Hewitt and Exult Stockholders Approve Merger, Create Clear Leader in HR Outsourcing Industry

Business Wire, Sept 30, 2004

LINCOLNSHIRE, Ill. & IRVINE, Calif. -- Hewitt's HR Domain Expertise Married With Exult's BPO Operational Skills

Hewitt Associates, Inc. (NYSE:HEW), a global human resources services firm, and Exult, Inc. (NASDAQ:EXLT), a leading provider of HR business process outsourcing (BPO), today announced that their stockholders have voted to approve the companies' proposed merger. Expected to close October 1, the merger will create the clear leader in the HR BPO industry.

The combined organization, known as Hewitt Associates, Inc., will be the leading provider of HR BPO services with a market share greater than 30 percent.(1) Hewitt already serves more than 300 companies and more than 18 million employees with benefits outsourcing services.

"This marks a defining moment for Hewitt and for the HR BPO industry," said Dale Gifford, Hewitt chairman and CEO. "Hewitt will be the clear leader in a rapidly growing industry, setting the standard with the most flexible and comprehensive solution available today."

Joining Hewitt's 64 years of HR domain expertise with HR BPO pioneer Exult's operational skills and Six Sigma quality approach to outsourcing, the combined company will be the only organization capable of offering total HR outsourcing services--benefits, payroll, recruiting, learning and more--on an integrated basis with HR consulting expertise. The company's combined revenues are expected to approach $3.0 billion in fiscal 2005.

"Our integration into an HR outsourcing force of this size and scale presents us with tremendous growth avenues," said Jim Madden, Exult founder and CEO. "Since we announced our intent to merge in June, we've been presented with several sales opportunities--including some opportunities that would not have been available to us as separate organizations. Already, clients and prospects are realizing our combined strengths and potential."

Hewitt and Exult's clients, including International Paper, have expressed positive reactions to the companies' merger.

"International Paper is extremely pleased with the merger between Hewitt and Exult as we expect to realize significant benefits from their combined portfolio of global products and services," said Paul Karre, vice president of U.S. HR for International Paper. "We look forward to partnering with the combined company to continue to expand and improve on HR service delivery across International Paper's businesses."

Exult's operations will be merged into Hewitt's existing HR outsourcing business, which will continue to be led by Hewitt's HR outsourcing leader, Bryan Doyle. Kevin Campbell will lead market strategy and development for Hewitt's outsourcing business.

Hewitt's board of directors increases from 10 to 12 with the addition of two of Exult's outside directors. Joining the board are Steve Denning, managing partner of global direct investment firm General Atlantic Partners, LLC, a founding investor in Exult; and Thomas J. Neff, U.S. chairman of global executive recruiting firm Spencer Stuart.

"HR is and will continue to be our core business," said Gifford. "Today, that business, anchored by deep HR content knowledge, is enhanced with increased process skills, a broader global presence, additional service capabilities and the infrastructure to support future growth. With this solid foundation, companies can rely on Hewitt as their one-stop shop for all of their HR needs."

Transaction Terms and Additional Information

Hewitt and Exult announced their plans to merge on June 16, 2004. Under terms of the merger agreement, Exult stockholders will receive 0.20 shares of Hewitt Class A common stock, on a tax-free basis, for each Exult share. Hewitt stock will continue trading on the New York Stock Exchange under the ticker symbol HEW. Exult stock will no longer trade as of October 1, 2004.

Share Repurchase and Additional Liquidity Events

Given certain legal limitations that existed between the initial announcement of the merger through the completion of the stockholder votes, Hewitt has not purchased any of its shares under its previously announced $150 million authorization. Going forward the company may purchase common shares under the existing authorization, depending on market conditions and other customary factors.

Hewitt also announced that it has been advised by FORE Holdings LLC (formerly known as Hewitt Holdings LLC) that FORE Holdings will release the transfer restrictions on 2 percent of the original number of aggregate Class B and Class C shares each month from October through December 2004 (1.6 million shares per month). These shares may be sold pursuant to the company's S-3 registration statement which became effective August 31, 2004. The company is unable to estimate how many of the released shares will be sold under that registration statement in that period. Restrictions on 2 percent of the 0.9 million Class A shares to be held by certain Exult senior executives after the closing of the merger will also be released each month from October through December 2004 (0.02 million shares per month). The company is unable to estimate how many of the related shares will be sold. FORE Holdings stated that liquidity opportunities after December 2004 could include a continuation of the release of transfer restrictions at the same or a different rate, a managed secondary offering, negotiated sales to institutions or a combination of these scenarios. As previously disclosed, sales restrictions on remaining Class B and Class C shares and shares held by certain senior Exult executives are expected to lapse on June 27, 2005.