Exhibit 10.2

PAYCOM SOFTWARE, INC.

ANNUAL INCENTIVE PLAN

Article I

Purpose

The purpose of the Paycom Software, Inc. Annual Incentive Plan (the “Plan”) is
to advance the interests of Paycom Software, Inc., Delaware corporation (the
“Company”) and its stockholders by (a) providing certain Employees of the
Company and its Subsidiaries (as hereinafter defined) with incentive
compensation which is tied to the achievement of pre-established and objective
performance goals, (b) identifying and rewarding superior performance and
providing competitive compensation to attract, motivate, and retain Employees
who have outstanding skills and abilities and who achieve superior performance,
and (c) fostering accountability and teamwork throughout the Company.

The Plan is intended to provide Participants (as hereinafter defined) with
incentive compensation which is not subject to the deduction limitation rules
prescribed under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), and should be construed to the extent possible as providing for
remuneration which is “performance-based compensation” within the meaning of
Code Section 162(m) and the treasury regulations promulgated thereunder.

Article II

Definitions

For the purposes of this Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

“Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act.

“Award” means a grant of Incentive Compensation that may be paid to an Eligible
Employee upon the satisfaction of specified Performance Goal(s) for a particular
Performance Period; such Performance Period may be for a period of less than a
Fiscal Year (e.g., six months, a “Short-Term Award”), a period equal to a Fiscal
Year (an “Annual Award”), or a period in excess of a Fiscal Year (e.g., three
Fiscal Years, a “Long-Term Award”).

“Base Pay” means for a Participant that is employed at the beginning of the
Performance Period, a Participant’s annualized rate of base salary in effect on
the first day of the Performance Period, or, for any other Participant, a
Participant’s annualized rate of base salary in effect on the first day of
Participant’s employment during the Performance Period, each according to the
books and records of the Company, excluding overtime, commissions, bonuses,
disability pay, any Incentive Compensation paid to the Participant, or any other
payment in the nature of a bonus or compensation paid under any other employee
plan, contract, agreement, or program.

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.

“Board” means the Board of Directors of the Company.

“Business Unit” means any segment or operating or administrative unit, including
geographical unit, of the Company identified by the Committee as a separate
business unit, or a Subsidiary identified by the Committee as a separate
business unit.

 

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“Business Unit Performance Goals” means the objective performance goals
established for each Business Unit in accordance with Sections 5.1 and 5.2 below
for any Performance Period.

“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 of this Plan, 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 this Plan, 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 this Plan 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 “Change in Control” definition,
to the extent necessary to comply with Section 409A of the Code, an event shall
not constitute a “Change in Control” for purposes of 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.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board or any other committee
as determined by the Board, which shall consist of two or more “outside
directors” within the meaning of Code Section 162(m).

“Company” means Paycom Software, Inc., a Delaware corporation.

 

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“Company Performance Goals” means the objective performance goals established
for the Company in accordance with Sections 5.1 and 5.3 below for any
Performance Period.

“Covered Employee” shall have the same meaning as the term “covered employee”
(or its counterpart, as such term may be changed from time to time) contained in
the treasury regulations promulgated under Code Section 162(m), or their
respective successor provision or provisions, that being an employee for whom
the limitation on deductibility for compensation pursuant to Code Section 162(m)
is applicable.

“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.
Notwithstanding the foregoing sentence, in the event an Award issued under the
Plan is subject to Code Section 409A, then, in lieu of the foregoing definition
and to the extent necessary to comply with the requirements of Code
Section 409A, the definition of “Disability” for purposes of such Award shall be
the definition of “disability” provided for under Code Section 409A and the
regulations or other guidance issued thereunder.

“Eligible Employee” shall mean any Employee of the Company or any Subsidiary.

“Employee” means a common law employee (as defined in accordance with the
treasury regulations and revenue rulings applicable under Code Section 3401(c))
of the Company or any Subsidiary of the Company.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from
time to time.

“Fiscal Year” means the fiscal year of the Company, which is the twelve-month
(12-month) period ending on December 31 of each calendar year.

“Incentive Compensation” means the compensation approved by the Committee to be
paid to a Participant for any Performance Period under the Plan.

“Individual Performance Goals” means the objective performance goals established
for an individual Participant in accordance with Section 5.6 below for any
Performance Period.

“Maximum Achievement” means, for a Participant for any Performance Period, the
maximum level of achievement of a set of Performance Goals required for
Incentive Compensation to be paid at the maximum bonus level, which shall be
established by the Committee in accordance with Section 5.1 below.

“Participant” means an Employee of the Company or a Subsidiary who satisfies the
eligibility requirements of Article IV of the Plan and who is selected by the
Committee (or an Authorized Officer, duly appointed in accordance with Article
III) to participate in the Plan for any Performance Period.

“Performance Criteria” shall have the meaning set forth in Section 5.2 below.

“Performance Goals” means the Individual Performance Goals, Business Unit
Performance Goals, and Company Performance Goals established by the Committee
for a Participant, the Company and/or each Business Unit for any Performance
Period, as provided in Sections 5.1, 5.2, 5.3, and 5.6 below.

 

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“Performance Period” means the period selected by the Committee for the payment
of Incentive Compensation, which period shall be scheduled in good faith at the
time the Performance Goals for such period are established. Unless the
Committee, in its discretion, specifies other Performance Periods for the
payment of Incentive Compensation hereunder, the Performance Period shall be a
Fiscal Year.

“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 (1) the Company or any of its subsidiaries, (2) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its Affiliates, (3) an underwriter temporarily holding securities
pursuant to an offering of such securities or (4) 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.

“Plan” means the Paycom Software, Inc. Annual Incentive Plan, as it may be
amended from time to time.

“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, members or unitholders thereof are
composed only of the Company, any corporation listed in item (i) above, any
limited partnership listed in item (ii) above or any other limited liability
company described in this item (iii). “Subsidiaries” means more than one of any
such corporations, limited partnerships, partnerships, or limited liability
company.

“Target Achievement” means, for a Participant for any Performance Period, the
level of achievement of a set of Performance Goals required for Incentive
Compensation to be paid at the target bonus level, which shall be established by
the Committee in accordance with Section 5.1 below.

“Threshold Achievement” means, for a Participant for any Performance Period, the
minimum level of achievement of a set of Performance Goals required for any
Incentive Compensation to be paid at the threshold bonus level, which shall be
established by the Committee in accordance with Section 5.1 below.

Article III

Administration

3.1 Committee’s Authority. Subject to the terms of this Article III, the Plan
shall be administered by the Committee. For each Performance Period, the
Committee shall have full authority to (i) designate the Eligible Employees who
shall participate in the Plan; (ii) establish the Performance Goals and
achievement levels for each Participant pursuant to Article V hereof; and
(iii) establish and certify the achievement of the Performance Goals.
Notwithstanding any provision of the Plan to the contrary, any decision
concerning the awarding of Incentive Compensation hereunder (including, without
limitation, establishment of Performance Goals, Threshold Achievement, Target
Achievement, Maximum Achievement, and any other information necessary to
calculate Incentive Compensation for a Covered Employee for such Performance
Period) shall be made exclusively by the members of the Committee who are at
that time “outside” directors, as that term is used in Code Section 162(m) and
the treasury regulations promulgated thereunder.

 

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3.2 Committee Action. A majority of the Committee shall constitute a quorum, and
the act of a majority of the members of the Committee present at a meeting at
which a quorum is present shall be the act of the Committee.

3.3 Committee’s Powers. The Committee shall have the power, in its discretion,
to take such actions as may be necessary to carry out the provisions and
purposes of the Plan and shall have the authority to control and manage the
operation and administration of the Plan. In order to effectuate the purposes of
the Plan, the Committee shall have the discretionary power and authority to
construe and interpret the Plan, to supply any omissions therein, to reconcile
and correct any errors or inconsistencies, to decide any questions in the
administration and application of the Plan, and to make equitable adjustments
for any mistakes or errors made in the administration of the Plan. All such
actions or determinations made by the Committee, and the application of rules
and regulations to a particular case or issue by the Committee, in good faith,
shall not be subject to review by anyone, but shall be final, binding and
conclusive on all persons ever interested hereunder.

To the extent permitted by applicable law, the Committee also may, in its
discretion and by a resolution adopted by the Committee, authorize one or more
officers of the Company (each an “Authorized Officer”), solely with respect to
Employees who are not Covered Employees, within the ten most highest compensated
officers of the Company, or Authorized Officers: (i) determine the amount of
Incentive Compensation payable to such Employees in accordance with the terms of
the Plan; (ii) establish Performance Goals for such Employees, and certify
whether, and to what extent, such Performance Goals were achieved for the
applicable Performance Period; and (iii) authorize payment to such Employees in
accordance with Article VI.

In construing the Plan and in exercising its power under provisions requiring
the Committee’s approval, the Committee shall attempt to ascertain the purpose
of the provisions in question, and when the purpose is known or reasonably
ascertainable, the purpose shall be given effect to the extent feasible.
Likewise, the Committee is authorized to determine all questions with respect to
the individual rights of all Participants under this Plan, including, but not
limited to, all issues with respect to eligibility. The Committee shall have all
powers necessary or appropriate to accomplish its duties under this Plan
including, but not limited to, the power to:

(a) designate the Eligible Employees who shall participate in the Plan;

(b) maintain complete and accurate records of all Plan transactions and other
data in the manner necessary for proper administration of the Plan;

(c) adopt rules of procedure and regulations necessary for the proper and
efficient administration of the Plan, provided the rules and regulations are not
inconsistent with the terms of the Plan as set out herein. All rules and
decisions of the Committee shall be uniformly and consistently applied to all
Participants in similar circumstances;

(d) enforce the terms of the Plan and the rules and regulations it adopts;

(e) review claims and render decisions on claims for benefits under the Plan;

(f) furnish the Company or the Participants, upon request, with information that
the Company or the Participants may require for tax or other purposes;

 

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(g) employ agents, attorneys, accountants or other persons (who also may be
employed by or represent the Company) for such purposes as the Committee
considers necessary or desirable in connection with its duties hereunder; and

(h) perform any and all other acts necessary or appropriate for the proper
management and administration of the Plan.

Article IV

Eligibility

For each Performance Period, the Committee shall select the particular Eligible
Employees to whom Incentive Compensation may be awarded for such Performance
Period; with respect to Covered Employees, such determination shall be made
within the first ninety (90) days of such Performance Period (and in the case of
a Performance Period less than a Fiscal Year, such determination shall be made
no later than the date that 25% of the Performance Period has elapsed). To the
extent permitted by the Committee, Employees who participate in the Plan may
also participate in other incentive or benefit plans of the Company or any
Subsidiary. Notwithstanding any provision in this Plan to the contrary, the
Committee may grant one or more Awards to an Eligible Employee at any time, and
from time to time, and the Committee shall have the discretion to determine
whether any such Award shall be a Short-Term Award, an Annual Award or a
Long-Term Award.

Article V

Determination of Goals and Incentive Compensation

5.1 Establishment of Business Unit and Company Performance Goals. No later than
the ninetieth (90th) day of the Performance Period (and in the case of a
Performance Period less than a Fiscal Year, such determination shall be made no
later than the date that 25% of the Performance Period has elapsed), the
Committee shall approve, as applicable, the following: (i) the Business Unit
Performance Goals for the Performance Period, (ii) the Company Performance Goals
for the Performance Period, (iii) the Threshold Achievement, Target Achievement,
and Maximum Achievement levels for the Business Unit Performance Goals and
Company Performance Goals for the Performance Period, (iv) with respect to each
Participant, Incentive Compensation for achievement of Threshold Achievement,
Target Achievement, and Maximum Achievement levels and the relative weighting of
each Performance Goal in determining the Participant’s Incentive Compensation,
and (v) a schedule setting forth the payout opportunity for Threshold
Achievement, Target Achievement, and Maximum Achievement levels.

5.2 Categories of Business Unit Performance Goals. The Business Unit Performance
Goals, if any, established by the Committee for any Performance Period may
differ among Participants and Business Units. For each Business Unit, any
Business Unit Performance Goals shall be based on the performance of the
Business Unit. Performance criteria for a Business Unit shall be related to the
achievement of financial and operating objectives of the Business Unit, which,
where applicable, shall be within the meaning of Code Section 162(m), and
consist of one or more of any of the following criteria: annualized new
recurring revenue; cash flow; cost; revenues; increased revenue; revenue budget
growth; revenue ratios; customer growth; 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; adjusted earnings before interest, taxes,
depreciation and amortization; gross margin; earnings per share (whether on a
pre-tax, after-tax, operational or other basis); earnings per share growth;
operating earnings; capital expenditures; expenses or expense levels; expense
controls; economic value added; ratio of operating earnings to capital spending
or any other operating ratios; free cash flow; cash flow from operations; net
profit; net sales; booked sales budget; net income;

 

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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 net assets, equity
or stockholders’ equity; return on capital employed; return on invested capital;
market share; total market value; inventory levels, inventory turn or shrinkage;
stockholder value; total enterprise value; or total return to stockholders
(“Performance Criteria”). Any Performance Criteria may be measured in absolute
terms, relative to a peer group or index, relative to past performance, or as
otherwise determined by the Committee. 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, or (iv) the effect of a merger or acquisition,
as identified in the Company’s quarterly and annual earnings releases. 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 which is consistently
applied and identified in the audited financial statements, including footnotes,
or the Management’s Discussion and Analysis of Financial Condition and Results
of Operation section of the Company’s Annual Report on Form 10-K.

5.3 Company Performance Goals. The Company Performance Goals, if any,
established by the Committee for any Performance Period shall relate to the
achievement of predetermined financial and operating objectives for the Company
and its Subsidiaries on a consolidated basis, which, where applicable, shall be
within the meaning of Code Section 162(m) and consist of one or more of any
combination of the factors set forth in Section 5.2 above, as applied to the
Company and its Subsidiaries on a consolidated basis. The Company Performance
Goals may be established either on an absolute or on a per share basis
reflecting dilution of shares as the Committee deems appropriate and, if the
Committee so determines, net of or including cash dividends. The Company
Performance Goals may also be established on a relative basis as compared to the
performance of a published or special index deemed applicable by the Committee
including, but not limited to, a group of companies deemed by the Committee to
be comparable to the Company.

5.4 Certification. On or before March 15 of the year immediately following the
end of the applicable Performance Period and following receipt of the
independent auditor’s report, the Committee shall certify in writing and in
compliance with the requirements of Treasury Regulation 1.162-27 (and successor
regulations thereto) in the case of any Award intended to qualify under Code
Section 162(m): (i) the extent to which each Business Unit achieved its Business
Unit Performance Goals, if any, for the Performance Period, (ii) the extent to
which the Company achieved its Company Performance Goals, if any, for the
Performance Period, (iii) the calculation of the Participants’ Incentive
Compensation, and (iv) the determination by the Committee of the amount of
Incentive Compensation, if any, to be paid to each Participant for the
Performance Period. In determining whether Performance Goals have been achieved
and Incentive Compensation is payable for a given Performance Period, generally
accepted accounting principles to the extent applicable to the Performance Goal
shall be applied on a basis consistent with prior periods, and such
determinations shall be based on the calculations made by the Company and
binding on each Participant. Approved minutes of the Committee meeting in which
the certification required by this Section 5.4 is made shall be treated as
written certification for purposes for this Section 5.4.

5.5 Award Based on Level of Achievement. If Threshold Achievement is attained
with respect to a Performance Goal, then the Incentive Compensation that may be
paid to such Participant with respect to such Performance Goal shall be based on
the Committee’s predetermined schedule (which may allow for interpolation
between achievement levels).

5.6 Established Performance Periods and Performance Goals. Appendix A, which
shall, from time to time, be updated by the Committee for each Performance
Period, sets forth (i) the

 

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Performance Goals established and approved by the Committee pursuant to this
Article V with respect to the applicable Performance Period; (ii) the Threshold
Achievement, Target Achievement, and Maximum Achievement levels for each
Performance Criteria underlying the Performance Goals; and (iii) the payout
schedules for the Incentive Compensation that may be paid to the Participant
with respect to the achievement of the Performance Goals.

5.7 Limitation on Total Incentive Compensation. Notwithstanding any provision to
the contrary contained herein, the maximum Incentive Compensation payable to any
Participant with respect to any single Award shall not exceed $5,000,000.

Article VI

Payment of Incentive Compensation

6.1 Form and Time of Payment. Subject to the provisions of Sections 6.2 and 6.3
below and except as otherwise provided herein, a Participant’s Incentive
Compensation for a Performance Period shall be paid in the calendar year
immediately following the close of the year in which such Performance Period
ends, following receipt of the independent auditor’s report, but no later than
March 15 of such year. The payment shall be in the form of a cash lump sum
payment.

6.2 Forfeiture Upon Termination Prior to End of Performance Period. If a
Participant’s employment with the Company and all of its Subsidiaries is
terminated voluntarily by the Participant for any reason, or is terminated by
his or her employer for any reason other than the death or Disability of the
Participant, during a Performance Period, then such Participant will immediately
forfeit any right to receive any Incentive Compensation hereunder for such
Performance Period. Under such circumstances where the termination of employment
occurs after the Performance Period has ended but prior to the date of actual
payment, the Committee shall pay the Participant an amount not to exceed the
amount set forth according to the terms of the Award.

6.3 Pro Rata Payment for Death or Disability; New Hires.

(a) Death or Disability. If during a Performance Period, a Participant’s
employment is terminated by reason of the Participant’s death or Disability,
then such Participant shall, if the Committee so determines, be eligible to
receive pro rata portion of the Incentive Compensation that would have been
payable to such Participant, if he or she had remained employed, based on the
number of days worked during the Performance Period. Such Incentive Compensation
shall be paid at the time and in the manner set forth in Section 6.1 hereof.

(b) New Hires; Promotions. Any individual who is newly-hired or becomes an
Eligible Employee during a Performance Period and who is selected by the
Committee to participate in the Plan shall be eligible to receive a pro rata
portion of the Incentive Compensation to which he or she could have been
entitled if he or she had been employed for the full Performance Period, based
on the number of days during the Performance Period during which he or she is a
Participant in the Plan and calculated on the basis of his or her Base Pay
received for the Performance Period. Such Incentive Compensation shall be paid
at the time and in the manner set forth in Section 6.1 hereof.

 

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6.4 Recoupment for Restatements. Notwithstanding any other language in this
Plan, the Committee may recoup all or any portion of any Incentive Compensation
paid to a Participant, in the event of a restatement of the Company’s financial
statements to the extent that the amount of the Incentive Compensation would
have been lower if the Company’s financial statements had been as restated.

6.5 Change in Control. In the event of a Change in Control, the Company shall
make a lump sum payment to each Participant equal to a prorated amount of any
potential Incentive Compensation payable under any Award made to such
Participant, calculated by multiplying the amount payable for Target Achievement
by the percentage of the Performance Period completed prior to the Change in
Control. In the event of such a lump sum payment, no further Incentive
Compensation shall be payable under any such Award.

Article VII

Miscellaneous Provisions

7.1 Non-Assignability. A Participant may not alienate, assign, pledge, encumber,
transfer, sell or otherwise dispose of any rights or benefits awarded hereunder
prior to the actual receipt thereof; and any attempt to alienate, assign,
pledge, sell, transfer or assign prior to such receipt, or any levy, attachment,
execution or similar process upon any such rights or benefits shall be null and
void ab initio.

7.2 No Right To Continue In Employment. Nothing in the Plan confers upon any
Employee the right to continue in the employ of the Company or any Subsidiary,
or interferes with or restricts in any way the right of the Company and its
Subsidiaries to discharge any Employee at any time (subject to any contract
rights of such Employee), including, without limitation, before or after the
date such Participant is entitled to payment with respect to an Award.

7.3 Indemnification of Committee; No Duties; Waiver of Claims. No member of the
Committee, nor any officer or Employee of the Company acting with or on behalf
of 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 of
the members of the Committee and each and any officer or Employee of the Company
acting with or on their behalf shall be indemnified and protected by the Company
in respect of any such action, determination, or interpretation to the fullest
extent provided by law. Except to the extent required by any unwaiveable
requirement under applicable law, no member of the Committee (and no officer,
Employee or Affiliate of the Company) shall have any duties or liabilities,
including without limitation any fiduciary duties, to any Participant (or any
Person claiming by and through any Participant) as a result of this Plan, any
Award or any Claim arising hereunder and, to the fullest extent permitted under
applicable law, each Participant (as consideration for receiving and accepting
an Award) irrevocably waives and releases any right or opportunity such
Participant might have to assert (or participate or cooperate in) any Claim
against any member of the Committee and any officer, Employee or Affiliate of
the Company arising out of this Plan.

7.4 No Trust or Plan Funding. The Company (and not any of its Affiliates) will
be solely responsible for the payment of all amounts hereunder. The Plan shall
at all times be entirely unfunded and no provision shall at any time be made
with respect to segregating assets of the Company for payment of any amounts
hereunder. Neither the Plan nor any Award shall create or be construed to create
a trust or separate fund of any kind or a fiduciary relationship between the
Company and any Participant. No Participant, beneficiary, or other person shall
have any interest in any particular assets of the Company (or any of its
Affiliates) by reason of the right to receive any Incentive Compensation under
the Plan. To the extent that any Participant acquires a right to receive any
payment from the Company pursuant to an Award, such right shall be no greater
than the right of any general unsecured creditor of the Company.

 

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7.5 Governing Law. This Plan shall be construed in accordance with the laws of
the State of Delaware, without giving effect to principles of conflict of laws,
and the rights and obligations created hereby shall be governed by the laws of
the State of Delaware. The Participant’s sole remedy for any claim, liability or
obligation of any nature, arising out of or relating to this Plan or an alleged
breach of this Plan, or an Award (collectively, “Claims”) shall be against the
Company, and no Participant shall have any claim or right of any nature against
any Affiliate or any owner or existing or former director, officer or Employee
of the Company or any Affiliate. The individuals and entities described above in
this Section 7.5 (other than the Company) shall be third-party beneficiaries of
this Plan for purposes of enforcing the terms of this Section 7.5.

7.6 Binding Effect. This Plan shall be binding upon and inure to the benefit of
the Company, its successors and assigns, and the Participants, and their heirs,
assigns, and personal representatives.

7.7 Construction of Plan. The captions used in this Plan are for convenience
only and shall not be construed in interpreting the Plan. Whenever the context
so requires, the masculine shall include the feminine and neuter, and the
singular shall also include the plural, and conversely.

7.8 Integrated Plan. This Plan constitutes the final and complete expression of
agreement with respect to the subject matter hereof.

7.9 Tax Requirements. The Company (and, where applicable, its Subsidiaries)
shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy applicable
taxes required by law to be withheld with respect to any payment of any
Incentive Compensation to a Participant.

7.10 Accounting of Compensation. Unless otherwise specifically provided in such
benefit plan, any amounts paid to a Participant hereunder shall not be treated
as compensation paid to such Participant for the purposes of any other benefit
plan.

7.11 Adjustments. In the event of (a) any merger, reorganization, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights, offering, extraordinary dividend (including a
spin-off), or other similar change affecting the Company’s common stock; (b) any
purchase, acquisition, sale, or disposition of a significant amount of assets
other than in the ordinary course of business, or of a significant business;
(c) any change resulting from the accounting effects of discontinued operations,
extraordinary income or loss, changes in accounting as determined under
generally accepted accounting principles, or restatement of earnings; or (d) any
charge or credit resulting from an item which is classified as “non-recurring,”
“restructuring,” or similar unusual item on the Company’s audited financial
statements which, in the case of (a) – (d), results in a change in the
components of the calculations of any of the criteria upon which the Performance
Goals are based, as established by the Committee, in each case with respect to
the Company or any other entity whose performance is relevant to the achievement
of any Performance Goal included in an Award, the Committee shall, without the
consent of any affected Participant, amend or modify the terms of any
outstanding Award that includes any Performance Goal based in whole or in part
on the financial performance of the Company (or any Subsidiary or division
thereof) or such other entity so as equitably to reflect such event or events,
such that the criteria for evaluating such financial performance of the Company
or such other entity (and the achievement of the corresponding Performance Goal)
will be substantially the same (as determined by the Committee or the committee
of the board of directors of the surviving corporation) following such event as
prior to such event; provided, however, that the Committee shall not take any
action pursuant to this Section which would constitute an impermissible exercise
of discretion pursuant to Code Section 162(m).

 

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Article VIII

Amendment or Discontinuance

Except as provided in Section 7.11, the Committee 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 any amendment that
modifies any pre-established Performance Goal for a Participant who is a Covered
Employee (or his successor(s), as may be applicable) under this Plan with
respect to any particular Performance Period may only be effected on or prior to
that date which is ninety (90) days following the commencement of such
Performance Period (and in the case of a Performance Period less than a Fiscal
Year, such determination shall be made no later than the date that 25% of the
Performance Period has elapsed). In addition, the Board shall have the power to
discontinue the Plan in whole or in part and amend the Plan in any manner
advisable in order for Incentive Compensation granted under the Plan to qualify
as “performance-based” compensation under Code Section 162(m) (including
amendments as a result of changes to Code Section 162(m) or the regulations
thereunder to permit greater flexibility with respect to Incentive Compensation
granted under the Plan).

Article IX

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 Participant any right to be granted Incentive
Compensation or any other rights. In addition, nothing contained in this Plan
and no action taken pursuant to its provisions shall be construed to (a) give
any Participant any right to any compensation, except as expressly provided
herein; (b) be evidence of any agreement, contract or understanding, express or
implied, that the Company or any Subsidiary will employ a Participant in any
particular position; (c) give any Participant any right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations hereunder; or (d) create a trust of any kind or a
fiduciary relationship between the Company and a Participant or any other
person.

Article X

Code Section 409A Compliance

This Plan is intended to be exempt from or comply with Code Section 409A and
shall be interpreted in a manner consistent with Code Section 409A and the
treasury regulations and guidance issued thereunder. To the extent (i) any
payment to which a Participant becomes entitled under this Plan in connection
with the Participant’s termination of service with the Company (for reasons
other than death) constitutes a payment of deferred compensation subject to Code
Section 409A, and (ii) the Participant is deemed at the time of such termination
to be a “specified employee” under Code Section 409A to whom the following
provisions must apply, then such payment shall not be made or commence until the
earliest of (A) the expiration of the six (6) month period measured from the
date of Participant’s termination of service with the Company; or (B) the date
of the Participant’s death following such termination of service. Upon the
expiration of the applicable deferral period, any payment which would have
otherwise been made during that period in the absence of this Article X shall be
made to the Participant or the Participant’s beneficiary.

Article XI

Term

The effective date of this Plan shall be as of January 1, 2015, subject to
stockholder approval. The material terms of this Plan shall be disclosed and
submitted to the stockholders of the Company at the

 

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next annual meeting of stockholders and thereafter every five (5) years (unless
earlier terminated) for approval in accordance with the requirements of Code
Section 162(m). This Plan and any benefits granted hereunder shall be null and
void if stockholder approval is not obtained at the applicable meeting of
stockholders of the Company, and no award or payment of Incentive Compensation
under this Plan to any Covered Employee shall be made unless such applicable
stockholder approval is obtained. This Plan shall remain in effect until it is
terminated by the Committee or the Board.

* * * * * * * *

 

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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of
May 5, 2015, by its Chief Executive Officer pursuant to prior action taken by
the Board.

 

PAYCOM SOFTWARE, INC. By: /s/ Chad Richison Name: Chad Richison Title: Chief
Executive Officer