITTED. Borrower’s obligations under this paragraph 12.15 shall survive the repayment of the Loan and the release of the Mortgage and the other Loan Documents.

12.19 Incorporation of Exhibits . All Exhibits and Schedules identified in this Agreement as exhibits to or schedules to this Agreement are hereby incorporated into this Agreement and made integral parts of it.

-27-

12.20 Government Regulations . The Borrower represents, warrants and covenants to Lender as follows, and acknowledges that such representations, warranties and covenants shall be continuing representations, warranties and covenants from Borrower to Lender:

(i) The Borrower is and shall remain in compliance with the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation, regulations or executive orders relating thereto, and the Uniting and Strengthening America By Providing Appropriate Tools Required To Intercept and Obstruct Terrorism Act (USA Patriot Act of 2001), as amended, and any other enabling legislation, regulations or executive orders relating thereto;

(iii) Borrower (A) is not a party whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (B) does not engage in any dealings or transactions prohibited by Section 2 of such executive order, and are not otherwise associated with any such person in any manner violative of Section 2, or (C) is not a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasure’s Office of Foreign Assets Control regulation or executive order.

12.21 Applicable Law . THIS AGREEMENT AND THE DOCUMENTS ISSUED AND EXECUTED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF OKLAHOMA AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA, EXCEPT, AND WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES AND EXCEPT TO THE EXTENT PREEMPTED BY THE LAWS OF THE UNITED STATES OF AMERICA.

12.22 Consent to Jurisdiction . BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL COURT OR OKLAHOMA STATE COURT HAVING THE MORTGAGED PROPERTY WITHIN ITS JUDICIAL DISTRICT, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS AND ANY OTHER DOCUMENTS EVIDENCING, SECURING OR RELATING TO THE LOAN, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE

-28-

HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION ANY OF THEM MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BROUGHT BY BORROWER AGAINST LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE LOAN OR ANY LOAN DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT IN OKLAHOMA.

12.23 Waiver of Jury Trial . TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE LOAN, ANY LOAN DOCUMENT OR ANY RELATIONSHIP ESTABLISHED THEREUNDER.

IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be duly executed effective as of the day and year first above written.


“Lender”:	KIRKPATRICK BANK, an Oklahoma banking corporation

	By	/s/ Shawn D. Brewer

		Shawn D. Brewer, Senior Vice President

“Borrower”:	PAYCOM PAYROLL, LLC,
	a Delaware limited liability company

	By	/s/ Chad Richison

		Chad Richison, President

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EXHIBIT “A”

Description of Real Property

Tract 1 :

All of Lot One (1), Block One (1) and Common Area A, of Paycom, an Addition to the City of Oklahoma City, Oklahoma County, Oklahoma, according to the recorded plat thereof.

Tract 2 :

Commencing at the Southeast (SE) Corner of said Southwest Quarter (SW/4); THENCE North 00°15’38” West, along and with the East line of said Southwest Quarter (SW/4), a distance of 1,496.10 feet to the Northeast (NE) Comer of Paycom recorded in Book PL68, Page 95, said point being the Point of Beginning; THENCE South 89°35’06” West along and with the North line of Paycom, a distance of 667.91 feet to the Northwest (NW) Corner of Paycom; THENCE North 00°01’27” West, along and with the extended West line of Paycom, a distance of 1,155.56 feet to the North line of Southwest Quarter (SW/4); THENCE South 89°52’18” East, along and with the North line of said Southwest Quarter (SW/4), a distance of 663.15 feet to the Northeast (NE) Comer of said Southwest Quarter (SW/4); THENCE South 00°15’38” East, along and with the East line of said Southwest Quarter (SW/4), a distance of 1,149.24 feet to the Point of Beginning.

EXHIBIT “B”

Request for Funds

(The form of request for funds follows this page.)

LOGO

AIAR Document G702TM - 1992
Application and Certificate for Payment
TO OWNER: PROJECT: APPLICATION NO: Distribution to:
PERIOD TO: OWNER
CONTRACT FOR: ARCHITECT
FROM VIA CONTRACT DATE: CONTRACTOR
CONTRACTOR: ARCHITECT: PROJECT NOS: / / FIELD
CONTRACTOR’S APPLICATION FOR PAYMENT
Application is made for payment, as shown below, in connection with the Contract. Continuation Sheet, AIA Document G703, is attached.
1. ORIGINAL CONTRACT SUM $0.00
2. NET CHANGE BY CHANGE ORDERS $0.00
3. CONTRACT SUM TO DATE (Line 1 ± 2) $0.00
4. TOTAL COMPLETED & STORED TO DATE (Column G on G703) $0.00
5. RETAINAGE:
a. 0 % of Completed Work
(Column D + E on G703: $0.00 )= $0.00
b. 0 % of Stored Material
(Column F on G703: $0.00 )= $0.00
Total Retainage (Lines 5a + 5b or Total in Column 1 of G703) $0.00
6. TOTAL EARNED LESS RETAINAGE $0.00
(Line 4 Less Line 5 Total)
7. LESS PREVIOUS CERTIFICATES FOR PAYMENT $0.00
(Line 6 from prior Certificate)
8. CURRENT PAYMENT DUE $0.00
9. BALANCE TO FINISH, INCLUDING RETAINAGE
(Line 3 less Line 6) $0.00
CHANGE ORDER SUMMARY ADDITIONS DEDUCTIONS
Total changes approved in previous months by Owner $0.00 $0.00
Total approved this Month S0.00 $0.00
TOTALS $0.00 $0.00
NET CHANGES by Change Order $0.00
The undersigned Contractor certifies that to the best of the Contractor’s knowledge, information and belief the Work covered by this Application for Payment has been completed in accordance with the Contract Documents, that all amounts have been paid by the Contractor for Work for which previous Certificates for Payment were issued and payments received from the Owner, and that current payment shown herein is now due.
CONTRACTOR: By: Date:
State of:
County of:
Subscribed and sworn to before me this day of
Notary Public:
My Commission expires:
ARCHITECT’S CERTIFICATE FOR PAYMENT
In accordance with the Contract Documents, based on on-site observations and the data comprising this application, the Architect certifies to the Owner that to the best of the Architect’s knowledge, information and belief the Work has progressed as indicated, the quality of the Work is in accordance with the Contract Documents, and the Contractor is entitled to payment of the AMOUNT CERTIFIED.
AMOUNT CERTIFIED $0.00
(Attach explanation if amount certified differs from the amount applied. Initial all figures on this Application and on the Continuation Sheet that are changed to conform with the amount certified
ARCHITECT:
By: Date:
This Certificate is not negotiable. The AMOUNT CERTIFIED is payable only to the Contractor named herein. Issuance, payment and acceptance of payment are without prejudice to any rights of the Owner or Contractor under this Contract
AIA Document G702TM - 1992. CopyrightC 1953, 1963, 1965, 1978 and 1992 by The American Institute of Architects. All rights reserved. WARNING: This AIAR Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIAR Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 09:55:50 on 06/04/2009 under Order No.1000379969_1 which expires on
12/02/2009, and is not for resale.
User Notes:
(862087258)

LOGO

AIAR Document G703TM – 1992
Continuation Sheet
AIA Document G702, APPLICATION AND CERTIFICATION FOR PAYMENT,
containing Contractor’s signed certification is attached.
In tabulations below, amounts are stated to the nearest dollar.
Use Column I on Contracts where variable retainage for line items may apply.
APPLICATION NO:
APPLICATION DATE:
PERIOD TO:
ARCHITECTS PROJECT NO:
A B C D E F G H I
WORK COMPLETED
ITEM
NO. DESCRIPTION OF WORK SCHEDULED VALUE FROM PREVIOUS APPLICATION (D + E) THIS PERIOD MATERIALS PRESENTLY STORED (NOT IN D OR E) TOTAL COMPLETED AND STORED TO DATE (D + E + F) % (G + C) BALANCE TO FINISH (C - G) RETAINAGE (IF VARIABLE Rate)
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
$0 $0 $0 $0 $0 0.00% $0 $0
GRAND TOTAL $0 $0 $0 $0 $0 0.00% $0 $0
AIA Document G703™ – 1992. Copyright C 1963, 1965, 1966, 1967, 1970, 1978, 1983 and 1992 by The American Institute of Architects. All rights reserved. WARNING: This AIAR Document is protected by U.S. Copyright Law and International Treaties. Unauthorized reproduction or distribution of this AIAR Document, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent possible under the law. This draft was produced by AIA software at 09:57:34 on 06/04/2009 under order No. 1000379969_1 which expires on 12/02/2009, and is not for resale.
User Notes:
(1366249300)

EXHIBIT “C”

Required Performance Bonds and Payment Bonds

(To be provided within fourteen (14) days as of this Agreement.)

Exhibit 10.10

SENIOR NOTE

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT (“ OID ”) AS DEFINED BY SECTION 1273(a)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. PURSUANT TO THE INFORMATION REPORTING REQUIREMENTS SET FORTH IN TREASURY REGULATION 1.1275-3, UPON WRITTEN REQUEST TO THE ISSUER C/O WELSH, CARSON, ANDERSON & STOWE, 320 PARK AVENUE, SUITE 2500, NEW YORK, NY, 10022, INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY WILL BE MADE AVAILABLE.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID LAWS.

PAYCOM PAYROLL HOLDINGS, LLC

10% Senior Note

Due April 3, 2022


$18,807,160.60		April 3, 2012

Paycom Payroll Holdings, LLC, a Delaware limited liability company (the “ Issuer ”), for value received, hereby promises to pay to WCAS Capital Partners IV, L.P., a Delaware limited partnership, or its registered assigns (collectively, the “ Holder ”), the principal sum of Eighteen Million Eight Hundred and Seven Thousand One Hundred and Sixty Dollars and Sixty Cents ($18,807,160.60) with interest thereon on the terms and conditions set forth in the hereinafter defined Securities Purchase and Contribution Agreement.

Notwithstanding any provision to the contrary in this Note or the Securities Purchase and Contribution Agreement, the Issuer shall not be required to pay, and the Holder shall not be permitted to contract for, take, reserve, charge or receive, any compensation, which constitutes interest under applicable law in excess of the maximum amount of interest permitted by law.

This Note is issued pursuant to that certain Securities Purchase and Contribution Agreement, dated as of April 3, 2012 (as amended, restated or otherwise modified from time to time, the “ Securities Purchase and Contribution Agreement ”), by and among the Issuer, the Holder and the Unit Purchaser from time to time party thereto, and Holder is entitled to the benefits thereof. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Securities Purchase and Contribution Agreement. Each Holder of this Note will be deemed, by its acceptance hereof, to have agreed to the provisions and to have made the representations and warranties set forth in Article V of the Securities Purchase and Contribution Agreement.

This Note is transferable only pursuant to the terms of the Securities Purchase and Contribution Agreement and by surrender hereof at the principal office of the Issuer, duly endorsed, accompanied by a written instrument of transfer duly executed by the registered Holder of this Note as shown in the Register of the Issuer or as otherwise permitted under the Securities Purchase and Contribution Agreement.

This Note is also subject to mandatory and optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Securities Purchase and Contribution Agreement, but not otherwise.

Except as provided in Section 3.01(b) of the Securities Purchase and Contribution Agreement, all payments of amounts due under this Note shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for payment of public and private debts.

If an Event of Default occurs and is continuing, the unpaid principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable premium) and with the effect provided in the Securities Purchase and Contribution Agreement.

This Note and the rights and obligations of the parties hereto shall be deemed to be contracts under the laws of the State of New York and for all purposes shall be governed by, and construed and enforced in accordance with, the laws of said State.

[ Signature page follows .]

IN WITNESS WHEREOF, this Note is executed and delivered as of the date first set forth above.


PAYCOM PAYROLL HOLDINGS, LLC

By:		/s/ Chad Richison

		Name:
		Title:

Exhibit 10.11

EXECUTION COPY

WCAS PAYCOM HOLDINGS, INC.

14% Note

Due April 3, 2017


$46,192,893.40		April 3, 2012

WCAS Paycom Holdings, Inc., a Delaware corporation (the “ Issuer ”), for value received, hereby promises to pay to Welsh, Carson, Anderson & Stowe X, L.P., a Delaware limited partnership, or its registered assigns (collectively, the “ Holder ”), the principal sum of forty-six million one hundred ninety two thousand eight hundred ninety three dollars and forty cents ($46,192,893.40) with interest thereon on the terms and conditions set forth herein.

1. Interest Rate .

(a) The interest rate hereunder shall be fixed at 14.0% per annum, compounded semi-annually on June 30th and December 31st of each year (the “ Applicable Interest Rate ”). Interest shall accrue on the unpaid principal balance hereunder from and alter the date hereof until the same is paid, whether at maturity, or upon prepayment, repayment, or otherwise. Interest shall be calculated based on a 360-day year and shall be payable annual in arrears on each anniversary of the date hereof. Payment of each installment of interest due hereunder shall be made, at the Issuer’s election (i) in cash, (ii) by adding such interest to principal, or (iii) in any combination of the foregoing (i) and (ii) with an aggregate value equal to the interest then due. Any accrued and unpaid interest under this Note that is added to principal shall also bear interest at the Applicable Interest Rate.

(b) Notwithstanding any provision to the contrary in this Note, the Issuer shall not be required to pay, and the Holder shall not be permitted to contract for, take, reserve, charge or receive, any compensation, which constitutes interest under applicable law in excess of the maximum amount of interest permitted by law. If any stated interest rate herein exceeds such maximum permitted rate, then the interest rate shall be reduced to the maximum rate permitted by applicable law, and any excess payment of interest made by the Issuer at any time shall be applied to the unpaid balance of any outstanding principal under this Note.

2. Maturity Date . The Issuer shall repay the total principal amount outstanding on this Note in one instalment on April 3, 2017 (the “ Maturity Date ”).

3. Prepayments . The Issuer may at any time upon five (5) business days’ prior notice prepay the whole or any part of any amount due on this Note without penalty. In case of a prepayment of the entire outstanding amount outstanding on this Note, such prepayment shall include a payment of all accrued and unpaid interest at the time of such prepayment and all other sums payable under this Note. In case of a partial prepayment, the amount outstanding on this Note prepaid shall be adjusted to reflect such prepayment.

4. Events of Default . Each of the following shall constitute an event of default (each, an “ Event of Default ”):

(c) if any amount payable under this Note has not been received by the Holder on the due date thereof and such default remains unremedied for ten (10) business days following the due date for such payment(s);

(d) if the Issuer is adjudicated by any competent governmental authority as insolvent or bankrupt, or a receiver, trustee or similar officer is appointed for the Issuer or for all or any substantial part of its assets, or if the Issuer suspends payments to its creditors generally.

Upon the occurrence of an Event of Default, at the Holder’s option, the total outstanding amount on this Note shall become immediately due and payable by the Issuer.

5. Currency . All cash payments of amounts due under this Note shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for payment of public and private debts.

6. Amendment . This Note may be amended only by a written instrument executed by the Issuer and the Holder.

7. Severability . Any term or provision of this Note which is invalid or unenforceable will be ineffective to the extent of such invalidity or enforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such provision or any other provisions of this Note.

8. Governing Law; Waiver of Jury Trial .

(e) The interpretation and construction of this Note, and all matters relating hereto, shall be governed by the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware, without giving effect to any conflict of law provisions thereof.

(f) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS NOTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

9. Assignment . The provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law and permitted assigns of the parties hereto. No assignment of this Note may be made by any party at any time, whether or not by operation of law, without the other parties’ prior written consent. Any assignment of this Note shall be recorded on a register (the “ Register ”) maintained by the Issuer, on which shall be recorded the name and address of each Holder and the amount of principal and interest owed to each such Holder from time to time. Entries in the Register shall be conclusive, absent manifest error.

10. No Third-Party Beneficiaries . Nothing in this Note is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Note.

[ Signature page follows .]

IN WITNESS WHEREOF, this Note is executed and delivered as of the date first set forth above.


WCAS PAYCOM HOLDINGS, INC.

By:		/s/ Jonathan M. Rather

Name:		Jonathan M. Rather
Title:		Vice President, Treasurer and Secretary

Signature Page - WCAS Paycom Holdings, Inc. Note

Exhibit 10.12

REAL PROPERTY PURCHASE AGREEMENT

THIS REAL PROPERTY PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 28 ^th day of November, 2012 by and between Kilpatrick Partners, L.L.C., an Oklahoma limited liability company (“Seller”) and Paycom Payroll, LLC, a Delaware limited liability company (“Purchaser”).

W I T N E S S E T H :

WHEREAS , Seller desires to sell and Purchaser desires to purchase, upon the terms and conditions hereinafter set forth, that certain tract or parcel of land consisting of approximately seventeen and 6067/1000 (17.6067) acres located in the SW/4 of Section 8, Township 13 North, Range 4 West, Oklahoma County, Oklahoma and more particularly described on Exhibit “A” attached hereto and by this reference made a part hereof, together with all rights, easements and appurtenances pertaining thereto and all improvements thereon (the “Property”) and subject only to the Permitted Exceptions (hereinafter defined).

NOW, THEREFORE , in consideration of the mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are all hereby acknowledged by each of the parties hereto, the parties hereto agree as follows:

1. Purchase Price . Seller shall sell and convey the Property to Purchaser and Purchaser shall purchase the Property from Seller and pay to Seller the sum of TWO MILLION THREE HUNDRED TWENTY FOUR THOUSAND EIGHTY FOUR DOLLARS and FORTY CENTS ($2,324,084.40) (the “Purchase Price”).

2. Earnest Money . Within five (5) days after the Effective Date (hereinafter defined), Purchaser agrees to deposit in escrow with the Title Company an earnest money deposit of FIFTEEN THOUSAND AND NO/100 DOLLARS ($15,000.00) (the “Earnest Money”). In the event Purchaser deposits the Earnest Money with the Title Company, Purchaser may, at its option, direct the Title Company to invest the Earnest Money in an interest bearing account designated by Purchaser. The Earnest Money shall be held in escrow to be applied for Purchaser’s benefit against the Purchase Price at Closing (hereinafter defined) or as otherwise provided for by this Agreement. All interest which has accrued on the Earnest Money shall, under all circumstances, belong to Purchaser.

3. Title Commitment and Survey .

(a) Within ten (10) days after the Effective Date, Seller, at Seller’s sole cost and expense, shall deliver, or cause to be delivered, to Purchaser any abstracts of title to the Property in Seller’s possession. Purchaser, at Purchaser’s cost and expense, may obtain an Owner’s Commitment for Owner’s Title Insurance Policy (the “Title Commitment”) from a title company selected by Purchaser (the “Title Company”).

(b) Purchaser, at Purchaser’s sole cost and expense, shall obtain a survey or surveys of the Property (the “Survey”).

4. Inspection Period .

(a) Purchaser shall have twenty (20) days from the Effective Date (the “Inspection Period”) to conduct such examinations, studies, tests and inspections as Purchaser shall deem necessary or desirable with respect to the Property and to satisfy itself as to such matters which Purchaser, in its sole discretion, deems to be necessary or desirable.

Should Purchaser desire to terminate this Agreement for any reason whatsoever on or before the end of the Inspection Period, then Purchaser may terminate this Agreement by giving written notice to Seller whereupon all Earnest Money shall be refunded to Purchaser and this Agreement shall be deemed null and void and of no further force or effect with Purchaser and Seller having no further rights, obligations or liabilities hereunder.

(b) If Purchaser has not terminated this Agreement on or before the expiration of the Inspection Period pursuant to the provisions of Section 4(a) above or as otherwise permitted in this Agreement, then Purchaser shall have the right, at its election by providing written notice to Seller prior to the expiration of the Inspection Period to extend the Inspection Period for an additional period of thirty (30) days (said thirty (30) day period being referred to as the “Extended Inspection Period”). At any time during the Extended Inspection Period, Purchaser shall have the right for any reason whatsoever to terminate this Agreement by notice to Seller whereupon the Title Company shall pay the Earnest Money to Purchaser and this Agreement shall thereafter be null and void and of no further force and effect with Purchaser and Seller having no further rights, obligations or liabilities hereunder.

Notwithstanding anything to the contrary contained herein, Purchaser shall have the right at any time during the Inspection Period or Extended Inspection Period to waive the remainder of the Inspection Period or Extended Inspection Period by delivering written notice to Seller of such election and to close on or before thirty (30) days thereafter.

5. Inspection Prior to Closing . Purchaser, its agents and representatives shall at all times before the Closing have the privilege, opportunity and right of entering upon the Property in order to inspect the Property and to examine, and perform topographical surveys, environmental tests, soil tests, borings, percolation tests and other tests needed to determine surface, subsurface and topographic conditions.

6. Title and Survey Objections; Lot Split . Purchaser shall have until the close of the Inspection Period (or any extension of the Inspection Period) to examine the Survey and title to the Property and to notify Seller of any objectionable matter or defect which affects the marketability or insurability of the title to the Property or which adversely affects the use of the Property. In the event Seller is notified of any such objectionable matters, Seller agrees to promptly employ diligent efforts to procure a cure for same. In the event, however, Seller is unable through the exercise of its good faith best efforts (which shall include the payment of money with respect to any existing mortgages, deeds of trust, deeds to secure debt, liens or other

matters that can be removed by the payment of money) to cure any objectionable matter prior to Closing, then at Purchaser’s option, Purchaser may either (a) take title to the Property despite the existence of such matter, or (b) terminate this Agreement in which event all Earnest Money paid by Purchaser shall be immediately refunded by Title Company to Purchaser, and neither Purchaser nor Seller shall have any further liabilities, obligations or rights with regard to this Agreement which shall then become null and void and of no further force or effect. Any title exceptions to the Property existing prior to the Effective Date hereof to which Purchaser does not object, or to which Purchaser waives its objection, are referred to herein as “Permitted Exceptions”.

In the event that any title exceptions or survey matters arise after Purchaser’s initial title search that affect the marketability or insurability of the title to the Property or which adversely affect the use of the Property, Purchaser may after the discovery thereof notify Seller, in which event Seller shall promptly employ its good faith best efforts to procure a cure for same, as required above, and upon the failure of Seller to effectuate a cure, the Purchaser may elect any of the options set forth in subclauses (a) and (b) above.

The subject Property is a part of ~107 acres owned by Seller. Purchaser, at Purchaser’s sole cost and expense, shall be solely responsible for applying for and obtaining any governmental approvals for the platting, PUD amendment, or lot-split contemplated by this Agreement. Seller shall cooperate with Purchaser in Purchaser’s efforts. In the event any such split or division is not approved in a reasonable time by the applicable governmental authorities, then either party may terminate this Agreement without penalty by providing written notice to the other party of termination, and in such an event, Seller shall return the earnest money to Purchaser.

7. Closing . The consummation of the purchase and sale of the Property contemplated under this Agreement (the “Closing”) shall be held on or before five (5) days after the later of (a) the expiration of the Inspection Period, (b) the expiration of the Extended Inspection Period, and (c) the satisfaction of all of the conditions to Closing, as same are more particularly set forth herein, at a date and time designated by Purchaser to Seller in the offices of the Title Company, or at such other location as may be designated by Purchaser. The parties shall endeavor to close this transaction on or before December 31, 2012.

8. Closing Deliveries .

(a) At the Closing, Seller shall deliver the following:

(i) Marketable fee simple title to the Property to Purchaser pursuant to a recordable general warranty deed (the “Deed”) reasonably acceptable to Purchaser.

(ii) An Owner’s Title Insurance Policy (or down dated title commitment to the date of closing) insuring title to the Property, free and clear of all liens, encumbrances, and other exceptions to title, other than the Permitted Exceptions;

(iii) An affidavit acceptable to Purchaser and the Title Company stating that Seller has sole and exclusive possession of the Property and which is sufficient to delete any exception to title with respect to unrecorded liens;

(iv) A nonforeign affidavit in form acceptable to Purchaser and the Title Company; and

(v) Such other documentation reasonably required by Purchaser and/or the Title Company.

(b) At the Closing, Purchaser shall deliver the Purchase Price, less the Earnest Money and subject to the prorations set forth in this Agreement, to the Title Company via wire transfer of immediately available and collectible funds.

9. Closing Costs . Seller’s attorneys’ fees, all doc stamps and all recording fees on the deed and recordable curative instruments shall be paid by Seller. The premium for title insurance and all costs associated with said title insurance shall be paid by Purchaser. All costs associated with Purchaser’s mortgage, if any, shall be paid by Purchaser. Purchaser shall be responsible for payment of its own attorneys’ fees and the costs of the Survey. All other closing costs shall be split equally between the parties or otherwise as is customary as determined by the title company.

10. Prorations . All real property ad valorem taxes shall be prorated (employing a 365-day year) between Purchaser and Seller as of the date of Closing based upon the most recently available property assessment. All taxes payable by Seller under this Section shall be paid in full by Seller on or before Closing even if said assessments are due in installments subsequent to Closing.

11. Condemnation . In the event, at any time between the making of this Agreement and Closing, all or any portion of the Property is condemned by any legally constituted authority for any public use or purpose, then Purchaser may, within 30 days of first being notified of said condemnation, elect to either: (a) terminate this Agreement, in which event all Earnest Money paid by Purchaser shall be immediately refunded by the Title Company to Purchaser, and neither Purchaser nor Seller shall have any further liabilities, obligations or rights with regard to this Agreement; or (b) consummate the purchase of the Property and collect all proceeds from any condemnation and have the terms of this Agreement remain in full force and effect and binding on the parties hereto. In the event of a condemnation or threatened condemnation prior to Closing, Seller shall keep Purchaser informed as to all aspects of such condemnation action, and shall obtain Purchaser’s prior written approval of any action taken and settlement proposed or made with regard to any such condemnation action. In the event of condemnation in which Purchaser does not elect to terminate this Agreement pursuant to the foregoing terms, then the term “Property” as used herein shall thereafter refer to the Property less and except any portion thereof taken by such condemnation.

12. Seller’s Representations and Warranties .

(a) Seller represents, warrants and covenants to Purchaser that:

(i) Seller has complete and full authority to execute this Agreement and to convey to Purchaser good and marketable fee simple title to the Property in accordance with this Agreement.

(ii) Seller will not further sell, encumber, convey, assign or contract to sell, convey, assign, pledge, encumber, lease or sublease all or any part of the Property, nor restrict the use of all or any part of the Property, nor take or cause to be taken any action in conflict with this Agreement at any time between the Effective Date and Closing or the earlier termination of this Agreement pursuant to its terms, or take or permit any action which could result in the imposition of any liens on the Property either before or after Closing. There are no existing rights of any third parties to possess or occupy any part of the Property.

(iii) No rights of first refusal or similar agreements exist in connection with the Property which would in any way interfere with Purchaser’s ability to purchase the Property as provided herein, or which is in any way in contravention of the spirit and intent of this Agreement.

(iv) Seller has no knowledge of, nor has Seller received any notice of, any actual or threatened action, litigation or proceeding by any organization, person, individual or governmental agency (including governmental actions under condemnation authority or proceedings similar thereto) against the Property or Seller, nor has any such organization, person, individual or governmental agency communicated to Seller anything which Seller believes to be a threat of any such action, litigation or proceeding.

(v) During Seller’s ownership of the Property (A) no landfill was deposited on, or taken from, the Property, (B) no construction debris or other debris (including, without limitation, rocks, stumps or concrete) was buried upon any of the Property, (C) no dangerous toxic or hazardous pollutants, contaminants, chemicals, wastes, materials or substances, as defined in or governed by the provisions of any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating thereto (collectively, the “Environmental Regulations”), and also including urea-formaldehyde, polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel or waste, and petroleum products, or any other waste, material, substance, pollutant or contaminant which would subject the owner of the Property to any damages, penalties or liabilities under any applicable Environmental Regulation (collectively, the “Hazardous Substances”) has ever been located, produced, treated, transported, incorporated, discharged, emitted, released, deposited or disposed of in, upon, under, over or from the Property in violation of any environmental Regulation, (D) no threat has existed of a discharge, release or emission of a Hazardous Substance upon or from the Property into the environment, which discharge, release or emission would subject the owner of the Property to any damages, penalties or liabilities under any applicable Environmental Regulation, and (E) the Property was not listed in the United States Environmental Protection Agency’s list of Hazardous Waste Sites or any

other list of Hazardous Substance sites maintained by any federal, state or local governmental agency. To the best of Seller’s knowledge, none of the foregoing has occurred with respect to the Property prior to the time Seller became the owner of the Property.

(vi) All contractors, suppliers, laborers or any other persons performing work on the Property have been paid in full and there are no claims or disputes arising therefrom.

(b) In addition to all other rights and remedies of Purchaser set forth herein, Seller shall defend, indemnify and hold Purchaser, its employees, officers, shareholders, directors, agents, contractors, assigns and successors-in-interest, harmless from and against any and all claims, actions, loss, cost, damage and expense (including reasonable attorneys’ fee actually incurred) resulting from a breach by Seller of any of the representations, warranties and covenants contained in this Agreement. The obligations of Seller under this Paragraph shall survive Closing.

13. Notice . All notices, requests, demands or other communications hereunder shall be in writing and deemed given when delivered personally or sent via a nationally recognized overnight courier service or on the day said communication is deposited in the U. S. mail, by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


If to Seller:		Chad Richison, Manager
		Kilpatrick Partners, LLC
		7501 W. Memorial Road
		Oklahoma City, OK 73142
		Telephone Number: 405-722-6900

If to Purchaser:		Craig Boelte, CFO
		Paycom Payroll, LLC
		7501 W. Memorial Road
		Oklahoma City, OK 73142
		Telephone Number: 405-722-6900

With a copy to:		John Falcone, Esq.
		Cheek & Falcone, PLLC
		6301 Waterford Blvd, Suite 320
		Oklahoma City, OK 73118
		Telephone Number: (405) 286-9191

or to such other address as the parties may from time to time designate by notice in writing to the other parties.

14. Agreement Assignable by Purchaser . This Agreement may be assigned or transferred by Purchaser at any time provided the assignee agrees to be specifically bound by the terms hereof. Seller shall not assign its interest hereunder without the prior written consent of Purchaser.

15. Amendment . Neither this Agreement nor any provision hereof may be changed, amended, modified, waived or discharged orally or by any course of dealing, but only by an instrument in writing signed by the party against which enforcement of the change, amendment, modification, waiver or discharge is sought.

16. Brokers . Purchaser and Seller represent and warrant that no real estate commission or compensation shall be payable by such party with respect to the procurement and execution of this Agreement or the sale of the Property contemplated hereby. Each party shall indemnify and save the other party wholly harmless against any loss, cost or other expense, including reasonable attorneys’ fees, that may be incurred by such other party by reason of any breach of the foregoing warranties.

17. Default . In the event the purchase and sale is not consummated because of the inability, failure or refusal, for any reason whatsoever, by Seller to convey the Property in accordance with the terms and conditions provided herein, or because of other fault of Seller or reason provided herein for Purchaser’s not consummating this transaction, all Earnest Money paid in connection with this Agreement shall be returned by the Title Company to Purchaser, without prejudice to any other legal or equitable right or remedy of Purchaser against Seller including, but not limited to, specific performance. In the event the purchase and sale is not consummated because of the default of Purchaser, then the Title Company shall deliver the Earnest Money paid hereunder to Seller as full, complete and final liquidated damages. Seller and Purchaser hereby agree that it would be impossible to ascertain the damages accruing to Seller as a result of a default by Purchaser under this Agreement and agree that such liquidated damages are a reasonable estimate thereof. The payment of said liquidated damages, therefore, shall constitute Seller’s sole remedy against Purchaser and shall be in lieu of the exercise by Seller of any other legal or equitable right or remedy which Seller may have against Purchaser as a result of Purchaser’s default.

18. Applicable Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Oklahoma.

19. Waiver . Failure of either Purchaser or Seller to exercise any right given hereunder or to insist upon strict compliance with regard to any term, condition or covenant specified herein, shall not constitute a waiver of Purchaser’s or Seller’s right to exercise such right or to demand strict compliance with any term, condition or covenant under this Agreement.

20. Counterparts . This Agreement may be executed in several counterparts, each of which may be deemed an original, and all of such counterparts together shall constitute one and the same Agreement.

21. Captions . All captions, headings, paragraph and subparagraph numbers and letters are solely for reference purposes and shall not be deemed to be supplementing, limiting or otherwise varying the text of this Agreement.

22. Severability . The invalidity or enforceability of a particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.

23. Time . Time is of the essence in this Agreement.

24. Entire Agreement . This Agreement constitutes the sole and entire agreement of the parties and is binding upon Seller and Purchaser, their heirs, successors, legal representatives and assigns.

25. Date of Agreement . The “Effective Date” of this Agreement shall be the date upon which it has been executed by both Seller and Purchaser.

IN WITNESS WHEREOF , the parties have executed this Agreement the date and year written below.


SELLER :

Kilpatrick Partners, LLC an Oklahoma limited liability company

/s/ Chad Richison
By:		Chad Richison, Manager
Date:		12-3-2012

PURCHASER :

Paycom Payroll, LLC a Delaware limited liability company

By:		/s/ Craig E. Boelte
Name:		Craig E. Boelte
Date:		12/3/12

EXHIBIT “A”

LEGAL DESCRIPTION (17.6067 ACRES more or less)

LEGAL DESCRIPTION

Paycom Phase 2

November 27, 2012

Commencing at the Southeast (SE) Corner of said Southwest Quarter (SW/4);

THENCE North 00°15’38” West, along and with the East line of said Southwest Quarter (SW/4), a distance of 1,496.10 feet to the Northeast (NE) Corner of Paycom recorded in Book PL68, Page 95, said point being the POINT OF BEGINNING;

THENCE South 89°35’06” West along and with the North line of Paycom, a distance of 667.91 feet to the Northwest (NW) Corner of Paycom;

THENCE North 00°01’27” West, along and with the extended West line of Paycom, a distance of 1,155.56 feet to the North line of Southwest Quarter (SW/4);

THENCE South 89°52’18” East, along and with the North line of said Southwest Quarter (SW/4), a distance of 663.15 feet to the Northeast (NE) Corner of said Southwest Quarter (SW/4);

THENCE South 00°15’38” East, along and with the East line of said Southwest Quarter (SW/4), a distance of 1,149.24 feet to the POINT OF BEGINNING.

Containing 766,950 square feet or 17.6067 acres, more or less.

Exhibit 10.13

REAL PROPERTY PURCHASE AGREEMENT

THIS REAL PROPERTY PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 16th day of October, 2013 by and between Kilpatrick Partners, L.L.C., an Oklahoma limited liability company (“Seller”) and Paycom Payroll, LLC, a Delaware limited liability company (“Purchaser”).

W I T N E S S E T H :

WHEREAS , Seller desires to sell and Purchaser desires to purchase, upon the terms and conditions hereinafter set forth, that certain tract or parcel of land consisting of approximately 18.3218 acres (more or less) located in the SW/4 of Section 8, Township 13 North, Range 4 West, Oklahoma County, Oklahoma and more particularly described on Exhibits “A” and “B” attached hereto and by this reference made a part hereof, together with all rights, easements and appurtenances pertaining thereto and all improvements thereon (the “Property”) and subject only to the Permitted Exceptions (hereinafter defined).

1. Purchase Price . Seller shall sell and convey the Property to Purchaser and Purchaser shall purchase the Property from Seller and pay to Seller an amount equal to $261,360.00 per acre for the Property and which is the sum of four million seven hundred eighty- eight thousand five hundred eighty five dollars and sixty cents ($4,788,585.60). If applicable, the purchase price shall be adjusted at Closing to reflect the actual acreage amount recited in the deed and transferred to Purchaser (the “Purchase Price”).

3. Title Commitment and Survey .

(b) Purchaser, at Purchaser’s sole cost and expense, shall obtain a survey or surveys of the Property (the “Survey”).

4. Inspection Period .

promptly employ diligent efforts to procure a cure for same. In the event, however, Seller is unable through the exercise of its good faith best efforts (which shall include the payment of money with respect to any existing mortgages, deeds of trust, deeds to secure debt, liens or other matters that can be removed by the payment of money) to cure any objectionable matter prior to Closing, then at Purchaser’s option, Purchaser may either (a) take title to the Property despite the existence of such matter, or (b) terminate this Agreement in which event all Earnest Money paid by Purchaser shall be immediately refunded by Title Company to Purchaser, and neither Purchaser nor Seller shall have any further liabilities, obligations or rights with regard to this Agreement which shall then become null and void and of no further force or effect. Any title exceptions to the Property existing prior to the Effective Date hereof to which Purchaser does not object, or to which Purchaser waives its objection, are referred to herein as “Permitted Exceptions”.

The subject Property is a part of ~90.25 acres owned by Seller. Purchaser, at Purchaser’s sole cost and expense, shall be solely responsible for applying for and obtaining any governmental approvals for the platting, PUD amendment, or lot-split contemplated by this Agreement. Seller shall cooperate with Purchaser in Purchaser’s efforts. In the event any such split or division is not approved in a reasonable time by the applicable governmental authorities, then either party may terminate this Agreement without penalty by providing written notice to the other party of termination, and in such an event, Seller shall return the earnest money to Purchaser.

8. Closing Deliveries .

(a) At the Closing, Seller shall deliver the following:

(i) Marketable fee simple title to the Property to Purchaser pursuant to a recordable general warranty deed (the “Deed”) reasonably acceptable to Purchaser.

(iv) A nonforeign affidavit in form acceptable to Purchaser and the Title Company; and

(v) Such other documentation reasonably required by Purchaser and/or the Title Company.

12. Seller’s Representations and Warranties .

(a) Seller represents, warrants and covenants to Purchaser that:

(i) Seller has complete and full authority to execute this Agreement and to convey to Purchaser good and marketable fee simple title to the Property in accordance with this Agreement.

environment, which discharge, release or emission would subject the owner of the Property to any damages, penalties or liabilities under any applicable Environmental Regulation, and (E) the Property was not listed in the United States Environmental Protection Agency’s list of Hazardous Waste Sites or any other list of Hazardous Substance sites maintained by any federal, state or local governmental agency. To the best of Seller’s knowledge, none of the foregoing has occurred with respect to the Property prior to the time Seller became the owner of the Property. Notwithstanding the foregoing, Seller makes no representation or warranty concerning the fill dirt that has been placed on the Property by Purchaser with Seller’s consent.

(vi) All contractors, suppliers, laborers or any other persons performing work on the Property have been paid in full and there are no claims or disputes arising therefrom.


If to Seller:		Chad Richison, Manager Kilpatrick Partners, L.L.C. 7501 W. Memorial Road Oklahoma City, OK 73142 Telephone Number: 405-722-6900

If to Purchaser:		Craig Boelte, CFO Paycom Payroll, LLC 7501 W. Memorial Road Oklahoma City, OK 73142 Telephone Number: 405-722-6900

With a copy to:		John Falcone, Esq. Cheek & Falcone, PLLC 6301 Waterford Blvd, Suite 320 Oklahoma City, OK 73118 Telephone Number: (405) 286-9191

or to such other address as the parties may from time to time designate by notice in writing to the other parties.

18. Applicable Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Oklahoma.

23. Time . Time is of the essence in this Agreement.

25. Date of Agreement . The “Effective Date” of this Agreement shall be the date upon which it has been executed by both Seller and Purchaser.

IN WITNESS WHEREOF , the parties have executed this Agreement the date and year written below.


SELLER :

Kilpatrick Partners, L.L.C. an Oklahoma limited liability company

/s/ Chad Richison
By:		Chad Richison, Manager
Date:		10-30-2013

PURCHASER :

Paycom Payroll, LLC a Delaware limited liability company

By:		/s/ Craig E. Boelte
Name:		Craig E. Boelte
Date:		10/29/13

LEGAL DESCRIPTION

Paycom Expansion Tract

October 4, 2013

Commencing at the Southeast (SE) Corner of said Southwest Quarter (SW/4);

THENCE North 00°15’38” West (North 00°15’26” West record), along and with the East line of said Southwest Quarter (SW/4), a distance of 575.51 feet (575.66 feet record) to the Southeast (SE) Corner of Paycom recorded in Book PL68, Page 95;

THENCE North 88°41’40” West (North 88°42’11” West record), along and with the South line of said Paycom and the North line of a tract of land owned by the Oklahoma Turnpike Authority recorded in Book 7536, Page 339, a distance of 671.88 feet to the Southwest (SW) Corner of said Paycom, said point being the POINT OF BEGINNING;

THENCE continuing North 88°41’40” West (North 88°42’11” West record) along and with the North line of a tract of land owned by the Oklahoma Turnpike Authority recorded in Book 7536, Page 339, a distance of 29.87 feet;

THENCE North 86°46’27” West (North 86°48’46” West record), continuing along and with the North line of a tract of land owned by the Oklahoma Turnpike Authority recorded in Book 7536, Page 339, a distance of 360.72 feet;

THENCE North 00°01’27” West, departing said North line, a distance of 2,035.89 feet to a point on the North line of said Southwest Quarter (SW/4);

THENCE South 89°52’18” East, along and with the North line of said Southwest Quarter (SW/4), a distance of 390.00 feet to a extended West line of Paycom;

THENCE South 00°01’27” East, along and with the extended West line of Paycom, a distance of 2,055.99 feet to the POINT OF BEGINNING.

Containing 798,096 square feet or 18.3218 acres, more or less.

Basis of Bearing: The East line of the SW/4 of Section 8, T13N, R4W having an assumed bearing of North 00°15’38” West.

Prepared by Johnson & Associates, Inc. (Matthew Johnson P.L.S. 1807)

Exhibit 10.14

RIGHT OF FIRST REFUSAL AGREEMENT

THIS RIGHT OF FIRST REFUSAL AGREEMENT dated as of the dates set forth below, between Kilpatrick Partners, L.L.C., an Oklahoma limited liability company (“Seller”), and Paycom Payroll, LLC, a Delaware limited liability company (“Buyer”).

WHEREAS, Seller is currently the owner of approximately 90.25 acres, more or less, located in the Southwest Quarter (SW/4) of Section Eight (8), Township Thirteen (13) North, Range Four (4) West of the Indian Meridian, Oklahoma City, Oklahoma County, Oklahoma;

WHEREAS, Seller is currently under contract with Buyer to sell approximately eighteen of Seller’s 90.25 acres to Buyer, leaving Seller with a remaining approximately 72 acres in said SW/4 of Section Eight (8).

WHEREAS, Seller desires to grant to Buyer a right of first refusal for a certain portion of Seller’s remaining 72 acres in said SW/4 of Section Eight (8);

WHEREAS, the right of first refusal provided to Buyer herein shall be for 28.1052 acres, more or less, and located in the Southwest Quarter (SW/4) of Section Eight (8), Township Thirteen (13) North, Range Four (4) West of the Indian Meridian, Oklahoma City, Oklahoma County Oklahoma County, Oklahoma, and more particularly described on Exhibit “A” attached hereto as a part hereof (the “Property”).

WHEREAS, the right of first refusal granted herein shall be for a period of twenty (20) years beginning on October 4, 2013 and expiring at 5:00 p.m., CST, on the October 3, 2033 (“Right of First Refusal Period”), and on the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the sum of Five Hundred Dollars ($500.00) in hand paid by Buyer to Seller and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. If, at any time after the date of this Agreement and during the Right of First Refusal Period, Seller shall desire to offer to sell the Property or any part thereof, or shall receive from a third party a bona fide offer to purchase the Property or any part thereof which Seller desires to accept, Seller, before making or accepting the offer, as the case may be, shall send Buyer two (2) copies of a contract for the sale of the Property embodying the terms of the offer, both copies of which have been duly executed by Seller, together with a written notification from Seller of Seller’s intention to make or accept the offer embodied in the contract, as the case may be, if the offer is not accepted by Buyer. Buyer shall have the right, within ten (10) calendar days of the receipt of the contract and the written notice, to purchase the Property or such part thereof on the terms and conditions set forth in the contract. In the event Buyer elects to accept the offer embodied in the contract, Buyer must do so by executing one copy of the contract and returning it to Seller within the ten (10) calendar day period. The contract provided to Buyer shall provide Buyer with a reasonable time for Buyer to comply with the purchase contract, customary title work, and/or customary financing for purposes of consummating a sale. The offer provided to Buyer for Buyer’s consideration herein may include all or any portion of the Property, but may not include any additional property.

2. If Buyer does not accept the offer embodied in the contract within the ten (10) calendar day period provided in Paragraph 1 hereof, then the offer embodied in the contract shall be deemed rejected and Seller shall be free for a period of six (6) months from the expiration of the

ten (10) calendar day period to sell the Property or such part thereof to third parties on the same terms set forth in the purchase contract tendered to Buyer. In the event the Property or such part thereof is not sold to a third party within the six (6) month period, then any further offer to sell or to purchase the Property or any part thereof must first be submitted to Buyer in accordance with the provisions of Paragraph 1.

3. Seller shall not sell or exchange the Property, or any portion thereof, nor shall Seller enter into any sale, option, exchange or trade agreement concerning the Property for the duration of the Right of First Refusal Period without first complying with the Right of First Refusal provided to Buyer herein.

4. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective personal representatives, heirs and assigns.

5. All notices pursuant to this Agreement shall be deemed given when personally delivered to the party to whom it is directed or in lieu of personal delivery on the third business day after the same is deposited in the United States mail, postage prepaid, sent Certified Mail, Return Receipt Requested, addressed as follows:


If to Seller:		Chad Richison, Manager
		Kilpatrick Partners, L.L.C.
		7501 W. Memorial Road
		Oklahoma City, OK 73142
		Telephone Number: 405-722-6900

If to Purchaser:		Craig Boelte, CFO
		Paycom Payroll, LLC
		7501 W. Memorial Road
		Oklahoma City, OK 73142
		Telephone Number: 405-722-6900

with a copy to:		John Falcone, Esq.
		Cheek & Falcone, PLLC
		6301 Waterford Blvd, Suite 320
		Oklahoma City, OK 73118
		Telephone Number: (405) 286-9191

Either party may change her or their address for the purposes of this section by giving notice of the changed address to the other party in the manner provided for above.

6. Covenant Running with the Land; Survival and Termination. The parties intend that this Right of First Refusal be a covenant running with the land until such time as it is expired or terminated pursuant to its terms. This Right of First Refusal shall survive any transfer or disposition of the Property not made in strict accordance with the terms of this Right of First Refusal. This Right of First Refusal shall terminate upon any of the following events: (1) A transfer to a third party that occurs subsequent to strict compliance with the terms hereof; (2) Buyer purchases the land and takes title to the Property from Seller; and (3) expiration of the twenty year Right of First Refusal Period. This Agreement may be enforced through specific performance against any party or any person, including against any third-party purchaser of the Property.

7. Recording. The Buyer may record this Agreement in the Oklahoma County Clerk’s Office.

8. Prevailing Party Attorney’s Fees. In the event of any litigation arising out of this Agreement, the court shall award attorney’s fees and costs to the prevailing party.

9. Time is of the essence with respect to the obligations of this Right of First Refusal.

10. This agreement shall be governed by and construed in accordance with the Laws of the State of Oklahoma. Venue for any litigation arising out of this agreement shall exclusively be in Oklahoma County District Court or the federal courts located in Oklahoma County, Oklahoma.

EXECUTED in Oklahoma County, Oklahoma as of the dates set forth herein.


SELLER :

Kilpatrick Partners, L.L.C. an Oklahoma limited liability company

/s/ Chad Richison
By:		Chad Richison, Sole Manager

BUYER :

Paycom Payroll, LLC a Delaware limited liability company

/s/ Craig E. Boelte
By:		Craig E. Boelte, CFO

ACKNOWLEDGMENT


STATE OF OKLAHOMA
		ss.
COUNTY OF OKLAHOMA

Before me, a Notary Public in and for said county and state, on this 31 day of October, 2013, personally appeared Chad Richison, to me known to be the identical person who executed the within and foregoing instrument, and acknowledged to me that he executed the same in his capacity as sole manager of Kilpatrick Partners, L.L.C. as his free and voluntary act and deed for the uses and purposes therein set forth.

Given under my hand and seal of office the day and year last above written.

/s/ Londa Jackson

NOTARY PUBLIC


My Commission (1.7.17) Expires:


{SEAL}

ACKNOWLEDGMENT


STATE OF OKLAHOMA
		ss.
COUNTY OF OKLAHOMA

Before me, a Notary Public in and for said county and state, on this 31 day of October, 2013, personally appeared Craig E. Boelte, to me known to be the identical person who executed the within and foregoing instrument, and acknowledged to me that he executed the same in his capacity as an officer of Paycom Payroll, LLC, as his free and voluntary act and deed for the uses and purposes therein set forth.

Given under my hand and seal of office the day and year last above written.

/s/ Londa Jackson

NOTARY PUBLIC


My Commission (1.7.17) Expires:


{SEAL}

EXHIBIT A

LEGAL DESCRIPTION

Paycom

Right of First Refusal Tract

October 4, 2013

Commencing at the Southeast (SE) Corner of said Southwest Quarter (SW/4);

THENCE North 88°41’40” West (North 88°42’11” West record), along and with the North line of a tract of land owned by the Oklahoma Turnpike Authority recorded in Book 7536, Page 339, a distance of 701.75 feet (701.77 feet record);

THENCE continuing North 86°46’27” West (North 86°48’46” West record), continuing along and with the North line of a tract of land owned by the Oklahoma Turnpike Authority recorded in Book 7536, Page 339, a distance of 590.10 feet;

THENCE North 89°18’20” West (North 89°16’40” West record), a distance of 414.86 feet;

THENCE North 41°55’58” East, departing said North line, a distance of 73.71 feet;

THENCE North 20°28’18” East, a distance of 146.45 feet;

THENCE North 69°30’50” East, a distance of 145.55 feet;

THENCE North 55°45’38” West, a distance of 156.20 feet;

THENCE North 31°39’05” West, a distance of 66.47 feet;

THENCE North 43°53’25” East, a distance of 131.44 feet;

THENCE North 03°42’36” East, a distance of 75.07 feet;

THENCE North 72°07’33” East, a distance of 196.23 feet;

THENCE North 76°22’07” East, a distance of 114.52 feet;

Prepared by Johnson & Associates, Inc. (Matthew Johnson P.L.S. 1807)

THENCE North 34°28’59” East, a distance of 58.54 feet;

THENCE North 09°01’16” West, a distance of 28.69 feet;

THENCE South 69°52’47” West, a distance of 76.44 feet;

THENCE North 29°37’44” West, a distance of 126.29 feet;

THENCE North 67°46’08” West, a distance of 45.70 feet;

THENCE North 12°25’23” West, a distance of 88.87 feet;

THENCE North 11°42’22” East, a distance of 68.13 feet;

THENCE North 25°43’48” West, a distance of 155.34 feet;

THENCE North 00°24’28” West, a distance of 93.73 feet;

THENCE North 74°18’20” East, a distance of 94.17 feet;

THENCE South 89°52’02” East, a distance of 147.01 feet;

THENCE North 28°46’21” East, a distance of 99.56 feet;

THENCE North 02°16’36” West, a distance of 82.41 feet;

THENCE North 07°35’57” East, a distance of 80.45 feet;

THENCE North 43°23’45” West, a distance of 61.34 feet;

THENCE North 14°11’54” East, a distance of 91.73 feet;

THENCE North 68°59’55” East, a distance of 84.79 feet;

THENCE North 88°04’19” East, a distance of 104.71 feet;

THENCE North 58°36’11” East, a distance of 200.30 feet;

THENCE North 43°45’26” East, a distance of 87.00 feet;

THENCE North 01°24’55” East, a distance of 52.84 feet;

THENCE North 66°42’12” West, a distance of 133.57 feet;

THENCE North 07 ^o 27’53” West, a distance of 60.72 feet;

THENCE North 38°46’55” West, a distance of 18.39 feet to a point on the North line of said Southwest Quarter (SW/4);

Prepared by Johnson & Associates, Inc. (Matthew Johnson P.L.S. 1807)

THENCE South 89°52’18” East, along and with the North line of said Southwest Quarter (SW/4), a distance of 210.08 feet;

THENCE South 00°01’27” East, departing said North line, a distance of 2,035.89 feet to the POINT OF BEGINNING.

Containing 1,224,264 square feet or 28.1052 acres, more or less.

Basis of Bearing: The East line of the SW/4 of Section 8, T13N, R4W having an assumed bearing of North 00°15’38” West.

Prepared by Johnson & Associates, Inc. (Matthew Johnson P.L.S. 1807)

Exhibit 21.1

SUBSIDIARIES OF PAYCOM SOFTWARE, INC.


Name of Subsidiary		Jurisdiction of Incorporation
WCAS Paycom Holdings, Inc.		Delaware
WCAS CP IV Blocker, Inc.		Delaware
Paycom Benefits, LLC		Delaware
Paycom Payroll Holdings, LLC		Delaware
Paycom Payroll, LLC		Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 10, 2014, with respect to the consolidated balance sheet of Paycom Software, Inc. and Subsidiary as of December 31, 2013, contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

March 10, 2014

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 10, 2014, with respect to the consolidated financial statements of Paycom Payroll Holdings, LLC as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013, contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

March 10, 2014