UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 0-24347
THE ULTIMATE SOFTWARE GROUP, INC.
---------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0694077
-------- ----------
State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization
</TABLE>
2000 ULTIMATE WAY, WESTON, FL 33326
----------------------------- -----
(Address of principal executive offices) (Zip Code)
(954) 331-7000
--------------
(Registrant's telephone number, including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 5, 1999, there were 15,893,831 shares of the Registrant's
Common Stock, par value $.01, outstanding.
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
PART I--FINANCIAL INFORMATION:
Item 1--Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998 3
Condensed Consolidated Statements of Operations for the Three Months
and Six Months Ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for the Three Months
and Six Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2--Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-19
Item 3--Quantitative and Qualitative Disclosures About Market Risk 19
PART II--OTHER INFORMATION:
Item 1--Legal Proceedings 20
Item 2--Changes in Securities and Use of Proceeds 20
Item 3--Defaults upon Senior Securities 20
Item 4--Submission of Matters to a Vote of Security Holders 21
Item 5--Other Information 21
Item 6--Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
2
<PAGE>
PART 1--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1999 1998
ASSETS ----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,955 $ 17,128
Accounts receivable, net 17,365 15,225
Prepaid expenses and other current assets 1,278 2,014
-------- --------
Total current assets 29,598 34,367
Property and equipment, net 3,852 2,458
Other assets, net 746 389
-------- --------
Total assets $ 34,196 $ 37,214
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,788 $ 2,761
Accrued expenses 3,765 4,353
Deferred revenue 6,924 8,913
Current portion of capital lease obligations 1,031 846
-------- --------
Total current liabilities 13,508 16,873
Capital lease obligations, net of current portion 1,158 1,010
Deferred revenue 526 221
-------- --------
Total liabilities 15,192 18,104
-------- --------
Commitments and contingencies -- --
Stockholders' equity:
Preferred Stock, $.01 par value, 2,000,000 and 501,914
shares authorized in 1999 and 1998, respectively;
no shares issued or outstanding in 1999 and 1998 -- --
Series A Junior Participating Preferred Stock, $.01 par value,
500,000 shares authorized, no shares issued and
outstanding in 1999 and 1998 -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized, 15,893,705 and 15,879,015 shares issued and
outstanding in 1999 and 1998, respectively 159 159
Additional paid-in capital 64,189 64,068
Accumulated deficit (45,344) (45,117)
-------- --------
Total stockholders' equity 19,004 19,110
-------- --------
Total liabilities and stockholders' equity $ 34,196 $ 37,214
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these financial statements.
3
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
License $ 6,011 $ 4,203 $ 9,030 $ 7,326
Service 8,339 5,936 16,065 10,385
------- ------- ------- -------
Total revenues 14,350 10,139 25,095 17,711
------- ------- ------- -------
Cost of revenues:
License 185 225 328 430
Service 5,300 4,225 10,402 7,968
------- ------- ------- -------
Total cost of revenues 5,485 4,450 10,730 8,398
------- ------- ------- -------
Operating expenses:
Sales and marketing 4,240 3,969 7,955 7,783
Research and development 2,405 1,626 4,499 3,045
General and administrative 1,241 1,111 2,379 2,027
Amortization of acquired intangibles - 191 - 382
------- ------- ------- -------
Total operating expenses 7,886 6,897 14,833 13,237
------- ------- ------- -------
Operating income (loss) 979 (1,208) (468) (3,924)
Compensation related to
modification of escrow
agreement - - - (4,183)
Interest expense (42) (117) (81) (155)
Interest and other income 140 101 322 110
------- ------- ------- -------
Net income (loss) $ 1,077 $(1,224) $ (227) $(8,152)
======= ======= ======= =======
Net income (loss) per share -- basic
and diluted $ 0.07 $ (0.09) $ (0.01) $ (0.62)
======= ======= ======= =======
Weighted average shares outstanding:
Basic 15,894 13,550 15,889 13,085
======= ======= ======= =======
Diluted 15,910 13,550 15,889 13,085
======= ======= ======= =======
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these financial statements.
4
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
-------------------------
1999 1998
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (227) $ (8,152)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 902 943
Provision for doubtful accounts 534 446
Compensation related to modification of escrow agreement - 4,183
Non-cash issuance of stock options for board fees 46 -
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (2,674) (4,651)
Prepaid expenses and other current assets 609 120
Other assets (373) (82)
Accounts payable (973) 394
Accrued expenses (588) (884)
Deferred revenue (1,684) (1,728)
------- --------
Net cash used in operating activities (4,428) (9,411)
------- --------
Cash flows from investing activities:
Purchases of property and equipment (1,483) (101)
Net proceeds from (issuances of) notes receivable 127 (177)
------- --------
Net cash used in investing activities (1,356) (278)
------- --------
Cash flows from financing activities:
Net borrowings under line of credit agreements - (209)
Net proceeds from capital lease obligations - 381
Principal payments on capital lease obligations (464) (207)
Equity transactions of 1998 poolings - (434)
Net proceeds from issuances of Common Stock 75 28,453
------- --------
Net cash provided by (used in) financing activities (389) 27,984
------- --------
Net increase (decrease) in cash and cash equivalents (6,173) 18,295
Cash and cash equivalents, beginning of period 17,128 3,270
------- --------
Cash and cash equivalents, end of period $10,955 $21,565
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 101 $ 146
======= =======
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
- The Company entered into capital lease obligations to acquire new equipment
totaling $797 and $721 in the six months ended June 30, 1999 and 1998,
respectively.
- In 1998, the Company acquired five third-party resellers in transactions
accounted under the pooling-of-interests accounting method.
- Prior to the initial public offering of the Company's Common Stock effective
June 2, 1998 (the actual closing date was June 5, 1998), shares of Common
Stock were issued upon the conversion of Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Class A Common Stock, Class B
Common Stock and Class C Common Stock.
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these financial statements.
5
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of The
Ultimate Software Group, Inc. and subsidiaries (the "Company") have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. The information in this report should be read in
conjunction with the Company's audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed with the SEC on March 31, 1999 (the "Form 10-K").
The unaudited condensed consolidated financial statements included
herein reflect all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of the Company's management, necessary
for a fair presentation of the information for the periods presented. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Interim results of operations
for the three months and six months ended June 30, 1999 and 1998 are not
necessarily indicative of operating results for the full fiscal years or for any
future periods.
2. INITIAL PUBLIC OFFERING
On June 5, 1998, the Company completed the sale of 3,250,000 shares of
the Company's common stock, par value $.01 (the "Common Stock"), in an initial
public offering at an offering price of $10 per share (the "IPO"). Prior to the
closing of the IPO, the Company's Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Class A Common Stock, Class B Common Stock and
Class C Common Stock were converted into Common Stock. In connection with the
IPO, the Company effected a 10.119-for-1 stock split of the issued and
outstanding shares of the Common Stock. All references to Common Stock amounts,
shares and per share data have been adjusted to give retroactive effect to the
stock split.
3. MODIFICATION TO ESCROW AGREEMENT
A total of 230,700 shares of the Class B Common Stock (converted into
2,334,453 shares of Common Stock), issued in connection with a series of
transactions occurring in 1996 were held in escrow pursuant to an escrow
agreement among the Company, The Ultimate Software Group, Ltd. (the
"Partnership") and the shareholders of The Ultimate Software Group, Inc., the
Partnership's then general partner (the "GP"), and the shareholders of Strategic
Image Systems, Inc. (the "Class B Escrow Agreement"). In March 1998, the Class B
Escrow Agreement was modified to provide that all of the shares of Class B
Common Stock held in escrow were to be released upon the execution of a firm
underwriting agreement for the initial public offering of the Company's capital
stock on or before July 1, 1998. Accordingly, approximately $4.2 million of
compensation expense
6
<PAGE>
was recorded as of the date of modification, representing 60,429 shares of Class
B Common Stock of the Company (converted into 611,477 shares of Common Stock)
released to directors, officers and employees of the Company, multiplied by the
difference between the fair market value of the Class B Common Stock on the date
of the modification and the price paid by the holders of the shares.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of The Ultimate Software Group, Inc. ("Ultimate Software" or the
"Company") should be read in conjunction with the unaudited Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
Form 10-Q. This Form 10-Q contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those contained in the forward-looking statements. Factors that may cause such
differences include, but are not limited to, those discussed below.
OVERVIEW
Ultimate Software, the leader in integrated Web-based and client/server
HRMS/payroll solutions on Microsoft SQL Server, designs, markets, implements and
supports technologically advanced cross-industry human resources management and
payroll ("HRMS/payroll") software solutions. Ultimate Software's Web-based
solutions include UltiPro Employee Self-Service, released in the fall of 1998,
and UltiPro Manager Self-Service, expected to be released in the second half of
1999 ("UltiPro Web"), and HRGateway.com, introduced in June 1999. The Company's
software solutions are marketed primarily to middle-market organizations with
500 to 15,000 employees.
Ultimate Software's core product, UltiPro HRMS/Payroll, automates an
organization's HRMS/payroll functions and is an enabling tool in the
cost-efficient management of the employee life cycle, from inception of
employment through retirement. As part of its comprehensive HRMS/payroll
solution, the Company provides high quality implementation, training and ongoing
support services to its customers. The Company's customers operate in a wide
variety of industries, including healthcare, professional employee organizations
("PEOs"), manufacturing, food services, retail, technology, finance, insurance,
real estate, transportation, communications, services, sports and entertainment.
The Company reaches its customer base and target market through its direct sales
force, a network of strategic alliance partners and its affiliate network
program.
During June 1999, the Company entered into an agreement with
International Business Machines Global Services, Inc. ("IBM") to provide
application hosting services for the Company's UltiPro Web and HRMS/Payroll
products, enabling Ultimate Software clients to build a foundation for
e-business (the "IBM Agreement"). The term "e-business" refers to software
applications designed to provide business value through access to the Internet.
Under the terms of the IBM Agreement, IBM will provide the installation
and ongoing database and server management of the UltiPro product family, which
includes UltiPro Employee Self Service and, when released, UltiPro Manager Self
Service, at an IBM Data Hosting Center. This application hosting model (which
the Company refers to as Intersourcing) provides organizations real-time access
to their employee data, Web-access for managers and employees, business
intelligence tools for executive decision-making, and comprehensive HRMS/payroll
functionality without a requirement for in-house information technology
resources. With Intersourcing, users have full access to comprehensive
HRMS/payroll functionality, including benefits administration, payroll
processing, position management, training management and Flexible Spending
Account claims administration. UltiPro offers extensive reporting with a
pre-built, ready-to-use suite of executive information and business intelligence
tools for online decision support, enabling business executives to make more
informed and quicker strategic
8
<PAGE>
decisions. Under the terms of the IBM Agreement, the dedicated server will
reside at the IBM Data Hosting Center where IBM monitors, manages and supports
it. All data will be hosted on IBM's site, backed up regularly, and frequently
virus checked using IBM's secure network connection to ensure privacy of data.
Ultimate Software believes Intersourcing offers organizations of all sizes
significant business value.
As part of the Company's strategy to provide its customers an easy
pathway to e-business, in June 1999, Ultimate Software introduced HRGateway.com,
a new Web portal and one-stop shopping supersite for HR/payroll professionals,
managers and the employees they support. The first phase of HRGateway.com
introduced in June 1999 offers a variety of third party and private-labeled
value-added products and services that complement Ultimate Software's Web-based
products which will be accessed through the portal. UltiPro Web products are and
will be fully integrated with UltiPro HRMS/Payroll and are not stand-alone
products. UltiPro Web addresses the growing demand for Web-based solutions that
empower managers and general employee populations. UltiPro Employee Self-Service
provides employees online access to employee handbooks, company news and
policies, employee directories, benefit plans and pay check history and extranet
connections to other relevant sites, such as the site of the 401(k)
administrator. UltiPro Manager Self-Service will provide managers online access
to information on their employee staffs, including features for performance
management, recruitment and staffing, training management and reporting.
In June 1999, Ultimate Software entered into an agreement with Action
Technologies, Inc., a leader in Web-based workflow and work management software
("Action"), to deliver collaborative workflow. Collaborative workflow expands
current administration workflow capabilities to a new level--from a binary
accept/decline model to a complex negotiation model. Using Action's flagship
product, ActionWorks Metro, Ultimate Software will deliver business process
automation in UltiPro HRMS/Payroll through a Web-based environment.
Ultimate Software is also strategically targeting certain specific
industries--health care and PEOs--and is creating additional functionality in
the UltiPro products to appeal to these business sectors. When the Company
releases new product functionality in the second half of 1999 with version 4.0
of UltiPro, additional purchasing options will be offered, including both
standard and strategic versions of each of the following: UltiPro HRMS/Payroll,
UltiPro Web, UltiPro Healthcare and UltiPro PEO. UltiPro Healthcare offers
standard and strategic versions and is packaged particularly for the healthcare
industry with functionality such as position management features required for
that industry. Similarly, UltiPro PEO offers standard and strategic versions
with functionality unique to PEOs such as billing for client companies' usage of
employees.
Company History
The Company was originally organized in August 1990 as The Ultimate
Software Group, Ltd., a Florida limited partnership (the "Partnership"). The
Company was incorporated in April 1996, at the direction of the Partnership, for
the purpose of acquiring and operating the existing business of the Partnership.
The Company began as a reseller of private label PC-based payroll software
products targeted to organizations with under 200 employees. In early 1992, the
Company began to develop a new product that would offer greater flexibility,
more features, more applications and the ability to handle the needs of larger
organizations.
In July 1993, the Company launched its first proprietary product,
UltiPro for Lan, a DOS-based HRMS/payroll software solution for local area
network personal computers. In 1996, in anticipation of the general market shift
to Windows and client/server applications, the Company began developing a
client/server HRMS/payroll solution for middle-market organizations. In June
1997, the Company launched UltiPro HRMS/Payroll, its 32-bit, object-oriented
HRMS/payroll solution for middle-market organizations.
9
<PAGE>
Since the release of UltiPro HRMS/Payroll, the principal source of the
Company's license revenues has shifted from its DOS-based product to its
client/server product. UltiPro HRMS/Payroll has higher license fees, service
fees and gross margins than the Company's DOS-based product. While the Company
continues to support its DOS-based product, it no longer actively markets this
product.
Prior to 1995, the Company sold its products solely through a network
of third-party resellers (the "Resellers"). In exchange for certain fees, the
Resellers were granted exclusive rights to sell the Company's products in
certain geographic areas. In mid-1995, in order to gain greater control over its
distribution channels, the Company shifted its distribution strategy from its
network of Resellers to a direct sales force, acquiring the businesses of three
Resellers in 1995 and that of nine Resellers in April 1996. These acquisitions
were accounted for under the purchase method of accounting with approximately
$8.8 million of goodwill recorded as a result. Such goodwill was fully amortized
as of December 31, 1998. In February and March 1998, the Company acquired the
businesses of the remaining five Resellers which acquisitions were recorded
under the pooling-of-interests method of accounting.
On June 5, 1998, the Company completed the sale of 3,250,000 shares of
the Company's common stock, par value $.01 (the "Common Stock"), in an initial
public offering at an offering price of $10 per share (the "IPO"). The net
proceeds from the IPO, after deducting $4.1 million in underwriting discounts,
commissions and other costs associated with the offering, were $28.4 million. A
portion of the net proceeds from the IPO in the amount of $3.6 million was used
to pay down the outstanding balance of the Company's existing line of credit.
The balance of the remaining net proceeds from the IPO has been and will
continue to be used for general corporate purposes, including working capital
(see "Liquidity and Capital Resources"). The Company may also use a portion of
the net proceeds to fund acquisitions of complementary businesses, products or
technologies. Although the Company may periodically review potential acquisition
opportunities, there are no current agreements with respect to any such
transactions.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the Statement of Operations data of the
Company, as a percentage of total revenues, for the periods indicated.
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1999 1998 1999 1998
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
License 41.9 % 41.5 % 36.0 % 41.4 %
Service 58.1 58.5 64.0 58.6
-------- --------- --------- ---------
Total revenues 100.0 100.0 100.0 100.0
-------- --------- --------- ---------
Cost of revenues:
License 1.3 2.2 1.3 2.4
Service 36.9 41.7 41.5 45.0
-------- --------- --------- ---------
Total cost of revenues 38.2 43.9 42.8 47.4
-------- --------- --------- ---------
Operating expenses:
Sales and marketing 29.5 39.1 31.7 43.9
Research and development 16.8 16.0 17.9 17.2
General and administrative 8.7 11.0 9.5 11.4
Amortization of acquired intangibles - 1.9 - 2.2
-------- --------- --------- ---------
Total operating expenses 55.0 68.0 59.1 74.7
-------- --------- --------- ---------
Operating income (loss) 6.8 (11.9) (1.9) (22.1)
Compensation related to modification
of escrow agreement - - (23.6)
-
Interest expense (0.3) (1.2) (0.3) (0.9)
Interest and other income 1.0 1.0 1.3 0.6
-------- --------- --------- ---------
Net income (loss) 7.5 % (12.1) % (0.9) % (46.0) %
======== ========= ========= =========
</TABLE>
REVENUES
The Company's revenues are derived from two principal sources: software
licenses ("license revenues") and fees for maintenance, implementation, training
and consulting services (collectively, "service revenues"). License revenues
include revenues from noncancellable software license agreements entered into
between the Company and its customers with respect to its products. License
revenues are generally recognized upon the delivery of the related software
product when all significant contractual obligations have been satisfied. Until
such delivery, the Company records amounts received when contracts are signed as
customer deposits which are included with deferred revenues in the condensed
consolidated balance sheets.
Service revenues are recognized as services are performed and
delivered. Included in service revenues are maintenance fees for maintaining,
supporting and providing periodic updates, which are recognized ratably over the
service period, generally one year. Upon delivery of the software, amounts
included in the contract relating to unperformed service revenues are recorded
as deferred revenue. All of the Company's customers that purchased software
during 1999 and 1998 also purchased maintenance and support service contracts.
Maintenance and support fees are generally priced as a percentage of the initial
license fee for the underlying products.
Total revenues, consisting of license and service revenues, increased
41.5% to $14.4 million for the three months ended June 30, 1999 from $10.1
million for the three months ended
11
<PAGE>
June 30, 1998. Total revenues increased 41.7% to $25.1 million for the six
months ended June 30, 1999 from $17.7 million for the six months ended June 30,
1998.
License revenues increased 43.0% to $6.0 million for the three months
ended June 30, 1999 from $4.2 million for the three months ended June 30, 1998.
License revenues increased 23.3% to $9.0 million for the six months ended June
30, 1999 from $7.3 million for the six months ended June 30, 1998. The increases
in license revenues were primarily attributable to increased sales of the
Company's core product, UltiPro HRMS/Payroll, and, to a lesser degree, revenues
generated from sales of the Company's Web-enabled Employee Self-Service product
released in the third calendar quarter of 1998.
Service revenues increased 40.5% to $8.3 million for the three months
ended June 30, 1999 from $5.9 million for the three months ended June 30, 1998.
Service revenues increased 54.7% to $16.1 million for the six months ended June
30, 1999 from $10.4 million for the six months ended June 30, 1998. The
increases in service revenues were primarily attributable to an increase in
services related to the implementation of UltiPro HRMS/Payroll principally to
support increased sales of the product as well as a higher level of utilization
of Ultimate Software's service consultants. Additionally, maintenance and
training revenues increased primarily as a result of an increase in the
installed base of UltiPro HRMS/Payroll customers.
COST OF REVENUES
Cost of revenues consists principally of the cost of license and
service revenues. Cost of license revenues primarily consists of fees payable to
a third party for software products distributed by the Company. Cost of service
revenues primarily consists of costs to provide consulting, implementation,
maintenance, technical support and training to the Company's customers, and the
cost of periodic updates.
Cost of license revenues decreased 17.8% to $185 thousand for the three
months ended June 30, 1999 from $225 thousand for the three months ended June
30, 1998. Cost of license revenues decreased 23.7% to $328 thousand for the six
months ended June 30, 1999 from $430 thousand for the six months ended June 30,
1998. As a percentage of license revenues, cost of license revenues decreased to
3.1% for the three months ended June 30, 1999 from 5.4% for the three months
ended June 30, 1998. As a percentage of license revenues, cost of license
revenues decreased to 3.6% for the six months ended June 30, 1999 from 5.9% for
the six months ended June 30, 1998. The decreases in cost of license revenues
were primarily attributable to lower third-party fees.
Cost of service revenues increased 25.4% to $5.3 million for the three
months ended June 30, 1999 from $4.2 million for the three months ended June 30,
1998. Cost of service revenues increased 30.5% to $10.4 million for the six
months ended June 30, 1999 from $8.0 million for the six months ended June 30,
1998. These increases were primarily attributable to additional implementation
services, training and maintenance personnel to support the Company's increased
sales of UltiPro HRMS/Payroll and, to a lesser degree, additional costs
associated with providing training to customers. Cost of service revenues, as a
percentage of service revenues, decreased to 63.6% for the three months ended
June 30, 1999 from 71.2% for the three months ended June 30, 1998 and to 64.7%
for the six months ended June 30, 1999 from 76.7% for the six months ended June
30, 1998. These decreases in cost of services, as a percentage of service
revenues, were primarily due to an increase in service revenues generated by
higher HRMS/Payroll revenues as well as an increased level of the utilization of
Ultimate Software's service consultants.
12
<PAGE>
SALES AND MARKETING
Sales and marketing expenses consist primarily of salaries, benefits,
sales commissions, travel and promotional expenses, and facility and
communication costs for direct sales offices and marketing costs. Sales and
marketing expenses increased 6.8% to $4.2 million for the three months ended
June 30, 1999 from $4.0 million for the three months ended June 30, 1998. Sales
and marketing expenses increased 2.2% to $8.0 million for the six months ended
June 30, 1999 from $7.8 million for the six months ended June 30, 1998. The
increases in sales and marketing expenses were primarily attributable to higher
advertising and marketing as well as additional costs associated with the
Company's newer sales programs--the affiliate network and strategic alliances
programs. Under the affiliate network program, accounting firms, consulting
firms and high quality resellers market, sell and implement the Company's
products. The strategic alliance program typically involves strategic marketing
relationships with other leading software vendors. Sales and marketing expenses,
as a percentage of total revenues, decreased to 29.5% for the three months ended
June 30, 1999 from 39.1% for the three months ended June 30, 1998. Sales and
marketing expenses, as a percentage of total revenues, decreased to 31.7% for
the six months ended June 30, 1999 from 43.9% for the six months ended June 30,
1998. The decreases in sales and marketing expenses, as a percentage of total
revenues, were primarily due to the absorption of the expenses in an increased
total revenue base.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of software
development personnel costs. Research and development expenses increased 47.9%
to $2.4 million for the three months ended June 30, 1999 from $1.6 million for
the three months ended June 30, 1998. Research and development expenses
increased 47.7% to $4.5 million for the six months ended June 30, 1999 from $3.0
million for the six months ended June 30, 1998. The increases in research and
development expenses were primarily attributable to an increase in costs
associated with hiring additional programmers and engineers for the development
and enhancement of UltiPro HRMS/Payroll, the continued development of UltiPro
Web products, and for the development of new HRMS/payroll-related enhancement
modules. Research and development expenses, as a percentage of total revenues,
increased to 16.8% for the three months ended June 30, 1999 from 16.0% for the
three months ended June 30, 1998. Research and development expenses, as a
percentage of total revenues, increased to 17.9% for the six months ended June
30, 1999 from 17.2% for the six months ended June 30, 1998. The increases in
research and development expenses, as a percentage of total revenues, were
primarily due to increased personnel costs partially offset by the absorption of
the expenses in an increased total revenue base.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of salaries and
benefits of executive, administrative and financial personnel, as well as
external professional fees and the provision for doubtful accounts. General and
administrative expenses increased 11.7% to $1.2 million for the three months
ended June 30, 1999 from $1.1 million for the three months ended June 30, 1998.
General and administrative expenses increased 17.4% to $2.4 million for the six
months ended June 30, 1999 from $2.0 million for the six months ended June 30,
1998. The increases in general and administrative expenses were principally due
to increased staffing to support the Company's growth as well as other
incremental costs associated with being a publicly-traded company, primarily
professional fees. General and administrative expenses, as a percentage of total
revenues, decreased to 8.7% for the three months ended June 30, 1999 from 11.0%
for the three months ended June 30, 1998. General and administrative expenses,
as a
13
<PAGE>
percentage of total revenues, decreased to 9.5% for the six months ended June
30, 1999 from 11.4% for the six months ended June 30, 1998. The decreases in
general and administrative expenses, as a percentage of total revenues, were
primarily due to the absorption of the expenses in an increased total revenue
base.
AMORTIZATION OF ACQUIRED INTANGIBLES
Amortization of acquired intangibles consisted of goodwill amortization
associated with the acquisition of three Resellers in 1995 and nine Resellers in
1996. Goodwill amortization decreased 100% to zero for both the three and six
months ended June 30, 1999 due to the goodwill associated with the Reseller
acquisitions being fully amortized as of December 31, 1998, thereby eliminating
the amortization expense in fiscal 1999.
COMPENSATION RELATED TO MODIFICATION OF ESCROW AGREEMENT
Compensation expense is related to the modification of an escrow
agreement, pursuant to which certain shares of the Company's Class B common
stock (the "Class B Common Stock") were placed in escrow (the "Class B Escrow
Agreement"). In March 1998, the Class B Escrow Agreement was modified to provide
for the release of all of the shares of Class B Common Stock held in escrow upon
the execution of a firm underwriting agreement for the Company's capital stock
on or before July 1, 1998. Accordingly, a non-recurring, non-cash charge of $4.2
million for compensation expense was recorded during March 1998, representing
the number of shares of common stock released to directors, officers and
employees of the Company multiplied by the difference between the fair market
value of the Class B Common Stock on the date of modification and the price paid
by the holders of the shares.
INTEREST EXPENSE
Interest expense decreased 64.1% to $42 thousand for the three months
ended June 30, 1999 from $117 thousand for the three months ended June 30, 1998.
Interest expense decreased 47.9% to $81 thousand for the six months ended June
30, 1999 from $155 thousand for the six months ended June 30, 1998. The
decreases in interest expense in 1999 were primarily attributable to the absence
of bank borrowings, partially offset by increased capital lease obligations.
INTEREST AND OTHER INCOME
Interest and other income increased 38.6% to $140 thousand for the
three months ended June 30, 1999 from $101 thousand for the three months ended
June 30, 1998. Interest and other income increased 192.7% to $322 thousand for
the six months ended June 30, 1999 from $110 thousand for the six months ended
June 30, 1998. The increases are the result of interest earned on the remaining
net proceeds from the IPO.
PROVISION FOR INCOME TAXES (BENEFIT)
No provision or benefit for federal, state or foreign income taxes was
made for the six months ended June 30, 1999 or 1998 due to the operating losses
incurred in the respective periods. The Company has reported only tax losses to
date and consequently had approximately $27.4 million of net operating loss
carryforwards available at December 31, 1998, which expire at various times
through the year 2018, available to offset future taxable income. The timing of
attaining profitability may result in the expiration of net operating loss
carryforwards before utilization.
14
<PAGE>
Additionally, utilization of such net operating losses may be limited as a
result of cumulative ownership changes in the Company's equity instruments.
LIQUIDITY AND CAPITAL EXPENDITURES
The Company has historically funded operations primarily through the
sale of private equity securities and, to a lesser extent, equipment financing
and borrowing arrangements. In June 1998, the Company completed an initial
public offering of its Common Stock which resulted in net proceeds to the
Company totaling approximately $28.4 million.
As of June 30, 1999, the Company had $11.0 million in cash and cash
equivalents, reflecting a net decrease of $6.2 million since December 31, 1998.
Working capital as of June 30, 1999 was $16.1 million as compared to $17.5
million as of December 31, 1998. The decrease in working capital for the six
months ended June 30, 1999 was primarily attributable to the cyclical nature of
sales of the Company's products. Revenues have historically increased at
graduated rates over the course of the year, typically heightening in the fourth
quarter of the year.
Net cash used in operating activities was $4.4 million for the six
months ended June 30, 1999 as compared to $9.4 million for the six months ended
June 30, 1998. The decrease in cash used in operating activities was principally
due to a reduction in the net loss for the six months ended June 30, 1999 and a
lower increase in accounts receivable principally associated with the Company's
total revenue growth combined with enhanced collection efforts.
Net cash used in investing activities was $1.4 million for the six
months ended June 30, 1999 as compared to $0.3 million for the six months ended
June 30, 1998. The increase in net cash used in investing activities was
primarily attributable to certain leasehold improvements made to the Company's
new headquarters, the lease for which commenced on July 15, 1999, and additional
equipment purchases in the six months ended June 30, 1999.
Net cash used in financing activities was $0.4 million for the six
months ended June 30, 1999 as compared to net cash provided by financing
activities of $28.0 million for the six months ended June 30, 1998. The decrease
in net cash provided by financing activities was primarily attributable to the
net proceeds from the IPO in June 1998 partially offset by principal payments
made under the line of credit agreements during the six months ended June 30,
1998. Financing activities in 1999 primarily relate to capital lease
obligations.
The Company has a working capital revolving line of credit (the "Credit
Facility") with a bank, which is secured by the Company's accounts receivable
and bears interest at a rate equal to LIBOR plus 4.875% per annum. The amount
available under the Credit Facility is limited to the lesser of 80% of the
Company's eligible accounts receivable, as defined, or $4.0 million. The Credit
Facility will expire on November 30, 1999. At June 30, 1999 and throughout the
six months ended June 30, 1999, there were no amounts outstanding under the
Credit Facility.
The net proceeds from the IPO, after deducting $4.1 million in
underwriting discounts, commissions and other costs associated with the
offering, were $28.4 million. A portion of the net proceeds from the IPO in the
amount of $3.6 million was used to pay down the outstanding balance of the
Credit Facility. The balance of the Credit Facility was paid with cash generated
from operations in June 1998. The balance of the remaining net proceeds from the
IPO in the amount of $10.1 million as of June 30, 1999 is available for future
working capital and other general corporate purposes. The Company may also use a
portion of the remaining net proceeds to fund acquisitions of complementary
businesses, products or technologies. Although the
15
<PAGE>
Company may periodically review potential acquisition opportunities, there are
no current agreements with respect to any such transactions.
The Company believes that cash and cash equivalents, remaining net
proceeds from the IPO, cash generated from operations, and available borrowings
under the Credit Facility will be sufficient to fund its operations for at least
the next 12 months.
ULTIPRO AND INTERSOURCING ARE REGISTERED TRADEMARKS OF THE ULTIMATE
SOFTWARE GROUP, INC. WINDOWS IS A REGISTERED TRADEMARK OF MICROSOFT CORPORATION.
ALL OTHER TRADEMARKS REFERENCED ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS.
SEASONALITY
The Company has experienced, and may experience in the future,
significant seasonality in its business. The Company's business, operating
results and financial condition may be affected by such trends in the future.
Revenues have historically increased at graduated rates over the course of the
year, typically heightening in the fourth quarter of the year and reducing to
lower rates in the next succeeding quarter. The Company believes such
seasonality is due to a number of factors, including the Company's quota-based
compensation arrangements, typical of those used in software companies, and
year-end budgetary dynamics which may encourage the Company's customers to make
capital expenditures before their fiscal year ends. The Company believes that
this seasonal trend may continue for the foreseeable future.
QUARTERLY FLUCTUATIONS
The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. The Company's operating results may fluctuate as a result
of a number of factors, including, but not limited to, increased expenses
(especially as they relate to product development and sales and marketing),
timing of product releases, increased competition, variations in the mix of
revenues, announcements of new products by the Company or its competitors and
capital spending patterns of the Company's customers. The Company establishes
its expenditure levels based upon its expectations as to future revenues, and,
if revenue levels are below expectations, expenses can be disproportionately
high. A drop in near term demand for the Company's products could significantly
affect both revenues and profits in any quarter. As a result of these factors,
there can be no assurance that the Company will be able to establish or, when
established, maintain profitability on a quarterly basis. The Company believes
that, due to the underlying factors for quarterly fluctuations, period-to-period
comparisons of its operations are not necessarily meaningful and that such
comparisons should not be relied upon as indications of future performance.
THE YEAR 2000 ISSUE
OVERVIEW
Like other businesses dependent upon computerized information
processing, the Company must deal with the "Year 2000" issues, which stem from
using two digits to reflect the year in many computer programs and data. Because
certain computers and computer applications define dates by the last two digits
of the year, "00" or other two-digit dates after the year 2000 may not be
properly identified as the year 2000 or the appropriate later year, but rather
the year 1900 or a year between 1901 and 1999 (as the case may be). This error
could result in the
16
<PAGE>
inaccurate processing of certain date-based information, which could cause a
variety of operational problems for businesses.
STATE OF READINESS
The Company believes it has addressed the Year 2000 issues in its
proprietary software products and does not anticipate any business interruptions
associated with these applications. Existing third-party software embedded in
the Company's proprietary software has been certified by the vendor to be Year
2000 compliant.
The Company's internal technology systems include telecommunications
(i.e., phones, voicemail and network connections), computer hardware (personal
computers and network servers) and software. In February 1999, the Company
successfully tested its "back office" servers which support the Company's
critical systems and supporting infrastructure. Software upgrades have been
applied to the base operating system to ensure Year 2000 compliance. In
addition, the Company has upgraded its phone systems and PC-based software for
Year 2000 compliance. The Company is in the process of assessing the Year 2000
issue with respect to telecommunications and computer hardware for its field
operations but does not anticipate such to materially impact the Company's
operations. The Company's principal software systems include payroll, accounting
and customer support. The Company utilizes its own proprietary product, which
tests show is Year 2000 compliant, for payroll and human resource data
processing. In the past several years, the Company has replaced certain of its
financial and operational systems, including the accounting and customer support
systems which have each been certified by the respective vendors as being Year
2000 compliant. Verification testing for certain material aspects of the
financial and operational systems is underway and scheduled to be completed by
the end of the third quarter of 1999. The amount of remediation work required to
address any Year 2000 problems in other systems is not expected to be extensive.
Non-information technology systems typically include embedded
technology such as security systems, elevators and other systems which contain
an embedded computer or computer-like device used to control the operation of
plant, machinery and equipment. The Company relocated to its new headquarters
effective August 1, 1999. The office building for these headquarters, which is
under a 15-year lease, is newly constructed and the Company believes the
security system, elevator and other non-information technology systems
substantially address Year 2000 issues. The utility company for the Company's
headquarters, Florida Power & Light, has completed its Year 2000 testing and has
certified to the Company its Year 2000 compliance.
The Company has initiated formal communications with certain
significant suppliers and is in the process of initiating formal communications
with major business partners to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. As of the date of this Form 10-Q, such formal
communications have not been concluded. The Company will seek to obtain the
appropriate warranties and assurances that those parties are, or will be, Year
2000 compliant. Although the Company believes that the information systems of
its major vendors (insofar as they relate to the Company's business) comply with
Year 2000 requirements, there can be no assurance that the Year 2000 issue will
not affect the information systems of the Company's major vendors as they relate
to the Company's business, or that any such impact on a major vendor's
information system would not have a material adverse effect on the Company.
17
<PAGE>
COSTS
Based on its assessments to date, the Company does not believe that it
has material exposure to the Year 2000 issue with respect to its own information
systems since its existing systems correctly define the year 2000. The Company
estimates the total cost associated with the Year 2000 issue to be in the range
of $75,000 and $150,000 during 1999 (principally in connection with the use of
outside consultants), assuming no major disruption of service from utility
companies. Historically, the Company has not separately tracked the internal
costs related to Year 2000 compliance. Such costs are principally the related
payroll costs for the Company's information systems employees.
RISKS
Although the Company currently offers software products that are
designed and have been tested to be ready for the year 2000, there can be no
assurance that the Company's software products contain all necessary date code
changes. Although the Company currently does not anticipate any material adverse
impact on its operations as a result of Year 2000 issues of its major suppliers
or customers, no assurances can be given that the failure by one or more of its
major suppliers or customers to become Year 2000 compliant will not have a
material adverse impact on the Company's operations. It has been widely reported
that a significant amount of litigation will arise out of Year 2000 compliance
issues. Because of the unique nature of such potential litigation, it is
uncertain whether, or to what extent, the Company may be affected by such
litigation. Significant uncertainty exists in the software industry concerning
the potential effects associated with Year 2000 readiness.
CONTINGENCY PLANS
When the Company completes its assessment of the anticipated total
impact of the Year 2000 issue, contingency plans will be prepared, if deemed
necessary, to handle the most reasonably likely worst case scenario. The
Company's target date for the completion of such contingency plans, if deemed
necessary at the completion of assessing the total impact of the Year 2000
issue, is September 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS 133"), subsequently amended by SFAS No. 137, was issued in
June 1998 and is effective for the Company's fiscal year ending December 31,
2001. SFAS 133 establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded on the balance sheet as either an asset or a
liability measured at its fair value. The Company believes that the adoption of
SFAS 133 will have no material impact on its financial statements as it has
entered into no derivative contracts and has no current plans to do so in the
foreseeable future.
FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements represent the Company's expectations or beliefs,
including, but not limited to, statements concerning the Company's operations
and
18
<PAGE>
financial performance and condition. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," and similar expressions
are intended to identify such forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to certain
risks and uncertainties that are difficult to predict. The Company's actual
results could differ materially from those contained in the forward-looking
statements. Factors that may cause such differences include, but are not limited
to, those discussed in the foregoing Management's Discussion and Analysis of
Financial Condition and Results of Operations as well as those discussed in the
Company's Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of its operations, the Company is exposed to
certain market risks, primarily interest rates. Uncertainties that are either
non-financial or non-quantifiable, such as political, economic, tax, other
regulatory or credit risks, are not included in the following assessment of the
Company's market risks.
INTEREST RATES. Cash equivalents consist of money market accounts with
original maturities less than three months. Interest on the Credit Facility is
based on LIBOR plus 4.875% per annum. Changes in interest rates could impact the
Company's anticipated interest income from interest-bearing cash accounts, or
cash equivalents, as well as interest expense on borrowings under the Credit
Facility. Changes in interest rates would not have a material effect on cash
equivalents. As of June 30, 1999 and the date of this Form 10-Q, there was no
amount outstanding under the Credit Facility; therefore, changes in interest
rates are not applicable for either interest expense or fair market value of the
debt instrument.
19
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. As of the
date of this filing, the Company is not a party to any legal proceeding the
adverse outcome of which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the Company's business, operating
results and financial condition.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
From the effective date of the Company's Registration Statement on Form
S-1 (No. 333-47881) filed with the Securities and Exchange Commission (the
"SEC") on March 13, 1998, as amended (the "Form S-1"), through June 30, 1999,
the Company incurred the following expenses in connection with the issuance and
distribution of the Common Stock in the IPO (in thousands):
Underwriting discounts and commissions $2,275
Other expenses (legal and accounting fees,
printing and engraving expenses, filing
and listing fees and miscellaneous) 1,841
------
Total $4,116
======
The net offering proceeds from the IPO to the Company, after deducting
the foregoing expenses, were $28.4 million. In connection with the offering and
sale of the Common Stock registered, except as otherwise noted below, the
Company did not make any direct or indirect payments to directors or officers of
the Company or, to the Company's knowledge, their associates; persons owning 10%
or more of any class of equity securities of the Company; or affiliates of the
Company. From the closing of the IPO on June 5, 1998 until June 30, 1999, except
as otherwise noted, the net offering proceeds were used as follows (in
thousands):
Invested in money market and other short-term
marketable securities at June 30, 1999 $10,066
Repayment of certain indebtedness 3,600
Capital expenditures for leasehold improvements
to the Company's new headquarters 800
Accrued bonuses to officers who are not
executive officers 436
Other working capital needs 13,482
-------
Total $28,384
=======
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
20
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 20, 1999.
The principal business of the meeting was to elect two directors to serve for
three-year terms or until their respective successors are duly elected and
qualified. No other business came before the meeting.
The two management nominees for director whose terms expired at the
1999 Annual Meeting of Stockholders of the Company were elected to serve as
directors until the 2002 Annual Meeting of Stockholders, as follows:
Nominee For Withheld Vote
----------------------------- --------------- ------------------
Robert A. Yanover 10,125,884 10,805
Le Roy A. Vander Putten 10,125,684 11,005
The names of each other director whose term of office as a director
continues after the 1999 Annual Meeting of Stockholders and their respective
term expirations are as follows:
Term Expires in 2000:
Marc D. Scherr
Rick Wilber
John R. Walter (1)
Term Expires in 2001:
Scott Scherr
Alan Goldstein, M.D.
Ofer Nemirovsky
- -------------------------
(1) John R. Walter, current Chairman of Manpower, Inc., retired President and
Chief Operating Officer of AT&T, and former Chairman, President and Chief
Executive Officer of R.R. Donnelley & Sons, was elected as a director by the
Company's board of directors on July 22, 1999. Mr. Walter is Chairman of the
Management Advisory Board of Aberdeen Strategic Capital LP, an affiliate of
Aberdeen Strategic Capital, Inc. ("Aberdeen"), which has an investment in the
Company.
ITEM 5. OTHER INFORMATION
On July 22, 1999, the Company engaged Aberdeen to provide marketing,
strategic and other advisory services (the "Engagement"). The Engagement may be
terminated by the Company at any time upon written notice to that effect. In
connection with the Engagement, the Company issued to Aberdeen a warrant (the
"Warrant") to purchase 100,000 shares of the Common Stock for $10.00 per share.
The Warrant vests in eight increments of 12,500 shares quarterly over a two-year
period commencing on July 22, 1999; provided that no increment of shares shall
vest if the Engagement has been terminated before the vesting date for such
increment. The Warrant expires on July 22, 2003. Definitive documents with
respect to the Engagement and the Warrant are being prepared.
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Commercial Office Lease by and between
UltiLand, Ltd., a Florida limited partnership
and the Company, dated December 22, 1998
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended June
30, 1999.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ULTIMATE SOFTWARE GROUP, INC.
Date: August 15, 1999 By: /S/ MITCHELL K. DAUERMAN
--------------------------------------
Executive Vice President, Chief
Financial Officer and Treasurer
(Authorized Signatory and Principal
Financial and Accounting Officer)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.1 Commercial Office Lease by and between
UltiLand, Ltd., a Florida limited partnership
and the Company, dated December 22, 1998
27.1 Financial Data Schedule
EXHIBIT 10.1
COMMERCIAL OFFICE LEASE
by and between
ULTILAND, LTD., a Florida limited partnership
("Landlord")
and
ULTIMATE SOFTWARE GROUP, INC., a Delaware corporation
("Tenant")
<PAGE>
COMMERCIAL OFFICE LEASE
ARTICLE I - DEMISED PREMISES
1.01 DEMISED PREMISES
1.02 USE OF ADDITIONAL AREAS
ARTICLE II - TERM
2.01 LENGTH OF TERM
2.02 COMMENCEMENT DATE
2.03 OPTION TO RENEW
ARTICLE III - RENT
3.01 PAYMENT OF RENT
3.02 FIXED MINIMUM RENT
ARTICLE IV - IMPROVEMENTS
4.01 IMPROVEMENTS BY LANDLORD
4.02 IMPROVEMENTS BY TENANT
4.03 INSTALLATION OF FIXTURES
ARTICLE V - USE BY TENANT
5.01 USE OF PREMISES
5.02 RESTRICTIONS ON USE
5.03 SIGNS
5.04 UTILITIES AND SERVICES
ARTICLE VI - MAINTENANCE AND REPAIRS
6.01 MAINTENANCE BY TENANT
6.02 REPAIRS BY TENANT
6.03 MAINTENANCE AND REPAIRS BY LANDLORD
6.04 ALTERATIONS
6.05 WAIVER OF CLAIMS
6.06 LANDLORD'S RIGHT TO INSPECT
6.07 CLEANLINESS AND WASTE
6.08 TRIPLE NET LEASE
ARTICLE VII - INSURANCE
7.01 INSURANCE BY TENANT
7.02 INDEMNITY FOR ACCIDENTS
7.03 DESTRUCTION BY FIRE OR CASUALTY
ARTICLE VIII - TAXES
8.01 REAL ESTATE TAXES
8.02 PERSONAL PROPERTY TAXES AND ASSESSMENTS
ARTICLE IX - TITLE
9.01 POSSESSION BY TENANT
9.02 SUBLEASE AND ASSIGNMENT
9.03 FINANCING
9.04 SURRENDER OF PREMISES
9.05 EMINENT DOMAIN
9.06 NONDISTURBANCE AND ATTORNMENT
ARTICLE X - DEFAULT
10.01 DEFAULT BY TENANT
10.02 LIEN OF LANDLORD FOR RENT, TAXES AND OTHER SUMS
10.03 NO LIENS CREATED BY TENANT
ARTICLE XI - ENVIRONMENTAL
11.01 COMPLIANCE WITH LAWS
11.02 STORAGE OF CONTAMINATION
11.03 NO LIENS
11.04 ENVIRONMENTAL ASSESSMENT AND REMEDIATION
11.05 NOTICE OF CONTAMINATION OR ENFORCEMENT
ARTICLE XII - MISCELLANEOUS
12.01 NOTICES
12.02 WAIVER
12.03 RELATIONSHIP OF PARTIES
12.04 GOVERNING LAW
1
<PAGE>
12.05 SAVINGS CLAUSE
12.06 MARGINAL HEADINGS
12.07 COVENANT TO BIND SUCCESSORS
12.08 CREDIT REPORTS
12.09 ESTOPPEL CERTIFICATE
12.10 EXCULPATION
12.11 FORCE MAJEURE
12.12 PREVAILING PARTY
12.13 RADON GAS
12.14 ENTIRE AGREEMENT
12.15 NEGOTIATION AND EXECUTION
2
<PAGE>
COMMERCIAL OFFICE LEASE
THIS LEASE, made and entered into this 22 day of DECEMBER, 1998, by and
between ULTILAND, LTD., a Florida limited partnership (hereinafter referred to
as "Landlord") and ULTIMATE SOFTWARE GROUP, INC., a Delaware corporation
(hereinafter referred to as "Tenant");
W I T N E S S E T H: THAT
In consideration of the rents, covenants and agreements hereinafter
reserved and contained on the part of the Tenant to be observed and performed,
the Landlord demises and leases to the Tenant, and Tenant takes, accepts and
rents from Landlord, the premises hereinafter described, for the period, at the
rental, and upon the terms and conditions hereinafter set forth.
ARTICLE I
DEMISED PREMISES
SECTION 1.01 - DEMISED PREMISES: The Landlord demises and leases to the
Tenant, and the Tenant rents from Landlord, that certain real property located
in Broward County, Florida and more particularly described on Exhibit "A"
attached hereto, (the "Property") together with all improvements located or to
be located thereon, including but not limited to a three-story office building
to be known as the Ultimate Software Group Building, located in Town Center
Circle, in the City of Weston, County of Broward, and State of Florida,
(hereinafter the Property and improvements thereon are referred to as the
"Demised Premises," in its "AS IS" condition.
SECTION 1.02 - USE OF ADDITIONAL AREAS: The use of occupancy by the Tenant
of the Demised Premises shall include the use of the automobile parking areas,
driveways, pathways, entranceways, restrooms, means of ingress and egress,
loading and unloading facilities, and other facilities as may be designated from
time to time by the Landlord, subject, however, to the terms and conditions of
this agreement, and to reasonable rules and regulations for the use thereof, as
prescribed from time to time by the Landlord.
ARTICLE II
TERM
SECTION 2.01 - LENGTH OF TERM: The length of this Lease shall be for a term
of fifteen (15) years (the "Term"), or as set forth below, unless otherwise
terminated or extended as provided herein.
SECTION 2.02 - COMMENCEMENT DATE: The term of this Lease shall commence on
a date thirty (30) days after Landlord obtains a Certificate of Occupancy (the
"Commencement Date"). If the Tenant occupies the Demised Premises prior to the
Commencement Date, such early occupancy shall be subject to all terms and
conditions contained in this Lease. All property of Tenant brought upon the
Demised Premises shall be kept at Tenant's sole risk.
SECTION 2.03 - OPTION TO RENEW: Provided Lessee shall not be in default
hereunder and upon one hundred eighty (180) days' written notice prior to the
end of the Term, Lessee shall have one (1) option to renew this Lease for a term
of five (5) years ("Option Term").
ARTICLE III
RENT
SECTION 3.01 - PAYMENT OF RENT: Tenant hereby covenants and
1
<PAGE>
agrees to pay rent to Landlord, which rent shall be as hereinafter provided. The
payment of said Rent shall begin on the Commencement Date. In the event the
Commencement Date occurs on a day other than the first day of a month, Tenant
shall pay rent for the fractional month on a per diem basis (calculated on the
basis of a thirty [30] day month) until the first day of the month following
such Commencement Date, and thereafter the Rent shall be paid in equal monthly
installments on the first day of each and every month in advance. Said Rent
shall be paid to the Landlord at c/o Marc Scherr, Gerschel & Company, 720 Fifth
Avenue, 10th Floor, New York, New York, 10019, or at such other place as may be
designated in writing from time to time by Landlord.
SECTION 3.02 - RENT:
A. Tenant shall pay to Landlord during the first year of this Lease,
commencing on the Commencement Date (the "Initial Lease Year"), and as adjusted
pursuant to Section 3.03 of this Lease, without any prior notice or demand
therefor, and without any deduction or setoff whatsoever, a total fixed minimum
annual rental of $697,760.00 per annum, payable in equal monthly installments of
$58,146.67, plus sales tax and use tax as required by law. The parties
acknowledge that the amount of fixed minimum annual rental has been arrived at
by calculating $17.50 per square foot per annum, based on an assumed square
footage of 39,872 feet of Demised Premises. Rent shall be payable in advance on
the first day of each and every calendar month, as provided in Section 3.01
hereof.
B. Commencing with the second year of this Lease, for a term of twelve (12)
months, and for each successive year of this Lease, fixed minimum annual rent
shall be adjusted in accordance with the CPI as more fully set forth in this
Article III, Section 3.03 below, whereupon the adjusted Rent shall be payable
in equal monthly installments, plus applicable sales tax and use tax as required
by law. Rent shall be payable in advance on the first day of each and every
calendar month, as provided in Section 3.01 hereof.
C. Landlord acknowledges receipt of the sum of $88.00. If, during the term
hereof, Tenant shall be in default in the payment of rent herein reserved or any
portion thereof, Landlord may apply all or any portion of the deposit as may be
necessary to the payment of overdue rent or any other charges which accrue in
favor of Landlord. Tenant agrees to forthwith, without demand, replace the
monies so used.
D. Late fee: Any payment not received by Landlord by the tenth (lOth) day
of the month shall be considered in arrears and in default of the terms hereof
and shall be subject to a late charge in the amount of one (1%) percent of the
monthly rent, which Tenant agrees to pay along with the late rent in the form of
a cashier's check, certified check or money order.
E. Returned Checks: In the event that Tenant's check is returned for any
reason, Tenant agrees to pay Landlord $50.00 as a handling charge in addition
any applicable late charge. Returned checks must be redeemed by cashier's check,
certified check or money order. In the event that more than one (1) check is
returned, Tenant agrees to pay all subsequent rents and charges by cashier's
check, certified check or money order.
SECTION 3.03 - COST OF LIVING INCREASE IN FIXED MINIMUM ANNUAL RENT:
Commencing with the second year of this Lease, and at the beginning of each
successive year of this Lease, the fixed minimum annual rent shall be adjusted
in accordance with the Consumer Price Index For All Urban Consumers and Wage
Earners and Clerical Workers (U.S. City Average: All Items) issued by the Bureau
of Labor statistics of the U.S. Department of Labor, using the year 1982-84 as a
base of 100. At the commencement of each year of this Lease,
2
<PAGE>
and each year thereafter, the fixed minimum annual rent shall be adjusted by
multiplying said rent by a fraction, the numerator of which shall be the Index
Number for the month preceding the commencement of the successive year of this
Lease, and the denominator of which shall be the Index Number for the month of
the commencement of the Term of this Lease. In no event shall the fixed minimum
annual rent, as adjusted, be less than the fixed minimum annual rent for the
last year of the preceding year's rental as specified in Section 3.02 hereof. In
the event that the Index herein referred to ceases to be published during the
term of this Lease, or if a substantial change is made in the method of
establishing such Index, then the determination of the adjustment in the fixed
minimum annual rent shall be made with the use of such conversion factor,
formula or table as may be published by the Bureau of Labor Statistics, or if
none is available, the parties shall accept comparable statistics on the cost of
living in the United States, as shall then be computed and published by an
agency of the United States, or if none, by a respected financial periodical
selected by Landlord. Further, if the publication of the Index is delayed or
receipt of same is untimely, then the Rent shall be adjusted as soon as the
Index is received, and the Tenant agrees to pay any adjustments in rent for
those months which may not have been calculable due to the unavailability of the
Index.
ARTICLE IV
IMPROVEMENTS
SECTION 4.01 - IMPROVEMENTS BY LANDLORD: Landlord shall not be responsible
for any improvements to the Demised Premises other than those Landlord
improvements set forth on Exhibit "B" attached hereto and made a part hereof
("Landlord Improvements"). Tenant takes the Demised Premises in an "AS IS"
condition other than Landlord's Improvements.
SECTION 4.02 - IMPROVEMENTS BY TENANT: Tenant, at its sole cost and
expense, shall be responsible for all improvements to the Demised Premises.
Provided however, that before any such improvements are made, Tenant shall
submit its plans, drawings and specifications to Landlord for Landlord's
approval which approval shall be in writing and shall not be unreasonably
withheld and provided that any and all improvements to be made by Tenant meet
all applicable building codes and/or zoning requirements as may be required by
the appropriate governmental authorities and that Tenant secure, in.advance of
commencement of any improvements the requisite governmental approvals and
permits. All bills shall be paid for in full, and Tenant does hereby agree to
indemnify, defend and hold harmless Landlord from any and all liens, claims or
demands in connection therewith. If any liens are placed against the Demised
Premises, Tenant shall be responsible for clearing all such liens immediately,
and, to the extent Landlord incurs any expenses (including attorney fees),
Tenant shall be responsible for reimbursement.
SECTION 4.03 - INSTALLATION OF FIXTURES: Prior to the commencement of the
Term, if Tenant enters upon the Demised Premises for the purpose of installing
trade fixtures and furnishings, Landlord shall not be liable to Tenant for
damage to or loss of such fixtures, equipment or furnishings. It is mutually
agreed that all work performed or requested by the Tenant shall be subject to
the approval of the Landlords architect, mechanical and electrical engineers.
ARTICLE V
USE BY TENANT
SECTION 5.01 - USE OF PREMISES: Tenant shall occupy and use the Demised
Premises as offices for a computer software company and
3
<PAGE>
related use, and for no other purpose. Tenant shall continuously and
uninterruptedly during the Term of this Lease conduct its customary business
activity therein during all normal business days and hours, unless prevented
from so doing by strikes, fire, casualty or other causes beyond Tenant's
control.
SECTION 5.02 - RESTRICTIONS ON USE: Tenant shall not use nor permit the
Demised Premises to be used for any purpose other than that set forth in Section
5.01 above, will not use or suffer anyone to use, the Demised Premises, or any
part thereof, for any purpose in violation of the laws of the United States, the
State of Florida, or the ordinances and regulations of a county or a
municipality having jurisdiction over the Demised Premises. Tenant further
covenants and agrees to execute and comply promptly with all statutes,
ordinances, rules, orders, regulations and requirements of federal, state,
county and city governments regulating the use by Tenant of the Demised
Premises. Tenant will not use, or permit the use of the Demised Premises in any
such manner that will tend to create a nuisance. The restrictions set forth in
this Paragraph shall extend to all agents and employees of the Tenant. Tenant
shall take good care of the Demised Premises, fixtures, appurtenances and all
alterations, additions and improvements thereof; shall make all repairs in and
about the Demised Premises as may be necessary to preserve same in good order
and condition, which repairs shall be equal in quality to the original work;
shall promptly pay the expenses of such repairs and shall promptly notify
Landlord of damage that may occur to the Demised Premises.
5.03 - SIGNS: Without Landlord's prior consent and approval, Tenant shall
not (a) install any exterior lighting, awnings, shades or exterior decorations
or painting; (b) erect or install any exterior or interior window or door signs
or advertising media, window or door lettering or placards or (c) keep or
display any merchandise on, or otherwise obstruct the areaways adjacent to the
premises. All signs must conform with the Landlord's sign specifications and/or
be approved by Landlord prior to installation.
5.04 - UTILITIES AND SERVICES: The Tenant shall be solely responsible for
and shall promptly pay all charges for public utilities and/or private services
rendered or furnished to the premises during the term hereof, including, but not
limited to, heat, water, gas, electricity, rubbish disposal and sewer rental,
together with all taxes or other charges based upon the use of such utilities.
Landlord shall in no event be liable for the quality, quantity or interference
of such services.
ARTICLE VI
MAINTENANCE AND REPAIRS
SECTION 6.01 - MAINTENANCE BY TENANT: Tenant shall at all times keep the
Demised Premises, including the foundations, exterior and structural walls and
roof of the Demised Premises, fixtures, appurtenances, and all alterations,
additions and improvements thereof, including, but not limited to all
partitions, doors, equipment and all heating, air conditioning, lighting and
plumbing fixtures, in good order, condition and repair, any damage by
unavoidable casualty excepted.
SECTION 6.02 - REPAIRS BY TENANT: Tenant shall make all repairs to the
Demised Premises, including without limitation, structural repairs to the
Demised Premises.
SECTION 6.03 - MAINTENANCE AND REPAIRS BY LANDLORD: If Tenant refuses or
neglects to maintain or repair promptly the premises as required in Sections
6.01 and 6.02 hereof, in a reasonable time after written demand by the Landlord,
the Landlord may make such repairs without liability to Tenant for any loss or
damage that may
4
<PAGE>
accrue to Tenant's equipment, fixtures and/or other property; or to the loss of
business occasioned by reason thereof; and further, upon completion of such
maintenance or repairs, Tenant shall pay Landlord's incurred costs occasioned by
such maintenance or repairs. It is further agreed and understood that said
billing of costs so incurred shall include interest at the highest rate allowed
by law from the date of completion of the repairs by the Landlord.
SECTION 6.04 - ALTERATIONS: Tenant shall not make any alterations or
additions to the Demised Premises, nor make any contract therefor, without first
procuring Landlord's written consent. All alterations, additions and
improvements made by Tenant to or upon the Demised Premises, except signs,
electrical equipment or other removable trade fixtures or furnishings shall,
when made or installed, be deemed to have attached to the Demised Premises and
to have become the property of Landlord; provided, however, if prior to
termination of this Lease, or within fifteen (15) days thereafter, Landlord so
directs by written notice to Tenant, Tenant shall promptly remove the additions,
improvements, trade fixtures and installations which were placed in the Demised
Premises by the Tenant and which are designated in said notice and shall repair
any damage occasioned by such removal, and in default thereof, Landlord may
effect said removal and repair at Tenant's expense and Tenant hereby agrees to
pay same. All signs, electrical equipment, fixtures, furnishings and other
personal property of Tenant kept on the Demised Premises and not removed prior
to the expiration of the term or earlier termination thereof shall become the
property of the Landlord, to do with as Landlord exclusively deems appropriate.
SECTION 6.05 - WAIVER OF CLAIMS: Neither Landlord nor Landlord's agents nor
servants shall be liable, and Tenant waives all claims for damage to persons or
property sustained by Tenant or any occupant of the Demised Premises, or any
equipment or appurtenance becoming out of repair, or resulting from any accident
in or about the Demised Premises, or resulting directly or indirectly from any
act or neglect of any tenant or occupant or of any other person. This Paragraph
shall apply especially, but not exclusively, to the flooding of basements or
other subsurface areas, and to damage caused by roof leaks, air conditioning
apparatus, sprinkling devices, water, excessive heat or cold, falling
plaster, broken glass, sewage, gas odors or noise, or the bursting or leaking of
pipes or plumbing fixtures, and shall apply equally whether any such
damage,results from the act or neglect of Landlord or of other tenants,
occupants or servants in the Property or of any other person and whether such
damage be caused or result from any thing or circumstances above mentioned or
referred to, or any other thing or circumstances, whether of a like nature or of
a wholly different nature. All property belonging to Tenant or any occupant of
the Demised Premises shall be there at the risk of Tenant or such other person
only, and Landlord shall not be liable for damage thereto or theft or
misappropriation thereof.
SECTION 6.06 - LANDLORDS RIGHT TO INSPECT: Landlord and its agents shall
have free access to the Demised Premises during all reasonable hours for the
purpose of examining same and to ascertain if they are in good repair, to make
reasonable repairs which the Landlord may be required to make hereunder and to
exhibit the same to prospective purchasers, lenders or tenants.
SECTION 6.07 - CLEANLINESS AND WASTE: Tenant shall keep the Demised
Premises, and the areaways adjacent thereto at all times in a neat, clean and
sanitary condition, free from waste or debris and shall neither commit nor
permit any waste or nuisance thereon. Tenant shall procure trash containers
adequate to handle Tenant's trash accumulation.
SECTION 6.08 - TRIPLE NET LEASE: Notwithstanding any provision in this
Lease to the contrary, it is understood and
5
<PAGE>
agreed that this is a triple net lease with all costs, expense, taxes (inclusive
of real property taxes and assessments), insurances, repairs and maintenance to
be paid by Tenant.
ARTICLE VII
INSURANCE
SECTION 7.01 - INSURANCE BY TENANT: Tenant shall procure, provide and pay
for, and shall maintain throughout the term of this Lease, the following
insurance coverages, in the following limits, in the name of the Tenant and with
Landlord named therein as an additional insured:
(1) a policy of insurance covering the Tenant's property in the Demised
Premises in the amount determined by Tenant;
(2) a comprehensive general liability insurance against any and all claims
for injuries to persons and property occurring in, upon, or about the
Demised Premises, during the Term of this Lease; such insurance, at all
times, to be in an amount not less than One Million ($1,000,000) Dollars
combined single limit per occurrence, $2,000,000.00 general aggregate; and
(3) casualty, fire, windstorm, flood and extended coverage insurance in the
amount equal to the maximum insurable value of the Demised Premises,
together with all improvements thereon.
All such insurance shall be written on a company or companies authorized to
engage in the business of casualty and general liability insurance in the State
of Florida, and there shall be delivered, by the Tenant, to the Landlord
customary certificates evidencing such paid-up insurance, and certifying
Landlord as an additional insured, which certificates are to be issued by the
insurance companies, and delivered on a yearly basis at the commencement of each
year during the Term of this Lease.
The policies of insurance provided herein are to be provided by the Tenant,
and shall be for a period of not less than one (1) year, it being understood and
agreed that fifteen (15) days prior to the expiration of any policy of
insurance, the Tenant will deliver to the Landlord a renewal or new policy to
take the place of the expiring policy, with the further understanding that,
should the Tenant fail to furnish policies, as is provided in this Lease, and at
the times herein provided, the Landlord may obtain such insurance, and the
premiums on such insurance shall be deemed Additional Rental to be paid by the
Tenant to the Landlord upon demand. Tenant shall make no claim for recovery
against Landlord and expressly waives any right of recovery against Landlord for
damage to or loss of the Demised Premises or improvements thereon, which damage
or loss may arise by fire or any other peril covered by any policy of insurance
containing a waiver of subrogation right against the Landlord in which said
policy the Tenant is or may be the insured and when said loss is caused by or
results from any acts of carelessness or negligence of the Landlord, its
officers, employees or other persons under its control. Tenant further covenants
and agrees to apply to its insurers for waiver of subrogation against Landlord,
its agents and employees, and to obtain same if Tenant's insurers will issue
such waiver without cost.
SECTION 7.02 - INDEMNITY FOR ACCIDENTS: Tenant covenants and agrees that it
will protect, defend and save and keep the Landlord forever harmless and
indemnified against and from any penalty or damage or charges imposed for any
violation of any laws or ordinances, whether occasioned by the neglect of Tenant
or those holding under Tenant, and that Tenant will at all times protect,
6
<PAGE>
defend, indemnify and save and keep harmless the Landlord against and from any
and all claims, loss, cost, damage or expense arising out of or from any
accident or other occurrence on or about the Demised Premises, causing injury to
any person or property whomsoever or whatsoever, and will protect, defend,
indemnify and save and keep harmless the Landlord against and from any and all
claims, loss, cost, damage or expense arising out of any failure of Tenant in
any respect to comply with and perform all the requirements and provisions of
this Lease.
SECTION 7.03 - DESTRUCTION BY FIRE OR CASUALTY: The Tenant shall give
immediate notice to Landlord in case of fire or other casualty in or about the
Demised Premises. In the event the Demised Premises shall be damaged by fire,
then Tenant shall repair such damages and put the Demised Premises in good
condition as rapidly as reasonably possible. Tenant shall not be entitled to any
abatement of the Rent, unless such damage was occasioned by the negligent acts
of Landlord, its agents or employees.
Notwithstanding any other provisions of this Paragraph to the contrary, if
the Demised Premises, shall be damaged to the extent of more than twenty-five
percent (25%) of its value at the time of such damage, then Landlord may, at its
sole election, upon notice to Tenant, within sixty (60) days after such damage,
terminate this Lease as of the date of such damage.
ARTICLE VIII
TAXES
SECTION 8.01 - REAL ESTATE TAXES: Tenant shall pay, not less than thirty
(30) days before delinquent, all real property taxes and assessments levied or
payable during the term hereof, by the county and municipality upon the
Property.
SECTION 8.02 - PERSONAL PROPERTY TAXES AND ASSESSMENTS: The Tenant shall
pay, not less than thirty (30) days before delinquent, any and all taxes,
licenses, fees and public charges levied, assessed or imposed, and which become
payable during the lease term upon Tenant's fixtures, furniture, appliances and
personal property located or installed in the Demised Premises.
ARTICLE IX
TITLE
SECTION 9.01 - POSSESSION BY TENANT: Tenant covenants and warrants that it
has full right and authority to enter into this Lease for the full term hereof.
Landlord covenants that Tenant, upon paying the Rent provided for herein and
upon performance of the covenants and agreements of this Lease to be performed
by said Tenant, will have, hold and enjoy quiet possession of the Demised
Premises.
SECTION 9.02 - SUBLEASE AND ASSIGNMENT: Landlord shall have first refusal
right to recapture the premises, on a request by Tenant to sublease or assign.
If Landlord does not desire to recapture the premises, then Tenant shall not
sublease, sublet or assign the Demised Premises or any portion thereof except by
written permission and consent of Landlord which approval or disapproval shall
be in Landlord's sole discretion, references elsewhere contained herein to
assignees notwithstanding. Any consent by Landlord once shall not constitute a
waiver of the requirement for its consent to any future subletting or assignment
of this Lease. Any such subleasing or assignment, even with the approval of the
Landlord, shall not relieve the Tenant from liability for payment of the rental
and any other monies due Landlord herein provided for or from the obligation to
keep and be bound by the terms, conditions and covenants of this Lease. The
acceptance of rent from any other person shall not be deemed to be
7
<PAGE>
a waiver of any of the provisions of this Lease or a consent to the assignment
or subletting of the Demised Premises. Any change in ten percent (10%) or more
of the equitable or beneficial ownership of Tenant shall be deemed an assignment
of this Lease.
SECTION 9.03 - FINANCING: Tenant agrees that Tenant's rights under this
Lease are and shall always be subordinate to the lien of any mortgage or trust
deed now or hereafter placed from time to time upon the Demised Premises. Tenant
shall, upon written demand from Landlord, execute such other and further
instruments or assurances subordinating this Lease to the lien or liens of any
such mortgage or trust deeds. If any mortgagee or trustee under a trust deed
elects to have Tenant's interest in this Lease superior to any such interest by
notice to Tenant, then this Lease shall be deemed superior to any such mortgage
or trust deed whether this Lease was executed before or after such mortgage or
trust deed.
SECTION 9.04 - SURRENDER OF PREMISES: Tenant shall, upon the expiration
date or sooner termination of this Lease, surrender to Landlord the Demised
Premises, together with all replacements thereto in good order, condition and
repair, except for ordinary wear and tear and loss by fire or other casualty. If
Tenant fails to surrender the Premises as required herein, Tenant shall be
deemed a month-to-month tenant and shall for the duration of such holdover
period pay Landlord, as holdover rent, twice the monthly rental amount as was
payable in the last month of the lease term in addition to all other payments
required under this Lease Agreement,
SECTION 9.05 - EMINENT DOMAIN: In the event the Demised Premises, or any
part thereof, shall be taken or condemned for public purposes by any competent
authority, the entire compensation awarded therefor shall belong to the
Landlord, without any deduction therefrom for any present or future estate of
Tenant; provided, however, that in the event more than twenty (20%) percent of
the Demised Premises shall be so taken or condemned, then either the Landlord or
Tenant shall have the option of terminating the term of this Lease upon giving
to the other written notice of such election within thirty (30) days after
possession of the part condemned has been taken by proper authorities, whereupon
the term of this Lease shall be terminated, as of the date on which possession
is so taken. If neither Landlord or Tenant so elects to terminate the term of
this Lease, the Landlord at its own expense, shall repair and restore the
premises not affected by the taking and thereafter, if a part of Demised
Premises itself has been taken or condemned, the Rent to be paid by the Tenant
shall be equitably reduced.
SECTION 9.06 - NONDISTURBANCE AND ATTORNMENT: In the event any proceedings
are brought for the foreclosure of, or in the event of the conveyance by deed in
lieu of foreclosure of, or in the event of the execution of the power of sale
under any superior mortgage, or in the event of transfer or conveyance of
the Demised Premises, or any part thereof, to any party for any reason
whatsoever, Tenant hereby attorns to, and covenants and agrees to execute an
instrument in writing reasonably satisfactory to the new owner whereby Tenant
attorns to such successor in interest and recognizes such successor as the
landlord under the Lease.
ARTICLE X
DEFAULT
SECTION 10.01 - DEFAULT BY TENANT: All of the rights and remedies of
Landlord herein enumerated shall be cumulative, and none shall exclude any other
right or remedy allowed by law. It is agreed that in the event:
(i) That the Tenant shall fail, neglect or refuse to pay
8
<PAGE>
any installment of Rent at the time, and in the amount as herein provided,
or to pay any other monies agreed by it to be paid promptly when and as the
same shall become due and payable under the terms hereof;
(ii) That any voluntary or involuntary petition or similar pleading,
under any section or sections of any bankruptcy act, shall be filed by or
against Tenant, or any voluntary or involuntary proceeding in any court or
tribunal shall be instituted to declare Tenant insolvent or unable to pay
Tenant's debts, and the same shall not be dismissed or discharged within
thirty (30) days after notice thereof in writing;
(iii) That the Tenant shall fail, neglect or refuse to keep and
perform any of the other covenants, conditions, stipulations or agreements
herein contained and to be kept and performed by it, and in the event any
such default shall continue, for a period of more than thirty (30) days
after notice thereof in writing given to the Tenant, by the Landlord;
provided, however, that if the cause for giving such notice involves the
making of repairs, or other matters reasonably requiring a longer period of
time than the period of such notice, the Tenant shall be deemed to have
complied with such notice so long as it has commenced to comply with said
notice within the period set forth in the notice, and is diligently
prosecuting compliance with said notice, or has taken proper steps or
proceedings, under the circumstances, to prevent the seizure, destruction,
alteration or other interference with said Demised Premises by reason of
non-compliance with the requirements of any law or any ordinance or with
the regulations, rules or directions of any government authority, as the
case may be;
(iv) That the Tenant makes any assignment of its property for the
benefit of creditors, or should the Demised Premises be taken under a levy
of execution or attachment, in an action against the Tenant, and such levy,
attachment or assignment is not dismissed and discharged within thirty (30)
days after written notice thereof to Tenant by Landlord, the Tenant does
hereby authorize and fully empower said Landlord or Landlord's agent to
cancel or annul this Lease at once and to re-enter and take possession of
said Demised Premises immediately, and remove all persons and their
property therefrom, and to use such force and assistance,in effecting and
perfecting such removal as said Landlord may deem necessary and advisable
to recover at once full and exclusive possession of all of said Demised
Premises, whether in possession of said Tenant or of their persons or
otherwise. At Landlord's option, Landlord may declare all installments of
Rent for the remainder of the lease term, to be immediately due and payable
whereupon the same shall become immediately due and payable.
The Landlord may, however, at its option, at any time after a default or
violation of condition or covenant, re-enter and take possession of said
Premises without such re-entering working a forfeiture of the rents to be paid
and the covenants, agreements and conditions to be kept and performed by said
Tenant for the full term of this Lease. In such event, the Landlord shall have
the right, but not the obligation, to divide or subdivide the Premises in any
manner the Landlord may determine and to lease or let the same or portions
thereof for such periods of time and at such rentals and for such use and upon
such covenants and conditions as Landlord may elect, applying the net rentals
from such letting first to the payment of Landlord's expenses incurred in
dispossessing the Tenant and the costs and expenses of making such improvements
in the Premises as may be necessary in order to enable the Landlord to relet the
same, and to the payment of any brokerage commissions or other necessary
expenses of the Landlord in connection with such reletting. The balance, if any,
shall be
9
<PAGE>
applied by the Landlord from time to time, but in any event not less than once
each month, on account of the payments due or payable by the Tenant hereunder,
with the right reserved to Landlord to bring such actions or proceedings for the
recovery of any deficits remaining unpaid as it may deem advisable from time to
time, without being obligated to await the end of the term hereof for a final
determination of the Tenant's account and the commencement or maintenance of one
(1) or more actions shall not bar the Landlord from bringing other or subsequent
actions for further accruals pursuant to the provisions of this Paragraph. Any
balance remaining, however, after full payment and liquidation of Landlord's
account, as aforesaid, shall be paid to the Tenant from time to time with the
right reserved to the Landlord at any time to give notice in writing to the
Tenant of Landlord's election to cancel and terminate this Lease and all
Tenant's obligations hereunder and upon the giving of such notice and the
simultaneous payment by Landlord to Tenant of any credit balance in Tenant's
favor that may at the time be owing to Tenant shall constitute a final and
effective cancellation and termination of this Lease and the obligations
thereunder on the part of either party to the other.
In addition to the foregoing, collection costs and reasonable attorneys'
fees shall be paid by Tenant if delinquencies are referred for collection.
SECTION 10.02 - LIEN OF LANDLORD FOR RENT, TAXES AND OTHER SUMS: Landlord
shall have, and Tenant hereby grants, a security interest in any furnishings,
equipment, fixtures, inventory, accounts receivable, or other personal property
of any kind belonging to Tenant, or the equity of Tenant therein, in the Demised
Premises. The security interest is granted for the purpose of securing the
payment of rent, other charges, assessments, penalties and damages herein
covenanted to be paid by Tenant and for the purpose of securing the performance
of all other obligations of Tenant under this Lease. Upon Tenant's default or
breach of any covenants of this Lease, Landlord shall have all remedies
available under the law of the State of Florida including, but not limited to,
the right to take possession of the above mentioned property and dispose of it
by public or private sale in a commercially reasonable manner. Tenant shall,
upon demand, reimburse Landlord for all filing and recording fees and taxes
incurred in connection with filing and recording of Financing Statements if the
same be necessary to perfect Landlord's security interest. Landlord's statutory
lien for rent is not hereby waived, the express contractual lien herein granted
being in addition and supplementary thereto.
SECTION 10.03 NO LIENS CREATED BY TENANT: The Tenant covenants and agrees
that it has no power to incur any indebtedness giving a right to a lien of any
kind or character upon the rights, title and interest of the Landlord in and to
the property covered by this Lease, and that no person shall ever be entitled to
any lien directly or indirectly derived through or under the Tenant, or its
agents or servants, or on account of any act or remission of said Tenant, which
lien shall be superior to the title of the Landlord to the Demised Premises. All
persons contracting with said Tenant, or furnishing materials or labor to said
Tenant, or to its agents or servants, as well as all persons whomsoever, shall
be bound by this provision of this Lease. Should any such lien be filed, the
Tenant shall discharge the same within thirty (30) days thereafter, by paying
the same or by filing a bond, or otherwise, as permitted by law. The Tenant
shall not be deemed to be the agent of the Landlord, so as to confer upon a
laborer bestowing labor or confer upon a materialman furnishing materials upon
the leased premises the right to a mechanic's lien thereon.
10
<PAGE>
ARTICLE XI
ENVIRONMENTAL
SECTION 11.01 - COMPLIANCE WITH LAWS: Tenant, at Tenant's expense, shall
keep and maintain the Demised Premises in compliance with, and shall not cause
or permit the Demised Premises to be in violation of, any federal, state, county
and municipal laws, ordinances or regulations including, without limitation,
those relating to contamination, air and water quality, waste disposal,
occupational safety and health, industrial hygiene, or to the environmental
conditions on, under or about the Demised Premises, including, but not limited
to, soil and groundwater conditions ("Laws"); provided, however, Tenant shall
have no obligation to keep or maintain the Demised Premises at a level or
standard different than that existing as of the date of this Lease. Provided
further, Tenant shall have no obligation or liability hereunder except as to any
actions or matters caused by Tenant's uses or actions.
SECTION 11.02 - STORAGE OF CONTAMINATION: Except in the ordinary course of
business in strict compliance with applicable laws, Tenant shall not use,
general, manufacture, store, or dispose of, on, under or about the Demised
Premises or transport to or from the Demised Premises any flammable explosives,
radioactive materials, including, without limitation, any substances defined as,
or included in the definition of hazardous substances, hazardous materials,
toxic substances or other similar or regulated substances, residues or wastes,
pollutants, asbestos, petroleum products and by-products, including any other
environmental contamination whatsoever (collectively "Tenant Contamination").
SECTION 11.03 - NO LIENS: Tenant shall not create or suffer to exist with
respect to the Demised Premises or permit any of its agent to create or suffer
to exist any lien, security interest or other charge or encumbrance of any kind,
including without limitation, any lien imposed pursuant to Section 107(f) of the
Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. Section 9607(1))
or any similar Law.
SECTION 11.04 - ENVIRONMENTAL ASSESSMENT AND REMEDIATION: Notwithstanding
any other provision of this agreement, Tenant shall be solely responsible for
and agrees to indemnify, defend and hold harmless Landlord, its employees,
agents, officers, directors, heirs and assigns, from and against any and all
fines, suits and claims, demands, penalties, liabilities, costs or expenses,
losses, settlements, remedial actions requirements and enforcement actions,
administrative proceedings and any other actions of whatever kind or nature,
including attorneys' fees and costs (and costs and fees on appeal), fees of
environmental consultants and laboratory fees, known or unknown, contingent or
otherwise, arising out of or in any way related to the discovery, remediation,
or disposal of such Tenant Contamination, including any personal injury
(including wrongful death) or property damage (real or personal) arising
therefrom. Landlord agrees to indemnify, defend and hold harmless Tenant, its
employees, agents, officers, directors, heirs and assigns, from and against any
and all fines, suits, claims, demands, penalties, liabilities, costs or
expenses, losses, settlements, remedial action requirements and enforcement
actions, administrative proceeds and all other actions of whatever kind or
nature, including attorneys' fees and costs (and costs and fees on appeal), fees
of environmental consultants and laboratory fees, known or unknown, continent or
otherwise, arising out of or in any way related to the discovery, remediation,
or disposal of contamination on or about the Demised Premises or the Property
other than Tenant Contamination, including any personal injury (including
wrongful death) or property damage (real or personal) arising therefrom. This
paragraph shall survive termination or expiration of this Lease.
11
<PAGE>
SECTION 11.05 - NOTICE OF CONTAMINATION OR ENFORCEMENT: Each party shall
immediately advise the other by telephone, followed up in writing, with a copy
to Landlord, of any and all enforcement, cleanup, removal, claims made or
threatened by any third party, or other governmental or regulatory actions
instituted, completed, or threatened, or any release, discharge, or spill of
Contamination, pursuant to any Laws affecting the Demised Premises, or adjoining
or neighboring properties. Each party shall provide copies to the other in a
timely fashion, in whatever capacity and in whatever form obtained, any and all
information, test results, correspondence or other data acquired in connection
with the locating, remediating, removing, or disposing of contamination on or
about the Demised Premises, or regarding such parties notice of contamination
or enforcement, or otherwise.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 - NOTICES: Whenever under this Lease a provision is made for
any demand or notice of any kind, or where it is deemed desirable or necessary
by either party to give or serve any such notice or demand to the other, it
shall be in writing sent by overnight mail or certified mail, return receipt
requested, postage prepaid, if to the Tenant addressed to the Tenant at 3111
Stirling Road, Florida 33312, and if to the Landlord addressed to the Landlord
at 720 Fifth Avenue, 10th Floor, New York, New York, 10019, c/o Marc Scherr,
Gerschel & Company, and either party may by like notice at any time and from
time to time designate a different address to which notices shall be sent. Such
notices or demands shall be deemed sufficiently served or given for all purposes
hereunder at the time they shall be mailed by an overnight delivery service or
by United States certified mail, as aforesaid.
SECTION 12.02 - WAIVER: One (1) or more waivers of any covenant, term or
condition of this Lease by either party shall not be construed by the other
party as a waiver of a subsequent breach of the same term, covenant or
condition. The consent or approval of either party to or of any act by the other
party of a nature requiring consent or approval shall not be deemed to waive or
render unnecessary consent to or approval of any subsequent similar act.
SECTION 12.03 - RELATIONSHIP OF PARTIES: Nothing contained in this Lease
nor any act or acts of the parties shall be deemed or construed by the parties
hereto or by any third party to create the relationship of principal and agent
or of partnership or of joint venture or of any association whatsoever between
Landlord and Tenant, other than the relationship of landlord and tenant.
SECTION 12.04 - GOVERNING LAW: The laws of the State of Florida shall
govern the validity, performance and enforcement of this Lease.
SECTION 12.05 - SAVINGS CLAUSE: The invalidity or unenforceability of any
provision of this Lease shall not affect or impair the validity of any other
provision.
SECTION 12.06 - MARGINAL HEADINGS: The paragraph titles herein are for
convenience only and do not define, limit or construe the contents of such
paragraph.
SECTION 12.07 - COVENANT TO BIND SUCCESSORS: It is agreed that the
provisions, covenants and conditions of this Lease shall be binding on the legal
representatives, heirs, successors and assigns of the respective parties hereto.
SECTION 12.08 - CREDIT REPORTS: The Tenant's performance under this Lease
Agreement may be reported to credit reporting agencies. The Landlord may also
obtain a consumer report of
12
<PAGE>
Tenant's credit history from a credit reporting agency. Upon request, Tenant
will be informed whether a consumer report was obtained and if so, the name and
address of the agency furnishing the report.
SECTION 12.09 - ESTOPPEL CERTIFICATE: Within ten (10) days after request
therefor by Landlord, the Tenant shall furnish an estoppel certificate. Tenant
agrees to deliver in recordable form a certificate to any proposed mortgagee or
purchaser, or to Landlord, certifying (if such be the case) that this Lease is
in full force and effect and there are no defenses or offsets thereto, or
stating those claimed by Tenant.
SECTION 12.10 - EXCULPATION: Tenant agrees that Tenant shall look solely to
Landlords interest in the Demised Premises for the satisfaction of any claims,
judgments or decrees requiring the payment of money by Landlord based upon
default hereunder. No other property or assets of Landlord, its successors or
assigns shall be subject to levy, execution or other enforcement procedure.
SECTION 12.11 - FORCE MAJEURE: Landlord or Tenant shall not be required to
perform any term, condition or covenant in this Lease so long as such
performance is delayed or prevented by Acts of God, strikes, lockouts, decree or
restriction by any governmental authority, civil riot, floods, financing, and
any other cause not reasonably within the control of Landlord or Tenant, and
which by the exercise of due diligence Landlord or Tenant is unable, wholly or
in part to prevent or overcome.
SECTION 12.12 - PREVAILING PARTY: In the event that litigation is required
to enforce this Agreement, the prevailing party shall be entitled to
reimbursement of its legal costs and attorneys fees, including appeals.
SECTION 12.13 - RADON GAS: In accordance with the provisions of Florida
Statutes Chapter 404.29(8), notification is hereby tendered concerning the
possible existence of Radon Gas in or about the Demised Premises. Please be
advised that:
"RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it overtime. Levels of radon that
exceed Federal and State guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your County Public Health Unit."
SECTION 12.14 - ENTIRE AGREEMENT: This Lease sets forth all of the
covenants, promises, agreements, conditions and understandings between the
Landlord and the Tenant governing the Demised Premises. There are no covenants,
promises, agreements, conditions and understandings, either oral or written,
between them other than those herein set forth. Except as herein provided, no
subsequent alterations, amendments, changes or additions to this Lease shall be
binding upon the Landlord or Tenant, unless reduced to writing and signed by
both parties.
SECTION 12.15 - NEGOTIATION AND EXECUTION: The furnishing of this Lease by
the Landlord to the prospective Tenant shall not be considered an offer to
lease, even though completed in every respect, until and unless the document has
been executed by the appropriate officers of Landlord. No correspondence or
other communication respecting this Lease shall create any obligation to go
forward with this Lease until the Lease document is fully completed and executed
by both the Landlord and Tenant.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease this day and
year first above written.
Signed and Acknowledged Landlord:
In the Presence of:
ULTILAND, LTD., a Florida
limited partnership
/s/ Jodie M. Sciarillo
- ------------------------------ By: P.A,G. Equities Corp., a
Witness signature New York corporation,
Jodie M. Sciarillo as general partner
- ------------------------------
Witness print name
/s/ Marybeth Bottone
- ------------------------------
Witness signature
Marybeth Bottone
- ------------------------------
Witness print name By: /s/ Marc D. Scherr
------------------------------
Its: Vice President
-----------------------------
(SEAL)
ULTIMATE SOFTWARE GROUP, INC.,
a Delaware corporation
/s/ George H. Hogge, Jr.
- -------------------------------
Witness signature
GEORGE H. HOGGE, JR.
- -------------------------------
Witness print name
/s/ Mark Marsden
- -------------------------------
Witness signature
Mark Marsden By: /s/ Scott Scherr
- ------------------------------- ----------------------------
Witness print name Its: President
---------------------------
(CORPORATE SEAL)
14
<PAGE>
EXHIBIT "A"
A portion of SECTOR 6, according to the Plat thereof, as recorded in Plat Book
141, Page 21, Public Records, Broward County, Florida, being more particularly
described as follows:
Commence at the intersection of the Southwest corner of Parcel 2 of said Plat
and the Northerly right of way for Arvida Parkway. Thence North 33"40'01" West
along the Westerly line of said Parcel 2, for a distance of 49.68 feet; Thence
North 11"32'29" East for a distance of 134.81 feet; Thence North 11"32'29" East
along the new alignment of Tract X, as described on the Plat of SECTOR 6, EAST,
as recorded in Plat Book 155, Page 4, Public Records, Broward County, Florida,
for 15.19 feet to a point of curvature; Thence Northeasterly and Northwesterly
along a circular curve to the left, having a radius of 500.00 feet, a central
angle of 12"34'21", for an arc distance of 109.72 feet to a point of reverse
curvature; Thence Northwesterly and Northeasterly along a circular curve to the
right, having a radius of 500.00 feet, a central angle of 18"21'57", for an arc
distance of 160.27 feet to a point of compound curvature; Thence Northeasterly
along a circular curve to the right, having a radius of 700.00 feet, a central
angle of 36"29'27", for an arc distance of 445.82 feet to a point where the
remaining portion of the description is not coincident with said new alignment;
Thence North 59"52'56" East for 38.31 feet; Thence North 56"57'31" East for a
distance of 131.88 feet; Thence South 78"02'29" East, for a distance of 42.43
feet; Thence South 33"02'29" East, for a distance of 17.00 feet to a point of
curvature; Thence Southeasterly along a curve to the left, having a radius of
550.00 feet, a central angle of 23"17'57, for an arc distance of 223.66 feet to
the POINT OF BEGINNING; Thence continue Southeasterly along a circular to
the left, having a radius of 550.00 feet, a central angle of 29"45'19", for an
arc distance of 285.63 feet; Thence South 26"28'28" West for 393.63 feet to a
point on a curve, said point bears North 05"52'46" West to the radius point on
the next described curve; Thence Southwesterly along a circular curve to the
right, having a radius of 500.00 feet, a central angle of 33"45'55", for an arc
distance of 294.66 feet; Thence North 26"28'28" East for 433.30 feet to the
POINT OF BEGINNING.
TOGETHER WITH:
EASEMENT ESTATE AS TO THAT CERTAIN PARCEL CONTAINED IN AND PURSUANT TO THAT
CERTAIN INGRESS/EGRESS EASEMENT, BY AND BETWEEN ARVIDA/JMB PARTNERS, A FLORIDA
GENERAL PARTNERSHIP AND B.C.B., INC., A FLORIDA CORPORATION, DATED APRIL 25,
1996, FILED OF RECORD MAY 3, 1996, IN OFFICIAL RECORD BOOK 24825, PAGE 128, OF
THE PUBLIC RECORDS OF BROWARD COUNTY, FLORIDA, SAID PARCEL BEING MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
ROADWAY EASEMENT:
A PORTION OF PARCEL 1; C-1 AND X-2, SECTOR 6, ACCORDING TO THE PLAT THEREOF AS
RECORDED IN PLAT BOOK 141, PAGE 21, OF THE PUBLIC RECORDS OF BROWARD COUNTY,
FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCE AT THE CENTERLINE INTERSECTION OF TRACT X-2 AND THE WESTERLY RIGHT OF
WAY LINE OF BONAVENTURE BOULEVARD, AS DEPICTED ON SAID PLAT OF SECTOR 6; THENCE
NORTH 74"21'58" WEST FOR 53.80 FEET; THENCE SOUTH 15"38'02" WEST FOR 40.00 FEET;
THENCE NORTH 74"21'58" WEST FOR 714.40 FEET TO THE POINT OF CURVATURE; THENCE
NORTHWESTERLY ALONG A CIRCULAR CURVE TO THE RIGHT, HAVING A RADIUS OF 1528.39
FEET, A CENTRAL ANGLE OF 13"18'49" FOR AN ARC DISTANCE OF 355.14 FEET; THENCE
SOUTH 75"30'20" WEST FOR 48.13 FEET; THENCE SOUTH 32"03'50" WEST FOR 12.31 FEET
TO A POINT OF BEGINNING; THENCE SOUTH 32"03'50" WEST FOR 9.64 FEET TO A POINT OF
CURVATURE; THENCE SOUTHWESTERLY ALONG A CIRCULAR CURVE TO THE RIGHT, HAVING A
RADIUS OF 1050.00 FEET, A CENTRAL ANGLE OF 41"06'09", FOR AN ARC DISTANCE OF
753.24 FEET TO A POINT OF COMPOUND CURVATURE; THENCE SOUTHWESTERLY AND
NORTHWESTERLY ALONG A CIRCULAR CURVE TO THE RIGHT, HAVING A RADIUS OF 550.00
FEET, A CENTRAL ANGLE OF 73"47'32",FOR AN ARC DISTANCE OF 708.35 FEET TO A POINT
OF TANGENCY; THENCE NORTH 33"02'29" WEST FOR 17.00 FEET; THENCE NORTH 78"02'29"
WEST FOR 42.43 FEET; THENCE SOUTH 56"57'31" WEST FOR 131.88 FEET; THENCE SOUTH
59"52'56" WEST FOR 38.31 FEET TO THE EASTERLY LINE OF SECTOR 6 EAST PLAT AS
RECORDED IN PLAT BOOK 155,PAGE 4,OF THE PUBLIC RECORDS OF BROWARD COUNTY,
FLORIDA, SAID POINT BEARS SOUTH 36"10'28" EAST TO THE RADIUS POlNT OF THE NEXT
DESCRIBED CURVE; THENCE NORTHEASTERLY ALONG A CIRCULAR CURVE TO THE RIGHT,
HAVING A RADIUS OF 700.00 FEET, A CENTRAL ANGLE OF 03"07'59", FOR AN ARC
DISTANCE OF 38.25 FEET TO A POINT OF TANGENCY; THENCE NORTH 56"57'31" EAST FOR
256.88 FEET; THENCE SOUTH 11"57'31" WEST FOR 49.50 FEET; THENCE SOUTH 33"02'29"
EAST FOR l5.00 FEET TO A POINT OF CURVATURE THENCE SOUTHEASTERLY AND
NORTHEASTERLY ALONG A CIRCULAR CURVE TO THE LEFT, HAVING A RADIUS OF 490.00
FEET, A CENTRAL ANGLE OF 73"47'32" FOR AN ARC DISTANCE OF 631.08 FEET TO A POINT
OF COMPOUND CURVATURE; THENCE NORTHEASTERLY ALONG A CIRCULAR CURVE TO THE LEFT,
HAVING A RADUIS OF 990.00 FEET, A CENTRAL ANGLE OF 41"06'09" FOR AN ARC DISTANCE
OF 710.20 FEET TO A POINT OF TANGENCY; THENCE NORTH 32"03'50" EAST FOR 9.64
FEET; THENCE SOUTH 57"56'10" EAST FOR 30.00 FEET TO A POINT HEREINAFTER REFERRED
TO A POINT A; THENCE SOUTH 57"56'10" EAST FOR 30.00 FEET TO THE POINT OF
BEGINNING.
RECORDED IN THE OFFICIAL RECORDS BOOK
OF BROWARD COUNTY, FLORIDA
COUNTY ADMINISTRATOR
15
<PAGE>
EXHIBIT "B"
LANDLORD IMPROVEMENTS
Construction of improvements of a three (3) story office building in accordance
with those certain plans and specifications prepared by Manuel Synalovski
Architects, Inc. as Project No. 9401-3 dated ________________________, 1998, of
which the parties each acknowledge having a complete copy.
Landlord Initials: Tenant Initials:
MDS SS
------------------ ----------------
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<CIK> 0001016125
<NAME> THE ULTIMATE SOFTWARE GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,955
<SECURITIES> 0
<RECEIVABLES> 18,480
<ALLOWANCES> (1,115)
<INVENTORY> 0
<CURRENT-ASSETS> 29,598
<PP&E> 7,413
<DEPRECIATION> (3,561)
<TOTAL-ASSETS> 34,196
<CURRENT-LIABILITIES> 13,508
<BONDS> 0
0
0
<COMMON> 159
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,196
<SALES> 25,095
<TOTAL-REVENUES> 25,095
<CGS> 10,730
<TOTAL-COSTS> 14,833
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> (227)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (227)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
