|   | þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|--------|------------------------------------------------------------------------------------------|

|   |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|--------|-------------------------------------------------------------------------------------------|

| Delaware                                       |   | 65-0694077                           |
|------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation) |   | (I.R.S. Employer Identification No.) |
| or organization                                |   |                                 |

| 2000 Ultimate Way, Weston, FL            |   | 33326      |
|------------------------------------------|--------|------------|
| (Address of principal executive offices) |   | (Zip Code) |

| Large accelerated filer   ̈ |   | Accelerated filer  þ |
|-------------------------------------------|--------|-------------------------------------|
|                                      |   |                                |
| Non-accelerated filer   ̈   |   | Smaller reporting company  ̈    |

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TABLE OF CONTENTS

|                                                                                                                                            |   | Page(s) |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|
|                                                                                                                                            |   |    |   |
| Part I – Financial Information:                                                                                                           |   |    |   |
|                                                                                                                                            |   |    |   |
| Item 1 – Financial Statements:                                                                                                            |   |    |   |
| Unaudited Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009                                                       |   |    | 1      |   |
| Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and June 30, 2009                    |   |    | 2      |   |
| Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and June 30, 2009                              |   |    | 3      |   |
| Unaudited Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss) for the Six Months Ended June 30, 2010 |   |    | 4      |   |
| Notes to Unaudited Condensed Consolidated Financial Statements                                                                                  |   |    | 5-11   |   |
|                                                                                                                                            |   |    |   |   |
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations                                      |   |    | 12-17  |   |
|                                                                                                                                            |   |    |   |   |
| Item 3 – Quantitative and Qualitative Disclosures About Market Risk                                                                       |   |    | 18     |   |
|                                                                                                                                            |   |    |   |   |
| Item 4 – Controls and Procedures                                                                                                          |   |    | 18     |   |
|                                                                                                                                            |   |    |   |   |
| Part II – Other Information:                                                                                                              |   |    |   |   |
|                                                                                                                                            |   |    |   |   |
| Item 1A – Risk Factors                                                                                                                    |   |    | 19     |   |
|                                                                                                                                            |   |    |   |   |
| Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds                                                                      |   |    | 19     |   |
|                                                                                                                                            |   |    |   |   |
| Item 6 – Exhibits                                                                                                                         |   |    | 19     |   |
|                                                                                                                                            |   |    |   |   |
| Signatures                                                                                                                                      |   |    | 20     |   |
| Certifications                                                                                                                                  |   |    |   |   |

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Table of Contents

| PART 1 – FINANCIAL INFORMATION                                                                                                                 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Item 1 – Financial Statements                                                                                                                  |   |
| THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES                                                                                                   |   |
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                      |   |
| (In thousands, except share data)                                                                                                                    |   |
|                                                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                                                 |   | As of |   |   | As of |   |
|                                                                                                                                                 |   | June 30, |   |   | December 31, |   |
|                                                                                                                                                 |   | 2010 |   |   | 2009 |   |
| ASSETS                                                                                                                                               |   |   |   |   |   |   |
| Current assets:                                                                                                                                      |   |   |   |   |   |   |
|    Cash and cash equivalents                                                                                                          |   | $ | 22,691 |   |   | $ | 23,684 |   |
|    Short-term investments in marketable securities                                                                                    |   |   | 8,169 |   |   |   | 8,079 |   |
|    Accounts receivable, net of allowance for doubtful accounts of $800 for 2010 and $600 for 2009                                     |   |   | 42,099 |   |   |   | 38,450 |   |
|    Prepaid expenses and other current assets                                                                                          |   |   | 18,358 |   |   |   | 15,594 |   |
|    Deferred tax assets, net                                                                                                           |   |   | 1,142 |   |   |   | 1,128 |   |
|       Total current assets before funds held for customers                                                             |   |   | 92,459 |   |   |   | 86,935 |   |
|    Funds held for customers                                                                                                           |   |   | 48,444 |   |   |   | 23,560 |   |
|       Total current assets                                                                                             |   |   | 140,903 |   |   |   | 110,495 |   |
| Property and equipment, net                                                                                                                          |   |   | 18,057 |   |   |   | 19,496 |   |
| Capitalized software, net                                                                                                                            |   |   | 3,790 |   |   |   | 4,463 |   |
| Goodwill                                                                                                                                             |   |   | 3,025 |   |   |   | 3,198 |   |
| Long-term investments in marketable securities                                                                                                       |   |   | 1,119 |   |   |   | 1,444 |   |
| Other assets, net                                                                                                                                    |   |   | 11,318 |   |   |   | 12,298 |   |
| Long-term deferred tax assets, net                                                                                                                   |   |   | 20,246 |   |   |   | 19,736 |   |
|       Total assets                                                                                                     |   | $ | 198,458 |   |   | $ | 171,130 |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                           |   |   |   |   |   |   |   |   |
| Current liabilities:                                                                                                                                 |   |   |   |   |   |   |   |   |
|    Accounts payable                                                                                                                   |   | $ | 4,922 |   |   | $ | 4,476 |   |
|    Accrued expenses                                                                                                                   |   |   | 12,026 |   |   |   | 9,972 |   |
|    Current portion of deferred revenue                                                                                                |   |   | 61,468 |   |   |   | 60,980 |   |
|    Current portion of capital lease obligations                                                                                       |   |   | 1,967 |   |   |   | 1,897 |   |
|       Total current liabilities before customer funds obligations                                                      |   |   | 80,383 |   |   |   | 77,325 |   |
|    Customer funds obligations                                                                                                         |   |   | 48,444 |   |   |   | 23,560 |   |
|       Total current liabilities                                                                                        |   |   | 128,827 |   |   |   | 100,885 |   |
| Deferred revenue, net of current portion                                                                                                             |   |   | 7,536 |   |   |   | 7,579 |   |
| Deferred rent                                                                                                                                        |   |   | 3,081 |   |   |   | 3,186 |   |
| Capital lease obligations, net of current portion                                                                                                    |   |   | 1,803 |   |   |   | 1,710 |   |
|       Total liabilities                                                                                                |   |   | 141,247 |   |   |   | 113,360 |   |
| Stockholders’ equity:                                                                                                                          |   |   |   |   |   |   |   |   |
|    Preferred Stock, $.01 par value, 2,000,000 shares authorized, no shares issued or outstanding                                      |   |   | – |   |   |   | – |   |
|    Series A Junior Participating Preferred Stock, $.01 par value, 500,000 shares authorized, no shares issued or outstanding          |   |   | – |   |   |   | – |   |
|    Common Stock, $.01 par value, 50,000,000 shares authorized, 28,212,156 and 27,620,384 shares issued in 2010 and 2009, respectively |   |   | 282 |   |   |   | 276 |   |
|    Additional paid-in capital                                                                                                         |   |   | 196,311 |   |   |   | 184,256 |   |
|    Accumulated other comprehensive income (loss)                                                                                      |   |   | 10 |   |   |   | (696 | ) |
|    Accumulated deficit                                                                                                                |   |   | (54,749 | ) |   |   | (54,410 | ) |
|                                                                                                                                                 |   |   | 141,854 |   |   |   | 129,426 |   |
| Treasury stock, 3,385,925 and 2,985,425 shares, at cost, for 2010 and 2009, respectively                                                             |   |   | (84,643 | ) |   |   | (71,656 | ) |
|       Total stockholders’ equity                                                                                 |   |   | 57,211 |   |   |   | 57,770 |   |
|       Total liabilities and stockholders’ equity                                                                 |   | $ | 198,458 |   |   | $ | 171,130 |   |

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| THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES                                                                                         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                  |   |
| (In thousands, except per share amounts)                                                                                                   |   |
|                                                                                                                                       |   |   |   |   |   |   |
|                                                                                                                                       |   | For the Three Months |   |   | For the Six Months |   |
|                                                                                                                                       |   | Ended June 30, |   |   | Ended June 30, |   |
|                                                                                                                                       |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Revenues:                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|    Recurring                                                                                                                |   | $ | 41,365 |   |   | $ | 32,544 |   |   | $ | 80,813 |   |   | $ | 63,366 |   |
|    Services                                                                                                                 |   |   | 13,032 |   |   |   | 13,407 |   |   |   | 28,613 |   |   |   | 29,322 |   |
|    License                                                                                                                  |   |   | 320 |   |   |   | 1,274 |   |   |   | 948 |   |   |   | 3,275 |   |
|       Total revenues                                                                                         |   |   | 54,717 |   |   |   | 47,225 |   |   |   | 110,374 |   |   |   | 95,963 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenues:                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Recurring                                                                                                                |   |   | 12,048 |   |   |   | 9,534 |   |   |   | 23,452 |   |   |   | 18,407 |   |
|    Services                                                                                                                 |   |   | 11,877 |   |   |   | 11,095 |   |   |   | 25,058 |   |   |   | 23,406 |   |
|    License                                                                                                                  |   |   | 50 |   |   |   | 261 |   |   |   | 150 |   |   |   | 598 |   |
|       Total cost of revenues                                                                                 |   |   | 23,975 |   |   |   | 20,890 |   |   |   | 48,660 |   |   |   | 42,411 |   |
| Gross profit                                                                                                                               |   |   | 30,742 |   |   |   | 26,335 |   |   |   | 61,714 |   |   |   | 53,552 |   |
| Operating expenses:                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Sales and marketing                                                                                                      |   |   | 14,580 |   |   |   | 12,884 |   |   |   | 29,696 |   |   |   | 26,719 |   |
|    Research and development                                                                                                 |   |   | 10,520 |   |   |   | 9,469 |   |   |   | 20,753 |   |   |   | 18,695 |   |
|    General and administrative                                                                                               |   |   | 5,169 |   |   |   | 4,322 |   |   |   | 10,170 |   |   |   | 8,870 |   |
|       Total operating expenses                                                                               |   |   | 30,269 |   |   |   | 26,675 |   |   |   | 60,619 |   |   |   | 54,284 |   |
|       Operating income (loss)                                                                                |   |   | 473 |   |   |   | (340 | ) |   |   | 1,095 |   |   |   | (732 | ) |
| Other income (expense):                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Interest expense and other                                                                                         |   |   | (61 | ) |   |   | (28 | ) |   |   | (106 | ) |   |   | (64 | ) |
|     Other income, net                                                                                                  |   |   | 45 |   |   |   | 39 |   |   |   | 67 |   |   |   | 111 |   |
| Total other income (expense), net                                                                                                          |   |   | (16 | ) |   |   | 11 |   |   |   | (39 | ) |   |   | 47 |   |
| Income (loss) from continuing operations before income taxes                                                                               |   |   | 457 |   |   |   | (329 | ) |   |   | 1,056 |   |   |   | (685 | ) |
|    (Provision) benefit for income taxes                                                                                     |   |   | (186 | ) |   |   | 72 |   |   |   | (465 | ) |   |   | 88 |   |
| Income (loss) from continuing operations                                                                                                   |   | $ | 271 |   |   | $ | (257 | ) |   | $ | 591 |   |   | $ | (597 | ) |
|    Loss from discontinued operations, net of income taxes                                                                   |   |   | (865 | ) |   |   | (73 | ) |   |   | (930 | ) |   |   | (146 | ) |
| Net loss                                                                                                                                   |   | $ | (594 | ) |   | $ | (330 | ) |   | $ | (339 | ) |   | $ | (743 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share:                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Earnings (loss) from continuing operations                                                                               |   | $ | 0.01 |   |   | $ | (0.01 | ) |   | $ | 0.02 |   |   | $ | (0.02 | ) |
|    Loss from discontinued operations                                                                                        |   | $ | (0.03 | ) |   |   | – |   |   | $ | (0.04 | ) |   | $ | (0.01 | ) |
|    Total                                                                                                                    |   | $ | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.02 | ) |   | $ | (0.03 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share:                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Earnings (loss) from continuing operations                                                                               |   | $ | 0.01 |   |   | $ | (0.01 | ) |   | $ | 0.02 |   |   | $ | (0.02 | ) |
|    Loss from discontinued operations                                                                                        |   | $ | (0.03 | ) |   |   | – |   |   | $ | (0.03 | ) |   | $ | (0.01 | ) |
|    Total                                                                                                                    |   | $ | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.03 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding:                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Basic                                                                                                                    |   |   | 24,839 |   |   |   | 24,414 |   |   |   | 24,797 |   |   |   | 24,354 |   |
|    Diluted                                                                                                                  |   |   | 26,972 |   |   |   | 24,414 |   |   |   | 26,911 |   |   |   | 24,354 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements. |

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| THE ULTIMATE SOFTWARE GROUP, INC. AND SUBSIDIARIES                                                                                 |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                          |   |
| (In thousands)                                                                                                                     |   |
|                                                                                                                               |   | For the Six Months |   |
|                                                                                                                               |   | Ended June 30, |   |
|                                                                                                                               |   | 2010 |   |   | 2009 |   |
| Cash flows from operating activities:                                                                                              |   |   |   |   |   |   |
|    Net loss                                                                                                         |   | $ | (339 | ) |   | $ | (743 | ) |
|    Adjustments to reconcile net loss to net cash provided by operating activities:                                  |   |   |   |   |   |   |   |   |
|       Depreciation and amortization                                                                  |   |   | 6,108 |   |   |   | 5,914 |   |
|       Provision for doubtful accounts                                                                |   |   | 1,038 |   |   |   | 528 |   |
|       Non-cash stock-based compensation expense                                                      |   |   | 6,725 |   |   |   | 6,590 |   |
|       Non-cash realized loss on foreign currency translation adjustment                              |   |   | 886 |   |   |   | – |   |
|       Deferred income taxes                                                                          |   |   | (524 | ) |   |   | (140 | ) |
|       Changes in operating assets and liabilities:                                                   |   |   |   |   |   |   |   |   |
|           Accounts receivable                                                    |   |   | (4,687 | ) |   |   | 3,958 |   |
|           Prepaid expenses and other current assets                              |   |   | (2,764 | ) |   |   | 576 |   |
|           Other assets                                                           |   |   | 755 |   |   |   | 98 |   |
|           Accounts payable                                                       |   |   | 446 |   |   |   | (3,778 | ) |
|           Accrued expenses and deferred rent                                     |   |   | 1,949 |   |   |   | (1,418 | ) |
|           Deferred revenue                                                       |   |   | 445 |   |   |   | (1,005 | ) |
|              Net cash provided by operating activities            |   |   | 10,038 |   |   |   | 10,580 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                                              |   |   |   |   |   |   |   |   |
|    Purchases of marketable securities                                                                               |   |   | (4,600 | ) |   |   | (1,090 | ) |
|    Maturities of marketable securities                                                                              |   |   | 4,835 |   |   |   | 5,295 |   |
|    Net purchases of securities with customer funds                                                                  |   |   | (24,884 | ) |   |   | (1,574 | ) |
|    Capitalized software                                                                                             |   |   | – |   |   |   | (631 | ) |
|    Purchases of property and equipment                                                                              |   |   | (2,401 | ) |   |   | (2,109 | ) |
|              Net cash used in investing activities                |   |   | (27,050 | ) |   |   | (109 | ) |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                                              |   |   |   |   |   |   |   |   |
|    Repurchases of Common Stock                                                                                      |   |   | (12,987 | ) |   |   | – |   |
|    Net proceeds from issuances of Common Stock                                                                      |   |   | 4,936 |   |   |   | 1,719 |   |
|    Excess tax benefit from employee stock plan                                                                      |   |   | 950 |   |   |   | – |   |
|    Shares acquired to settle employee tax withholding liability                                                     |   |   | (552 | ) |   |   | – |   |
|    Principal payments on capital lease obligations                                                                  |   |   | (1,206 | ) |   |   | (1,226 | ) |
|    Net increase in customer fund obligations                                                                        |   |   | 24,884 |   |   |   | 1,574 |   |
|              Net cash provided by financing activities            |   |   | 16,025 |   |   |   | 2,067 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash                                                                                            |   |   | (6 | ) |   |   | (15 | ) |
| Net (decrease) increase in cash and cash equivalents                                                                               |   |   | (993 | ) |   |   | 12,523 |   |
| Cash and cash equivalents, beginning of period                                                                                     |   |   | 23,684 |   |   |   | 17,200 |   |
| Cash and cash equivalents, end of period                                                                                           |   | $ | 22,691 |   |   | $ | 29,723 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                                                                  |   |   |   |   |   |   |   |   |
|    Cash paid for interest                                                                                           |   | $ | 100 |   |   | $ | 73 |   |
|    Cash paid for income taxes                                                                                       |   | $ | 136 |   |   | $ | 128 |   |
|                                                                                                                               |   |   |   |   |   |   |   |   |
| Supplemental disclosure of non-cash financing activities:                                                                          |   |   |   |   |   |   |   |   |
| - Ultimate entered into capital lease obligations to acquire new equipment totaling $1.4 million and $1.2 million for the six |   |
| months ended June 30, 2010 and June 30, 2009, respectively.                                                                        |   |
| - Ultimate entered into an agreement to purchase certain source code from a third-party vendor for $2.0 million, of which     |   |
| $0.5 million was paid during the six months ended June 30, 2009. There were no payments during the six months ended           |   |
| June 30, 2010 as this was fully paid as of June 30, 2009.                                                                          |   |

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|                                                         |   | Common Stock |          |   | Additional Paid-in |   |          | Accumulated Other Comprehensive |   |   | Accumulated   |   |   | Treasury Stock |          |    | Total Stockholders’ |   |
|--------------------------------------------------------------|--------|--------------|---------------|--------|--------------------|--------|---------------|---------------------------------|--------|--------|---------------|--------|--------|---------------------|---------------|---------|---------------------------|--------|
|                                                         |   | Shares       |          |   | Amount             |   |          | Capital                         |   |   | Income (Loss) |   |   | Deficit             |          |    | Shares                    |   |   | Amount |   |   | Equity |   |
| Balance, December 31, 2009                                   |   |         | 27,620        |   |               | $      | 276           |                            |   | $      | 184,256       |   |   | $                   | (696          | )       |                      | $      | (54,410 | ) |   |   | 2,985 |   |   | $ | (71,656 | ) |   | $ | 57,770 |   |
| Net  loss                                          |   |         | –       |   |               |   | –       |                            |   |   | –       |   |   |                | –       |    |                      |   | (339 | ) |   |   | – |   |   |   | – |   |   |   | (339 | ) |
| Realized foreign currency translation adjustment             |   |         | –  |   |               |   | –  |                            |   |   | –  |   |   |                | 886      |    |                      |   | –  |   |   |   | –  |   |   |   | –  |   |   |   | 886  |   |
| Unrealized loss on foreign currency translation adjustments  |   |         | –  |   |               |   | –  |                            |   |   | –  |   |   |                | (178     | )  |                      |   | –  |   |   |   | –  |   |   |   | –  |   |   |   | (178  | )  |
| Unrealized loss on investments in marketable securities      |   |         |          |   |               |   |          |                            |   |   |          |   |   |                | (2            | )       |                      |   |   |   |   |   |   |   |   |   |   |   |   |   | (2 | ) |
| Comprehensive income (loss)                                  |   |         | –       |   |               |   | –       |                            |   |   | –       |   |   |                | –       |    |                      |   | – |   |   |   | – |   |   |   | – |   |   |   | 367 |   |
| Issuances of Common Stock from exercises of stock options    |   |         | 424      |   |               |   | 4        |                            |   |   | 4,930    |   |   |                | –  |    |                      |   | –  |   |   |   | –  |   |   |   | –  |   |   |   | 4,934  |   |
| Issuances of Common Stock from restricted stock releases     |   |         | 168           |   |               |   | 2             |                            |   |   | –       |   |   |                | –       |    |                      |   | – |   |   |   | – |   |   |   | – |   |   |   | 2 |   |
| Shares acquired to settle employee tax withholding liability |   |         | –       |   |               |   | –       |                            |   |   | (552          | )      |   |                | –       |    |                      |   | – |   |   |   | – |   |   |   | – |   |   |   | (552 | ) |
| Excess tax benefit from employee stock plan                  |   |         | –       |   |               |   | –       |                            |   |   | 950           |   |   |                |          |    |                      |   |   |   |   |   |   |   |   |   |   |   |   |   | 950 |   |
| Repurchases of  Common Stock                       |   |         | –       |   |               |   | –       |                            |   |   | –       |   |   |                | –       |    |                      |   | – |   |   |   | 401 |   |   |   | (12,987 | ) |   |   | (12,987 | ) |
| Non-cash stock-based compensation                            |   |         | –       |   |               |   | –       |                            |   |   | 6,727         |   |   |                | –       |    |                      |   | – |   |   |   | – |   |   |   | – |   |   |   | 6,727 |   |
|                                                         |   |         |          |   |               |   |          |                            |   |   |          |   |   |                |          |    |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2010                                       |   |         | 28,212        |   |               | $      | 282           |                            |   | $      | 196,311       |   |   | $                   | 10            |    |                      | $      | (54,749 | ) |   |   | 3,386 |   |   | $ | (84,643 | ) |   | $ | 57,211 |   |

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|                                                   |   | For the Three Months |   |   | For the Six Months |   |
|--------------------------------------------------------|--------|----------------------|--------|--------|--------------------|--------|
|                                                   |   | Ended June 30,       |   |   | Ended June 30,     |   |
|                                                   |   | 2010                 |   |   | 2009               |   |   | 2010 |   |   | 2009 |   |
|                                                   |   |                 |   |   |               |   |   |   |   |   |   |   |
| Total revenues                                         |   | $                    | 10     |   |               | $      | 80 |   |   | $ | 48 |   |   | $ | 160 |   |
|                                                   |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Pretax income (loss) from UK Subsidiary operations     |   | $                    | 18     |   |               | $      | (101 | ) |   | $ | (59 | ) |   | $ | (198 | ) |
| Loss from disposal of UK Subsidiary (for foreign       |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
|    currency translation adjustment)     |   |                 | (886   | )      |               |   | – |   |   |   | (886 | ) |   |   | – |   |
| Pretax loss from discontinued operations               |   |                 | (868   | )      |               |   | (101 | ) |   |   | (945 | ) |   |   | (198 | ) |
| Income tax benefit                                     |   |                 | 3      |   |               |   | 28 |   |   |   | 15 |   |   |   | 52 |   |
| Loss from discontinued operations, net of income taxes |   | $                    | (865   | )      |               | $      | (73 | ) |   | $ | (930 | ) |   | $ | (146 | ) |
|                                                   |   |                 |   |   |               |   |   |   |   |   |   |   |   |   |   |   |

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|                               |   | As of June 30, 2010 |      |   | As of December 31, 2009 |   |
|------------------------------------|--------|---------------------|-----------|--------|-------------------------|--------|
|                               |   |                |      |   | Net                     |   |   |   |   |   |   |   |   | Net |   |   |   |   |
|                               |   | Amortized           |      |   | Unrealized              |   |   | Fair |   |   | Amortized |   |   | Unrealized |   |   | Fair |   |
|                               |   | Cost                |      |   | Gain                    |   |   | Value |   |   | Cost |   |   | Gain |   |   | Value |   |
|                               |   |                |      |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate debentures – bonds |   | $                   | 2,868     |   |                    | $      | 1 |   |   | $ | 2,869 |   |   | $ | 3,025 |   |   | $ | 3 |   |   | $ | 3,028 |   |
| Commercial paper                   |   |                | 600       |   |                    |   | – |   |   |   | 600 |   |   |   | 1,499 |   |   |   | – |   |   |   | 1,499 |   |
| Agency bonds                       |   |                | 2,419     |   |                    |   | – |   |   |   | 2,419 |   |   |   | 1,407 |   |   |   | 1 |   |   |   | 1,408 |   |
| International government bond      |   |                | 305  |   |                    |   | –  |   |   |   | 305  |   |   |   | –  |   |   |   | –  |   |   |   | –  |   |
| U.S. Treasury bills                |   |                | 998       |   |                    |   | 1 |   |   |   | 999 |   |   |   | 1,995 |   |   |   | 2 |   |   |   | 1,997 |   |
| U.S. Treasury bonds                |   |                | 1,004     |   |                    |   | 2 |   |   |   | 1,006 |   |   |   | 501 |   |   |   | – |   |   |   | 501 |   |
| Certificates of deposit            |   |                | 1,090     |   |                    |   | – |   |   |   | 1,090 |   |   |   | 1,090 |   |   |   | – |   |   |   | 1,090 |   |
| Total investments                  |   | $                   | 9,284     |   |                    | $      | 4 |   |   | $ | 9,288 |   |   | $ | 9,517 |   |   | $ | 6 |   |   | $ | 9,523 |   |

|                    |   | As of June 30, 2010 |   |
|-------------------------|--------|---------------------|--------|
|                    |   | Amortized           |   |   | Fair |   |
|                    |   | Cost                |   |   | Value |   |
|                    |   |                |   |   |   |   |
| Due in one year or less |   | $                   | 8,164  |   |   | $ | 8,169 |   |
| Due after one year      |   |                | 1,120  |   |   |   | 1,119 |   |
| Total                   |   | $                   | 9,284  |   |   | $ | 9,288 |   |

|   | 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. |
|--------|----------|--------------------------------------------------------------------------------------------------------------------|

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|                          |   |                |   |   |                    |   |
|-------------------------------|--------|---------------------|--------|--------|-------------------------|--------|
|                          |   | As of June 30, 2010 |   |   | As of December 31, 2009 |   |
|                          |   |                |   |   | Quoted                  |   |   |   |   |   |   |   |   | Quoted |   |   |   |   |
|                          |   |                |   |   | Prices in               |   |   | Other |   |   |   |   |   | Prices in |   |   | Other |   |
|                          |   |                |   |   | Active                  |   |   | Observable |   |   |   |   |   | Active |   |   | Observable |   |
|                          |   |                |   |   | Markets                 |   |   | Inputs |   |   |   |   |   | Markets |   |   | Inputs |   |
|                          |   | Total               |   |   | (Level 1)               |   |   | (Level 2) |   |   | Total |   |   | (Level 1) |   |   | (Level 2) |   |
| Corporate debentures-bonds    |   | $                   | 2,869  |   |                    | $      | –  |   |   | $ | 2,869 |   |   | $ | 3,028 |   |   | $ | – |   |   | $ | 3,028 |   |
| Commercial paper              |   |                | 600    |   |                    |   | – |   |   |   | 600 |   |   |   | 1,499 |   |   |   | – |   |   |   | 1,499 |   |
| Agency bonds                  |   |                | 2,419  |   |                    |   | – |   |   |   | 2,419 |   |   |   | 1,408 |   |   |   | – |   |   |   | 1,408 |   |
| International government bond |   |                | 305    |   |                    |   | –  |   |   |   | 305 |   |   |   |   |   |   |   | –  |   |   |   | –  |   |
| U.S. Treasury bills           |   |                | 999    |   |                    |   | – |   |   |   | 999 |   |   |   | 1,997 |   |   |   | – |   |   |   | 1,997 |   |
| U.S.Treasury bonds            |   |                | 1,006  |   |                    |   | – |   |   |   | 1,006 |   |   |   | 501 |   |   |   | – |   |   |   | 501 |   |
| Certificates of deposit       |   |                | 1,090  |   |                    |   | 1,090 |   |   |   | – |   |   |   | 1,090 |   |   |   | 1,090 |   |   |   | – |   |
| Total                         |   | $                   | 9,288  |   |                    | $      | 1,090 |   |   | $ | 8,198 |   |   | $ | 9,523 |   |   | $ | 1,090 |   |   | $ | 8,433 |   |

|                                                       |   | As of June 30,2010 |   |   | As of December 31, 2009 |   |
|------------------------------------------------------------|--------|--------------------|--------|--------|------------------------------|--------|
| Property and equipment                                     |   | $                  | 76,340 |   |                         | $      | 72,717 |   |
| Less:  accumulated depreciation and amortization |   |               | 58,283 |   |                         |   | 53,221 |   |
|                                                       |   | $                  | 18,057 |   |                         | $      | 19,496 |   |

|                                                                                                                                                                                                     |   | For the Three MonthsEnded June 30, |   |   | For the Six Monthsended June 30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                                                                                                                                                                                                     |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Basic weighted average shares outstanding                                                                                                                                                                |   |                               | 24,839 |   |                             |   | 24,414 |   |   |   | 24,797 |   |   |   | 24,354 |   |
| Effect of dilutive equity instruments                                                                                                                                                                    |   |                               | 2,133  |   |                             |   | – |   |   |   | 2,114 |   |   |   | – |   |
| Dilutive weighted average shares outstanding                                                                                                                                                             |   |                               | 26,972 |   |                             |   | 24,414 |   |   |   | 26,911 |   |   |   | 24,354 |   |
|                                                                                                                                                                                                     |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Options to purchase shares of common stock and other stock-based awards outstanding which are not included in the calculation of diluted earnings (loss) per share because their impact is anti-dilutive |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                     |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                     |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                     |   | 59                                 |   |   |                             | 6,317  |   |   |   | 56 |   |   |   | 6,361 |   |

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|                                                                                                                              |   | For the Three Monthsended June 30, |      |    | For the Six Monthsended June 30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|---------|----------------------------------|--------|
|                                                                                                                              |   | 2010                               |      |    | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Net loss (1)                                                                                                                      |   | $                                  | (594      | )       |                             | $      | (330 | ) |   | $ | (339 | ) |   | $ | (743 | ) |
|     Other comprehensive income (loss)                                                                         |   |                               |      |    |                             |   |   |   |   |   |   |   |   |   |   |   |
|         Realized foreign currency translation adjustment                                  |   |                               | 886  |    |                             |   | –  |   |   |   | 886  |   |   |   | –  |   |
|         Unrealized gain (loss) on investments in marketable securities available-for-sale |   |                               | (1   |  ) |                             |   | 2  |   |   |   | (2)  |   |   |   | (1)  |   |
|         Unrealized gain (loss) on foreign currency translation adjustments                |   |                               | (41       | )  |                             |   | 456 |   |   |   | (178 | ) |   |   | 395 |   |
| Comprehensive income (loss)                                                                                                       |   | $                                  | 250       |    |                             | $      | 128 |   |   | $ | 367 |   |   | $ | (349 | ) |

| (1)   | Pursuant to applicable accounting rules, the amount attributable to the UK Subsidiary and accumulated in the translation adjustment component of equity became realized in the unaudited condensed consolidated statement of operations during the second quarter of 2010, the period in which discontinuation of the operations for the UK Subsidiary were substantially complete. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                        |   | For the Three MonthsEnded June 30, |   |   | For the Six MonthsEnded June 30, |   |
|-------------------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                                                        |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Non-cash stock-based compensation expense:                  |   |                               |   |   |                             |   |   |   |   |   |   |   |
|    Cost of recurring revenues                |   | $                                  | 224    |   |                             | $      | 171 |   |   | $ | 441 |   |   | $ | 336 |   |
|    Cost of services revenues                 |   |                               | 322    |   |                             |   | 324 |   |   |   | 663 |   |   |   | 668 |   |
|    Sales and marketing                       |   |                               | 1,642  |   |                             |   | 1,747 |   |   |   | 3,361 |   |   |   | 3,534 |   |
|    Research and development                  |   |                               | 341    |   |                             |   | 308 |   |   |   | 668 |   |   |   | 610 |   |
|    General and administrative                |   |                               | 805    |   |                             |   | 724 |   |   |   | 1,592 |   |   |   | 1,439 |   |
|   Total non-cash stock-based compensation expense |   | $                                  | 3,334  |   |                             | $      | 3,274 |   |   | $ | 6,725 |   |   | $ | 6,587 |   |

|                             |   |   |    |   |           |   |    | Weighted        |   |   |      |   |
|----------------------------------|--------|--------|---------|--------|----------------|--------|---------|-----------------|--------|--------|-----------|--------|
|                             |   |   |    |   |           |   |    | Average         |   |   |      |   |
|                             |   |   |    |   | Weighted       |   |    | Remaining       |   |   | Aggregate |   |
|                             |   |   |    |   | Average        |   |    | Contractual     |   |   | Intrinsic |   |
| Stock Options                    |   | Shares |    |   | Exercise Price |   |    | Term (in Years) |   |   | Value     |   |
| Outstanding at December 31, 2009 |   |   | 4,165   |   |           | $      | 17.79   |            |   |   | 5.55      |   |   | $ | 49,687 |   |
|   Granted              |   |   | – |   |           |   | – |            |   |   |      |   |   |   |   |   |
|   Exercised            |   |   | (424    | )      |           |   | 11.64   |            |   |   |      |   |   |   |   |   |
|   Forfeited or expired |   |   | (11     | )      |           |   | 27.49   |            |   |   |      |   |   |   |   |   |
| Outstanding at June 30, 2010     |   |   | 3,730   |   |           | $      | 18.46   |            |   |   | 5.31      |   |   | $ | 53,813 |   |
|                             |   |   |    |   |           |   |    |            |   |   |      |   |   |   |   |   |
| Exercisable at June 30, 2010     |   |   | 3,411   |   |           | $      | 17.50   |            |   |   | 5.08      |   |   | $ | 52,496 |   |

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|                             |   | Restricted Stock Awards |    |   | Restricted Stock Unit Awards |   |
|----------------------------------|--------|-------------------------|---------|--------|------------------------------|--------|
|                             |   |                    |    |   | Weighted                     |   |   |   |   |
|                             |   |                    |    |   | Average                      |   |   |   |   |
|                             |   |                    |    |   | Grant Date                   |   |   |   |   |
|                             |   | Shares                  |    |   | Fair Value                   |   |   | Shares |   |
| Outstanding at December 31, 2009 |   |                    | 1,405   |   |                         | $      | 24.36 |   |   |   | 247 |   |
|   Granted              |   |                    | 17      |   |                         |   | 31.06 |   |   |   | 156 |   |
|   Released             |   |                    | (105    | )      |                         |   | 21.60 |   |   |   | (82 | ) |
|   Forfeited or expired |   |                    | – |   |                         |   | – |   |   |   | (4 | ) |
| Outstanding at June 30, 2010     |   |                    | 1,317   |   |                         | $      | 24.66 |   |   |   | 317 |   |

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|                                                                   |   | For the Three Months |    |   | For the Six Months |   |
|------------------------------------------------------------------------|--------|----------------------|---------|--------|--------------------|--------|
|                                                                   |   | Ended June 30,       |    |   | Ended June 30,     |   |
|                                                                   |   | 2010                 |    |   | 2009               |   |   | 2010 |   |   | 2009 |   |
| Revenues:                                                              |   |                 |    |   |               |   |   |   |   |   |   |   |
| Recurring                                                              |   |                 | 75.6    | %      |               |   | 68.9 | % |   |   | 73.2 | % |   |   | 66.0 | % |
| Services                                                               |   |                 | 23.8    |   |               |   | 28.4 |   |   |   | 25.9 |   |   |   | 30.6 |   |
| License                                                                |   |                 | 0.6     |   |               |   | 2.7 |   |   |   | 0.9 |   |   |   | 3.4 |   |
| Total revenues                                                         |   |                 | 100.0   |   |               |   | 100.0 |   |   |   | 100.0 |   |   |   | 100.0 |   |
| Cost of revenues:                                                      |   |                 |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Recurring                                                              |   |                 | 22.0    |   |               |   | 20.2 |   |   |   | 21.2 |   |   |   | 19.2 |   |
| Services                                                               |   |                 | 21.7    |   |               |   | 23.4 |   |   |   | 22.8 |   |   |   | 24.4 |   |
| License                                                                |   |                 | 0.1     |   |               |   | 0.6 |   |   |   | 0.1 |   |   |   | 0.6 |   |
| Total cost of revenues                                                 |   |                 | 43.8    |   |               |   | 44.2 |   |   |   | 44.1 |   |   |   | 44.2 |   |
| Operating expenses:                                                    |   |                 |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                    |   |                 | 26.7    |   |               |   | 27.3 |   |   |   | 26.9 |   |   |   | 27.8 |   |
| Research and development                                               |   |                 | 19.2    |   |               |   | 20.0 |   |   |   | 18.8 |   |   |   | 19.5 |   |
| General and administrative                                             |   |                 | 9.4     |   |               |   | 9.2 |   |   |   | 9.2 |   |   |   | 9.2 |   |
| Total operating expenses                                               |   |                 | 55.3    |   |               |   | 56.5 |   |   |   | 54.9 |   |   |   | 56.5 |   |
| Operating income (loss)                                                |   |                 | 0.9     |   |               |   | (0.7 | ) |   |   | 1.0 |   |   |   | (0.7 | ) |
| Other income (expense):                                                |   |                 |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
|       Interest expense and other         |   |                 | (0.1    | )      |               |   | – |   |   |   | (0.1 | ) |   |   | (0.1 | ) |
|       Other income, net                  |   |                 | – |   |               |   | – |   |   |   | – |   |   |   | 0.1 |   |
| Total other income (expense), net                                      |   |                 | (0.1    | )      |               |   | – |   |   |   | (0.1 | ) |   |   | – |   |
| Income (loss) from continuing operations                               |   |                 |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
|    before income taxes                                  |   |                 | 0.8     |   |               |   | (0.7 | ) |   |   | 0.9 |   |   |   | (0.7 | ) |
|       (Expense) benefit for income taxes |   |                 | (0.3    | )      |               |   | 0.2 |   |   |   | (0.4 | ) |   |   | 0.1 |   |
| Income (loss) from continuing operations                               |   |                 | 0.5     |   |               |   | (0.5 | ) |   |   | 0.5 |   |   |   | (0.6 | ) |
| Loss from discontinued operations,                                     |   |                 |    |   |               |   |   |   |   |   |   |   |   |   |   |   |
|    net of taxes                                         |   |                 | (1.6    | )      |               |   | (0.2 | ) |   |   | (0.8 | ) |   |   | (0.2 | ) |
| Net income (loss)                                                      |   |                 | (1.1    | ) %    |               |   | (0.7 | ) % |   |   | (0.3 | ) % |   |   | (0.8 | ) % |

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|   | · | 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. |
|--------|--------|---------------------------------------|

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|                                                                                                                 |   |                 |    |   |           |   |    | Total Cumulative Number of |   |   | Maximum Number of      |   |
|----------------------------------------------------------------------------------------------------------------------|--------|----------------------|---------|--------|----------------|--------|---------|----------------------------|--------|--------|------------------------|--------|
|                                                                                                                 |   |                 |    |   |           |   |    | Shares Purchased as Part   |   |   | Shares That May Yet    |   |
|                                                                                                                 |   | Total Number of      |    |   | Average Price  |   |    | Of Publicly Announced      |   |   | Be Purchased Under the |   |
| Period                                                                                                               |   | Shares Purchased (1) |    |   | Paid per Share |   |    | Plans or Programs (1)      |   |   | Plans or Programs      |   |
| April 1 – 30, 2010                                                                                             |   |                 | – |   |           |   | – |                       |   |   | 3,105,925              |   |   |   | 894,075 |   |
| May 1 – 31, 2010                                                                                               |   |                 | 212,900 |   |           |   | 24.85   |                       |   |   | 3,318,825              |   |   |   | 681,175 |   |
| June 1 – 30, 2010                                                                                              |   |                 | 67,100  |   |           |   | 25.00   |                       |   |   | 3,385,925              |   |   |   | 614,075 |   |
| Total                                                                                                                |   |                 | 280,000 |   |           | $      | 33.22   |                       |   |   | 3,385,925              |   |   |   | 614,075 |   |
|                                                                                                                 |   |                 |    |   |           |   |    |                       |   |   |                   |   |   |   |   |   |
| (1) All shares were purchased through the publicly announced Stock Repurchase Plan in open-market transactions. |   |

| Number | Description                                                                                                      |
|--------|------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                             |
| 10.1   | Master Space Agreement between Quality Technology Services Miami LLC and Ultimate, dated June 1, 2009 *ü    |
| 10.2   | Master Space Agreement between Quality Technology Services Metro LLC and Ultimate, dated June 1, 2009 *ü    |
| 10.3   | Service Order Form between Verizon Canada Ltd. and Ultimate, dated September 23, 2009 *ü                    |
| 10.4   | Amended and Restated Change in Control Bonus Plan for Executive Officers dated April 26, 2010 *                  |
| 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 *                                          |

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|                                                                                  | The Ultimate Software Group, Inc. |
|---------------------------------------------------------------------------------------|-----------------------------------|
|                                                                                  |                              |   |
| Date:           August 9, 2010 | By:                               | /s/ Mitchell K. Dauerman |
|                                                                                  |                              | Mitchell K. Dauerman |
|                                                                                  |                              | Executive Vice President, Chief Financial Officer and Treasurer (Authorized Signatory and Principal Financial and Accounting Officer) |

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