Exhibit 10.2

DIRECTOR FEE OPTION AWARD AGREEMENT

The Ultimate Software Group, Inc.
2005 Equity and Incentive Plan

     This Award Agreement (the “Agreement”) made as of this 3rd day of January,
2005, between The Ultimate Software Group, Inc., a Delaware corporation (the
“Company”), and ___ (the “Optionee”), is made pursuant to the terms of The
Ultimate Software Group, Inc. 2005 Equity and Incentive Plan (the “Plan”). This
Agreement and the benefits conferred hereunder shall be subject to the approval
of the Plan by the Company’s stockholders at the Company’s 2005 Annual Meeting
of Stockholders. Capitalized terms used herein but not defined shall have the
meanings set forth in the Plan.

     Section 1. Grant of Option. The Company has granted to the Optionee a
non-qualified stock option for the purchase of the number of shares of common
stock of the Company, par value $.01 per share (the “Common Stock”), specified
in Appendix A hereto (the “Option Shares”). Appendix A may be amended by the
Company from time to time to reflect additional grants, or the exercise of an
option, following the date hereof. Each option identified in Appendix A shall be
subject to the conditions hereinafter provided and subject to the terms and
conditions set forth in the Plan, a copy of which the Optionee acknowledges
having received. (Each option identified in Appendix A is hereinafter referred
to as an “Option.”)

     Section 2. Exercise Price. The exercise price per share of each Option
shall be 30% of the Fair Market Value of a share of the Common Stock on the Date
of Grant (as defined in the Plan) (the “Option Price”).

     Section 3. Vesting and Term. Each Option shall be fully and immediately
vested on the Date of Grant, but shall become exercisable or payable only in
accordance with the provisions of Sections 4 and 5 hereof. To the extent that an
Option is not exercised within the exercise period described in Section 4
hereof, and is not otherwise settled in accordance with Section 5 hereof, the
Option shall be terminated and the Optionee’s rights hereunder shall be
forfeited.

     Section 4. Exercise. An Option shall first become exercisable on the
earliest to occur of the following events: (i) the fifth (5th) anniversary of
the Date of Grant, (ii) the date on which the Optionee ceases to be a member of
the Board, and (iii) the effective date of a Change in Control (each, an
“Exercise Event”); and shall remain exercisable for a period of 90 days
following the applicable Exercise Event. Notwithstanding the foregoing, a Change
in Control that does not also qualify as a “change in control” for purposes of
Section 409A of the Code shall not be treated as an Exercise Event for purposes
hereof.

     Section 5. Cash Settlement. Notwithstanding the provisions of Section 4
hereof, the Committee may, in its discretion, cancel the right of the Optionee
to exercise an

 

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Option upon or following the occurrence of an Exercise Event as provided in
Section 4 hereof in exchange for a cash settlement payment to the Optionee (or
the Optionee’s legal representative) equal to the product of: (i) the number of
shares of Common Stock subject to the Option being cancelled, multiplied by
(ii) the excess, if any, of the per share Fair Market Value of the Common Stock
on the date of cancellation of the Option over the exercise price per share of
the Option. To the extent that the Optionee (or the Optionee’s legal
representative) fails to exercise the Option prior to the expiration of the
exercise period described in Section 4 hereof, the Option shall automatically be
cancelled immediately prior to the expiration of such exercise period, and the
Optionee (or the Optionee’s legal representative) shall be paid any cash
settlement payment determined as described in the preceding sentence as soon as
practicable following such cancellation.

     Section 6. Procedure for Exercise.

     (a) Notice of Exercise. An Option may be exercised, in whole or in part,
and whole Option Shares may be purchased, by delivery of a notice (the “Notice”)
to the Secretary of the Company at the Company’s principal business address and
under any procedures specified by the Committee, which Notice shall: (i) state
the number of whole Option Shares being exercised; (ii) state the method of
payment of the Option Price and tax withholding; (iii) include any
representation of the Optionee required pursuant to Section 7 hereof; (iv) in
the event that the Option shall be exercised by any person other than the
Optionee pursuant to Section 10 hereof, include appropriate proof of the right
of such person to exercise the Option; and (v) comply with such further
requirements consistent with the Plan as the Committee may from time to time
prescribe.

     (b) Payment of Option Price. Payment of the Option Price shall be made:
(i) in cash or by cash equivalent acceptable to the Committee, (ii) by payment
in shares of Common Stock that have been held by the Optionee for at least six
months (or such other period as the Committee may deem appropriate for purposes
of applicable accounting rules), valued at the Fair Market Value of such shares
on the date of exercise, (iii) through an open-market, broker-assisted
transaction, or (iv) by a combination of the foregoing methods. In addition and
at the time of exercise, if and to the extent required by applicable law, the
Optionee shall remit to the Company under procedures specified by the Company
all required Federal, state and local withholding tax amounts in any manner as
permitted above for payment of the Option Price.

     (c) Delivery of Stock Certificates Upon Exercise. Upon each exercise of an
Option, the Company shall mail or deliver to the Optionee (or beneficiary in the
case of exercise by a beneficiary), as promptly as practicable, a stock
certificate or certificates representing the shares of Common Stock then
purchased, and will pay all stamp taxes payable in connection therewith.
Notwithstanding the foregoing, the Company shall not be obligated to deliver any
such certificate or certificates upon exercise of an Option until the Company
shall have received such assurances from its counsel as the Company may
reasonably request that the exercise of the Option and the issuance of shares of
Common Stock pursuant to such exercise will not violate the Securities Act of
1933 (the “Act”), as amended (as then in effect or any similar statute then in
effect), or the securities laws of any state applicable to such exercise,
issuance or transfer. Such assurances may include (but need not be limited to)
opinions of counsel to the Company, covenants by the holder or transferee to

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observe such Act and laws and the placement of a legend on such certificate or
certificates restricting subsequent transfers or sales except in compliance with
such Act and laws.

     Section 7. Investment Representation. Upon the exercise of an Option at a
time when there is not in effect a registration statement under the Act relating
to the shares of Common Stock, by virtue of such exercise, the Optionee shall be
deemed to represent and warrant to the Company that the shares of Common Stock
shall be acquired for investment and not with a view to the distribution
thereof, and not with any present intention of distributing the same, and the
Optionee shall provide the Company with such further representations and
warranties as the Company may require in order to ensure compliance with
applicable Federal and state securities, blue sky and other laws. No shares of
Common Stock shall be acquired unless and until the Company and/or the Optionee
shall have complied with all applicable Federal or state registration, listing
and/or qualification requirements and all other requirements of law or of any
regulatory agencies having jurisdiction, unless the Committee has received
evidence satisfactory to it that the Optionee may acquire such shares pursuant
to an exemption from registration under the applicable securities laws. Any
determination in this connection by the Committee shall be final, binding and
conclusive.

     Section 8. Limitation of Rights. The Optionee shall not have any privileges
of a stockholder of the Company with respect to any Option Shares, including
without limitation any right to vote such Option Shares or to receive dividends
or other distributions in respect thereof, until the date of the issuance to the
Optionee of a stock certificate evidencing the Common Stock. Nothing in this
Agreement or an Option shall confer upon the Optionee any right to continued
employment with the Company or to interfere in any way with the right of the
Company to terminate the Optionee’s employment at any time.

     Section 9. Adjustments. If there shall occur any recapitalization,
reclassification, stock dividend, extraordinary dividend, stock split, reverse
stock split, or other distribution with respect to the shares of Common Stock,
or any merger, reorganization, consolidation or other change in corporate
structure affecting the Common Stock, the Committee shall, in the manner and to
the extent that it deems appropriate and equitable to the Optionee and
consistent with the terms of the Plan, cause an adjustment to be made in (i) the
number and kind of shares of Common Stock subject to the Option, (ii) the Option
Price, and (iii) any other terms of the Option that are affected by the event to
prevent dilution or enlargement of the Optionee’s rights hereunder.

     Section 10. Transfer Restrictions. No Option may be transferred, pledged,
assigned, hypothecated or otherwise disposed of in any way by the Optionee,
except by will or by the laws of descent and distribution; provided, however,
that the Optionee may, during the Optionee’s lifetime and subject to the prior
approval of the Committee at the time of proposed transfer, transfer all or part
of an Option to or for the benefit of the Optionee’s “family members” (as
defined in a manner consistent with the rules applicable to registration
statements on Form S-8 promulgated under the Securities Act of 1933), which
include certain trusts and other entities established for the benefit of the
Optionee and/or the Optionee’s family members. Subsequent transfers of an Option
shall be prohibited other than by will or the laws of descent and distribution
upon the death of the transferee. In the event that an Optionee becomes legally

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incapacitated, an Option shall be exercisable by the Optionee’s legal guardian,
committee or legal representative. If the Optionee dies, an Option shall
thereafter be exercisable by the legatee of such Option under the Optionee’s
will or by the Optionee’s estate in accordance with the Optionee’s will or the
laws of descent and distribution, in each case in the same manner and to the
same extent that such Option was exercisable by the Optionee on the date of the
Optionee’s death. An Option shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of an Option contrary to the provisions hereof, and the levy
of any execution, attachment or similar process upon an Option, shall be null
and void and without effect.

     Section 11. Notices. Any notice hereunder by the Optionee shall be given to
the Company in writing and such notice shall be deemed duly given only upon
receipt thereof by the Secretary of the Company. Any notice hereunder by the
Company shall be given to the Optionee in writing and such notice shall be
deemed duly given only upon receipt thereof at such address as the Optionee may
have on file with the Company.

     Section 12. Construction. Any Option hereunder is granted pursuant to the
Plan and is in all respects subject to the terms and conditions of the Plan. The
Optionee hereby acknowledges that a copy of the Plan has been delivered to the
Optionee and accepts the Options hereunder subject to all terms and provisions
of the Plan, which is incorporated herein by reference. In the event of a
conflict or ambiguity between any term or provision contained herein and a term
or provision of the Plan, the Plan will govern and prevail. The construction of
and decisions under the Plan are vested in the Committee, whose determinations
shall be final, conclusive and binding upon the Optionee.

     Section 13. Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware, without giving effect to
the choice of law principles thereof.

     Section 14. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

     Section 15. Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the parties hereto as to the Options, and
merges and supersedes all prior discussions, agreements (including, without
limitation, any stock option agreements) and understandings of every kind and
nature between them with respect to the Options. This Agreement shall not be
changed or amended except by a writing signed by each of the parties hereto.

[SIGNATURES ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement effective as of the date first above written.

            THE ULTIMATE SOFTWARE GROUP, INC.
      By:   /s/         Name:           Title:        

            OPTIONEE
            Signature of Optionee       
_________________________________________
Print Name   

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Appendix A

                            Number of Shares           Date of Grant     Subject
to Option     Option Price    
January 3, 2005
          $3.65 per share    
April 1, 2005
          $4.71 per share    
 
               
 
               

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