|   þ  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                                                 |
|---------------------|----------------------------------------------------------------------------------------------------------------------|
|                | SECURITIES EXCHANGE ACT OF 1934                                                                                      |
|                |                                                                                                                 |
|                | For the fiscal year ended December 31, 2010                                                                          |
|                |                                                                                                                 |
|                | or                                                                                                                   |
|                |                                                                                                                 |
|   ⁭ | 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                                                                                      |

| Delaware                                 | 65-0694077          |
|------------------------------------------|---------------------|
| (State or other jurisdiction of          | (I.R.S. Employer    |
| incorporation or organization)           | Identification No.) |
|                                     |                |
| 2000 Ultimate Way,                       | 33326               |
| Weston, FL                               | (Zip Code)          |
| (Address of principal executive offices) |                |

| Title of Each Class:                   | Name of Each Exchange on which Registered: |
|----------------------------------------|--------------------------------------------|
|                                   |                                       |
| Common Stock, par value $.01 per share | The Nasdaq Stock Market LLC                |

----

INDEX

|       |                                                                 |   | Page(s) |     |
|------------|----------------------------------------------------------------------|--------|---------|----------|
|       |  Forward-Looking Statements                                     |   |    | 1        |   |
|       |                                                                 |   |    |     |   |
|       | PART I                                                               |   |    |     |   |
| Item 1.    | Business                                                             |   |    | 1        |   |
| Item 1A.   | Risk Factors                                                         |   |    | 10       |   |
| Item 1B.   | Unresolved Staff Comments                                            |   |    | 17       |   |
| Item 2.    | Properties                                                           |   |    | 18       |   |
| Item 3.    | Legal Proceedings                                                    |   |    | 18       |   |
| Item 4.    | [Removed and Reserved]                                               |   |    |  18 |   |
|       |                                                                 |   |    |     |   |
|       | PART II                                                              |   |    |     |   |
| Item 5.    | Market for the Registrant’s Common Equity, Related Stockholder |   |    | 19       |   |
|       | Matters, and Issuer Purchases of Equity Securities                   |   |    | 19       |   |
| Item 6.    | Selected Financial Data                                              |   |    | 20       |   |
| Item 7.    | Management’s Discussion and Analysis of Financial Condition    |   |    |     |   |
|       | and Results of Operations                                            |   |    | 22       |   |
| Item 7A.   | Quantitative and Qualitative Disclosures about Market                |   |    |     |   |
|       | Risk                                                                 |   |    | 33       |   |
| Item 8.    | Financial Statements and Supplementary Data                          |   |    | 34       |   |
| Item 9.    | Changes in and Disagreements With Accountants on Accounting          |   |    |     |   |
|       | and Financial Disclosure                                             |   |    | 61       |   |
| Item 9A.   | Controls and Procedures                                              |   |    | 61       |   |
|       | Independent Registered Public Accounting Firm’s Report on      |   |    |     |   |
|       | Internal Control over Financial Reporting                            |   |    | 62       |   |
| Item 9B.   | Other Information                                                    |   |    | 63       |   |
|       | PART III                                                             |   |    |     |   |
| Item 10.   | Directors, Executive Officers and Corporate Governance               |   |    | 63       |   |
| Item 11.   | Executive Compensation                                               |   |    | 66       |   |
| Item 12.   | Security Ownership of Certain Beneficial Owners and                  |   |    |     |   |
|       | Management and Related Stockholder Matters                           |   |    | 66       |   |
| Item 13.   | Certain Relationships and Related Transactions, and Director         |   |    |     |   |
|       | Independence                                                         |   |    | 66       |   |
| Item 14.   | Principal Accountant Fees and Services                               |   |    | 66       |   |
|       | PART IV                                                              |   |    |     |   |
| Item 15.   | Exhibits and Financial Statement Schedules                           |   |    | 67       |   |
| Signatures |                                                                 |   | 71      |     |

----

FORWARD-LOOKING STATEMENTS

Item 1.  Business

----

Table of Contents

| §   | Leading-edge service-oriented-architecture technology platform built using the Microsoft .NET 3.0 framework and now transitioning to Microsoft .NET 4.0. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Multi-tenancy (multiple companies can reside on one server).  The multi-tenant model allows each application component to run on a separate farm, or cluster, of load-balanced servers while still providing customer data isolation that customers demand. Ultimate’s multi-tenant site registry functions similar to “yellow pages” to manage tenant location and isolation within the site. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Connecting UltiPro via Web services (a set of platform-neutral and vendor-independent protocols that enable application interactions over the Internet using Extensible Markup Language, or XML, and other Web-based technologies).  Through Web services, UltiPro interfaces with other applications and data services easily and securely. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

----

Table of Contents

----

Table of Contents

----

Table of Contents

----

Table of Contents

----

Table of Contents

----

Table of Contents

Item 1A.                      Risk Factors

----

Table of Contents

| §   | The volatility inherent in stock prices within the sector in which we conduct business; |
|--------------------|-----------------------------------------------------------------------------------------|

| §   | The volume of trading in our Common Stock, including sales upon exercise of outstanding stock options and the vesting of restricted stock and restricted stock units; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Failure to achieve earnings expectations; |
|--------------------|-------------------------------------------|

| §   | Changes in our earnings estimates by analysts; |
|--------------------|------------------------------------------------|

| §   | Variations in our actual and anticipated operating results, including, but not limited to, prospective financial guidance provided by Ultimate to our investors and research analysts; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The announcement of a merger or acquisition. |
|--------------------|----------------------------------------------|

----

Table of Contents

|   | § | Human error; |
|--------|--------|--------------|

|   | § | Natural disasters; |
|--------|--------|--------------------|

|   | § | Power loss or telecommunication failures; |
|--------|--------|-------------------------------------------|

|   | § | Sabotage or other intentional acts of vandalism; and |
|--------|--------|------------------------------------------------------|

|   | § | Unforeseen interruption or damages experienced in moving hardware to a new location. |
|--------|--------|--------------------------------------------------------------------------------------|

|   | § | Result in interruptions in the services we provide to our customers, during which time our customers may be unable to retrieve their data; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Require us to spend substantial amounts of money replacing existing equipment and/or purchasing services from an alternative data center; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Cause existing customers to cancel their contracts; |
|--------|--------|-----------------------------------------------------|

|   | § | Cause our customers to seek damages for losses incurred; or |
|--------|--------|-------------------------------------------------------------|

|   | § | Make it more difficult for us to attract new customers. |
|--------|--------|---------------------------------------------------------|

----

Table of Contents

|   | § | Enhance our current products and introduce new products in order to keep pace with products offered by our competitors; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | § | Adapt to technological advancements and changing industry standards; and |
|--------|--------|--------------------------------------------------------------------------|

|   | § | Expand the functionality of our products to address the increasingly sophisticated requirements of our customers. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | § | Large service bureaus, primarily ADP and, to a lesser extent, Ceridian; |
|--------|--------|-------------------------------------------------------------------------|

|   | § | A number of companies, such as PeopleSoft/Oracle, Lawson, Kronos, and Workday that offer HCM software products for use on mainframes, client/server environments and/or Web servers; and, in the UltiPro Workplace market, payroll service providers such as ADP, Ceridian and Paychex that service companies on the smaller end of the mid-market; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | The internal HR/payroll departments of potential customers which use custom-written software. |
|--------|--------|-----------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

|   | § | Cause delays in product introductions and shipments; |
|--------|--------|------------------------------------------------------|

|   | § | Result in increased costs and diversion of development resources; |
|--------|--------|-------------------------------------------------------------------|

|   | § | Require design modifications; or |
|--------|--------|----------------------------------|

|   | § | Decrease market acceptance of, or customer satisfaction with, our products. |
|--------|--------|-----------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

Item 1B.                      Unresolved Staff Comments

----

Table of Contents

Item 2.              Properties

|                            |   | Size      |   | Lease       |   |                                                               |   |
|---------------------------------|--------|-----------|--------|-------------|--------|--------------------------------------------------------------------|--------|
| Location                        |   | (sq. ft.) |   | Termination |   | General Use                                                        |   |
| Weston, FL – HQ           |   | 39,872    |   | 1/31/2017   |   | Technology                                                         |   |
| Weston, FL – HQ           |   | 21,392    |   | 1/31/2018   |   | Executive Management and Customer Support                          |   |
| Atlanta, GA  (1)      |   | 24,609    |   | 3/31/2011   |   | Professional Services and Customer Support                         |   |
| Atlanta, GA (2)                 |   | 5,263     |   | 9/30/2011   |   | Professional Services and Customer Support                         |   |
| Atlanta, GA (3)                 |   | 49,172    |   | 5/31/2019   |   | Professional Services and Customer Support                         |   |
|                            |   |      |   |        |   |                                                               |   |
| Weston, FL – HQ (4)       |   | 5,000     |   | Owned       |   | Information Technology and Hosting Services                        |   |
| Weston, FL – HQ (5)       |   | 30,000    |   | 5/31/2015   |   | Sales Administration, Marketing, Professional Services and Finance |   |
| Weston, FL – HQ (6)       |   | 19,950    |   | 3/31/2018   |   | Corporate Support and Information Technology                       |   |
| Weston, FL – HQ (7)       |   | 8,000     |   | 2/29/2016   |   | Technology                                                         |   |
| Schaumburg, Illinois (8)        |   | 7,861     |   | 6/30/2014   |   | Administration and Training                                        |   |
| Toronto, Ontario  (9) |   | 2,115     |   | 12/31/2015  |   | Professional Services and Customer Support                         |   |

| (1)   | During the second fiscal quarter of 2006, Ultimate entered into a 79-month lease agreement for office space in Atlanta, Georgia.  Ultimate moved a portion of its service and support operations into this building in August 2006.  In August 2006, Ultimate amended the lease to expand the premises by 10,300 square feet, extend the lease term to 2013 and increase the monthly rental amount.  This lease will terminate on March 31, 2011 as Ultimate entered into a new replacement lease during the first fiscal quarter of 2011 as discussed in (3) below. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | During the third fiscal quarter of 2009, Ultimate entered into a 24-month lease agreement for office space in Atlanta, Georgia in a building within a short distance of the other Atlanta, Georgia locations. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | During the first fiscal quarter of 2011, Ultimate entered into a 100-month lease agreement for office space in a building within a short distance of the other Atlanta, Georgia locations.  This lease was entered into after the early termination of the lease discussed in (1) above to accommodate continued growth.  This lease covers approximately twice the square footage of the original lease in (1) above. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | In December 2004, Ultimate purchased, with available cash, all the available square footage of a building adjacent to its main headquarters buildings that serves as an extension of Ultimate’s corporate headquarters. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | In January 2008, Ultimate entered into an 84-month lease agreement for a fourth headquarters building located in Weston, Florida within a short distance of the other headquarters locations.  Ultimate moved a portion of its operations into this building in June 2008. After this move, we modified the general use of the remaining three headquarters locations. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | In November 2010, Ultimate entered into an 84-month lease agreement for a fifth headquarters building located in Weston, Florida within a short distance of the other headquarters locations.  Ultimate moved a portion of its operations into this building in January 2011. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | In November 2010, Ultimate entered into a 60-month lease agreement for a sixth headquarters building located in Weston, Florida within a short distance of the other headquarters locations.  Ultimate moved a portion of its operations into this building in January 2011. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8)   | During the fourth quarter of 2008, Ultimate entered into a 65-month lease agreement for office space in Schaumburg, Illinois to accommodate general office space and training facilities. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | During the third fiscal quarter of 2009, Ultimate entered into a 64-month lease agreement for new office space in Toronto, Ontario with RT Twenty-Sixth Pension Properties Limited to accommodate continued growth in Canada. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 3.              Legal Proceedings

Item 4.              [Removed and Reserved]

----

Table of Contents

Item 5.              Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

|           |   | 2010   |   |   | 2009   |   |
|----------------|--------|--------|--------|--------|--------|--------|
|           |   | High   |   |   | Low    |   |   | High |   |   | Low |   |
| First Quarter  |   | $      | 34.94  |   |   | $      | 26.81 |   |   | $ | 18.96 |   |   | $ | 12.40 |   |
| Second Quarter |   |   | 37.25  |   |   |   | 30.90 |   |   |   | 26.92 |   |   |   | 16.49 |   |
| Third Quarter  |   |   | 39.23  |   |   |   | 31.38 |   |   |   | 29.50 |   |   |   | 20.17 |   |
| Fourth Quarter |   |   | 50.28  |   |   |   | 37.50 |   |   |   | 31.66 |   |   |   | 24.73 |   |

----

Table of Contents

| Period                      |   | Total Number of Shares Purchased |    |   | Average Price Paid per Share |   |    | Total Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs |   |   | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |   |
|-----------------------------|--------|----------------------------------|---------|--------|------------------------------|--------|---------|---------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------|--------|
| October 1 – 31, 2010  |   |                             | – |   |                         |   | – |                                                                                        |   |   | 3,594,825                                                                      |   |   |   | 405,175 |   |
| November 1 – 30, 2010 |   |                             | – |   |                         |   | – |                                                                                        |   |   | 3,594,825                                                                      |   |   |   | 405,175 |   |
| December 1 – 31, 2010 |   |                             | – |   |                         |   | – |                                                                                        |   |   | 3,594,825                                                                      |   |   |   | 405,175 |   |
| Total                       |   |                             | – |   |                         | $      | – |                                                                                        |   |   | 3,594,825                                                                      |   |   |   | 405,175 |   |
|                        |   |                             |    |   |                         |   |    |                                                                                        |   |   |                                                                           |   |   |   |   |   |
|                        |   |

Item 6.                      Selected Financial Data

----

Table of Contents

|                                                                                                                                                |   | Years Ended December 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                                                                                |   | 2010                     |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Statements of Operations Data:                                                                                                                      |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                                                                                           |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |
|    Recurring                                                                                                                         |   | $                        | 170,905 |   |   | $ | 133,159 |   |   | $ | 106,198 |   |   | $ | 86,191 |   |   | $ | 63,683 |   |
|    Services                                                                                                                          |   |                     | 55,368  |   |   |   | 58,996 |   |   |   | 60,535 |   |   |   | 49,492 |   |   |   | 38,580 |   |
|    License                                                                                                                           |   |                     | 1,538   |   |   |   | 4,125 |   |   |   | 11,264 |   |   |   | 14,372 |   |   |   | 12,237 |   |
|       Total revenues                                                                                                  |   |                     | 227,811 |   |   |   | 196,280 |   |   |   | 177,997 |   |   |   | 150,055 |   |   |   | 114,500 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenues:                                                                                                                                   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Recurring                                                                                                                         |   |                     | 49,144  |   |   |   | 38,765 |   |   |   | 29,605 |   |   |   | 22,525 |   |   |   | 17,786 |   |
|    Services                                                                                                                          |   |                     | 49,843  |   |   |   | 48,304 |   |   |   | 50,058 |   |   |   | 39,995 |   |   |   | 30,131 |   |
|    License                                                                                                                           |   |                     | 255     |   |   |   | 750 |   |   |   | 1,795 |   |   |   | 1,659 |   |   |   | 1,389 |   |
|       Total cost of revenues                                                                                          |   |                     | 99,242  |   |   |   | 87,819 |   |   |   | 81,458 |   |   |   | 64,179 |   |   |   | 49,306 |   |
| Gross profit                                                                                                                                        |   |                     | 128,569 |   |   |   | 108,461 |   |   |   | 96,539 |   |   |   | 85,876 |   |   |   | 65,194 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                                                                                 |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Sales and marketing                                                                                                               |   |                     | 58,374  |   |   |   | 52,810 |   |   |   | 47,193 |   |   |   | 36,109 |   |   |   | 29,248 |   |
|    Research and development                                                                                                          |   |                     | 42,222  |   |   |   | 38,005 |   |   |   | 36,025 |   |   |   | 27,536 |   |   |   | 22,265 |   |
|    General and administrative                                                                                                        |   |                     | 19,727  |   |   |   | 17,803 |   |   |   | 17,516 |   |   |   | 14,182 |   |   |   | 10,597 |   |
|       Total operating expenses                                                                                        |   |                     | 120,323 |   |   |   | 108,618 |   |   |   | 100,734 |   |   |   | 77,827 |   |   |   | 62,110 |   |
|       Operating income (loss)                                                                                         |   |                     | 8,246   |   |   |   | (157 | ) |   |   | (4,195 | ) |   |   | 8,049 |   |   |   | 3,084 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other (expense) income:                                                                                                                             |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Interest expense and other                                                                                                        |   |                     | (263    | ) |   |   | (90 | ) |   |   | (243 | ) |   |   | (170 | ) |   |   | (194 | ) |
|    Other income, net                                                                                                                 |   |                     | 188     |   |   |   | 162 |   |   |   | 857 |   |   |   | 5,988 |   |   |   | 1,538 |   |
| Total other (expense) income, net                                                                                                                   |   |                     | (75     | ) |   |   | 72 |   |   |   | 614 |   |   |   | 5,818 |   |   |   | 1,344 |   |
| Income (loss) from continuing operations before income taxes                                                                                        |   |                     | 8,171   |   |   |   | (85 | ) |   |   | (3,581 | ) |   |   | 13,867 |   |   |   | 4,428 |   |
|    (Provision) benefit for income taxes                                                                                              |   |                     | (5,161  | ) |   |   | (721 | ) |   |   | 1,016 |   |   |   | 19,596 |   |   |   | (89 | ) |
| Income (loss) from continuing operations                                                                                                            |   |                     | 3,010   |   |   |   | (806 | ) |   |   | (2,565 | ) |   |   | 33,463 |   |   |   | 4,339 |   |
|    Loss from discontinued operations, net of income taxes                                                                            |   |                     | (853    | ) |   |   | (336 | ) |   |   | (332 | ) |   |   | (334 | ) |   |   | (206 | ) |
| Net income (loss)                                                                                                                                   |   | $                        | 2,157   |   |   | $ | (1,142 | ) |   | $ | (2,897 | ) |   | $ | 33,129 |   |   | $ | 4,133 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share: (1)                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Earnings (loss) from continuing operations                                                                                        |   | $                        | 0.12    |   |   | $ | (0.04 | ) |   | $ | (0.10 | ) |   | $ | 1.35 |   |   | $ | 0.18 |   |
|    Loss from discontinued operations                                                                                                 |   |                     | (0.03   | ) |   |   | (0.01 | ) |   |   | (0.02 | ) |   |   | (0.01 | ) |   |   | (0.01 | ) |
|    Total                                                                                                                             |   | $                        | 0.09    |   |   | $ | (0.05 | ) |   | $ | (0.12 | ) |   | $ | 1.34 |   |   | $ | 0.17 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share: (1)                                                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Earnings (loss) from continuing operations                                                                                        |   | $                        | 0.11    |   |   | $ | (0.04 | ) |   | $ | (0.10 | ) |   | $ | 1.25 |   |   | $ | 0.16 |   |
|    Loss from discontinued operations                                                                                                 |   |                     | (0.03   | ) |   |   | (0.01 | ) |   |   | (0.02 | ) |   |   | (0.01 | ) |   |   | (0.01 | ) |
|    Total                                                                                                                             |   | $                        | 0.08    |   |   | $ | (0.05 | ) |   | $ | (0.12 | ) |   | $ | 1.24 |   |   | $ | 0.15 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding: (1)                                                                                                            |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Basic                                                                                                                             |   |                     | 24,960  |   |   |   | 24,463 |   |   |   | 24,588 |   |   |   | 24,701 |   |   |   | 23,853 |   |
|    Diluted                                                                                                                           |   |                     | 27,101  |   |   |   | 24,463 |   |   |   | 24,588 |   |   |   | 26,722 |   |   |   | 26,978 |   |
| Balance Sheet Data:                                                                                                                                 |   | As of December 31,       |    |
|                                                                                                                                                |   |                     | 2010    |   |   |   | 2009 |   |   |   | 2008 |   |   |   | 2007 |   |   |   | 2006 |   |
| Cash and cash equivalents                                                                                                                           |   | $                        | 40,889  |   |   | $ | 23,684 |   |   | $ | 17,200 |   |   | $ | 17,462 |   |   | $ | 16,734 |   |
| Investments in marketable securities                                                                                                                |   |                     | 9,317   |   |   |   | 9,523 |   |   |   | 5,805 |   |   |   | 18,418 |   |   |   | 16,286 |   |
| Total assets                                                                                                                                        |   |                     | 249,557 |   |   |   | 171,130 |   |   |   | 147,257 |   |   |   | 135,156 |   |   |   | 93,530 |   |
| Deferred revenue                                                                                                                                    |   |                     | 78,095  |   |   |   | 68,559 |   |   |   | 63,494 |   |   |   | 51,708 |   |   |   | 42,969 |   |
| Long-term borrowings, including capital lease obligations                                                                                           |   |                     | 2,406   |   |   |   | 1,710 |   |   |   | 1,519 |   |   |   | 2,311 |   |   |   | 1,610 |   |
| Stockholders’ equity                                                                                                                          |   | $                        | 72,985  |   |   | $ | 57,770 |   |   | $ | 51,072 |   |   | $ | 60,978 |   |   | $ | 31,022 |   |
|                                                                                                                                                |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) See Note 9 of the Notes to the Consolidated Financial Statements for information regarding the computation of net income (loss) per share. |   |

----

Table of Contents

Item 7.              Management’s Discussion and Analysis of Financial Condition and Results of Operations

----

Table of Contents

| ·   | persuasive evidence of an arrangement exists; |
|--------------------|-----------------------------------------------|

| ·   | delivery has occurred; |
|--------------------|------------------------|

| ·   | the fees are fixed and determinable; and |
|--------------------|------------------------------------------|

| ·   | collection is considered probable. |
|--------------------|------------------------------------|

----

Table of Contents

| a)   | Subscription revenues are principally derived from PEPM fees earned from the SaaS Offering and from sales of hosting services on a stand-alone basis to customers who already own a perpetual license (“Base Hosting”). To the extent there are upfront or setup fees associated with our SaaS Offering, subscription revenues are recognized ratably over the term of the related contract, commencing upon the related Live date.  Ongoing PEPM fees from the SaaS Offering and Base Hosting are recognized as subscription revenues as the services are delivered commencing when the customer goes Live. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | Customer support and maintenance revenues are derived from maintaining, supporting, and providing periodic updates of our software for our hosting services. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|                                                              |   | For the Years Ended December 31, |    |
|-------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                              |   | 2010                             |    |   | 2009 |   |   | 2008 |   |
| Revenues:                                                         |   |                             |    |   |   |   |   |   |   |
|    Recurring                                       |   |                             | 75.0    | % |   |   | 67.8 | % |   |   | 59.7 | % |
|    Services                                        |   |                             | 24.3    |   |   |   | 30.1 |   |   |   | 34.0 |   |
|    License                                         |   |                             | 0.7     |   |   |   | 2.1 |   |   |   | 6.3 |   |
|       Total revenues                |   |                             | 100.0   |   |   |   | 100.0 |   |   |   | 100.0 |   |
| Cost of revenues:                                                 |   |                             |    |   |   |   |   |   |   |   |   |   |
|    Recurring                                       |   |                             | 21.6    |   |   |   | 19.7 |   |   |   | 16.7 |   |
|    Services                                        |   |                             | 21.9    |   |   |   | 24.6 |   |   |   | 28.1 |   |
|    License                                         |   |                             | 0.1     |   |   |   | 0.4 |   |   |   | 1.0 |   |
|       Total cost of revenues        |   |                             | 43.6    |   |   |   | 44.7 |   |   |   | 45.8 |   |
| Gross profit                                                      |   |                             | 56.4    |   |   |   | 55.3 |   |   |   | 54.2 |   |
| Operating expenses:                                               |   |                             |    |   |   |   |   |   |   |   |   |   |
|    Sales and marketing                             |   |                             | 25.6    |   |   |   | 26.9 |   |   |   | 26.5 |   |
|    Research and development                        |   |                             | 18.5    |   |   |   | 19.3 |   |   |   | 20.2 |   |
|    General and administrative                      |   |                             | 8.7     |   |   |   | 9.1 |   |   |   | 9.9 |   |
|       Total operating expenses      |   |                             | 52.8    |   |   |   | 55.3 |   |   |   | 56.6 |   |
|       Operating income (loss)       |   |                             | 3.6     |   |   |   | – |   |   |   | (2.4 | ) |
| Other income (expense):                                           |   |                             |    |   |   |   |   |   |   |   |   |   |
|    Interest expense and other                      |   |                             | (0.1    | ) |   |   | – |   |   |   | (0.1 | ) |
|    Other income, net                               |   |                             | 0.1     |   |   |   | – |   |   |   | 0.5 |   |
| Total other income (expense), net                                 |   |                             | – |   |   |   | – |   |   |   | 0.4 |   |
| Income (loss) from continuing operations before income taxes      |   |                             | 3.6     |   |   |   | – |   |   |   | (2.0 | ) |
|    (Provision) benefit for income taxes            |   |                             | (2.3    | ) |   |   | (0.4 | ) |   |   | 0.6 |   |
| Income (loss) from continuing operations                          |   |                             | 1.3     |   |   |   | (0.4 | ) |   |   | (1.4 | ) |
|    Loss from discontinued operations, net of taxes |   |                             | (0.4    | ) |   |   | (0.2 | ) |   |   | (0.2 | ) |
| Net income (loss)                                                 |   |                             | 0.9     | % |   |   | (0.6 | ) % |   |   | (1.6 | ) % |
|                                                              |   |                             |    |   |   |   |   |   |   |   |   |   |

----

Table of Contents

|   | i) | SaaS revenues increased 39.9% for 2010, primarily due to the continued growth of the SaaS Offering, which comprised the majority of unit sales. The increase in SaaS revenues is based on the revenue impact of incremental units that have gone Live since December 31, 2009, including the UltiPro core product and, to a lesser extent, Optional Features of UltiPro.  Recognition of recurring revenues for SaaS sales commences upon the Live date. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | Maintenance revenues from previously sold licenses decreased 3.3% primarily due to the fact we stopped selling licenses on a perpetual basis to new customers effective April 1, 2009.  Maintenance revenues are recognized over the initial term of the related license contract, which is typically 12 months, and then on a monthly recurring basis thereafter as the maintenance contracts renew annually. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iii) | Our annual revenue customer retention rate for total recurring revenues was 96% in 2010.  This rate is comprised of an annual retention rate exceeding 96% for existing SaaS customers and an annual retention rate of approximately 95% for existing license customers from which renewal maintenance revenues are derived. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iv) | The impact on recurring revenues of units sold under the SaaS Offering has been a gradual increase from one reporting period to the next, based on the incremental effect of revenue recognition of the SaaS fees over the terms of the related contracts as sales in backlog go Live. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | i)  The increase in SaaS costs was principally a result of the growth in SaaS operations and increased sales, including increased labor costs, costs related to our tax filing services (as we continue to grow that business) and, to a lesser extent, increased hosting data center costs. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii)  The increase in customer support and maintenance costs was primarily due to higher labor costs commensurate with the growth in the number of customers serviced. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

|   | i) | SaaS revenues increased 39.9% for 2009 from 2008, primarily due to the continued growth of the SaaS Offering, which comprised the majority of unit sales. The increase in SaaS revenues was based on the revenue impact of incremental units that have gone Live since December 31, 2008, including the UltiPro core product and, to a lesser extent, Optional Features of UltiPro.  SaaS revenues from the UltiPro Workplace solution in 2009 also contributed to the year-over-year growth, particularly since this solution was introduced late in 2007 and was ramping up in 2008.  Our annual recurring revenue customer retention rate of 97% in 2009 for existing SaaS customers also contributed to the growth in SaaS revenues when combined with incremental revenues resulting from additional customers going Live in 2009 as compared to 2008. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | Maintenance revenues from license sales increased 2.1% primarily due to annual price increases to existing customers combined with our annual recurring revenue customer retention rate of 97% in 2009.  We also converted some of our existing maintenance customers to SaaS, which contributed to the marginal increase in maintenance revenues.  Since we stopped selling licenses on a perpetual basis to new customers effective April 1, 2009, we do not expect to have significant increases in our customer support and maintenance revenues. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iii) | Recurring subscription revenues decreased 40.4% in 2009.  This decrease was primarily due to the termination of an agreement with an independent third-party provider effective March 9, 2008, at which time the related revenue recognition ended. There was no revenue recognized in 2009 under such agreement whereas in 2008, revenue recognized under this agreement amounted to $1.5 million. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | i)  The increase in SaaS costs was principally as a result of the growth in SaaS operations and increased sales, including higher depreciation and amortization of related computer equipment supporting the hosting operations, increased Microsoft licenses for our customer base, increased hosting data center costs and, to a lesser extent, increased labor costs, amortization of capitalized software and increased third-party royalty fees for UltiPro Time and Attendance sales. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii)  The increase in customer support and maintenance costs was primarily due to higher labor costs commensurate with the growth in the number of customers serviced. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

| Quarters Ended                                                     |   | Dec. 31, 2010 |    |   | Sep. 30, 2010 |   |    | Jun. 30, 2010 |   |   | Mar. 31, 2010 |    |   | Dec. 31, 2009 |    |   | Sep. 30, 2009 |   |    | Jun. 30, 2009 |   |   | Mar. 31, 2009 |   |
|--------------------------------------------------------------------|--------|---------------|---------|--------|---------------|--------|---------|---------------|--------|--------|---------------|---------|--------|---------------|---------|--------|---------------|--------|---------|---------------|--------|--------|---------------|--------|
| (In thousands, except per share amount)                            |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |
|                                                               |   |          |    |   |          |   |    |          |   |   | (Unaudited)   |    |   |          |    |   |          |   |    |          |   |   |          |   |
| Revenues:                                                          |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |
| Recurring                                                          |   | $             | 46,038  |   |          | $      | 44,054  |          |   | $      | 41,365        |    |   | $             | 39,448  |   |          | $      | 35,700  |          |   | $      | 34,092        |   |   | $ | 32,544 |   |   | $ | 30,822 |   |
| Services                                                           |   |          | 13,959  |   |          |   | 12,796  |          |   |   | 13,032        |    |   |          | 15,581  |   |          |   | 15,894  |          |   |   | 13,778        |   |   |   | 13,407 |   |   |   | 15,915 |   |
| License                                                            |   |          | 409     |   |          |   | 181     |          |   |   | 320           |    |   |          | 628     |   |          |   | 598     |          |   |   | 252           |   |   |   | 1,274 |   |   |   | 2,001 |   |
| Total revenues                                                     |   |          | 60,406  |   |          |   | 57,031  |          |   |   | 54,717        |    |   |          | 55,657  |   |          |   | 52,192  |          |   |   | 48,122        |   |   |   | 47,225 |   |   |   | 48,738 |   |
| Cost of revenues:                                                  |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Recurring                                                          |   |          | 13,101  |   |          |   | 12,591  |          |   |   | 12,048        |    |   |          | 11,404  |   |          |   | 10,441  |          |   |   | 9,917         |   |   |   | 9,534 |   |   |   | 8,873 |   |
| Services                                                           |   |          | 12,932  |   |          |   | 11,853  |          |   |   | 11,877        |    |   |          | 13,181  |   |          |   | 13,312  |          |   |   | 11,586        |   |   |   | 11,095 |   |   |   | 12,311 |   |
| License                                                            |   |          | 105     |   |          |   | – |          |   |   | 50            |    |   |          | 100     |   |          |   | 152     |          |   |   | –       |   |   |   | 261 |   |   |   | 337 |   |
| Total cost of revenues                                             |   |          | 26,138  |   |          |   | 24,444  |          |   |   | 23,975        |    |   |          | 24,685  |   |          |   | 23,905  |          |   |   | 21,503        |   |   |   | 20,890 |   |   |   | 21,521 |   |
| Gross profit                                                       |   |          | 34,268  |   |          |   | 32,587  |          |   |   | 30,742        |    |   |          | 30,972  |   |          |   | 28,287  |          |   |   | 26,619        |   |   |   | 26,335 |   |   |   | 27,217 |   |
| Operating expenses:                                                |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                |   |          | 14,038  |   |          |   | 14,640  |          |   |   | 14,580        |    |   |          | 15,116  |   |          |   | 13,042  |          |   |   | 13,049        |   |   |   | 12,884 |   |   |   | 13,835 |   |
| Research and development                                           |   |          | 10,790  |   |          |   | 10,679  |          |   |   | 10,520        |    |   |          | 10,233  |   |          |   | 9,544   |          |   |   | 9,763         |   |   |   | 9,469 |   |   |   | 9,226 |   |
| General and administrative                                         |   |          | 4,708   |   |          |   | 4,849   |          |   |   | 5,169         |    |   |          | 5,001   |   |          |   | 4,596   |          |   |   | 4,337         |   |   |   | 4,322 |   |   |   | 4,548 |   |
| Total operating expenses                                           |   |          | 29,536  |   |          |   | 30,168  |          |   |   | 30,269        |    |   |          | 30,350  |   |          |   | 27,182  |          |   |   | 27,149        |   |   |   | 26,675 |   |   |   | 27,609 |   |
| Operating income (loss)                                            |   |          | 4,732   |   |          |   | 2,419   |          |   |   | 473           |    |   |          | 622     |   |          |   | 1,105   |          |   |   | (530          | )      |   |   | (340 | ) |   |   | (392 | ) |
| Other (expense) income:                                            |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
|     Interest and other expense                 |   |          | (69     | )      |          |   | (88     | )             |   |   | (61           | )       |   |          | (45     | )      |          |   | (6      | )             |   |   | (19           | )      |   |   | (28 | ) |   |   | (36 | ) |
|     Other income, net                          |   |          | 53      |   |          |   | 68      |          |   |   | 45            |    |   |          | 22      |   |          |   | 21      |          |   |   | 30            |   |   |   | 39 |   |   |   | 72 |   |
|  Total other (expense) income, net                            |   |          | (16     | )      |          |   | (20     | )             |   |   | (16           | )  |   |          | (23     | )      |          |   | 15      |          |   |   | 11            |   |   |   | 11 |   |   |   | 36 |   |
| Income (loss) from continuing operations before income taxes       |   |          | 4,716   |   |          |   | 2,399   |          |   |   | 457           |    |   |          | 599     |   |          |   | 1,120   |          |   |   | (519          | )      |   |   | (329 | ) |   |   | (356 | ) |
| Income tax benefit (expense), net                                  |   |          | (3,270  | )      |          |   | (1,426  | )             |   |   | (186          | )       |   |          | (279    | )      |          |   | (974    | )             |   |   | 165           |   |   |   | 72 |   |   |   | 16 |   |
| Income (loss) from continuing operations                           |   |          | 1,446   |   |          |   | 973     |          |   |   | 271           |    |   |          | 320     |   |          |   | 146     |          |   |   | (354          | )      |   |   | (257 | ) |   |   | (340 | ) |
| Income (loss) from discontinued operations, net of income taxes    |   |          | – |   |          |   | 77      |          |   |   | (865          | )       |   |          | (65     | )      |          |   | (76     | )             |   |   | (115          | )      |   |   | (73 | ) |   |   | (73 | ) |
| Net income (loss)                                                  |   | $             | 1,446   |   |          | $      | 1,050   |          |   | $      | (594          | )       |   | $             | 255     |   |          | $      | 70      |          |   | $      | (469          | )      |   | $ | (330 | ) |   | $ | (413 | ) |
|                                                               |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share:                                   |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
|     Earnings (loss) from continuing operations |   | $             | 0.06    |   |          | $      | 0.04    |          |   | $      | 0.01          |    |   | $             | 0.01    |   |          | $      | – |          |   | $      | (0.01         | )      |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|     Loss form discontinued operations               |   |          | – |   |          |   | – |          |   |   | (0.03         | )       |   |          | – |   |          |   | – |          |   |   | (0.01         | )      |   |   | – |   |   |   | – |   |
| Total                                                              |   | $             | 0.06    |   |          | $      | 0.04    |          |   | $      | (0.02         | )       |   | $             | 0.01    |   |          | $      | – |          |   | $      | (0.02         | )      |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|                                                               |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share:                                 |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
|     Earnings (loss) from continuing operations |   | $             | 0.05    |   |          | $      | 0.04    |          |   | $      | 0.01          |    |   | $             | 0.01    |   |          | $      | – |          |   | $      | (0.01         | )      |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|     Loss from discontinued operations          |   |          | – |   |          |   | – |          |   |   | (0.03         | )       |   |          | – |   |          |   | – |          |   |   | (0.01         | )      |   |   | – |   |   |   | – |   |
| Total                                                              |   | $             | 0.05    |   |          | $      | 0.04    |          |   | $      | (0.02         | )       |   | $             | 0.01    |   |          | $      | – |          |   | $      | (0.02         | )      |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|                                                               |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding:                               |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |
| Basic                                                              |   |          | 25,302  |   |          |   | 24,937  |          |   |   | 24,839        |    |   |          | 24,755  |   |          |   | 24,604  |          |   |   | 24,539        |   |   |   | 24,414 |   |   |   | 24,292 |   |
| Diluted                                                            |   |          | 27,412  |   |          |   | 27,011  |          |   |   | 26,972        |    |   |          | 26,823  |   |          |   | 26,590  |          |   |   | 24,539        |   |   |   | 24,414 |   |   |   | 24,292 |   |
|                                                               |   |          |    |   |          |   |    |          |   |   |          |    |   |          |    |   |          |   |    |          |   |   |          |   |   |   |   |   |   |   |   |   |

----

Table of Contents

----

Table of Contents

|                               |   | Payments Due by Period |    |
|------------------------------------|--------|------------------------|---------|
|                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   | Total                  |    |   | Less Than 1 Year |   |   | 1-3 Years |   |   | 4-5 Years |   |   | More than 5 Years |   |
|                               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital lease obligations (1)      |   | $                      | 5,201   |   |   | $ | 2,717 |   |   | $ | 2,484 |   |   | $ | — |   |   | $ | — |   |
| Other long-term obligations (2)    |   |                   | 20,971  |   |   |   | 4,026 |   |   |   | 7,519 |   |   |   | 5,950 |   |   |   | 3,476 |   |
| Purchase obligations (3)           |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Other long-term liabilities (4)    |   |                   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Total contractual cash obligations |   | $                      | 26,172  |   |   | $ | 6,743 |   |   | $ | 10,003 |   |   | $ | 5,950 |   |   | $ | 3,476 |   |
| _________________________          |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | We lease certain computer equipment under non-cancelable agreements, which are accounted for as capital leases and expire at various dates through 2013. See Note 13 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for information regarding capital lease obligations. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Included in other long-term obligations were Ultimate’s leases for corporate office space and certain equipment under non-cancelable operating lease agreements expiring at various dates and a software maintenance agreement.  See Note 16 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for information regarding operating lease obligations.  The software maintenance agreement is a 36-month agreement beginning July 21, 2008 and ending on August 1, 2011 with 36 monthly payments. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Purchase orders or contracts for the purchase of goods and services are not included in the table above.  Ultimate is not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements.  Ultimate does not have significant agreements for the purchase of goods or services specifying minimum quantities or set prices. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Ultimate does not have any other long-term liabilities as of December 31, 2010. |
|-----------------|---------------------------------------------------------------------------------|

----

Table of Contents

Item 7A.                      Quantitative and Qualitative Disclosures about Market Risk

|   | · | Maximum safety of principal; |
|--------|--------|------------------------------|

|   | · | Maintenance of appropriate liquidity for regular cash needs; |
|--------|--------|--------------------------------------------------------------|

|   | · | Maximum yields in relationship to guidelines and market conditions; |
|--------|--------|---------------------------------------------------------------------|

|   | · | Diversification of risks; and |
|--------|--------|-------------------------------|

|   | · | Fiduciary control of all investments. |
|--------|--------|---------------------------------------|

----

Table of Contents

Item 8.              Financial Statements and Supplementary Data

|                                                                                                                                                                    |   | Page(s) |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|
| Report of Independent Registered Public Accounting Firm                                                                                                                 |   |    | 35     |   |
| Consolidated Balance Sheets as of December 31, 2010 and 2009                                                                                                            |   |    | 36     |   |
| Consolidated Statements of Operations for the Years Ended     December 31, 2010, 2009 and 2008                                                 |   |    | 37     |   |
| Consolidated Statements of Stockholders’ Equity and Comprehensive Income     (Loss) for the Years Ended December 31, 2010, 2009 and 2008 |   |    | 38     |   |
| Consolidated Statements of Cash Flows for the Years Ended     December 31, 2010, 2009 and 2008                                                 |   |    | 39     |   |
| Notes to Consolidated Financial Statements                                                                                                                              |   |    | 40     |   |

----

Table of Contents

Report of Independent Registered Public Accounting Firm

----

Table of Contents

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                                                                        |   | As of December 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|                                                                                                                                                                                                                        |   | 2010               |    |   | 2009 |   |
| (In thousands, except share data)                                                                                                                                                                                           |   |
| ASSETS                                                                                                                                                                                                                      |   |               |    |   |   |   |
| Current assets:                                                                                                                                                                                                             |   |               |    |   |   |   |
|      Cash and cash equivalents                                                                                                                                                                     |   | $                  | 40,889  |   |   | $ | 23,684 |   |
|      Short-term investments in marketable securities                                                                                                                                               |   |               | 8,884   |   |   |   | 8,079 |   |
|      Accounts receivable, net of allowance for doubtful accounts of $800 and $600                                                                                                                  |   |               |    |   |   |   |   |   |
|          for 2010 and 2009, respectively                                                                                                                                       |   |               | 47,570  |   |   |   | 38,450 |   |
|      Prepaid expenses and other current assets                                                                                                                                                     |   |               | 18,613  |   |   |   | 15,594 |   |
|      Deferred tax assets, net                                                                                                                                                                      |   |               | 1,434   |   |   |   | 1,128 |   |
|         Total current assets before funds held for customers                                                                                                                        |   |               | 117,390 |   |   |   | 86,935 |   |
|      Funds held for customers                                                                                                                                                                      |   |               | 72,875  |   |   |   | 23,560 |   |
|         Total current assets                                                                                                                                                        |   |               | 190,265 |   |   |   | 110,495 |   |
| Property and equipment, net                                                                                                                                                                                                 |   |               | 18,075  |   |   |   | 19,496 |   |
| Capitalized software, net                                                                                                                                                                                                   |   |               | 3,115   |   |   |   | 4,463 |   |
| Goodwill                                                                                                                                                                                                                    |   |               | 3,025   |   |   |   | 3,198 |   |
| Long-term investments in marketable securities                                                                                                                                                                              |   |               | 433     |   |   |   | 1,444 |   |
| Other assets, net                                                                                                                                                                                                           |   |               | 11,656  |   |   |   | 12,298 |   |
| Long-term deferred tax assets, net                                                                                                                                                                                          |   |               | 22,988  |   |   |   | 19,736 |   |
|      Total assets                                                                                                                                                                                  |   | $                  | 249,557 |   |   | $ | 171,130 |   |
|                                                                                                                                                                                                                        |   |               |    |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                  |   |               |    |   |   |
| Current liabilities:                                                                                                                                                                                                        |   |               |    |   |   |   |   |   |
|      Accounts payable                                                                                                                                                                              |   | $                  | 4,683   |   |   | $ | 4,476 |   |
|      Accrued expenses                                                                                                                                                                              |   |               | 11,074  |   |   |   | 9,972 |   |
|      Current portion of deferred revenue                                                                                                                                                           |   |               | 71,808  |   |   |   | 60,980 |   |
|      Current portion of capital lease obligations                                                                                                                                                  |   |               | 2,551   |   |   |   | 1,897 |   |
|          Total current liabilities before customer funds obligations                                                                                                           |   |               | 90,116  |   |   |   | 77,325 |   |
|      Customer funds obligations                                                                                                                                                                    |   |               | 72,875  |   |   |   | 23,560 |   |
|          Total current liabilities                                                                                                                                             |   |               | 162,991 |   |   |   | 100,885 |   |
| Deferred revenue, net of current portion                                                                                                                                                                                    |   |               | 6,287   |   |   |   | 7,579 |   |
| Deferred rent                                                                                                                                                                                                               |   |               | 3,022   |   |   |   | 3,186 |   |
| Capital lease obligations, net of current portion                                                                                                                                                                           |   |               | 2,406   |   |   |   | 1,710 |   |
| Long-term income taxes payable                                                                                                                                                                                              |   |               | 1,866   |   |   |   | – |   |
|      Total liabilities                                                                                                                                                                             |   |               | 176,572 |   |   |   | 113,360 |   |
|                                                                                                                                                                                                                        |   |               |    |   |   |   |   |   |
| Commitments and contingencies (Note 16)                                                                                                                                                                                     |   |               | – |   |   |   | – |   |
| Stockholders’ equity:                                                                                                                                                                                                 |   |               |    |   |   |   |   |   |
|      Series A Junior Participating Preferred Stock, $.01 par value, 500,000 shares         authorized, no shares issued                               |   |               | – |   |   |   | – |   |
|      Preferred Stock, $.01 par value, 2,000,000 shares         authorized, no shares issued                                                           |   |               | – |   |   |   | – |   |
|      Common Stock, $.01 par value, 50,000,000 shares authorized, 29,027,277 and          27,620,384 shares issued in 2010 and 2009, respectively |   |               | 290     |   |   |   | 276 |   |
|      Additional paid-in capital                                                                                                                                                                    |   |               | 216,262 |   |   |   | 184,256 |   |
|      Accumulated other comprehensive income (loss)                                                                                                                                                 |   |               | 126     |   |   |   | (696 | ) |
|      Accumulated deficit                                                                                                                                                                           |   |               | (52,253 | ) |   |   | (54,410 | ) |
|                                                                                                                                                                                                                        |   |               | 164,425 |   |   |   | 129,426 |   |
| Treasury stock, at cost, 3,594,825 and 2,985,425 shares in 2010 and 2009, respectively                                                                                                                                      |   |               | (91,440 | ) |   |   | (71,656 | ) |
|      Total stockholders’ equity                                                                                                                                                              |   |               | 72,985  |   |   |   | 57,770 |   |
|      Total liabilities and stockholders’ equity                                                                                                                                              |   | $                  | 249,557 |   |   | $ | 171,130 |   |

----

Table of Contents

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                         |   | For the Years Ended December 31, |    |
|--------------------------------------------------------------|--------|----------------------------------|---------|
|                                                         |   | 2010                             |    |   | 2009 |   |   | 2008 |   |
| Revenues:                                                    |   |                             |    |   |   |   |   |   |   |
| Recurring                                                    |   | $                                | 170,905 |   |   | $ | 133,159 |   |   | $ | 106,198 |   |
| Services                                                     |   |                             | 55,368  |   |   |   | 58,996 |   |   |   | 60,535 |   |
| License                                                      |   |                             | 1,538   |   |   |   | 4,125 |   |   |   | 11,264 |   |
|    Total revenues                             |   |                             | 227,811 |   |   |   | 196,280 |   |   |   | 177,997 |   |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Cost of revenues:                                            |   |                             |    |   |   |   |   |   |   |   |   |   |
| Recurring                                                    |   |                             | 49,144  |   |   |   | 38,765 |   |   |   | 29,605 |   |
| Services                                                     |   |                             | 49,843  |   |   |   | 48,304 |   |   |   | 50,058 |   |
| License                                                      |   |                             | 255     |   |   |   | 750 |   |   |   | 1,795 |   |
|    Total cost of revenues                     |   |                             | 99,242  |   |   |   | 87,819 |   |   |   | 81,458 |   |
| Gross profit                                                 |   |                             | 128,569 |   |   |   | 108,461 |   |   |   | 96,539 |   |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                          |   |                             |    |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                          |   |                             | 58,374  |   |   |   | 52,810 |   |   |   | 47,193 |   |
| Research and development                                     |   |                             | 42,222  |   |   |   | 38,005 |   |   |   | 36,025 |   |
| General and administrative                                   |   |                             | 19,727  |   |   |   | 17,803 |   |   |   | 17,516 |   |
|    Total operating expenses                   |   |                             | 120,323 |   |   |   | 108,618 |   |   |   | 100,734 |   |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Operating income (loss)                                      |   |                             | 8,246   |   |   |   | (157 | ) |   |   | (4,195 | ) |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Other (expense) income:                                      |   |                             |    |   |   |   |   |   |   |   |   |   |
| Interest expense and other                                   |   |                             | (263    | ) |   |   | (90 | ) |   |   | (243 | ) |
| Other income, net                                            |   |                             | 188     |   |   |   | 162 |   |   |   | 857 |   |
|    Total other (expense) income, net          |   |                             | (75     | ) |   |   | 72 |   |   |   | 614 |   |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations before income taxes |   |                             | 8,171   |   |   |   | (85 | ) |   |   | (3,581 | ) |
| (Provision) benefit for income taxes                         |   |                             | (5,161  | ) |   |   | (721 | ) |   |   | 1,016 |   |
| Income (loss) from continuing operations                     |   |                             | 3,010   |   |   |   | (806 | ) |   |   | (2,565 | ) |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Loss from discontinued operations, net of income taxes       |   |                             | (853    | ) |   |   | (336 | ) |   |   | (332 | ) |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                            |   | $                                | 2,157   |   |   | $ | (1,142 | ) |   | $ | (2,897 | ) |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share:                             |   |                             |    |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from continuing operations                   |   | $                                | 0.12    |   |   | $ | (0.04 | ) |   | $ | (0.11 | ) |
| Loss from discontinued operations                            |   |                             | (0.03   | ) |   |   | (0.01 | ) |   |   | (0.01 | ) |
|    Total                                      |   | $                                | 0.09    |   |   | $ | (0.05 | ) |   | $ | (0.12 | ) |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share:                           |   |                             |    |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from continuing operations                   |   | $                                | 0.11    |   |   | $ | (0.04 | ) |   | $ | (0.11 | ) |
| Loss from discontinued operations                            |   |                             | (0.03   | ) |   |   | (0.01 | ) |   |   | (0.01 | ) |
|    Total                                      |   | $                                | 0.08    |   |   | $ | (0.05 | ) |   | $ | (0.12 | ) |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding:                         |   |                             |    |   |   |   |   |   |   |   |   |   |
| Basic                                                        |   |                             | 24,960  |   |   |   | 24,463 |   |   |   | 24,588 |   |
| Diluted                                                      |   |                             | 27,101  |   |   |   | 24,463 |   |   |   | 24,588 |   |
|                                                         |   |                             |    |   |   |   |   |   |   |   |   |   |

----

Table of Contents

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

|                                                                                                          |   |         |    |   |                        |   |    |                                         |   |   |               |   |    |           |    |   |                            |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------|-----------------------------|--------|---------|----------------------------------------------|--------|--------|--------------------|--------|---------|----------------|---------|--------|---------------------------------|--------|
|                                                                                                          |   | Common Stock |    |   | Additional Paid -in Capital |   |    | Accumulated Other Comprehensive(Loss) Income |   |   | AccumulatedDeficit |   |    | Treasury Stock |    |   | Total Stockholders’Equity |   |
|                                                                                                          |
|                                                                                                          |   | Shares       |    |   | Amount                      |   |    | Shares                                       |   |   | Amount             |   |
| Balance, December 31, 2007                                                                                    |   |         | 26,220  |   |                        | $      | 262     |                                         |   | $      | 143,913            |   |    | $              | (18     | )      |                            | $      | (50,371 | ) |   |   | 1,452 |   |   | $ | (32,808 | ) |   | $ | 60,978 |   |
| Net loss                                                                                                      |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | (2,897 | ) |   |   | – |   |   |   | – |   |   |   | (2,897 | ) |
| Unrealized gain on investments in marketable securities available-for-sale, net of tax                   |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | 15      |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 15 |   |
| Unrealized loss on foreign exchange, net of tax                                                               |   |         |    |   |                        |   |    |                                         |   |   |               |   |    |           | (999    | )      |                            |   |   |   |   |   |   |   |   |   |   |   |   |   | (999 | ) |
| Comprehensive loss                                                                                            |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | (3,881 | ) |
| Repurchases of Common Stock                                                                                   |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | – |   |   |   | 1,082 |   |   |   | (26,692 | ) |   |   | (26,692 | ) |
| Issuances of Common Stock from exercises of stock options                                                     |   |         | 576     |   |                        |   | 6       |                                         |   |   | 5,175              |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 5,181 |   |
| Non-cash stock-based compensation expense for stock options and restricted stock                         |   |         |    |   |                        |   |    |                                         | 15,486 |   |               |   | – |           |    |   |  –                   |   |   |   | – |   |   |   | – |   |   |   | 15,486 |   |
| Balance, December 31, 2008                                                                                    |   |         | 26,796  |   |                        | $      | 268     |                                         |   | $      | 164,574            |   |    | $              | (1,002  | )      |                            | $      | (53,268 | ) |   |   | 2,534 |   |   | $ | (59,500 | ) |   | $ | 51,072 |   |
| Net loss                                                                                                      |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | (1,142 | ) |   |   | – |   |   |   | – |   |   |   | (1,142 | ) |
| Unrealized gain on investments in marketable securities available-for-sale, net of tax                        |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | 1       |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 1 |   |
| Unrealized gain on foreign exchange, net of tax                                                               |   |         |    |   |                        |   |    |                                         |   |   |               |   |    |           | 305     |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   | 305 |   |
| Comprehensive loss                                                                                            |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | (836 | ) |
| Shares acquired to settle employee tax withholding liability                                                  |   |         | – |   |                        |   | – |                                         |   |   | (373               | )      |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | (373 | ) |
| Excess tax benefits from employee stock plan                                                                  |   |         | – |   |                        |   | – |                                         |   |   | 549                |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 549 |   |
| Repurchases of Common Stock                                                                                   |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | – |   |   |   | 451 |   |   |   | (12,156 | ) |   |   | (12,156 | ) |
| Issuances of Common Stock from exercises of stock options                                                     |   |         | 824     |   |                        |   | 8       |                                         |   |   | 6,270              |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 6,278 |   |
| Non-cash stock-based compensation expense for stock options, restricted stock and restricted stock units |   | –      |    |   | –                     |   |    |                                         | 13,236 |   |               |   | – |           |    |   |  –                   |   |   |   | – |   |   |   | – |   |   |   | 13,236 |   |
| Balance, December 31, 2009                                                                                    |   |         | 27,620  |   |                        | $      | 276     |                                         |   | $      | 184,256            |   |    | $              | (696    | )      |                            | $      | (54,410 | ) |   |   | 2,985 |   |   | $ | (71,656 | ) |   | $ | 57,770 |   |
| Net income                                                                                                    |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | 2,157 |   |   |   | – |   |   |   | – |   |   |   | 2,157 |   |
| Non-cash realized foreign currency translation adjustment, net of tax                                    |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | 912     |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 912 |   |
| Unrealized loss on investments in marketable securities available-for-sale, net of  tax             |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | (1      | )      |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | (1 | ) |
| Unrealized loss on foreign exchange, net of tax                                                               |   |         |    |   |                        |   |    |                                         |   |   |               |   |    |           | (89     | )      |                            |   |   |   |   |   |   |   |   |   |   |   |   |   | (89 | ) |
| Comprehensive income                                                                                          |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 2,979 |   |
| Shares acquired to settle employee tax withholding liability                                                  |   |         | – |   |                        |   | – |                                         |   |   | (2,797             | )      |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | (2,797 | ) |
| Excess tax benefits from employee stock plan                                                                  |   |         | – |   |                        |   | – |                                         |   |   | 6,671              |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 6,671 |   |
| Repurchases of Common Stock                                                                                   |   |         | – |   |                        |   | – |                                         |   |   | –            |   |    |           | – |   |                            |   | – |   |   |   | 610 |   |   |   | (19,784 | ) |   |   | (19,784 | ) |
| Issuances of Common Stock from exercises of stock options                                                     |   |         | 1,124   |   |                        |   | 11      |                                         |   |   | 14,883             |   |    |           | – |   |                            |   | – |   |   |   | – |   |   |   | – |   |   |   | 14,894 |   |
| Issuances of Common Stock from restricted stock releases                                                      |   |         | 283     |   |                        |   | 3       |                                         |   |   |               |   |    |           |    |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   | 3 |   |
| Non-cash stock-based compensation expense for stock options, restricted stock and restricted stock units      |   | –      |    |   | –                     |   |    |                                         | 13,249 |   |               |   | – |           |    |   |  –                   |   |   |   | – |   |   |   | – |   |   |   | 13,249 |   |
| Balance, December 31, 2010                                                                                    |   |         | 29,027  |   |                        | $      | 290     |                                         |   | $      | 216,262            |   |    | $              | 126     |   |                            | $      | (52,253 | ) |   |   | 3,595 |   |   | $ | (91,440 | ) |   | $ | 72,985 |   |

----

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                                                                                                                                                                                                                                                                  |   | For the Years Ended December 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                  |   | 2010                             |    |   | 2009 |   |   | 2008 |   |
| Cash flows from operating activities:                                                                                                                                                                                                                                                                                                                                 |   |                             |    |   |   |   |   |   |   |
| Net income (loss)                                                                                                                                                                                                                                                                                                                                                     |   | $                                | 2,157   |   |   | $ | (1,142 | ) |   | $ | (2,897 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by  operating activities:                                                                                                                                                                                                                                                                   |   |                             |    |   |   |   |   |   |   |   |   |   |
|    Depreciation and amortization                                                                                                                                                                                                                                                                                                                       |   |                             | 11,883  |   |   |   | 11,806 |   |   |   | 10,106 |   |
|    Provision for doubtful accounts                                                                                                                                                                                                                                                                                                                     |   |                             | 1,549   |   |   |   | 972 |   |   |   | 1,546 |   |
|    Non-cash stock-based compensation expense                                                                                                                                                                                                                                                                                                           |   |                             | 13,249  |   |   |   | 13,234 |   |   |   | 15,456 |   |
|    Non-cash realized loss on foreign currency translation adjustment                                                                                                                                                                                                                                                                                   |   |                             | 912     |   |   |   | – |   |   |   | – |   |
|    Income taxes                                                                                                                                                                                                                                                                                                                                        |   |                             | 4,982   |   |   |   | 561 |   |   |   | (1,205 | ) |
|    Excess tax benefits from employee stock plan                                                                                                                                                                                                                                                                                                        |   |                             | (6,671  | ) |   |   | (549 | ) |   |   | – |   |
|    Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                        |   |                             |    |   |   |   |   |   |   |   |   |   |
|       Accounts receivable                                                                                                                                                                                                                                                                                                               |   |                             | (10,669 | ) |   |   | (1,120 | ) |   |   | (5,190 | ) |
|       Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                         |   |                             | (3,019  | ) |   |   | 417 |   |   |   | (6,210 | ) |
|       Other assets                                                                                                                                                                                                                                                                                                                      |   |                             | 362     |   |   |   | (851 | ) |   |   | (2,488 | ) |
|       Accounts payable                                                                                                                                                                                                                                                                                                                  |   |                             | 207     |   |   |   | (2,724 | ) |   |   | 3,672 |   |
|       Accrued expenses and deferred rent                                                                                                                                                                                                                                                                                                |   |                             | 938     |   |   |   | (2,372 | ) |   |   | 1,199 |   |
|       Deferred revenue                                                                                                                                                                                                                                                                                                                  |   |                             | 9,536   |   |   |   | 5,065 |   |   |   | 11,786 |   |
|          Net cash provided by operating activities                                                                                                                                                                                                                                                                       |   |                             | 25,416  |   |   |   | 23,297 |   |   |   | 25,775 |   |
|                                                                                                                                                                                                                                                                                                                                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                                                                                                                                                                                                                                                                                 |   |                             |    |   |   |   |   |   |   |   |   |   |
| Purchases of marketable securities                                                                                                                                                                                                                                                                                                                                    |   |                             | (9,223  | ) |   |   | (10,040 | ) |   |   | (6,688 | ) |
| Maturities of marketable securities                                                                                                                                                                                                                                                                                                                                   |   |                             | 9,429   |   |   |   | 6,323 |   |   |   | 19,315 |   |
| Net purchases of securities with customer funds                                                                                                                                                                                                                                                                                                                       |   |                             | (49,315 | ) |   |   | (17,697 | ) |   |   | (5,863 | ) |
| Capitalized software                                                                                                                                                                                                                                                                                                                                                  |   |                             | – |   |   |   | (630 | ) |   |   | (2,230 | ) |
| Purchases of property and equipment                                                                                                                                                                                                                                                                                                                                   |   |                             | (4,980  | ) |   |   | (4,011 | ) |   |   | (12,206 | ) |
|          Net cash used in investing activities                                                                                                                                                                                                                                                                           |   |                             | (54,089 | ) |   |   | (26,055 | ) |   |   | (7,672 | ) |
|                                                                                                                                                                                                                                                                                                                                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                                                                                                                                                                                                                                                 |   |                             |    |   |   |   |   |   |   |   |   |   |
| Repurchases of Common Stock                                                                                                                                                                                                                                                                                                                                           |   |                             | (19,784 | ) |   |   | (12,156 | ) |   |   | (26,692 | ) |
| Net proceeds from issuances of Common Stock                                                                                                                                                                                                                                                                                                                           |   |                             | 14,897  |   |   |   | 6,278 |   |   |   | 5,182 |   |
| Excess tax benefits from employee stock plan                                                                                                                                                                                                                                                                                                                          |   |                             | 6,671   |   |   |   | 549 |   |   |   | – |   |
| Shares acquired to settle employee tax withholding liabilities                                                                                                                                                                                                                                                                                                        |   |                             | (2,797  | ) |   |   | (373 | ) |   |   | – |   |
| Principal payments on capital lease obligations                                                                                                                                                                                                                                                                                                                       |   |                             | (2,503  | ) |   |   | (2,445 | ) |   |   | (2,152 | ) |
| Repayments of borrowings of long-term debt                                                                                                                                                                                                                                                                                                                            |   |                             | – |   |   |   | (320 | ) |   |   | (572 | ) |
| Net increase in customer fund obligations                                                                                                                                                                                                                                                                                                                             |   |                             | 49,315  |   |   |   | 17,697 |   |   |   | 5,863 |   |
|          Net cash provided by (used in) financing activities                                                                                                                                                                                                                                                             |   |                             | 45,799  |   |   |   | 9,230 |   |   |   | (18,371 | ) |
|                                                                                                                                                                                                                                                                                                                                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash                                                                                                                                                                                                                                                                                                                               |   |                             | 79      |   |   |   | 12 |   |   |   | 6 |   |
| Net increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                  |   |                             | 17,205  |   |   |   | 6,484 |   |   |   | (262 | ) |
| Cash and cash equivalents, beginning of year                                                                                                                                                                                                                                                                                                                          |   |                             | 23,684  |   |   |   | 17,200 |   |   |   | 17,462 |   |
| Cash and cash equivalents, end of year                                                                                                                                                                                                                                                                                                                                |   | $                                | 40,889  |   |   | $ | 23,684 |   |   | $ | 17,200 |   |
|                                                                                                                                                                                                                                                                                                                                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                                                                                                                                                                                                                                                                                                     |   |                             |    |   |   |   |   |   |   |   |   |   |
|    Cash paid for interest                                                                                                                                                                                                                                                                                                                              |   | $                                | 218     |   |   | $ | 149 |   |   | $ | 85 |   |
|    Cash paid for taxes                                                                                                                                                                                                                                                                                                                                 |   | $                                | 203     |   |   | $ | 175 |   |   | $ | 332 |   |
|                                                                                                                                                                                                                                                                                                                                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of non-cash investing and financing activities (in thousands):                                                                                                                                                                                                                                                                                |   |
| - Ultimate entered into capital lease obligations to acquire new equipment totaling $3,852, $2,499 and $1,712 in 2010, 2009 and 2008, respectively                                                                                                                                                                                                                    |   |
| - Ultimate included in capitalized software in our consolidated balance sheet a total of $2 and $30 in stock-based compensation expense related to capitalized software at December 31, 2009 and 2008, respectively. There was no stock-based compensation related to capitalized software included in our consolidated balance sheet at December 31, 2010. |   |
| - Ultimate entered into an agreement to purchase source code from a third-party vendor for $2.0 million, of which $0.5 million was paid during 2009 and $1.5 was paid during 2008. The amount owed under the agreement was fully paid in 2009.                                                                                                              |   |
| - Ultimate had adjustments of $173, $701 and $1,005 between goodwill and other comprehensive loss (related to foreign currency translation adjustments) during 2010, 2009 and 2008, respectively.                                                                                                                                                                |   |

----

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

----

Table of Contents

----

Table of Contents

| ·   | persuasive evidence of an arrangement exists; |
|--------------------|-----------------------------------------------|

| ·   | delivery has occurred; |
|--------------------|------------------------|

| ·   | the fees are fixed and determinable; and |
|--------------------|------------------------------------------|

| ·   | collection is considered probable. |
|--------------------|------------------------------------|

----

Table of Contents

----

Table of Contents

----

Table of Contents

|                                                       |   | For the Years Ended December 31, |   |
|------------------------------------------------------------|--------|----------------------------------|--------|
|                                                       |   | 2010                             |   |   | 2009 |   |   | 2008 |   |
|                                                       |   |                             |   |   |   |   |   |   |   |
| Total revenues                                             |   | $                                | 51     |   |   | $ | 299 |   |   | $ | 575 |   |
|                                                       |   |                             |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |                             |   |   |   |   |   |   |   |   |   |   |
| Pretax loss from UK Subsidiary operations                  |   | $                                | (85    | ) |   | $ | (472 | ) |   | $ | (475 | ) |
| Loss from disposal of UK Subsidiary (primarily for foreign |   |                             |   |   |   |   |   |   |   |   |   |   |
|    currency translation adjustment)         |   |                             | (912   | ) |   |   | – |   |   |   | – |   |
| Pretax loss from discontinued operations                   |   |                             | (997   | ) |   |   | (472 | ) |   |   | (475 | ) |
| Income tax benefit                                         |   |                             | 144    |   |   |   | 136 |   |   |   | 143 |   |
| Loss from discontinued operations, net of                  |   |                             |   |   |   |   |   |   |   |   |   |   |
|    income taxes                             |   | $                                | (853   | ) |   | $ | (336 | ) |   | $ | (332 | ) |
|                                                       |   |                             |   |   |   |   |   |   |   |   |   |   |

----

Table of Contents

|                               |   | As of December 31, 2010 |    |   | As of December 31, 2009 |   |
|------------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                               |   |                    |    |   | Net                     |   |   |   |   |   |   |   |   | Net |   |   |   |   |
|                               |   | Amortized               |    |   | Unrealized              |   |   | Fair |   |   | Amortized |   |   | Unrealized |   |   | Fair |   |
|                               |   | Cost                    |    |   | Gain                    |   |   | Value |   |   | Cost |   |   | Gain |   |   | Value |   |
|                               |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate debentures – bonds |   | $                       | 2,903   |   |                    | $      | 4 |   |   | $ | 2,907 |   |   | $ | 3,025 |   |   | $ | 3 |   |   | $ | 3,028 |   |
| Commercial paper                   |   |                    | 2,599   |   |                    |   | – |   |   |   | 2,599 |   |   |   | 1,499 |   |   |   | – |   |   |   | 1,499 |   |
| U.S. Agency bonds                  |   |                    | 1,513   |   |                    |   | 1 |   |   |   | 1,514 |   |   |   | 1,407 |   |   |   | 1 |   |   |   | 1,408 |   |
| U.S. Treasury bills                |   |                    | 1,504   |   |                    |   | 2 |   |   |   | 1,506 |   |   |   | 1,995 |   |   |   | 2 |   |   |   | 1,997 |   |
| U.S. Treasury bonds                |   |                    | – |   |                    |   | – |   |   |   | – |   |   |   | 501 |   |   |   | – |   |   |   | 501 |   |
| Non U.S. government bond           |   |                    | 301     |   |                    |   | – |   |   |   | 301 |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Certificates of deposit            |   |                    | 490     |   |                    |   | – |   |   |   | 490 |   |   |   | 1,090 |   |   |   | – |   |   |   | 1,090 |   |
| Total investments                  |   | $                       | 9,310   |   |                    | $      | 7 |   |   | $ | 9,317 |   |   | $ | 9,517 |   |   | $ | 6 |   |   | $ | 9,523 |   |

|                    |   | As of December 31, 2010 |   |
|-------------------------|--------|-------------------------|--------|
|                    |   | Amortized               |   |   | Fair |   |
|                    |   | Cost                    |   |   | Value |   |
|                    |   |                    |   |   |   |   |
| Due in one year or less |   | $                       | 8,877  |   |   | $ | 8,884 |   |
| Due after one year      |   |                    | 433    |   |   |   | 433 |   |
| Total                   |   | $                       | 9,310  |   |   | $ | 9,317 |   |

|   | Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 2: | Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. |
|--------|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3: | Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|                           |   | As of December 31, 2010 |    |   | As of December 31, 2009 |   |
|--------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                           |   |                    |    |   | Quoted                  |   |   |   |   |   |   |   |   |   |   |   | Quoted |   |   |   |   |   |   |   |
|                           |   |                    |    |   | Prices in               |   |   | Other |   |   | Un- |   |   |   |   |   | Prices in |   |   | Other |   |   | Un- |   |
|                           |   |                    |    |   | Active                  |   |   | Observable |   |   | Observable |   |   |   |   |   | Active |   |   | Observable |   |   | Observable |   |
|                           |   |                    |    |   | Markets                 |   |   | Inputs |   |   | Inputs |   |   |   |   |   | Markets |   |   | Inputs |   |   | Inputs |   |
|                           |   | Total                   |    |   | (Level 1)               |   |   | (Level 2) |   |   | (Level 3) |   |   | Total |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| Corporate debentures and bonds |   | $                       | 2,907   |   |                    | $      | – |   |   | $ | 2,907 |   |   | $ | – |   |   | $ | 3,028 |   |   | $ | – |   |   | $ | 3,028 |   |   | $ | – |   |
| Commercial paper               |   |                    | 2,599   |   |                    |   | – |   |   |   | 2,599 |   |   |   | – |   |   |   | 1,499 |   |   |   | – |   |   |   | 1,499 |   |   |   | – |   |
| U.S. Agency bonds              |   |                    | 1,514   |   |                    |   | – |   |   |   | 1,514 |   |   |   |   |   |   |   | 1,408 |   |   |   | – |   |   |   | 1,408 |   |   |   |   |   |
| U.S. Treasury bills            |   |                    | 1,506   |   |                    |   | – |   |   |   | 1,506 |   |   |   |   |   |   |   | 1,997 |   |   |   | – |   |   |   | 1,997 |   |   |   |   |   |
| U.S. Treasury bond             |   |                    | – |   |                    |   | – |   |   |   | – |   |   |   |   |   |   |   | 501 |   |   |   | – |   |   |   | 501 |   |   |   |   |   |
| International government bond  |   |                    | 301     |   |                    |   | – |   |   |   | 301 |   |   |   |   |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   |   |   |
| Certificates of deposit        |   |                    | 490     |   |                    |   | 490 |   |   |   | – |   |   |   | – |   |   |   | 1,090 |   |   |   | 1,090 |   |   |   | – |   |   |   | – |   |
| Total                          |   | $                       | 9,317   |   |                    | $      | 490 |   |   | $ | 8,827 |   |   | $ | – |   |   | $ | 9,523 |   |   | $ | 1,090 |   |   | $ | 8,433 |   |   | $ | – |   |

----

Table of Contents

|                                                       |   | As of December 31, |   |
|------------------------------------------------------------|--------|--------------------|--------|
|                                                       |   | 2010               |   |   | 2009 |   |
| Computer equipment                                         |   | $                  | 66,735 |   |   | $ | 59,234 |   |
| Leasehold improvements                                     |   |               | 9,134  |   |   |   | 8,307 |   |
| Furniture and fixtures                                     |   |               | 3,960  |   |   |   | 3,592 |   |
| Building                                                   |   |               | 929    |   |   |   | 929 |   |
| Land                                                       |   |               | 655    |   |   |   | 655 |   |
| Property and equipment                                     |   |               | 81,413 |   |   |   | 72,717 |   |
| Less:  accumulated depreciation and amortization |   |               | 63,338 |   |   |   | 53,221 |   |
| Property and equipment, net                                |   | $                  | 18,075 |   |   | $ | 19,496 |   |

|                                      |   | As of December 31, |   |
|-------------------------------------------|--------|--------------------|--------|
|                                      |   | 2010               |   |   | 2009 |   |
| Computer equipment                        |   | $                  | 22,799 |   |   | $ | 18,946 |   |
| Less:  accumulated amortization |   |               | 19,457 |   |   |   | 16,936 |   |
|                                      |   | $                  | 3,342  |   |   | $ | 2,010 |   |

----

Table of Contents

|                                                                    |   | For the Years EndedDecember 31, |   |
|-------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                    |   | 2010                            |   |   | 2009 |   |   | 2008 |   |
| Basic weighted average shares outstanding                               |   |                            | 24,960 |   |   |   | 24,463 |   |   |   | 24,588 |   |
| Effect of dilutive equity instruments                                   |   |                            | 2,141  |   |   |   | – |   |   |   | – |   |
| Dilutive shares outstanding                                             |   |                            | 27,101 |   |   |   | 24,463 |   |   |   | 24,588 |   |
|                                                                    |   |                            |   |   |   |   |   |   |   |   |   |   |
| Options to purchase shares of Common Stock and other stock-based        |   |                            |   |   |   |   |   |   |   |   |   |   |
| awards outstanding which are not included in the calculation of diluted |   |                            |   |   |   |   |   |   |   |   |   |   |
| income (loss) per share because their impact is anti-dilutive           |   |                            | 25     |   |   |   | 6,161 |   |   |   | 5,927 |   |

----

Table of Contents

|                                                                                                                                                                   |   | For the Years Ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                                                                                                                   |   | December 31,        |   |
|                                                                                                                                                                   |   | 2010                |   |   | 2009 |   |   | 2008 |   |
|                                                                                                                                                                   |   |                |   |   |   |   |   |   |   |
| Net income (loss) (1)                                                                                                                                                  |   | $                   | 2,157  |   |   | $ | (1,142 | ) |   | $ | (2,897 | ) |
|    Other comprehensive income (loss):                                                                                                                   |   |                |   |   |   |   |   |   |   |   |   |   |
|       Realized foreign currency translation adjustment       adjustment      |   |                | 912    |   |   |   |   |   |   |   |   |   |
|       Unrealized (loss) gain on investments in                                                                                                |   |                |   |   |   |   |   |   |   |   |   |   |
|          marketable securities available-for-sale                                                                         |   |                | (1     | ) |   |   | 1 |   |   |   | 15 |   |
|       Unrealized (loss) gain on foreign currency                                                                                         |   |                |   |   |   |   |   |   |   |   |   |   |
|          translation adjustments                                                                                          |   |                | (89    | ) |   |   | 305 |   |   |   | (999 | ) |
| Comprehensive income (loss)                                                                                                                                            |   | $                   | 2,979  |   |   | $ | (836 | ) |   |  $ | (3,881 | ) |

| (1)   | The amount attributable to the UK Subsidiary and accumulated in the foreign currency translation adjustment component of equity became realized in the consolidated statements of operations during the year ended December 31, 2010, the period in which discontinuation of the operations for the UK Subsidiary was completed. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|                                                     |   | As of December 31, |   |
|----------------------------------------------------------|--------|--------------------|--------|
|                                                     |   | 2010               |   |   | 2009 |   |
|                                                     |   |               |   |   |   |   |
| Goodwill, beginning balance                              |   | $                  | 3,198  |   |   | $ | 2,906 |   |
|    Impact of foreign currency translation |   |               | (173   | ) |   |   | 292 |   |
| Goodwill, ending balance                                 |   | $                  | 3,025  |   |   | $ | 3,198 |   |

|                               |   | Estimated    |    |   | Balance as of     |   |    | Balance as of     |   |
|------------------------------------|--------|--------------|---------|--------|-------------------|--------|---------|-------------------|--------|
|                               |   | Useful Lives |    |   | December 31, 2010 |   |    | December 31, 2009 |   |
| Acquired intangible assets:        |   |         |    |   |              |   |    |              |   |
|   Developed technology   |   | 1 year       |    |   | $                 | 82     |    |              | $      | 192 |   |
|   Customer relationships |   |         | – |   |              |   | – |              |   |   | 170 |   |

| Year  |   | Amount |   |
|-------|--------|--------|--------|
| 2011  |   | $      | 82     |   |
| Total |   | $      | 82     |   |

----

Table of Contents

|                                                               |   | As of December 31, |   |
|--------------------------------------------------------------------|--------|--------------------|--------|
|                                                               |   | 2010               |   |   | 2009 |   |
| Sales commissions and performance-based bonuses                    |   | $                  | 4,420  |   |   | $ | 2,974 |   |
| Other items individually less than 5% of total current liabilities |   |               | 6,654  |   |   |   | 6,998 |   |
|                                                               |   | $                  | 11,074 |   |   | $ | 9,972 |   |
|                                                               |   |               |   |   |   |   |   |   |

| Year                                                                                |   | Amount |   |
|-------------------------------------------------------------------------------------|--------|--------|--------|
| 2011                                                                                |   | $      | 2,717  |   |
| 2012                                                                                |   |   | 1,806  |   |
| 2013                                                                                |   |   | 678    |   |
|                                                                                |   |   | 5,201  |   |
| Less amount representing interest                                                   |   |   | (244   | ) |
| Lease obligations reflected as current ($2,551) and  non-current ($2,406) |   | $      | 4,957  |   |

|                                    |   | For the Year Ended December 31, |   |
|-----------------------------------------|--------|---------------------------------|--------|
|                                    |   | 2010                            |   |   | 2009 |   |   | 2008 |   |
| Current taxes:                          |   |                            |   |   |   |   |   |   |   |
|     Federal         |   | $                               | (7,276 | ) |   | $ | — |   |   | $ | — |   |
|     State and Local |   |                            | (1,408 | ) |   |   | (24 | ) |   |   | (45 | ) |
|     Foreign         |   |                            | (102   | ) |   |   | — |   |   |   | — |   |
| Deferred taxes, net                     |   |                            |   |   |   |   |   |   |   |   |   |   |
|     Federal         |   |                            | 3,094  |   |   |   | (369 | ) |   |   | 931 |   |
|     State and Local |   |                            | 564    |   |   |   | (29 | ) |   |   | 337 |   |
|     Foreign         |   |                            | (33    | ) |   |   | (299 | ) |   |   | (207 | ) |
| Income tax (provision) benefit, net     |   | $                               | (5,161 | ) |   | $ | (721 | ) |   | $ | 1,016 |   |

|                                                                 |   | For the Year Ended December 31, |   |
|----------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                 |   | 2010                            |   |   | 2009 |   |   | 2008 |   |
| Income tax (provision) benefit expense at statutory Federal tax rate |   | $                               | (2,860 | ) |   | $ | 30 |   |   | $ | 1,254 |   |
| State and local income taxes                                         |   |                            | (548   | ) |   |   | (20 | ) |   |   | 169 |   |
| Non deductible expenses                                              |   |                            | (1,782 | ) |   |   | (662 | ) |   |   | (380 | ) |
| Change in tax rates                                                  |   |                            | 27     |   |   |   | 34 |   |   |   | (2 | ) |
| Change in foreign valuation allowance                                |   |                            | 85     |   |   |   | (103 | ) |   |   | (65 | ) |
| Other, net                                                           |   |                            | (83    | ) |   |   | – |   |   |   | 40 |   |
| Income tax (provision) benefit, net                                  |   | $                               | (5,161 | ) |   | $ | (721 | ) |   | $ | 1,016 |   |

----

Table of Contents

|                                                |   | As of December 31, |    |
|-----------------------------------------------------|--------|--------------------|---------|
|                                                |   | 2010               |    |   | 2009 |   |   | 2008 |   |
|                                                |   |               |    |   |   |   |   |   |   |
| Deferred tax assets:                                |   |               |    |   |   |   |   |   |   |
|    Net operating losses              |   | $                  | – |   |   | $ | 4,886 |   |   | $ | 6,515 |   |
|    Tax credit carryforwards          |   |               | 127     |   |   |   | 224 |   |   |   | 224 |   |
|    Deferred revenue                  |   |               | 3,362   |   |   |   | 3,849 |   |   |   | 7,515 |   |
|    Accruals not currently deductible |   |               | 239     |   |   |   | 213 |   |   |   | 129 |   |
|    Allowance for doubtful accounts   |   |               | 292     |   |   |   | 233 |   |   |   | 272 |   |
|    Charitable contributions          |   |               | 264     |   |   |   | 234 |   |   |   | 251 |   |
|    Stock-based compensation          |   |               | 21,258  |   |   |   | 17,608 |   |   |   | 13,168 |   |
|    Deferred rent adjustment          |   |               | 1,171   |   |   |   | 1,235 |   |   |   | 1,188 |   |
| Gross deferred tax assets                           |   |               | 26,713  |   |   |   | 28,482 |   |   |   | 29,262 |   |
| Less valuation allowance                            |   |               | – |   |   |   | (4,972 | ) |   |   | (5,657 | ) |
| Deferred tax assets                                 |   | $                  | 26,713  |   |   | $ | 23,510 |   |   | $ | 23,605 |   |
|                                                |   |               |    |   |   |   |   |   |   |   |   |   |
| Deferred tax liabilities:                           |   |               |    |   |   |   |   |   |   |   |   |   |
|    Property and equipment            |   | $                  | (1,836  | ) |   | $ | (1,391 | ) |   | $ | (1,057 | ) |
|    Acquired intangible assets        |   |               | (32     | ) |   |   | (141 | ) |   |   | (227 | ) |
|    Software development costs        |   |               | (415    | ) |   |   | (1,099 | ) |   |   | (1,417 | ) |
|    Other, net                        |   |               | (8      | ) |   |   | (15 | ) |   |   | (28 | ) |
| Gross deferred tax liabilities                      |   |               | (2,291  | ) |   |   | (2,646 | ) |   |   | (2,729 | ) |
|                                                |   |               |    |   |   |   |   |   |   |   |   |   |
| Net deferred tax assets                             |   | $                  | 24,422  |   |   | $ | 20,864 |   |   | $ | 20,876 |   |

----

Table of Contents

|                                  |   | December 31, |    |
|---------------------------------------|--------|--------------|---------|
|                                  |   | 2010         |    |   | 2009 |   |   | 2008 |   |
|                                  |   |         |    |   |   |   |   |   |   |
| Balance at January 1,                 |   | $            | – |   |   | $ | – |   |   | $ | – |   |
| Tax positions taken in prior period   |   |         |    |   |   |   |   |   |   |   |   |   |
|    Gross increases     |   |         | – |   |   |   | – |   |   |   | – |   |
|    Gross decreases     |   |         | – |   |   |   | – |   |   |   | – |   |
| Tax positions taken in current period |   |         |    |   |   |   |   |   |   |   |   |   |
|    Gross increases     |   |         | 1,866   |   |   |   | – |   |   |   | – |   |
| Settlements                           |   |         | – |   |   |   | – |   |   |   | – |   |
| Statute expiration                    |   |         | – |   |   |   | – |   |   |   | – |   |
| Balance at December 31,               |   | $            | 1,866   |   |   | $ | – |   |   | $ | – |   |
|                                  |   |         |    |   |   |   |   |   |   |   |   |   |

|                       |   | For the Years Ended December 31, |   |
|----------------------------|--------|----------------------------------|--------|
|                       |   | 2010                             |   |   | 2009 |   |   | 2008 |   |
|                       |   |                             |   |   |   |   |   |   |   |
| Cost of recurring revenues |   | $                                | 914    |   |   | $ | 689 |   |   | $ | 871 |   |
| Cost of services revenues  |   |                             | 1,238  |   |   |   | 1,316 |   |   |   | 1,988 |   |
| Cost of license revenues   |   |                             | -      |   |   |   | - |   |   |   | 12 |   |
| Sales and marketing        |   |                             | 6,678  |   |   |   | 7,059 |   |   |   | 7,389 |   |
| Research and development   |   |                             | 1,218  |   |   |   | 1,228 |   |   |   | 1,570 |   |
| General and administrative |   |                             | 3,201  |   |   |   | 2,942 |   |   |   | 3,626 |   |
| Total SBC                  |   | $                                | 13,249 |   |   | $ | 13,234 |   |   | $ | 15,456 |   |

----

Table of Contents

|                                      |   |                                 |    |
|-------------------------------------------|--------|--------------------------------------|---------|
|                                      |   | For the Year Ended December 31, 2008 |    |
| Expected term (in years)                  |   |                                 | 5.2     |   |
| Volatility                                |   |                                 | 41      | % |
| Interest rate                             |   |                                 | 2.78    | % |
| Dividend yield                            |   |                                 | – |   |
| Weighted average fair value at grant date |   | $                                    | 11.17   |   |

----

Table of Contents

----

Table of Contents

|                             |   |   |    |   |           |   |    | Weighted        |   |   |      |   |
|----------------------------------|--------|--------|---------|--------|----------------|--------|---------|-----------------|--------|--------|-----------|--------|
|                             |   |   |    |   |           |   |    | Average         |   |   |      |   |
|                             |   |   |    |   | Weighted       |   |    | Remaining       |   |   | Aggregate |   |
|                             |   |   |    |   | Average        |   |    | Contractual     |   |   | Intrinsic |   |
| Options                          |   | Shares |    |   | Exercise Price |   |    | Term (in Years) |   |   | Value     |   |
| Outstanding at December 31, 2007 |   |   | 4,547   |   |           | $      | 13.31   |            |   |   | –   |   |   |   | – |   |
|   Granted              |   |   | 1,066   |   |           |   | 28.33   |            |   |   | –   |   |   |   | – |   |
|   Exercised            |   |   | (576    | )      |           |   | 8.97    |            |   |   | –   |   |   |   | – |   |
|   Forfeited or expired |   |   | (73     | )      |           |   | 26.54   |            |   |   | –   |   |   |   | – |   |
| Outstanding at December 31, 2008 |   |   | 4,964   |   |           | $      | 16.86   |            |   |   | 6.02      |   |   | $ | 16,140 |   |
|                             |   |   |    |   |           |   |    |            |   |   |      |   |   |   |   |   |
| Exercisable at December 31, 2008 |   |   | 3,792   |   |           | $      | 13.73   |            |   |   | 5.17      |   |   | $ | 16,140 |   |
|                             |   |   |    |   |           |   |    |            |   |   |      |   |   |   |   |   |
| Outstanding at December 31, 2008 |   |   | 4,964   |   |           | $      | 16.86   |            |   |   | –   |   |   |   | – |   |
|   Granted              |   |   | – |   |           |   | – |            |   |   | –   |   |   |   | – |   |
|   Exercised            |   |   | (668    | )      |           |   | 9.40    |            |   |   | –   |   |   |   | – |   |
|   Forfeited or expired |   |   | (131    | )      |           |   | 24.94   |            |   |   | –   |   |   |   | – |   |
| Outstanding at December 31, 2009 |   |   | 4,165   |   |           | $      | 17.79   |            |   |   | 5.55      |   |   | $ | 49,687 |   |
|                             |   |   |    |   |           |   |    |            |   |   |      |   |   |   |   |   |
| Exercisable at December 31, 2009 |   |   | 3,576   |   |           | $      | 16.12   |            |   |   | 5.15      |   |   | $ | 48,360 |   |
|                             |   |   |    |   |           |   |    |            |   |   |      |   |   |   |   |   |
| Outstanding at December 31, 2009 |   |   | 4,165   |   |           | $      | 17.79   |            |   |   | –   |   |   |   | – |   |
|   Granted              |   |   | – |   |           |   | – |            |   |   | –   |   |   |   | – |   |
|   Exercised            |   |   | (1,124  | )      |           |   | 13.25   |            |   |   | –   |   |   |   | – |   |
|   Forfeited or expired |   |   | (26     | )      |           |   | 27.58   |            |   |   | –   |   |   |   | – |   |
| Outstanding at December 31, 2010 |   |   | 3,015   |   |           | $      | 19.40   |            |   |   | 5.07      |   |   | $ | 88,136 |   |
|                             |   |   |    |   |           |   |    |            |   |   |      |   |   |   |   |   |
| Exercisable at December 31, 2010 |   |   | 2,807   |   |           | $      | 18.71   |            |   |   | 4.90      |   |   | $ | 83,989 |   |

----

Table of Contents

|                             |   | Restricted Stock |    |   |       |   |
|----------------------------------|--------|------------------|---------|--------|------------|--------|
|                             |   |             |    |   | Weighted   |   |   |   |   |
|                             |   |             |    |   | Average    |   |   |  Restricted |   |
|                             |   |             |    |   | Grant Date |   |   |  Stock Units |   |
|                             |   | Shares           |    |   | Fair Value |   |   | Shares |   |
| Outstanding at December 31, 2007 |   |             | 911     |   |       | $      | 27.11 |   |   |   | 45 |   |
|   Granted              |   |             | 450     |   |       |   | 14.94 |   |   |   | – |   |
|   Vested               |   |             | – |   |       |   | – |   |   |   | – |   |
|   Forfeited or expired |   |             | – |   |       |   | – |   |   |   | – |   |
| Outstanding at December 31, 2008 |   |             | 1,361   |   |       | $      | 23.09 |   |   |   | 45 |   |
|   Granted              |   |             | 212     |   |       |   | 26.55 |   |   |   | 211 |   |
|   Vested               |   |             | – |   |       |   | – |   |   |   | – |   |
|   Released             |   |             | (169    | )      |       |   | 16.86 |   |   |   |   |   |
|   Forfeited or expired |   |             | – |   |       |   | – |   |   |   | (9 | ) |
| Outstanding at December 31, 2009 |   |             | 1,404   |   |       | $      | 24.36 |   |   |   | 247 |   |
|   Granted              |   |             | 166     |   |       |   | 40.51 |   |   |   | 200 |   |
|   Vested               |   |             | – |   |       |   | – |   |   |   | – |   |
|   Released             |   |             | (263    | )      |       |   | 23.16 |   |   |   | (95 | ) |
|   Forfeited or expired |   |             | – |   |       |   | – |   |   |   | (16 | ) |
| Outstanding at December 31, 2010 |   |             | 1,307   |   |       | $      | 26.64 |   |   |   | 336 |   |

|                    |               |   | Options Outstanding |   |      | Options Exercisable                              |   |
|-------------------------|--------------------|--------|---------------------|--------|-----------|--------------------------------------------------|--------|
| Range of ExercisePrices |               |   | Number              |   |      | Weighted-AverageRemainingContractual Life(Years) |   |   | Weighted-AverageExercise Price |   |   | Number |   |   | Weighted-AverageExercise Price |   |
| $                       | 0.89—$3.87   |   |                |   | 302,894   |                                             |   |   | 1.73 |   |   | $ | 2.93 |   |   |   | 302,894 |   |   | $ | 2.93 |   |
| $                       | 4.05—$9.40   |   |                |   | 353,441   |                                             |   |   | 2.59 |   |   |   | 7.47 |   |   |   | 353,441 |   |   |   | 7.47 |   |
| $                       | 10.54—$13.05 |   |                |   | 312,600   |                                             |   |   | 3.57 |   |   |   | 12.40 |   |   |   | 312,600 |   |   |   | 12.40 |   |
| $                       | 13.63—$16.68 |   |                |   | 318,374   |                                             |   |   | 5.09 |   |   |   | 14.96 |   |   |   | 302,875 |   |   |   | 14.97 |   |
| $                       | 17.11—$21.60 |   |                |   | 336,381   |                                             |   |   | 5.16 |   |   |   | 20.40 |   |   |   | 336,381 |   |   |   | 20.40 |   |
| $                       | 24.20—$24.20 |   |                |   | 104,294   |                                             |   |   | 5.81 |   |   |   | 24.20 |   |   |   | 104,294 |   |   |   | 24.20 |   |
| $                       | 24.30—$24.30 |   |                |   | 313,600   |                                             |   |   | 6.03 |   |   |   | 24.30 |   |   |   | 313,600 |   |   |   | 24.30 |   |
| $                       | 26.72—$27.02 |   |                |   | 46,675    |                                             |   |   | 5.92 |   |   |   | 26.86 |   |   |   | 46,675 |   |   |   | 26.86 |   |
| $                       | 28.41—$28.41 |   |                |   | 465,519   |                                             |   |   | 7.06 |   |   |   | 28.41 |   |   |   | 340,569 |   |   |   | 28.41 |   |
| $                       | 30.34—$34.89 |   |                |   | 461,787   |                                             |   |   | 7.15 |   |   |   | 32.18 |   |   |   | 394,163 |   |   |   | 32.14 |   |
| $                       | 0.89—$34.89  |   |                |   | 3,015,565 |                                             |   |   | 5.07 |   |   | $ | 19.40 |   |   |   | 2,807,492 |   |   | $ | 18.71 |   |

----

Table of Contents

| Year   |   |   | Exercise Price of Options Granted (1) (2) (3) |   |   | Number of Options Granted |    |   | Market Value of Restricted Stock Awards Granted |   |   | Number of Restricted Stock Awards Granted |   |
|--------|--------|--------|----------------------------------------------------|--------|--------|---------------------------|---------|--------|-------------------------------------------------|--------|--------|-------------------------------------------|--------|
|   |   |   |                                               |   |   |                      |    |   |                                            |   |   |                                      |   |
|   |   |   |                                               |   |   |                      |    |   |                                            |   |   |                                      |   |
| 2008   |   | $      | 28.41                                              |   |   |                      | 20,000  |   |                                            | $      | 28.41  |                                      |   |   | 2,195 |   |
|   |   |   | 32.54                                              |   |   |                      | 23,750  |   |                                            |   | 32.54  |                                      |   |   | 1,920 |   |
|   |   |   | 32.39                                              |   |   |                      | 23,750  |   |                                            |   | 32.39  |                                      |   |   | 1,925 |   |
|   |   |   | 14.72                                              |   |   |                      | 23,750  |   |                                            |   | 14.72  |                                      |   |   | 4,245 |   |
|   |   |   |                                               |   |   |                      |    |   |                                            |   |   |                                      |   |   |   |   |
| 2009   |   |   | –                                            |   |   |                      | – |   |                                            | $      | 14.43  |                                      |   |   | 10,580 |   |
|   |   |   | –                                            |   |   |                      | – |   |                                            |   | 18.75  |                                      |   |   | 9,580 |   |
|   |   |   | –                                            |   |   |                      | – |   |                                            |   | 26.97  |                                      |   |   | 8,565 |   |
|   |   |   | –                                            |   |   |                      | – |   |                                            |   | 27.63  |                                      |   |   | 8,510 |   |
|   |   |   |                                               |   |   |                      |    |   |                                            |   |   |                                      |   |   |   |   |
| 2010   |   |   | –                                            |   |   |                      | – |   |                                            | $      | 30.29  |                                      |   |   | 8,310 |   |
|   |   |   | –                                            |   |   |                      | – |   |                                            |   | 31.84  |                                      |   |   | 8,210 |   |
|   |   |   | –                                            |   |   |                      | – |   |                                            |   | 33.33  |                                      |   |   | 8,125 |   |
|   |   |   | –                                            |   |   |                      | – |   |                                            |   | 42.03  |                                      |   |   | 6,171 |   |
|   |   |   |                                               |   |   |                      |    |   |                                            |   |   |                                      |   |   |   |   |

|   |  (1) | All Options granted during 2008, were valued on the date of grant in accordance with ASC 718.  These Options were granted in lieu of cash retainers and Board meeting fees. |
|--------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Options granted during 2008 became exercisable immediately.  All such Options were valued on the date of grant in accordance with the requirements prescribed in ASC 718.  These Options were granted in lieu of cash retainers and Board meeting fees. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | The non-cash compensation expense, recognized in the consolidated statements of operations, related to the Board Options and Restricted Stock Awards determined pursuant to the application of ASC 718 for the years ended December 31, 2010, 2009 and 2008 was $427,000, $188,000 and $1,052,000, respectively, and is included in general and administrative expenses. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| Year       |   | Amount |   |
|------------|--------|--------|--------|
| 2011       |   | $      | 4,026  |   |
| 2012       |   |   | 4,054  |   |
| 2013       |   |   | 3,465  |   |
| 2014       |   |   | 3,281  |   |
| 2015       |   |   | 2,669  |   |
| Thereafter |   |   | 3,476  |   |
|       |   | $      | 20,971 |   |

----

Table of Contents

Item 9.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9A.                      Controls and Procedures

----

Table of Contents

Report of Independent Registered Public Accounting Firm

----

Table of Contents

Item 9B.  Other Information

Item 10.                      Directors, Executive Officers and Corporate Governance

| Name                       | Age | Position(s)                                   |
|------------------------------------------------------------------------------------------------------------------------------------------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Scott Scherr                                                                                                                             | 58  | Chairman of the Board, President and Chief Executive Officer                                                                                                                                                            |
| Marc D. Scherr                                                                                                                           | 53  | Vice Chairman of the Board and Chief Operating Officer                                                                                                                                                                  |
| Mitchell K. Dauerman                                                                                                                     | 53  | Executive Vice President, Chief Financial Officer and Treasurer                                                                                                                                                         |
| Jon Harris                                                                                                                               | 46  | Senior Vice President and General Manager, Enterprise Services                                                                                                                                                          |
| Robert Manne                                                                                                                             | 57  | Senior Vice President, General Counsel                                                                                                                                                                                  |
| Vivian Maza                                                                                                                              | 49  | Senior Vice President, Chief People Officer and Secretary                                                                                                                                                               |
| Laura Johnson                                                                                                                            | 46  | Senior Vice President, Product Strategy                                                                                                                                                                                 |
| Adam Rogers                                                                                                                              | 36  | Senior Vice President, Chief Technology Officer                                                                                                                                                                         |
| Greg Swick                                                                                                                               | 47  | Senior Vice President, Chief Enterprise Sales Officer                                                                                                                                                                   |
| Chris Phenicie                                                                                                                           | 39  | Senior Vice President, Chief Workplace Sales Officer                                                                                                                                                                    |
| Bill Hicks                                                                                                                               | 45  | Senior Vice President, Shared Services Chief Information Officer                                                                                                                                                        |
| Julie Dodd                                                                                                                               | 41  | Senior Vice President and General Manager, Workplace Services                                                                                                                                                           |
| Jody Kaminsky                                                                                                                            | 36  | Senior Vice President, Marketing                                                                                                                                                                                        |
| James A. FitzPatrick, Jr.                                                                                                                | 61  | Director                                                                                                                                                                                                                |
| LeRoy A. Vander Putten                                                                                                                   | 76  | Director                                                                                                                                                                                                                |
| Rick A. Wilber                                                                                                                           | 64  | Director                                                                                                                                                                                                                |
| Robert A. Yanover                                                                                                                        | 74  | Director                                                                                                                                                                                                                |
| Alois T. Leiter                                                                                                                          | 45  | Director                                                                                                                                                                                                                |

----

Table of Contents

----

Table of Contents

----

Table of Contents

Item 11.                      Executive Compensation

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

| Equity Compensation Plan Information   |   |
|----------------------------------------|--------|
|                                   |   |   |   |   |   |   |   |   |   |
| Plan Category                          |   | (a)  Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |   |   | (b)  Weighted - Average Exercise Price of Outstanding Options, Warrants and Rights |   |   | (c)  Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column ( a )) |   |
|                                   |   |   |   |   |   |   |   |   |   |
| Equity compensation plans approved     |   |   |   |   |   |   |   |   |   |
|   by security holders        |   |   | 3,015,565 |   |   | $ | 19.40 |   |   |   | 915,628 |   |
| Equity compensation plans not approved |   |   |   |   |   |   |   |   |   |   |   |   |
|   by security holders        |   |   | – |   |   |   | – |   |   |   | – |   |
| Total                                  |   |   | 3,015,565 |   |   | $ | 19.40 |   |   |   | 915,628 |   |

Item 13.                      Certain Relationships and Related Transactions, and Director Independence

Item 14.                      Principal Accountant Fees and Services

----

Table of Contents

Item 15.                      Exhibits and Financial Statement Schedule

|   | (1) | Consolidated Financial Statements. The following consolidated financial statements of Ultimate are included in Part II, Item 8, of this Form 10-K: |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Exhibits |
|-----------------|----------|

----

Table of Contents

| Number | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.1    | Amended and Restated Certificate of Incorporation  (incorporated by reference to Exhibit 3.4 to the                                                                                                                                                                                                                                                                                                                                                                            |
|   | Registration Statement on Form S-1 (File No. 333-47881), initially filed March 13, 1998 (the “Registration  Statement”)                                                                                                                                                                                                                                                                                                                                            |
| 3.2    |  Certificate of Designations of Series A Junior Preferred Stock (incorporated by reference to Exhibit 2  to Ultimate’s Current Report on Form 8-K dated October 23, 1998)                                                                                                                                                                                                                                                                                           |
| 3.3    |  Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.5 to the Registration Statement)                                                                                                                                                                                                                                                                                                                                                                        |
| 4.1    |  Form of Certificate for the Common Stock, par value $0.01 per share **                                                                                                                                                                                                                                                                                                                                                                                                             |
| 4.2    |  Form of Warrant for Common Stock (incorporated by reference to                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |  Exhibit 4.4 to Ultimate’s Registration Statement on Form S-3 (File No. 333-107527), initially  filed July 31, 2003)                                                                                                                                                                                                                                                                                                                                                |
| 10.1   |  Shareholders Rights Agreement, dated June 6, 1997 among Ultimate and certain                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | stockholders named therein **                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.2   | Asset Purchase Agreement, dated February 2, 1998, among The Ultimate Software Group of Virginia, Inc., Ultimate and certain principals named therein **                                                                                                                                                                                                                                                                                                                                  |
| 10.3   |  Asset Purchase Agreement, dated February 2, 1998, among Ultimate,                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | The Ultimate Software Group of the Carolinas, Inc. and certain principals name therein **                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.4   | Asset Acquisition Agreement, dated February 20, 1998, among Ultimate,                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | The Ultimate Software Group of Northern California, Inc. and certain principals named therein **                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.5   |  Asset Purchase Agreement dated March 4, 1998, among Ultimate, Ultimate Investors Group, Inc. and certain principals name therein **                                                                                                                                                                                                                                                                                                                                                |
| 10.6   |  Agreement and Plan of Merger dated February 24, 1998, among Ultimate, ULD Holding Corp.,                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Ultimate Software Group of New York and New England, G.P. and certain principals named                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | therein **                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.7   | Nonqualified Stock Option Plan, as amended and restated as of December 20, 2002                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |  (incorporated by reference to the corresponding exhibit in Ultimate’s Annual Report on Form 10-K dated March 31, 2003)                                                                                                                                                                                                                                                                                                                                                       |
| 10.8   | Commercial Office Lease agreement by and between UltiLand, Ltd., a Florida limited partnership,                                                                                                                                                                                                                                                                                                                                                                                          |
|   | and Ultimate, dated December 31, 1998 (incorporated by reference herein to                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | corresponding exhibit in Ultimate’s Annual Report on Form 10-K dated March 31, 1999)                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.9   | Rights Agreement, dated as of October 22, 1998, between Ultimate and BankBoston, N.A.,                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | as Rights Agent. The Rights Agreement includes the Form of Certificate of Designations of Series A                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Junior Preferred Stock as Exhibit A, the Form of Rights Certificate as Exhibit B, and the Summary of Rights as Exhibit C (incorporated by reference herein to Exhibit 2 to Ultimate’s Current Report on Form 8-K dated October 23, 1998)                                                                                                                                                                                                                                           |
| 10.10  | Commercial Office Lease by and between UltiLand, Ltd., a Florida limited partnership                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | and Ultimate, dated December 22, 1998 (incorporated by reference to Exhibit 10.1                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | to Ultimate’s Quarterly Report on Form 10-Q dated August 15, 1999)                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.11  | Letter Agreement between Aberdeen Strategic Capital LP and Ultimate, dated October 21, 1999                                                                                                                                                                                                                                                                                                                                                                                              |
|   |  (incorporated herein by reference to Exhibit 10.1 to Ultimate’s Quarterly Report                                                                                                                                                                                                                                                                                                                                                                                             |
|   | on Form 10-Q dated November 15, 1999)                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.12  | Warrant issued to Aberdeen Strategic Capital LP (incorporated by reference to Exhibit 10.2 to the                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Company’s Quarterly Report on Form 10-Q dated November 15, 1999)                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.13  |  Software License Agreement between Ultimate and Ceridian                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Corporation dated as of March 9, 2001 (incorporated by reference to Exhibit 10.17 to Ultimate’s                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Annual Report on Form 10-K dated March 27, 2001)                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.14  | Letter amendment between Ultimate and Ceridian Corporation dated as of August 9, 2001                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |  (incorporated by reference to Exhibit 10.14 to Ultimate’s Annual Report on Form 10-K                                                                                                                                                                                                                                                                                                                                                                                         |
|   | dated March 29, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.15  | Letter amendment between Ultimate and Ceridian Corporation dated as of February 5, 2002                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |  (incorporated by reference to Exhibit 10.15 to Ultimate’s Annual Report on Form 10-K                                                                                                                                                                                                                                                                                                                                                                                         |
|   | dated March 29, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.16  |  Loan and Security Agreement by and between Ultimate and Silicon Valley Bank                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | dated as of November 29, 2001 (incorporated by reference to Exhibit 10.16 to Ultimate’s                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Annual Report on Form 10-K dated March 29, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.17  | Revolving Promissory Note by and between Ultimate and Silicon Valley Bank dated as of November 29, 2001 (incorporated by reference to Exhibit 10.17 to Ultimate’s                                                                                                                                                                                                                                                                                                                  |
|   | Annual Report on Form 10-K dated March 29, 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.18  |  Equipment Term Note by and between Ultimate and Silicon Valley Bank dated as of                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | November 29, 2001 (incorporated herein by reference to Exhibit 10.18 to Ultimate’s Annual Report on Form 10-K dated March 29, 2002)                                                                                                                                                                                                                                                                                                                                                |
| 10.19  | Services Agreement between Ultimate and Ceridian Corporation dated as of February 10, 2003                                                                                                                                                                                                                                                                                                                                                                                               |
|   |  (incorporated by reference to the corresponding exhibit in Ultimate’s Annual Report on Form 10-K dated March 31, 2003)                                                                                                                                                                                                                                                                                                                                                       |
| 10.20  | Third Loan Modification Agreement by and between Ultimate                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | and Silicon Valley Bank dated March 27, 2003 (incorporated by reference to the corresponding exhibit in Ultimate’s Annual Report on Form 10-K dated March 31, 2003)                                                                                                                                                                                                                                                                                                                |
| 10.21  | Fourth Loan Modification Agreement by and between Ultimate                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | and Silicon Valley Bank dated as of April 29, 2003 (incorporated by reference to Exhibit 10.10 to Ultimate’s Quarterly Report on Form 10-Q dated May 14, 2003)                                                                                                                                                                                                                                                                                                                     |
| 10.22  | Change in Control Bonus Plan for Executive Officers, effective                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | March 5, 2004 (incorporated by reference to Exhibit 10.1 to Ultimate’s Quarterly Report on Form 10-Q dated May 13, 2004)                                                                                                                                                                                                                                                                                                                                                           |
| 10.23  | Fifth Loan Modification Agreement by and between Ultimate                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | and Silicon Valley Bank dated as of May 28, 2004 (incorporated by reference to Exhibit 10.1 to Ultimate’s Quarterly Report on Form 10-Q dated August 12, 2004)                                                                                                                                                                                                                                                                                                                     |
| 10.24  | Silicon Valley Bank Second Amended and Restated Revolving Promissory Note by and between                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Ultimate and Silicon Valley Bank dated May 28, 2004 (incorporated by reference to Exhibit 10.2 to Ultimate’s Quarterly Report on Form 10-Q dated August 12, 2004)                                                                                                                                                                                                                                                                                                                  |
| 10.25  | Amended Nonqualified stock option agreement (incorporated by reference to Exhibit 10.1 to Ultimate’s Form 8-K dated January 3, 2006)                                                                                                                                                                                                                                                                                                                                               |
| 10.26  | Amended Director Fee Option Award Agreement (incorporated by reference to Exhibit 10.2 to Ultimate’s Form 8-K dated January 3, 2006)                                                                                                                                                                                                                                                                                                                                               |
| 10.27  | Amended Director Fee Option Agreement for Non-Employee Directors (as incorporated by reference to Exhibit 10.27 to Ultimate’s Annual Report on Form 10-K dated March 15, 2006)                                                                                                                                                                                                                                                                                                     |
| 10.28  |  Entry into a Material  Definitive Agreement with executives (incorporated by reference to Ultimate’s Form 8-K, Item 1.01 dated February 10, 2006)                                                                                                                                                                                                                                                                                                                  |
| 10.29  |  Seventh Loan Modification Agreement between Ultimate and  Silicon Valley Bank                                                                                                                                                                                                                                                                                                                                                                                            |
|   |  (incorporated by reference to Exhibit 10.1 to Ultimate’s Form 8-K dated June 17, 2005)                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.30  |  Term Note between Ultimate and Silicon Valley Bank (incorporated by reference to Exhibit 10.2                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   to Ultimate’s Form 8-K dated June 17, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.31  |  Notice of Termination of License Agreement and Acknowledgement of Receipt by                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |  Ceridian Corporation dated, March 9, 2006 (incorporated by reference to Exhibit 10.31 to the       Company’s Annual Report on Form 10-K, dated March 15, 2006)                                                                                                                                                                                                                                                                            |
| 10.32  |  Commercial Office Lease by and between ROHO Ultimate, LTD. II, a Florida limited partnership     (“Landlord”) and Ultimate  dated May 23, 2001 (incorporated by reference to Exhibit 10.32 to the  Company’s Annual Report on Form 10-K, dated March 15, 2006)                                                                                                                                                      |
| 10.33  |   Agreement of Purchase and Sale by and between Parry F. Goodman and Ivy Goodman and Robert J. Manne and/or assigns dated September 22, 2004  (incorporated by reference to Exhibit 10.33 to the  Company’s Annual Report on Form 10-K, dated March 15, 2006)                                                                                                                                                                                        |
| 10.34  |  Assignment of Agreement of Purchase and Sale by and between Robert J. Manne a/k/a Robert Manne and Ultimate dated October 26, 2004 (incorporated by reference to Exhibit 10.34 to Ultimate’s Annual Report on Form 10-K, dated March 15, 2006)                                                                                                                                                                                                                               |
| 10.35  |  Weston Town Center South Office Building Lease between South Office Building-DLB, LLC, a Florida Limited Liability Company, South Office Building Bagtrust, LLC, a Florida Limited Liability Company, and South Office Building-BJB, LLC, a Florida Limited Liability Company, and Ultimate and Weston Common Area LTD., dated August 18, 2005 (incorporated by reference to Exhibit 10.35 to Ultimate’s Annual Report on Form 10-K, dated March 15, 2006)                   |
| 10.36  | Galleria Atlanta office lease agreement between Galleria 600, LLC, a Delaware limited liability company, and Ultimate, dated April 27, 2006  (incorporated by reference to Exhibit 10.36 to Ultimate’s Quarterly Report on Form 10-Q, dated August 8, 2006                                                                                                                                                                                                               |
| 10.37  |  Lease of Office Space by and between OMERS Realty Corporation CPP Investment Board Real Estate Holdings Inc., and The Ultimate Group of Canada, Inc., dated August 22, 2006 (incorporated by reference to Exhibit 10.37 to Ultimate’s Quarterly Report on Form 10-Q, dated November 8, 2006)                                                                                                                                                                                 |
| 10.38  |  Indemnity Agreement between OMERS Realty Corporation, CPP Investment Board Real Estate Holdings, Inc., and Ultimate dated August 22, 2006 (incorporated by reference to Exhibit 10.38 to Ultimate’s Quarterly Report on Form 10-Q, dated  November 8, 2006)                                                                                                                                                                                                        |
| 10.39  |  Amendment to Lease by and between ROHO Ultimate, Ltd. I (“Landlord”) and Ultimate Group. Inc. (“Tenant”) for Demised premises at 2000 Ultimate Way, Weston, FL 33326 (the “Premises”) dated February 15, 2000 (incorporated by reference to Exhibit 10.39 to Ultimate’s Annual Report on Form 10-K, dated March 16, 2007)                                                                                                                |
| 10.40  |  Lease Relating to Unit 2 Sceptre House, Hornbeam Park, Harrogate between St. James Property Management Limited (“The Landlord”) And RTIX Limited (“The Tenant”) dated May 25, 2005 (incorporated by reference to Exhibit 10.40 to Ultimate’s Annual Report on Form 10-K, dated March 16, 2007)                                                                                                                                                       |
| 10.41  |  Counterpart/Underlease relating to Unit 2 Second Floor Sceptre House Hornbeam Square North Hornbeam Business Park, Harrogate between RTIX Limited (“The Landlord”) and First 4 IT Limited to (“The Tenant”) dated May 25, 2005 (incorporated by reference to Exhibit 10.41 to Ultimate’s Annual Report on Form 10-K, dated March 16, 2007)                                                                                                           |
| 10.42  |  First Amendment to Lease between Galleria 600, LLC (“Landlord”) and Ultimate, dated August 18, 2006 (incorporated by reference to Exhibit 10.42 to Ultimate’s Annual Report on Form      10-K, dated March 16, 2007)                                                                                                                                                                                                               |
| 10.43  |  Amended and Restated Change in Control Bonus Plan for Executive Officers, effective July 24, 2007 (incorporated by reference to Exhibit 10.1 to Ultimate’s Quarterly Report on Form 10-Q, dated August 8, 2007)                                                                                                                                                                                                                                                              |
| 10.44  | Amended and Restated 2005 Equity and Incentive Plan (incorporated by reference to Exhibit 10.1 to Ultimate’s Form 8-K, dated May 18, 2009)                                                                                                                                                                                                                                                                                                                                         |
| 10.45  |  Commercial lease between Weston Office, LLC (“Landlord”) and Ultimate, dated January 18, 2008 (incorporated by reference to Exhibit 10.45 to Ultimate’s Annual Report on Form 10-K, dated March 13, 2008)                                                                                                                                                                                                                                                        |
| 10.46  | Amended and Restated Rights Agreement, dated as of August 26, 2008, between Ultimate and Computershare Trust Company, N.A., as Rights Agent.  The Rights Agreement includes the Form of Certificate Designations of Series A Junior Preferred Stock as Exhibit A, the Form of Rights Certificate as Exhibit B and the Summary of Rights as Exhibit C (incorporated by reference herein to Exhibit 4.1 to Ultimate’s Current Report on Form 8-K dated September 2, 2008). |
| 10.47  | Commercial lease between AGF Woodfield Owner, L.L.C., (“Landlord”) and Ultimate, dated October 31, 2008 (incorporated by reference to Exhibit 10.47 to Ultimate’s Annual Report on Form 10-K, dated March 2, 2009)                                                                                                                                                                                                                                                     |
| 10.48  | Commercial lease between 300 Galleria Parkway Associates, L.P., (“Landlord”) and Ultimate, dated September 8, 2009 (incorporated by reference to Exhibit 10.33 to Ultimate’s Quarterly Report on Form 10-Q, dated November 9, 2009)                                                                                                                                                                                                                                    |
| 10.49  | Commercial lease between RT Twenty-Sixth Pension Properties Limited (“Landlord”) and Ultimate, dated September 4, 2009 (incorporated by reference to Exhibit 10.34 to Ultimate’s Quarterly Report on Form 10-Q, dated November 9, 2009)                                                                                                                                                                                                                                |
| 10.50  | Master Space Agreement between Quality Technology Services Miami LLC and Ultimate, dated June 1, 2009 (incorporated by reference to Exhibit 10.1 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010)                                                                                                                                                                                                                                                                |
| 10.51  | Master Space Agreement between Quality Technology Services Metro LLC and Ultimate, dated June 1, 2009 (incorporated by reference to Exhibit 10.2 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010)                                                                                                                                                                                                                                                                |
| 10.52  | Service Order Form between Verizon Canada Ltd. And Ultimate, dated September 23, 2009 (incorporated by reference to Exhibit 10.3 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010)                                                                                                                                                                                                                                                                                |
| 10.53  | Amended and Restated Change in Control Bonus Plan for Executive Officers dated April 26, 2010 (incorporated by reference to Exhibit 10.4 to Ultimate’s Quarterly Report on Form 10-Q, dated August 9, 2010)                                                                                                                                                                                                                                                                        |
| 10.54  | Commercial lease between 2000 Main Street Associates, LLC (“Landlord”) and Ultimate, dated November 3, 2010 *                                                                                                                                                                                                                                                                                                                                                                |
| 10.55  | Commercial lease between Micari Holdings, LLC (“Landlord”) and Ultimate, dated November 5, 2010 *                                                                                                                                                                                                                                                                                                                                                                            |
| 10.56  | Commercial lease between Galleria 400, LLC (“Landlord”) and Ultimate, dated December 29, 2010 *                                                                                                                                                                                                                                                                                                                                                                              |
| 21.1   | Subsidiary of the Registrant *                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 23.1   |  Consent of Independent Registered Public Accounting Firm *                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.1   | Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended*                                                                                                                                                                                                                                                                                                                                                                          |
| 31.2   | Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended *                                                                                                                                                                                                                                                                                                                                                                         |
| 32.1   | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended *                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 32.2   | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended *                                                                                                                                                                                                                                                                                                                                                                                                                  |

----

Table of Contents

----

Table of Contents

|   Classification                                                            |   | Balance atBeginning ofYear |   |   | Charged to Expenses and Other |   |   |   Write-offs andOther |   |   |   Balance atEnd of Year |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------|-------------------------------|--------|--------|----------------------------|--------|--------|------------------------------|--------|
| Allowance for doubtful accounts:                                                                                                                                                                                                                                |   |                       |   |   |                          |   |   |                       |   |   |                         |   |
|                                                                                                                                                                                                                                                            |   |                       |   |   |                          |   |   |                       |   |   |                         |   |
|   December 31, 2010                                                                                                                                                                                                                                   |   | $                          | 600    |   |                          | $      | 1,549  |                       |   | $      | (1,349                       | )      |   | $ | 800 |   |
|   December 31, 2009                                                                                                                                                                                                                                   |   |                       | 700    |   |                          |   | 972    |                       |   |   | (1,072                       | )      |   |   | 600 |   |
|   December 31, 2008                                                                                                                                                                                                                                   |   |                       | 700    |   |                          |   | 1,546  |                       |   |   | (1,546                       | )      |   |   | 700 |   |
|                                                                                                                                                                                                                                                            |   |                       |   |   |                          |   |   |                       |   |   |                         |   |   |   |   |   |
| Valuation allowance for deferred tax asset:                                                                                                                                                                                                                     |   | Balance atBeginning ofYear |   |   | Charged to Expenses and Other |   |   | Write-offs andOther        |   |   | Balance atEnd of Year        |   |
|                                                                                                                                                                                                                                                            |   |                       |   |   |                          |   |   |                       |   |   |                         |   |   |   |   |   |
|   December 31, 2010                                                                                                                                                                                                                                   |   | $                          | 4,972  |   |                          |   | (4,748 | )(2)                       |   | $      | (224                         | )(3)   |   | $ | – |   |
|   December 31, 2009                                                                                                                                                                                                                                   |   |                       | 5,657  |   |                          |   | (685   | )(2)                       |   |   | –                      |   |   |   | 4,972 |   |
|   December 31, 2008                                                                                                                                                                                                                                   |   |                       | 5,592  |   |                          |   | 65     | (1)                        |   |   | –                      |   |   |   | 5,657 |   |
|                                                                                                                                                                                                                                                            |   |                       |   |   |                          |   |   |                       |   |   |                         |   |   |   |   |   |
| (1) Represents an increase in the valuation allowance primarily due to foreign operations.                                                                                                                                                                 |   |
| (2) Represents a decrease in the valuation allowance primarily for the recognition of equity of stock-based payment deductions. (3) Represents a write-off of valuation allowance attributable to discontinued operations for the UK Subsidiary. |   |

----

Table of Contents

SIGNATURES

|   | Signature                                  | Title                        | Date                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ Scott Scherr                                                                                                                                                                                                | President, Chief Executive                                                                                                                      | March 1, 2011                                                                                  |
|   | Scott  Scherr                                                                                                                                                                                         |   Officer and Chairman of the                                                                                                         |                                                                                           |
|   |                                                                                                                                                                                                            |   Board                                                                                                                               |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ Mitchell K. Dauerman                                                                                                                                                                                        | Executive Vice President,                                                                                                                       | March 1, 2011                                                                                  |
|   | Mitchell K. Dauerman                                                                                                                                                                                            |   Chief Financial Officer and                                                                                                         |                                                                                           |
|   |                                                                                                                                                                                                            |   Treasurer (Principal Financial                                                                                                      |                                                                                           |
|   |                                                                                                                                                                                                            |   and Accounting Officer)                                                                                                             |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ Marc D. Scherr                                                                                                                                                                                              | Vice Chairman of the Board                                                                                                                      | March 1, 2011                                                                                  |
|   | Marc D. Scherr                                                                                                                                                                                                  |    and Chief Operating Officer                                                                                                   |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ James A. FitzPatrick, Jr.                                                                                                                                                                                   | Director                                                                                                                                        | March 1, 2011                                                                                  |
|   | James A. FitzPatrick, Jr.                                                                                                                                                                                       |                                                                                                                                            |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ LeRoy A. Vander Putten                                                                                                                                                                                      | Director                                                                                                                                        | March 1, 2011                                                                                  |
|   | LeRoy A. Vander Putten                                                                                                                                                                                          |                                                                                                                                            |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ Rick Wilber                                                                                                                                                                                                 | Director                                                                                                                                        | March 1, 2011                                                                                  |
|   | Rick Wilber                                                                                                                                                                                                     |                                                                                                                                            |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ Robert A. Yanover                                                                                                                                                                                           | Director                                                                                                                                        | March 1, 2011                                                                                  |
|   | Robert A. Yanover                                                                                                                                                                                               |                                                                                                                                            |                                                                                           |
|   |                                                                                                                                                                                                            |                                                                                                                                            |                                                                                           |
|   | /s/ Alois T. Leiter                                                                                                                                                                                             | Director                                                                                                                                        | March 1, 2011                                                                                  |
|   | Alois T. Leiter                                                                                                                                                                                                 |                                                                                                                                            |                                                                                           |

----