<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to _________

                         Commission file number 0-30035

                                   EXULT, INC.
             (Exact Name of Registrant as Specified in its Charter)

         DELAWARE                                                33-0831076
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

               4 PARK PLAZA, SUITE 1000, IRVINE, CALIFORNIA 92614
           (Address of Principal Executive Office, including Zip Code)

                                 (949) 250-8002
              (Registrant's Telephone Number, including Area Code)

        Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$0.0001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of the Common Stock of the registrant held by
non-affiliates of the registrant as of March 1, 2002 was approximately
$523,537,000 (based upon the closing price on the Nasdaq National Market on that
date).

The number of shares of Common Stock of the registrant outstanding as of March
1, 2002 was 104,737,307.


<PAGE>



                       DOCUMENTS INCORPORATED BY REFERENCE

    Part III incorporates by reference certain information from the registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held May 7, 2002,
which will be filed with the Commission not later than April 30, 2002.

       INFORMATION REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

    This report contains forward-looking statements that are based on our
current expectations, assumptions, estimates and projections about our company
and our industry. When used in this report, the words "may," "will," "should,"
"predict," "continue," "plans," "expects," "anticipates," "estimates," "intends"
and similar expressions are intended to identify forward-looking statements.
These statements include, but are not limited to, statements under the captions
"Business," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report concerning,
among other things, our goals and strategies, the anticipated scope and result
of our business operations, and our ability to:

    o   complete development of our service delivery infrastructure;

    o   obtain new comprehensive process management contracts;

    o   successfully implement our comprehensive Exult eHR solutions for our
        existing clients and scale our service offering across a broad client
        base;

    o   establish new client service centers;

    o   increase revenue, control expenditures, recognize economies of scale and
        achieve profitability; and

    o   expand our sales and marketing capabilities and our technology and
        general operating infrastructure.

    These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. We have
not yet proven our business model and must invest substantial resources to build
our service capabilities. It is not certain that our Exult eHR solution will
perform as anticipated. The market in which we operate is competitive and other
service providers may be more effective at selling or delivering human resources
process management services. These and other risks and uncertainties are
described in this report under the heading "Risk Factors" and in our other
filings made from time to time with the Securities and Exchange Commission. The
cautionary statements made in this report should be read as being applicable to
all related forward-looking statements wherever they appear in this report.
These statements are only predictions. We cannot guarantee future results,
levels of activity, performance or achievements. We assume no obligation to
publicly update or revise these forward-looking statements for any reason, or to
update the reasons actual results could differ materially from those anticipated
in these forward-looking statements, even if new information becomes available
in the future.

    This report contains estimates of market size and growth related to the
human resources business process outsourcing market, the use of the Internet,
the Global 500 and other industry data. These estimates have been included in
studies published by Dataquest, a division of GartnerGroup and Fortune Magazine.
These estimates contain certain assumptions regarding current and future events,
trends and activities. Although we believe that these estimates are generally
indicative of the matters reflected in those studies, these estimates are
inherently imprecise, and we caution you to read these estimates in conjunction
with the rest of the disclosure in this report, particularly the "Risk Factors"
section.


<PAGE>


                               TABLE OF CONTENTS


<TABLE>
<CAPTION>

PART I                                                                                                          PAGE
------                                                                                                          ----
<S>                                                                                                            <C>
Item 1.            BUSINESS (including Risk Factors beginning on page 13).........................................1

Item 2.            PROPERTIES....................................................................................22

Item 3.            LEGAL PROCEEDINGS.............................................................................23

Item 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................23

Executive Officers and Certain Significant Employees of the Registrant...........................................24

</TABLE>


<TABLE>
<CAPTION>

PART II
-------
<S>                                                                                                            <C>
Item 5.            MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                   STOCKHOLDER MATTERS...........................................................................26

Item 6.            SELECTED FINANCIAL DATA.......................................................................27

Item 7.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS...........................................................28

Item 7A.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                   MARKET RISK...................................................................................35

Item 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................35

Item 9.            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                   ACCOUNTING AND FINANCIAL DISCLOSURE...........................................................35

</TABLE>

<TABLE>
<CAPTION>

PART III
--------
<S>                                                                                                            <C>
Item 10.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................36

Item 11.           EXECUTIVE COMPENSATION........................................................................36

Item 12.           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                   AND MANAGEMENT................................................................................36

Item 13.           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................36

</TABLE>

<TABLE>
<CAPTION>

PART IV
-------
<S>                                                                                                            <C>
Item 14.           EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                   ON FORM 8-K...................................................................................37

SIGNATURES         ..............................................................................................40

Financial Statements............................................................................................F-1

</TABLE>


<PAGE>


                                     PART I

ITEM 1.    BUSINESS.

OVERVIEW

    Our mission is to be the leading provider of outsourced HR services to
Global 500 corporations. We design our services to enable Global 500
corporations to enhance human capital productivity, reduce HR costs, streamline
HR processes and provide superior HR services to their employees. We provide
comprehensive, integrated HR process management through our Exult eHR(SM)
solution, which includes:

    o   HR process management expertise;

    o   shared client service centers;

    o   expert HR process consulting capabilities;

    o   our myHR(SM) web-enabled applications; and

    o   management of third-party vendor relationships.

    The broad spectrum of process management services we provide through our
eHR(SM) solution is grouped into five major categories:

    o   payroll production;

    o   rewards;

    o   life events;

    o   advice & information; and

    o   finance & accounting.

     Our shared service centers operate in North Carolina, Scotland, Tennessee
and Texas and house the personnel and systems that manage our clients'
transaction, production and service center requirements. Our myHR(SM)
applications are designed to enable our clients and their employees to access
and manage HR information via the Internet in a self-service environment. We
have seven HR outsourcing clients: Bank of America Corporation, BP p.l.c.,
International Paper Company, Pactiv Corporation, Prudential Financial, Tenneco
Automotive and Unisys Corporation. In addition, we have many process consulting
clients, including Diageo PLC, Pechiney, Siemens AG and Unilever PLC.

INDUSTRY BACKGROUND

    HUMAN RESOURCES DEPARTMENTS IN THE GLOBAL 500. According to the Global 500
List for the Year 2001 published by Fortune Magazine, Global 500 corporations
employed more than 24 million people in 2000, and the median number of employees
for a Global 500 corporation was approximately 60,000, in multiple locations and
countries. An employee base of this magnitude presents logistical complexities,
and the human resources functions of Global 500 corporations are often
complicated by multiple human resources groups for different business units and
the lack of central information repositories and coordinated communications
infrastructures. As a result, the HR operational processes of large corporations
often are redundant and inefficient. In addition, the large number of
third-party vendors typically used by a


                                       1
<PAGE>

human resources department to handle discrete functions complicates HR process
management. By necessity, HR departments typically devote most of their
resources to administrative functions rather than strategic planning and
initiatives. At the same time, corporations that extend cost-cutting to their HR
departments often focus more on reducing staff than on reengineering service
delivery.

    THE EMERGENCE OF HR PROCESS OUTSOURCING. Many large corporations outsource
discrete, non-core functions of their operations, such as payroll, tax filings
and benefits administration. According to Dataquest, the worldwide HR
outsourcing market is projected to grow from approximately $26.2 billion in 1999
to approximately $76.4 billion in 2004. The market for multi-process HR
outsourcing is relatively new. We believe that approximately 300 of the Global
500 are viable candidates for HR outsourcing provided by Exult. Based on the
median employee base and our estimates of annual spending per employee for
services that we perform, we estimate that the addressable market for our
services consists of annual spending of approximately $29 billion per year.
Comprehensive HR process outsourcing for large corporations is difficult and
requires a well-developed service delivery infrastructure and significant
expertise in analyzing, providing and managing HR processes across many
divisions and third-party vendors, and using policies, procedures, operations
and technologies that yield superior performance as measured by productivity,
cost, quality and customer satisfaction metrics.

    EXPANSION OF THE INTERNET. The Internet facilitates interactive
communications among large groups of individuals in multiple geographic
locations. To date, however, we believe that HR organizations have not fully
utilized the Internet and web-enabled processes and systems because they have
not broadly implemented mechanisms for effectively centralizing and organizing
the large amount of information and electronic transmissions generated by
processes within the HR organization. Accordingly, we believe the Internet's use
in HR departments has been largely limited to one-on-one e-mail communications
or process-specific internal networks, often provided by third parties, which do
not integrate into a seamless information source for the company or its
employees.

OUR STRATEGY

    We rely upon the following strategic elements in the development and
management of our business:

    o   TARGET GLOBAL 500 CORPORATIONS AS CLIENTS. Global 500 corporations
        generally have operations spread across multiple business units and
        locations. We believe the magnitude and complexity of these corporations
        and their resulting HR needs make them ideal candidates for our
        comprehensive Exult eHR(SM) process management services.

    o   ESTABLISH LONG-TERM CLIENT RELATIONSHIPS. We pursue long-term contracts
        to reengineer and manage our clients' HR processes. We believe long-term
        contracts foster mutual commitment and shared goals with our clients,
        and best enable us to transform client HR processes to our
        infrastructure and best practices. The long-term nature of our contracts
        also gives us greater visibility of future revenue streams and better
        information for determining future investment decisions.

    o   PROVIDE BROADLY INTEGRATED PROCESS MANAGEMENT SERVICES. We have designed
        a service offering that covers approximately 25 specific human resources
        and related processes in the areas of payroll production, rewards, life
        events, advice & administration, and finance & accounting. This enables
        us to offer clients a comprehensive service for integrated management of
        many or all HR processes, which we believe enhances the efficiency and
        effectiveness of our clients' HR operations.

    o   INCREASE EFFICIENCIES BY SHARING RESOURCES OVER A BROAD CLIENT BASE. We
        combine shared service centers, internal process capabilities, and
        strategic relationships with selected vendors into an integrated service
        delivery infrastructure that enables us to deliver efficient,
        large-scale HR process management services to multiple clients. Our
        shared client service centers in North Carolina, Scotland, Tennessee and
        Texas are designed to handle multiple clients and utilize automated
        processes and technology to provide efficient client service and achieve
        economies of scale. We combine our internal process capabilities for
        core functions, including payroll and HR information


                                       2
<PAGE>

        systems, with our strategic relationships with third-party providers, to
        make our integrated service offering comprehensive and efficient.

    o   USE OUR MYHR(SM) APPLICATIONS TO ENHANCE HR PERFORMANCE. We use emerging
        technologies and our myHR systems and applications to connect the
        people, processes, technologies and third-party vendors involved in our
        clients' HR organizations and to provide a comprehensive central
        repository of company and employee data. We help our clients implement
        database and interconnectivity tools to easily access, evaluate and use
        HR information to further their strategic business objectives. Our
        myHR(SM) applications operate behind secure Internet firewalls and are
        designed to enable our clients' personnel to access information and
        employee productivity tools and communicate freely with other people
        throughout the organization. myHR(SM) is designed to enable our clients'
        employees to perform both HR and non-HR tasks and encourage employees to
        become more self-sufficient in handling many day-to-day HR functions,
        while enhancing communication and efficiency throughout our clients'
        organizations.

OUR EXULT EHR(SM) SOLUTION

    Our Exult eHR(SM) solution combines a broad process management services
offering, shared service center resources and service delivery, third-party
vendor management, and strategic consulting expertise, and is designed to
simplify and standardize our clients' HR practices and procedures and deliver
improved management information and employee communications at significant cost
savings.

SERVICES

    Our Exult eHR(SM) solution includes a broad spectrum of process management
services grouped into five major categories, as follows:

Payroll Production

    We manage clients' payroll processes and related production requirements so
as to reduce our clients' investment of internal resources in transaction
processing. Our payroll and production services include:

    o   Payroll disbursements and reporting;

    o   Related systems and data administration;

    o   Tax withholding and reporting;

    o   Banking interfaces;

    o   Time and attendance administration; and

    o   Wage attachments.

Rewards

    We manage compensation and benefit programs that are designed to reduce our
clients' internal process and administration burdens. Our services in this area
include:

    o   Benefits enrollment and administration;

    o   Pension plan administration;


                                       3
<PAGE>

    o   401(k) plan administration;

    o   Salary review planning;

    o   Performance management; and

    o   Salary and bonus compensation administration.

Life Events

    We process and manage clients' workforce changes in order to help our
clients effectively develop and deploy their human capital. Our services in this
area include:

    o   Recruiting and staffing functions;

    o   Training administration;

    o   Expatriation and repatriation administration;

    o   Domestic relocation; and

    o   Severance administration.

Advice & Information

    We manage HR systems and information for our clients, enabling us to
capture, track, modify and report large amounts of employee-related data. We use
this data to help our clients manage various HR functions, including:

    o   HRIS reporting;

    o   HR systems management and support;

    o   Performance management;

    o   Employee data and records management;

    o   Organization development;

    o   Employee development;

    o   HR strategy;

    o   Labor relations and employee relations; and

    o   Policy and legal compliance.

Finance & Accounting

    We manage accounts payable processes, including disbursements and
reconciliation. These services are designed to streamline our clients' back
office transaction processing, and include:


                                       4
<PAGE>

    o   Accounts payable;

    o   Travel and entertainment expense reimbursements;

    o   Payroll accounting;

    o   Benefits accounting; and

    o Fixed asset accounting.

SHARED RESOURCES AND SERVICE DELIVERY

    We deliver our process management services through an infrastructure of
client service centers, web-enabled technology systems, functional applications,
and third-party service providers. Our model involves leveraging shared
resources to provide exemplary HR process management while achieving economies
of scale, which we believe enables us to deliver improved HR services at a
reduced cost.

Client Service Centers

    We operate four client service centers, in North Carolina, Scotland,
Tennessee and Texas. These centers house the personnel and systems we use to
manage our clients' transaction, production and service center requirements,
including customer service representatives and production operations staff for
functions such as payroll processing, benefits administration, training
administration, and information technology support and maintenance. These client
service centers also contain systems and technology, such as contact/case
management systems, imaging and workflow, and HR application software and
databases. Our clients' employees can communicate with the client service
centers online through myHRSM or by phone, fax, or e-mail.

    We acquired the Texas center at the end of 1999. This center had been
providing payroll and related services for Tenneco Automotive and Pactiv
Corporation, and we entered into agreements to continue to provide those
services to Tenneco and Pactiv when we acquired the center. We have invested
heavily in developing this center into a broad platform from which we deliver
process management services to multiple clients.

    We established the Scotland center during 2000 specifically to accommodate
our United Kingdom service center requirements. We selected Scotland because of
its accessibility, educated English-speaking workforce, relatively low cost of
doing business, and European Union membership. The Scotland center currently
manages the processes we provide to BP in the United Kingdom, as well as our own
United Kingdom internal processing requirements. In addition, the Scotland
center can accommodate additional client demands, and we anticipate that it will
play a significant role in service delivery to future clients in the U.K.,
continental Europe, and other parts of the world, including North America.

    We acquired the North Carolina facility in early 2001 in connection with the
signing of our process management contract with Bank of America Corporation.
This was a facility that Bank of America was then using to provide for itself
some of the HR process management services we have agreed to handle. We will
continue adapting this facility to our own systems. Our ability to retain key
managers and operate the center during conversion contributed to our ability to
transition Bank of America's HR processes relatively quickly.

    We acquired the Tennessee facility in early 2002 in connection with the
signing of our process management contract with International Paper Company.
This was a facility that International Paper was then using to provide for
itself some of the HR process management services we have agreed to handle. We
are adapting this facility to our own systems. We believe our ability to retain
key managers and operate the center during conversion will contribute to our
ability to transition International Paper's HR processes relatively quickly.


                                       5
<PAGE>

    Each of our client service centers, except Scotland, was previously operated
by our clients, and therefore has an experienced workforce. All of these centers
are designed to give us efficiencies and economies of scale by leveraging the
functionality, staff and technology of centralized processes and services across
many business units for multiple clients. They also provide important
redundancies for service continuity purposes.

    In the aggregate, we expect our current client demands to occupy two-thirds
of our current centers' capacity upon completion of the transitioning of work
under the contract we signed in January 2002 with Prudential Financial.
Therefore, our existing service centers can accommodate significant expansion of
our client base from "Greenfield" client opportunities, where we will not
acquire significant amounts of client assets or employees. We also envision
selectively developing additional centers in the future, as may be appropriate
to handle growth or to take advantage of opportunities to contract with clients
that have previously consolidated HR services to some degree and seek to
transfer their HR facilities and workforce to us in connection with retaining us
for HR process management services.

Systems, Production Applications and myHR(SM)

    In order to deliver comprehensive, integrated HR process management, we have
developed a service infrastructure that relies upon third-party vendors,
licensed components, and our own intellectual property.

    Performance under our process management contracts requires sophisticated
information technology capabilities. All of our clients utilize database tools
for their HR information systems, including programs licensed from PeopleSoft
USA, Inc. and SAP AG, and some legacy systems. Some of these systems must be
replaced and others require substantial integration work. In most cases,
significant systems interface work is required to enable the client's systems to
be integrated and to communicate with our systems. We assist in these processes,
both directly and through vendors we supervise, so that the client's internal HR
information systems provide an adequate platform for integrated HR process
management.

    Many of our process management capabilities are based upon third-party
software that we have selected as "best in class" and compatible with our
infrastructure. For example, we rely upon sophisticated tax and process
management software licensed from Deloitte & Touche LLP to provide our
expatriate administration services, and we use an open web platform for
workforce planning, hiring and deployment licensed from Deploy Solutions in our
delivery of strategic resourcing management. Our relationships with Docent and
SmartForce assist us in providing employee learning management systems and
e-learning content to our clients.

    In general, we manage all of the essential back-end systems, such as HR
application management, in order to provide full service accountability and
control. We may contract with third parties from time to time to perform certain
services related to applications management. For example, in the fourth quarter
of 2001, we contracted with two firms domiciled in India to perform this work at
a cost significantly below our historical cost. Application server management
and hosting is generally provided by our information technology infrastructure
partners, principally Unisys, and backed-up by their business continuity and
disaster recovery systems.

    Our Exult eHR(SM) services integrate software applications and business
processes with a client's own internal information and communications systems to
compile and centralize a wealth of HR information. Our myHR(SM) applications are
designed to enable our clients and their employees to access and use that
information.

Third-Party Service Providers

    Our Exult eHR(SM) solution incorporates the services of third-party vendors
in two important ways. First, our process management contracts may include
certain services being provided to the client by third-party vendors. At the
time we become responsible for a client's HR organization, we generally assume
responsibility for administration of many of these vendors, either by assignment
of their contracts to us or through management arrangements. Depending upon a
number of


                                       6
<PAGE>

factors, including the type of services involved, terms of the vendors'
contracts, and client preferences, over time we may retain the vendor as a
service provider to the client within the scope of our contract and under our
management, replace the vendor with a new third-party provider under our
management, or take over provision of the services ourselves.

    Second, in addition to management of third-party vendors who had preexisting
relationships with our clients, we also utilize selected third parties to
complement our integrated service offering with specialized HR services that can
be more effectively and efficiently provided by third-party vendors and
subcontractors than through our internal resources. For example, we currently
outsource management of various pension and benefit arrangements and some
elements of relocation administration. Over time, we may outsource additional
elements of our service offering, or bring some elements "in house," depending
upon the availability of appropriately skilled third parties in various areas,
competition, the development of our own capabilities, client demands,
acquisition opportunities, capital availability and requirements, and other
factors.

    We believe our familiarity and experience with HR process management and
with the market for third-party HR vendors enables us to evaluate whether the
services being provided by a third party meet the needs of a given client and
represent an appropriate blend of quality and value in the HR services market.
In addition, we believe we will be able to provide improved service levels and
greater cost savings on behalf of our clients through negotiation and management
of these third-party vendor contracts.

    In June 2001, we entered into a basic framework agreement with Automatic
Data Processing, Inc. under which we anticipate using ADP as a subcontractor to
Exult to provide transactional and administrative services to supplement and
enhance our service offering, including minor parts of our payroll processing,
benefits and systems integration components. This relationship with ADP is
non-exclusive, and there is no requirement that we or our clients use ADP, or
that ADP accept any particular work. In addition, in connection with initiation
of the relationship, ADP purchased approximately 1.5 million shares of our
common stock for approximately $20 million, and under certain circumstances,
Exult may require ADP to purchase up to an additional $30 million of stock.

Strategic Consulting Expertise

    In November 1999, we acquired the business of Gunn Partners, Inc., a
business process improvement consulting company with operations in the United
States and Europe. Gunn Partners has been consulting with Global 500
corporations since 1991 on administrative staff functions such as human
resources and finance and accounting, as well as procurement, information
technology, and customer service. Gunn Partners generates revenue through its
own consulting activities, provides strategic assistance in structuring our
client relationships, assists in cross-marketing, and provides us with a service
offering for potential clients that are not yet ready for our full Exult eHR(SM)
solution. Gunn Partners has provided consulting services to some of the largest
companies in the Global 500.

BUSINESS PROCESS MANAGEMENT CLIENTS AND CONTRACTS

CLIENT SUMMARY

    The table below lists our business process management clients and shows for
each the contract date, the anticipated base term, the processes we manage and
the number of affected employees.



                                       7
<PAGE>


<TABLE>
<CAPTION>
                                                                                                       ESTIMATED
                                                              ANTICIPATED                              AFFECTED
CLIENT                                   CONTRACT DATE         TERM -YEARS         PROCESSES           EMPLOYEES
------                                   -------------         ------------        ---------           ---------
<S>                                    <C>                         <C>           <C>                  <C>
Bank of America Corporation (1)          Nov. 2000                     10          Substantial HR,       143,000
                                                                                   Some Finance and
                                                                                   Accounting

BP p.l.c. (2)                            Dec. 1999                      7          Comprehensive HR      56,000

International Paper Company              Oct. 2001                     10          Substantial HR,       70,000
                                                                                   Some Finance and
                                                                                   Accounting

Pactiv Corporation and Tenneco           Jan. 2000                      3          Payroll, Some         18,000
Automotive                                                                         Finance and
                                                                                   Accounting

Prudential Financial                     Jan. 2002                     10          Comprehensive HR,     47,000
                                                                                   Some Finance and
                                                                                   Accounting


Unisys Corporation                       Aug. 2000                      7          Comprehensive HR      16,000

</TABLE>

---------------
        (1) The contract with Bank of America Corporation has been expanded
    twice, once in March 2001 to include expatriate administration services, and
    again in September 2001 to include regional staffing services.

          (2) The relationship with BP p.l.c. is reflected by a seven-year
     Framework Agreement signed in December 1999, pursuant to which two
     five-year country agreements were entered into, one covering the U.S. and
     the other covering the U.K. The arrangement with BP has been expanded to
     cover certain persons who became BP employees in connection with BP's
     acquisitions of ARCO and Burmah Castrol.

    The column labeled "Contract Date" shows the date each contract was signed.
Each client relationship involves a transition period following contract signing
during which we prepare for and then assume responsibility for the processes we
have agreed to manage. Sometimes we assume management for all processes on the
same date, and sometimes process take-on is staggered. The transition period can
be as short as a few months, and as long as a year or more. In general, the
transition period is shorter for "brownfield" clients that already have
concentrated their internal management of the processes we are taking over, and
longer for "greenfield" clients with less concentration and little take-on of
client facilities or employees. Other factors, including contract scope,
complexity of information systems integration and geographic dispersion, can
affect the transition time. Our commencement of billing and revenue under a
contract generally corresponds with the completion of transition, so delays
between signing of a contract and recognition of revenue under that contract
should be expected.


                                       8
<PAGE>

    The column labeled "Anticipated Term - Years" shows the anticipated base
term of the contract. Any contract may terminate before the completion of the
anticipated term, and may also be extended beyond the anticipated term. In
addition, the anticipated revenues under any contract may increase or decrease
during its term as client volumes change or the scope of services under the
contract change. Our contracts with Pactiv Corporation and Tenneco Automotive
are scheduled to expire on December 31, 2002. We are in discussions with these
clients regarding renewal of the contracts, but we may not reach agreement on
terms. The revenue associated with these contracts is not material in aggregate.

    The descriptions in the column labeled "Processes" correspond to the items
below:

         "Comprehensive HR" generally means that the contract covers
         substantially all of the processes covered by the Exult Service
         Delivery Model under the four major categories of HR services described
         above.

         "Substantial HR" generally means that the contract covers integrated HR
         process management for multiple processes covered by the Exult Service
         Delivery Model, but that a significant number of processes are not
         included.

         "Some Finance and Accounting" generally means that the contract covers
         accounts payable and expense reimbursement processes, and other minor
         finance or accounting oriented processes.

    We strive to maximize commonality in our processes across our client base,
but client-specific requirements and differing allocation between us and clients
of the component tasks and responsibilities comprising each particular process
mean that there are differences between our management of the same process for
different clients.

    We currently provide our services in the U.S. and, with respect to BP, in
the U.S. and U.K. Some services for some clients have overseas components, but
these overseas components are not yet a material part of our business.

    The column labeled "Estimated Affected Employees" shows the approximate
number of employees of the client or its affiliates who have access to or
benefit directly from one or more of our services. Different processes we manage
for a particular client may have different scopes within the client
organization, so not all Estimated Affected Employees of that client have access
to, or benefit directly from, all services we provide to that client. The
Estimated Affected Employees under each client contract may vary from time to
time as a result of increases or decreases in the client's workforce and
expansions or contractions in the scope of our services. Changes in Estimated
Affected Employees under a client contract do not necessarily correlate to
changes in anticipated revenue under that contract.

CONTRACT TERMS

    Our business process management contracts have certain common features, as
described below.

    Responsibilities and Performance Commitments

    The contracts all cover multiple HR processes - some more than others. For
each in-scope process, responsibilities are divided between us and the client.
In general, we are responsible for systems design and implementation, routine
employee communications, data gathering, processing and retrieval, management
reporting, vendor management, and overall administration of related HR
functions. The client generally remains responsible for strategic planning,
policy decisions, employee relations, legal compliance, and professional
resources.

    We are generally entitled to determine our methods of service delivery and
to use the tools, vendors and subcontractors that we develop and select. We
remain ultimately responsible for performance, even when vendors assist us.

    The contracts all set forth performance standards applicable to key elements
of our services, and if our performance falls below the applicable standards,
the client may be entitled to service credits or payments from us.


                                       9
<PAGE>

    Fees

    Our services, and correspondingly our revenue, can be divided into two
categories. The first, which we call "direct managed," refers to our taking
responsibility for processes and tasks that the client had previously performed
internally through its own employees. The second, which we call "indirect" or
"third party," refers to our taking responsibility for processes and tasks that
the client had previously contracted to receive from third party vendors.

    For direct managed services, our price to our client generally includes a
contractually obligated discount from the cost that the client incurred to
provide those services to itself. This discount generally takes effect after a
transition period of approximately one year, and sometimes increases
periodically during the contract term. For third party services, we have
generally entered into "gain sharing" arrangements, pursuant to which we attempt
to (but are not obligated to) reduce the cost to the client of outside vendors,
and we share with the client any savings we achieve. The sharing ratio is
negotiated and varies according to the circumstances. In the future, we may
utilize additional pricing mechanisms. For example, we may charge for direct
services on a transaction basis, and we may offer guaranteed savings to clients
on our assumption or management of third party vendor arrangements.

    We also provide additional services to clients on a negotiated case-by-case
basis, and charge for these at negotiated time and materials or project rates.

    Termination

    All of the contracts may be terminated by the client for "convenience" after
a certain point in the contract term. This point varies from client to client;
it is December 2002 for BP p.l.c., July 2004 for Prudential Financial, and
January 2006 for International Paper Company, and has passed for Bank of America
Corporation, Pactiv Corporation, Tenneco Automotive, and Unisys Corporation.

    In case of termination for convenience, the client is generally required to
provide 6-12 months' notice and compensate us for certain costs of winding down
the contract. An early termination payment to us may also be required. The
amount of the early termination payment generally declines over time, and in
some cases diminishes to zero before the end of the anticipated contract term.
Additional payments are designed to help defray the unrecovered expenses we
incur in implementing the contract, including diligence, transition, set-up and
installation costs, and may provide some compensation to us, but they are not
adequate substitutes for the revenue or profit that could be lost as a result of
contract termination.

    All of the contracts may be terminated by the client for our excessive
performance failure, material uncured breach or insolvency. Some contracts also
include special termination provisions related to various events or
circumstances including change of control. We generally do not have a right to
terminate the contract unless the client fails to pay us or under certain other
limited circumstances.

    In most cases of termination, the contract provides for a transition
assistance period during which we continue to perform and be paid.

BUSINESS EXPANSION

    Our new-contract sales pipeline consists of potential expansions of
contracts with existing clients, as well as potential contracts with new
clients. We currently define the highly qualified portion of the new contract
pipeline as "frontlog." These are the contract prospects which we have
identified as highly desirable, the client has generally agreed to go forward on
a sole source negotiation basis and for which a non-disclosure agreement has
generally been executed. From time to time we publicly discuss our estimated
frontlog in order to provide investors with information that is relevant to an
understanding of our business. These estimates are based upon our assumptions
regarding potential scope and pricing,


                                       10
<PAGE>

and assume an average ten-year contract term. Frontlong estimates are not
representations; the sales cycle for our services is long and complex and the
pipeline is fluid, so the frontlog does not represent any assurance of future
revenue and it is impossible to predict in advance which prospects may become
clients or how quickly contracts may be signed.

    Each of our client contracts has a defined scope that is narrower than the
client's overall HR administration. Clients retain responsibility for various
processes because of internal expertise, established relationships, strategic
sensitivities or other reasons. Portions of each client's employee base may be
excluded for geographic or organizational reasons. We view these situations as
growth opportunities within our existing contract base, particularly in relation
to those contracts whose initial scope is only for "Substantial HR processes" as
defined above, and we actively seek to capitalize upon such growth opportunities
by marketing additional services. Our clients are generally not required to give
us more business, so we rely upon our performance record and the value we
deliver to motivate our clients to increase the size of our existing contracts.

    Our current operations are in the U.S. and U.K. Our aspirations are global.
We have existing clients with overseas operations that represent growth
opportunities for us, and we are currently pursuing new business opportunities
that could lead us into other countries. However, overseas expansion requires
capital investment and presents several operational challenges, including
cultural and language differences, legal and regulatory requirements, and
significant investment of management time. We plan to expand the geographic
scope of our business as appropriate based upon client opportunities, and as our
resources permit without compromising service delivery in our existing contract
base.

REVENUE AND MARGINS

    When we sign a new process management contract, we typically announce our
estimate of the revenue potential for that contract over its anticipated term.
These estimates are intended to provide information that is relevant to an
understanding of our business, but are not a representation or guaranty
regarding future performance. Initially, our information about a new client's
historical volumes and costs for the HR processes we take on is imperfect, and
verification procedures that take place after contract announcement may result
in reduction in our fees. Further, our revenue expectations for each contract
change over its life. Factors that can cause our revenue expectations for a
given contract to increase include expansion of the contract to add processes or
employee subpopulations not included in the original scope, client requests that
we perform work on a separately billed project basis, volume increases that
result from increasing workforce demands and the impact of Cost of Living
Adjustments (COLA's") which are applicable to certain portions of our fees. For
example, our contract with Bank of America Corporation expanded beyond its
original scope to include expatriate administration and regional staffing, and
our contract with BP expanded to include former employees of ARCO.

    Factors that can cause our revenue expectations for a given contract to
decrease include client workforce contraction, insourcing by the client of
processes previously contracted to us (subject to our agreement under the terms
of the contract), non-assignment to us of third-party vendor contracts that we
had initially envisioned taking over from the client, and early termination.
Some of these dynamics have resulted in decreases from our original estimates of
anticipated revenue from our contracts with Unisys Corporation, Pactiv
Corporation, and Tenneco Automotive.

    Once we have announced estimated revenue potential for a new contract, we
generally do not undertake to update that estimate to reflect all of these
changes. Rather, we try to maintain a reasonably current estimate of the
aggregate anticipated revenue for our entire contract base.

    Our revenue is broadly divided into two categories: revenue associated with
direct managed processes, and revenue derived from third party processes. We
anticipate that gross margin associated with direct managed revenues will
generally be greater than gross margin associated with third party processes. It
is essential to our value proposition to the client that we manage both types of
processes in order to fulfill our mission to be the single point of
accountability for all HR processes on their behalf. However, our overall gross
margin may vary as the mix of revenue changes between direct managed and third
party. For the fiscal year 2001, the mix of revenue between direct


                                       11
<PAGE>

managed and third party was approximately evenly divided, and we have not yet
generated meaningful margins from our third-party processes.

SALES AND MARKETING

    Our sales efforts target senior executives of Global 500 corporations,
largely through personal relationships and introductions. Due to the importance
of these senior executive relationships, most of our selling efforts involve the
active participation of members of our executive management team. We have also
maintained a small staff of dedicated sales professionals whose primary role has
been to assess our compatibility with potential clients and negotiate and
document our contracts. We employ a team approach to business development,
working with colleagues in our information technology delivery, client services
centers, strategy and other functional areas to identify, qualify and prioritize
prospects, manage due diligence processes, negotiate contracts, and craft Exult
eHRSM solutions for our clients.

    We have focused our marketing efforts on creating awareness of the
comprehensive nature of our Exult eHRSM solution and establishing Exult as the
leader in this new market primarily through market research, information pieces
and written articles published for industry trade press, public relations
activities, seminars, speaking engagements and relationships with industry
analysts. The goal of these activities is to promote Exult as the leading
provider of comprehensive HR services, and to publicize the advantages of
integrated HR process management. We have also pursued client lead generation in
a more targeted manner through direct sales contacts.

COMPETITION

    We believe our primary competitors are large human resource departments
within Global 500 corporations who may be averse to outsourcing. This is another
key reason why we focus our sales and client relationship efforts on senior
executives, including those in charge of HR. We also believe we are in
competition with third parties including:

    o  certain information technology outsourcers and broad-based outsourcing
       and consultancy firms that aspire to provide business process outsourcing
       services and may seek to add selected HR offerings;

    o   companies that provide a discrete group of transactional services, such
        as payroll or benefits administration, and aspire to provide additional
        services; and

    o   other consulting companies that perform individual projects, such as
        development of HR strategy and HR information systems.

    Historically, most of these vendors have focused upon discrete processes,
but many of them are now promoting integrated process management offerings that
may be viewed as competitive with ours. We expect competition to increase, and
competitors to develop broad service capabilities that match ours.

EMPLOYEES

    As of March 1, 2002, we employed 1,636 people, including approximately 1,177
in our client service centers, approximately 318 in information technology and
client transitions, approximately 45 in consulting and approximately 96 in sales
& marketing and general & administrative roles.



                                       12
<PAGE>


                                  RISK FACTORS

    Any of the following risks and uncertainties could adversely affect our
business, financial condition or results of operations. Other risks and
uncertainties may also affect our business. The risks described in this report,
and other risks that may become apparent from time to time, should be
considered in assessing the Company's prospects.

WE HAVE A LIMITED OPERATING HISTORY AND UNPROVEN BUSINESS MODEL.

    We entered into our first process management contract in December 1999 and
we are still striving to prove that we can sustain growth and operate
profitably. Our success depends on our ability to develop and implement a high
quality, cost-effective service offering, operate it profitably, produce
satisfactory results for our clients and attract new clients. While we have met
our development objectives to date and we believe our current clients have
perceived our services as beneficial, we have not been in operation long enough
to judge whether we can accomplish these objectives. Accordingly, our revenue
and income potential and future operating results are uncertain.

WE CURRENTLY DEPEND ON A SMALL NUMBER OF CLIENTS FOR SUBSTANTIALLY ALL OF OUR
REVENUE. IF ANY OF THESE CLIENTS WERE TO SUBSTANTIALLY REDUCE OR STOP USING OUR
SERVICES, OR IF WE EXPERIENCE SIGNIFICANT, REPEATED PERFORMANCE FAILURES IN
PROVIDING SERVICES TO THESE CLIENTS, OUR REPUTATION AND FUTURE REVENUES WOULD BE
SERIOUSLY IMPAIRED.

     Bank of America Corporation, BP p.l.c., International Paper Company,
Prudential Financial and Unisys Corporation are the first clients for which we
are offering a comprehensive HR process management solution, and we anticipate
revenue from each of these contracts will represent a substantial portion of our
revenue through 2002 and possibly in future periods. For fiscal 2001, BP and
Bank of America each accounted for slightly more than 40% of our revenues.
International Paper and Prudential Financial will contribute to revenues for the
first time in 2002. Our contracts with these clients are still relatively new
and our service offering is not yet fully implemented for all of these clients.
We believe our ability to secure future clients and revenues will be largely
dependent upon our ability to perform and achieve the contracted service levels
and cost savings for these clients. Each of our process management contracts can
be terminated for material breach, significant or repeated performance failures
or in certain instances for convenience upon required notice and, in many cases,
payment of specified early termination penalties. In addition, Bank of America
has the right to terminate its agreement with us if our current Chief Executive
Officer or our current Chief Operating Officer ceases to be employed by us
(other than due to non-performance, death or disability) within one year after
specified contract milestones are met. The early termination penalties are
designed to help defray the expenses we incur in implementing the contract,
including diligence, transition, set-up and installation costs, and may provide
some compensation to us, but they are not adequate substitutes for the revenue
or profit that could be lost as a result of contract termination. If any of
these clients were to substantially reduce or stop using our services, or if we
experience significant, repeated performance failures, our reputation and future
revenues would be seriously impaired. We expect to face similar risks with other
significant clients until our business model and service offering are more
firmly established.

OUR CLIENT CONTRACTS AND VENDOR RELATIONSHIPS MAY NOT YIELD THE RESULTS WE
EXPECT.

    We try to maintain a reasonably current estimate of the aggregate
anticipated revenue for our entire contract base. In addition, we may from time
to time provide estimates of revenues we expect to receive from specific
contracts over their anticipated duration. These estimates change as our
contracts evolve, and a number of factors can cause our revenue expectations to
decrease. These factors include client workforce contraction; insourcing or
retention by the client of processes previously contracted to us (subject to our
approval under the terms of the contract); non-assignment to us of third-party
vendor contracts that we initially envisioned taking over from the client,
either because the client chooses to retain a direct relationship with the
vendor or the vendor refuses to provide services within the scope of our
contract; early termination of client contracts in whole or part; and other
circumstances within the client's organization. In addition, our receipt of
revenue under any particular contract may be delayed if transition of the
client's processes to our infrastructure takes longer than anticipated. While
our contracts with our clients may contemplate further expansion, this may not
occur,


                                       13
<PAGE>

and if it does occur, significant additional expenditures by us may be required
to fund such expansion. In addition, our process management contracts generally
permit our clients to impose financial penalties against us for specified
material performance failures.

    A significant part of our revenue is attributable to services we offer to
our clients through third-party vendors that provide specialized services, such
as benefits administration and relocation services. We select some of these
vendors and assume others from relationships established by our clients before
contracting with us. These vendors may act as subcontractors or vendors to us or
provide services directly to our clients under our management; in either case,
we are responsible for the delivery and acceptability of these services and
errors or omissions by our vendors could cause us to have liability to our
clients in excess of the limits of liability the vendors negotiate with us. If
our clients are not satisfied with the services provided by these third-party
vendors, they may be entitled to recover penalties or to terminate their
agreements with us, which could seriously harm our business. In many cases our
initial cost of paying these vendors is equal to our revenue attributable to
their services. In order to generate target operating margins and realize a
profit from revenue received in connection with these third-party vendor
contracts we must reduce these vendor costs by improving efficiencies, obtaining
more favorable pricing, or performing the services ourselves at a lower cost. We
plan to achieve these efficiencies and cost reductions through vendor management
and consolidation. This may involve delay as existing contracts run their course
and we attempt to renegotiate with or replace these vendors. At the conclusion
of these third-party contracts we must negotiate new third-party contracts, or
provide these services ourselves, at the same or more favorable rates. We are
still developing our third party vendor management capabilities, and to date our
third-party business has not generated significant operating margins.

WE MIGHT NOT BE ABLE TO ACHIEVE THE COST SAVINGS REQUIRED TO BECOME PROFITABLE
UNDER OUR CONTRACTS.

    We provide our services for fixed fees that are generally equal to or less
than our clients' historical costs to provide for themselves the services we
contract to deliver. Additionally, our contracts generally require one or more
percentage reductions of this fixed fee during the contract term, generally
beginning upon completion of process transitions or approximately one year after
we commence services, irrespective of our cost of providing these services. As a
result, we bear the risk of increases in the cost of delivering HR process
management services to our clients, and our profitability will depend on our
ability to control our costs and meet our service commitments cost-effectively.
Over time, vendor costs and our own internal operating expenses will tend to
increase, and taking over services previously delivered by vendors involves
further increases in internal operating expense. Therefore, our business model
involves consistent pressure on our operating margins. We must respond by
successfully transforming clients' HR operations to more efficient processes and
constantly improving our service efficiency and vendor management; if we stop
improving, our ability to generate profits will be jeopardized. Further,
operating margins are more difficult to achieve in the portion of our revenue
attributable to our management of third-party vendors, which represents
approximately half of our revenue. Accordingly, until we are able to develop our
third-party vendor management business to the point that it generates meaningful
operating margins, our overall margins and profitability will rely upon strong
performance in the "direct" process management, project and consulting services
that make up the balance of our revenue.

    Achieving the efficiency we need to operate profitably depends upon our
ability to develop our process operations and our Exult eHR solution into a
standardized management system that can be operated from our client service
centers and extended to multiple clients with limited client-specific adaptation
and modification. The actual cost reductions we are able to achieve will vary by
client for a variety of reasons, including the scope of services we agree to
provide and the existing state of our clients' HR departments and processes. To
operate profitably we must transform clients' HR operations by standardizing,
centralizing, and simplifying their processes, notwithstanding the complexity of
their existing systems and potential resistance by some parts of the client
organization to change. If we miscalculate the resources or time we need to
perform under any of our contracts, or if our transformation efforts are not as
successful as we anticipate, the costs of providing our services could exceed
the fees we receive from our clients, and we would lose money.


                                       14
<PAGE>


OUR EXULT eHR SOLUTION IS EVOLVING AND REQUIRES ONGOING DEVELOPMENT.

    We are still developing the Exult Service Delivery Model and our service
delivery infrastructure, and our ability to continue to deliver and expand our
broad process management solution depends upon continued success in assembling
and managing our own systems and capabilities and third-party vendors into an
integrated and efficient delivery platform. Our clients use disparate
information systems and operating methods, and transitioning their processes to
our operating platforms requires significant technology and process integration.
We often must adapt or develop new systems and processes to accommodate various
clients' needs. Clients' employees may access and utilize our web-enabled Exult
eHR solution and systems through interfaces that require significant development
and integration of many independent programs and complex functions, as well as
ongoing revision, adaptation and maintenance. If we fail to develop a client's
service delivery infrastructure in accordance with the specifications and
delivery milestones agreed upon, or if we are unable to complete development of
scalable systems and achieve the functionality we expect, our ability to deliver
our services and achieve our business objectives in general could be seriously
impeded.

WE MUST ANTICIPATE AND CONFORM TO THE NEW AND EVOLVING MARKET IN WHICH WE
OPERATE.

    Our business model is based on integrated management of a variety of client
HR and finance processes. Based on client reaction to date, we believe there is
significant market demand for this service, but our ability to satisfy this
demand depends upon our ability to anticipate market developments. If we are
unable to react quickly to changes in the market, if the market fails to develop
in the ways we expect, or if our services do not achieve additional market
acceptance, then we are unlikely to maintain our leadership position or become
or remain profitable. Our ability to be successful in this regard may be
impaired because the market is new and may evolve quickly.

CAPACITY CONSTRAINTS AND THE LENGTH OF OUR NEW CLIENT SALES AND INTEGRATION
CYCLES MAY LIMIT OUR REVENUE GROWTH.

    We expect most of our future revenue growth in 2002 and beyond to come from
new client engagements. However, because we are a new company and are still
creating the components of our service offering, we plan to limit the number of
additional client engagements we accept over the near term. This strategy may
negatively affect our revenue growth until we have developed our services to the
point that they can be extended more rapidly across a greater number of clients.

    Our client contracts involve significant commitments and cannot be made
without a lengthy, mutual due diligence process during which we identify the
potential client's service needs and costs, and our ability to meet those needs
and provide specified cost savings. While we may receive some fees for
conducting due diligence, we will not recover all our costs from conducting the
due diligence unless it results in a long-term client engagement. We must devote
significant management time and other resources to each due diligence process
over a period of six months or more, and we can conduct at most only a few of
these due diligence undertakings at one time. This lengthy due diligence process
limits our revenue growth, and we have invested significant time in some
potential client relationships that have not resulted in contracts. It is
possible that any potential client due diligence process could result in a
decision by us or the potential client not to enter into a contract after we
have made significant investments of time and resources.

    After a new client contract is signed, we must convert the client's HR
processes to our systems and infrastructure. This transition period can take
from three months to over one year and may involve unanticipated difficulties
and delays. Transition takes longer for "greenfield" clients that have not
centralized their HR operations, and goes more quickly for "brownfield" clients
that have consolidated HR operations that we can take over in place. We cannot
realize the full efficiencies of providing services to the client through our
infrastructure until this transition is complete. Therefore, any increase in our
earnings that could be expected from our agreements can be delayed for at least
several months after the contract is signed, and it could take a significant
amount of time for our agreements to contribute significantly to profits or cash
flow. We attempt to negotiate long-term contracts in order to give us time to
complete the transition and earn a profit, but if implementation of our service
model is delayed, or if the client terminates our engagement early for
convenience or


                                       15
<PAGE>

because we do not meet our service commitments, we might experience no return,
and possibly a loss, on our substantial investment of time and resources in that
client.

THERE IS NO ASSURANCE THAT WE WILL ACHIEVE PROFITABILITY.

    Since our formation, we have not had a profitable quarter. We incurred net
losses of $94.8 million and $74.7 million for the years ended December 31, 2000
and 2001, respectively. We expect to incur net losses during the first half of
2002 and potentially in future periods thereafter as we continue to develop our
service offering and transition new business. While we do not enter into
contracts for which we expect to incur a loss, and although we estimate and
model each of our client contracts to be individually profitable, due to our
rapid growth, the expense of creating our company, and other factors described
in this report, we cannot be certain that we will ever operate profitably, or
that we can sustain or increase profitability on a quarterly or annual basis in
the future.

    From time to time we make projections about our future operating results,
including the time we may achieve profitable operations and the amount of
potential profitability. These projections are estimates intended to provide
information that is relevant to an understanding of our business, but are not a
representation or guaranty regarding future performance. The timing and
magnitude of any profitability we may achieve depends upon a number of factors
including those set forth in these Risk Factors.

WE MAY NEED ADDITIONAL CAPITAL, WHICH MIGHT NOT BE AVAILABLE OR MIGHT DILUTE
EXISTING STOCKHOLDERS.

    For the years ended December 31, 2000 and 2001, we used cash of $60.7
million and $33.9 million, respectively, in operating activities and $23.8
million and $21.0 million, respectively, in investing activities. Ongoing
development and expansion of our infrastructure and service capacity, acquiring
new client contracts and transitioning their services requires significant
capital investment. We anticipate rapid growth and until our operating income
covers our cash needs we may need to raise additional funds through public or
private debt or equity financings in order to address operating issues; finance
acquisitions, new client contracts with capital investment requirements, and
other strategic opportunities; and maintain adequate cash balances to satisfy
the expectations of prospective clients. If we are required to raise additional
funds through the issuance of equity securities, the percentage ownership of our
existing stockholders would be reduced. Further, such equity securities may be
sold at prices below those paid by existing stockholders, and have rights,
preferences or privileges senior to those of our common stock. We cannot be
certain that we will be able to raise additional funds on favorable terms, or at
all. If we are unable to obtain additional funds, we may be unable to fund our
operations or strategic initiatives.

TO SUCCEED WE MUST HIRE, ASSIMILATE AND RETAIN KEY MANAGEMENT PERSONNEL AND
LARGE NUMBERS OF NEW EMPLOYEES, OPEN NEW CLIENT SERVICE CENTERS, ASSIMILATE OUR
CLIENTS' PERSONNEL AND SYSTEMS AND EXPAND OUR OWN SYSTEMS AND CONTROLS.

    To achieve sustainable profitability, we must extend our service model
across many client organizations and gain critical mass in the size and breadth
of our operations. Our ability to achieve rapid growth depends upon the
following essential elements:

    o   Current markets for skilled employees are competitive, and we must be
        able to hire, train and retain key management personnel and large
        numbers of human resources specialists, web and Internet technologists
        and programmers, business development and process management specialists
        and technical and customer support personnel.

    o   We currently operate four large-scale client service centers, in North
        Carolina, Scotland, Tennessee and Texas. These centers are designed to
        handle our existing client demands, and have capacity to handle
        anticipated near-term growth in our service volumes, but we must open
        new client service centers in new geographic locations to handle
        significant additional growth in our business. We must devote
        substantial financial and management resources to


                                       16
<PAGE>

        launch and operate these centers successfully, and we may not select
        appropriate locations for these centers, open them in time to meet our
        client service commitments or manage them profitably.

    o   As we assume responsibility for the existing HR departments of our
        clients, we must be able to assimilate HR personnel from these clients
        and integrate disparate systems, procedures, controls and
        infrastructures.

    o   We will need to improve our financial and management controls, reporting
        systems and operating systems to accommodate growth. If we do not manage
        growth effectively, our ability to perform under our contracts may be
        jeopardized and our reputation may be harmed.

OUR QUARTERLY FINANCIAL RESULTS ARE VOLATILE AND MAY CAUSE OUR STOCK PRICE TO
FLUCTUATE.

    Our quarterly financial results have varied in the past and are likely to
vary significantly in the future. It is possible that in some future quarter or
quarters our financial results will be below the revenue or profit expectations
of public market analysts or investors. If so, the market price of our common
stock may decline significantly. Factors that may cause our results to fluctuate
include:

    o   the growth of the market for our HR services and our ability to obtain
        new client contracts;

    o   our ability to continue to execute successfully on client contracts;

    o   the length of the sales and integration cycle for our new clients;

    o   cancellations or reductions in the scope of our contracts;

    o   delays in transitioning various client processes to our infrastructure;

    o   our ability to develop and implement additional service offerings and
        technologies;

    o   the introduction of comprehensive HR services by new and emerging
        competitors;

    o   changes in our pricing policies or those of our competitors;

    o   our ability to manage costs, including personnel costs, support services
        costs and third-party vendor costs;

    o   the timing and cost of anticipated openings or expansions of client
        service centers; and

    o   the timing and extent of achieving overall profitability.

    We have in the past purchased assets and hired personnel from our clients.
We expect to continue such transactions in the future. Client asset acquisitions
may result in amortization expense and other charges. In addition, rationalizing
headcount and facilities consolidation following transition of client processes
to our systems may result in severance and closing expense. As our business
evolves, we may from time to time incur "business optimization costs" relating
to the implementation of new organization structures, technologies, processes
and other changes in our business. These expenses will reduce our reported
earnings.

WE COULD EXPERIENCE DAMAGES, SERVICE INTERRUPTIONS OR FAILURES AT OUR CLIENT
SERVICE CENTERS OR IN OUR COMPUTER AND TELECOMMUNICATIONS SYSTEMS.

    Our business could be interrupted by damage to or disruption of our client
service centers, computer and telecommunications equipment and software systems
from fire, power loss, hardware or software malfunctions,


                                       17
<PAGE>

penetration by computer hackers, computer viruses, natural disasters and other
causes. Our clients' businesses may be harmed by any system or equipment failure
we experience. As a result of any of the foregoing, our relationship with our
clients may be adversely affected, we may lose clients, our ability to attract
new clients may be adversely affected and we could be exposed to liability. We
cannot be certain that we will be able to route calls and other operations from
an affected center to another in the event service is disrupted. In addition, in
the event of widespread damage or failures at our facilities, we cannot
guarantee that the disaster recovery plans we have in place will protect our
business.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS.

    We believe multinational capabilities will be important as the competitive
market for outsourcing evolves. Our business strategy includes international
expansion as we broaden the geographic scope of services we deliver to our
clients from United States and United Kingdom operations to foreign operations
and as we take on additional large, multinational clients. Overseas expansion
requires capital investment and presents significant risks and operational
challenges. Foreign legal and regulatory requirements, affecting business
operations in general as well as human resources processes in particular, may be
complex and require significant investment in compliance capabilities. We do not
yet have the expertise required to deal effectively with different countries'
workplace practices, and developing this expertise could be expensive and time
consuming. Tariffs and other trade barriers, political instability, and
international currency exchange rates and related issues may increase the cost
and risks associated with overseas operations. We must design and operate web
sites and other service delivery components that are accessible by employees of
overseas clients, and differing technology standards and Internet regulations
may affect access to and operation of our web sites and our clients' web sites.
Because of these and other factors, overseas operations will require significant
management resources and may be more prone to service delivery errors and
delays, which could damage our reputation and jeopardize existing contracts.

    We use overseas vendors to assist in our business, including to provide
services to our clients overseas and to take advantage of lower overseas labor
costs for some support functions. We expect to increase this practice. Some
clients and potential clients may resist our use of overseas vendors because of
concerns about service quality, legal and cultural issues, and other reasons.
Overseas vendors may be difficult to manage and require significant investments
in monitoring and systems integration. If we have disputes with overseas vendors
it may be difficult for us to enforce our rights, and replacing overseas vendors
may involve delay and expense.

WE DEPEND ON OUR SENIOR EXECUTIVES, INCLUDING A NUMBER WHO HAVE RECENTLY JOINED
US, AND IF THEY ARE UNABLE OR UNWILLING TO CONTINUE IN THEIR PRESENT POSITIONS,
THESE EXECUTIVES WOULD BE DIFFICULT TO REPLACE AND OUR BUSINESS COULD BE HARMED.

    We believe that our success is dependent upon our senior management team and
our senior executives' leadership skills. The loss of any of these individuals
or an inability to attract, retain and maintain qualified personnel could
adversely effect us. A number of our senior management, including our Chief
Financial Officer and Chief Operating Officer, joined us in 2000 or 2001. Due to
the competitive nature of our industry, we may not be able to retain all of our
senior managers. If one or more members of our senior management team were
unable or unwilling to continue in their present positions, these executives
would be difficult to replace and our business could be harmed.

    Each of our senior executive's employment is "at will," which means that the
executive's employment with us may be terminated by either us or the executive
at any time, for any reason without cause or advance notice.

THE MARKET FOR OUR SERVICES AND OUR REVENUE GROWTH DEPENDS ON OUR ABILITY TO USE
THE INTERNET AS A MEANS OF DELIVERING HUMAN RESOURCES SERVICES.

    We rely on the Internet as a mechanism for delivering our services to our
clients and achieving efficiencies in our service model, and this reliance
exposes us to various risks.


                                       18
<PAGE>

    o   We use public networks to transmit and store extremely confidential
        information about our clients and their employees, such as compensation,
        medical information and social security numbers. We may be required to
        expend significant capital and other resources to address security
        breaches. We cannot be certain that our security measures will be
        adequate and security breaches could disrupt our operations, damage our
        reputation and expose us to litigation and possible liability.

    o   Our target clients may not be receptive to human resources services
        delivered over the Internet because of concerns over transaction
        security, user privacy, the reliability and quality of Internet service
        and other reasons. In addition, growth in Internet traffic may cause
        performance and reliability to decline. Interruptions in Internet
        service and infrastructure delays could interfere with our ability to
        use the Internet to support our Exult eHR service, which would impair
        our revenue growth and results of operations.

    o   Laws and regulations may be adopted relating to Internet user privacy,
        pricing, usage fees and taxes, content, distribution and characteristics
        and quality of products and services. This could decrease the popularity
        or impede the expansion of the Internet and decrease demand for our
        services. Moreover, the applicability of existing laws to the Internet
        is uncertain with regard to many important issues, including property
        ownership, intellectual property, export of encryption technology, libel
        and personal privacy. The application of laws and regulations from
        jurisdictions whose laws do not currently apply to our business, or the
        application of existing laws and regulations to the Internet and other
        online services, could also harm our business.

WE MUST KEEP OUR COMPUTING AND COMMUNICATIONS INFRASTRUCTURE ON PACE WITH
CHANGING TECHNOLOGIES.

    Our success depends on our sophisticated computer, Internet and
telecommunications systems. We have invested significantly in our technological
infrastructure and anticipate that it will be necessary to continue to do so in
the future to remain competitive. These technologies are evolving rapidly and
are characterized by short product life cycles, which require us to anticipate
technological changes and developments. Our success in designing and delivering
high quality, cost-effective services that add value for our clients depends, in
part, upon our ability to adapt our processes to incorporate new and improved
software applications, communications systems and other technologies and
devices. If we fail to adapt to technological developments, our clients may
experience service implementation delays or our services may become
non-competitive or obsolete.

WE RELY ON THIRD-PARTY VENDORS FOR SOFTWARE. IF THEIR PRODUCTS ARE NOT AVAILABLE
OR ARE INADEQUATE, OUR BUSINESS COULD BE SERIOUSLY HARMED.

    Our service delivery capability incorporates and relies on software owned by
third parties that we license directly or use through existing license
arrangements between our clients and the vendor. If these vendors change or fail
to maintain a product that we are using, or if these agreements are terminated
or not renewed, we might have to delay or discontinue our services until
equivalent technology can be found, licensed and installed.

THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND OUR COMPETITORS MAY HAVE MUCH
GREATER RESOURCES TO COMMIT TO GROWTH, NEW TECHNOLOGY AND MARKETING.

    Our current and potential competitors include in-house HR departments of
large multinational corporations, as well as other third parties that provide
discrete or combined HR and information technology functions, including certain
information technology outsourcers and broad-based outsourcing and consultancy
firms that aspire to provide business process outsourcing services and may seek
to add selected HR offerings; companies that provide a discrete group of
transactional services, such as payroll or benefits administration, and aspire
to provide additional services; and other consulting companies that perform
individual projects, such as development of HR strategy and HR information
systems. We expect that the predicted growth of the HR outsourcing market will
attract and motivate competitors to assume responsibility for broad integration
of HR processes.


                                       19
<PAGE>

    Several of our existing or potential competitors have substantially greater
financial, technical and marketing resources, larger customer bases, greater
name recognition and more established relationships with their customers and key
product and service suppliers than we do. Our competitors may be able to:

    o   develop and expand their delivery infrastructure and service offerings
        more quickly;

    o   adapt better to new or emerging technologies and changing client needs;

    o   take advantage of acquisitions and other opportunities more readily;

    o   devote greater resources to the marketing and sale of their services;
        and

    o   adopt more aggressive pricing policies.

    Some of our competitors may also be able or willing to provide clients with
additional benefits at lower overall costs. In addition, we believe there will
be future consolidation in our market, which could increase competition in ways
that may be adverse to us.

WE OPERATE IN A COMPLEX REGULATORY ENVIRONMENT, AND FAILURE TO COMPLY WITH
APPLICABLE LAWS AND REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS.

    Corporate human resources operations are subject to a number of laws and
regulations, including those applicable to payroll practices, benefits
administration, employment practices and data privacy. Because our clients have
employees in states across the United States and in various countries around the
world, we must perform our services in compliance with the legal and regulatory
requirements of multiple jurisdictions. Some of these laws and regulations may
be difficult to ascertain or interpret, may change, and may be inconsistent with
our business practices. Violation of laws and regulations could subject us to
fines and penalties, damage our reputation, constitute breach of our client
contracts and impair our ability to do business in various jurisdictions or
according to our established processes.

    The European Commission's Directive on Data Privacy limits transfer of
personal data outside the European Union. In order to receive personal data
about our clients' European employees and fulfill our service commitments, we
have elected to comply with the Safe Harbor Principles established by the United
States Department of Commerce, in collaboration with the European Commission, to
provide "adequate protection" for personal data about European Union residents.
Because we process HR data, we are required by the Safe Harbor Principles to
submit to the jurisdiction of the European Union Data Protection Authorities
(DPAs). Specifically, we must cooperate with the DPAs in the investigation and
resolution of complaints brought under the Safe Harbor Principles by European
citizens and comply with any corrective advice and remedial or compensatory
measures they dictate. In addition, operation under the Safe Harbor Principles
subjects us to the jurisdiction of the Federal Trade Commission. If we fail to
process personal data in accordance with these principles, we could be subject
to legal penalties under the Federal Trade Commission Act and foreign privacy
laws. We could also lose our ability to move personal data from the European
Union to the United States, which would significantly impair our ability to
fulfill our contractual commitments to our clients. We expect to have to comply
with similar laws of other foreign jurisdictions in which we do business in the
future.

WE MAY UNDERTAKE ACQUISITIONS WHICH MAY LIMIT OUR ABILITY TO MANAGE AND MAINTAIN
OUR BUSINESS, MAY RESULT IN ADVERSE ACCOUNTING TREATMENT AND MAY BE DIFFICULT TO
INTEGRATE INTO OUR BUSINESS.

    We expect to pursue acquisitions under appropriate circumstances. We cannot
provide any assurance that we will be able to complete any acquisitions, or that
any acquisitions we may complete will enhance our business. Any acquisition we
do complete could subject us to a number of risks, including:

    o   diversion of our management's attention;


                                       20
<PAGE>

    o   inability to integrate the acquired company and its employees into our
        organization effectively, and to retain key personnel of the acquired
        business;

    o   inability to retain the acquired company's customers; and

    o   exposure to legal claims for activities of the acquired business prior
        to acquisition.

    Client satisfaction or performance problems with an acquired business also
could affect our reputation as a whole. In addition, any acquired business could
significantly underperform relative to our expectations.

WE MUST PROTECT OUR INTELLECTUAL PROPERTY AND AVOID INFRINGING UPON THE
INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

    We may not be able to detect or deter unauthorized use of our intellectual
property. If third parties infringe upon or misappropriate our trade secrets,
copyrights, trademarks, service marks, trade names or proprietary information,
our business could be seriously harmed. In addition, although we believe that
our proprietary rights do not infringe upon the intellectual property rights of
others, other parties may assert that we have violated their intellectual
property rights. These claims, even if not true, could result in significant
legal and other costs and may be a distraction to management. In addition,
protection of intellectual property in many foreign countries is weaker and less
reliable than in the United States. If our business expands into foreign
countries, risks associated with protecting our intellectual property will
increase.

OUR EXECUTIVE OFFICERS, DIRECTORS AND THEIR AFFILIATES CONTROL THE COMPANY.

    Our executive officers, directors and their respective affiliates
beneficially own approximately 54% of our outstanding common stock. As a result,
these stockholders, acting together, have the ability to control matters
requiring stockholder approval, including the election of directors and mergers,
consolidations and sales of all or substantially all of our assets. These
stockholders may have interests that differ from other investors and they may
approve actions that other investors vote against or reject actions that other
investors have voted to approve. In addition, this concentration of ownership
may also have the effect of preventing, discouraging or deferring a change in
control of Exult, which, in turn, could depress the market price of our common
stock.

OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

    The price at which our common stock trades has fluctuated significantly and
is likely to continue to be highly volatile. From our IPO in June 2000 through
March 1, 2002, the sales price of our stock, as reported on the Nasdaq
National Market, has ranged from a low of $7.00 to a high of $19.85. We are a
relatively new company with no record of profits, and we utilize the Internet
and a technology infrastructure to deliver our services. The share prices for
other companies with similar characteristics have at times increased to levels
that bore no relationship to their operating performance, and at other times
have declined dramatically, even without apparent changes in their business.

    In addition, the stock market in general has from time to time experienced
significant price and volume fluctuations that have affected the market prices
for companies like ours. In the past, this kind of market price volatility has
often resulted in securities class action litigation against companies
comparable to ours. Securities litigation could result in substantial costs and
divert our management's attention and resources.

SUBSTANTIAL SALES OF OUR COMMON STOCK BY OUR EXISTING INVESTORS COULD CAUSE OUR
STOCK PRICE TO DECLINE.

    Of our 104,737,307 shares outstanding as of March 1, 2002, 20.1 million have
been sold publicly in registered offerings, including 14.3 million by the
Company and 5.8 million by selling stockholders. In addition, approximately 7.9
million shares have been sold publicly under Rule 144 by investors who acquired
the shares from the company in private placement investments, and approximately
3.3 million shares have been sold publicly by employees and former


                                       21
<PAGE>

employees following exercise of stock options and stock purchase plan rights. We
currently estimate that approximately 73.4 million privately issued shares are
still held by the original purchasers. Of this amount, approximately 68.9
million can be sold publicly pursuant to Rule 144.

    The vast majority of our outstanding shares are in the hands of their
original purchasers. These investors may seek to sell their shares, and sales of
large numbers of shares in the same time period could cause the market price of
our common stock to decline significantly. These sales also might make it more
difficult for us to sell securities in the future at a time and price that we
deem appropriate.

OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DETER A TAKEOVER EFFORT.

    Provisions of our certificate of incorporation and bylaws, including those
that provide for a classified board of directors, authorized but unissued shares
of common and preferred stock and notice requirements for stockholder meetings,
and Delaware law regarding the ability to conduct specific types of mergers
within specified time periods, could make it more difficult for a third party to
acquire us, even if doing so would provide our stockholders with a premium to
the market price of their common stock. A classified board of directors may
inhibit acquisitions in general, and a tender offer not endorsed by our board of
directors in particular, because only one-third of our directors are reelected
annually, thereby requiring two annual meetings before a majority of our
directors could be replaced. The authorization of undesignated preferred stock
gives our board of directors the ability to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of the company. If a change in control or change in management is
delayed or prevented, the market price of our common stock could decline.

ITEM 2.    PROPERTIES.

FACILITIES

    Headquarters. Our U.S. corporate headquarters are located in approximately
29,000 square feet of office space in Irvine, California under a lease that
expires in April 2003. Our lease agreement for this facility requires monthly
base rental payments of approximately $80,000. We are currently negotiating for
new space to replace this lease. The new lease will be for approximately 22,000
square feet of space also located in Irvine, California, at a reduced rental
rate. We expect to cancel our existing lease obligation and move into the new
space by June 30, 2002. Our European headquarters are located in approximately
9,000 square feet of office space in London under a lease that expires in June
2010 and provides for monthly base rental payments of approximately GBP 36,000
per month.

    North Carolina Service Center. We lease approximately 96,000 square feet of
office space for our shared service center in North Carolina under a lease that
expires in November 2010. We prepaid the rent through 2010 under the North
Carolina lease as part of the consideration for our sale of stock to Bank of
America Corporation.

    Scotland Service Center. We lease approximately 31,000 square feet of office
space for our client service center in Scotland under a lease that expires in
March 2010 and requires quarterly base rental payments of approximately GBP
132,000. The landlord or we may terminate the lease in March 2005 with 12 months
prior notice.

    Tennessee Service Center. We lease approximately 63,000 square feet of
office space for our client service center in Tennessee under a sub-lease from
International Paper Company that requires monthly base rental payments of
approximately $46,000 and has a term that is coextensive with the term during
which Exult provides HR process management services to International Paper
Company, subject to earlier termination if International Paper's master lease on
the premises terminates.

    Texas Service Center. We lease approximately 71,000 square feet of office
space for our client service center in Texas under a lease that expires in March
2006 and requires monthly base rental payments of approximately $37,000.


                                       22
<PAGE>

    Other Leases. We also lease office space for our consultants in Georgia,
Massachusetts, New York, the United Kingdom and Switzerland. Finally, we have
small numbers of employees providing various services to Bank of America from
office space in approximately 15 locations throughout the US, which we occupy
under prepaid site licenses from Bank of America; and we have similar site
license arrangements covering two International Paper Company locations.

INTELLECTUAL PROPERTY

    We regard the protection of our trademarks, service marks, copyrights, trade
secrets and other intellectual property rights as critical to our future
success. We rely on various intellectual property laws and contractual
restrictions to protect our proprietary rights in products and services. We
currently have service mark registrations in the United States for the mark
EXULT and our logo. We have pending service mark applications in the United
States for the marks MYHR, PROCESS EXCELLENCE, PROVEN RESULTS, Exult Service
Delivery Model, ESDM and EXULT EHR. We have also filed service mark applications
for some of these marks as well as similar marks in Australia, Canada, Europe,
and Switzerland. We cannot guarantee that we will be able to secure
registrations of our marks domestically or in any foreign country. Our inability
to register and protect marks could require us to stop using them or to share
them with others, which could cause confusion in the marketplace and harm our
business.

    In addition, we currently hold various Internet domain names, including
www.exult.net and www.myHR.com. The acquisition and maintenance of domain names
generally is regulated by Internet regulatory bodies. The regulation of domain
names in the United States and in foreign countries is subject to change.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business or into which we choose to expand.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights continues to evolve.
Therefore, we may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or otherwise decrease the value of our
intellectual property and other proprietary rights.

    We also rely on technologies that we license from third parties. These
licenses may not continue to be available to us on commercially reasonable terms
in the future, if at all. As a result, we may be required to obtain substitute
technology of lower quality or at greater cost, which could materially adversely
affect our business, results of operations and financial condition.

    As is common with technology companies, from time to time, third parties may
assert patent, copyright, trademark and other intellectual property rights to
our intellectual property or proprietary information or technologies. Any claims
asserting that our products, services, intellectual property, or proprietary
information infringe or may infringe proprietary rights of third parties could
require significant defense expenditures and, if determined adversely to us,
could seriously harm our business, results of operation and financial condition.

ITEM 3.    LEGAL PROCEEDINGS.

    From time to time, we may be involved in litigation relating to claims
arising out of our operations in the normal course of business. As of the date
of this report, we are not a party to any material legal proceedings.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year covered by this report, either by proxy
solicitation or otherwise.



                                       23
<PAGE>


EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANT

    Set forth below are the names, ages, positions and business backgrounds of
the Company's executive officers and certain significant employees.

    JAMES C. MADDEN, V, 40, has been our President and Chief Executive Officer
since November 1998 and the Chairman of the Board since February 2000. Mr.
Madden served as the Corporate Chief Financial Officer at MCI Systemhouse, the
outsourcing unit of MCI, from June 1997 to November 1998. From June 1995 to June
1997, Mr. Madden served as the President of the United States and Latin American
Divisions, and from January 1994 to June 1995, he was the General Manager of MCI
Systemhouse's Pacific Region. He first joined MCI Systemhouse in 1993 as Vice
President and Managing Director of the Los Angeles office. Prior to joining MCI
Systemhouse, Mr. Madden was a Principal at Booz-Allen & Hamilton from 1991 to
1993. Mr. Madden began his career with Andersen Consulting, where he created and
led Andersen's first outsourcing practice on the West Coast. Mr. Madden received
his B.B.A. degree in Finance and B.A. degree in Geology from Southern Methodist
University. Mr. Madden was elected to the Board in 1998.

    KEVIN M. CAMPBELL, 42, joined us as Operations President in May, 2000, and
became Chief Operating Officer in June 2001. Before joining Exult, Mr. Campbell
was a partner with Ernst & Young, LLP from August 1999 to May 2000, and was
Director of the Products Market for its Global Operate practice for business
process and information technology outsourcing. Before joining Ernst & Young,
Mr. Campbell was with Andersen Consulting for 17 years, including nine years as
a partner. At Andersen Consulting, Mr. Campbell served at different times as the
Global Managing Partner for business process management for the Resources Market
Unit; America's managing partner for business process management for the
manufacturing industry; and partner in charge of the northeast region's
electronics and high-tech market. Mr. Campbell has a B.S. degree in Management
from Boston College.

    MICHAEL F. HENN, 53, joined Exult as Chief Financial Officer in April 2001.
From July 2000 through March 2001, Mr. Henn was President of The Meyers Group, a
provider of information analysis and consulting services to the United States
residential development industry. From 1994 to 2000, Mr. Henn served as Senior
Vice President and Chief Financial Officer of KB Homes, formerly known as
Kaufman and Broad Home Corporation. From 1985 to 1994, Mr. Henn was Executive
Vice President, Chief Financial and Administrative Officer of the Vons
Companies. Mr. Henn received an M.B.A. degree and a B.S. degree in Finance from
Northern Illinois University.

    BRUCE W. FERGUSON, 47, joined Exult as our Chief People Officer in June
2000. Prior to joining Exult, Mr. Ferguson served as National Director of
Recruiting for Ernst & Young LLP from 1998 to 2000 and as National Director of
Human Resources from 1995 to 1998. Mr. Ferguson served as Director of Human
Resources for Kenneth Leventhal & Company from 1990 to 1995. From 1978 to 1990,
Mr. Ferguson served in various capacities at Arthur Andersen & Co., including
Director of Human Resources and Director of Recruiting. Mr. Ferguson received
his B.S. degree from the University of Wisconsin.

    RICHARD H. JONES, 50, joined our UK subsidiary, Exult Ltd., in September
2000 as its Vice President of International Operations. Prior to joining Exult,
Mr. Jones served as Managing Partner, Business Process Management, of the
Resources Industries Global Market Unit of Andersen Consulting from 1999 to 2000
and as the Chief Operations Officer of the United Kingdom Outsourcing Business
of Andersen Consulting from 1997 to 1999. From 1994 to 1997, Mr. Jones served in
various roles, including Managing Director, Sales and Marketing Director,
Director of Commercial Business and Director of Finance Services, for Digital
Equipment Company. From 1973 to 1994, Mr. Jones held various management
positions at IBM. Mr. Jones received his degree in Pure Mathematics from the
University of Southampton in England.

    WILLIAM T. MCCARTHY, 47, joined us as Vice President, Third Party Operations
in June 2001. From September 2000 until joining Exult, Mr. McCarthy was North
American President and Chief Operating Officer for IMR Global, a provider of
end-to-end technology solutions for Fortune 500 and Global 2000 companies.
Before joining IMR Global, Mr. McCarthy served as President of the Information
Technology Division at Personnel Group of America, a provider of


                                       24
<PAGE>

personnel staffing services, from 1998 to 2000, and as Vice President - Sales
and Marketing Management of Syntel, Inc., an applications management services
provider, from 1997 to 1998. From 1990 to 1997, Mr. McCarthy was with Andersen
Consulting (now Accenture), most recently as Managing Director of the Americas
Business Integration Providers. Earlier, Mr. McCarthy was with IBM for 15 years.
Mr. McCarthy has a bachelors degree from Florida International University.

    ROBERT G. MCGRAW, 44, joined Exult as Executive Director Planning and
Financial Reporting in May 2000. He became Vice President Controller in October
2000 and Vice President Finance and Chief Accounting Officer in January 2002.
Prior to joining the Company, Mr. McGraw was Chief Financial Officer of Quality
Systems, Inc., a publicly traded developer and provider of computer-based
medical and dental practice management systems, from February 1996 through April
2000. Mr. McGraw was the Chief Financial Officer of CVD Financial Corporation, a
publicly traded asset-based commercial lender, from March 1994 to February 1996.
Mr. McGraw is a Certified Public Accountant and holds an M.B.A. from the
University of California, Los Angeles, and a B.A. in Business Economics from the
University of California, Santa Barbara.

    BRIAN W. COPPLE, 41, joined Exult as our General Counsel and Secretary in
February 2000. Prior to joining Exult, Mr. Copple served as a Senior Vice
President and the General Counsel for EPS Solutions Corporation, a provider of
outsourced executive search, performance learning and financial services from
February 1999 to February 2000. From January 1988 to February 1999, Mr. Copple
practiced corporate and securities law with Gibson, Dunn & Crutcher LLP,
including as a partner for three years. Mr. Copple has a J.D. degree and an
M.B.A. degree from the University of California, Los Angeles and an A.B. degree
in Political Science from Stanford University.



                                       25
<PAGE>


PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS.

    The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "EXLT". The following table sets forth for the quarters indicated the
high and low prices as reported by Nasdaq. The quotations reflect inter-dealer
prices, without retail markup, markdown or commissions, and may not represent
actual transactions. The Company completed its initial public offering in June
2000.


<TABLE>
<CAPTION>
                                                                     HIGH            LOW
                                                                     ----            ---
<S>                                                               <C>             <C>
QUARTER ENDED:
  June 30, 2000............................................          12.00           9.69
  September 30, 2000.......................................          19.00           7.00
  December 31, 2000........................................          17.88           8.38
  March 30, 2001...........................................          14.13           9.19
  June 30, 2001............................................          19.85           8.40
  September 30, 2001.......................................          17.72          10.25
  December 31, 2001........................................          17.95          10.00

</TABLE>

    At March 1, 2002, there were approximately 76 holders of record of the
Company's Common Stock. The Company estimates the number of beneficial holders
of its Common Stock to be in excess of 4,500.

    In June 2001, the Company issued to an investor 1,538,461 of unregistered
shares of its Common Stock for $20.0 million in cash. In September 2001, the
Company issued to a second investor 504,200 of unregistered shares of its Common
Stock for $6.0 million in cash. The shares were issued in private placements
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

    Through March 1, 2002, the Company has never declared or paid any cash
dividends on shares of its Common Stock. We currently intend to retain any
future earnings to finance the growth and development of our business.
Therefore, we do not anticipate that we will declare or pay any cash dividends
on our Common Stock in the foreseeable future. Any future determination to pay
cash dividends will be at the discretion of our board of directors and will be
dependent upon our financial condition, results of operations, capital
requirements, restrictions under any existing indebtedness and other factors the
board of directors deems relevant.



                                       26
<PAGE>



ITEM 6.    SELECTED FINANCIAL DATA.

    The Company commenced operations in October 1998. The following selected
consolidated financial data as of and for the period and years ended December
31, 1998, 1999, 2000 and 2001, has been derived from our audited consolidated
financial statements and related notes. The historical results are not
necessarily indicative of future results. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes included elsewhere herein.


<TABLE>
<CAPTION>
                                                                  OCTOBER 31,
                                                                     1998
                                                                (INCEPTION) TO     YEAR ENDED        YEAR ENDED     YEAR ENDED
                                                                 DECEMBER 31,     DECEMBER 31,      DECEMBER 31,   DECEMBER 31,
                                                                      1998             1999             2000           2001
                                                                ---------------  ---------------  -------------   -------------
                                                                             (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                             <C>             <C>                  <C>              <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue.......................................................    $      -         $   4,857         $   66,661       $ 272,534
Cost of revenue...............................................           -             4,498             93,195         289,420
                                                                  ---------        ---------         ----------       ---------
Gross profit (loss)...........................................           -               359            (26,534)        (16,886)
Expenses:
  Product development.........................................           -               368              6,674           4,630
  Selling, general and administrative(1)......................          187            9,976             28,207          44,457
  Depreciation and amortization...............................           -               943              8,811          12,472
  Warrant charges.............................................           -             4,547             29,900              -
                                                                  ---------        ---------         ----------       ---------
    Total expenses............................................          187           15,834             73,592          61,559
                                                                  ---------        ---------         ----------       ---------
Loss from operations..........................................         (187)         (15,475)        $ (100,126)        (78,445)
Interest income, net..........................................            3              263              5,306           3,794
                                                                  ---------        ---------         ----------       ---------
Net loss......................................................    $    (184)       $ (15,212)        $  (94,820)      $ (74,651)
                                                                  =========        =========         ==========       =========
Net loss per share:
  Basic and diluted (rounded)(2)..............................    $ (140.48)       $   (2.20)        $     (1.74)     $   (0.77)
                                                                  =========        =========         ===========      =========
Weighted average number of common
  shares outstanding, basic and diluted.......................            1            6,906             54,491          96,622
                                                                  =========        =========         ==========       =========

</TABLE>



<TABLE>
<CAPTION>

                                                                                           DECEMBER 31,
                                                                 -----------------------------------------------------------
                                                                     1998             1999              2000              2001
                                                                 -----------      -----------       -----------        --------
                                                                                          (IN THOUSANDS)

<S>                                                             <C>             <C>               <C>             <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and investments.....................        $    851        $  39,199         $   99,890      $  169,569
Working capital............................................             813           31,957             93,185         149,545
Total assets...............................................             854           58,767            204,181         291,807
Long-term obligations, net of current portion..............              -             4,304                152           1,881
Convertible preferred stock................................           1,000           58,768                 --              --
Total stockholders' equity.................................             816           46,110            171,429         233,634

</TABLE>

----------
(1)    Includes $18.5 million of business optimization costs in the year ended
       December 31, 2001, consisting of severance charges of $9.7 million
       (including non-cash option acceleration charges of $3.0 million); certain
       wind-up costs resulting in a $6.6 million charge (including severance
       costs of $5.4 million) associated with the elimination of two secondary,
       non-strategic processing centers; and a $2.2 million non-cash charge
       arising from the write-off of a research database that we have determined
       is no longer a strategic component of our business.

(2)    Please refer to note 2 and note 9 of notes to consolidated financial
       statements for information regarding the method used to compute our basic
       and diluted net loss per share.

    Concurrent with the consummation of the June 2000 initial public offering of
the Company's Common Stock, all outstanding shares of Series A, Series B, Series
C, and Series D Preferred Stock were automatically converted into Common Stock
at the rate of 900 shares of Common Stock for each share of Series A Preferred
Stock, five shares of Common Stock for each share of Series B and Series C
Preferred Stock, and one share of Common Stock for each share of Series D
Preferred Stock.



                                       27
<PAGE>



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

OVERVIEW

    Our primary source of revenue is fees we earn for providing our HR business
process management services under long-term contracts. We also receive
additional revenue from our consulting services. We recognize revenue for our
services as the services are performed. We fulfill some of our service delivery
obligations through use of third-party vendors, including vendors that had
previously contracted directly with our clients and were then assigned to us for
management in connection with our process management services. We may continue
to use these vendors, hire replacement vendors, or provide some of these
services directly; however, we are responsible for the delivery and
acceptability of these third-party vendor services. We include in revenue all
charges for services that we are contractually obligated to provide to our
clients, whether we provide these services directly using our own personnel or
through third-party vendors. We pay the charges of the third-party vendors that
provide services for which we are responsible to our clients, and such costs are
included in our cost of revenue. In many cases our initial cost of paying these
vendors is equal to our revenue attributable to their services. In order to
realize a profit from revenue received in connection with these third-party
vendor contracts we must reduce these vendor costs by improving efficiencies,
obtaining more favorable pricing, or performing the services ourselves at a
lower cost.

    To date, we have typically generated leads for potential process management
clients through our management, existing consulting relationships, our board of
directors, third-party consultants, contact with key executives at Global 500
corporations or direct communication from such companies. After initial
discussions with and qualification of the potential client, we typically enter
into a non-disclosure agreement. If subsequent discussions result in a mutual
desire to pursue a transaction, we then typically enter into a non-binding
letter of intent with the client which establishes a framework for due diligence
and contract negotiations. Our letter of intent may provide for reimbursement of
some or all of our direct and indirect costs incurred during this process.

    Our contracts are generally structured so that we receive a fee that is no
greater than our client's historical cost of operating the functions assumed by
us. We are generally required to provide a minimum savings to the client on a
portion of the contract after about one year from contract signing, and, we may
be required to share further savings with our clients in negotiated gain sharing
arrangements. The amount of minimum savings is determined in accordance with the
terms of the applicable contracts. Once we have signed a contract with a client,
we transition its HR processes to our facilities and control. After we have
transitioned a client's processes, we work to transform these processes in order
to increase efficiencies and reduce costs. Typically the costs we have incurred
during the transition period for the services provided and the transitioning of
the client's processes have exceeded the revenue received from the client during
the transition period. By transforming client processes and operating on a
long-term contract basis, we seek to reduce the costs of service delivery below
the minimum savings provided in the contract, recover the excess costs incurred
during the transition period and realize a profit for the contract period.

    We incurred a net loss of $10.7 million in 1999, exclusive of a non-cash
warrant charge of $4.5 million, and $64.9 million in 2000, exclusive of a
non-cash warrant charge of $29.9 million. Our net loss in 2001 was $56.2
million, exclusive of business optimization costs of $18.5 million. We may incur
losses in future years. In the next two years, we anticipate ongoing significant
expense to fund the development and expansion of our technology and general
operating infrastructures. We may also make substantial investments to pursue,
obtain and transition new client contracts, and to develop new service center
capacity to accommodate any growth we may achieve beyond the capacity of our
existing service center infrastructure. To the extent that revenue does not
increase at a rate commensurate with our increasing costs and expenditures, our
future operating results and liquidity could be materially and adversely
affected.




                                       28
<PAGE>
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    Exult's discussion and analysis of its financial condition and results of
operations are based upon Exult's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires Exult to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, Exult evaluates its estimates, including
those related to long-term service contracts, bad debts, intangible assets,
income taxes, contingencies and litigation. Exult bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Exult believes the
following critical accounting policies affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.

    Exult recognizes revenue and profit as work progresses on long-term
contracts based upon the proportion of costs incurred to the total expected
costs. This method relies to some degree on estimates of total expected contract
revenue and costs. Exult follows this method since reasonably dependable
estimates of the revenue and costs applicable to various stages of a contract
can be made. Recognized revenues and profit are subject to revisions as the
contract progresses to completion. Revisions in profit estimates that would
result in any contract losses are charged to income in the period in which the
facts that give rise to the revision become known.

    Exult maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of Exult's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

    Exult records a valuation allowance to reduce its deferred tax assets to the
amount that is more likely than not to be realized. While Exult has considered
future taxable income and ongoing prudent and feasible tax planning strategies
in assessing the need for the valuation allowance, in the event Exult were to
determine that it would be able to realize its deferred tax assets in the future
in excess of its net recorded amount, an adjustment to the deferred tax asset
would increase income in the period such determination was made. Likewise,
should Exult determine that it would not be able to realize all or part of its
net deferred tax asset in the future, an adjustment to the deferred tax asset
would be charged to income in the period such determination was made. As of
December 31, 2001, Exult has $59.4 million of deferred tax assets, arising
primarily from its net operating losses, for which it has fully reserved
through its valuation allowance.

RESULTS OF OPERATIONS

    Our primary activities during 1999 were organization, planning and certain
work performed for our first business process management client prior to
entering into the related long-term contract. We did not generate any
outsourcing process revenues from long-term contracts during 1999. At December
31, 1999, we had approximately 75 employees. As of December 31, 2000, we had
five business process management clients and approximately 634 employees. As of
December 31, 2001, we had six business process management clients and
approximately 1,561 employees. Due to the early stage of our business during
1999, our 1999 operating results do not bear significant relationship to our
operating results for the years ended December 31, 2000 and 2001. In addition,
in view of the rapidly evolving nature of our business and our limited operating
history, we believe that period-to-period comparisons of our operating results,
including our revenue, gross profit (loss) and expenses as a percentage of
revenue, should not be relied upon as an indication of our future performance.

    The following table sets forth statement of operations data expressed as a
percentage of revenue for the years indicated:


<TABLE>
<CAPTION>

                                                         FOR THE YEAR ENDED DECEMBER 31,
                                                  -------------------------------------------
                                                     1999             2000              2001
                                                  --------           ------           -------
<S>                                                 <C>              <C>               <C>
Revenue...................................           100.0%           100.0%            100.0%
Cost of revenue...........................            92.6            139.8             106.2
                                                  --------           ------           -------
Gross profit (loss).......................             7.4            (39.8)             (6.2)
                                                  --------           ------           -------

</TABLE>

                                       29
<PAGE>


<TABLE>
<S>                                             <C>                 <C>              <C>
Expenses:
  Product development.....................             7.6             10.0               1.7
  Selling, general and administrative(1)..           205.4             42.3              16.3
  Depreciation and amortization...........            19.4             13.2               4.6
  Warrant charges.........................            93.6             44.9               0.0
                                                  --------           ------           -------
     Total expenses.......................           326.0            110.4              22.6
                                                  --------           ------           -------
Loss from operations......................          (318.6)          (150.2)            (28.8)
Interest income, net......................             5.4              8.0               1.4
                                                  --------           ------           -------
Net loss..................................          (313.2)%         (142.2)%           (27.4)%
                                                  ========           ======           =======

</TABLE>

------------
(1) Includes $18.5 million of business optimization costs in 2001. Excluding
    such costs, selling, general and administrative expense was 9.5% of revenue.

REVENUE

    Revenue for the years ended December 31, 2001, 2000 and 1999, was $272.5
million, $66.7 million and $4.9 million, respectively. The 2001 amount included
$255.4 million, or 93.7%, of revenue derived from five business process
management clients, and the 2000 amount included $54.9 million, or 82.3%, of
revenue derived from four business process management clients, respectively. The
balance of our 2001 and 2000 revenue primarily consisted of consulting revenue
generated from various clients. As our process management business expands, we
expect the relative contribution of revenue derived from consulting clients to
continue to decrease. Revenue for the year ended December 31, 1999, primarily
consisted of approximately $4.1 million billed to our first business process
management client, BP Amoco, for work performed before we entered into a
long-term contract with this client in December 1999. The balance of our 1999
revenue primarily consisted of consulting revenue generated from various
clients.

    The revenue increase for 2001 as compared to 2000 principally resulted from
the progressive transition of service responsibility to Exult under five process
management contracts which were executed at various dates from December 1999
through November 2000. The contract for the Company's sixth process management
client was executed in October 2001, with process transition occurring in
January 2002, so this contract did not result in any revenue in 2001. For the
years ended December 31, 2001 and 2000, one process management client accounted
for 43.8% and 67.2%, respectively, of revenue. A second process management
client accounted for 41.5% of revenue in 2001 and generated no revenue in 2000.
No other client accounted for more than 10.0% of revenue in 2001 and 2000. An
important part of our revenue growth to date has resulted from sales of
additional services to existing clients. The potential for further revenue
growth within our existing client base is finite, and we must continue to
attract new clients to sustain growth.

COST OF REVENUE

    Our cost of revenue for the years ended December 31, 2001, 2000 and 1999,
was $289.4 million, $93.2 million and $4.5 million, respectively, and our gross
margin (loss) for the same periods was (6.2%), (39.8%) and 7.4%, respectively,
as a percentage of revenue. In 2001 and 2000, cost of revenue consists primarily
of expenses associated with third-party vendors that we manage who provide
services for our clients within the scope of our process management contracts,
compensation and benefits paid to our employees who are directly involved in
providing our services, computer and communications equipment and services
costs, and facilities costs. In 1999, cost of revenue consisted primarily of
compensation and benefits paid to our employees for work performed for one of
our process management clients prior to the execution of the long-term contract.
The increase in the cost of revenue for the year ended December 31, 2001 as
compared to the year ended December 31, 2000 principally resulted from the
progressive transition of service responsibility to Exult under our various
process management contracts and the continuing expansion of our infrastructure
and service capacity. We began to operate our first client service center during
the first six months of 2000, opened a second in the latter half of 2000, and
began operating our third primary center during the first quarter of 2001. We
did not begin operating our fourth primary center until the first quarter of
2002, so 2001 results do not include any costs associated with operating that
center. Operating expense will tend to increase to support any growth we may
achieve, and


                                       30
<PAGE>

our profitability depends upon our ability to leverage existing resources across
a broader revenue base and limit increases in operating expense associated with
new business to levels significantly below our clients' historical costs of
operating the processes we assume. We have incurred, and may continue to incur,
negative gross margins as we continue to transition and transform our clients'
HR processes.

PRODUCT DEVELOPMENT EXPENSE

    Product development expense for the years ended December 31, 2001, 2000 and
1999, was $4.6 million, or 1.7% as a percentage of revenue, $6.7 million, or
10.0% as a percentage of revenue, and $368,000, or 7.6% as a percentage of
revenue, respectively. Product development expense consists primarily of
consultant costs and the compensation of our employees who are directly
associated with the development of our product features and Internet software
and capabilities. We cannot be certain that our product development efforts will
provide us with the desired results or will be economically feasible.

    We increased our spending for product development during 2000 as compared to
1999. During 2001, we redirected a portion of these resources to implementation
and transformation activities relating to the progressive transition of service
responsibility to Exult for our process management contracts, resulting in a
decrease in product and development expense for 2001 as compared to 2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

    For the years ended December 31, 2001, 2000 and 1999, selling, general and
administrative expense was $44.5 million, or 16.3% as a percentage of revenue,
$28.2 million, or 42.3% as a percentage of revenue, and $10.0 million, or 205.4%
as a percentage of revenue, respectively. Selling, general and administrative
expense generally consists of compensation for employees engaged in marketing,
promoting and selling our services, and for management and administrative
personnel. Selling, general and administrative expense also includes third-party
consulting and marketing expenditures, as well as facilities and office costs,
and legal, accounting and recruiting fees and expenses. Also included in
selling, general and administrative expense for the year ended December 31, 2001
were business optimization costs totaling $18.5 million, consisting of severance
charges of $9.7 million (including non-cash option acceleration charges of $3.0
million); certain wind-up costs resulting in a $6.6 million charge (including
severance costs of $5.4 million) associated with the elimination of two
secondary, non-strategic processing centers; and a $2.2 million non-cash charge
arising from the write-off of a research database that we have determined is no
longer a strategic component of our business. We call these charges "business
optimization costs" because they reflect our pursuit of strategies intended to
enhance our efficiency and profitability as our operating scale increases and
our business progresses toward operational maturity. We may incur business
optimization costs from time to time as we implement new organization
structures, technologies, processes and other changes in our business.

    Exclusive of business optimization costs, selling, general and
administrative expense for the year ended December 31, 2001 was $26.0 million,
or 9.5% as a percentage of revenue, compared to $28.2 million, or 42.3% of
revenue for the year ended December 31, 2000.The decrease in amount for 2001 as
compared to 2000 primarily resulted from the redeployment of certain personnel
and other resources to direct client activities, at which time the costs
associated with such employees were included in cost of revenue. The decrease in
percentage of revenue for 2001 as compared to 2000 primarily resulted from the
revenue growth experienced in 2001 as compared to 2000. Selling, general and
administrative expense increased for the year ended December 31, 2000 as
compared to the year ended December 31, 1999 as a result of the continuing
expansion of our infrastructure. However, as a percentage of revenue, these
expenses grew at a slower rate than revenue during 2000 as compared to 1999.

DEPRECIATION AND AMORTIZATION EXPENSE

    Depreciation and amortization expense for the years ended December 31, 2001,
2000 and 1999 was $12.5 million, or 4.6% as a percentage of revenue, $8.8
million, or 13.2% as a percentage of revenue, and $943,000, or 19.4% as


                                       31
<PAGE>

a percentage of revenue, respectively. Included in the 2001, 2000 and 1999
amounts was $8.5 million, $3.4 million and $107,000, respectively, of
depreciation and amortization expense from property and equipment. Also included
in the 2001, 2000 and 1999 amounts was intangible asset amortization of $3.0
million, $4.2 million and $357,000, respectively, and $1.0 million, $1.2 million
and $479,000, respectively, of deferred compensation amortization. The increase
in depreciation and amortization from property and equipment reflects the
continuing build out of our infrastructure and service delivery capabilities.

WARRANT CHARGES

    Warrant charges were $4.5 million and $29.9 million for the years ended
December 31, 1999 and 2000, respectively. The 1999 amount included a $3.3
million charge for warrants issued in connection with a business process
management contract and a $1.2 million charge for warrants issued in exchange
for consulting and recruiting services. The 2000 amount consisted of a charge
for warrants issued in connection with the sale of Common Stock. In 2001, no
warrant charges were incurred.

INTEREST INCOME, NET

    Interest income, net for years ended December 31, 2001, 2000 and 1999
consisted of interest income of $4.5 million, $6.7 million and $334,000,
respectively, partially offset by interest expense of $754,000, $1.4 million and
$71,000, respectively. Interest income is generated primarily from short-term
investing of cash in excess of current requirements. Interest expense is
associated with certain capitalized leases and the debt incurred to purchase the
Gunn Partners, Inc. assets in November 1999.

INCOME TAXES

    We incurred losses since our founding in 1998, resulting in federal, state
and foreign net operating loss carryforwards. The federal and state net
operating loss carryforwards expire beginning in 2020 and 2008, respectively.
The foreign net operating loss may be carried forward indefinitely. A full
valuation allowance has been provided against the tax benefit generated by the
net operating losses because of the uncertainty of realizing the deferred tax
assets.

NET LOSS

    The foregoing resulted in a net loss for the years ended December 31, 2001,
2000 and 1999 of $74.7 million, or $0.77 per basic and diluted share, $94.8
million, or $1.74 per basic and diluted share, and $15.2 million, or $2.20 per
basic and diluted share, respectively. Excluding business optimization costs of
$18.5 million for the year ended December 31, 2001, the net loss would have been
$56.2 million, or $0.58 per basic and diluted share. Excluding warrant charges
of $4.5 million and $29.9 million for the years ended December 31, 1999 and
2000, and reflecting the conversion of all of the outstanding shares of the
Company's Preferred Stock during 1999 and 2000, the net losses would have been
$10.7 million, or $0.14 per share, and $64.9 million, or $0.81 per share,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

    Since our inception in October 1998, we have financed our operations
primarily with equity contributions including private placements of our capital
stock for consideration of $1.0 million in 1998, $55.1 million in 1999, $161.3
million in 2000 and $26.0 million in 2001; the net proceeds from our initial and
secondary public offerings of $56.7 million in June 2000 and $100.3 million in
August 2001, respectively; and, to a lesser extent, by cash generated from our
business and the exercise of stock options and warrants. The 2000 amount of
$161.3 million included $29.9 million from a warrant issued in connection with
the sale of Common Stock and $44.0 million of indebtedness owed to us that was
subsequently satisfied with prepaid rent and an intangible asset in connection
with one of our business process management contracts. The intangible asset is
being amortized as a reduction of revenue over the life of the contract.


                                       32
<PAGE>

    Net cash used in operating activities was $33.9 million in the year ended
December 31, 2001, and $60.7 million for the year ended December 31, 2000 and
$7.6 million for the year ended December 31, 1999. We obtained our first three
process management contracts in December 1999 and January 2000 and began
generating revenue from these contracts during the first quarter of 2000. We
obtained two additional process management contracts during the second half of
2000 and began generating revenue from both of these agreements by the first
quarter of 2001. We obtained our sixth and seventh process management contracts
in the fourth quarter of 2001 and first quarter of 2002, respectively, and
expect to begin generating revenue from these agreements during the first half
of 2002. During the years ended December 31, 2001, 2000 and 1999, we continued
using operating cash to pursue additional business opportunities and the
development of our corporate infrastructure. We also expended operating cash in
support of revenue generated by our process management contracts and to fund the
transition and transformation costs associated with these process management
contracts. Cash used in investing activities was $21.0 million in 2001, $23.8
million in 2000 and $9.6 million in 1999, and was used to construct and expand
our client service centers and our internal systems. We generated $127.0
million, $140.3 million and $55.5 million in cash from financing activities
during the years ended December 31, 2001, 2000 and 1999 primarily from private
placements and public offerings of our stock.

     We expect to generate negative operating cash flow until we become
profitable. We expect to increase our investments in property and equipment to
support the expansion and renovation of our facilities, including our existing
client service centers, and to purchase related computer and other equipment
necessary to support our client contracts and growth. In addition, from time to
time in the ordinary course of business, we evaluate potential acquisitions of
related businesses, assets, services and technologies. Such acquisitions, if
completed, may require significant cash expenditures.

    We believe that our cash on hand will be sufficient to satisfy our working
capital requirements for at least the next 12 months. We anticipate rapid growth
and we may need to raise additional funds through public or private debt or
equity financings in order to address unanticipated operating issues, finance
acquisitions, obtain new client contracts with capital investment requirements,
finance other strategic opportunities, and maintain adequate cash balances to
satisfy the expectations of prospective clients. We cannot be certain that we
will be able to raise additional funds on favorable terms, or at all. If we are
unable to obtain additional funds, we may be unable to fund our operations or
strategic initiatives.

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141 "Business
Combinations" which addresses financial accounting and reporting for business
combinations and supersedes Accounting Principles Board ("APB") No. 16,
"Business Combinations", and SFAS No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises". SFAS No. 141 requires that all business
combinations and acquisitions be accounted for based on fair value of assets
exchanged under the purchase method, separate recognition of intangible assets
apart from goodwill when these assets meet certain criteria and additional
disclosure of the primary reasons for a business combination and the allocation
of the purchase price paid to the assets acquired and liabilities assumed by
major balance sheet captions. The provisions of SFAS No. 141 apply to all
business combinations initiated after June 30, 2001. We have adopted the
provisions of SFAS No. 141 as of July 1, 2001. Adoption did not have a material
impact on our financial condition and results of operations.

    In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and is effective for fiscal years beginning
after December 15, 2001, with early adoption permitted in certain instances for
entities with fiscal years beginning after March 15, 2001. We do not expect the
adoption of SFAS No. 142 to have a material impact on our consolidated financial
position or results of operations.

    In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible assets and the associated
asset retirement costs. It applies to legal obligations associated with the
retirement of assets that result from the acquisition, construction, development
and/or the normal operation of an asset, except for certain obligations of
lessees. SFAS 143


                                       33
<PAGE>

requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the asset. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002 (with earlier application being encouraged). We do not expect the
adoption of SFAS 143 to have a material impact on our financial condition and
results of operations.

    In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Assets." SFAS 144 addresses financial accounting and reporting
for the impairment or disposal of assets. SFAS 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Assets to Be Disposed Of," and the accounting
and reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business (as previously defined in that Opinion).
The provisions of SFAS 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001, with early application
encouraged and generally are to be applied prospectively. We do not expect the
adoption of SFAS 144 to have a material impact on our financial condition and
results of operations.



                                       34
<PAGE>



ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    Not applicable.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The Financial Statements of the Company identified in the Index to Financial
Statements appearing under "Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form-8K" of this report are incorporated herein by reference to
Item 14.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

    None.



                                       35
<PAGE>


                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    Except for certain information concerning the Company's executive officers
which is included under the caption "Executive Officers and Certain Significant
Employees of the Registrant" following Part I, Item 4 of this report, the
information required under this Item is included in the Company's Proxy
Statement for its 2002 Annual Meeting of Stockholders under the caption
"Directors and Executive Officers," which will be filed with the Securities and
Exchange Commission no later than April 30, 2002, and is incorporated herein by
reference.

ITEM 11.   EXECUTIVE COMPENSATION.

    The information required under this Item is included in the Company's Proxy
Statement for its 2002 Annual Meeting of Stockholders under the caption
"Directors and Executive Officers," which will be filed with the Securities and
Exchange Commission no later than April 30, 2002, and is incorporated herein by
reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information required under this Item is included in the Company's Proxy
Statement for its 2002 Annual Meeting of Stockholders under the caption
"Directors and Executive Officers," which will be filed with the Securities and
Exchange Commission no later than April 30, 2002, and is incorporated herein by
reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The information required under this Item is included in the Company's Proxy
Statement for its 2002 Annual Meeting of Stockholders under the caption
"Directors and Executive Officers," which will be filed with the Securities and
Exchange Commission no later than April 30, 2002, and is incorporated herein by
reference.



                                       36
<PAGE>



                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
           FORM 8-K.

(a)     The following documents are filed as part of this report:

        1.        Index to financial statements

<TABLE>
<CAPTION>
                                                                                                        PAGE
                                                                                                        ----
<S>                                                                                                    <C>
Report of Independent Public Accountants................................................................ F-2
Consolidated Balance Sheets............................................................................. F-3
Consolidated Statements of Operations................................................................... F-4
Consolidated Statements of Stockholders' Equity......................................................... F-5
Consolidated Statements of Cash Flows................................................................... F-6
Notes to Consolidated Financial Statements.............................................................. F-7

</TABLE>

        2.        Financial statement schedules

<TABLE>
<CAPTION>
                                                                                                PAGE
                                                                                                ----
<S>                                                                                        <C>
Report of Independent Public Accountants on Supplemental Schedule.......................... See.Exhibit.99.1
Supplemental Schedule Schedule II Valuation and Qualifying Accounts........................ See.Exhibit.99.2

</TABLE>


        3.        Exhibits

        See Item (c) below.

(b)     Reports on Form 8-K.

        None

(c)     Exhibits.

2.1(1)        Asset Purchase Agreement by and among Exult, Inc., Gunn Partners,
              Inc., the shareholders of Gunn Partners, Inc. and Michael Gibson
              dated as of November 22, 1999

2.2(1)        Asset Purchase Agreement dated as of December 20, 1999 among
              Pactiv Corporation, Pactiv Business Services, Inc. and Exult, Inc.

3.1(1)        Fourth Amended and Restated Certificate of Incorporation of Exult,
              Inc.

3.2(1)        Amended and Restated Bylaws of Exult, Inc.

4.1(1)        See Exhibits 3.1 and 3.2 for provisions of the Exult, Inc.'s
              Certificate of Incorporation and Bylaws defining the rights of
              holders of Exult, Inc.'s Common Stock


4.2(1)        Specimen Common Stock certificate

10.1.1(1)*    Registrant's 1999 Stock Option/Stock Issuance Plan

10.1.2(1)*    Form of Notice of Grant of Stock Option

10.1.3(1)*    Form of Stock Option Agreement

10.1.4(1)*    Form of Addendum to Stock Option Agreement

10.1.5(1)*    Form of Stock Purchase Agreement

10.1.6(1)*    Form of Addendum to Stock Purchase Agreement

10.1.7(1)*    Form of Stock Issuance Agreement

10.1.8(1)*    Form of Addendum to Stock Issuance Agreement


                                       37
<PAGE>

10.2.1(1)*    Registrant's 1999 Special Executive Stock Option/Stock Issuance
              Plan

10.2.2(1)*    Form of Notice of Grant of Stock Option

10.2.3(1)*    Form of Stock Option Agreement

10.2.4(1)*    Form of Addendum to Stock Option Agreement

10.2.5(1)*    Form of Stock Purchase Agreement

10.2.6(1)*    Form of Addendum to Stock Purchase Agreement

10.2.7(1)*    Form of Stock Issuance Agreement

10.2.8(1)*    Form of Addendum to Stock Issuance Agreement

10.3(1)*      Form of Directors' and Officers' Indemnification Agreement

10.4(1)*      Founder Stock Purchase Agreement by and among BPO-US, Inc., James
              Madden and General Atlantic Partners, LLC dated April 1, 1999

10.5.1(1)*    Amended and Restated Registration Rights Agreement among Exult,
              Inc. and the Stockholders identified therein dated December 23,
              1999

10.5.2(1)*    Amendment No. 1 to Amended and Restated Registration Rights
              Agreement among Exult and the Stockholders identified therein
              dated February 10, 2000

10.6.1(1)     Office Space Lease between The Irvine Company and BPO-US, Inc.
              dated June 28, 1999

10.6.2(1)     First Amendment to Office Space Lease between The Irvine Company
              and Exult, Inc. dated February 29, 2000

10.7.1(1)     Lease Agreement Venture Technology Center VI Building, The
              Woodlands, Montgomery County, Texas between The Woodlands
              Corporation and Tenneco Business Services, Inc. dated August 15,
              1995

10.7.2(1)     Assignment and Assumption of Lease between Pactiv Business
              Services, Inc. (formerly known as Tenneco Business services, Inc.)
              and Exult, Inc. dated January 1, 2000

10.8(1)+      Framework Agreement dated December 7, 1999 by and between the
              Company and BP Amoco, p.l.c.

10.9(1)+      US Country Agreement dated December 7, 1999 by and between the
              Company and BP America, Inc.

10.10(1)+     UK Country Agreement dated December 7, 1999 by and between Exult
              Limited and BP International Limited

10.16*        Registrant's 2000 Employee Stock Purchase Plan, amended and
              restated as of January 1, 2002

10.17(1)      Lease among Scottish Mutual Assurance p.l.c. and Exult Limited and
              Exult, Inc.

10.18(1)*     Registrant's 2000 Equity Incentive Plan

10.19(1)*     Loan Agreement dated May 30, 2000 by and between Exult, Inc. and
              Kevin Campbell

10.20(2)+     Master Services Agreement by and between Exult, Inc. and Unisys
              Corporation dated August 28, 2000

10.21(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for James C. Madden, V

10.22(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for Stephen M. Unterberger

10.23(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for Kevin M. Campbell

10.24*        Offer Letter for Richard Jones

10.25(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for Robert W. Gunn

10.26(3)      Office Lease between Temple Property Holdings Limited and Exult
              Limited dated June 13, 2000

10.27(3)      Unit Purchase Agreement between Exult, Inc. and Bank of America
              Corporation dated October 12, 2000

10.28(3)      Common Stock Warrant Issued to Bank of America October 12, 2000

10.29(3)+     Master Services Agreement between Exult, Inc. and Bank of America
              Corporation dated November 21, 2000

10.30(3)+     Office Space Lease between Bank of America, National Association
              and Exult, Inc. dated November 21, 2000


                                       38
<PAGE>

10.31(4)+     Common Stock Purchase Agreement by and between Exult, Inc. and
              Automatic Data Processing, Inc. dated as of June 11, 2001

10.32(5)+     Addendum 1 to Master Services Agreement between Exult, Inc. and
              Bank of America Corporation dated as of March 15, 2001

10.33(5)+     Addendum 2 to Master Services Agreement between Exult, Inc. and
              Bank of America Corporation dated as of September 10, 2001

10.34++       Human Resources Services Agreement between Exult, Inc. and
              International Paper Company dated as of October 18, 2001

10.35++       Systems Services Agreement between Exult, Inc. and International
              Paper Company dated as of October 18, 2001

10.36++       Technical Services Agreement between Exult, Inc. and International
              Paper Company dated as of October 18, 2001

10.37++       Sublease between Exult, Inc. and International Paper Company dated
              as of January 1, 2002

10.38*        Loan Agreement dated September 1, 2000 by and between Exult, Inc.
              and Richard Jones

10.39*        Bonus Letter dated September 1, 2000 by and between Exult, Inc.
              and Richard Jones

21.1(1)       Subsidiaries of Exult, Inc.

23.1          Consent of Independent Public Accountants

99.1          Report of Independent Public Accountants on Supplemental Schedule

99.2          Supplemental Schedule - Schedule II - Valuation and Qualifying
              Accounts

99.3          Letter to SEC Pursuant to Temporary Note 3T
-----------

(1)  Previously filed with the Registrant's Registration Statement on Form S-1,
     Registration Number 333-31754, and incorporated herein by reference.

(2)  Previously filed with the Registrant's quarterly report on Form 10-Q for
     the quarter ended September 30, 2000 and incorporated herein by reference.

(3)  Previously filed with the Registrant's annual report on Form 10-K for the
     year ended December 31, 2000 and incorporated herein by reference.

(4)  Previously filed with the Registrant's quarterly report on Form 10-Q for
     the quarter ended June 30, 2001 and incorporated herein by reference.

(5)  Previously filed with the Registrant's quarterly report on Form 10-Q for
     the quarter ended September 30, 2001 and incorporated herein by reference.

+    Confidential treatment has been granted with respect to certain portions of
     this agreement. Such portions have been omitted from this filing and have
     been filed separately with the Securities and Exchange Commission.

++   Confidential treatment is being sought with respect to certain portions of
     this agreement. Such portions have been omitted from this filing and have
     been filed separately with the Securities and Exchange Commission.

*    This exhibit is a management contract or a compensatory plan or
     arrangement.

     (d)     See item (a)(2) above.




                                       39
<PAGE>


                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   EXULT, INC.
                                  (REGISTRANT)


Date:  March 29, 2002                By:   /s/ JAMES C. MADDEN, V
                                        ------------------------------
                                           James C. Madden, V
                                           Chief Executive Officer and President

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>

                SIGNATURE                                              TITLE                                        DATE
                ---------                                              -----                                        ----

<S>                                                     <C>                                                 <C>
   /s/ JAMES C. MADDEN, V                                 Chief Executive Officer,                            March 29, 2002
----------------------------------------------------      President and Chairman of the Board
   James C. Madden, V                                     (principal executive officer)


   /s/ MICHAEL F. HENN                                    Chief Financial Officer                             March 29, 2002
----------------------------------------------------      (principal financial officer)
   Michael F. Henn

   /s/ ROBERT G. McGRAW                                   Vice President, Finance and                         March 29, 2002
----------------------------------------------------      Chief Accounting Officer
   Robert G. McGraw                                       (principal accounting officer)


   /s/ J. MICHAEL CLINE                                   Director                                            March 29, 2002
----------------------------------------------------
   J. Michael Cline


  /s/ STEVEN A. DENNING                                   Director                                            March 29, 2002
----------------------------------------------------
   Steven A. Denning


   /s/ MARK DZIALGA                                       Director                                            March 29, 2002
----------------------------------------------------
   Mark Dzialga


   /s/ MICHAEL MILES                                      Director                                            March 29, 2002
----------------------------------------------------
   Michael Miles

  /s/ THOMAS NEFF                                         Director                                            March 29, 2002
----------------------------------------------------
   Thomas Neff


   /s/ JOHN R. OLTMAN                                     Director                                            March 29, 2002
----------------------------------------------------
   John R. Oltman

</TABLE>



                                       40
<PAGE>


<TABLE>


<S>                                                     <C>                                                  <C>
   /s/ A. MICHAEL SPENCE                                  Director                                            March 29, 2002
----------------------------------------------------
   A. Michael Spence

   /s/ JOSH S. WESTON                                     Director                                            March 29, 2002
----------------------------------------------------
   Josh S. Weston

</TABLE>

                                       41



<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants..............................    F-2
Consolidated Balance Sheets...........................................    F-3
Consolidated Statements of Operations.................................    F-4
Consolidated Statements of Stockholders' Equity.......................    F-5
Consolidated Statements of Cash Flows.................................    F-6
Notes to Consolidated Financial Statements............................    F-7
</TABLE>


                                       F-1

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the stockholders of Exult, Inc.:

     We have audited the accompanying consolidated balance sheets of Exult, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 2000 and 2001, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999, 2000 and 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Exult, Inc. and
subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for the years ended December 31, 1999, 2000 and
2001 in conformity with accounting principles generally accepted in the United
States.


/s/ Arthur Andersen LLP
-----------------------------------
ARTHUR ANDERSEN LLP
Orange County, California
January 23, 2002



                                      F-2
<PAGE>


                                   EXULT, INC.

                           CONSOLIDATED BALANCE SHEETS
                 (amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                   -------------------------
                                                                      2000           2001
                                                                   ---------       ---------
<S>                                                                <C>             <C>
                              ASSETS
Current Assets:
  Cash and cash equivalents .................................      $  94,890       $ 166,888
  Investments ...............................................          5,000           2,681
  Accounts receivable .......................................         17,713          19,574
  Other receivables .........................................          2,418           2,860
  Prepaid expenses and other current assets .................          5,764          13,834
                                                                   ---------       ---------
         Total Current Assets ...............................        125,785         205,837
Property and equipment, net .................................         24,945          39,143
Intangibles assets, net .....................................         36,447          28,683
Other assets ................................................         17,004          18,144
                                                                   ---------       ---------
         Total Assets .......................................      $ 204,181       $ 291,807
                                                                   =========       =========


              LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable ..........................................      $   3,475       $   9,907
  Accrued liabilities .......................................         24,858          44,796
  Current portion of long-term obligations and other ........          4,419           3,470
                                                                   ---------       ---------
         Total Current Liabilities ..........................         32,752          58,173
                                                                   ---------       ---------

Commitments and Contingencies

Stockholders' Equity:
  Preferred stock, $0.0001 par value;
    Authorized - 15,000 shares;
    Issued and outstanding - none at
      December 31, 2000 and 2001, respectively ..............             --              --
  Common stock, $0.0001 par value;
    Authorized - 500,000 shares;
    Issued and outstanding - 90,956 and 104,195
      at December 31, 2000 and 2001, respectively ...........              9              10
  Additional paid-in capital ................................        284,393         419,814
  Deferred compensation .....................................         (2,757)         (1,198)
  Cumulative translation adjustments ........................             --            (125)
  Accumulated deficit .......................................       (110,216)       (184,867)
                                                                   ---------       ---------
         Total Stockholders' Equity .........................        171,429         233,634
                                                                   ---------       ---------
         Total Liabilities and Stockholders' Equity .........      $ 204,181       $ 291,807
                                                                   =========       =========
</TABLE>






              The accompanying notes are an integral part of these
                          consolidated balance sheets.



                                      F-3

<PAGE>


                                   EXULT, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (amounts in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                           -----------------------------------------
                                                              1999           2000            2001
                                                           ---------       ---------       ---------
<S>                                                        <C>             <C>             <C>
Revenue .............................................      $   4,857       $  66,661       $ 272,534
Cost of revenue .....................................          4,498          93,195         289,420
                                                           ---------       ---------       ---------
Gross profit (loss) .................................            359         (26,534)        (16,886)
                                                           ---------       ---------       ---------
Expenses:
  Product development ...............................            368           6,674           4,630
  Selling, general and administrative(1) ............          9,976          28,207          44,457
  Depreciation and amortization .....................            943           8,811          12,472
  Warrant charges ...................................          4,547          29,900              --
                                                           ---------       ---------       ---------
     Total expenses .................................         15,834          73,592          61,559
                                                           ---------       ---------       ---------
Loss from operations ................................        (15,475)       (100,126)        (78,445)
  Interest income, net ..............................            263           5,306           3,794
                                                           ---------       ---------       ---------
Net loss ............................................      $ (15,212)      $ (94,820)      $ (74,651)
                                                           =========       =========       =========
Net loss per common share:
  Basic and diluted .................................      $   (2.20)      $   (1.74)      $   (0.77)
                                                           =========       =========       =========

Weighted average number of common shares outstanding:
    Basic and diluted ...............................          6,906          54,491          96,622
                                                           =========       =========       =========
</TABLE>


-------------------

(1)  Includes $18,474 of business optimization costs in 2001.






              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-4

<PAGE>
                                   EXULT, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (amounts in thousands)
<TABLE>
<CAPTION>
                                                              CONVERTIBLE
                                                            PREFERRED STOCK            COMMON STOCK
                                                          ------------------    -----------------------------
                                                                                                   ADDITIONAL
                                                                   PREFERRED                        PAID-IN     DEFERRED
                                                           SHARES    STOCK      SHARES     PAR      CAPITAL   COMPENSATION
                                                          -------  ---------   --------  --------  ---------- ------------
<S>                                                         <C>    <C>            <C>    <C>        <C>        <C>
BALANCE, December 31, 1998..........................           25  $   1,000          9  $     --  $      --   $       --
  Issuance of preferred stock.......................        6,166     55,144         --        --         --           --
  Issuance of common stock for cash.................           --         --      8,856         1         38           --
  Issuance of common stock for services and
    subscription....................................           --         --        307        --        200           --
  Common stock issued upon exercise of stock options           --         --        262        --        197           --
  Issuance of preferred stock and
    common stock warrants for service contract......           --      2,624         --        --        693           --
  Issuance of common stock warrants for services....           --         --         --        --      1,230           --
  Deferred compensation related to the issuance
    of common stock and common stock options........           --         --         --        --      3,613       (3,613)
  Amortization of deferred compensation.............           --         --         --        --         --          479
  Net loss..........................................           --         --         --        --         --           --
                                                          -------  ---------   --------     -----  ---------   ----------
BALANCE, December 31, 1999..........................        6,191     58,768      9,434         1      5,971       (3,134)
  Issuance of preferred stock.......................        7,271     63,936         --        --         --           --
  Common stock issued upon warrant exercises........           --         --      4,187        --      5,273           --
  Preferred stock issued upon warrant exercise......        3,339      7,192         --        --         --           --
  Issuance of common stock in initial public offering          --         --      6,300         1     56,668           --
  Conversion of preferred stock into common stock...      (16,801)  (129,896)    65,485         7    129,889           --
  Issuance of common stock and
    common stock warrants for cash and assets.......           --         --      5,000        --     84,900           --
  Common stock issued upon exercise of stock options           --         --        514        --        436           --
  Common  stock issued under employee stock
    purchase plan...................................           --         --         36        --        370           --
  Issuance of common stock warrants for services....           --         --         --        --         94           --
  Payment of subscription receivable................           --         --         --        --         --           --
  Deferred compensation related to stock options
    granted.........................................           --         --         --        --        792         (792)
  Amortization of deferred compensation.............           --         --         --        --         --        1,169
  Net loss..........................................           --         --         --        --         --           --
                                                          -------  ---------   --------     -----  ---------   ----------
BALANCE, December 31, 2000..........................           --         --     90,956         9    284,393       (2,757)
  Issuance of common stock in secondary offering....           --         --      8,000         1    100,317           --
  Issuance of common stock for cash.................           --         --      2,068        --     26,000           --
  Common stock issued upon
     exercise of stock options and warrants.........           --         --      3,048        --      5,472           --
  Common stock issued under employee stock
    purchase plan...................................           --         --        123        --      1,080           --
  Issuance of common stock options for services.....           --         --         --        --         36           --
  Accelerated vesting of common stock options
     net of related unamortized deferred compensation          --         --         --        --      2,516          524
  Amortization of deferred compensation.............           --         --         --        --         --        1,035
  Cumulative translation adjustments................           --         --         --        --         --           --
  Net loss..........................................           --         --         --        --         --           --
                                                          -------  ---------  ---------  --------  ---------   ----------
BALANCE, December 31, 2001..........................           --   $     --    104,195  $     10  $ 419,814   $   (1,198)
                                                          =======  =========  =========  ========  =========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                           CUMULATIVE                                   TOTAL
                                                           TRANSLATION  ACCUMULATED  SUBSCRIPTIONS  STOCKHOLDERS'
                                                           ADJUSTMENTS    DEFICIT     RECEIVABLE      EQUITY
                                                          ------------  -----------  -------------  -------------
<S>                                                        <C>           <C>          <C>            <C>
BALANCE, December 31, 1998..........................       $    --       $  (184)     $       --     $     816
  Issuance of preferred stock.......................            --             --             --        55,144
  Issuance of common stock for cash.................            --             --             --            39
  Issuance of common stock for services and
    subscription....................................            --             --           (100)          100
  Common stock issued upon exercise of stock options            --             --             --           197
  Issuance of preferred stock and
    common stock warrants for service contract......            --             --             --         3,317
  Issuance of common stock warrants for services....            --             --             --         1,230
  Deferred compensation related to the issuance
    of common stock and common stock options........            --             --             --           --
  Amortization of deferred compensation.............            --             --             --           479
  Net loss..........................................            --        (15,212)            --       (15,212)
                                                           -------      ---------      ---------     ---------
BALANCE, December 31, 1999..........................            --        (15,396)          (100)       46,110
  Issuance of preferred stock.......................            --             --             --        63,936
  Common stock issued upon warrant exercises........            --             --             --         5,273
  Preferred stock issued upon warrant exercise......            --             --             --         7,192
  Issuance of common stock in initial public offering           --             --             --        56,669
  Conversion of preferred stock into common stock...            --             --             --           --
  Issuance of common stock and
    common stock warrants for cash and assets.......            --             --             --        84,900
  Common stock issued upon exercise of stock options            --             --             --           436
  Common  stock issued under employee stock
    purchase plan...................................            --             --             --           370
  Issuance of common stock warrants for services....            --             --             --            94
  Payment of subscription receivable................            --             --            100           100
  Deferred compensation related to stock options
    granted.........................................            --             --             --           --
  Amortization of deferred compensation.............            --             --             --         1,169
  Net loss..........................................            --        (94,820)            --       (94,820)
                                                           -------      ---------      ---------     ---------
BALANCE, December 31, 2000..........................            --       (110,216)            --       171,429
  Issuance of common stock in secondary offering....            --             --             --       100,318
  Issuance of common stock for cash.................            --             --             --        26,000
  Common stock issued upon
     exercise of stock options and warrants.........            --             --             --         5,472
  Common stock issued under employee stock
    purchase plan...................................            --             --             --         1,080
  Issuance of common stock options for services.....            --             --             --            36
  Accelerated vesting of common stock options
     net of related unamortized deferred compensation           --             --             --         3,040
  Amortization of deferred compensation.............            --             --             --         1,035
  Cumulative translation adjustments................          (125)            --             --          (125)
  Net loss..........................................            --        (74,651)            --       (74,651)
                                                           -------      ---------      ---------     ---------
BALANCE, December 31, 2001..........................       $  (125)     $(184,867)     $      --     $ 233,634
                                                           =======      =========      =========     =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       F-5
<PAGE>

                                   EXULT, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                    -----------------------------------------
                                                                       1999           2000            2001
                                                                    ---------       ---------       ---------
<S>                                                                 <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ...................................................      $ (15,212)      $ (94,820)      $ (74,651)
  Adjustments to reconcile net loss to net cash
    used in operating activities -
    Depreciation and amortization ............................            943           8,811          15,600
    Charge for warrants and options ..........................          4,547          29,994           3,076
    Write off of intangible assets ...........................             --              --           2,165
  Changes in operating assets and liabilities -
    Investments ..............................................             --          (5,000)          2,319
    Receivables ..............................................           (824)        (19,307)         (1,861)
    Prepaid expenses and other current assets ................           (287)         (5,477)         (8,512)
    Other assets .............................................           (410)            455          (1,140)
    Accounts payable .........................................          1,449           2,022           6,432
    Accrued liabilities ......................................          2,235          22,588          22,717
                                                                    ---------       ---------       ---------
        Net cash used in operating activities ................         (7,559)        (60,734)        (33,855)
                                                                    ---------       ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment .........................         (4,363)        (23,831)        (20,957)
  Cash paid in acquisition of intangible assets ..............         (5,210)             --              --
                                                                    ---------       ---------       ---------
        Net cash used in investing activities ................         (9,573)        (23,831)        (20,957)
                                                                    ---------       ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of preferred stock ..................         55,144          71,128              --
  Proceeds from issuance of common stock .....................            139          73,312         126,318
  Payment of subscription receivable .........................             --             100              --
  Exercise of stock options ..................................            197             436           6,028
  Payments on long-term obligations ..........................             --          (4,720)         (5,349)
                                                                    ---------       ---------       ---------
        Net cash provided by financing activities ............         55,480         140,256         126,997
                                                                    ---------       ---------       ---------
Effect of exchange rate changes on cash ......................             --              --            (187)
                                                                    ---------       ---------       ---------
Net increase in cash and cash equivalents ....................         38,348          55,691          71,998
Cash and cash equivalents, beginning of period ...............            851          39,199          94,890
                                                                    ---------       ---------       ---------
Cash and cash equivalents, end of period .....................      $  39,199       $  94,890       $ 166,888
                                                                    =========       =========       =========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest .................................................      $       5       $     321       $   1,464
                                                                    =========       =========       =========
    Income taxes .............................................      $       1       $      34       $      48
                                                                    =========       =========       =========
SUMMARY OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:
  Common stock issued on subscriptions .......................      $     100       $      --       $      --
                                                                    =========       =========       =========
  Preferred and common stock warrants
    issued in connection with a service contract .............      $   3,317       $      --       $      --
                                                                    =========       =========       =========
  Common stock options and warrants issued for services ......      $   1,230       $      94       $      36
                                                                    =========       =========       =========
  Acquisition of equipment through capital lease .............      $     139       $      --       $   1,621
                                                                    =========       =========       =========
  Common stock issued for prepaid rent and intangible asset ..      $      --       $  44,000       $      --
                                                                    =========       =========       =========
  Common stock warrants issued in connection with common stock      $      --       $  29,900       $      --
                                                                    =========       =========       =========
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                      F-6
<PAGE>

1.   DESCRIPTION OF BUSINESS

Organization

     Exult, Inc. and subsidiaries ("Exult" or the "Company") designs,
implements, and manages comprehensive web-enabled human resources processes in
support of the employees of clients, generally under long-term contracts. In
addition, the Company provides consulting services for measuring and improving
the efficiency of human capital productivity and human resource, finance and
accounting processes.

     Exult was incorporated in the State of Delaware on October 29, 1998. The
Company began marketing its services in 1999. In August 1999 and November 1999,
the Company formed two subsidiaries, Exult Limited in the United Kingdom to
establish operations in that country, and Exult Equity Partners, Inc. for the
purpose of acquiring most of the assets of Gunn Partners, Inc., a consulting
business (Gunn).

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RISK FACTORS

Accounting Estimates

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingencies at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from estimated amounts.

Reclassifications

     Certain amounts in the 1999 and 2000 financial statements have been
reclassified to conform with the 2001 presentation.

Cash Equivalents

     The Company considers all highly liquid temporary cash investments with an
initial maturity of three months or less to be cash equivalents. The carrying
amount of cash equivalents approximates fair value because of the short maturity
period of these investments.

Investments

     As of December 31, 2001, the Company had approximately $2,681,000 invested
in fixed-term deposit accounts which bear interest ranging from 3.87 percent to
4.81 percent and mature between January 23, 2002 and March 15, 2002.

Property and Equipment

     Property and equipment is stated at cost. Depreciation and amortization of
property and equipment are recorded using either the double declining balance or
straight-line methods over the estimated useful life of the assets. Significant
additions and improvements to property and equipment are capitalized. When
assets are retired or otherwise disposed of, the cost and related accumulated
depreciation are removed and any gain or loss is reflected in the results of
operations. Maintenance, repairs and minor renewals are charged directly to
expense as incurred.

Capitalized Costs

     In accordance with Statement of Position (SOP) 98-1, Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use, the Company
expenses all costs associated with the development or purchase of internal use
software other than those incurred during the application development stage.
Costs related to application development are capitalized and amortized over the
estimated useful life of the software.

     The Company capitalizes all incremental direct origination costs and
certain non-incremental internal direct origination costs, including direct
labor, incurred subsequent to contract acquisition to the extent that management
determines that such costs are realizable. Contract acquisition is generally
deemed by the Company's management to have occurred, and therefore costs are
begun to



                                      F-7
<PAGE>
be capitalized, at the time a definitive letter of intent is executed between
Exult and the customer. These costs are amortized over the applicable contract
term.

    Exult capitalizes certain set-up and other direct installation costs to the
extent that management determines such costs are realizable. Capitalized set-up
and other direct installation costs are amortized over the applicable contract
term.

Intangibles, Net

     Intangible assets consist of the portion of the purchase price of assets
acquired from a client and assets acquired from the former owners of Gunn in
excess of the fair value of identifiable net tangible assets acquired in each
instance. Amortization is computed using the straight-line method over the
estimated useful lives of the assets. The intangible asset acquired from a
client is being amortized as a reduction of revenue over the life of the
contract.

Long-Lived Assets

     In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, the Company assesses the recoverability of its
long-lived assets on an annual basis or whenever adverse events or changes in
circumstances of business climate indicate that expected undiscounted future
cash flows related to such long-lived assets may not be sufficient to recover
the net book value of such assets. If undiscounted cash flows are not sufficient
to recover the recorded assets, an impairment is recognized to reduce the
carrying value of the long-lived assets to the estimated fair value. Cash flow
projections, although subject to a degree of uncertainty, are based on trends of
historical performance and management's estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions.
Additionally, in conjunction with the review for impairment, the remaining
estimated lives of certain of the Company's long-lived assets are assessed.

Revenue Recognition

     The Company recognizes revenue at the time services are performed and the
amount is billable, either on a fee-for-service basis for process management
clients or per diem basis for consulting clients. Fee-for-service contracts are
generally structured so that the Company receives a fee that is no greater than
the client's historical cost of operating the functions assumed by the Company.
After the Company has achieved a negotiated minimum cost reduction, in certain
instances the Company may be required to share further savings with its clients
in a negotiated gain sharing arrangement. The amount of savings to be shared
with clients is determined on a periodic basis in accordance with the terms of
the applicable contracts. In cases where the Company anticipates that, based
upon the amount of costs incurred and estimated future costs to be incurred,
amounts will be due to clients, revenue is recorded net of such amounts.

     In connection with the long-term service contracts, revenue is recognized
based on the proportion of incurred contract costs to date compared to total
estimated contract costs after giving effect to the most recent estimates of
total cost. The effect of changes to total estimated contract costs is
recognized in the period such changes are determined. In addition, if the
Company miscalculates the resources or time needed to perform under these
contracts or is not able to perform human resource management more cost
effectively than its clients, the costs of providing services could exceed the
fixed amount the Company would receive and a provision for such loss is recorded
at the time such determination is made.

     In the course of acquiring new clients, the Company performs significant
due diligence work. In certain cases, the Company may receive a guarantee that
its clients will pay or reimburse the Company for work performed in the due
diligence phase whether or not a contract is consummated. The Company records
these amounts as revenue and the corresponding direct costs as cost of revenue.

Concentration and Other Outsourcing Risk Factors

     During the years ended December 31, 1999 and 2000, approximately 84 percent
and 67 percent, respectively, of the Company's revenue was generated from a
single process management client. During the year ended December 31, 2001, two
of the Company's process management clients, including the Company's largest
client in 1999 and 2000, accounted for approximately 44 percent and 42 percent
of the Company's revenue. No other client accounted for 10 percent or more of
the Company's total revenue during any of these three years. As of December 31,
2001, the Company has a total of six process management clients and in January
2002, the Company added a seventh process management client. If any of the five
largest process management clients were to substantially reduce or stop using
the Company's services, future revenues would be seriously impaired. These
contracts are still at early stages. As such, management believes that the
Company's ability to secure future clients and revenues will be largely
dependent upon managing



                                      F-8
<PAGE>
and administering these clients' human resource processes effectively and
efficiently, and achieving service levels and cost savings specified in the
contracts. Although these contracts are not scheduled to expire until December
2004, November 2010, October 2011, and January 2012, the clients may terminate
their contracts prior to those dates for significant nonperformance by the
Company; for any reason after December 2002, November 2001, January 2006 and
July 2004, respectively, with specified prior written notice; or in the event
there is a change in control of the Company, as defined.

     The Company has, and plans to continue to enter into, fixed price or
relatively fixed priced process management contracts. These contracts typically
are structured so that the Company receives fixed amounts that are generally
equal to or less than the client's historical costs incurred in connection with
the services the Company is assuming. After the Company has achieved a
negotiated minimum cost reduction, in certain instances the Company may be
required to share further savings with its clients in a negotiated gain sharing
arrangement. If the Company miscalculates the resources or time needed to
perform under these contracts or is not able to perform human resource
management more cost effectively than its clients, the costs of providing
services could exceed the fixed amount the Company would receive. If that
occurs, the Company would lose money on the contract. The contracts also contain
certain minimum service level requirements that must be met. The Company
currently depends on third parties to provide a number of specialized human
resource services to the clients, such as recruiting and relocation, training
and temporary help services. If the Company and its third-party vendors are not
able to meet these requirements, the clients can assess penalties against the
Company in accordance with the terms of the contracts. The assessment of any
penalties could adversely affect future operating results.

Income Taxes

     The Company recognizes deferred tax assets and liabilities based on
differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rules and laws that are expected to be in effect
when the differences are expected to be recovered. Under the Tax Reform Act of
1986, the benefits from net operating losses carried forward may be impaired or
limited in certain circumstances. A valuation allowance has been provided for
deferred tax assets when it is more likely than not that all, or some portion,
of the deferred tax asset will not be realized.

Loss Per Share

     Basic loss per share is computed using the weighted average number of
shares of common stock outstanding during the period. Diluted earnings per share
is computed using the weighted average number of shares of common stock and
common stock equivalent shares outstanding during the period. To date, common
stock equivalent shares have been excluded from the computations as their effect
is antidilutive.

Comprehensive Income (Loss)

     Components of comprehensive income (loss) include amounts that are excluded
from net income (loss). There were no significant differences between the
Company's net loss and comprehensive loss for each of the years presented.

Stock-Based Compensation

     The Company has elected to follow Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to Employees, and related interpretations,
in accounting for employee stock options rather than the alternative fair value
accounting allowed by SFAS No. 123, Accounting for Stock Based Compensation. APB
No. 25 provides that compensation expense relative to the Company's employee
stock options is measured based on the intrinsic value of stock options granted.
Under SFAS No. 123, the fair value of stock options at the date of grant is
recognized in earnings over the vesting period of the options.

Foreign Currency Translation

     The functional currency of the Company's foreign subsidiary is the local
currency. Assets and liabilities of subsidiaries with international operations
are translated into U.S. dollars at year-end exchange rates, and revenues and
expenses are translated at average exchange rates prevailing as they occur.
Translation adjustments are included in accumulated other comprehensive income
(loss), a separate component of stockholders' equity. Transaction gains and
losses arising from transactions denominated in a currency other than the
functional currency of the entity involved, which are immaterial, are included
in the consolidated statements of operations. The Company has not entered into
any foreign currency exchange contracts or other derivative financial
instruments.


                                      F-9
<PAGE>
Segment Information

     Management has determined that the Company operates in only one business
segment. Prior to 2000, substantially all of the Company's revenue was derived
from within the United States. For the years ended December 31, 2000 and 2001,
76 percent and 83 percent, respectively, of the Company's revenue was derived
from within the United States with the balance for each year being derived
primarily from within the United Kingdom.

Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141 "Business Combinations" which addresses financial accounting and
reporting for business combinations and supersedes APB No. 16, "Business
Combinations", and SFAS No. 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises". SFAS No. 141 requires that all business combinations and
acquisitions be accounted for based on fair value of assets exchanged under the
purchase method, separate recognition of intangible assets apart from goodwill
when these assets meet certain criteria and additional disclosure of the primary
reasons for a business combination and the allocation of the purchase price paid
to the assets acquired and liabilities assumed by major balance sheet captions.
The provisions of SFAS No. 141 apply to all business combinations initiated
after June 30, 2001. The Company adopted the provisions of SFAS No. 141 as of
July 1, 2001. Adoption did not have a material impact on the Company's financial
condition and results of operations.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and is effective for fiscal years beginning
after December 15, 2001, with early adoption permitted in certain instances for
entities with fiscal years beginning after March 15, 2001. The Company does not
expect the adoption of SFAS No. 142 to have a material impact on its
consolidated financial position or results of operations.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible assets and the
associated asset retirement costs. It applies to legal obligations associated
with the retirement of assets that result from the acquisition, construction,
development and/or the normal operation of an asset, except for certain
obligations of lessees. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
asset. SFAS 143 is effective for financial statements issued for fiscal years
beginning after June 15, 2002 (with earlier application being encouraged). The
Company does not expect the adoption of SFAS 143 to have a material impact on
its financial condition and results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Assets." SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of assets. SFAS 144 supersedes SFAS No.
121, "Accounting for the Impairment of Assets to Be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). The provisions of SFAS 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, with early
application encouraged and generally are to be applied prospectively. The
Company does not expect the adoption of SFAS 144 to have a material impact on
its financial condition and results of operations.

3.   DETAIL OF SELECTED FINANCIAL STATEMENT CAPTION INFORMATION (IN THOUSANDS)

Property and Equipment

     Property and equipment consists of the following:
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                         -----------------------
                                                           USEFUL LIFE     2000           2001
                                                          -------------  --------       --------
<S>                                                       <C>            <C>            <C>
     Furniture and fixtures ........................         5 years     $  3,323       $  3,801
     Equipment, computers and software .............      3 to 5 years     10,683         31,675
     Leasehold improvements ........................        Lease term      5,063          5,773
     Construction-in-progress ......................                        9,401          9,918
                                                                         --------       --------
                                                                           28,470         51,167
     Less: Accumulated depreciation and amortization                       (3,525)       (12,024)
                                                                         --------       --------
     Property and equipment, net ...................                     $ 24,945       $ 39,143
                                                                         ========       ========
</TABLE>


                                      F-10

<PAGE>
Intangible Assets

     Intangible assets consists of the following:
<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                         -----------------------
                                           2000           2001
                                         --------       --------
<S>                                      <C>            <C>
     Gross intangible assets ........    $ 41,039       $ 35,667
     Less: Accumulated amortization..      (4,592)        (6,984)
                                         --------       --------
     Intangible assets, net .........    $ 36,447       $ 28,683
                                         ========       ========
</TABLE>

Other Assets

     Other assets consists of the following:
<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                                  --------------------
                                                    2000         2001
                                                  -------      -------
<S>                                               <C>          <C>
     Prepaid rent, net of current portion...      $15,189      $14,335
     Other .................................        1,815        3,809
                                                  -------      -------
                                                  $17,004      $18,144
                                                  =======      =======
</TABLE>

Accrued Liabilities

     Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                        --------------------
                                                                          2000         2001
                                                                        -------      -------
<S>                                                                     <C>          <C>
     Accrued employee compensation benefits and related costs ....      $ 5,929      $16,880
     Accrued outsourcing third-party arrangements ................        5,562        8,280
     Bank liability ..............................................        4,513           --
     Accrued severance and related costs .........................           --       11,484
     Other accrued liabilities ...................................        8,854        8,152
                                                                        -------      -------
                                                                        $24,858      $44,796
                                                                        =======      =======
</TABLE>


Business Optimization Costs

     Included in selling, general and administrative expense for the year ended
December 31, 2001, are $9,688,000 of severance costs (including non-cash option
acceleration charges of $3,040,000), certain wind-up costs totaling $6,621,000
(including severance costs of $5,412,000) associated with the elimination of two
secondary processing centers and a $2,165,000 non-cash charge relating to the
write-off of a research database that the Company has determined is no longer a
strategic component of its business. In connection with the severance costs and
the consolidation of the processing centers, the Company plans to terminate 353
employees.

4.   COMMITMENTS AND CONTINGENCIES

Lease Obligations

     The Company leases space in the building it uses as its international
headquarters under a noncancellable operating lease agreement, which expires in
April 2003, and leases space in the building it uses as its European
headquarters under a noncancellable operating lease agreement, which expires in
June 2010. The Company also leases space to house its processing and shared
service center staffs in North Carolina, Scotland and Texas under noncancellable
operating lease agreements expiring in November 2010, March 2010 and March 2006,
respectively. Under the lease agreement for the Scotland facility, the landlord
or the Company may terminate the agreement in March 2005 with 12 months prior
notice. The Company also leases certain amounts of limited office space for
various employees and office equipment under operating lease agreements expiring
through October 2003.



                                      F-11
<PAGE>


     Future minimum rental commitments under all operating leases as of December
31, 2001, are as follows:
<TABLE>
<CAPTION>
                                             COMMITMENTS
                                           --------------
                                           (in thousands)
<S>                                           <C>
     2002 ..............................      $ 5,362
     2003 ..............................        4,549
     2004 ..............................        4,039
     2005 ..............................        4,039
     2006 ..............................        3,329
     Thereafter ........................       11,340
                                              -------
     Future minimum lease payments .....      $32,658
                                              =======
</TABLE>

     Rental expense for the years ended December 31, 1999, 2000 and 2001, was
$272,000, $3,394,000 and $7,800,000, respectively.

Purchase Commitments

     The Company has entered into various purchase commitment agreements with
third parties for certain products and services in connection with the Company's
process management service offerings. Under these agreements, the Company is
required to make aggregate minimum payments of $5,172,000, $4,869,000,
$5,552,000, $6,594,000, $8,125,000 and $7,500,000 upon receipt of the products
and services for the years ended December 31, 2002, 2003, 2004, 2005, 2006 and
2007, respectively. Certain of these agreements provide the Company with the
ability to cancel the respective agreement for convenience upon the payment of a
fee.

Customer Contracts

     The Company has entered into several contracts for the provision of the
Company's process management service offerings. Under these agreements, the
Company is purchasing various assets and making certain payments aggregating
$15,600,000 anticipated to occur during 2002.

Employment Agreements

     The Company entered into employment agreements with key management
personnel. These agreements provide for a defined level of compensation and
additional compensation in the form of bonuses based on performance. The
agreements also provide for severance benefits in the event of termination
without cause or in connection with a change in control, as defined.

Bonus Plan

     During 1999, the Company adopted an annual incentive program (Incentive
Plan) for all personnel. The Incentive Plan provides bonuses based upon the
achievement of various targets, both financial and non-financial, as well as the
participants' contributions to the Company. The Company expensed $997,000,
$1,997,000 and $11,127,000 in connection with the Incentive Plan during the
years ended December 31, 1999, 2000 and 2001, respectively, approximately
$2,477,000 and $11,388,000 of which was included in accrued liabilities as of
December 31, 2000 and 2001, respectively.

5. NOTE PAYABLE

     In connection with the Company's purchase of Gunn's assets, the Company
issued a note payable in the amount of $10,000,000. The note was due in two
equal installments of $5,000,000 each. The November 2000 and November 2001
payments were made as scheduled, resulting in no remaining balance as of
December 31, 2001.

6. STOCKHOLDERS' EQUITY

Preferred Stock

     The Company was originally authorized to issue 50,000 shares of Preferred
Stock at $0.01 par value per share. On November 25, 1998, the Company filed a
Certificate of the Powers, Designations, Preferences and Rights of the series A
convertible Preferred Stock, par value $0.01 per share, designating 25,000
shares of the Company's Preferred Stock as series A convertible Preferred Stock.



                                      F-12
<PAGE>

On April 27, 1999, December 20, 1999, and February 9, 2000, the Company amended
and restated its certificate of incorporation to authorize the issuance of
5,000,000, 15,000,000, and 15,000,000 shares of Preferred Stock, respectively,
at $0.0001 par value per share. At December 31, 1999, 25,000 shares were
designated as series A convertible Preferred Stock, 1,696,369 shares as series B
convertible Preferred Stock, and 5,500,000 shares as series C convertible
Preferred Stock. On February 9, 2000, the third amended and restated Certificate
of Incorporation designated 7,650,533 shares as series D convertible Preferred
Stock. Concurrent with the consummation of the Company's June 2000 initial
public offering, all of the outstanding shares of Preferred Stock were converted
into Common Stock.

Common Stock

     The Company was originally authorized to issue 300,000 shares of Common
Stock at $0.01 par value per share. On April 27, 1999, December 20, 1999, and
February 9, 2000, the Company amended and restated its certificate of
incorporation to authorize the issuance of 25,000,000, 40,000,000, and
500,000,000 shares of Common Stock, respectively, at $0.0001 par value per
share.

     Certain stockholders who purchased their shares prior to the initial public
offering have registration rights associated with their stock.

Stock Split

     On April 26, 1999, the Board of Directors declared a 180-for-1 stock split
on all Common Stock and Preferred Stock then outstanding. Further, on January
31, 2000, the Board of Directors declared a 5-for-1 split on all Common Stock
then outstanding. All common share and per share data have been retroactively
restated to give effect to these splits.

Capital Transactions

     On April 1, 1999, the Company issued 8,856,000 shares of Common Stock, par
value of $0.0001 per share, to a key employee for total consideration of
$39,000. The Company estimated the fair value as of November 1998, when his
employment and the stock purchase was negotiated, based on recent cash sales to
third parties, adjusting the valuation for differences in rights associated with
each class of stock. Of the 8,856,000 shares, 922,500 shares were immediately
vested with the balance vesting in 43 equal monthly installments. If the
holder's employment terminates for cause or voluntarily, no further shares vest.
If the holder's employment terminates for any reason other than cause, including
death or disability, 50 percent of all unvested shares will vest, except that
all unvested shares will vest upon termination of the holder's employment by the
Company without cause or by the holder with good reason in connection with a
change in control, as defined. Following termination of employment, the Company
has the right to repurchase any or all unvested shares at their original
purchase price. Subsequent to the lapse of the Company's repurchase right,
certain of the Company's founding investors have a right to purchase the
remaining unvested shares.

     On April 27, 1999, the Company issued 1,696,369 shares of series B
convertible Preferred Stock in a private placement with institutional investors
for total consideration of approximately $9,194,000. Each share of series B
convertible Preferred Stock was convertible into five shares of Common Stock.
The Company reserved 8,481,845 shares of Common Stock for the conversion.

     On June 6, 1999, the Company issued 306,750 shares of Common Stock to a
consultant in connection with services rendered valued at approximately $100,000
and for a subscription receivable of $100,000. The subscription receivable was
paid during the first quarter of 2000.

     On June 6, 1999, the Company became obligated to issue warrants exercisable
for 691,880 and 182,390 shares of Common Stock at an exercise price of
approximately $1.08 and $2.06 per share, respectively, as consideration for
consulting services performed. In connection therewith, the Company recorded
expenses of $750,000 and $375,000, respectively, which was deemed to be the fair
market value of the services performed. The warrants included a provision for a
cashless exercise whereby shares to be issued upon exercise of the warrants
could be used to pay the exercise price using the fair market value of a share
of Common Stock on the date of exercise. On November 2, 2000, the warrants
exercisable for 691,880 and 182,390 shares of Common Stock were exercised in
full using the cashless exercise feature resulting in the net issuance of
643,617 and 158,149 shares of Common Stock, respectively.

     On July 29, 1999, and on October 12, 1999, the Company issued 70,320 and
46,875 shares of Common Stock, respectively, to a director for the exercise of
non-statutory stock options for total consideration of $46,000 and $30,000,
respectively. The shares are subject to repurchase under the terms of the 1999
Stock Option/Stock Issuance Plan.


                                      F-13

<PAGE>
     On September 22, 1999, the Company became obligated to issue warrants
exercisable for 47,770 and 46,155 shares of Common Stock at an exercise price of
approximately $1.57 and $0.65 per share, respectively, as consideration for
consulting services performed. In connection therewith, the Company recorded
expenses of $75,000 and $30,000, respectively, which was deemed to be the fair
market value of the services performed. The warrant exercisable for 46,155
shares of Common Stock was exercised in full during 2000 generating net proceeds
of $30,000. The warrant exercisable for 47,770 shares of Common Stock was
exercised in full during 2001 generating net proceeds of $75,000.

     On October 22, 1999, the Company issued 1,478,600 shares of series C
convertible Preferred Stock in a private placement with institutional investors
for total consideration of approximately $15,200,000. Each share of series C
convertible Preferred Stock was convertible into five shares of Common Stock.
The Company reserved 7,393,000 shares of Common Stock for the conversion.

     On November 17, 1999 the Company issued 58,364 shares of series C
convertible Preferred Stock in a private placement with institutional investors
for total consideration of approximately $600,000. Each share of series C
convertible Preferred Stock was convertible into five shares of Common Stock.
The Company reserved 291,820 shares of Common Stock for the conversion.

     On December 7, 1999, the Company issued a Common Stock warrant and a series
C Preferred Stock warrant to BP International Limited. The Common Stock warrant
had a five-year term and was exercisable for 3,339,220 shares of Common Stock at
an exercise price of $1.57 per share. The series C Preferred Stock warrant had a
one-year term and was exercisable for 667,844 shares of series C Preferred
Stock, which were convertible into 3,339,220 shares of Common Stock, at an
initial exercise price of $10.28 which increased at an annual rate of 12 percent
compounded daily over the term of the warrant. The value of these warrants is
approximately $3,317,000 and was expensed. The value of these warrants was
determined using the Black-Scholes options pricing model with the following
assumptions: risk free interest rate of 5.82%; expected life of 5 years;
weighted average volatility of 77.70% and weighted average dividend yield of
0.00%. On April 28, 2000, BP International Limited exercised the warrants to
acquire 3,339,220 shares of Common Stock and 667,844 shares of series C
Preferred Stock for net consideration of $5,243,000 and $7,192,000,
respectively.

     On December 15, 1999, the Company issued 117,195 shares of Common Stock to
a director for the exercise of non-statutory stock options for total
consideration of $76,000. The shares are subject to repurchase under the terms
of the 1999 Stock Option/Stock Issuance Plan.

    On December 21, 1999, the Company issued 28,160 shares of Common Stock to an
officer for the exercise of non-statutory stock options for total consideration
of $44,000. The shares are subject to repurchase under the terms of the 1999
Stock Option/Stock Issuance Plan.

     On December 22, 1999, the Company issued 2,932,879 shares of series C
convertible Preferred Stock in a private placement with institutional investors
for total consideration of approximately $30,150,000. Each share of series C
convertible Preferred Stock was convertible into five shares of Common Stock.
The Company reserved 14,664,395 shares of Common Stock for the conversion.

     On February 7, 2000, BP International Limited, subject to the terms of a
stockholders agreement which contains certain preemptive and anti-dilution
provisions, exercised its right to purchase 385,805 shares of series C Preferred
Stock for total consideration of $3,966,000.

     On February 10, 2000, the Company issued 6,885,480 shares of series D
convertible Preferred Stock in a private placement with institutional investors
for total consideration of approximately $59,970,000. Each share of series D
convertible Preferred Stock was convertible into one share of Common Stock.

     On June 2, 2000, the Company completed its initial public offering of its
Common Stock issuing 6,000,000 shares. On July 6, 2000, Exult issued an
additional 300,000 shares of Common Stock in connection with the underwriters'
exercise of their over-allotment option. The Company received net consideration
after the underwriting discount and offering costs of $56,669,000 for the
issuance of the 6,300,000 shares at a gross offering price of $10.00 per share.
Concurrent with the consummation of the initial public offering, all of the
outstanding shares of the Company's Preferred Stock were converted into
65,484,786 shares of Common Stock.

     On October 12, 2000, Exult and Bank of America signed a non-binding
Memorandum of Understanding providing the framework for a broad business
relationship, including the provision of business process management services to
Bank of America by Exult. The business relationship and process management
services transaction were subject to ongoing negotiations and the Memorandum of
Understanding established a 60-day time period to reach a definitive agreement.
Upon executing the Memorandum of Understanding, Bank of America acquired
5,000,000 investment units, each unit consisting of one share of Exult Common
Stock and a warrant to buy one additional share of Exult Common Stock. Each
warrant is exercisable for three years at $11.00 per share. The purchase price
for



                                      F-14

<PAGE>

the 5,000,000 units was $55,000,000, of which $11,000,000 was paid in cash and
the remainder in prepaid rent and intangible assets. In connection with the
issuance of the warrants, the Company incurred a charge of $29,900,000 during
the fourth quarter of 2000. In November 2001, warrants exercisable for 2,500,000
shares of Common Stock were exercised using the cashless exercise feature
resulting in the net issuance of 766,078 shares of Common Stock.

     In June 2001, one of the Company's third-party vendors purchased 1,538,461
shares of the Company's Common Stock for $20,000,000 in cash. In certain
circumstances, the third-party vendor may be required by the Company to purchase
for cash up to an additional $30,000,000 of the Company's Common Stock in
installments over the next four years. The per share purchase price for future
installments, if any, is derived from a formula designed to approximate the fair
market value of a share of Common Stock for a 30-day period ending each date the
third-party vendor is notified by the Company the Company will require a
purchase of its Common Stock by the vendor.

     In August 2001, the Company completed a public offering of its Common Stock
issuing 8,000,000 shares. The Company received net consideration after the
underwriting discount and offering costs of $100,318,000 for the issuance of the
shares at a gross offering price of $13.34 per share.

     In September 2001, another of the Company's third-party vendors purchased
504,200 shares of the Company's Common Stock for $6,000,000 in cash.

Common Stock and Stock Option Deferred Compensation

     The Company recorded aggregate deferred compensation for Common Stock and
stock options issued of approximately $3,613,000, $792,000 and $0 for the years
ended December 31, 1999, 2000 and 2001, respectively. The amounts recorded
represent the difference between the grant price and the deemed fair value of
the Company's Common Stock at the date of grant. Deferred Common Stock and stock
option compensation is amortized to expense using the straight-line method over
the 48-month vesting period.

Employee Stock Purchase Plan

     In May 2000, the Company adopted the 2000 Employee Stock Purchase Plan
(2000 Stock Purchase Plan). Under the 2000 Stock Purchase Plan, employees may
elect to participate by contributing to the plan a portion, not in excess of 10
percent, of their after-tax pay for each pay period during the quarter. The
purchase price per share of Exult Common Stock will be the lesser of the fair
market value of a share of Exult Common Stock on the first day of the quarter or
the fair market value of a share of Exult Common Stock on the last day of the
quarter, minus a 15 percent discount. The total number of shares available for
purchase under the 2000 Stock Purchase Plan may not exceed 2,000,000 shares. As
of December 31, 2001, 159,544 shares have been issued under the 2000 Stock
Purchase Plan generating net cash proceeds of $1,450,000.

7. STOCK OPTION PLANS

1999 Stock Option/Stock Issuance Plan

     In May 1999, the Company adopted the 1999 Stock Option/Stock Issuance Plan
(1999 Plan). The 1999 Plan was comprised of two separate equity programs: (i)
the Discretionary Option Grant Program, under which eligible persons could, at
the discretion of the Plan administrator, be granted options to purchase shares
of Common Stock, and (ii) the Stock Issuance Program under which eligible
persons could, at the discretion of the Plan administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered to the Company. Upon the expiration,
termination for any reason, or cancellation of unexercised stock options, the
shares of Common Stock subject thereto will again be available for issuance
under the terms of the 2000 Equity Incentive Plan. Upon any change in the
outstanding Common Stock without the Company's receipt of consideration,
appropriate adjustments shall be made to each outstanding option.

     Eligible participants in the Plan were employees, non-employee members of
the board of directors of the Company, non-employee members of the board of
directors of any parent or subsidiary, and consultants and other advisors who
provide services to the Company, or any parent or subsidiary. The Plan is
administered by the compensation committee of the Company's board of directors.

     The options were issued as incentive stock options (as defined by the
Internal Revenue Code of 1986) or as nonqualified options. Options under the
Plan were granted at prices not less than 85 percent of the fair market value at
the date of option grant and could


                                      F-15

<PAGE>
become exercisable in installments ranging up to 10 years from the date of
grant. If the optionee is a 10 percent stockholder, the exercise price could not
be less than 110 percent of the fair market value at the date of option grant.
As of December 31, 1999, the non-qualified stock options and incentive stock
options are immediately exercisable by the optionee. Upon exercise, and subject
to Internal Revenue Service limitations for incentive stock options, the option
shares are initially unvested and subject to repurchase by the Company upon
termination of employment or services, at the option exercise price per share.
The optionee shall acquire a vested interest in, and the Company's repurchase
right shall lapse with respect to, 25 percent of the optionee's shares upon
completion of one year of service from the date of grant, and the remainder vest
either on an annual basis or on a monthly basis over a 36-month period measured
from the first anniversary of the grant date. At December 31, 2001, there were
117,176 shares subject to repurchase.

1999 Special Executive Stock Option Plan

     On November 19, 1999, the Company adopted the Special Executive Stock
Option Plan (Executive Plan). Participation in the Executive Plan was limited to
officers and other highly compensated employees. The Executive Plan provided
that the exercise price for all options must be at least 85 percent of the fair
market of the option shares at the time of the option grant. Furthermore, no
option may have a term in excess of ten years, and each option will be subject
to early termination following the optionee's cessation of services with the
Company. The Executive Plan also provides that the exercise price for the shares
of Common Stock subject to option grants may be paid in cash or in shares of
Common Stock valued at fair market value on the exercise date. Options vest over
a period determined by the Company's board of directors. Since December 1999, no
options have been granted under this plan.

2000 Equity Incentive Plan

     In May 2000, the Company adopted the 2000 Equity Incentive Plan (2000
Plan). The 2000 Plan is the successor program to the 1999 Plan and the Executive
Plan and terminates in May 2010. The 2000 Plan provides various equity incentive
programs, including discretionary option grants for employees and consultants
and automatic option grants for non-employee directors. The initial number of
shares available for grant under the 2000 Plan is 20,000,000 shares, which
includes shares subject to outstanding awards under the 1999 Plan and the
Executive Plan as of the adoption date of the 2000 Plan. The share reserve under
the 2000 Plan automatically increases on the first trading day in January of
each year, beginning with calendar year 2001, by an amount equal to 5 percent of
the total number of shares of Exult Common Stock outstanding on the last trading
day in December of the immediately prior year, but in no event will any such
annual increase exceed 6,000,000 shares. In accordance with this provision, the
share reserve increased by 4,548,000 and 5,209,757 in January 2001 and 2002,
respectively. Shares subject to awards that expire or are otherwise cancelled or
terminated are again available for future grant. At December 31, 2001, 1,698,266
shares are available for future grant under the 2000 Plan.

     The 2000 Plan is administered by the Company's board of directors (the
"Plan Administrator"). The Plan Administrator generally determines which
eligible individuals receive option grants or other awards, the time or times
when the awards are made, the number of shares subject to each award, the
exercise price or other amount payable in connection with an award, the status
of any granted option as either an incentive stock option or a non-statutory
stock option under the federal tax laws, the vesting schedule to be in effect
for each award, and the maximum term for which any award is to remain
outstanding. The exercise price for any options and the issue price for shares
granted pursuant to the 2000 Plan may be paid in cash, vested shares in certain
circumstances, and a net-issuance basis. In addition, no participant in the 2000
Plan may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances for more than 1,000,000 shares of Common Stock
per calendar year.

     In certain circumstances involving an acquisition or merger of the Company,
a sale of substantially all of the Company's assets, a change in more than 30
percent of the ownership of the Company, or a change in control of the Company's
board of directors, all vesting of awards under the 1999 Plan, the Executive
Plan and the 2000 Plan may be accelerated or extended.

     The following is a summary of transactions relating to the 1999 Plan, the
Executive Plan and the 2000 Plan:

<TABLE>
<CAPTION>
                                                                        WEIGHTED AVERAGE
                                                            SHARES       EXERCISE PRICE
                                                          ----------    ----------------
<S>                                                       <C>               <C>
     Options outstanding at January 1, 1999 .......               --        $    --
       Granted ....................................       10,407,910           0.92
       Exercised ..................................         (262,550)          0.74
       Canceled ...................................               --             --
                                                          ----------
     Options outstanding at December 31, 1999 .....       10,145,360           0.93
       Granted ....................................        7,474,989          10.88
       Exercised ..................................         (513,867)          0.69
       Canceled ...................................         (262,216)          5.01
                                                          ----------
</TABLE>



                                      F-16


<PAGE>

<TABLE>
<S>                                                       <C>                  <C>
     Options outstanding at December 31, 2000 .....       16,844,266           5.29
       Granted ....................................        7,662,257          12.27
       Exercised ..................................       (2,446,343)          2.52
       Canceled ...................................       (2,382,599)         10.08
                                                          ----------
     Options outstanding at December 31, 2001 .....       19,677,581        $  7.58
                                                          ==========        =======
     Options exercisable at December 31, 2001 .....       11,039,061        $  4.27
                                                          ==========        =======
</TABLE>


Of the options exercisable as of December 31, 2001, 9,095,431 are vested.

     The following table shows pro forma net loss as if the fair value method
had been used to account for stock-based compensation expense:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                         -----------------------------------------
                                            1999            2000           2001
                                         ----------      ---------       ---------
                                                      (in thousands)
<S>                                      <C>             <C>             <C>
     Net loss, as reported ........      $ (15,212)      $ (94,820)      $ (74,651)
     Pro forma adjustment .........           (243)         (7,076)        (21,162)
                                         ---------       ---------       ---------
     Pro forma net loss ...........      $ (15,455)      $(101,896)      $ (95,813)
                                         =========       =========       =========
</TABLE>


     The following outlines the significant assumptions used to calculate the
fair value information presented utilizing the Black-Scholes approach with
ratable amortization as of December 31, 1999, 2000 and 2001:

<TABLE>
<S>                                      <C>
     Risk-free interest rate .......     5.63% to 6.20%
     Expected life .................         4.00
     Expected volatility ...........        77.7%
     Expected dividends ............          --
</TABLE>


8.   INCOME TAXES

     The Company did not record a tax provision at December 31, 1999, 2000 and
2001, as it had incurred only operating losses as of these dates.

     The components of the Company's net deferred income tax assets are as
follows:

<TABLE>
<CAPTION>
                                              DECEMBER 31,   DECEMBER 31,
                                                 2000            2001
                                              ------------   ------------
                                                    (in thousands)
<S>                                             <C>            <C>
     Net operating loss carryforwards ....      $ 28,785       $ 52,480
     Deferred tax assets .................         2,028          6,948
                                                --------       --------
                                                  30,813         59,428
     Less: Valuation allowance ...........       (30,813)       (59,428)
                                                --------       --------
     Net deferred tax assets .............      $     --       $     --
                                                ========       ========
</TABLE>


     A full valuation allowance is provided because of the uncertainty of
realizing the deferred tax assets.

     At December 31, 2001, the Company had federal, state and foreign net
operating loss carryforwards of approximately $100.0 million, $101.8 million and
$27.9 million, respectively. The federal and state net operating loss
carryforwards will begin expiring in the years 2020 and 2008, respectively. The
foreign net operating loss may be carried forward indefinitely. The realization
of future tax benefits from utilization of the net operating loss carryforwards
may be subject to certain limitations as a result of ownership changes that have
occurred and may occur in the future.


                                      F-17


<PAGE>

9. LOSS PER SHARE

     The following is the calculation for net loss per share (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                          --------------------------------------
                                                            1999           2000           2001
                                                          --------       --------       --------
<S>                                                       <C>            <C>            <C>
     Basic:
       Net loss ....................................      $(15,212)      $(94,820)      $(74,651)
       Weighted average common shares ..............         6,906         54,491         96,622
                                                          --------       --------       --------
       Net loss per common share ...................      $  (2.20)      $  (1.74)      $  (0.77)
                                                          ========       ========       ========
     Diluted:
       Net loss ....................................      $(15,212)      $(94,820)      $(74,651)
                                                          --------       --------       --------
       Weighted average common shares ..............         6,906         54,491         96,622
       Stock options adjustment ....................            --             --             --
       Convertible preferred stock .................            --             --             --
                                                          --------       --------       --------
       Average common shares outstanding ...........         6,906         54,491         96,622
                                                          --------       --------       --------
       Net loss per common share ...................      $  (2.20)      $  (1.74)      $  (0.77)
                                                          ========       ========       ========
</TABLE>


     At December 31, 1999, 2000 and 2001, the impact of any outstanding shares
of Preferred Stock convertible into Common Stock, warrants to purchase Common
Stock or Preferred Stock convertible into Common Stock, and stock options to
purchase Common Stock was excluded from the respective computations of diluted
net loss per common share as the effect is antidilutive.

     Concurrent with the consummation of the June 2000 initial public offering
of the Company's Common Stock, all outstanding shares of series A, series B,
series C, and series D Preferred Stock were automatically converted into Common
Stock at the rate of 900 shares of Common Stock for each share of series A
Preferred Stock, five shares of Common Stock for each share of series B and
series C Preferred Stock, and one share of Common Stock for each share of series
D Preferred Stock.

10.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table sets forth selected quarterly financial data for the
twelve quarters ended December 31, 2001 (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                                                 QUARTER ENDED --
                                                       -------------------------------------------------------------------
                                                       MARCH 31, 1999  JUNE 30, 1999 SEPTEMBER 30, 1999  DECEMBER 31, 1999
                                                       --------------  ------------- ------------------  -----------------
<S>                                                        <C>           <C>              <C>                 <C>
     Revenue ........................................      $    --       $   213          $ 2,031             $ 2,613
     Gross profit ...................................           --            --               --                 359
     Loss from operations ...........................         (516)       (2,670)          (3,745)             (8,544)
     Net loss .......................................         (510)       (2,609)          (3,678)             (8,415)
     Net loss per share, basic and diluted ..........      $(56.66)      $ (0.29)         $ (0.40)            $ (0.90)
                                                           =======       =======          =======             =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                 QUARTER ENDED --
                                                        --------------------------------------------------------------------
                                                        MARCH 31, 2000  JUNE 30, 2000  SEPTEMBER 30, 2000  DECEMBER 31, 2000
                                                        --------------  -------------  ------------------  -----------------
<S>                                                       <C>            <C>               <C>                  <C>
     Revenue .......................................      $  5,577       $  8,172          $ 20,878             $ 32,034
     Gross profit ..................................          (173)        (4,221)           (9,241)             (12,899)
     Loss from operations ..........................       (11,694)       (15,254)          (19,115)             (54,063)
     Net loss ......................................       (10,902)       (13,802)          (17,640)             (52,476)
     Net loss per share, basic and diluted .........      $  (1.16)      $  (0.40)         $  (0.21)            $  (0.60)
                                                          ========       ========          ========             ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                 QUARTER ENDED --
                                                        --------------------------------------------------------------------
                                                        MARCH 31, 2001  JUNE 30, 2001  SEPTEMBER 30, 2001  DECEMBER 31, 2001
                                                        --------------  -------------  ------------------ ------------------
<S>                                                       <C>             <C>               <C>               <C>
     Revenue .......................................      $ 43,464        $ 64,318          $ 75,332          $ 89,420
     Gross profit ..................................       (11,391)         (8,443)           (2,352)            5,300
     Loss from operations ..........................       (23,384)        (25,468)          (12,926)          (16,667)
     Net loss ......................................       (22,307)        (24,801)          (11,871)          (15,672)
     Net loss per share, basic and diluted .........      $  (0.24)       $  (0.27)         $  (0.12)         $  (0.15)
                                                          ========        ========          ========          ========
</TABLE>



                                      F-18

<PAGE>

     For the quarter ended December 31, 2000, excluding the $29.9 million
warrant charge, loss from operations, net loss and net loss per share would have
been $24,163,000, $22,576,000, and $0.26, respectively.

     For the quarter ended June 30, 2001, excluding the business optimization
costs of $7.3 million, loss from operations, net loss and net loss per share
would have been $18,134,000, $17,467,000, and $0.19, respectively.

     For the quarter ended December 31, 2001, excluding the business
optimization costs of $11.2 million, loss from operations, net loss and net loss
per share would have been $5,527,000, $4,532,000, and $0.04, respectively.


                                      F-19
<PAGE>
EXHIBIT INDEX

2.1(1)        Asset Purchase Agreement by and among Exult, Inc., Gunn Partners,
              Inc., the shareholders of Gunn Partners, Inc. and Michael Gibson
              dated as of November 22, 1999

2.2(1)        Asset Purchase Agreement dated as of December 20, 1999 among
              Pactiv Corporation, Pactiv Business Services, Inc. and Exult, Inc.

3.1(1)        Fourth Amended and Restated Certificate of Incorporation of Exult,
              Inc.

3.2(1)        Amended and Restated Bylaws of Exult, Inc.

4.1(1)        See Exhibits 3.1 and 3.2 for provisions of the Exult,
              Inc.'s Certificate of Incorporation and Bylaws defining
              the rights of holders of Exult, Inc.'s Common Stock


4.2(1)        Specimen Common Stock certificate

10.1.1(1)*    Registrant's 1999 Stock Option/Stock Issuance Plan

10.1.2(1)*    Form of Notice of Grant of Stock Option

10.1.3(1)*    Form of Stock Option Agreement

10.1.4(1)*    Form of Addendum to Stock Option Agreement

10.1.5(1)*    Form of Stock Purchase Agreement

10.1.6(1)*    Form of Addendum to Stock Purchase Agreement

10.1.7(1)*    Form of Stock Issuance Agreement

10.1.8(1)*    Form of Addendum to Stock Issuance Agreement


<PAGE>

10.2.1(1)*    Registrant's 1999 Special Executive Stock Option/Stock Issuance
              Plan

10.2.2(1)*    Form of Notice of Grant of Stock Option

10.2.3(1)*    Form of Stock Option Agreement

10.2.4(1)*    Form of Addendum to Stock Option Agreement

10.2.5(1)*    Form of Stock Purchase Agreement

10.2.6(1)*    Form of Addendum to Stock Purchase Agreement

10.2.7(1)*    Form of Stock Issuance Agreement

10.2.8(1)*    Form of Addendum to Stock Issuance Agreement

10.3(1)*      Form of Directors' and Officers' Indemnification Agreement

10.4(1)*      Founder Stock Purchase Agreement by and among BPO-US, Inc., James
              Madden and General Atlantic Partners, LLC dated April 1, 1999

10.5.1(1)*    Amended and Restated Registration Rights Agreement among Exult,
              Inc. and the Stockholders identified therein dated December 23,
              1999

10.5.2(1)*    Amendment No. 1 to Amended and Restated Registration Rights
              Agreement among Exult and the Stockholders identified therein
              dated February 10, 2000

10.6.1(1)     Office Space Lease between The Irvine Company and BPO-US, Inc.
              dated June 28, 1999

10.6.2(1)     First Amendment to Office Space Lease between The Irvine Company
              and Exult, Inc. dated February 29, 2000

10.7.1(1)     Lease Agreement Venture Technology Center VI Building, The
              Woodlands, Montgomery County, Texas between The Woodlands
              Corporation and Tenneco Business Services, Inc. dated August 15,
              1995

10.7.2(1)     Assignment and Assumption of Lease between Pactiv Business
              Services, Inc. (formerly known as Tenneco Business services, Inc.)
              and Exult, Inc. dated January 1, 2000

10.8(1)+      Framework Agreement dated December 7, 1999 by and between the
              Company and BP Amoco, p.l.c.

10.9(1)+      US Country Agreement dated December 7, 1999 by and between the
              Company and BP America, Inc.

10.10(1)+     UK Country Agreement dated December 7, 1999 by and between Exult
              Limited and BP International Limited

10.16*        Registrant's 2000 Employee Stock Purchase Plan, amended and
              restated as of January 1, 2002

10.17(1)      Lease among Scottish Mutual Assurance p.l.c. and Exult Limited and
              Exult, Inc.

10.18(1)*     Registrant's 2000 Equity Incentive Plan

10.19(1)*     Loan Agreement dated May 30, 2000 by and between Exult, Inc.
              and Kevin Campbell

10.20(2)+     Master Services Agreement by and between Exult, Inc. and Unisys
              Corporation dated August 28, 2000

10.21(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for James C. Madden, V

10.22(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for Stephen M. Unterberger

10.23(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for Kevin M. Campbell

10.24*        Offer Letter for Richard Jones

10.25(3)*     Employment Agreement, Severance Agreement, and Stock Option
              Addendum for Robert W. Gunn

10.26(3)      Office Lease between Temple Property Holdings Limited and Exult
              Limited dated June 13, 2000

10.27(3)      Unit Purchase Agreement between Exult, Inc. and Bank of America
              Corporation dated October 12, 2000

10.28(3)      Common Stock Warrant Issued to Bank of America October 12, 2000

10.29(3)+     Master Services Agreement between Exult, Inc. and Bank of America
              Corporation dated November 21, 2000

10.30(3)+     Office Space Lease between Bank of America, National Association
              and Exult, Inc. dated November 21, 2000
<PAGE>

10.31(4)+     Common Stock Purchase Agreement by and between Exult, Inc. and
              Automatic Data Processing, Inc. dated as of June 11, 2001

10.32(5)+     Addendum 1 to Master Services Agreement between Exult, Inc. and
              Bank of America Corporation dated as of March 15, 2001 +

10.33(5)+     Addendum 2 to Master Services Agreement between Exult, Inc. and
              Bank of America Corporation dated as of September 10, 2001 +

10.34++       Human Resources Services Agreement between Exult, Inc. and
              International Paper Company dated as of October 18, 2001 ++

10.35++       Systems Services Agreement between Exult, Inc. and International
              Paper Company dated as of October 18, 2001 ++

10.36++       Technical Services Agreement between Exult, Inc. and International
              Paper Company dated as of October 18, 2001 ++

10.37++       Sublease between Exult, Inc. and International Paper Company dated
              as of January 1, 2002 ++

10.38*        Loan Agreement dated September 1, 2000 by and between Exult, Inc.
              and Richard Jones

10.39*        Bonus Letter dated September 1, 2000 by and between Exult, Inc.
              and Richard Jones

21.1(1)       Subsidiaries of Exult, Inc.

23.1          Consent of Independent Public Accountants

99.1          Report of Independent Public Accountants on Supplemental Schedule

99.2          Supplemental Schedule - Schedule II - Valuation and Qualifying
              Accounts

99.3          Letter to SEC Pursuant to Temporary Note 3T
-----------

(1)  Previously filed with the Registrant's Registration Statement on Form S-1,
     Registration Number 333-31754, and incorporated herein by reference.

(2)  Previously filed with the Registrant's quarterly report on Form 10-Q for
     the quarter ended September 30, 2000 and incorporated herein by reference.

(3)  Previously filed with the Registrant's annual report on Form 10-K for the
     year ended December 31, 2000 and incorporated herein by reference.

(4)  Previously filed with the Registrant's quarterly report on Form 10-Q for
     the quarter ended June 30, 2001 and incorporated herein by reference.

(5)  Previously filed with the Registrant's quarterly report on Form 10-Q for
     the quarter ended September 30, 2001 and incorporated herein by reference.

+    Confidential treatment has been granted with respect to certain portions of
     this agreement. Such portions have been omitted from this filing and have
     been filed separately with the Securities and Exchange Commission.

++   Confidential treatment is being sought with respect to certain portions of
     this agreement. Such portions have been omitted from this filing and have
     been filed separately with the Securities and Exchange Commission.

* This exhibit is a management contract or a compensatory plan or arrangement.