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CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995  SAFE HARBOR FOR FORWARD LOOKING STATEMENTS
 This Annual Report on Form 10-K (the  Form 10-K ) of The Ultimate Software Group, Inc. and
subsidiaries (Ultimate Software or the Company) may contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements represent the
Companys expectations or beliefs, including, but not limited to, statements concerning the
Companys operations and financial performance and condition. Words such as anticipates,
expects, intends, plans, believes, seeks, estimates, and similar expressions are
intended to identify such forward-looking statements. These forward-looking statements are not
guarantees of future performance and are subject to certain risks and uncertainties that are
difficult to predict. The Companys actual results could differ materially from those contained in
the forward-looking statements due to risks and uncertainties associated with fluctuations in the
Companys quarterly operating results, concentration of the Companys product offerings,
development risks involved with new products and technologies, competition, the Companys
contractual relationships with third parties, contract renewals with business partners, compliance
by our customers with the terms of their contracts with us, and other factors disclosed in the
Companys filings with the Securities and Exchange Commission. Other factors that may cause such
differences include, but are not limited to, those discussed in this Form 10-K , including this
Exhibit 99.1. The Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
 Risk Factors
 We may be adversely affected by substantial quarterly fluctuations in our revenues and
operating results.
  
    
    Variations in the mix of revenues;
    
    Increased expenses (especially as they relate to product development and sales and
marketing);
    
    Timing of product releases:
    
    Increased competition;
    
    Announcements of new products by us or our competitors;
    
    Capital spending patterns of our customers; and
    
    A drop in near-term demand for our products.




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Our quarterly revenues and operating results may be negatively impacted by seasonality, especially
in the first fiscal quarter of each year.
   Adverse changes in general economic or political conditions could adversely affect our operating
results.
  Our failure to maintain and increase acceptance of UltiPro, which accounts for substantially all of
our revenues, could cause a significant decline in our revenues.
  A systems failure or other service interruption at either of the data centers managed by Quality
Technology Services (QTS) and used for our hosting services could result in substantial expense
to us, loss of customers and claims by our customers for damages caused by any losses they incur.
   
    
    Human error;
    
    Natural disasters;
    
    Power loss or telecommunication failures;
    
    Sabotage or other intentional acts of vandalism; and
    
    Unforseen 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;
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
    
    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.
 If our direct sales force is not successful, we may be unable to achieve significant revenue growth
in the future.
  If we are not able to successfully recruit personnel, our revenues could be negatively affected.
  Rapid technological changes and the introduction of new products and enhancements by new or
existing competitors could undermine our current market position.
  
    
    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.
  Our current and future competitors include companies with greater financial, technical and
marketing resources than we have and if we are unable to compete successfully with other
businesses in our industry or with in-house systems developed by potential customers, our
profitability will be adversely affected.
  
    
    Large service bureaus, primarily Automatic Data Processing, Inc. (ADP) and, to a
lesser extent, Ceridian Corporation;
    
    A number of companies, such as PeopleSoft/Oracle, Lawson and Kronos, that offer
human resource management and payroll software products for use on mainframes,
client/server environments and/or Web servers; and
    
    The internal payroll/human resources departments of potential customers which use
custom-written software.
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The loss of the services of one or more of our key employees could negatively affect our ability to
implement our business strategy.
  The potential growth of our business and expansion of our customer base may place a significant
strain on our management and operations and we may be unable to manage that growth and expansion
successfully.
  Our business relies heavily on the products of Microsoft, which may not always be compatible with
our products, and we may be required to spend significant capital if businesses adopt alternative
technologies that are incompatible with our products.
  If our third-party software is not adequately maintained or updated, our sales could be materially
adversely affected.
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If we are unable to release annual or periodic updates on a timely basis to reflect changes in tax
laws and regulations or other regulatory provisions applicable to our products, the market
acceptance of our products may be adversely affected and our revenues could decline.
  If we are unable to protect our proprietary rights against unauthorized third-party copying or use,
our revenues or our methods of doing business could be negatively impacted.
  Litigation may be necessary in the future to enforce our intellectual property rights, to protect
our trademarks, copyrights or trade secrets or to determine the validity and scope of the
proprietary rights of others; such litigation may be expensive and divert the attention of
management.
   Defects and errors in our software could affect market acceptance of our products.
  
    
    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.
  5




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Our software products may be vulnerable to break-ins and similar disruptive problems; addressing
these issues may be expensive and require a significant amount of our resources.
  The sale and support of software products and the performance of related services by us entail the
risk of product liability claims, which could significantly affect our financial results.
  Anti-takeover provisions in our certificate of incorporation and by-laws and under our Rights
Agreement and Delaware law and our Change in Control Bonus Plans could substantially increase the
cost to acquire us or prevent or delay a change in control and, as a result, negatively impact our
stockholders and the price of our common stock.
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The growth of the international operations of our business subjects us to additional risks
associated with foreign operations.
   If our goodwill or amortizable intangible assets become impaired we may be required to record a
significant charge to earnings.
  Changes in, or interpretations of, accounting principles could result in unfavorable accounting
changes.
  Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax
rates.
  7