SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as Amended
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only(as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE ULTIMATE SOFTWARE GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC.
2000 ULTIMATE WAY
WESTON, FLORIDA 33326
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of The Ultimate Software Group, Inc. (the "Company" or "Ultimate
Software"), which will be held on Thursday, May 18, 2000 at 9:00 a.m. at the
Company's principal corporate office at 2000 Ultimate Way, Weston, Florida 33326
(the "Annual Meeting").
The principal business of the meeting will be to elect two directors to
serve for three-year terms or until their respective successors are duly elected
and qualified and to transact such other business as may properly come before
the meeting or any postponement or adjournment thereof. During the Annual
Meeting, we will also review the results of the past fiscal year and report on
significant aspects of our operations during the first quarter of fiscal 2000.
Whether you plan to attend the Annual Meeting or not, please complete,
sign, date and return the enclosed proxy card in the postage prepaid envelope
provided so that your shares will be voted at the meeting. If you decide to
attend the meeting, you may, of course, revoke your proxy and personally cast
your votes.
For your benefit, enclosed is a copy of Ultimate Software's Annual Report
to Stockholders, including our Annual Report on Form 10-K filed with the
Securities and Exchange Commission, which includes audited financial statements
and notes thereto. We thank you for your continued interest in Ultimate
Software.
Sincerely yours,
/s/ Scott Scherr
-----------------------------------------
Scott Scherr
Chairman, President and Chief Executive
Officer
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC.
2000 ULTIMATE WAY
WESTON, FLORIDA 33326
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2000
TO THE STOCKHOLDERS OF THE ULTIMATE SOFTWARE GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
Ultimate Software Group, Inc. (the "Company") will be held on Thursday, May 18,
2000 at 9:00 a.m. at the Company's principal corporate office at 2000 Ultimate
Way, Weston, Florida 33326 for the following purposes:
1. To elect two directors to serve until the 2003 Annual Meeting of
Stockholders or until their respective successors are duly elected and
qualified; and
2. To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
Holders of record of the voting stock of the Company at the close of
business on March 31, 2000 are entitled to notice of and to vote at the Annual
Meeting or any postponement or adjournment thereof.
ENCLOSED ARE A PROXY STATEMENT, A FORM OF PROXY AND AN ADDRESSED RETURN
ENVELOPE. ALL STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO BE PRESENT AT THE
MEETING, ARE REQUESTED TO FILL IN, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY, IF THEY DESIRE, REVOKE THEIR PROXIES AND VOTE IN PERSON.
By Order of the Board of Directors
/s/ Vivian Maza
----------------------------------
Vivian Maza
Secretary
Weston, Florida
April 10, 2000
<PAGE>
THE ULTIMATE SOFTWARE GROUP, INC.
2000 ULTIMATE WAY
WESTON, FLORIDA 33326
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2000
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of The Ultimate Software Group, Inc. (the "Company") for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held on Thursday,
May 18, 2000, at 9:00 a.m., at the Company's principal corporate office at 2000
Ultimate Way, Weston, Florida and at any postponement or adjournment thereof,
for the purposes set forth in the Notice of Annual Meeting of Stockholders. This
Proxy Statement, the accompanying proxy and the Company's Annual Report to
Stockholders for 1999 including therewith the Company's Annual Report on Form
10-K for the year ended December 31, 1999 (the "Form 10-K"), are first being
mailed to stockholders commencing on or about April 10, 2000.
Proxies are being solicited from holders of the Company's common stock, par
value $0.01 per share (the "Common Stock"). If a proxy is properly executed and
returned, the shares represented by it will be voted and, where specification is
made by the stockholder as provided in such proxy, will be voted in accordance
with such specification. Unless a stockholder specifies otherwise, all shares
represented by valid proxies will be voted (i) FOR the election of the persons
named in this Proxy Statement as the nominees of the Company under the heading
"Election of Directors," and (ii) at the discretion of the proxy holders on any
other matter that may properly come before the Annual Meeting or any adjournment
thereof.
SOLICITATION OF PROXIES
The Company is paying the costs of solicitation, including the cost of
preparing and mailing this Proxy Statement. Proxies are being solicited
primarily by mail, but in addition, the solicitation by mail may be followed by
solicitation in person, or by telephone or facsimile, by directors, officers and
regular employees of the Company without additional compensation. Brokers,
dealers, banks, voting trusts, custodians and other institutions, and their
nominees, who are holders of shares of the Company's Common Stock on the Record
Date referred to below, will be requested to forward the soliciting material to
the beneficial owners of such shares of Common Stock and to obtain authorization
for the execution of proxies. The Company will, upon request, reimburse such
institutions for their reasonable expenses in forwarding proxy material to their
beneficial owners.
VOTING RIGHTS AND PROCEDURES
Only stockholders of record of the Common Stock of the Company at the close
of business on March 31, 2000 (the "Record Date"), will be entitled to vote at
the Annual Meeting. As of that date, a total of 16,075,488 shares of Common
Stock were outstanding, each share being entitled to one vote. There is no
cumulative voting. Assuming the presence of a quorum, the affirmative vote of a
plurality of the votes cast is required for the election of directors.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock will constitute a quorum for the
transaction of business at the Annual
<PAGE>
Meeting. If a stockholder returns a proxy withholding authority to vote the
proxy with respect to a nominee for director, then the shares of the Common
Stock covered by such proxy shall be deemed present at the Annual Meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to such nominee, but shall not be deemed to have been voted for such
nominee. If a stockholder abstains from voting as to any matter, then the shares
held by such stockholder shall be deemed present at the Annual Meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to such matter, but shall not be deemed to have been voted in favor of
such matter. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on such matter, then the shares covered by such non-vote shall
be deemed present at the Annual Meeting for purposes of determining a quorum but
shall not be deemed to be present and entitled to vote at the Annual Meeting for
purposes of calculating the vote with respect to such matter.
A stockholder may revoke a proxy at any time prior to its exercise by
giving to the Secretary of the Company a written notice of revocation of the
proxy's authority prior to the voting thereof or by submitting a duly executed
proxy bearing a later date, or by voting in person, at the Annual Meeting.
PROPOSAL I--ELECTION OF DIRECTORS
The Board of the Company is currently composed of eight members divided
into three classes. The members of each class are elected to serve three-year
terms with the term of office of each class ending in successive years. Mr.
Marc D. Scherr, Mr. John R. Walter and Mr. Rick Wilber are the directors in the
class whose term expires at the Annual Meeting. Mr. Wilber has chosen not to
serve beyond his existing term which ends at the Annual Meeting.
The Board has nominated Messrs. Marc D. Scherr and John R. Walter for
election to the Board at the Annual Meeting for terms of three years, expiring
at the 2003 Annual Meeting, and each has indicated a willingness to serve. The
other directors of the Company will continue in office for their existing
terms. Mr. Scott Scherr, Dr. Alan Goldstein and Mr. Ofer Nemirovsky serve in
the class whose term expires at the Annual Meeting in 2001. Mr. LeRoy A. Vander
Putten and Mr. Robert A. Yanover serve in the class whose term expires at the
Annual Meeting in 2002. The affirmative vote of a plurality of the votes cast
at the Annual Meeting is necessary to elect the nominees for director. The
persons named as proxies in the enclosed form of proxy will vote the proxies
received by them for the election of Messrs. Marc D. Scherr and John R. Walter,
unless otherwise directed. In the event that any nominee becomes unavailable
for election at the Annual Meeting, the persons named as proxies in the
enclosed form of proxy may vote for a substitute nominee in their discretion as
recommended by the Board.
The following table sets forth certain information concerning the nominees,
based on data furnished by them. Information regarding incumbent directors whose
terms are not expiring and that of Mr. Wilber who will not serve beyond his
existing term is included in the section labeled "Directors and Executive
Officers" below.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------- ----- -------------------------------------- ---------------
<S> <C> <C> <C>
Marc D. Scherr .......... 42 Vice Chairman, The Ultimate Software April 1996
Group, Inc.
John R. Walter .......... 53 Chairman, Manpower, Inc. July 1999
</TABLE>
Marc D. Scherr has been a director of the Company since its inception in
April 1996 and was elected as Vice Chairman in July 1998. Mr. Scherr became an
executive officer of the Company effective March 1, 2000. Mr. Scherr served as
a director of Gerschel & Co., Inc., a private investment firm, from January
1992 until March 2000. In December 1995, Mr. Scherr co-founded Residential
Company of America, Ltd. ("RCA"), a real estate firm, and served as President
of its general partner until March 2000. Mr. Scherr also served as Vice
President of RCA's general partner from its inception in August 1993 until
December 1995. From 1990 to 1992, Mr. Scherr was a real estate pension fund
2
<PAGE>
advisor at Aldrich, Eastman & Waltch. Previously, he was a partner in the
Boston law firm of Fine & Ambrogne. Mr. Scherr is the brother of Scott Scherr,
Chairman of the Board, President and Chief Executive Officer of the Company.
John R. Walter has served as a director of the Company since July 1999.
Mr. Walter is the current Chairman of Manpower, Inc., a provider of temporary
employee services, retired President and Chief Operating Officer of AT&T Corp.
("AT&T"), a telecommunications company, and former Chairman, President and
Chief Executive Officer of R.R. Donnelley & Sons, a financial printing company.
Mr. Walter is Chairman of the Management Advisory Board of Aberdeen Strategic
Capital LP, which has an investment in the Company. Aberdeen Strategic Capital
is a private equity fund focused on value-added investments in public
companies. In addition to Manpower, Inc., Aberdeen Strategic Capital and the
Company, Mr. Walter serves on the boards of directors of Abbott Laboratories,
Deere & Company, Celestica, Inc., Jones Lang LaSalle, Inc., and Prime Capital
Corporation. Mr. Walter also serves on the International Advisory Council of
the Singapore Economic Development Board, is a director of Evanston
Northwestern Healthcare Corporation, and holds numerous other advisory and
membership positions. Mr. Walter began his career in 1969 at R.R. Donnelley.
After holding sales and executive positions of increasing responsibility, in
1989 he was appointed R.R. Donnelley's Chairman, President and Chief Executive
Officer, a position he retained through 1996, when he resigned to join AT&T. As
President and Chief Operating Officer of AT&T, Mr. Walter was responsible for
day-to-day operations of the company's core long-distance, local, wireless and
on-line services businesses, as well as its credit card and outsourcing
businesses.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF MESSRS. MARC D. SCHERR AND
JOHN R. WALTER AS DIRECTORS OF THE COMPANY TO HOLD OFFICE UNTIL THE 2003 ANNUAL
MEETING AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During fiscal 1999, the Board held four meetings. During fiscal 1999, each
director holding office during the year attended at least 75% of the total
number of meetings of the Board and committees of the Board on which he served.
The Board has an Executive Committee, an Audit Committee and a Compensation
Committee, which are described below.
EXECUTIVE COMMITTEE. The Executive Committee is composed of Messrs. Scott
Scherr, Ofer Nemirovsky, Marc D. Scherr and Dr. Alan Goldstein. The Executive
Committee has the authority to exercise (except as provided by law or as may
have been specifically reserved by or for the Board) all the powers and
authority of the Board in the management of the business and affairs of the
Company between regular meetings of the Board and while the Board is not in
session. The Executive Committee held no meetings during fiscal 1999.
AUDIT COMMITTEE. Messrs. Ofer Nemirovsky (Chairman), John R. Walter and
Robert Yanover are members of the Audit Committee. The Audit Committee is
responsible for reviewing the Company's financial condition with officers and
employees of the Company, as well as the Company's independent auditors, and
reporting to the Board concerning such reviews. The Audit Committee also makes
recommendations to the Board and management of the Company concerning auditing
and accounting matters and the selection of independent auditors. The Audit
Committee held three meetings during fiscal 1999.
The Company's independent auditors for the fiscal year ended December 31,
1999 were Arthur Andersen LLP. Representatives of Arthur Andersen LLP will be
present at the Annual Meeting. They will be afforded the opportunity to make a
statement, should they desire to do so, and to respond to appropriate questions.
COMPENSATION COMMITTEE. Messrs. LeRoy Vander Putten (Chairman) and Rick
Wilber are members of the Compensation Committee. Subsequent to the Annual
Meeting, the date on which
3
<PAGE>
Mr. Wilber's term as a director expires, the Board will appoint a replacement
for Mr. Wilber on the Compensation Committee. The Compensation Committee is
responsible for determining the compensation and benefits for the executive
officers of the Company and oversees the Company's stock plans and such other
benefits plans as the Company may from time to time maintain. The Compensation
Committee held four meetings during fiscal 1999.
DIRECTOR COMPENSATION
As compensation for serving on the Board, each non-employee director of the
Company receives a quarterly retainer of $5,000, payable exclusively in the form
of options to purchase Common Stock under The Ultimate Software Group, Inc.
Nonqualified Stock Option Plan (the "Stock Option Plan"). Such options vest upon
the date of grant and have an exercise price equal to 30% of the fair market
value of the Company's Common Stock on the date of grant. The total discount
from fair market value on all options granted to directors for a calendar
quarter is equivalent to the retainer fees earned by the non-employee directors
for such quarter. All directors are reimbursed for expenses incurred in
connection with their attendance at Board and related committee meetings.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 10, 2000 (unless otherwise
noted) by (i) each person who is known by the Company to own beneficially more
than 5% of the Common Stock; and (ii) each of the Company's directors and
executive officers and all directors and executive officers of the Company as a
group.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(2)
- ------------------------------------------------ ----------------- -----------
HarbourVest Partners V--Direct Fund L.P.(3) .... 1,550,807 9.7%
One Financial Center, 44th Fl.
Boston, MA 02111
Scudder Kemper Investments, Inc.(4) ............ 1,300,400 8.1%
345 Park Avenue
New York, New York 10154
J.P. Morgan Investment Corporation(5) .......... 969,267 6.0%
60 Wall Street
New York, NY 10260
Michael Feinberg(6) ............................ 1,046,740 6.5%
3980 N. 32 Terrace
Hollywood, FL 33312
Scott Scherr(7) ................................ 687,701 4.3%
Alan Goldstein, M.D.(8) ........................ 552,838 3.4%
Mitchell K. Dauerman(9) ........................ 143,701 *
James M. Alu(10) ............................... 132,217 *
Ofer Nemirovsky(3)(11) ......................... 1,556,947 9.7%
Marc D. Scherr(12) ............................. 341,702 2.1%
LeRoy A. Vander Putten(13) ..................... 27,378 *
John R. Walter(14) ............................. 631,590 3.9%
Rick Wilber(15) ................................ 354,250 2.2%
Robert A. Yanover(16) .......................... 166,657 1.0%
All directors and executive officers
as a group (10 persons)(17) .................. 4,594,980 28.6%
- ----------------
* Indicates beneficial ownership of less than 1.0% of the outstanding Common
Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and includes voting
or investment power with respect to securities. Shares of Common Stock
issuable upon the exercise of stock options exercisable within 60 days
hereof are deemed outstanding and to be beneficially owned by the person
holding such option for purposes of computing such person's percentage
ownership, but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Except for shares held jointly
with a person's spouse or subject to applicable community property laws, or
as indicated in the footnotes to this table, each stockholder identified in
the table possesses the sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by such stockholder.
5
<PAGE>
(2) Applicable percentage of ownership is based on 16,063,338 shares of Common
Stock outstanding.
(3) Mr. Nemirovsky, a director of the Company, is a Managing Director of
HarbourVest Partners, L.L.C. which is the Managing Director of the HVP
V-Direct Associates, L.L.C. which in turn is the General Partner of
HarbourVest Partners V-Direct Fund L.P. ("HarborVest"). Mr. Nemirovsky
disclaims beneficial ownership of the shares held by HarbourVest, except to
the extent of his pecuniary interest therein.
(4) Represents shares held as of December 31, 1999.
(5) Represents 899,032 shares of Common Stock held by J.P. Morgan Investment
Corporation and 70,235 shares of Common Stock held as of December 31, 1999
by Sixty Wall Street SBIC Fund, L.P., which is an affiliate of J.P. Morgan
Investment Corporation.
(6) Represents 949,815 shares of Common Stock owned by Mr. Feinberg and 96,925
shares of Common Stock owned by Ann Feinberg, his spouse, held as of
December 31, 1999.
(7) Represents 331,735 shares of Common Stock held by Mr. Scott Scherr, 116,368
shares of Common Stock held by Mr. Scott Scherr for the benefit of one of
his children and exercisable options to purchase 239,598 shares of Common
Stock.
(8) Represents 309,985 shares of Common Stock held by Dr. Goldstein, 57,315
shares of Common Stock held by the Alan S. Goldstein Irrevocable Trust, of
which Mr. Goldstein's wife, Cheryl A. Zickler, is the trustee, and
exercisable options to purchase 185,538 shares of Common Stock. Mr.
Goldstein disclaims beneficial ownership of the shares owned by the Alan S.
Goldstein Irrevocable Trust.
(9) Represents exercisable options to purchase 143,701 shares of Common Stock.
(10) Represents 93,050 share of Common Stock held by Mr. Alu, 2,400 shares of
Common Stock held for the benefit of Mr. Alu's children, and exercisable
options to purchase 36,767 shares of Common Stock.
(11) Includes exercisable options to purchase 6,140 shares of Common Stock.
Options issued and issuable to Mr. Nemirovsky in his capacity as a director
of the Company's Board are beneficially owned by HarbourVest by special
agreement between Mr. Nemirovsky and HarbourVest. See note (3) for balance
of shares disclosed herein as beneficially owned.
(12) Represents 23,259 shares of Common Stock held by Mr. Marc Scherr, 13,567
shares of Common Stock held by certain trusts established for the benefit
of Mr. Marc Scherr's children, and exercisable options to purchase 304,876
shares of Common Stock. Mr. Marc Scherr disclaims beneficial ownership of
the shares owned by the trusts established for the benefit of his children.
(13) Represents 21,238 shares of Common Stock held by Mr. Vander Putten and
exercisable options to purchase 6,140 shares of Common Stock.
(14) Represents 594,090 shares of Common Stock held by Aberdeen Strategic
Capital LP ("Aberdeen") and an exercisable warrant to purchase 37,500
shares of Common Stock, as described below. Mr. Walter is Chairman of the
Management Advisory Board of Aberdeen, which has a consulting agreement
with the Company. As sole compensation for the services of Aberdeen and its
affiliates under the consulting agreement, on October 21, 1999 the Company
issued to Aberdeen a warrant to purchase 100,000 shares of the Company's
Common Stock for $10 per share. Mr. Walter is a minority stockholder of
Aberdeen. Mr. Walter disclaims beneficial ownership of the shares held by
Aberdeen, except to the extent of his pecuniary interest therein.
(15) Represents 322,812 shares of Common Stock and exercisable options to
purchase 31,438 shares of Common Stock.
(16) Represents 135,219 shares of Common Stock held by Yanover Associates and
exercisable options held by Mr. Yanover to purchase 31,438 shares of Common
Stock. Mr. Yanover is the President of the general partner of Yanover
Associates.
(17) Represents an aggregate of 3,571,846 shares of Common Stock and exercisable
options to purchase an aggregate of 1,010,635 shares of Common Stock.
6
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers (Messrs. Scott Scherr, Marc D.
Scherr, Dr. Alan Goldstein, Mitchell K. Dauerman and James M. Alu), and their
ages as of March 10, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- --------------------------------- ----- ----------------------------------------------------------------
<S> <C> <C>
Scott Scherr .................... 48 Chairman of the Board, President and Chief Executive Officer
Marc D. Scherr .................. 42 Vice Chairman of the Board
Alan Goldstein, M.D. ............ 49 Executive Vice President, Chief Technology Officer and Director
Mitchell K. Dauerman ............ 43 Executive Vice President, Chief Financial Officer and Treasurer
James M. Alu .................... 55 Executive Vice President and Chief Operating Officer
Ofer Nemirovsky ................. 41 Director
LeRoy A. Vander Putten .......... 65 Director
John R. Walter .................. 53 Director
Rick Wilber ..................... 53 Director
Robert A. Yanover ............... 63 Director
</TABLE>
Scott Scherr has served as President and a director of the Company since
its inception in April 1996 and has been Chairman of the Board and Chief
Executive Officer of the Company since September 1996. In 1990, Mr. Scherr
founded The Ultimate Software Group, Ltd. (the "Partnership"), the business and
operations of which were assumed by the Company in 1996. Mr. Scherr served as
President of the Partnership's general partner from the inception of the
Partnership until its dissolution in March 1998. From 1979 until 1990, he held
various positions at Automatic Data Processing, Inc. ("ADP"), a payroll services
company, where his titles included Vice President of Operations and Sales
Executive. Prior to joining ADP, Mr. Scherr ran Management Statistics, Inc., a
data processing service bureau founded by his father, Reuben Scherr, in 1959. He
is the brother of Marc Scherr, the Vice Chairman of the Board of the Company.
Alan Goldstein, M.D., FACS has served as a director of the Company since
its inception in April 1996 and as Executive Vice President and Chief
Technology Officer since September 1996. From April 1996 through September
1996, he served as Vice President and Treasurer of the Company. From January
1994 until February 1998, Dr. Goldstein served as Vice President of the general
partner of the Partnership. In 1989, Dr. Goldstein founded Strategic Image
Systems, Inc., which produced and developed software applications and tools.
From 1985 to 1986, Dr. Goldstein served as Vice President of Information
Systems for Loren Industries, Inc., a jewelry casting manufacturer. From 1985
to 1987, Dr. Goldstein served as Director of Surgical Services at Kings County
Hospital in New York. In 1985, as a trauma surgeon engaged in research and
medical education, Dr. Goldstein developed a software application for use in
hospitals to aid in patient management, quality assurance and physician
education.
Mitchell K. Dauerman has served as Executive Vice President of the Company
since April 1998 and as Chief Financial Officer and Treasurer of the Company
since September 1996. From 1979 to 1996, Mr. Dauerman held various positions
with KPMG LLP, a global accounting and consulting firm, serving as a Partner in
the firm from 1988 to 1996. Mr. Dauerman is a Certified Public Accountant.
James M. Alu has served as Executive Vice President of the Company since
February 1999 and as Chief Operating Officer since January 1998. Prior to that,
Mr. Alu served as Vice President of the Company from September 1996 and Vice
President of the general partner of the Partnership from July 1993 until April
1996. From 1988 until 1993, Mr. Alu served as Area Sales Vice President for the
northeastern United States for ADP's Dealer Services Group.
7
<PAGE>
Ofer Nemirovsky has served as a director of the Company since June 1997 and
is Chairman of the Audit Committee of the Board. Mr. Nemirovsky has been a
Managing Director of HarbourVest Partners, LLC since January 1997. HarbourVest
Partners, LLC was formed by the management team of Hancock Venture Partners,
Inc., a venture capital investment firm ("HVP"), where Mr. Nemirovsky had served
in various capacities since 1986. Prior to joining HVP, Mr. Nemirovsky held
various computer sales and marketing positions at Hewlett-Packard Company, a
measurement, computation and communications company. He is currently a director
of Primix Solutions, Inc. (formerly OneWave, Inc.), an Internet software and
services company, and Daleen Technologies, Inc., a telecommunications billing
software company, as well as several privately-held companies.
LeRoy A. Vander Putten has served as a director of the Company since
October 1997 and is Chairman of the Compensation Committee of the Board. Mr.
Vander Putten has served as the Chairman of Trade Resources International
Holdings, Ltd., a corporation engaged in trade finance for exporters from
developing countries, since April 1998. From January 1988 until May 1997, Mr.
Vander Putten was Chairman and Chief Executive Officer of Executive Risk Inc.,
a specialty insurance holding company. From August 1982 to January 1988, Mr.
Vander Putten served as Vice President and Deputy Treasurer of The Aetna Life
and Casualty Company, an insurance company.
Rick Wilber has served as a director of the Company since October 1997 and
is a member of the Compensation Committee of the Board. Mr. Wilber was a
co-founder of Champs Sports Shops and served as its President from 1974 to
1984. He served on the Board of Royce Laboratories, a pharmaceutical concern,
from 1990 until April 1997, when the company was sold to Watson
Pharmaceuticals, Inc., a pharmaceutical concern. Mr. Wilber currently is the
President of Lynn's Hallmark Cards which owns and operates a number of Hallmark
Card stores. Mr. Wilber has chosen not to serve as a director of the Company
beyond his existing term which ends on May 18, 2000.
Robert A. Yanover has served as a director of the Company since January
1997 and is a member of the Audit Committee of the Board. Mr. Yanover founded
Computer Leasing Corporation of Michigan, a private leasing company, in 1975
and has served as its President since that time. Mr. Yanover also founded
Lason, Inc., a corporation specializing in the imaging business, and served as
Chairman of the Board from its inception in 1987 until 1998 and is currently a
director.
Information regarding Messrs. Marc D. Scherr and John R. Walter is
included under the heading "Proposal I--Election of Directors."
8
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation for services rendered in
all capacities to the Company during the past three completed fiscal years by
the Company's Chief Executive Officer and all other executive officers of the
Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------- UNDERLYING ALL OTHER
NAME AND POSITION(1) YEAR SALARY(2) BONUS OPTIONS COMPENSATION(3)
- -------------------------------- -------- ----------- ------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Scott Scherr 1999 $255,518 $0 4,108 $2,500
Chairman of the Board, 1998 239,774 0 0 2,500
President and Chief 1997 200,000 0 316,725 2,084
Executive Officer
Alan Goldstein, M.D. 1999 259,615 0 3,756 2,500
Executive Vice President and 1998 219,231 0 0 2,500
Chief Technology Officer 1997 200,000 0 244,880 2,375
Mitchell K. Dauerman 1999 233,654 0 78,591 2,500
Executive Vice President, 1998 209,615 0 0 2,500
Chief Financial Officer 1997 200,000 0 86,012 2,375
and Treasurer
James M. Alu 1999 206,731 0 52,998 2,500
Executive Vice President 1998 175,000 0 0 2,500
and Chief Operating Officer 1997 150,000 0 30,357 2,375
- ----------------
<FN>
(1) Marc D. Scherr, Vice Chairman of the Company, became an executive officer of the Company
effective March 1, 2000. Since he was not an executive officer before that date, Mr. Marc D.
Scherr is not included in this table or the tables below with respect to option grants.
(2) During 1999, there were 27 pay periods as compared to 26 pay periods for each of the calendar
years 1998 and 1997.
(3) Consists of contributions by the Company to the Company's 401(k) Plan on behalf of the
executive officers indicated.
</FN>
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1999 to the Company's Chief Executive Officer and
all other executive officers of the Company:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------- ANNUAL RATES OF
NUMBER OF % OF STOCK PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR OPTION TERM(1)
UNDERLYING GRANTED TO EXERCISE OR ---------------------------------------
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH)(2) DATE 5% 10%
- ------------------------------ ------------ -------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Scott Scherr ................. 4,108 0.29% $ 7.75 1/27/09 $ 20,022 $ 50,740
Alan Goldstein, M.D. ......... 3,756 0.27% 7.75 1/27/09 18,306 46,392
Mitchell K. Dauerman ......... 3,591 0.26% 7.75 1/27/09 17,502 44,354
75,000 5.35% 7.63 10/21/09 359,885 912,019
James M. Alu ................. 2,998 0.21% 7.75 1/27/09 14,612 37,030
50,000 3.56% 7.63 10/21/09 239,923 608,013
- ----------------
<FN>
(1) The potential realizable value of each grant of options assumes that the market price of the underlying security
appreciates in value from the date of grant to the end of the option (i.e., over the term of the option) at the
annualized rates indicated.
(2) The exercise or base price for stock options granted to the executive officers in 1999 was equal to the market
price of the underlying security at the date of grant.
</FN>
</TABLE>
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT FISCAL YEAR-END
The following table sets forth, for the Company's Chief Executive Officer
and all other executive officers of the Company, certain information concerning
the exercise of stock options during 1999, including the value of unexercised
options as of December 31, 1999:
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON VALUE OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
EXERCISE REALIZED ------------------------------- ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ---------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Scott Scherr ................. 0 $ 0 239,598 81,235 $1,401,256 $474,361
Alan Goldstein, M.D. ......... 0 0 185,538 63,098 1,084,940 368,298
Mitchell K. Dauerman ......... 15,000 126,285 143,701 79,549 952,459 441,003
James M. Alu ................. 0 0 36,767 46,588 209,136 256,122
- ----------------
<FN>
(1) Options are in-the-money if the fair market value of the shares covered thereby is greater than the option exercise
price. This calculation is based on the fair market value at December 31, 1999 of $13.063 per share, less the exercise
price.
</FN>
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE INFORMATION CONTAINED IN THIS REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE "FILED" WITH THE COMMISSION NOR SHALL SUCH
INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES IT BY
REFERENCE INTO SUCH FILING.
The Compensation Committee of the Board (the "Committee") is composed of
two non-employee directors, Messrs. LeRoy A. Vander Putten and Rick Wilber, and
is responsible for developing and approving the Company's compensation program
for the executive officers, including the Chief Executive Officer, and other
officers of the Company. In addition, the Committee oversees the Company's stock
plans and such other benefits plans as the Company may from time to time
maintain. The Board will appoint another non-employee director to the Committee
to replace Mr. Wilber whose term as a director will end on May 18, 2000.
COMPENSATION PHILOSOPHY
The executive compensation program is designed to attract and retain
qualified executive officers who will contribute to the Company's long-term
success, to reward executive officers for achieving the Company's strategic
goals and to align the interests of the executive officers with those of the
Company's stockholders. This philosophy is reflected in a compensation package
that includes base salaries and benefits which are competitive with other
software and technology companies of comparable size and incentive compensation
which is related to the Company's achievement of specified financial and other
performance targets and which includes the granting of stock options which
creates a link between executive compensation and the interests of the Company's
stockholders.
BASE SALARY AND BENEFITS
In order to attract and retain qualified executives, the Company strives to
offer competitive base salaries and employee benefits, including health care
plans, a Section 401(k) Profit Sharing Plan and other employee benefit programs.
The Committee establishes base salary levels for executives by comparison to
industry compensation practices of other software and technology companies with
revenues in the same range as that of the Company (the "Comparison"). In June
1999, the base salary of Mr. Dauerman was increased based on the Comparison. The
base salaries of the other executive officers remained at the respective amounts
established in July 1998.
INCENTIVE COMPENSATION
In October 1998, the Company adopted the Incentive Compensation Plan (the
"ICP") for executive officers. The ICP bonuses are a significant element of the
Company's executive
10
<PAGE>
compensation program. The ICP is designed to reward executive officers and
employees for the achievement of corporate goals. Annual bonuses under the ICP
are based on actual performance measured against "key performance variables."
For 1999, these variables were (i) the Company's "net income before bonuses"
which is the Company's consolidated net income for the year before taxes and
before the charge to earnings from bonuses, (ii) the Company's "license
revenues", which are the Company's consolidated license revenues for the year
and (iii) "management objectives" which are financial and other factors
designated by the Committee for participants in the ICP.
The Compensation Committee assigns a relative weight to each of the key
performance variables to determine the portion of annual bonuses to be
represented by each variable. In addition, "threshold," "target" and "maximum"
objectives are set for each of the variables, and bonus payments, as a
percentage of base salary, are established for each objective level. Bonuses are
paid in the form of cash or stock options, issued under the Stock Option Plan.
The per share purchase price of the Common Stock under the stock options is the
fair market price of the Common Stock as of the date of grant. The Black-Scholes
evaluation method is used for determining the number of stock options awarded in
lieu of cash.
When the Committee adopted the performance objectives of the ICP for 1998,
it determined that any bonuses payable to executive officers would be payable in
stock options. During January 1999, stock options under the ICP were granted to
Messrs. Scott Scherr, Goldstein, Dauerman and Alu for an aggregate of 14,453
shares of Common Stock as a result of certain performance objectives achieved in
1998. In addition, Messrs. Alu and Dauerman were granted options for an
aggregate of 125,000 shares of Common Stock in October 1999, reflecting
increased responsibilities in their respective positions.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee determined the compensation for the fiscal year 1999 for the
Company's Chief Executive Officer, Mr. Scott Scherr, based primarily on the
Company's 1998 financial results versus Mr. Scherr's personal objectives and
targets for the key performance variables under the ICP. Based on the foregoing,
the Committee did not increase Mr. Scherr's base salary in 1999. No cash bonuses
or stock options were granted to Mr. Scherr in 1999, except for stock options
granted to Mr. Scherr in January 1999 in relation to performance objectives
achieved in 1998 pursuant to the ICP. The Committee believes that Mr. Scherr is
being appropriately compensated in a manner that relates to these performance
criteria.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Federal tax law generally disallows the corporate tax deduction for certain
compensation paid in excess of $1,000,000 annually to each of the chief
executive officer and the four other most highly paid executive officers of
publicly held companies. One of the exceptions to the deduction limit is for
"performance-based" compensation. The Committee believes the Stock Option Plan
satisfies the requirements for "performance-based compensation," thereby
exempting awards thereunder from the $1,000,000 compensation deduction limit.
For this reason, and because the Company's annual cash compensation to its
executive officers is currently below the $1,000,000 limit, the Company does not
at this time anticipate any loss of deductibility under the Federal tax law for
compensation paid to its executive officers. The Company was not denied a
deduction under this law for any compensation paid to its executive officers
during 1999.
LeRoy A. Vander Putten, Chairman
Rick Wilber
Members of the Compensation Committee
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board are Messrs.
LeRoy A. Vander Putten and Rick Wilber. No executive officer of the Company has
served as a member of the compensation committee of any other entity whose
executive officers served as a member of the Compensation Committee of the
Board.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder returns on
the Company's Common Stock for the period covering June 2, 1998 (the first day
of the trading pursuant to the Company's initial public offering of 3,250,000
shares of Common Stock at an offering price of $10 per share, the "IPO") through
December 31, 1999, on a quarterly basis, except for June 1998 which covers the
period June 2, 1998 through June 30, 1998, with the cumulative total return of
The Nasdaq Stock Market - US (the "Nasdaq Market") Index and the Hambrecht &
Quist Computer Software (the "H & Q Computer Software") Index for the same
period.
COMPARISON OF NINETEEN-MONTH CUMULATIVE TOTAL RETURN (1) AMONG THE COMPANY, (2)
THE NASDAQ MARKET INDEX AND (3) THE H & Q COMPUTER SOFTWARE INDEX.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------------------------
6/2/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE ULTIMATE SOFTWARE GROUP, INC. 100 93 95 71 73 52 75 131
NASDAQ STOCK MARKET (U.S.) 100 108 98 127 142 155 159 229
HAMBRECHT & QUIST COMPUTER SOFTWARE 100 109 91 106 105 120 134 240
- ----------------
<FN>
(1) Assumes the investment of $100 on June 2, 1998 and reinvestment of dividends (no dividends were
declared on the Company's Common Stock during the period).
(2) Prior to the IPO, the Company's Common Stock was not listed or quoted on any organized market system.
</FN>
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 21, 1999, the Company entered into a definitive consulting
agreement (the "Consulting Agreement") with Aberdeen Strategic Capital LP
("Aberdeen") under which Aberdeen has been engaged to provide marketing,
strategic and other advisory services to the Company. John R. Walter, a member
of the Company's Board of Directors, is Chairman of the Management Advisory
Board of Aberdeen and has minority ownership interests in Aberdeen and its
general partner.
As sole compensation for the services of Aberdeen and its affiliates under
the Consulting Agreement, on October 21, 1999 the Company issued to Aberdeen a
warrant (the "Warrant") to purchase 100,000 shares of the Company's Common Stock
for $10 per share. The Warrant vests in eight quarterly increments of 12,500
shares, the first of which increments vested on October 22, 1999. No increment
of shares shall vest if the Consulting Agreement has been terminated before the
vesting date for such increment. The Warrant expires on July 22, 2003.
In mid-1999, the Company moved its corporate headquarters into a new and
larger facility located in Weston, Florida. On December 31, 1998, the Company
executed a commercial office lease to lease all available square footage in this
new facility, or approximately 40,000 square feet. The lessor for this facility
is a limited partnership (the "Lessor") of which Mr. Marc D. Scherr, a director
of the Company and an executive officer of the Company, effective March 1, 2000,
and a corporation owned by Mr. Robert Manne, Vice President and General Counsel
of the Company, are limited partners. Execution of the lease was approved by a
majority of disinterested members of the Board of Directors of the Company. The
annual rent payable under the lease is approximately $698,000. The Company
believes that the terms of the lease are no less favorable than could be
obtained from an unaffiliated party.
In January 2000, the Lessor of the Company's new corporate headquarters
sold the related building and land to a third-party corporation and is in the
process of assigning the related commercial office lease to such third-party or
an affiliate thereof. No material revisions to the commercial office lease are
anticipated.
Effective March 1, 2000, Mr. Marc D. Scherr, Vice Chairman of the Board,
became solely employed by the Company. Until March 1, 2000, Mr. Scherr devoted a
portion of his professional time, without salary, to assisting the Company's
management in connection with its business operations generally and, in
particular, the negotiation and development of the Company's business partner
relationships. Prior to full employment with the Company, in his capacity as a
director, Mr. Scherr did not receive the quarterly retainer payable to
non-employee directors. (See "Director Compensation.") Prior to March 1, 2000,
Mr. Scherr participated in the ICP and continues to participate in the ICP in
his capacity as Vice Chairman and executive officer of the Company. Under the
ICP, in 1999, Mr. Scherr received options to purchase 1,285 shares of Common
Stock at $7.75 per share for performance in 1998. In addition, in 1999 the
Company paid $150,000 to Mr. Scherr's then employer, Gerschel & Company
("Gerschel"), to reimburse it for Mr. Scherr's time and certain business-related
expenses. Effective March 1, 2000, such reimbursements to Gerschel ceased.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who beneficially own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Commission. Such executive officers, directors
and greater than 10% beneficial owners are required by the regulations of the
Commission to furnish the Company with copies of all Section 16(a) reports they
file. Based solely on a review of the copies of such reports furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors and greater than 10% beneficial owners were
met
13
<PAGE>
during 1999, except that Mr. Marc Scherr inadvertently filed a late Form 5 for
the acquisition of stock options granted to him in July 1998 under the Plan.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Under the rules of the Commission, any proposal by a stockholder to be
presented at the 2001 Annual Meeting of Stockholders and to be included in the
Company's proxy statement must be received at the Company's principal corporate
office: 2000 Ultimate Way, Weston, Florida 33326, no later than the close of
business on December 11, 2000. Proposals should be sent to the attention of the
Secretary of the Company. Any such stockholder proposal must comply with the
applicable rules of the Commission.
Under the Company's By-Laws, proposals of Stockholders not included in the
proxy materials may be presented at the 2001 Annual Meeting of Stockholders only
if the Company's Secretary has been notified of the nature of the proposal and
is provided certain additional information at least sixty days but not more than
ninety days prior to April 10, 2001, the first anniversary of the proxy
statement in connection with the 2000 Annual Meeting of Stockholders (subject to
exceptions if the 2001 Annual Meeting is advanced by more than thirty days and
the proposal is a proper one for stockholder action).
OTHER MATTERS
FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Stockholders, including therewith
a copy of the Company's Annual Report on Form 10-K, for the year ended December
31, 1999 is being provided to stockholders with this Proxy Statement.
OTHER
The Company is not aware of any other matters that may come before the
Annual Meeting. If other matters are properly presented at the Annual Meeting,
it is the intention of the persons named as proxies in the enclosed proxy to
vote in accordance with their best judgment.
By Order of the Board of Directors:
/s/ Vivian Maza
-----------------------------------
Vivian Maza
Secretary
Weston, Florida
April 10, 2000
14
<PAGE>
DETACH HERE
PROXY
THE ULTIMATE SOFTWARE GROUP, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 18, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoints Mitchell
K. Dauerman and Vivian Maza, with full power of substitution, as proxies to
represent and vote, as designated herein, all the shares of stock of The
Ultimate Software Group, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held at 2000 Ultimate Way, Weston, Florida, on Thursday, May
18, 2000, at 9:00 a.m., and at any adjournment thereof (the "Annual Meeting").
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED HEREIN.
Attendance of the undersigned at the Annual Meeting will not be deemed to revoke
this proxy unless the undersigned shall revoke this proxy in writing or shall
deliver a subsequently dated proxy to the Secretary of the Company prior to the
Annual Meeting or shall vote in person at the Annual Meeting.
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE
DETACH HERE
PLEASE MARK YOUR VOTES
BY FIRMLY PLACING AN "X" IN
THE APPROPRIATE BOXES.
1. To elect two directors to serve until the 2003 Annual Meeting.
NOMINEES: FOR WITHHELD
MARC D. SCHERR [ ] [ ]
JOHN R. WALTER [ ] [ ]
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature: Date:
--------------------------------------- -------------
Signature: Date:
--------------------------------------- -------------
