Document:

Ex-10.1

 

EXHIBIT 10.1

STATE OF NORTH CAROLINA

AGREEMENT

COUNTY OF MECKLENBURG

     THIS AGREEMENT (this “Agreement”) is entered into as of June 15, 2005 by and between LANCE,
INC., a North Carolina corporation (the “Company”), and PAUL A. STROUP, III (“Stroup”).

STATEMENT OF PURPOSE

     Stroup has been employed by the Company for 31 years in various positions. On November 7,
1997, the Company and Stroup entered into an Executive Severance Agreement, which has been amended
by Amendments dated July 26, 2001 and October 21, 2004 (as amended, the “Severance Agreement”),
whereby the Company provided Stroup with certain benefits. At the time the Severance Agreement was
executed, Stroup held the titles of Chairman of the Board, President and Chief Executive Officer of
the Company, was a member of the Company’s Board of Directors and held various other positions with
the Company and its Affiliates.

     The Company recognizes Stroup’s dedication to the Company and has expressed its gratitude for
his long and effective service to the Company

     As part of a change in the overall strategic direction of the Company, on May 11, 2005, the
Board of Directors of the Company removed Stroup from the positions of Chairman of the Board,
President and Chief Executive Officer. Since that date, the Company and Stroup have entered into
negotiations with a view toward resolving all issues relating to Stroup’s employment with the
Company and the termination of that employment.

     As a result of these negotiations, Stroup and the Company have agreed that Stroup and the
Company will terminate their relationship on the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the Statement of Purpose and the terms and provisions of
this Agreement, the parties hereto mutually agree as follows:

     1.     Definitions. Capitalized terms used in this Agreement that are not expressly defined
herein but are defined in the Severance Agreement have the respective meanings given those terms in
the Severance Agreement. In addition, as used herein, the following terms shall have the following
meanings:

	 	(a)	 	“Affiliate” with reference to the Company means any Person that
directly or indirectly is controlled by, or is under common control with, the
Company, including each subsidiary of the Company. For purposes of this
definition the term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management

 

 

	 	 	 	and policies of a Person, whether through ownership of voting securities, by
contract or otherwise.

	 	(b)	 	“Person” means any individual, corporation, association,
partnership, business trust, joint stock company, limited liability company,
foundation, trust, estate or other entity or organization of whatever nature.
	 
	 	(c)	 	“Effective Date” with reference to this Agreement means the
eighth (8th) day following the execution of this Agreement, if not a Saturday,
Sunday or legal holiday, and if such day is a Saturday, Sunday or legal
holiday, then the first business day following such eighth (8th) day.

     2.      Termination of Employment; Resignation from Offices. The Company does hereby terminate
Stroup’s employment Without Cause, with said termination to be effective as of June 8, 2005 (the
“Termination Date”). Stroup has remained on the payroll through June 8, 2005 and was considered
during the period May 11, 2005 to June 8, 2005 as being on vacation. As requested by the Company,
Stroup hereby resigns from all offices, directorships, committees and positions he holds with the
Company and its Affiliates, including but not limited to, Chairman of the Board, President and
Chief Executive Officer of the Company and a member of the Company’s Board of Directors, with said
resignation to be effective as of May 11, 2005. If requested by the Company, Stroup will execute
any additional resignation letters, forms or other documents that acknowledge his resignation from
such employment, positions, committees and offices.

     3.     Payments by the Company. The Company agrees to pay or provide Stroup with the following:

	 	(a)	 	Compensation and benefits to which Stroup is otherwise entitled
as an employee of the Company at Stroup’s current rate and status through June
8, 2005 in accordance with the Company’s generally applicable policies and
procedures (payment for the period May 11, 2005 through June 8, 2005 shall be
treated as vacation pay and shall exhaust Stroup’s accrued vacation
entitlement);

	 	(b)	 	Except as expressly modified by this Paragraph 3, compensation
and benefits to which Stroup is otherwise entitled under the Severance
Agreement in accordance with the terms of the Severance Agreement. For
purposes hereof, the Company acknowledges and agrees that Stroup shall be
considered to have been involuntarily terminated Without Cause prior to a
Change in Control or Executive’s Retirement Date, and Stroup shall be due,
except as expressly modified by this Paragraph 3, all payments and benefits set
forth in Paragraph 5 of the Severance Agreement. The parties agree that Stroup
will be paid $1,488,375 under Paragraph 5(a) of the Severance Agreement, that
Stroup has elected to receive the present value of the payments provided
pursuant to Paragraph 5(b) of the Severance Agreement in the form of a single
cash payment calculated in accordance with Paragraph 3(d) of the Severance
Agreement in the amount of

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	 	 	 	$1,293,298, that the payments described in Paragraph 3(a) hereof satisfy the
obligations described in Paragraph 5(c) of the Severance Agreement and that
Stroup agrees to accept in full satisfaction of the Company’s obligations
under Paragraph 5(d) of the Severance Agreement a single cash payment in the
amount of $115,830. While it is not obligated to make any payment under
Paragraph 5(d) of the Severance Agreement at this time, the Company agrees
to pay Stroup $115,830 within thirty (30) days after the Effective Date;

	 	(c)	 	Possession of the Company automobile used by Stroup in
connection with his employment together with insurance coverage on said
automobile through the date of conveyance and conveyance of title to said
automobile promptly following the Effective Date of this Agreement in
accordance with Paragraph 5(e) of the Severance Agreement;
	 
	 	(d)	 	In lieu of the cash payment described in Paragraph 5(f) of the
Severance Agreement, the Company will make a single cash payment in the amount
of $226,171, which the parties agree represents the Value of Stroup’s unvested
stock options, and will extend the time for the exercise of his vested stock
options as provided in Paragraph 7 below;
	 
	 	(e)	 	Coverage under the Company’s Group Medical Benefits Plan in
accordance with Paragraph 5(g) of the Severance Agreement (including the right
to elect optional coverages at his expense) until the earlier of (a) the
date Stroup becomes eligible for comparable coverage under another employer’s
plan (the determination of whether the coverage is “comparable” shall be made
by Stroup in his sole discretion), (b) his death or (c) July 12, 2011;
	 
	 	(f)	 	Stroup has participated in various Company sponsored benefit
plans including the Deferred Compensation, Profit-Sharing Retirement, 401(k),
Employee Stock Purchase and Incentive Equity plans. All of Stroup’s vested
interests in any benefit plan in which he had vested interests as of the
Termination Date shall be paid when and as provided in, and otherwise subject
to, the terms, provisions and conditions of the applicable plans, and nothing
in this Agreement shall modify or override the terms, provisions or conditions
of those plans;
	 
	 	(g)	 	In lieu of the benefits to be provided in Paragraphs 5(h) and
(k) of the Severance Agreement, the Company agrees to pay, and Stroup agrees to
accept, the agreed cash value of the outplacement benefits in the amount of
$69,451 plus reimbursement of expenses, subject to a ceiling amount of $5,000,
incurred by Stroup for legal services in connection with the termination of his
employment.

     4.     Termination of the Compensation and Benefits Assurance Agreement and All Other Benefits Not
Specified in this Agreement. On November 7, 1997, Stroup and the

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Company entered into a Compensation and Benefits Assurance Agreement that was intended to provide
Stroup with certain compensation and benefits in the event of the termination of his employment
under certain specified circumstances in connection with a Change in Control, as defined in the
Compensation and Benefits Assurance Agreement. It is agreed that this Agreement is not being
entered into in connection with a Change in Control, that Stroup is not entitled to receive any
compensation or benefits under the Compensation and Benefits Assurance Agreement, that the
Compensation and Benefits Assurance Agreement is hereby terminated and that neither party has any
further rights and obligations thereunder. The Company and Stroup acknowledge and agree that all
other benefits and perquisites related to or resulting from Stroup’s employment and positions with
the Company and its Affiliates, which are not described and provided for in this Agreement,
terminate on the Effective Date, and that the Company has no further obligations with respect
thereto.

     5.     Confidential Information and Company Property. Stroup acknowledges that by reason of
Stroup’s employment by the Company, Stroup has had access to certain Company “Trade Secrets” (as
defined in the North Carolina Trade Secrets Protection Act, N.C.G.S. §66-152) and confidential
product formulations (collectively “Confidential Information”). Stroup agrees that he shall not
directly or indirectly use, reveal, disclose or remove from the Company’s premises Confidential
Information or material containing Confidential Information, without the prior written consent of
the Company. In addition, Stroup represents that except for the computer used by Stroup during his
employment which the Company has transferred to him and any gifts from the Company received during
his employment, he has returned to the Company all property of the Company which was in his
possession. The Company is not currently aware of any property belonging to the Company which he
has not returned.

     6.     Employment Taxes and Withholdings. Stroup acknowledges and agrees that the Company shall
withhold from the payments and benefits described in this Agreement all taxes, including income and
employment taxes, required to be so deducted or withheld under applicable law.

     7.     Extension of Stock Options. Notwithstanding any provisions to the contrary in any
Nonqualified Stock Option Agreement between the Company and Stroup, Stroup shall be permitted to
exercise, at any time between June 8, 2005 and the close of business on June 8, 2007, any stock
option which became exercisable prior to June 8, 2005. Any sales of the Company’s Common Stock
pursuant to the exercise of the options, which occurs on or before December 31, 2005, shall be
conducted in accordance with the Company’s Insider Trading Policy.

     8.     Confidentiality of this Agreement; Employment Reference. Stroup shall not at any time,
directly or indirectly, discuss with or disclose to anyone (other than to members of his immediate
family, his attorney, certain personal advisors with whom he consulted prior to the Effective Date,
his tax advisors and the appropriate taxing authorities or as otherwise required by law,
hereinafter “Qualified Persons”) the terms of this Agreement, including the amounts payable
hereunder. Stroup agrees that he will generally avoid discussions with anyone other than Qualified
Persons about the circumstances surrounding the termination of his employment, but the parties
acknowledge that Stroup is free to discuss all aspects of his employment, including the termination
of his employment, with prospective employers and others who may

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assist him in locating other suitable employment. Stroup further agrees that for a period of two
years from the Effective Date, he will refrain from making derogatory comments about the Company or
its agents or affiliates to the Company’s customers, suppliers or employees. The Company agrees
that for a period of two years from the Effective Date, the Company and its officers will likewise
refrain from making derogatory comments about Stroup to the Company’s customers, suppliers or
employees. The Company further agrees that if any person makes inquiry concerning Stroup, the
Company will advise such person only as to the dates of Stroup’s employment with the Company and
the positions held. Both Stroup and the Company have the right to respond truthfully to public
statements or publicly reported statements about either of them.

     9.     Release of the Company. Stroup, on behalf of himself and his heirs, personal
representatives, successors and assigns, hereby releases and forever discharges the Company and its
Affiliates, and each and every one of their respective present and former shareholders, directors,
officers, employees and agents, and each of their respective successors and assigns, from and
against any and all claims, demands, actions, causes of action, damages, costs and expenses,
including without limitation all “Employment-Related Claims,” which Stroup now has or may have by
reason of any thing occurring, done or omitted to be done to the date of this Agreement;
provided, however, this release shall not apply to any claims that Stroup may have
for the payments or benefits expressly provided for Stroup or otherwise specifically referred to in
this Agreement. For purposes of this Agreement, “Employment-Related Claims” means all rights and
claims Stroup has or may have:

	 	(i)	 	related to his employment by or status as an employee of the
Company or any of its Affiliates or the termination of that employment or
status or to any employment practices and policies of the Company, or its
Affiliates; or
	 
	 	(ii)	 	under the federal Age Discrimination in Employment Act of 1967,
as amended (“ADEA”).

     10.     Special ADEA Waiver Acknowledgements. STROUP ACKNOWLEDGES AND AGREES THAT HE HAS READ
THIS AGREEMENT IN ITS ENTIRETY AND THAT THIS AGREEMENT CONTAINS A GENERAL RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS, INCLUDING RIGHTS AND CLAIMS ARISING UNDER THE FEDERAL AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967, AS AMENDED (“ADEA”). STROUP FURTHER ACKNOWLEDGES AND AGREES THAT:

	 	(a)	 	THIS AGREEMENT DOES NOT RELEASE, WAIVE OR DISCHARGE ANY RIGHTS
OR CLAIMS THAT MAY ARISE AFTER THE DATE OF THIS AGREEMENT;
	 
	 	(b)	 	HE IS ENTERING INTO THIS AGREEMENT AND RELEASING, WAIVING AND
DISCHARGING RIGHTS OR CLAIMS ONLY IN EXCHANGE FOR CONSIDERATION THAT HE IS NOT
ALREADY ENTITLED TO RECEIVE;

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	 	(c)	 	HE HAS BEEN ADVISED, AND IS BEING ADVISED IN THIS AGREEMENT, TO
CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS AGREEMENT;
	 
	 	(d)	 	HE HAS BEEN ADVISED, AND IS BEING ADVISED IN THIS AGREEMENT,
THAT HE HAS UP TO TWENTY-ONE DAYS (21) DAYS WITHIN WHICH TO CONSIDER THIS
AGREEMENT AND THAT IF HE EXECUTES THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE
TWENTY-ONE (21) DAY PERIOD, THEN HE EXPRESSLY WAIVES HIS RIGHTS WITH RESPECT TO
THE REMAINING TIME, AND THAT THE AGREEMENT WILL BECOME EFFECTIVE THE EIGHTH DAY
AFTER HE SIGNS IT AS REFERENCED IN PARAGRAPH 10(e) BELOW; AND
	 
	 	(e)	 	HE IS AWARE THAT HE MAY REVOKE THIS AGREEMENT AT ANY TIME
WITHIN SEVEN (7) DAYS AFTER THE DAY HE SIGNS THIS AGREEMENT AND THAT THIS
AGREEMENT WILL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EIGHTH DAY AFTER
THE DATE THIS AGREEMENT IS SIGNED, ON WHICH DAY, THE EFFECTIVE DATE, THIS
AGREEMENT WILL AUTOMATICALLY BECOME EFFECTIVE UNLESS PREVIOUSLY REVOKED WITHIN
THAT SEVEN-DAY PERIOD. HE IS ALSO AWARE THAT TO AFFECT A REVOCATION, HE MAY,
WITHIN THE SEVEN-DAY PERIOD DELIVER (OR CAUSE TO BE DELIVERED) TO THE PRINCIPAL
OFFICE OF THE COMPANY NOTICE OF HIS REVOCATION OF THIS AGREEMENT NO LATER THAN
5:00 P.M. EASTERN TIME ON THE SEVENTH (7TH) DAY FOLLOWING HIS EXECUTION OF THIS
AGREEMENT.

     11.     Applicable Law. This Agreement is made and executed with the intention that the
construction, interpretation and validity hereof shall be determined in accordance with and
governed by the laws of the State of North Carolina.

     12.     Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns. This Agreement shall be binding upon and inure to the benefit
of Stroup, his heirs, executors and administrators.

     13.     Entire Agreement. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous
oral or written agreements and understandings between them with respect to the subject matter
hereof.

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized
officer, and Stroup has hereunto set his hand and seal, all as of the day and year first above
written.

	 	 	 
	[CORPORATE SEAL]	 	
LANCE, INC.
	 	 	
By  s/ Earl D. Leake     

     Earl D. Leake

     Vice President

	 	 	 	 	 
	 	/s/ Paul A. Stroup,
III               [SEAL]
 	 
	 	     Paul A. Stroup, III 	 
	 	 	 
	 

7Seventh Loan Modification Agreement

 

Exhibit 10.1

SEVENTH LOAN MODIFICATION AGREEMENT

     THIS SEVENTH LOAN MODIFICATION AGREEMENT (this “Agreement”) is entered into as of June 13,
2005, but is effective as of May 27, 2005 by and between SILICON VALLEY BANK (“Bank”), whose
address is 3003 Tasman Drive, Santa Clara, California 95054 and having a loan production office at
3353 Peachtree Road, NE, North Tower, Suite M-10, Atlanta, Georgia 30326, and THE ULTIMATE SOFTWARE
GROUP, INC., a corporation organized and in good standing in the State of Delaware (“Borrower”),
whose address is 2000 Ultimate Way, Weston, Florida 33326.

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be owing by
Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, a Loan and
Security Agreement, dated November 29, 2001 (as may be amended from time to time, the “Loan
Agreement”). Hereinafter, all obligations owing by Borrower to Bank shall be referred to as the
“Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as
described in the Loan Agreement. Hereinafter, the Loan Agreement, together with all other
documents evidencing or securing the Obligations shall be referred to as the “Existing Loan
Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

     A. Defined Terms. The definitions of “Credit Extension”, Loan Documents”, and “Revolving Loan
Maturity Date” set forth in Section 13.1 of the Loan Agreement are amended and restated in their
entirety as follows:

     “Committed Revolving Line” is Advances of up to Two Million Five Hundred Thousand
Dollars ($2,500,000) and includes all Equipment Advances, Letters of Credit and the amount
of all Cash Management Services.

     “Credit Extension” is each Advance, Equipment Advance, Letter of Credit, Cash
Management Service, Supplemental Equipment Advance, Term Loan or any other extension of
credit by Bank for Borrower’s benefit.

     “Loan Documents” are, collectively, this Agreement, the Revolving Promissory Note, the
Equipment Term Note, the Supplemental Equipment Term Note, the Term Note, any other note, or
notes or guaranties executed by Borrower, and any other present or future agreement between
Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended,
extended or restated.

     “Revolving Maturity Date” is May 26, 2006.

     From and after the date hereof, the following definitions terms are added to Section 13.1 of
the Loan Agreement:

     “Non Formula Period” means such times as Borrower maintains not less than Twelve
Million Dollars ($12,000,000) in unencumbered cash or cash equivalents with Bank and any
investments held with Bank’s affiliates.

 

 

     “Term Loan” is a Credit Extension of up to Two Million Five Hundred Thousand Dollars
($2,500,000).

     “Term Loan Advance” has the meaning set forth in Section 2.1.6.

     “Term Loan Availability End Date” means April 28, 2006.

     “Term Note” means that certain Term Note dated June 13, 2005 in the principal amount of
Two Million Five Hundred Thousand Dollars ($2,500,000) from Borrower in favor of Bank,
together with all renewals, amendments, modifications and substitutions therefor.

     B. Revolving Advances. Section 2.1.1 of the Loan Agreement is amended and restated in its
entirety as follows:

     2.1.1 Revolving Advances.

     (a) During any Non Formula Period, Bank will make Advances not exceeding the Committed
Revolving Line. At all other times, Bank will make Advances not exceeding (i) the lesser of
(A) the Committed Revolving Line, or (B) the Borrowing Base; minus (y) the outstanding
principal balance of all Equipment Advances, and minus (z) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit). Amounts borrowed
under this Section may be repaid without penalty and reborrowed during the term of this
Agreement. All Advances shall be evidenced by the Revolving Promissory Note to be executed
and delivered by Borrower to Bank on the Closing Date and shall be repaid in accordance with
the terms of the Revolving Promissory Note. Notwithstanding anything set forth in this
Agreement to the contrary, the maximum amount of Credit Extensions allowed under the
Committed Revolving Line shall not at any time exceed Two Million Five Hundred Thousand
Dollars ($2,500,000).

     C. Term Loan. The following provisions are added to the Loan Agreement immediately after
Section 2.1.5 as Section 2.1.6:

     2.1.6 Term Loan.

          (a) Through the Term Loan Availability End Date, Bank will make advances (“Term Loan
Advance” and, collectively, “Term Loan Advances”) under the Term Loan. Each Term Loan
Advance must be for a minimum of One Hundred Thousand Dollars ($100,000). The number of
Term Loan Advances is limited to seven (7). Borrower must advance not less than Five
Hundred Thousand Dollars under the Term Loan within seventy five (75) days of the closing of
the Term Loan and not less than One Million Dollars ($1,000,000) on or before December 31,
2005.

          (b) Term Loan Advances are payable in thirty six (36) equal monthly installments of
principal, plus accrued interest, beginning on the first (1st) day of each month
following the date of the Term Loan Advance and ending on the date which is thirty six (36)
months after the date of such Term Loan Advance. All Term Loan Advances shall be evidenced
by the Term Note to be executed and delivered by Borrower to Bank. Term Loan Advances when
repaid may not be reborrowed.

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          (c) To obtain a Term Loan Advance, Borrower must notify Bank with a Payment/Advance
Form (the notice is irrevocable) by facsimile no later than 3:00 p.m. Eastern time one (1)
Business Day before the day on which the Term Loan Advance is to be made. The
Payment/Advance Form must be signed by a Responsible Officer or designee.

          (d) Borrower may voluntarily prepay all or any portion of any Term Loan Advance upon
not less than five (5) Business Days notice to Bank, provided any such prepayment is
accompanied by a prepayment fee equal to (i) three percent (3%) of the amount prepaid if the
prepayment occurs within the first twelve (12) months from the date of the Term Loan
Advance; (ii) two percent (2%) of the amount prepaid if the prepayment occurs after the
first twelve (12) months, and prior to the twenty fourth (24th) month from the date of the
Term Loan Advance; and (iii) one percent (1%) of the amount prepaid at all times after the
first twenty four (24) months from the date of the Term Loan Advance. In addition to the
above prepayment fee, at the time of any such prepayment, Borrower must pay, on the date of
the prepayment (A) all unpaid accrued interest to the date of the prepayment; and (B) all
other sums, if any, that shall have become due and payable hereunder with respect to this
Agreement. This provision does not apply to any prepayment which results from an Event of
Default.

          (e) All Term Loan Advances shall accrue at a fixed rate of interest as of the date of
each Term Loan Advance, as selected by Borrower equal to either (y) one half of one percent
per annum in excess of the Prime Rate as of the date of such Term Loan Advance or (z) seven
percent (7.0%) per annum.

     D. Financial Reporting. From and after the date hereof, Section 6.2(d) is amended and
restated in its entirety as follows:

     (d) Within thirty (30) days after the last day of each month, Borrower will deliver to
Bank with the monthly financial statements a Compliance Certificate signed by a Responsible
Officer in the form of Exhibit D, provided, however, during any Non Formula Period,
Borrower will deliver such Compliance Certificate on a quarterly basis, within forty five
(45) days after the last day of each quarter.

     E. Financial Covenants. From and after the date hereof, Section 6.7 of the Loan Agreement is
amended and restated in its entirety as follows:

     6.7 Financial Covenants. Borrower will maintain:

          (i) Quick Ratio. A ratio of (a) Quick Assets, including all short and long term
securities to (b) Current Liabilities, plus all Indebtedness debt to Bank, (including issued
but undrawn Letters of Credit), less deferred revenue of at least 1.75 to 1.00. This
covenant will be measured as of the as of the last day of each month during any Formula
Period and as of the last day of each quarter during any Non-Formula Period.

          (ii) Quarterly Revenue. Minimum revenue as of the end of each quarter of not less than
the following amounts at the following times:

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	Period Ending:	 	Quarterly Revenue:	 
	March 31, 2005
	 	$	15,400,000;	 
	June 30, 2005
	 	$	16,300,000;	 
	September 30, 2005
	 	$	16,800,000;	 
	December 31, 2005
and as of the end of
each quarter thereafter
	 	$	18,900,000.	 

     E. During any Non Formula Period, provided no Event of Default has occurred and is continuing
and the outstanding amount of Advances under the Committed Revolving Line does not exceed $500,000,
Borrower will not be required to have an audit of the Collateral performed.

4. PAYMENT OF LOAN FEE. In consideration of Bank’s agreement to enter into this Agreement,
and amend and extend the Committed Revolving Line, the Borrower shall pay to Bank on the date of
the first Advance on the Committed Revolving Line after the date hereof, a non refundable loan fee
in the amount of Six Thousand Two Hundred Fifty Dollars ($6,250) (the “Revolving Loan Fee”). In
addition, Borrower shall pay to Bank a non refundable loan fee in connection with the Term Loan on
December 31, 2005 (the “Term Loan Fee”). The Term Loan Fee shall be calculated in accordance with
the following formula:

	 	 	 	 	 
	$1,000,000 minus aggregate amount of	 	 	 	 
	Term Loan Advances (but not to exceed $1,000,000)	 	 	 	 
	made on or before December 31, 2005	 	 	 	 
	$1,000,000

	 	x
	 	$19,750= Term Loan Fee

In addition, Borrower shall pay on the date hereof all out-of-pocket expenses, including, without
limitation, Bank’s attorneys’ fees. The Revolving Loan Fee and the Term Loan Fee each are
considered earned on the date hereof and are not refundable.

5. COMPLIANCE CERTIFICATE. Exhibit D (Compliance Certificate) to the Loan
Agreement is replaced in its entirety with Exhibit D attached hereto.

6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary
to reflect the changes described above.

7. NO DEFENSES OF BORROWER. Borrower agrees that it has no defenses against the
obligations to pay any amounts under the Obligations.

8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing
Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to this Agreement, the
terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank’s
agreement to modifications to the existing Obligations pursuant to this Agreement in no way shall
obligate Bank to make any future modifications to the Obligations. Nothing in this Agreement shall
constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue
of this Agreement. The terms of this paragraph apply not only to this Agreement, but also to all
subsequent loan modification agreements.

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9. CONDITIONS. This Agreement shall not become effective until Bank receives the
following, each of which shall be satisfactory in form and substance to Bank:

     (a) The Term Note;

     (b) proof that the Borrower has paid all fees, costs and expenses to Bank in connection with
this Agreement, including but not limited to all the Bank’s attorneys fees and expenses; and

     (c) such other information, instruments, opinions, documents, certificates and reports as Bank
may deem necessary.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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     This Agreement is executed as of the date first written above.

BORROWER:

THE ULTIMATE SOFTWARE GROUP, INC.

	 	 	 	 	 	 	 
	By:	 	/s/ Mitchell K. Dauerman	 	 
	 	 	 	 	 
	Name:	 	Mitchell K. Dauerman	 	 
	 

	 	 	 	 
	 	 
	Title:	 	Executive Vice President, Chief Financial Officer and Treasurer	 	 
	 

	 	 	 	 
	 	 

BANK:

SILICON VALLEY BANK

	 	 	 	 	 	 	 
	By:	 	/s/ Dale Kirkland	 	 
	 	 	 	 	 
	Name:	 	Dale Kirkland	 	 
	 

	 	 	 	 
	 	 
	Title:	 	Senior Vice President	 	 
	 

	 	 	 	 
	 	 

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EXHIBIT D

COMPLIANCE CERTIFICATE

	 	 	 
	TO:

	 	SILICON VALLEY BANK
	 

	 	3003 Tasman Drive
	 

	 	Santa Clara, CA 95054
	 
	 	 
	FROM:

	 	THE ULTIMATE SOFTWARE GROUP, INC.
	 

	 	2000 Ultimate Way
	 

	 	Weston, Florida 33326

     The undersigned authorized officer of The Ultimate Software Group, Inc. (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank
(the “Agreement”), (i) Borrower is in complete compliance for the period ending ___
with all required covenants except as noted below and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date. Attached are the
required documents supporting the certification. The Officer certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one
period to the next except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance is determined not
just at the date this certificate is delivered.

Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Form 10-Q

	 	Quarterly within 45 days
	 	 	 	Yes
	 	No
	Annual (Audited)

	 	FYE within 120 days
	 	 	 	Yes
	 	No
	 
	 	 	 	 	 	 	 	 
	During any Formula Period, Monthly
financial statements + CC

	 	Monthly within 30 days
	 	 	 	Yes
	 	No
	During any Non Formula Period,
Quarterly financial
statements+ CC

	 	Quarterly within 45 days
	 	 	 	Yes
	 	No
	 
	 	 	 	 	 	 	 	 
	When Advances are outstanding on
	 	 	 	 	 	 	 	 
	Line of Credit:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	A/R Aging

	 	Monthly within 30 days
	 	
	 	Yes	 	No
	Borrowing Base Certificate

	 	Monthly within 30 days
	 	
	 	Yes	 	No

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	 	Actual	 	 	Complies	 
	Maintain on a Monthly Basis during any
Formula Period and Quarterly,
during any Non Formula Period
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum Quick Ratio
	 	 	1.75:1.00	 	 	 	                    :1.00	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Maintain on a Quarterly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

7

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	 	Actual	 	 	Complies	 
	Minimum Revenue
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	March 31, 2005
	 	$	15,400,000	 	 	$	                    	 	 	Yes	 	No
	June 30, 2005
	 	$	16,300,000	 	 	$	                    	 	 	Yes	 	No
	September 30, 2005
	 	$	16,800,000;	 	 	$	                    	 	 	Yes	 	No
	December 31, 2005
and as of the end of
each quarter thereafter
	 	$	18,900,000	 	 	$	                    	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Have there been updates to Borrower’s
intellectual property, if appropriate?
	 	Yes	 	No
	Has Borrower added any new offices or
business locations since the prior
compliance certificate?
	 	Yes	 	No

Comments Regarding Exceptions: See Attached.

Sincerely,

 

Signature

Title

Date

8

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