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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                   For the Fiscal Year Ended December 31, 2003
                        Commission file number: 001-31256

                                   CLARK, INC.
             (Exact name of Registrant as specified in its charter)

                DELAWARE                                         52-2103926
(State of incorporation or organization)           (I.R.S. Employer Identification No.)

    102 SOUTH WYNSTONE PARK DRIVE
      NORTH BARRINGTON, ILLINOIS                                   60010
(Address of principal executive offices)                         (Zip code)

                                 (847) 304-5800
                        (Registrant's telephone number)

           Securities Registered Pursuant to Section 12(b) of the Act:

         TITLE OF SECURITIES                    EXCHANGES ON WHICH REGISTERED
         -------------------                    -----------------------------
 COMMON STOCK, PAR VALUE $.01 PER SHARE            New York Stock Exchange

 JUNIOR PARTICIPATING PREFERRED STOCK,
      SERIES A, PURCHASE RIGHTS
      PAR VALUE, $.01 PER SHARE

           Securities Registered Pursuant to Section 12(g) of the Act:
                                     None

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         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.
Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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. [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
Yes [X] No [ ]

         The aggregate market value of common stock of the Registrant held by
non-affiliates of the Registrant as of June 30, 2003 was approximately $110.7
million.

         As of March 1, 2004, the Registrant had outstanding 18,539,203 shares
of common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

         The definitive proxy statement for the 2004 annual meeting is
incorporated into Part III of this Form 10-K by reference.


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                                TABLE OF CONTENTS
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                                                                                                             PAGE

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FORWARD-LOOKING STATEMENTS..............................................................................        2
PART I
  ITEM 1.          BUSINESS.............................................................................        3
  ITEM 2.          PROPERTIES...........................................................................       15
  ITEM 3.          LEGAL PROCEEDINGS....................................................................       16
  ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................       16

PART II
  ITEM 5.          MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................       17
  ITEM 6.          SELECTED FINANCIAL DATA..............................................................       18
  ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS       20
  ITEM 7A.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................       34
  ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................       34
  ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.       34
  ITEM 9A.         CONTROLS AND PROCEDURES..............................................................       35

PART III
  ITEM 10.         DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................       35
  ITEM 11.         EXECUTIVE COMPENSATION...............................................................       35
  ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................       36
  ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................       36
  ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES...............................................       36

PART IV
  ITEM 15.         EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.....................       36
SIGNATURES..............................................................................................       67

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                           FORWARD-LOOKING STATEMENTS

         This Form 10-K and the documents incorporated by reference in this Form
10-K may contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, and Section 21E of the Securities Exchange Act of
1934, as amended. Such statements are identified by words such as "anticipate,"
"believe," "estimate," "expect," "intend," "predict," "project," and similar
expressions. When we make forward-looking statements, we are basing them on our
management's beliefs and assumptions, using information currently available to
us. These forward-looking statements are subject to risks, uncertainties and
assumptions, including but not limited to, risks, uncertainties and assumptions
related to the following:

         o        changes in tax legislation;
         o        federal and state regulations;
         o        general economic conditions;
         o        competitive factors and pricing pressures;
         o        our dependence on key consultants and services of key
                  personnel;
         o        our dependence on persistency of existing business;
         o        our ability to achieve our earnings projections;
         o        risks associated with acquisitions;
         o        significant intangible assets;
         o        our dependence on a select group of insurance companies; and
         o        our dependence on information processing systems and risk of
                  errors or omissions.

         If one or more of these or other risks or uncertainties materialize, or
if our underlying assumptions prove to be incorrect, actual results may vary
materially from those anticipated. Any forward-looking statements you read in
this Form 10-K or the documents incorporated herein by reference reflect our
current views with respect to future events and are subject to these and other
risks, uncertainties and assumptions relating to our operations, results of
operations, growth strategy and liquidity. You should specifically consider the
factors identified in this Form 10-K, including under the caption "Risk
Factors," or in the documents incorporated by reference in this Form 10-K, which
could cause actual results to differ materially from those indicated by the
forward-looking statements. In light of the foregoing risks and uncertainties,
you should not unduly rely on such forward looking statements when deciding
whether to buy, sell or hold any of our securities. We disclaim any intent or
obligation to update or alter any of the forward-looking statements whether in
response to new information, unforeseen events, changed circumstances or
otherwise.


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                                     PART I

ITEM 1.  BUSINESS

Overview

         Founded in 1967, Clark, Inc. is a national firm dedicated to helping
companies keep their best people through integrated compensation, benefits, and
funding solutions. We design, market, and administer compensation and benefit
programs for companies supplementing and securing employee benefits and provide
executive compensation and related consulting services to U.S. corporations,
banks and healthcare organizations. We have approximately 3,950 clients that use
our customized programs to supplement and secure benefits for their executives,
key employees and other professionals and to offset the costs of employee
benefit liabilities our clients also rely on our consultants to structure their
compensation programs. We were one of the first organizations to offer
business-owned and bank-owned life insurance programs.

         On June 9, 2003, we, (formerly known as Clark/Bardes, Inc.) changed our
name to Clark, Inc. On May 7, 2003, our broker/dealer subsidiary (formerly knows
as Clark/Bardes Financials Services, Inc.) changed its name to Clark Securities,
Inc. ("CSI"). On April 24, 2003, our operating entity, (formerly known as
Clark/Bardes Consulting, Inc.) changed its name to Clark Consulting, Inc.

         We have experienced significant growth and transition over the last
several years. A majority of our revenues result from commissions paid by
insurance companies that underwrite the insurance policies used to finance our
clients' benefit programs. As a result of a series of acquisitions, we have
expanded our service offerings to become a value-added provider of a wide range
of employee compensation and benefit consulting services. Our sources of revenue
are: (1) commissions paid by insurance companies issuing the policies underlying
our benefit programs, (2) program design and administrative service fees paid by
our clients, (3) executive compensation, benefit, and consulting fees and (4)
legislative liaison and related advisory services.

         We are headquartered at 102 S. Wynstone Park Drive, North Barrington,
Illinois 60010 and maintain offices nationwide. Our Internet address is
www.clarkconsulting.com. We post, by means of a hyperlink to the SEC's website,
the following filings as soon as reasonably practicable after they are
electronically filed with or furnished to the SEC: our annual report on Form
10-K; our quarterly reports on Form 10-Q; our current reports on Form 8-K and
any amendments to those reports filed or furnished to the SEC. All such filings
are on our website and available free of charge. Information related to our
corporate governance can also be found on our website under "corporate
governance."

Our products and services

         We provide executive compensation and benefit consulting services as
well as evaluate, design, implement, and administer a diverse array of
compensation and benefit programs for executives, key employees, and other
professionals. Typically, in selling, designing, and implementing executive
compensation and benefit programs, we:

         o        evaluate a client's existing compensation and benefit programs
                  and the effectiveness of those programs in meeting that
                  client's organizational needs;

         o        design or improve the compensation and benefit programs;

         o        compare financing alternatives for the programs and present
                  the financial strengths of each to the client;

         o        arrange for the placement of the insurance coverage or other
                  instruments which will finance the underlying programs; and

         o        provide the enrollment, reporting, and ongoing administrative
                  services associated with the programs.

         Most of our benefit programs are financed by business-owned life
insurance and other financial products. Business-owned life insurance refers to
life insurance policies purchased and owned by a business on the lives of a
select group of employees. The business pays the premiums on, and is the owner
and beneficiary of, such policies. Business-owned life insurance programs are
used primarily to offset a client's cost of providing executive benefits and to
supplement and secure benefits for executives, key employees, and other
professionals. The cash flow characteristics of business-owned life insurance
policies are designed to closely match the long-term cash


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flow characteristics of a client's employee benefit liabilities. Additionally,
the cash value of the business-owned life insurance policies grow on a
tax-deferred basis and the policies' death benefits are received tax free,
providing an attractive return to the client.

         We maintain strategic relationships with insurance companies such as
AEGON, AXA/Equitable, General American, Great-West, Mass Mutual, Nationwide, New
York Life, ING, Travelers, and West Coast Life, in which both parties are
committed to developing and delivering creative products with high client value.
We work closely with clients to design customized products that meet the
specific organizational needs of the client and with insurance companies to
develop unique policy features and competitive pricing.

         Set forth below is a description of our principal benefit plan
solutions, consulting services, financing products, and administrative services.

BENEFIT PLAN SOLUTIONS

         Deferred Income Plans. Deferred income plans allow executives to defer
a portion of their current income on a tax-deferred basis. The deferred income
and interest in a properly designed and administered deferred income plan grows
on a tax-deferred basis until distributions are made to the executive, usually
at retirement. Corporations often purchase life insurance to create an asset in
order to offset the costs of the liability created by a deferred income plan.
Deferred income plans can be structured in a variety of ways, including:
traditional deferred income plans, which credit the deferred income amount with
a fixed rate of interest and use fixed yield life insurance products to offset
the costs of the company's liability, or variable deferred income plans, which
credit the deferred income amount with interest based on bond or equity indices
and use variable yield life insurance products to offset the costs of the
company's liability. In an effort to provide additional security for executives,
many corporations will create a trust to hold the related insurance policies.

         Supplemental Executive Retirement Plans. Supplemental executive
retirement plans are specifically designed to supplement the dollar limitation
on benefits paid from qualified pension plans. The maximum dollar amount of
compensation that can be used to determine the pension benefits payable to an
executive from a qualified plan is currently set at $200 thousand. Accordingly,
non-qualified plans such as supplemental executive retirement plans, which are
not subject to the same stringent rules, have increased in popularity. Many
supplemental executive retirement plans are funded with the same insurance
products and strategies used to fund deferred income plans.

         Supplemental Offset Plans. Supplemental offset plans are designed to
supplement an executive's retirement income by restoring benefits previously
limited by legislative changes. Supplemental offset plans are funded with
insurance policies using a technique commonly known as "split dollar." Ownership
rights to an individual policy are shared between the corporation and the
executive. The corporation and the executive share in the insurance policy's
increasing cash value and death benefit. The corporation pays the premiums and
recovers these expenditures from its share of the policy's proceeds. The
executive's interest in such policy is targeted to equal the present value of
the retirement benefits due at the time of such executive's retirement. In
September 2003, the Treasury Department finalized regulations changing the
manner in which split dollar life insurance arrangements will be taxed. The new
tax treatment is, in certain respects, less attractive than the historical tax
treatment of split dollar arrangements. Additionally, provisions under the
Sarbanes-Oxley Act of 2002 have created uncertainty as to whether certain split
dollar policies may be used with respect to certain executives. The final
split-dollar regulations and the Sarbanes-Oxley Act of 2002 have significantly
reduced the amount of revenue generated from new split dollar arrangements and
may further reduce revenue from existing split dollar arrangements in the near
term.

         Group Term Carve Out Plans. Currently, a corporation can provide its
employees with a group term life insurance policy death benefit of up to $50
thousand on a tax-free basis. The cost of providing a death benefit in excess of
$50 thousand is taxed to the employee as ordinary income. Group term carve out
plans allow companies to provide portable coverage in a customized program of
amounts greater than $50 thousand that are taxed at lower rates. The purpose of
group term carve out plans is to provide a greater amount of insurance and
post-retirement death benefit to the employee at a competitive overall cost.

         Disability Income Plan. Many companies provide group disability income
insurance for their employees. In many cases, these plans have limits that may
not be sufficient to provide reasonable income replacement for executives in the
event of a disability. Group disability insurance plans marketed by our
Executive Benefits Practice and Healthcare Group supplement the group plans
currently in place, and provide additional income for executives in the event of
a disability.

         ExecuFLEX Program. Our Healthcare Group provides a total compensation
planning approach to the not-for-profit healthcare market through its
"ExecuFLEX" program. The program includes a base level of benefits, such as
medical, dental, vision, long-term disability, long-term care, and group term
life insurance. In addition, participants are provided an allowance made up of
company contributions and voluntary personal deferrals. The flex allowance is
used to supplement base coverage and to add to the employees'


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retirement funding. The Execu-FLEX program is designed to provide maximum
flexibility to the participants at a minimal cost to the organization. The
success of ExecuFLEX has led us to offer the program to companies serviced by
our other operating groups as well as additional market segments within the
healthcare industry.

CONSULTING SERVICES

         With the acquisition of Pearl Meyer & Partners in 2000, we entered the
market for senior executive and board of director level executive compensation
consulting. At the time of the acquisition, Pearl Meyer & Partners was one of
the largest independent executive compensation consulting firms in the United
States, and the acquisition broadened the services we offer to our clients.

         In 2002, we formed our Human Capital Practice. The practice was formed
by combining our existing Rewards and Performance Group and ten former partners
and 74 support staff from Arthur Andersen LLP's ("Andersen") Human Capital
Practice. The Human Capital Practice provides compensation benefits and human
resources consulting services and products to major companies. As of October 1,
2003, we reorganized the executive compensation consulting practices. As part of
this reorganization, some of the operations and employees of Human Capital
Practice were transferred to Pearl Meyer & Partners. The remaining business of
Human Capital Practice consists of actuarial/retirement plan and investment
advisory services.

         With the acquisition of the Federal Policy Group ("FPG") in 2002, we
were able to expand our services to include a variety of legislative and
regulatory strategic services. FPG develops and implements strategies to pursue
legislative changes; anticipate and respond to proposed legislative initiatives;
help shape administrative regulations and rulings; and raise the visibility of
our clients through testimony before Congress and other avenues. Federal Policy
Group clients include Fortune 500 companies, trade associations and other
businesses.

         Our Healthcare Group and Banking Practice have developed compensation
consulting programs in base salary, incentives, deferred compensation, and other
compensation design plans.

FINANCING PRODUCTS

         Business-Owned Life Insurance. Business-owned life insurance is life
insurance purchased and owned by an employer on the lives of a group of its
employees. The insurance is used to help offset the cost of the employee benefit
obligations of the employer. The insurance is held as a general asset and is not
directly linked to the employee benefits. Business-owned life insurance is
marketed to mid-sized and large corporations and healthcare institutions.

         Bank-Owned Life Insurance. When utilized by banks, business-owned life
insurance (as discussed above) is referred to as bank-owned life insurance. We
market these programs to banks with assets in excess of $5 billion, as well as
to regional and community banks that generally have assets of less than $5
billion.

ADMINISTRATIVE SERVICES

         We believe that we are an industry leader in providing high quality and
customized administrative services to support the executive benefit and
insurance programs we market. As of December 31, 2003, we administered
approximately 396 thousand policies for approximately 3,000 clients. As of the
same date, the insurance policies underlying our employee benefit programs
represented a total of approximately $171 billion of inforce insurance coverage.

         The following table presents the number of clients, policies
administered, and inforce coverage as of December 31, 2003.

<TABLE>
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                                EXECUTIVE BENEFITS           BANKING          HEALTHCARE
                                     PRACTICE               PRACTICE            GROUP               TOTAL
                              -----------------------     --------------    ---------------    ----------------
<S>                                      <C>               <C>                  <C>               <C>
  CLIENTS                                        400              2,100                500               3,000
  POLICIES ADMINISTERED                       89,000            288,000             19,000             396,000
  INFORCE COVERAGE                           $45 billion       $121 billion         $5 billion        $171 billion

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         We also provide consulting services for an additional 950 clients.


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         We generate fee-based revenues from providing administrative services
to our clients. We approach administrative services with a strategy focused on
servicing our clients' unique requirements and needs through customized,
value-added services and intensive support in order to create brand and client
loyalty and lower sensitivity to price.

         We offer customized enrollment and administrative services for our
employee benefit programs. In an effort to provide a high level of personalized
services, each client is assigned an account team comprised of specialists who
are responsible for servicing the needs of that client. The administrative
services provided by each of our practices' account specialists include
coordinating and managing the enrollment process; distributing communication
materials; monitoring financial, tax and regulatory changes; providing
accounting reports and periodic benefit statements to participants; performing
annual reviews, and reporting the historical and projected cash flow and
earnings impact of the plans. Each practice's account specialists are supported
by actuarial, financial, and insurance experts.

         We build our client base by fostering long-term client relationships.
To this end, the training and focus of each account team centers on our goal of
delivering the highest quality program, implementation, and administrative
services in the industry. This benefits both the client, through top
professional support, and the consultant, who can focus more closely on the
consulting process. To further emphasize long-term client relationships, we
enter into administrative agreements with each client, in most cases for a term
of five to ten years.

         We believe our commitment to providing high quality client and
administrative services is one of the primary reasons that we have achieved the
success we have enjoyed to date. We believe that our continued focus on, and
investment in, the personnel and technology necessary to deliver high quality
service to our clients will continue to bolster our reputation as an industry
leader.

OUR BUSINESS UNITS

         We operate through six operating segments: (1) Executive Benefits
Practice, (2) Banking Practice, (3) Healthcare Group, (4) Human Capital
Practice, (5) Pearl Meyer & Partners, and (6) Federal Policy Group. Through
these six segments, we design, market, and administer compensation and benefit
programs for companies supplementing and securing employee benefits and provide
executive compensation and related consulting and legislative strategic services
to U.S. corporations, banks, and healthcare organizations. Our six operating
segments operate as independent and autonomous business units with a central
corporate staff responsible for finance, strategic planning, human resources,
and company-wide policies. Each segment has its own client base as well as its
own marketing, administration, and management.

         We have structured these segments to be independent because each has an
established reputation in their distinct markets and a specific expertise
required to serve these markets. Through these segments, we are able to tailor
compensation and benefit programs and consulting services to the unique needs of
our clients.

EXECUTIVE BENEFITS PRACTICE

         One of the leaders in its field, our Executive Benefits Practice
("EBP") focuses on the marketing, designing, implementation, administration, and
placement of financing of non-qualified benefit plans for companies of all
sizes, including Fortune 1000 companies and other companies which can benefit
from our products and services. This segment currently administers approximately
400 client cases, covering approximately 89,000 policies for executives, key
employees, and other professionals. The large corporate marketplace in which the
Executive Benefits Practice does business requires a significant degree of
customization. Growth in this group will focus on further penetrating the
corporate marketplace and providing additional executive compensation and
benefits services to corporations. EBP has struggled in recent years as a result
of a difficult United States economic and legislative environment, which most
directly affects this segment of our business.

BANKING PRACTICE

         Also, one of the leaders in its industry, the Banking Practice offers
compensation consulting, executive and director benefits programs, and
bank-owned life insurance to the bank market. The Banking Practice is a market
leader that provides programs to approximately 2,100 banks, including 30 of the
top 50 largest banks in the United States. In addition to compensation and
benefit programs, this group also performs incentive consulting and works with
banks in the design of ownership succession programs. Traditionally, the Banking
Practice has experienced a large spike in new business during the last two weeks
of December each year. The impact of a sustained low interest rate environment
in December of 2003 negatively impacted our product offerings and our


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ability to close new business. The uncertainty about the direction of future
interest rates will continue to impact this segment of our business in 2004.

HEALTHCARE GROUP

         The Healthcare Group employs a comprehensive benefits approach that
encompasses a variety of insurance products, ranging from traditional life
insurance policies to disability and long-term care coverage. The healthcare
industry's changing environment and complex structure offer many challenges for
the near future. The industry has experienced a great deal of contraction with
changes in our national healthcare regulations and compensation structure.

HUMAN CAPITAL PRACTICE

         The Human Capital Practice was formed in 2002 by combining our existing
Rewards and Performance Group with former partners and support staff from the
Human Capital Practice of Arthur Andersen LLP. The Human Capital Practice has
experienced revenue difficulties related to the start-up of a new consulting
practice and has not performed up to expectations. As of October 1, 2003, we
reorganized our executive compensation consulting practices. As part of this
reorganization, some of the operations and employees of Human Capital Practice
were transferred to Pearl Meyer & Partners. The remaining business of the Human
Capital Practice consists of actuarial/retirement plan and investment advisory
services.

PEARL MEYER & PARTNERS

         Our executive compensation consulting practice was created through the
acquisition, on June 21, 2000, of Pearl Meyer & Partners, Inc., a New York
City-based consulting firm specializing in executive compensation and retention
programs. The Pearl Meyer & Partners organization is focused predominantly on
executive compensation consulting for Fortune 1000 corporations. It is one of
the largest executive compensation consulting organizations in the United
States.

FEDERAL POLICY GROUP

         With the acquisition of the Federal Policy Group ("FPG") in 2002, we
were able to expand our services to include a variety of legislative and
regulatory strategic services. FPG develops and implements strategies to pursue
legislative changes; anticipate and respond to proposed legislative initiatives;
help shape administrative regulations and rulings; and raise the visibility of
our clients through testimony before Congress and other avenues. FPG's clients
include Fortune 500 companies, trade associations, and other businesses.

DISTRIBUTION

         Each of our segments markets its employee benefit programs and related
administrative and consulting services through an in-house sales organization as
well as through consultants in independently operated sales offices located
throughout the United States. As of December 31, 2003, we were represented by
170 employee and 36 independent consultants.

         Our independent consultants enter into exclusive agency agreements with
us to market programs and services on our behalf. Each agreement defines the
duties of the consultant to solicit and sell covered business in an exclusive
geographic territory, the commission splits between the consultant and us, and
includes a confidentiality agreement and operating standards. We pay a
substantial portion of the total sales revenue as commissions to the independent
consultant, usually from 50% to 65% of total revenue. All of our independent
consultants are responsible for their own operating expenses. Most of our
segments generate a significant portion of their sales revenue through
employee-consultants and we bear the administrative expense of the
employee-consultants in exchange for lower commission expense.

         Many of our products have a securities component and must be sold
through a licensed broker/dealer. Clark Securities, Inc. ("CSI") is used by our
consultants for distributing these securities-related products. CSI currently
distributes insurance, annuities, and mutual funds for our products. CSI
currently has 246 registered representatives and is licensed to operate in all
50 states and the District of Columbia. By having our own broker/dealer, we are
able to control costs and sensitive customer information more effectively than
if we used an outside broker/dealer.


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         Clark Reinsurance Company, Ltd. ("CRCL"), a wholly-owned subsidiary of
Clark, Inc., was incorporated in the Cayman Islands with Limited Liability
effective December 13, 2001. CRCL was formed in order to increase and diversify
our earnings stream by participating in the underwriting profits of the
insurance business produced by its various operating segments. The insurance
license for CRCL has been issued and was capitalized effective as of February 1,
2002. The business activity in this subsidiary during 2003 consisted of
operating expenses. No revenue was generated by this entity during 2003 or 2002.

         Our consultants are supported by a design and analysis department in
each segment. The primary responsibility of the design and analysis department
is to design customized compensation and benefit programs that will effectively
reduce the costs of a client's employee benefit and compensation liabilities.
The design analyst works with the consultant to identify the needs of a
prospective client and investigates the availability and pricing of products
that are compatible with that client's needs. Finally, the analyst develops the
financial projections necessary to evaluate the benefit costs and cost
recoveries for the prospective client, together with an analysis of financing
alternatives to assist the client in making a decision.

         We recognize the importance of attracting and retaining qualified,
productive sales professionals. We actively recruit and develop new sales
professionals in order to add to our distribution capacity. Further, our
acquisition strategy focuses on retaining the productive sales professionals of
the entity being acquired.

         We are dependent on a few select consultants for a portion of our
revenue. Our top three consultants collectively accounted for approximately 7.4%
of our total revenue in 2003, 6.8% of our total revenue in 2002, and 6.8% of our
total revenue in 2001. We expect this concentration to decrease as we expand our
consultant base and product offerings.

MARKETING SUPPORT

         Investments have been made to establish highly qualified marketing
departments in each practice. Each marketing department's primary focus is to
support the sales efforts of their operation through integrated marketing
communications strategies. The marketing departments develop and track leads for
consultants through various channels including advertising, public relations,
trade shows, and direct mail. Additionally, the marketing function provides
collateral materials, business communication, brand support, and survey research
and distribution. We distribute external newsletters and other program update
pieces to approximately 15,000 clients and prospects throughout the year and
sponsor conferences and meetings featuring our industry experts. Public
relations and corporate marketing functions coordinate the publication of
articles, white papers, and briefs written by our consultants and ensure that
our representatives are positioned as thought leaders and industry experts in
national, local, and industry trade publications. These efforts have made us a
clear leader in the executive compensation and benefits consulting industry.

         Our distribution strategy seeks to leverage our relationships within
our organization and among our business partners. We establish relationships
with carriers and professional service providers that provide opportunities for
cross-utilization of services. We have also developed strategic relationships
with several professional service firms that are used as a referral source for
our consultants. In addition, we have an advisory board of current and former
industry leaders familiar with our products and services who provide
introductions to prospective clients. We believe these relationships assist our
consultants in gaining access to the appropriate personnel of prospective
clients and more effectively establish relationships based on a position of
trust.

INDUSTRY BACKGROUND

         Over the past twenty years, as the result of legislative change and
increased competition for executive talent, compensation and benefit programs
have become more sophisticated and complex. In turn, the financing of these
programs has also become increasingly complex. Corporations and banks now
commonly use life insurance to offset the costs of employee benefit liabilities
and several large insurers, including AEGON, General American, Great-West, Mass
Mutual, New York Life, Nationwide, ING, and Travelers, have committed
significant resources to develop business-owned life insurance products for use
in this market. The industry has shifted more toward the use of variable life
insurance, which contain equity investment features to meet these needs.

         At the same time, the corporations, banks, and healthcare organizations
that use these services have become more sophisticated and demanding. Clients
now regularly perform extensive due diligence on the firms providing their
compensation and benefit programs. Issues related to reputation and
technological capabilities are now central to their decision-making process. In
addition, the client's expectation regarding the level of administrative
services to be provided and technological capabilities of a provider has risen
substantially. For example, in the early 1990's, community banks went through a
consolidation phase. This consolidation gave bank executives a greater
appreciation and need for expertise regarding the impact of consolidation on
their compensation and benefit programs. This developed into a stronger demand
by the community banking industry for expert advice in addressing estate and


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continuity planning. In addition, healthcare organizations have been faced
with growing challenges to attract and retain executives. The tax status of
healthcare providers, many of whom are not-for-profit healthcare organizations,
requires tailored compensation and benefits programs that comply with the
various not-for-profit compensation and benefit rules.

         Our products and services have also historically been affected both
positively and negatively by legislative change. For example, prior legislation
has increased the attractiveness of non-qualified benefit plans for highly-paid
executives by limiting the amount of tax-deductible contributions to traditional
pension plans. In contrast, tax legislation was enacted in 1996 that disallowed
interest deductions on policy loans and essentially eliminated a financing
technique for corporations known as "leveraged corporate-owned life insurance."
Recently finalized Treasury regulations change the manner in which split dollar
arrangements will be taxed. The new treatment will be, in certain respects, less
attractive than the historical tax treatment of split dollar arrangements.
Additionally, provisions under the Sarbanes-Oxley Act of 2002 have created
uncertainty as to whether certain split dollar policies may be used with respect
to certain executives.

         There have been several recent legislative proposals to change the
federal tax laws with respect to business-owned life insurance. On September 17,
2003, the Senate Finance Committee approved legislation proposed by Sen. Jeff
Bingaman (D-NM) that would tax the death benefits taxpayers receive from certain
policies on the lives of former employees. Following an intensive lobbying
effort by the insurance industry, the Finance Committee on February 2, 2004,
reconsidered the business-owned life insurance provision it had previously
approved and, in its place, approved legislation that generally would tax the
death benefits taxpayers receive from policies on the lives of employees or
former employees only in cases where the insured person had not consented to
being covered or in the case of a former employee, where the insured was not
among the company's highly-compensated employees at the time of policy issuance.
We believe that this most recent proposal, if enacted, would not have a material
adverse effect on our revenue from the sale of business-owned life insurance
policies. However, if Congress were to adopt legislation broadly limiting the
tax-free payment of death benefits on such policies or otherwise adversely
affecting the tax treatment of the policies, future revenues from the sale of
business-owned life insurance policies could materially decline.

         We believe that increasing product complexity, growing buyer
sophistication, and the changing legislative landscape requires product
development systems and personnel that are more sophisticated and cost intensive
than most producers and producer groups are able to justify economically. We
believe this will continue to drive consolidation in the industry as smaller
firms respond in order to stay competitive.

         We also believe the industry offers additional growth opportunities. We
estimate that there are approximately 15,000 corporations, banks, and healthcare
institutions that have executive compensation and benefits needs, which can be
served by us. Of these, we currently have approximately 3,000 as executive
benefit, banking, and healthcare clients. In addition, the rising pay of
executives and the nearing retirement of the baby-boom generation are
significant macro-trends that we believe will drive growth in our industry in
the future.

EMPLOYEES

         As of December 31, 2003, we employed 948 people as follows:

        Executive Benefits Practice                                         250
        Banking Practice                                                    300
        Healthcare Group                                                    177
        Human Capital Practice                                               50
        Pearl Meyer & Partners                                               83
        Federal Policy Group                                                 12
        Resource Center (Corporate) and Clark Securities, Inc.               76
                                                                           -----
                  Total                                                     948
                                                                           =====

The majority of our employees have college degrees, with several holding
advanced degrees in law, accounting, finance, business administration, or
actuarial science. Professional development is a highly valued industry
characteristic, and insurance and financial planning designations, such as
Chartered Life Underwriter, Fellow of the Life Management Institute, Fellow of
the Society of Actuaries and Certified Financial Planner, are held by a large
number of our employees. We actively encourage continuing education for
employees through expense reimbursement and reward plans. Due to the specialized
nature of the business, we often recruit experienced persons from insurance
companies, consulting firms, and related industries.


                                       9
<PAGE>


COMPETITION

         The executive compensation and benefit consulting market is highly
competitive as the margins from this type of work are high. We compete with
consulting firms, brokers, third party administrators, producer groups, and
insurance companies. A number of our competitors offer attractive alternative
programs. The direct competitors of our Executive Benefits Practice include
Mullin Consulting, TBG Financial, and Fidelity Investments. The competitors of
our Banking Practice include Charon Planning and Analect. Additionally, the
banking industry continues consolidating, which may reduce the number of
potential bank clients. Primary competitors of our Healthcare Group, Human
Capital Practice, and Pearl Meyer & Partners include Sullivan & Cotter, Towers
Perrin, and Mercer Consulting Group.

         We compete for clients on the basis of reputation, client service,
program and product offerings, and the ability to tailor our products and
administrative services to the specific needs of a client. We believe that we
are in a superior competitive position in most of the meaningful aspects of our
business because of our track record, name recognition, established
relationships, industry focus and expertise, and specialization. We do not
consider our direct competitors to be our greatest competitive threat. Rather,
we believe that our most serious competitive threat will likely come from large,
diversified financial services organizations that are willing to expend
significant resources to enter our markets and from the larger competitors that
pursue an acquisition or consolidation strategy similar to ours.

GOVERNMENT REGULATION

         State governments extensively regulate our life insurance activities.
We sell our insurance products in all 50 states and the District of Columbia
through licensed insurance producers. Insurance laws vary from state to state.
Each state has broad powers over licensing, payment of commissions, business
practices, policy forms, and premium rates. While we have not encountered
regulatory problems in the past, we cannot assure you that we will always be in
compliance with all applicable regulatory requirements of each state.
Additionally, we cannot be sure if we or our consultants or the insurance
carriers underwriting the policies will encounter regulatory problems in the
future, including any potential sanctions or penalties for operating in a state
without all required licenses.

         While the federal government does not directly regulate the marketing
of most insurance products, securities, including variable life insurance, are
subject to federal securities laws. As a result, our consultants and entities
with which we have administrative service agreements related to selling those
products, must be registered with the National Association of Securities
Dealers. We market these financial products through CSI, a wholly-owned
subsidiary and a registered broker-dealer. While we have not had any regulatory
problems in the past related to these products, we cannot assure you that our
consultants or we will not have regulatory problems in the future.

                                  RISK FACTORS

         You should carefully consider the risks described below together with
the other information contained in this 10-K before making a decision to invest
in our common stock. The risks described below are not the only risks we face.
Additional risks and uncertainties of which we are unaware or currently believe
may be immaterial may also impair our business operations. If any of the
following risks actually occur, our business, financial condition, and operating
results could be adversely affected.

RISKS RELATED TO OUR INDUSTRY

WE ARE SUBSTANTIALLY DEPENDENT ON REVENUE GENERATED BY THE SALE OF
BUSINESS-OWNED LIFE INSURANCE POLICIES. CHANGES IN FEDERAL TAX AND LEGISLATIVE
LAWS COULD MATERIALLY AND ADVERSELY AFFECT OUR RENEWAL INCOME AND ABILITY TO
GAIN NEW BUSINESS.

         Many of the compensation and benefit programs we design and implement
for our clients are financed with business-owned life insurance. Business-owned
life insurance programs have tax advantages associated with such products that
are attractive to our current and prospective clients. Commission revenue from
these products represented 72.4%, 71.4% and 78.6%, of our total revenues in
2003, 2002, and 2001, respectively.

         There have been several recent legislative proposals to change the
federal tax laws with respect to business-owned life insurance. On September 17,
2003, the Senate Finance Committee approved legislation proposed by Sen. Jeff
Bingaman (D-NM) that would tax the death benefits taxpayers receive from certain
policies on the lives of former employees. Following an intensive lobbying
effort by the insurance industry, the Finance Committee on February 2, 2004,
reconsidered the business-owned life insurance provision it had previously
approved and, in its place, approved legislation that generally would tax the
death benefits taxpayers receive from policies on


                                       10
<PAGE>


the lives of employees or former employees only in cases where the insured
person had not consented to being covered or in the case of a former employee,
where the insured was not among the company's highly-compensated employees at
the time of policy issuance. We believe that this most recent proposal, if
enacted, would not have a material adverse effect on our revenue from the sale
of business-owned life insurance policies. However, if Congress were to adopt
legislation broadly limiting the tax-free payment of death benefits on such
policies or otherwise adversely affecting the tax treatment of the policies,
future revenues from the sale of business-owned life insurance policies could
materially decline.

         In September 2003, the Treasury Department finalized regulations
changing the manner in which split dollar life insurance arrangements will be
taxed. The new tax treatment is, in certain respects, less attractive than the
historical tax treatment of split dollar arrangements. Additionally, provisions
under the Sarbanes-Oxley Act of 2002 have created uncertainty as to whether
certain split dollar policies may be used with respect to certain executives.
The final split-dollar regulations and the Sarbanes-Oxley Act of 2002 have
significantly reduced the amount of revenue generated from new split dollar
arrangements and may further reduce revenue from existing split dollar
arrangements in the near term.

OUR BUSINESS IS SUBJECT TO FLUCTUATIONS IN INTEREST RATES, STOCK PRICES AND
GENERAL ECONOMIC CONDITIONS.

         General economic conditions and market factors, such as changes in
interest rates and stock prices, can affect our commission and fee income and
the extent to which clients keep their policies inforce year after year. Equity
returns and interest rates can have a significant effect on the sale and
profitability of many employee benefit programs whether they are financed by
life insurance or other financial instruments. For example, if interest rates
increase, competing products could become attractive to potential purchasers of
the programs we market. When interest rates are at historically low levels, our
fixed income products become less attractive to potential purchasers. Further, a
prolonged decrease in stock prices can have an effect on the sale and
profitability of our clients' programs that are linked to stock market indices.
We cannot guarantee that we will be able to compete with alternative products if
these market forces make our clients' programs unattractive.

         The general down cycle in the U.S. economy from 2000 through early 2003
has adversely affected the financial condition of our clients, which in turn
resulted in a significant reduction in demand for compensation and benefit
consulting services and programs. A deterioration of economic conditions could
have a material adverse effect on our business, financial condition and results
of operations.

WE ARE SUBJECT TO REGULATION AT THE STATE LEVEL.

         State governments extensively regulate life insurance activities. We
sell our insurance products in all 50 states through licensed insurance
consultants operating as independent agents as well as through our employee
consultants. States have broad powers over licensing, payments of commissions,
business practices, policy forms, and premium rates. Insurance laws related to
licensing, marketing activities, and the receipt of commissions varies from
state to state. While we have not encountered significant regulatory problems in
the past, we cannot assure you that we or the consultants through whom we sell
will be in compliance at all times with all applicable regulatory requirements
of each state.

RISKS RELATED TO OUR COMPANY

WE FACE STRONG COMPETITION.

         Our business is highly competitive. We compete with consulting firms,
insurance brokers, third party administrators, producer groups, and insurance
companies. A number of our competitors offer attractive alternative programs.
The direct competitors of our Executive Benefits Practice include Mullin
Consulting, TBG Financial, and Fidelity Investments. The competitors of our
Banking Practice include Charon Planning and Analect. Additionally, the banking
industry is constantly consolidating, which may reduce the number of potential
bank clients. Primary competitors of our Healthcare Group, Human Capital
Practice, and Pearl Meyer & Partners include Sullivan & Cotter, Towers Perrin,
and Mercer Consulting Group.

         We may also face competition from large, diversified financial services
firms willing and able to expend the resources to enter our markets and from
large direct competitors that choose to pursue an acquisition or consolidation
strategy similar to ours.


                                       11
<PAGE>


WE ARE DEPENDENT ON CERTAIN KEY CONSULTANTS.

         Our top three consultants collectively accounted for approximately 7.4%
of our total revenue in 2003, 6.8% of our total revenue in 2002, and 6.8% of our
total revenue in 2001. We enter into agreements with our consultants in which
they agree not to compete with us for a period of time after their relationship
with us terminates. We cannot assure you that we will be able to maintain
consultant relationships with our most productive consultants or that any
non-compete provisions in the agreements will be honored or enforceable. Our
business could suffer in the future as a result of the loss of any of our most
productive consultants.

OUR BUSINESS DEPENDS ON THE RENEWAL COMMISSIONS WE GENERATE FROM THE LIFE
INSURANCE POLICIES UNDERLYING OUR CLIENTS' COMPENSATION AND BENEFIT PROGRAMS.

         We derive a substantial portion of our revenue from the renewal
commissions we earn on the business-owned life insurance policies and other
financial instruments that underlie our clients' compensation and benefit
programs. We earn these annual commissions so long as the underlying policies
remain in existence. If a client chooses to cancel a policy, we will stop
receiving any renewal commissions and fees on that policy. In addition, if a
client delays or reduces the annual premiums it pays on the underlying policy
due to a flexible premium structure or financial difficulties, our renewal
commissions may be correspondingly delayed or reduced. We have historically
experienced average persistency of approximately 95% on the policies underlying
our renewal commissions although we cannot assure you that the persistency rate
will not decline in the future.

OUR QUARTERLY OPERATING RESULTS VARY DRAMATICALLY.

         Our operating results fluctuate considerably from quarter to quarter.
We have experienced and may continue to experience large concentrations of
revenue in the first and fourth quarters. Our operating results may be affected
by a number of factors including: a significant portion of the funding for our
bank-owned life insurance products occurs in the fourth calendar quarter, many
deferred compensation plans marketed by our Executive Benefits Practice are
financed in the first fiscal quarter; and the timing of significant sales can
have a material impact on our quarterly operating results.

         Our revenue is difficult to forecast, and we believe that comparing our
consecutive quarterly results of operations is not meaningful, nor does it
indicate what results we will achieve for any subsequent period. In our
business, past operating results are not consistently reliable indicators of
future performance. Significant downward fluctuations in our quarterly operating
results could result in a sharp decline in the trading price of our common
stock. See further discussion about the quarterly operating results in Note 23
to the Consolidated Financial Statements under Item 15 "Exhibits, Financial
Statement Schedules, and Reports on Form 8-K."

WE ARE DEPENDENT ON OUR MANAGEMENT TEAM.

         Our performance depends largely on the performance of our executive
officers and key employees. It is important to us to keep and motivate high
quality personnel, especially our management, consultants, and program
development teams. The loss of the services of any of our key employees
particularly Tom Wamberg, Chairman and Chief Executive Officer; Thomas M. Pyra,
Chief Operation Officer; Jeffrey W. Lemajeur, Chief Financial Officer; Les
Brockhurst, President of the Executive Benefits Practice; Richard C. Chapman,
President of the Banking Practice; Ken Ackerman, President of the Healthcare
Group; Bruce Benesh, President of Human Capital Practice, Steve Hall, President
of Pearl Meyer & Partners; and Ken Kies, Managing Director of Federal Policy
Group could have a material adverse effect on our business, financial condition,
and operating results. We cannot assure you that we will be successful in
retaining our key personnel.

WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY OR
INTEGRATE THE BUSINESSES WE ACQUIRE.

         Since September 1997, we have completed 26 acquisitions. At any point
in time, we may also be considering several other potential acquisitions. Future
acquisitions may require substantial expenditures that will be financed through
cash from operations, or bank debt as well as future debt and/or equity
offerings. We cannot assure you that funds will be available from banks or
through the capital markets or that they will be available on terms acceptable
to us. If funds are not available, we may be unable to fully implement our
acquisition strategy.

         Acquisitions involve numerous risks, including the diversion of our
management's time and attention to the negotiation of the transaction and to the
integration of the businesses acquired, the possible need to modify financial
and other systems and add management resources, and unforeseen difficulties in
the acquired operations. An acquisition may not produce the revenue and profits
we expect.


                                       12
<PAGE>


Thus, an acquisition that fails to meet our expectations could have a material
adverse effect on our business, financial condition and operating results.

A SUBSTANTIAL PORTION OF OUR TOTAL ASSETS ARE REPRESENTED BY INTANGIBLE ASSETS.

         When we acquire a company, we normally acquire few tangible assets.
Therefore, substantially the entire purchase price for the acquisition is
allocated to intangible assets. The three primary components of our intangible
assets are inforce revenue, goodwill, and non-compete agreements. The amounts of
purchase price allocated to inforce revenue are determined by discounting the
cash flow of future commissions adjusted for expected persistency, mortality,
and associated costs. Non-compete agreements are amortized over the period of
the agreements and other identifiable intangibles are amortized over their
useful lives. The persistency of our inforce business is influenced by many
factors outside of our control and we cannot be sure that the value we have
allocated will ultimately be realized. The balance of the purchase price not
allocated to identifiable intangible assets is classified as goodwill.

         If any component of our inforce revenue should become unrealizable,
this could have a material adverse effect on our business, financial condition,
and operating results. We cannot assure you that all of our inforce revenue will
be realizable or that accounting regulatory bodies will not impose different
amortization methods.

A MAJORITY OF OUR COMMISSION REVENUE IS DERIVED FROM POLICIES WRITTEN BY A
LIMITED NUMBER OF INSURANCE COMPANIES.

         We depend on a select group of insurance companies to underwrite the
insurance policies underlying the programs we sell. During 2003, 20 life
insurance companies underwrote substantially all of the insurance policies
underlying our clients' programs. Seven of these companies accounted for
approximately 55.7% of our first year commission revenue in 2003, 48.3% in 2002,
and 60.0% in 2001. If our relationship with any of these insurance companies, or
their financial condition, were to significantly change for any reason, we could
experience a disruption in our ability to provide products and services to our
clients. Although we believe such disruption would only be short-term and that
we would not experience any difficulties in securing replacement relationships
with similar insurance companies, any long-term delays in doing so could affect
our ability to provide competitive financing alternatives to our clients.

MAJOR STOCKHOLDERS HAVE THE ABILITY TO INFLUENCE STOCKHOLDER ACTION.

         AEGON and Liberty Wanger Asset Management owned approximately 12.4% and
10.4%, respectively, of our outstanding common stock as of December 31, 2003.
Tom Wamberg, our Chairman and Chief Executive Officer, owned approximately 10.4%
of our outstanding common stock as of December 31, 2003. As a result, these
stockholders are able to exercise significant influence over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying, preventing, or deterring a change in control of
Clark, Inc. that may otherwise be beneficial to stockholders.

WE ARE SUBJECT TO LITIGATION, WHICH MAY HAVE A NEGATIVE IMPACT ON OUR BUSINESS
AND REPUTATION.

         From time to time, we are subject to lawsuits and other claims, which
are being handled and defended in the ordinary course of business. While we are
unable to predict the outcome of these matters, we do not believe, based upon
currently available facts, that the ultimate resolution of any of such pending
matters will have a material adverse effect on our overall financial condition,
results of operations, or cash flows. However, adverse developments could
negatively impact earnings in a particular future period. See Item 3. "Legal
Proceedings."

ERRORS OR OMISSIONS IN THE SERVICES WE PROVIDE OUR CLIENTS MAY RESULT IN
LIABILITIES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND
REPUTATION.

         We market, design, and administer sophisticated financial products and
we provide accounting, actuarial, and other professional services in connection
with marketing, designing, and administering these programs. Our clients rely
upon the services and interpretations rendered by our employees. To the extent
any services or interpretations provided by our employees prove to be
inaccurate, we may be liable for the damages, and such liability, to the extent
not covered by existing insurance, could have a material adverse effect on our
business, financial condition, and results of operations.


                                       13
<PAGE>


WE ARE DEPENDENT ON OUR INFORMATION PROCESSING SYSTEMS.

         Our ability to provide administrative services depends on our capacity
to store, retrieve, process, and manage significant databases and expand and
upgrade periodically our information processing capabilities. Interruption or
loss of our information processing capabilities through loss of stored data,
breakdown, or malfunctioning of computer equipment and software systems,
telecommunications failure, or damage caused by fire, tornadoes, lightning,
electrical power outage, or other disruption could have a material adverse
effect on our business, financial condition, and results of operations. Although
we have disaster recovery procedures in place and insurance to protect against
such contingencies, we cannot assure you that such insurance or services will
continue to be available at reasonable prices, cover all such losses or
compensate us for the possible loss of clients occurring during any period that
we are unable to provide services.

RISKS RELATED TO OUR COMMON STOCK

THE TRADING PRICE OF OUR COMMON STOCK MAY BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.

         The trading price of our common stock could fluctuate significantly in
response to variations in our operating results, changes in earnings estimates,
changes in our business, and changes in general market or economic conditions.
In addition, in recent years the stock market has experienced significant price
and volume fluctuations. Such market fluctuations could result in a sharp
decline in the trading price of our common stock and the value of your
investment.

THE ISSUANCE OF ADDITIONAL COMMON STOCK MAY DILUTE OTHER STOCKHOLDERS.

         We have an aggregate of 17,347,160 shares of common stock authorized
but unissued and not reserved for specific purposes. We may issue all of these
shares without any action or approval by our stockholders. As of December 31,
2003, we had an aggregate of 2,377,558 unissued shares reserved for issuance
under our employee and director incentive plans. In addition, 174,807 shares
(based on the December 31, 2003 closing price of $19.24 per share) are subject
to issuance as contingent payments in connection with our recent acquisitions,
if stipulated revenue and/or financial targets are achieved. We intend to
continue to actively pursue acquisitions of competitors and related businesses
and may issue shares of common stock in connection with those acquisitions. Any
shares issued in connection with our acquisitions, the exercise of stock
options, or otherwise would dilute the percentage ownership held by existing
stockholders.

EXISTING STOCKHOLDERS CAN SELL A SUBSTANTIAL NUMBER OF THEIR SHARES IN THE
PUBLIC MARKET, WHICH COULD DEPRESS OUR STOCK PRICE.

         Sales of a substantial number of shares of our common stock in the open
market, or the perception that such sales could occur, could adversely affect
the trading price of our common stock. Mr. Wamberg held 1,931,680 shares as of
December 31, 2003, representing approximately 10.4% of the outstanding shares of
common stock. Institutional investors (that individually hold in excess of 5% of
our outstanding shares) cumulatively represent 6,617,695 shares or approximately
35.7% of the outstanding shares of common stock. A decision by Mr. Wamberg or
the other stockholders to sell shares of our common stock could adversely affect
the trading price of our common stock.

DELAWARE LAW AND OUR CHARTER DOCUMENTS COULD PREVENT AN UNSOLICITED TAKEOVER.

         Delaware law, as well as provisions of our certificate of incorporation
and bylaws, could discourage unsolicited proposals to acquire us, even though
such a proposal may be beneficial to stockholders. These provisions include a
board of directors classified into three classes of directors with the directors
of each class having staggered, three-year terms, our board's authority to issue
shares of preferred stock without stockholder approval, and Delaware law
restrictions on many business combinations and prohibitions on removing
directors serving on a staggered board for any reason other than "for cause."

         In addition, we have adopted a stockholder rights plan that could
further discourage attempts to acquire control of us. These provisions of our
certificate of incorporation, bylaws, and Delaware law could discourage tender
offers or other transactions that might otherwise result in your receiving a
premium over the market price for our common stock.


                                       14
<PAGE>


ITEM 2.  PROPERTIES

         The following table sets forth information with respect to the
principal facilities used in our operations, all of which are leased.

<TABLE>
<CAPTION>
                                                      CURRENT
                                                      MONTHLY       SQUARE
PRACTICE-LOCATION                                      RENT         FOOTAGE         LEASE EXPIRES
-----------------                                     -------       -------         -------------

<S>                                                    <C>           <C>           <C>
Executive Benefits Practice--
      Dallas, Texas................................    $86,961       59,372            April 2009
      Bethesda, Maryland...........................     23,651        8,519             July 2007
      Phoenix, Arizona.............................      3,427        2,056            March 2004
      Los Angeles, California......................     62,188       37,313             June 2010
      Chicago, Illinois............................      8,290        4,737             June 2004
      Bedminster, New Jersey.......................      6,833        3,000        September 2008
      Waltham, Massachusetts.......................      6,913        2,440         November 2004
      Beachwood, Ohio..............................      5,844        3,049             June 2004
      Houston, Texas...............................     13,160        7,376        September 2008
Banking Practice--
      Bloomington, Minnesota.......................   $101,622       45,746             June 2012
      Annapolis, Maryland..........................      2,645        1,190        September 2004
      Frisco, Texas................................     11,295        6,034         February 2005
      Littleton, Colorado..........................      2,046          180           August 2004
      Dublin, Ohio.................................      2,629        2,176            March 2004
      Duxbury, Massachusetts.......................      4,496        3,455              May 2004
      Mequon, Wisconsin............................     10,007        6,025          October 2007
      Greensboro, North Carolina...................     24,601       13,066             July 2006
      Glen Allen, Virginia.........................      2,709        2,322      Being Negotiated
      Hingham, Massachusetts.......................      2,645          180         December 2004
      Morton, Illinois.............................        600          680         December 2005
      Wellington, Florida..........................      1,378        1,250            April 2006
      Memphis, Tennessee...........................      1,885        1,470            March 2004
      Deerfield, Illinois..........................      5,753        4,171            April 2008
Healthcare Group--
      Minneapolis, Minnesota.......................    $49,467       47,564             June 2008
      Kansas City, Missouri........................     34,292       20,000         December 2008
Human Capital Practice--
      New York, New York...........................   $101,559       19,672          October 2012
      Atlanta, Georgia (1).........................     27,151       15,652           August 2008
      Charlotte, North Carolina....................      6,652        3,983          October 2007
      Los Angeles, California......................     13,037        7,804             June 2010
      Berkeley, California.........................     16,997        5,483            April 2006
Pearl Meyer & Partners--
      New York, New York...........................    $79,271       19,000              May 2010
      Marlborough, Massachusetts...................     25,168       15,284             July 2005
Federal Policy Group--
      Washington, D.C..............................    $32,215        4,832         February 2012
Resource Center office--
      North Barrington, Illinois...................    $24,216       17,783         February 2009

<FN>
-------------------
(1) The Executive Benefits Practice co-locates with the Human Capital Practice
at this location.
</FN>
</TABLE>


                                       15
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

         From time to time, we are involved in various claims and lawsuits
incidental to our business, including claims and lawsuits alleging breaches of
contractual obligations under agreements with our consultants. During the year
ended December 31, 2003, we received $1.5 million from the favorable settlement
of a lawsuit. The following is a summary of the current material legal
proceedings pending against us.

WILLIAM L. MACDONALD, SR. V. CLARK/BARDES CONSULTING, INC.

         On April 10, 2003, William L. MacDonald, Sr., the former Chairman of
the Executive Benefits Practice, filed suit in Los Angeles, California Superior
Court alleging wrongful termination and seeking damages of $10.1 million and a
declaration that all of his non-competition and non-solicitation provisions were
unenforceable. On April 11, 2003, we filed proceedings in the Circuit Court of
Cook County, Illinois to enforce the non-competition and non-solicitation
covenants agreed to by Mr. MacDonald when we purchased Mr. MacDonald's business,
Compensation Resource Group, Inc., in September of 2000. In light of the
California suit, the Illinois litigation was stayed pending the outcome of
proceeding in the California court.

         We responded to Mr. MacDonald's suit by requesting the California court
to transfer the matter to arbitration as provided for in several of the
contracts at issue, and to enter a temporary restraining order prohibiting Mr.
MacDonald from competing with us and contacting our clients, in aid of and
pending the outcome of the arbitration. On May 1, 2003, the Court granted our
motion and entered a temporary restraining order prohibiting Mr. MacDonald from
contacting certain clients of ours. On June 5, 2003, the court entered a
preliminary injunction, which prohibits Mr. MacDonald and persons acting in
concert with him from soliciting clients of our Executive Benefits Practice. On
July 24, 2003, the court issued its order granting our Motion to Compel
Arbitration and those proceedings have been commenced by both Mr. MacDonald and
us. We deny any wrongdoing and intend to vigorously defend Mr. MacDonald's
claims. We also intend to vigorously pursue the enforcement of Mr. MacDonald's
non-competition and non-solicitation covenants.

FRIEDA SHUSTER, ET AL. V. HYDER MIRZA, ET AL. INCLUDING CLARK/BARDES, INC.

         On May 30, 2001, we were named as a defendant in a lawsuit initially
filed in the District Court of LaSalle County, Texas, now in Dallas County,
Texas, alleging gross negligence in connection with the death of an employee
when the private aircraft in which he was traveling on company business crashed.
Damages are unspecified. On February 12, 2004, settlement was reached with the
lead plaintiff. The trial for the remaining plaintiffs has been continued
indefinitely by the court. We deny any and all claims and allegations in this
action and intend to vigorously defend this matter. The matter is covered by our
existing insurance.

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

         No matters were submitted during the fourth quarter of the fiscal year
covered by this Form 10-K to a vote of our security holders, through the
solicitation of proxies or otherwise.


                                       16
<PAGE>


                                     PART II

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

         Effective June 9, 2003, our common stock began trading on the New York
Stock Exchange under the symbol "CLK." From March 7, 2002 through June 8, 2003,
our common stock was traded on the New York Stock Exchange under the symbol
"CBC." Prior to that, our common stock was traded on the NASDAQ National Market
under the symbol "CLKB."

         The following table sets forth for the periods indicated the high and
low closing prices for our common stock, as reported on the New York Stock
Exchange.

<TABLE>
<CAPTION>
                                                                                HIGH            LOW
                                                                                ----            ---

<S>                                                                             <C>          <C>
YEAR ENDED DECEMBER 31, 2002:
First Quarter...................................................................$28.80       $22.49
Second Quarter.................................................................. 30.60        20.73
Third Quarter................................................................... 22.04        14.05
Fourth Quarter.................................................................. 20.00        15.16

YEAR ENDED DECEMBER 31, 2003:
First Quarter...................................................................$19.48       $10.50
Second Quarter.................................................................. 12.87        10.78
Third Quarter................................................................... 16.65        11.94
Fourth Quarter.................................................................. 19.76        13.80

FIRST QUARTER TO MARCH 1, 2004..................................................$20.70       $16.68

</TABLE>

         The closing price of our common stock on March 1, 2004, as reported on
the New York Stock Exchange, was $16.68 per share. As of March 1, 2004, we had
18,539,203 outstanding shares of common stock and approximately 795 stockholders
of record, which does not include shares held in securities position listings.

DIVIDEND POLICY

         We intend to retain future earnings to fund growth and currently do not
plan to pay any cash dividends in the foreseeable future. Under the terms of our
credit agreement with Bank One, as lead agent in a five bank lending group, we
cannot declare or pay dividends or return capital to our stockholders, nor can
we authorize or make any other distribution, payment or delivery of property or
cash to our stockholders, unless the bank group gives its prior written consent.
We can repurchase up to $5.0 million worth of our common stock under terms of
the credit agreement.

RECENT SALES OF UNREGISTERED SECURITIES

         On October 7, 2003, we issued 44,298 shares of our common stock as part
of the purchase price for the acquisition of Blackwood Planning Corporation. The
issue was exempt from registration under Section 4(2) of the Securities Act of
1933. The total value of the shares issued was $630 thousand and constituted
32.1% of the purchase price at closing.


                                       17
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

(Dollars in thousands except share and per share amounts)

         The following historical information should be read in conjunction with
information included elsewhere herein, including the consolidated financial
statements and notes thereto and "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations." The results of operations
presented below are not necessarily indicative of the results of operations that
may be achieved in the future.

<TABLE>
<CAPTION>
                                                             2003(1)     2002(4)     2001(5)     2000(9)     1999(10)
                                                            ----------- ----------- ----------- ----------- -----------
<S>                                                           <C>         <C>         <C>         <C>         <C>
           CONSOLIDATED STATEMENT OF OPERATIONS
           TOTAL REVENUE...............................       $325,929    $278,586    $236,884    $149,567    $121,722
                                                            ----------- ----------- ----------- ----------- -----------
           OPERATING EXPENSES..........................
             Commissions and fees......................         88,259      89,998      84,002      50,804      53,108
             General and administrative................        159,279     140,583     102,853      68,189      45,153
             Reimbursable expenses.....................          6,344       5,043       4,848       2,028         962
             Amortization .............................         21,579       9,249      11,560       7,138       4,370
             Settlement of litigation (2)..............         (1,500)          -           -           -           -
             Write-off of Insurance Alliance Group
             ("IAG")(6) ...............................              -           -       2,070           -           -
             Acquisition integration and
               reorganization(3).......................          7,490           -           -         518           -
                                                            ----------- ----------- ----------- ----------- -----------
           OPERATING INCOME............................         44,478      33,713      31,551      20,890      18,129
           OTHER INCOME(7).............................            302         262         354       1,075           -
           INTEREST, NET
             Income....................................            281         350         551         278         329
             Expense...................................        (24,290)     (4,070)     (5,738)     (4,970)     (3,548)
             Interest rate swap settlement(8)..........              -           -      (1,981)          -           -
                                                            ----------- ----------- ----------- ----------- -----------
           Income before taxes and cumulative effect
             of change in accounting principle,
             net of tax................................         20,771      30,255      24,737      17,273      14,910
           Income taxes  ..............................          8,089      12,404       8,725       5,825       6,079
                                                            ----------- ----------- ----------- ----------- -----------
           Income before cumulative effect of change
             in accounting principles net of tax.......         12,682      17,851      16,012      11,448       8,831
           Cumulative effect of change in accounting
             principle, net of tax.....................              -        (523)          -           -           -
                                                            ----------- ----------- ----------- ----------- -----------
           NET INCOME .................................       $ 12,682    $ 17,328    $ 16,012    $ 11,448    $  8,831
                                                            =========== =========== =========== =========== ===========

           BASIC EARNINGS PER
             COMMON SHARE:
           Basic Earnings per common share, before
             cumulative effect of change in
             accounting principle......................          $0.69       $1.06       $1.22       $1.07       $0.97
           Cumulative effect of change in accounting
             principle.................................              -       (0.03)          -           -           -
                                                            ----------- ----------- ----------- ----------- -----------
           BASIC EARNINGS PER COMMON SHARE.............          $0.69       $1.03       $1.22       $1.07       $0.97
                                                            =========== =========== =========== =========== ===========
           Weighted average shares outstanding-Basic...     18,338,963  16,896,657  13,162,899  10,744,718   9,077,775


           DILUTED EARNINGS PER
             COMMON SHARE:
           Diluted Earnings per common share, before
             cumulative effect of change in
             accounting principle......................          $0.68       $1.02       $1.18       $1.05       $0.95
           Cumulative effect of change in accounting
              principle................................              -       (0.03)          -           -           -
                                                            ----------- ----------- ----------- ----------- -----------
           DILUTED EARNINGS PER COMMON SHARE...........          $0.68       $0.99       $1.18       $1.05       $0.95
                                                            =========== =========== =========== =========== ===========
           Weighted average shares outstanding- Diluted    18,740,934  17,513,106  13,575,830  10,880,093   9,328,939

           Dividends per common share..................             $-          $-          $-          $-          $-

           CONSOLIDATED BALANCE SHEET
           Cash and Cash Equivalents...................       $  3,156    $ 14,266    $ 10,207    $  7,598    $  4,832
           Intangible Assets -- Net....................        589,803     600,195     187,728     165,373      94,991
           Total Assets................................        699,303     734,675     269,931     219,855     125,524
           Debt:
             Current...................................         16,553      22,675       1,046      11,968       7,252
             Long-Term.................................        335,968     396,038       6,079      52,605      35,473
           Total Liabilities...........................        441,035     493,553      73,739     107,297      63,156
           Stockholders' Equity........................        258,268     241,122     196,192     112,558      62,368
</TABLE>


                                       18
<PAGE>


(1)      Includes the results of operations subsequent to the date of
         acquisition of the following:
         o        Executive Benefits Solutions LLC as of September 30, 2003
         o        Blackwood Planning Corporation as of October 7, 2003
(2)      In 2003, we received $1.5 million from the favorable settlement of a
         lawsuit.
(3)      In 2003, we incurred operating expense of $7.5 million in connection
         with the reorganization of the Human Capital Practice. In 2000, we
         incurred an operating expense of $518 thousand in connection with the
         integration of our acquisition of Compensation Resource Group.
(4)      Includes the results of operations subsequent to the date of
         acquisition of the following:
         o        Federal Policy Group as of February 25, 2002
         o        Hilgenberg and Associates as of April 25,
                  2002
         o        Comiskey Kaufman as of April 26, 2002
         o        LongMiller & Associates, LLC as of November 26, 2002
(5)      Includes the results of operations subsequent to the date of
         acquisition of the following:
         o        Rich Florin/Solutions, Inc. (f.d.b.a. Executive Alliance) as
                  of March 12, 2001
         o        Partners First as of March 23, 2001
         o        Management Science Associates, Inc. as of July 24, 2001
         o        Lyons Compensation & Benefits, LLC as of August 31, 2001
         o        Coates Kenney as of December 26, 2001
(6)      In 2001, we incurred an operating expense of approximately $2.1 million
         in connection with the write-down of assets acquired from Insurance
         Alliances Group.
(7)      In 2003 and 2002, we received rental income of approximately $302
         thousand and $262 thousand, respectively from several subtenants. In
         2001, other income includes $191 thousand of life insurance proceeds as
         a result of the death of an executive. In 2000, we received $1.0
         million of life insurance proceeds as the result of the death of a
         sales consultant.
(8)      In 2001, we recorded interest expense of approximately $2.0 million as
         a result of interest rate swap settlements associated with the pay off
         of our outstanding bank debt with the proceeds from our secondary
         offering.
(9)      Includes the results of operations subsequent to the date of
         acquisition of the following:
         o        Christiansen & Associates as of January 1, 2000
         o        The Watson Company as of February 1, 2000
         o        Insurance Alliances Group as of May 5, 2000
         o        W.M. Sheehan & Company, Inc. as of June 13, 2000
         o        Pearl Meyer & Partners, Inc. as of June 21, 2000
         o        Compensation Resource Group as of September 6, 2000
         o        Forrest, Wagner & Associates as of October 23, 2000
(10)     Includes the results of operations subsequent to the date of
         acquisition of the following:
         o        National Institute for Community Banking as of January 1, 1999
         o        Management Compensation Group/Healthcare as of April 1, 1999
         o        The Wamberg Organization as of September 1, 1999
         o        Banking Consultants of America as of October 1, 1999


                                       19
<PAGE>


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

         (Tables shown in thousands of dollars, except per share amounts)

         The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements, the notes thereto and other information appearing
elsewhere in this Form 10-K.

OVERVIEW

         We design, market, and administer compensation and benefit programs for
companies supplementing and securing employee benefits and provide executive
compensation and related consulting services to U.S. corporations, banks, and
healthcare organizations. We generally compete with regional firms while we
market our products and services nationwide. A majority of our revenues result
from commissions paid by insurance companies that underwrite the insurance
policies used to finance our clients' benefit programs. Most of our clients'
benefit programs are financed by business-owned life insurance and other
financial products. We pay commissions to employee and independent consultants
based upon a percentage of our commission revenue. We work closely with clients
to design customized products that meet the specific organizational needs of the
client and with insurance companies to develop unique policy features and
competitive pricing.

         A significant portion of our growth has been acquisition related.
Business-owned life insurance programs have tax advantages associated with
products that are attractive to our clients. A portion of our product offering
is interest rate sensitive. Changes in tax and legislative laws can have an
affect on our business, as seen over the last several years with our Executive
Benefits Practice. We have been expanding our compensation consulting practices
to diversify our product offerings. The largest component of our general and
administrative expense is salary and other benefit related costs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Securities and Exchange Commission ("SEC") has
defined a company's most critical accounting policies as those that are most
important to the portrayal of its financial condition and the results of
operations, and which require us to make difficult and subjective judgements,
often as a result of the need to make estimates of matters that are inherently
uncertain. Based on this definition, we have identified the following as our
critical accounting policies and judgements. Although we believe that our
estimates and assumptions are reasonable, they are based upon information
available when they are made. Actual results may differ significantly from these
estimates under different assumptions and conditions.

REVENUE SOURCES AND RECOGNITION

        Our operating segments derive revenue primarily from:

         o        commissions paid by insurance companies issuing the policies
                  underlying our clients' benefit programs;
         o        program design and administrative service fees paid by our
                  clients;
         o        executive compensation and benefit and related consulting
                  fees; and
         o        fees for legislative liaison and related advisory services.

        Our commission revenue is normally recurring, is typically paid annually
and usually extends for a period of ten years or more after the sale.
Commissions are paid by insurance companies and vary by policy and by program
and typically represent a percentage of the premium or the cash surrender value
of the insurance policies underlying the program.

         First Year Commission Revenue and Related Fees. First year commission
revenue and related fees are derived from two principal sources: (a) the
commission we earn when the client first purchases the policies, which revenue
is recognized at the time the application is substantially completed, the client
is contractually committed to purchase the insurance policies and the premiums
are paid, by the client, to the insurance company; and (b) fees for the services
related to the enrollment and initial administration of the benefit programs and
underlying policies.


                                       20
<PAGE>


         Our first year commission revenue is frequently subject to chargeback,
which means that insurance companies retain the right to recover commissions
paid in the event policies prematurely terminate. The chargeback schedules
differ by product and usually apply to first year commission only.

         A typical chargeback schedule, based on a percent of first year
commission, is as follows:

              Year 1                            100%
              Year 2 and 3                       50%
              Year 4                             25%
              Year 5 and beyond                   0%

         Given the homogenous nature of such cases and historical information
about chargebacks, we believe we are able to accurately estimate the revenue
earned. We currently maintain a chargeback allowance, which is monitored on a
quarterly basis for adequacy. The chargeback allowance is calculated based on
the average percentage rate of the last two years of chargebacks multiplied by
the first year revenue for the trailing twelve months.

         Renewal Commission Revenue and Related Fees. Renewal commission revenue
is the commission we earn on the policies underlying the benefit programs we
have sold in prior years. Renewal revenue is recognized on the date that the
renewal premium is due or paid by the client to the insurance company depending
on the type of policy. In the case of single pay policies, renewal revenue is
recognized on the date of the renewal and calculated based on a percentage of
the asset value or based on a percentage of the original premium paid.

         Consulting fee revenue. Consulting fee revenue consists of fees charged
by Human Capital Practice, Pearl Meyer & Partners, and Federal Policy Group for
the services we perform in advising our clients on their executive compensation
programs and related consulting services, retirement, benefit, actuarial,
pension savings plan design and management, people strategy, compensation
surveys, institutional registered investment advisory services, and fees from
legislative and regulatory policy matters. These fees are generally based on a
rate per hour arrangement or a fixed monthly fee and are earned when the service
is rendered. Consulting revenue generated by the Executive Benefits Practice,
Banking Practice, and Healthcare Group are included in the first year revenue
line on our consolidated income statement.

         Administrative service fee revenue. Administrative service fee revenue
consists of fees we charge our clients for the administration of their benefit
programs and are earned when services are rendered. These revenues are included
in our renewal revenue line on our consolidated income statement.

         In accordance with Emerging Issues Task Force ("EITF") Issue No. 01-14,
Income Statement Characterization of Reimbursements Received for "Out-of-Pocket"
Expenses Incurred, reimbursements received for out-of-pocket expenses incurred
are characterized as revenues and are shown as a separate component of total
revenue. Similarly, related reimbursable expenses are also shown separately
within operating expenses.

         We record revenue on a gross basis when we are the primary obligors in
the arrangement or when we bear the credit risk in the arrangement. We record
revenue on a net basis when another party is the primary obligor in the
arrangement or when another party bears the credit risk.

INTANGIBLE ASSETS

         Intangible assets represent the excess of the costs of acquired
businesses over the fair values of the tangible net assets associated with an
acquisition. Intangible assets consist of the net present value of future cash
flows from policies inforce at the acquisition date, non-compete agreements with
the former owners, other identifiable intangibles, and goodwill. Non-compete
agreements are amortized over the period of the agreements and other
identifiable intangibles are amortized over their useful lives.

         The net present value of inforce revenue is typically amortized between
20 and 30 years (the expected average policy duration). The determination of the
amortization schedule involves making certain assumptions related to
persistency, expenses, and discount rates that are used in the calculation of
the carrying value of inforce revenue. If any of these assumptions change or
actual experience differs materially from the assumptions used, it could affect
the carrying value of the inforce revenue.


                                       21
<PAGE>


         We are required to assess potential impairments of long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
Accounting for Impairment of Long-Lived Assets, if events or changes in
circumstances indicate that the carrying amount of a long-lived asset may not be
recoverable. In assessing the recoverability of goodwill, in accordance with
SFAS No. 142, Goodwill and Other Intangible Assets, and the net present value of
future cash flows from policies inforce, we must make assumptions regarding
estimated future cash flows, mortality, lapse, and other factors to determine
the fair value of the respective assets. If these estimates and related
assumptions change in the future, we may be required to record impairment
charges.

INCOME TAXES

         Significant judgement is required in determining the provision for
income taxes and related accruals, deferred tax assets and liabilities, and any
valuation allowance recorded against the deferred tax assets. In the ordinary
course of business, there are transactions and calculations where the ultimate
tax outcome is uncertain. Additionally, our tax returns are subject to audit by
federal and various state authorities. Although we believe our estimates are
reasonable, no assurance can be given that the final tax outcome will not be
materially different from that which is reflected in our historical income tax
provisions and accruals. In assessing the realizability of deferred tax assets,
we consider the likelihood that some portion or all of the deferred tax assets
may not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which the temporary differences become deductible. We consider the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment.

RESTRUCTURING COSTS

         We make provisions for restructuring costs in accordance with SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities. To
determine the amounts expensed in any period, we estimate the amounts we will
receive in the future for subleasing office space that is no longer required for
our existing operations. Should these estimates not reflect actual results in
future periods, we adjust the provision through the income statement.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

         Financial Statement Overview. Our revenue for the year ended December
31, 2003 was $325.9 million, compared to $278.6 million for the year ended
December 31, 2002, an increase of 17.0%. Our net income for 2003 was $12.7
million, compared to $17.3 million (net of the effect of a change in accounting
principle of $523 thousand, net of tax, from the adoption of SFAS No. 142) for
the year ended December 31, 2002, a decrease of 26.8% over 2002. Diluted
earnings per share for 2003 were $0.68, compared to $0.99 for 2002. The diluted
weighted average number of shares outstanding increased to 18.7 million for the
year ended December 31, 2003, compared to 17.5 million for the year ended
December 31, 2002.

         Revenue. Total revenue for the year ended December 31, 2003 was $325.9
million compared to $278.6 million for the year ended December 31, 2002. First
year revenue (which includes consulting and reimbursable expense revenue)
increased $3.3 million, or 2.0%, in 2003 compared to 2002. Renewal and other
recurring revenues were $158.5 million in 2003, up $44.1 million, or 38.5%, from
2002, reflecting a full year of renewals from the November 2002 LongMiller
acquisition. First year commission revenue for 2003 included $3.5 million
related to agreements with two of our insurance carriers in which we received
additional payments and revenue based on the cash value of our existing inforce
revenue with these carriers. The length of one of the contracts is five and one
half years and the other contract is one year. The contracts automatically renew
at the end of each term unless notice is given by one of the parties. These
agreements generated $775 thousand per quarter starting in the fourth quarter of
2003 for the Banking Practice and increasing to $1.1 million per quarter
starting in the third quarter of 2004, of which, $875 thousand is for the
Banking Practice and $200 thousand is for the Executive Benefits Practice. First
year commission revenue in 2002 included $3.1 million related to an agreement
with another insurance carrier, which was executed in 2002. Under the
thirty-year agreement, renewal revenues have also been affected each quarter
since execution of the agreement with approximately $2.5 million of revenue
reflected in the year ended December 31, 2003. The expected revenue streams are
based on our existing inforce business with these carriers, and would be
negatively impacted by potential future surrenders of the inforce business or
non-renewal of the agreements and positively impacted by asset growth of our
business with these carriers.


                                       22
<PAGE>


         Commission expense. Commission and fee expense was $88.3 million, or
27.1% of total revenue, for the year ended December 31, 2003, versus $90.0
million, or 32.3% of total revenue, for the year ended December 31, 2002. The
reduction in commission expense as a percentage of revenue reflects an increase
in the percentage of revenue generated from employee consultants. Additionally,
a higher percentage of 2003 revenue was renewal revenues (48.6)% as compared to
2002 (41.1)%. Generally, renewal revenues have a lower commission rate than
first year revenues. We do not pay commission, or any other related expenses, on
the revenue associated with the carrier incentive contracts.

         General and administrative expense. General and administrative expense
for the year ended December 31, 2003 was $159.3 million, or 48.9% of total
revenue, compared to $140.6 million, or 50.5% of total revenue, for the year
ended December 31, 2002. General and administrative expenses increased for the
year ended December 31, 2003 from the prior year as a result of a full year of
expense from the 2002 acquisitions, such as LongMiller and Federal Policy Group
and the hiring of Andersen Human Capital Practice partners and employees,
included for the entire year of 2003. General and administrative expense for the
year ended December 31, 2003 included approximately $2.6 million in charges,
primarily related to severance costs and lease terminations in our Executive
Benefits Practice and Healthcare Group and approximately $1.3 million relating
to the corporate re-branding effort as a result of our name change. A non-cash
charge of $345 thousand was incurred in the first quarter of 2003 related to
stock compensation expense. General and administrative expenses increase as we
add more employee consultants as opposed to independent consultants.

         Amortization. Amortization expense for the year ended December 31, 2003
was $21.6 million compared to $9.2 million in the prior year period. We acquired
approximately $400 million of inforce revenue with our November 2002 acquisition
of LongMiller. The acquisition of LongMiller added approximately $14.0 million
of amortization expense in 2003 as a result of a full year of amortization of
the net present value of inforce revenue and non-compete agreements. The 2002
results included one month of amortization related to this intangible asset.

         Settlement of litigation. During the year ended December 31, 2003, we
received $1.5 million from a favorable lawsuit settlement.

         Human Capital Practice reorganization. In the fourth quarter of 2003,
we reorganized our executive compensation consulting practices. As part of the
reorganization, some of the operations and employees of the Human Capital
Practice were transferred to the Pearl Meyer & Partners practice. In addition,
several partners and staff members were terminated which resulted in exiting
certain activities of the Practice and creating unused leased office space in
numerous cities. We recorded a charge of $7.5 million in the fourth quarter of
2003 relating to the reorganization, of which, $7.1 million remains on the
consolidated balance sheet as of December 31, 2003. No similar costs were
recorded in 2002.

         Other income. For the years ended December 31, 2003 and 2002, we
received rental income of approximately $302 thousand and $262 thousand,
respectively from several subtenants.

         Interest expense. Interest expense for the year ended December 31, 2003
was $24.3 million compared to $4.1 million in 2002. To finance the November 2002
acquisition of LongMiller, we borrowed approximately $87.5 million on our line
of credit and issued $305 million of non-recourse insurance revenue asset-backed
notes. The increased outstanding borrowings were responsible for the increase in
interest expense.

         Income taxes. Income taxes for the year ended December 31, 2003 were
$8.1 million, at an effective tax rate of 38.9%, compared to $12.4 million at an
effective tax rate of 41.0% for the year ended December 31, 2002. The effective
tax rate for the year ended December 31, 2003 reflects $283 thousand of net
state tax refunds relating to prior years. The decrease in the effective tax
rate is primarily related to the true up of the estimated 2002 state tax
liability. We expect a normalized effective income tax rate of approximately 40%
in future periods.

         Net income. Net income, for the year ended December 31, 2003 was $12.7
million, or $0.68 per diluted common share versus net income of $17.3 million
after an impairment charge of $523 thousand, net of taxes, from the adoption of
SFAS No. 142, or $0.99 per diluted share, for the same period last year. The
diluted weighted average number of shares outstanding increased to 18.7 million
shares for the year ended December 31, 2003 from 17.5 million shares for the
year ended December 31, 2002.


                                       23
<PAGE>


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

         Revenue. Total revenue for the year ended December 31, 2002 was $278.6
million compared to $236.9 million for the year ended December 31, 2001. The
Banking Practice experienced strong revenue growth of 26.3% in 2002 as a result
of closing numerous cases in the community banking sector and the acquisition of
LongMiller in November 2002. Increases of approximately $3.0 million of first
year commission and fee revenue and approximately $14.0 million of renewal
revenue are attributable to the acquisition of LongMiller. Revenue growth was
also strong in the Healthcare Group, which benefited from increased first year
commission and fee revenue. Revenue in 2002 was positively impacted by
approximately $9.5 million with the February 2002 acquisition of Federal Policy
Group, which provides tax and legislative consulting services. New business
revenue includes $3.2 million received pursuant to an Administrative Services
Agreement and Bonus Forfeiture Agreement with an insurance carrier with which a
significant amount of inforce insurance is in place (see Carrier Incentive
Contracts below). Our Executive Benefits Practice ("EBP") experienced a decline
in revenue from $94.2 million in 2001 to $82.8 million in 2002 as a result of
economic conditions and proposed legislation related to the structure of
deferred compensation plans that has caused clients to delay implementing new
deferred compensation plans. These circumstances may continue in future periods
and adversely affect our ability to generate future revenue in EBP.

         Commission expense. Commission and fee expense was $90.0 million, or
32.3% of total revenue, for the year ended December 31, 2002, versus $84.0
million, or 35.5% of total revenue, for the year ended December 31, 2001. This
reduction in the percentage of commission expense as a percentage of revenue
reflects an increased proportion of revenue from fee-based consulting activity
in 2002 as well as an increase in the percentage of revenue generated from
employee consultants. We expect the acquisition of LongMiller to result in a
greater percentage of commission expense as a percentage of revenue in the
future. Fee-based consulting activity accounted for 11.6% of 2002 revenue
compared to 8.3% of 2001 revenue. Included in commission expense is $474
thousand of non-cash expense recognized in 2002 from performance-based stock
options issued to non-employee producers. Such expenses may be incurred in the
future if certain non-employee producers achieve specified targets.

         General and administrative expense. General and administrative expense
for the year ended December 31, 2002 was $140.6 million, or 50.5% of total
revenue, compared to $102.9 million, or 43.4% of total revenue, for the year
ended December 31, 2001. The increase is attributed to the expanded staffing of
sales consultants and support services company-wide and expenses associated with
recent acquisitions. General and administrative expenses in 2002 include $13.3
million of general and administrative expense, which includes approximately $825
thousand of severance costs associated with not pursuing the International
Employment Solutions practice, for Human Capital Practice since May 2002. In
addition, general and administrative expense includes $550 thousand of severance
costs related to reorganization initiatives in the Healthcare Group that
occurred in second quarter 2002.

         Amortization. Amortization expense for the year ended December 31, 2002
was $9.2 million, compared to $11.6 million in the prior year period. The
reduction in amortization expense resulted from the January 2002 adoption of
SFAS No. 142, which eliminated the amortization of goodwill, offset by
amortization related to identifiable intangibles through acquisitions in 2002.
For the year ended December 31, 2001, amortization expense included $4.0 million
pre-tax attributed to goodwill amortization. The acquisition of LongMiller added
approximately $14.0 million of amortization expense in 2003, as a result of a
full year's of amortization of the net present value of inforce revenue and
non-compete agreements. We acquired approximately $400 million of inforce
revenue with our November 2002 acquisition of LongMiller and the 2002 results
include one month of amortization related to this intangible asset.

         Other income. During 2002, we received $262 thousand in rental income
from a tenant. During 2001, we received $191 thousand of life insurance proceeds
as the result of the death of one of our employees, and rental income from a
tenant of $256 thousand.

         Interest expense. Interest expense for the year ended December 31, 2002
was $4.1 million compared to $7.7 million in 2001. In 2001, we recorded interest
expense of approximately $2.0 million as a result of interest rate swap
settlements associated with the pay off of our outstanding bank debt with the
proceeds from our secondary equity offering. As a result, we had minimal debt
outstanding during the first half of 2002. With the November 2002 acquisition of
LongMiller, we borrowed approximately $87.5 million on our line of credit and
issued $305 million of non-recourse insurance revenue asset-backed notes.

         Income taxes. Income taxes for the year ended December 31, 2002 were
$12.4 million at an effective tax rate of 41.0% compared to $8.7 million at an
effective tax rate of 35.3% for the year ended December 31, 2001. The 2001
effective tax rate was affected by the filing of an amended federal tax return
during the third quarter 2001 which reduced the overall tax rate.


                                       24
<PAGE>


         Net income. Net income, after an impairment charge of $523 thousand
(net of taxes) from the adoption of SFAS No. 142, for the year ended December
31, 2002 was $17.3 million, or $0.99 per diluted common share versus net income
of $16.0 million or $1.18 per diluted share for the year ended December 31,
2001. The diluted weighted average number of shares outstanding increased to
17.5 million shares for the year ended December 31, 2002 from 13.6 million
shares for the year ended December 31, 2001.

ACQUISITION STRATEGY

         Our acquisition criteria focuses on the quality of the management,
future earnings and the strategic fit with our company, as well as the growth
potential of the target company. In several of our acquisitions, we also acquire
the financial value embedded in a book of recurring renewal business that is
expected to be realized for many years after the acquisition takes place. Up
until now, our future renewal revenue stream has been the source of collateral
for our line of credit, which we frequently use for acquisitions. As we acquire
more businesses that do not have this attribute, this may limit our future
borrowing availability. We typically structure a majority of the purchase price
in cash. We acquire little in the way of tangible assets, thus creating a
substantial amount of intangible assets on our balance sheet. The companies we
acquire are frequently privately owned and structured as subchapter S
corporations and the acquisitions are usually effected through a purchase of
assets with the income taxed directly to the stockholders.

         From time to time we are involved in negotiations relating to the
acquisition of companies in our industry or related industries. Some of these
negotiations could involve companies whose acquisition would be highly material
to our results of operations and financial condition. In addition, we could
incur substantial costs in connection with negotiating such transactions, even
if the transactions are not completed.

HUMAN CAPITAL PRACTICE REORGANIZATION

         In the fourth quarter of 2003, we reorganized our executive
compensation consulting practices. As part of the reorganization, some of the
operations and employees of the Human Capital Practice were transferred to the
Pearl Meyer & Partners practice. In addition, four partners and six staff
members were terminated which resulted in exiting certain activities of the
practice and creating unused leased office space in numerous cities. We recorded
a charge of $7.5 million in the fourth quarter of 2003 relating to the
reorganization of which $7.1 million remains on the consolidated balance sheet
as of December 31, 2003.

         As a result of the restructuring, we expect to leverage the Pearl Meyer
& Partners brand name for executive compensation consulting, eliminate confusion
in the marketplace regarding our practices and their markets, and significantly
lower the cost structure for the remaining Human Capital Practice. The remaining
business of the Human Capital Practice consists of actuarial/retirement plan and
investment advisory services. See Note 4, "Human Capital Practice" to the
consolidated financial statements for further information.

CARRIER INCENTIVE CONTRACTS

         During the third quarter of 2003, we completed agreements with two of
our insurance carriers, which will generate additional revenue on our existing
blocks of business with these carriers. The length of one of the contracts is
five and one half years and the other contract is one year. The contracts
automatically renew at the end of each term unless notice is given by one of the
parties. The agreements resulted in revenue of $2.7 million in the third quarter
2003, and $775 thousand in the fourth quarter 2003, and provide for additional
payments upon certain conditions and measurement dates. The future payment
amounts are based on the cash value (or fair value) of our existing inforce
business with these carriers at specified dates of measurement and are projected
at approximately $3.7 million per year. Future payment amounts would be
negatively impacted by potential future surrenders of the inforce business or
non-renewal of the agreements and positively impacted by asset growth of these
contracts.

         On September 25, 2002, we entered into an Administrative Services
Agreement and Bonus Forfeiture Agreement with an affiliate of AUSA Holding,
Inc., one of our principal stockholders and insurance carrier. We received
approximately $2.5 million of payments in 2003 related to this agreement. During
2002, we received $2.5 million for services rendered prior to and through
September 30, 2002 and recognized a total of $3.1 million of revenue in 2002,
pursuant to this agreement. Under the terms of this agreement, we expect to
continue to receive approximately $2.5 million annually from the carrier for a
period of 30 years, depending upon certain conditions. Of this annual amount
$2.0 million is included in the cash flows securitizing the asset-backed notes
issued to finance the acquisition of LongMiller, and we will not have access to
this cash for general corporate purposes until the securitized notes are fully
paid. This revenue, net of amounts provided for chargebacks, is being recognized
on a monthly basis beginning in October 2002. The amounts received are subject
to chargeback (reimbursement of a portion of amounts received) if any policies
under this agreement are surrendered or exchanged. Any chargeback amounts would
be deducted from the next scheduled payment.


                                       25
<PAGE>


RECENT DEVELOPMENTS

Tax and legislative initiatives

         In recent years, the Internal Revenue Service ("IRS") has undertaken a
major enforcement initiative to disallow the interest deductions on certain
leveraged business-owned life insurance programs sold during or prior to 1995.
The IRS has prevailed on the cases it has litigated to date related to this
initiative and recently made a temporary (now expired) public settlement offer
to address ongoing cases. While we stopped selling leveraged business-owned life
insurance programs after 1995 and we do not expect any material adverse impact
on our revenue from this enforcement initiative, it is impossible to determine
the impact of this initiative on a client's decision to continue or surrender an
existing leveraged business-owned life insurance program.

         There have been several recent legislative proposals to change the
federal tax laws with respect to business-owned life insurance. On September 17,
2003, the Senate Finance Committee approved legislation proposed by Sen. Jeff
Bingaman (D-NM) that would tax the death benefits taxpayers receive from certain
policies on the lives of former employees. Following an intensive lobbying
effort by the insurance industry, the Finance Committee on February 2, 2004,
reconsidered the business-owned life insurance provision it had previously
approved and, in its place, approved legislation that generally would tax the
death benefits taxpayers receive from policies on the lives of employees or
former employees only in cases where the insured person had not consented to
being covered or in the case of a former employee, or where the insured was not
among the company's highly-compensated employees at the time of policy issuance.
We believe that this most recent proposal, if enacted, would not have a material
adverse effect on our revenue from the sale of business-owned life insurance
policies. However, if Congress were to adopt legislation broadly limiting the
tax-free payment of death benefits on such policies or otherwise adversely
affecting the tax treatment of the policies, future revenue from sale of
business-owned life insurance policies could materially decline.

Change in insurable interest laws

         There have been several recent proposals in various states (e.g.,
Georgia, Texas, and Washington) to change the insurable interest and other state
laws governing the ability of an employer to purchase or hold life insurance on
the lives of employees. California has recently enacted legislation prohibiting
the purchase of business-owned life insurance on the lives of employees not
exempt from wage and hour laws (a group of employees not typically insured under
the arrangements we market). Significant segments of the life insurance industry
are engaged in an ongoing, intensive effort to prevent the enactment of state
law changes that would have an adverse impact on business-owned life insurance.
If one or more states were to adopt proposals broadly limiting the ability of
employers to purchase or hold life insurance on the lives of employees, the
market for these policies would be reduced and a number of existing policies
could be surrendered or exchanged, with a resulting reduction in our revenues
from these arrangements.


                                       26
<PAGE>


SEGMENT RESULTS

         The following analysis depicts the results of each of our operating
segments on a stand-alone basis. The practices are allocated a charge to cover
centralized Resource Center expenditures in the areas of human resources,
marketing, and information technology.

Executive Benefits Practice

<TABLE>
<CAPTION>
                                                                                 OPERATING RESULTS
                                                                              YEAR ENDED DECEMBER 31,
                                                                        ------------------------------------
                                                                            2003         2002       2001
                                                                       ------------- ------------ ------------
                        <S>                                                   <C>        <C>        <C>
                        Revenue
                          First year commissions and related fees.            $21,481    $29,370    $42,117
                          Renewal commissions and related fees....             48,249     53,277     51,674
                          Reimbursable expenses...................                258        200        447
                                                                        -------------- ---------- ----------
                                  TOTAL REVENUE...................             69,988     82,847     94,238
                        Operating Expenses
                          Commissions and fees....................             29,281     40,615     47,650
                          % of revenue............................              41.8%      49.0%      50.6%
                          General and administrative..............             33,723     34,051     28,915
                          % of revenue............................              48.2%      41.1%      30.7%
                          Reimbursable expenses...................                258        200        447
                          Amortization............................              4,110      4,298      5,703
                                                                        -------------- ---------- ----------
                        OPERATING INCOME                                      $ 2,616    $ 3,683    $11,523
                        % of revenue..............................               3.7%       4.4%      12.2%
                                                                        ============== ========== ==========
</TABLE>


         As of January 1, 2003, we transferred the operations of Coates Kenney
from Executive Benefits Practice to Human Capital Practice. As a result, segment
information for the year ended December 31, 2002 has been reclassified to
reflect this transfer.

         First year revenue was significantly lower in the Executive Benefits
Practice, reflecting the continued difficult economic and legislative
environment, which most directly affects this segment of the business. First
year revenue for the year ended December 31, 2003, includes approximately $785
thousand from the execution of an incentive contract with one of our insurance
carriers. Renewal revenue declined from the year ended December 31, 2002, as a
result of split dollar legislation and lower deferrals into executive benefit
plans. Commission expense as a percentage of total revenue declined from 49.0%
for the year ended December 31, 2002, to 41.8% for the year ended December 31,
2003, due to the higher percentage of sales by employee consultants who are paid
on a lower commission grid. General and administrative expense for the year
ended December 31, 2003, includes approximately $800 thousand of restructuring
charges recorded in accordance with Statement of Financial Accounting Standards
("SFAS ") No. 146, Accounting for Costs Associated with Exit or Disposal
Activities for the ongoing consolidation of the business support services and
$711 thousand of charges associated with other severance agreements and lease
terminations.

         The acquisitions of Comiskey Kaufman, Inc. (acquired April 2002) and
Lyons Compensation and Benefits, LLC (acquired August 2001) contributed
approximately $4.7 million to the year ended December 31, 2002, revenue and $200
thousand of operating income. 2002 renewal revenue increased due to higher than
anticipated premium payments on inforce business and additional renewals from
2001 new business. General and administrative expense increased for the year
ended December 31, 2002 over 2001 due to the acquisitions mentioned above and
additional hirings. Amortization expense decreased in 2002 when compared to 2001
primarily due to the elimination of goodwill amortization as of January 1, 2002.
Goodwill amortization for Executive Benefits Practice in 2001 was approximately
$759 thousand.


                                       27
<PAGE>


Banking Practice

<TABLE>
<CAPTION>
                                                                               OPERATING RESULTS
                                                                            YEAR ENDED DECEMBER 31,
                                                                    ----------------------------------------
                                                                         2003          2002         2001
                                                                    ------------- ------------ -------------
<S>                                                                        <C>          <C>          <C>
                      Revenue
                        First year commissions and related fees.          $ 66,147     $ 64,179     $55,797
                        Renewal commissions and related fees....            99,511       51,787      35,964
                        Reimbursable expenses...................               181           70         129
                                                                    --------------- ------------ -----------
                                TOTAL REVENUE...................           165,839      116,036      91,890
                      Operating Expenses
                        Commissions and fees....................            55,016       45,322      33,356
                        % of revenue............................             33.2%        39.1%       36.3%
                        General and administrative..............            40,183       30,832      25,450
                        % of revenue............................             24.2%        26.6%       27.7%
                        Reimbursable expenses...................               181           70         129
                        Amortization............................            15,238        2,659       1,690
                                                                    --------------- ------------ -----------
                      OPERATING INCOME                                    $ 55,221     $ 37,153     $31,265
                       % of revenue.............................             33.3%        32.0%       34.0%
                                                                    =============== ============ ===========
</TABLE>

         Total first year revenue increased 3.1% to $66.1 million for the year
ended December 31, 2003 from $64.2 million for the year ended December 31, 2002.
Revenue in the large bank sector of the business declined significantly from
2002 due to the sustained low interest rate environment. Increases in the
community bank sector more than offset the first year revenue decrease in the
large bank sector. Renewal revenue for the year ended December 31, 2003 includes
$2.0 million related to the Administrative Services Agreement entered into on
September 25, 2002 with an affiliate of AUSA Holding, Inc. along with $2.7
million in first year revenue from the execution of contracts with two other
insurance carriers during 2003. With interest rates remaining at very low
historical levels, there is some uncertainty about sustaining revenue growth due
to product appeal, product capacity, and pricing concerns. Approximately $40.0
million of the increase in renewal revenue is attributable to the securitized
inforce revenue stream from the acquisition of LongMiller. Commission expense
for the year ended December 31, 2003 was $55.0 million, or 33.2% of revenue,
compared to $45.3 million, or 39.1% of revenue, in the same period in 2002. The
commission expense as a percentage of revenue continues to decrease as a result
of a higher percentage of first year revenue produced by employee consultants.
In addition, a larger percentage of total revenue consists of renewal revenue,
which has a lower commission expense percentage. We do not pay commission
expense on the revenue associated with the carrier incentive contracts. General
and administrative expense for the year ended December 31, 2003, was $40.2
million, or 24.2% of revenue, compared to $30.8 million or 26.6% of revenue, for
the comparable period in 2002. December 31, 2003 expenses included twelve months
for LongMiller compared to one month in 2002, and operating expenses for the
fourth quarter 2003 acquisition of Shoemaker and Blackwood. The lower percentage
of general and administrative expenses to revenue reflects the relatively lower
costs associated with the revenue stream from the LongMiller acquisition.

         Total first year commission revenue increased 15.0% to $64.2 million
and total revenue increased 26.3% to $116.0 million for the year ended December
31, 2002, compared to the prior year. These increases reflect significant sales
growth in the community bank market, and include only limited contribution from
the large bank market, which has been more adversely affected by the low
interest rate environment. Approximately $14 million of the increase to renewal
revenue is attributable to the acquisition of LongMiller which was completed
November 26, 2002. Commission expense for the year ended December 31, 2002, was
$45.3 million, or 39.1% of revenue, compared to $33.4 million or 36.3% of
revenue in the same period in 2001. Commission expense as a percentage of
revenue increased due to the mix of business between independent and employee
consultants. General and administrative expenses for the year ended December 31,
2002 were $30.8 million, or 26.6% of revenue, compared to $25.5 million or 27.7%
of revenue for the comparable period in 2001, due to the acquisitions of
Hilgenberg and LongMiller, and investments in staffing of sales consultants and
support staff to service increased sales volumes.


                                       28
<PAGE>


Healthcare Group

<TABLE>
<CAPTION>
                                                                           OPERATING RESULTS
                                                                        YEAR ENDED DECEMBER 31,
                                                                   -----------------------------------
                                                                      2003        2002        2001
                                                                 ------------- ------------ ------------

<S>                                                                     <C>        <C>        <C>
                          Revenue
                            First year commissions and related
                              fees...............................      $24,703    $26,812     $20,065
                            Renewal commissions and related fees         8,554      8,244       5,159
                            Reimbursable expenses................        2,843      2,850       2,303
                                                                   ------------ ---------- -----------
                                    TOTAL REVENUE................       36,100     37,906      27,527
                          Operating Expenses
                            Commissions and fees.................        3,962      4,061       2,996
                             % of revenue........................        11.0%      10.7%       10.9%
                            General and administrative...........       22,765     24,369      21,180
                             % of revenue........................        63.1%      64.3%       76.9%
                            Reimbursable expenses................        2,843      2,850       2,303
                            Amortization.........................        1,683      1,808       2,382
                                                                   ------------ ---------- -----------
                          OPERATING INCOME (LOSS) ...............      $ 4,847    $ 4,818     $(1,334)
                          % of revenue...........................        13.4%      12.7%       (4.8)%
                                                                   ============ ========== ===========
</TABLE>

         Healthcare Group revenues were slightly (4.8)% lower for the year ended
December 31, 2003, compared to the prior year. Healthcare's 2002 performance was
strong and the current Healthcare environment has been challenging especially
for revenues in the areas of labor services, rank and file compensation, and
physician services. For the year ended December 31, 2003, commission and general
and administrative expenses include approximately $435 thousand and $335
thousand, respectively, for costs associated with a severance agreement. General
and administrative expense for the year ended December 31, 2002, included one
time charges of $729 thousand for write off of leasehold improvements from a
previous office space and severance associated with the downsizing of existing
staff levels.

         Total revenue increased 37.7% for the year ended December 31, 2002
compared to 2001. Revenue was favorably impacted by the acquisition of
Management Science Associates ("MSA"), as it was included for the full year
2002, compared to six months for 2001, and continued focus on marketing efforts
of the managing directors. Consulting fees included in first year revenues also
increased considerably during the period. Revenue from increased fees for
providing recordkeeping services (included in renewal commission and related
fees) contributed $632 thousand to revenue for the year ended December 31, 2002.
Reimbursable expenses revenue increased from the year ended December 31, 2001,
as MSA is included for the entire year of 2002 compared to six months for 2001.
Commission expense as a percent of revenue decreased to 10.7% of revenue for the
year ended December 31, 2002, as compared to 10.9% of revenue in the year ended
December 31, 2001, reflecting the increase in administration and recordkeeping
fees, in which no commissions are paid to consultants. General and
administrative expenses increased 15.1% over 2001, primarily due to a full year
of expenses in 2002 for MSA. Severance expense of approximately $550 thousand
was incurred during the year associated with the downsizing of existing staff
levels of the Healthcare Group. Operating income for the year ended December 31,
2002 was $4.8 million, the highest in any period since acquiring the Healthcare
Group, which is a result of the factors discussed above.


Human Capital Practice

<TABLE>
<CAPTION>
                                                                  OPERATING RESULTS
                                                              YEAR ENDED DECEMBER 31,
                                                              --------------------------

                                                                  2003         2002
                                                              ------------- ------------
<S>                                                               <C>           <C>
                          Revenue
                            Consulting fees................        $ 8,170      $ 4,804
                            Reimbursable expenses..........            370          239
                                                              ------------- ------------
                                    TOTAL REVENUE..........          8,540        5,043
                          Operating Expenses
                            General and administrative.....         19,528       10,225
                            % of revenue...................         228.7%       202.8%
                            Reimbursable expenses..........            370          239
                                                              ------------- ------------
                          OPERATING LOSS                          $(11,358)     $(5,421)
                          % of revenue....................         (133.0)%     (107.5)%
                                                              ============= ============
</TABLE>


         In May 2002, the Human Capital Practice was formed by combining our
existing Rewards and Performance Group with the addition of 10 partners and 74
employees from Andersen's Human Capital Practice. As of October 1, 2003, we
transferred part of the


                                       29
<PAGE>

operations of the Human Capital Practice to Pearl Meyer & Partners. As a result,
all years presented have been reclassified to reflect this transfer. The Human
Capital Practice results continue to be negatively affected by the economic
climate for consulting services and the inability of the former Andersen
employees to retain their Andersen client base or to develop and sell into new
relationships.

         In the fourth quarter of 2003, we reorganized our executive
compensation consulting practices. As part of the reorganization, some of the
operations and employees of the Human Capital Practice (including the Rewards
and Performance Group) were transferred to the Pearl Meyer & Partners Practice.
We recorded a charge of approximately $7.5 million in the fourth quarter 2003
relating to the reorganization of which $7.1 million remains on the consolidated
balance sheet as of December 31, 2003.

Pearl Meyer & Partners

<TABLE>
<CAPTION>
                                                                       OPERATING RESULTS
                                                                    YEAR ENDED DECEMBER 31,
                                                              -------------------------------------
                                                                 2003         2002        2001
                                                              ------------- ------------ ----------
<S>                                                                <C>          <C>         <C>
                          Revenue
                            Consulting fees................       $24,365     $20,811      $19,659
                            Reimbursable expenses..........         2,506       1,522        1,969
                                                              ------------ ----------- ------------
                                    TOTAL REVENUE                  26,871      22,333       21,628
                          Operating Expenses
                            General and administrative.....        23,267      20,927       14,244
                            % of revenue...................         86.6%       93.7%        65.9%
                            Reimbursable expenses..........         2,506       1,522        1,969
                            Amortization...................             -           -        1,571
                                                              ------------ ----------- ------------
                          OPERATING INCOME (LOSS)..........       $ 1,098     $ (116)      $ 3,844
                          % of revenue.....................          4.1%      (0.5)%        17.8%
                                                              ============ =========== ============
</TABLE>

         As of October 1, 2003, we transferred part of the operations of the
Human Capital Practice to Pearl Meyer & Partners. As a result, all years
presented have been reclassified to reflect this transfer.

         Total consulting revenue increased 20.3% to $26.8 million for the year
ended December 31, 2003, compared to $22.3 million for the year ended December
31, 2002. The practice continues to experience more sales activity as a result
of additional engagements in its areas of expertise of corporate governance and
executive compensation due, in part, to increased public scrutiny of these
areas. General and administrative expense was $23.3 million for the year ended
December 31, 2003, compared to $20.9 million for the year ended December 31,
2002 reflecting higher headcount.

         Total consulting revenue increased 3.2% to $22.3 million for the year
ended December 31, 2002, compared to $21.6 million for the year ended December
30, 2001. General and administrative expense increased to $20.9 million for the
year ended December 31, 2002 from $14.2 million for the year ended December 31,
2001, due to additional depreciation for new information systems, increased
compensation costs, and higher headcount than in 2001. Amortization expense for
the year ended December 31, 2002 decreased compared to the year ended December
31, 2001, due to the elimination of goodwill amortization as of January 1, 2002.
Operating loss of $116 thousand for the year ended December 31, 2002, decreased
from $3.8 million for the year ended December 31, 2001, due to the slowing
economy and the difficult consulting environment.

Federal Policy Group
<TABLE>
<CAPTION>
                                                              OPERATING RESULTS
                                                           YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                              2003          2002
                                                          -------------- ------------
<S>                                                             <C>           <C>
                          Revenue
                            Consulting fees............         $14,670       $9,358
                            Reimbursable expenses......             185          162
                                                          -------------- ------------
                                    TOTAL REVENUE......          14,855        9,520
                          Operating Expenses
                            General and administrative.           7,689        4,946
                            % of revenue...............           51.8%        52.0%
                            Reimbursable expenses......             185          162
                            Amortization...............             383          318
                                                          -------------- ------------
                          OPERATING INCOME.............         $ 6,598       $4,094
                          % of revenue.................           44.4%        43.0%
                                                          ============== ============
</TABLE>

         Federal Policy Group was acquired on February 25, 2002. Federal Policy
Group is a consulting practice representing Fortune 500 companies, trade
associations, and other businesses before Congress, the Treasury Department, and
other federal agencies on


                                       30
<PAGE>


legislative and regulatory matters. Results for the year ended December 31, 2003
included approximately $1.6 million of revenue and approximately $538 thousand
of operating income related to the four new employees hired during the second
quarter of 2003. Federal Policy Group experienced strong demand for its services
and benefited from a $2.8 million success fee recorded and collected during the
first quarter of 2003. Revenue for the year ended December 31, 2002 (10 months
activity) was $9.5 million, generating operating income of $4.1 million, or
43.0% of revenue.

LIQUIDITY AND CAPITAL RESOURCES

Selected Measures of Liquidity and Capital Resources.

<TABLE>
<CAPTION>
                                                                       AS OF DECEMBER 31,
                                                                      ---------------------
                                                                        2003       2002
                                                                      ---------- ----------
<S>                                                                      <C>       <C>
                             Cash and cash equivalents............       $3,156    $14,266
                             Working capital (1)..................       $2,623    $19,403
                             Current ratio-- to one...............         1.04       1.24
                             Stockholders' equity per common
                                share(2)..........................       $13.95     $13.35
                             Debt to total capitalization (3) ....        57.7%      63.5%

<FN>
-------------------
(1)      Includes restricted cash and current portion of debt
         associated with asset-backed notes.
(2)      Total stockholders' equity divided by actual shares
         outstanding at year-end.
(3)      Current debt plus long-term debt divided by current debt plus
         long-term debt plus stockholders' equity.
</FN>
</TABLE>

         In addition to our tangible balance sheet assets and liabilities, we
have an on-going non-securitized renewal revenue stream, estimated to be $818.4
million over the next ten years. This on-going renewal revenue stream reflects
current conditions and is not necessarily indicative of the revenue that may
actually be achieved in the future and we cannot assure you that commissions
under these policies will be received. See "Estimated Future Gross Renewal
Revenue" section in the next few pages.

         Based on our historically strong operating cash flow and revolving
credit facility, we believe we have little need to maintain substantial cash
balances. We use net cash from operating activities primarily to fund capital
expenditures, small acquisitions, and service existing debt. We expect large
cash outlays and future acquisitions will be financed primarily through
externally available funds. However, we can offer no assurance such funds will
be available and, if so, on terms acceptable to us.

<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                         -------------------------------------
                                            2003         2002         2001
                                         ------------ ------------ -----------
<S>                                          <C>          <C>         <C>
             Cash flows from (used in):
               Operating activities.....     $74,613     $ 21,520     $28,422
               Investing activities.....     (13,585)    (371,005)    (34,242)
               Financing activities.....     (72,138)     353,544       8,429
</TABLE>

Cash Flows from Operating Activities

         Our cash flow from operating activities for the twelve months ended
December 31, 2003, 2002, and 2001 were as follows:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ----------------------------------
                                                                 2003        2002       2001
                                                              ----------- ----------- ----------
<S>                                                              <C>         <C>        <C>
                      Net income plus non-cash expenses...       $47,011     $33,874    $35,973
                      Changes in operating assets and
                        liabilities.......................        27,602     (12,354)    (7,551)
                                                              ----------- ----------- ----------
                      Cash flow from operating activities.       $74,613     $21,520    $28,422
                                                              =========== =========== ==========
</TABLE>

          The non-cash expenses mentioned above include depreciation of
equipment and leasehold improvements, amortization of intangibles, charges for
performance-based stock options issued to non-employee producers, and deferred
tax expense. Cash provided by changes in operating assets and liabilities
included a reduction of accounts receivable $(18.0 million) primarily as a
result of lower fourth quarter 2003 revenues than fourth quarter 2002 and
improved collection efforts, and an increase in non current liabilities $(6.8
million) primarily as a result of the fourth quarter 2003 Human Capital Practice
restructuring charge.


                                       31
<PAGE>


Estimated Future Gross Renewal Revenue

         The following tables represent the estimated gross renewal revenue
associated with the business-owned life insurance policies owned by our clients
as of December 31, 2003. The projected gross revenues are not adjusted for
mortality, lapse, or other factors that may impair realization, have not been
discounted to reflect their net present value, and do not reflect the commission
expense we must pay to consultants when we recognize the related revenue. We
cannot assure you that commissions under these policies will be received. These
projected gross revenues are based on the beliefs and assumptions of management
and are not necessarily indicative of the revenue that may actually be realized
in the future.

         Non-securitized Gross Inforce Revenues. The following table represents
the estimated gross inforce revenue associated with business-owned life
insurance policies owned by our clients as of December 31, 2003, not including
estimated securitized inforce revenues, which are set forth in a separate table.

<TABLE>
<CAPTION>
                                            EXECUTIVE                  BANKING             HEALTHCARE
                                        BENEFITS PRACTICE              PRACTICE               GROUP                TOTAL
                                     -------------------------   ---------------------  ------------------  ---------------------
<S>                                                  <C>                     <C>                  <C>                   <C>
                2004                                 $ 48,382                $ 46,401             $ 5,937               $100,720
                2005                                   48,105                  43,683               5,565                 97,353
                2006                                   42,332                  43,072               5,254                 90,658
                2007                                   33,004                  42,128               4,919                 80,051
                2008                                   30,515                  42,180               4,328                 77,023
                2009                                   31,172                  40,601               3,684                 75,457
                2010                                   28,635                  41,733               3,038                 73,406
                2011                                   28,720                  43,170               2,376                 74,266
                2012                                   27,643                  44,480               1,539                 73,662
                2013                                   28,470                  45,846               1,506                 75,822
                                     -------------------------   ---------------------  ------------------  ---------------------
      Total December 31, 2003                        $346,978                $433,294             $38,146               $818,418
                                     =========================   =====================  ==================  =====================

                                     -------------------------   ---------------------  ------------------  ---------------------
      Total December 31, 2002                        $352,256                $342,837             $42,962               $738,055
                                     =========================   =====================  ==================  =====================
</TABLE>

         The 10-year inforce revenues net of commission expense are $612.6
million for the year ended December 31, 2003, as compared to $ 516.9 at December
31, 2002.

         The following table represents the estimated gross renewal revenue
associated with our securitized inforce bank-owned life insurance policies as of
December 31, 2003. These revenue streams are restricted for the specific purpose
of paying off our asset-backed notes, which were issued in connection with the
acquisition of LongMiller in November 2002.

<TABLE>
<CAPTION>
                                                             SECURITIZED
                                                               BANKING
                                                               PRACTICE
                                                             -------------
<S>                            <C>                               <C>
                               2004.....................         $ 47,421
                               2005.....................           47,744
                               2006.....................           49,537
                               2007.....................           52,728
                               2008.....................           56,062
                               2009.....................           58,454
                               2010.....................           61,142
                               2011.....................           63,249
                               2012.....................           66,172
                               2013.....................           69,511
                                                             -------------
                               Total December 31, 2003..         $572,020
                                                             =============

                               Total December 31, 2002..         $508,130
                                                             =============
</TABLE>

         The 10-year inforce revenue net of commission expense is $438.0 million
and $395.5 million, for the years ended December 31, 2003 and 2002,
respectively.

         Human Capital Practice, Pearl Meyer & Partners, and Federal Policy
Group generate fee-based revenues and do not produce inforce revenues.


                                       32
<PAGE>


Cash Used in Investing Activities

         During the year ended December 31, 2003, $9.2 million was used for
acquisitions and $4.4 million was used for purchases of equipment.

         A substantial portion of the purchase price used to fund acquisitions
has historically been paid in cash. This is primarily due to our desire to avoid
diluting our existing stockholders. We expect acquisitions to continue and be
financed primarily from available credit lines and possible additional equity.
However, we can offer no assurances such will be the case.

Cash Flows from Financing Activities

         For the year ended December 31, 2003, approximately $72.1 million of
cash was used primarily $(66.2 million) for the net repayment of borrowings.

         As of December 31, 2003, there was restricted cash of approximately
$19.0 million, an increase of $4.9 million from December 31, 2002, which will be
used to pay down the asset-backed notes issued to finance the acquisition of
LongMiller. This cash is not available for general corporate purposes, but is
solely to service securitization indebtedness incurred to finance the
acquisition of LongMiller.

         On May 23, 2003, we received proceeds of approximately $14.5 million
from our participation in a pooled trust preferred transaction, in which we
issued $15.0 million aggregate principal amount of long-term subordinated debt
securities with a floating rate based on three month LIBOR plus a spread of 420
basis points (5.37% as of December 31, 2003). We used the net proceeds to pay
down the term portion of our credit facility. The pooled trust preferred debt is
payable in one payment due in 30 years with interest paid quarterly.

         On December 16, 2003, we received proceeds of approximately $11.5
million from our participation in a pooled trust preferred transaction, in which
we issued $12.0 million aggregate principal amount of long-term subordinated
debt securities with a floating rate based on three month LIBOR plus a spread of
410 basis points (5.27% as of December 31, 2003). We used the net proceeds to
pay down the term portion of our credit facility. The pooled trust preferred
debt is payable in one payment due in 30 years with interest paid quarterly.

         In November 2003, we amended and restated our December 28, 1999 Credit
Agreement, revising the amount available under the credit facility to $80.0
million. In December 2003, a new participant bank was added to the facility
increasing the facility amount to $90 million. At December 31, 2002, we
converted $50 million of the outstanding balance under the revolving credit
facility to term debt. The term debt is being paid quarterly over five years
under the facility agreement. We had $59.1 million available under our credit
line at December 31, 2003. Our restrictive covenants may limit our borrowing
ability under our credit line.

         The restrictive covenants under the credit agreement provide for the
maintenance of a minimum ratio of fixed charges, a maximum allowable leverage
ratio, a minimum amount of net worth (stockholders' equity), and a maximum ratio
of debt to capitalization. We were in compliance with all restrictive covenants
as of December 31, 2003.

         We believe that our cash flow from operating activities will continue
to provide sufficient funds to service our debt obligations. However, as our
business grows, our working capital and capital expenditure requirements will
also continue to increase. There can be no assurance that the net cash flow from
operations will be sufficient to meet our anticipated cash flow requirements or
that we will not require additional debt or equity financing in the future. We
may issue stock to finance future acquisitions.

OFF-BALANCE SHEET ARRANGEMENTS AND OTHER CONTRACTUAL OBLIGATIONS

         We do not have any material off-balance sheet arrangements that have,
or are reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenue or expenses, results of
operations, liquidity, capital expenditures, or capital resources. Set forth
below is a summary presentation of our contractual obligations as of December
31, 2003, which are expected to become due and payable during the periods
specified.


                                       33
<PAGE>


<TABLE>
<CAPTION>
                                                     PAYMENTS DUE BY PERIOD

                                                                          LESS THAN                                      MORE THAN
CONTRACTUAL OBLIGATIONS                                     TOTAL           1 YEAR        1-3 YEARS       3-5 YEARS       5 YEARS
                                                           --------        -------         -------         -------       --------

<S>                                                        <C>             <C>             <C>             <C>           <C>
Long-term debt obligations...................              $352,521        $16,553         $50,693         $27,242       $258,033
Operating lease obligations..................                62,380         10,882          20,653          16,753         14,092

Contingent consideration for acquisitions....                27,086          6,361          16,019           4,706              -
                                                           --------        -------         -------         -------       --------
Total........................................              $441,987        $33,796         $87,365         $48,701       $272,125
                                                           ========        =======         =======         =======       ========
</TABLE>

We expect to make significant cash outlays in future years for interest, taxes
and deferred compensation arrangements. However, due to their variable nature,
no amounts for these items have been included in the table above.

INFLATION

         Inflation has not had a material effect on our results of operations.
Certain of our expenses, such as compensation, benefits, and capital equipment
costs, are subject to normal inflationary pressures. However, the majority of
our service and administrative agreements with clients, which generate fee
income, have a cost of living adjustment tied to the consumer price index.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         At December 31, 2003, we had total outstanding indebtedness of $352.5
million, or approximately 99.0% of total market capitalization. Of our
outstanding debt, $288.7 million was subject to an average fixed rate of 6.3% at
December 31, 2003. Of our outstanding debt, $5.9 million was subject to fixed
rates of 10.0% at December 31, 2003. Of our outstanding debt, $15.5 million is
term debt and is subject to a variable rate based on LIBOR plus a spread (3.17%
at December 31, 2003). Outstanding debt on our credit revolver is $15.4 million,
borrowed at prime and at a one-month LIBOR rate plus a spread (weighted average
interest rate of 3.45% as of December 31, 2003). The amount outstanding on our
two pooled trust preferred debt issues is $27.0 million as of December 31, 2003
(average interest rate of 5.33% as of December 31, 2003).

         On January 7, 2003, we entered into two interest rate swaps with a
total notional value of $50 million to hedge $50 million of LIBOR-based debt. In
conjunction with renewing our credit facility, we terminated one of the interest
rate swaps in November 2003. The notional amount of the remaining interest rate
swap amortizes at the rate of $1.4 million per quarter. The terms of the
remaining swap are as follows:



<TABLE>
<CAPTION>
                                             NOTIONAL AMOUNT
        EFFECTIVE                            AT DECEMBER 31,     FIXED RATE    VARIABLE RATE   FAIR VALUE AS OF
          DATE            MATURITY DATE            2003          TO BE PAID   TO BE RECEIVED   DECEMBER 31, 2003
    ------------------ -------------------- ------------------- ------------- ---------------- ------------------
<S>                     <C>                      <C>               <C>             <C>                      <C>
    January 7, 2003     December 31, 2007        $22,400           2.85%           LIBOR                    $157
</TABLE>


         We have exposure to changing interest rates and, as discussed in Note
15 "Financial Instruments" to the consolidated financial statements, will engage
in hedging activities, from time to time, to mitigate this risk. The interest
rate swaps, which we have entered into, are used to hedge our interest rate
exposure on the LIBOR based variable rate debt outstanding at December 31, 2003.
Interest on the remaining $35.5 million of unhedged debt at December 31, 2003,
bears interest at LIBOR plus 225 basis points, LIBOR plus 420 basis points and
prime. At our current borrowing level, a 1% change in the interest rate will
have an effect of approximately $355 thousand on interest expense on an annual
basis.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Our financial statements begin on page 37 of this Form 10-K.

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

         On February 27, 2002, Ernst & Young LLP, after being notified that it
would not be retained to serve as our independent accountants for the 2002
calendar year, resigned and ceased its relationship with us upon completion of
the annual audit for our fiscal year ended December 31, 2001. The report of
Ernst & Young LLP on our consolidated financial statements for the year ended
December 31,


                                       34
<PAGE>


2001, contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
In addition, there have been no disagreements with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements if not resolved to the
satisfaction of Ernst & Young LLP would have caused it to make reference thereto
in its reports on the consolidated financial statements for such periods; and
there have been no matter that was the subject of a reportable event.

         On March 14, 2002, we engaged Deloitte & Touche LLP to serve as our
independent public accountants for the year ending December 31, 2002. Deloitte &
Touche LLP's report for the years ended December 31, 2003 and December 31, 2002,
is on page 38 of this Form 10K.

ITEM 9A.  CONTROLS AND PROCEDURES

         As of the end of the period covered by this annual report, we carried
out an evaluation, under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")). Based upon, and as of
the date of that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded the Company's disclosure controls and procedures were
effective to ensure information required to be disclosed by the Company in the
reports filed or submitted by it under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within time periods
specified in the rules and forms of the SEC and include controls and procedures
designed to ensure that information required to be disclosed by the Company in
such reports is accumulated and communicated to the Company's management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosures.

         The Chief Executive Officer and Chief Financial Officer have concluded
that there have been no significant changes to our internal control over
financial reporting identified in connection with the evaluation of our internal
controls performed during our last quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by Item 10 regarding directors is incorporated
by reference from the information under the captions "Election of Directors" and
"Continuing Directors" in our definitive Proxy Statement for the 2004 Annual
Meeting of Stockholders (the "Proxy Statement"). The information required by
Item 10 regarding the audit committee and audit committee financial expert
disclosures are incorporated by reference from the information under the caption
"Committees and Meetings of the Board of Directors-Audit Committee" in the Proxy
Statement. Disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K will be contained in the Proxy Statement under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance". The information required by Item 10
regarding executive officers will be contained in the Proxy Statement under the
caption "Our Executive Officers."

         We have adopted a code of business conduct and ethics, entitled "Clark
Consulting Code of Ethics and Business Values" (the "Code of Ethics") as
required by the listing standards of the New York Stock Exchange and the rules
of the SEC. This Code applies to all of our directors, officers, and employees.
We have also adopted corporate governance guidelines (the "Governance
Guidelines") and a charter for each of our Audit Committee, Compensation
Committee and our Corporate Governance and Nominating Committee (collectively,
the "Committee Charters"). We have posted the Code of Ethics, the Governance
Guidelines, and each of the Committee Charters on our website at
www.clarkconsulting.com in the investor-relations-corporate governance page. We
will post on our website any amendments to, or waivers from, our Code of Ethics
applicable to any of our directors or executive officers. The foregoing
information will also be available in print to any stockholder who requests such
information.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by Item 11 is hereby incorporated by reference
from our 2004 Proxy Statement under the caption "Summary Compensation Table",
"Option Grants in Last Fiscal Year", "Aggregated Option Exercises and Year-End
Values", "Compensation of Directors", "Executive Officer Employment Agreements",
"Compensation Committee Interlocks and Insider Participation", "Report of the
Compensation Committee" and "Performance Graph."


                                       35
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 12 is hereby incorporated by reference
from our 2004 Proxy Statement under the caption "Ownership of Common Stock by
Certain Beneficial Owners and Management" and under the caption "Equity Plan
Compensation Information."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is hereby incorporated by reference
from our 2004 Proxy Statement under the caption "Certain Relationships and
Related Transactions."

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The information required by Item 14 is hereby incorporated by reference
from our 2004 Proxy Statement under the caption "Principal Accounting Firm
Fees."

                                    PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

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

         (1)      Financial Statements

<TABLE>
<S>                                                                            <C>
                  Reports of Independent Auditors...............................38
                  Consolidated Balance Sheets as of December 31, 2003 and 2002..40
                  Consolidated Statements of Income for the years ended
                    December 31, 2003, 2002, and 2001...........................41
                  Consolidated Statements of Stockholders' Equity for the
                    years ended December 31, 2003, 2002, and 2001...............42
                  Consolidated Statements of Cash Flows for the years ended
                    December 31, 2003, 2002, and 2001...........................43
                  Notes to the Consolidated Financial Statements................44
</TABLE>

         (2)      Financial Statement Schedules

                  None.

                  Schedules not listed above have been omitted because they are
         not required, are not applicable, are shown in the related financial
         statements or notes thereto or the amounts are immaterial.

         (3)      Exhibits

                  The information required by this Item 15(a)(3) is set forth in
         the Exhibit Index immediately following our consolidated financial
         statements. The exhibits listed herein will be furnished upon written
         request to "Vice-President of Investor Relations" located at our
         headquarters and payment of a reasonable fee that will be limited to
         our reasonable expense in furnishing such exhibits.

         (4)      Reports on Form 8-K

                  We furnished the following Current Report on Form 8-K during
         the quarter ended December 31, 2003. The information furnished under
         Item 12. Results of Operations and Financial Condition is not deemed to
         be "filed" for purposes of Section 18 of the Securities Exchange Act of
         1934:

                  Current Report on Form 8-K dated October 28, 2003 furnishing
         the financial performance of the Registrant for the three months and
         nine months ended September 30, 2003.


                                       36
<PAGE>


<TABLE>
<CAPTION>
                                   CLARK, INC.
                                AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS

                                                                                                    PAGE

<S>                                                                                                 <C>
                Reports of Independent Auditors..................................................   38
                Consolidated Balance Sheets as of December 31, 2003 and 2002.....................   40
                Consolidated Statements of Income for the years ended
                  December 31, 2003, 2002, and 2001..............................................   41
                Consolidated Statements of Stockholders' Equity for the years ended
                  December 31, 2003, 2002, and 2001..............................................   42
                Consolidated Statements of Cash Flows for the years ended
                  December 31, 2003, 2002, and 2001..............................................   43
                Notes to Consolidated Financial Statements.......................................   44
</TABLE>


                                       37
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Clark, Inc.

    We have audited the accompanying consolidated balance sheets of Clark, Inc.
and subsidiaries as of December 31, 2003 and December 31, 2002, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended. 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 of America. 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, such financial statements present fairly, in all material
respects, the financial position of Clark, Inc. and subsidiaries at December 31,
2003 and December 31, 2002, and the results of their operations and their cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.

    As discussed in Note 9, in 2002, Clark, Inc. and subsidiaries changes its
method of accounting for goodwill and other intangible assets as required by
Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets".


/s/ DELOITTE AND TOUCHE LLP

Chicago, Illinois
March 5, 2004


                                       38
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Clark, Inc.

    We have audited the consolidated statements of income, stockholders' equity,
and cash flows of Clark/Bardes, Inc. and subsidiaries for the year ended
December 31, 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 audit.

    We conducted our audit 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 audit provides a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of the operations and the
cash flows of Clark/Bardes, Inc. and subsidiaries for the year ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States.

                                                           /s/ ERNST & YOUNG LLP

Dallas, Texas
February 22, 2002


                                       39
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                      -----------------------
                                                                                         2003        2002
                                                                                      ----------- -----------
                                                                                      (DOLLARS IN THOUSANDS
                                                                                       EXCEPT SHARE AND PER
                                                                                           SHARE DATA)
                                                            ASSETS

<S>                                                                                     <C>         <C>
                      CURRENT ASSETS
                        Cash and cash equivalents.................................      $  3,156    $ 14,266
                        Restricted cash...........................................        18,966      14,065
                        Accounts and notes receivable, net........................        47,478      63,934
                        Prepaid income taxes......................................         2,931       3,253
                        Deferred tax assets.......................................           253       1,252
                        Other current assets......................................         3,149       2,888
                                                                                      ----------- -----------
                                TOTAL CURRENT ASSETS..............................        75,933      99,658
                                                                                      ----------- -----------
                      INTANGIBLE ASSETS, NET......................................
                        Net present value of inforce revenue......................       455,495     479,561
                        Goodwill..................................................       126,888     117,803
                        Non-compete agreements....................................         7,420       2,831
                                                                                      ----------- -----------
                                TOTAL INTANGIBLE ASSETS, NET......................       589,803     600,195
                                                                                      ----------- -----------
                      Equipment and leasehold improvements, net...................        13,284      15,135
                      Other assets................................................        20,283      19,687
                                                                                      ----------- -----------
                                TOTAL ASSETS......................................      $699,303    $734,675
                                                                                      =========== ===========

                                             LIABILITIES AND STOCKHOLDERS' EQUITY

                      CURRENT LIABILITIES
                        Accounts payable..........................................      $  8,129    $  8,048
                        Accrued liabilities.......................................        46,648      47,183
                        Deferred revenue..........................................         1,980       2,349
                        Recourse debt maturing within one year....................         8,120      11,154
                        Non-recourse debt maturing within one year................         8,433      11,521
                                                                                      ----------- -----------
                                TOTAL CURRENT LIABILITIES.........................        73,310      80,255
                      LONG-TERM RECOURSE DEBT.....................................        55,672     102,559
                      LONG-TERM NON-RECOURSE DEBT.................................       280,296     293,479
                      DEFERRED TAX LIABILITIES....................................        14,057       8,837
                      DEFERRED COMPENSATION.......................................         6,563       3,779
                      INTEREST RATE SWAP..........................................           157           -
                      OTHER NON-CURRENT LIABILITIES...............................        10,980       4,644
                                                                                      ----------- -----------
                                 TOTAL LIABILITIES................................       441,035     493,553
                                                                                      ----------- -----------

                      COMMITMENTS AND CONTINGENCIES (NOTES 6 AND 17)

                      STOCKHOLDERS' EQUITY
                        Preferred stock
                           Authorized - 1,000,000 shares; $0.01 par value,
                            none issued ..........................................             -           -
                        Common stock
                           Authorized - 40,000,000 shares; $0.01 par value, issued
                            and outstanding - 18,515,203 in 2003 and 18,060,518
                            in 2002...............................................           186         181
                        Paid in capital...........................................       190,876     185,339
                        Retained earnings.........................................        69,643      56,961
                        Other comprehensive income................................          (245)          -
                        Treasury stock, at cost, 65,171 shares in 2003 and 59,909
                         shares in 2002                                                   (2,192)     (1,359)
                                                                                      ----------- -----------
                      TOTAL STOCKHOLDERS' EQUITY..................................       258,268     241,122
                                                                                      ----------- -----------
                      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................      $699,303    $734,675
                                                                                      =========== ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       40
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001



<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                       ---------------------------------------------
                                                                            2003           2002           2001
                                                                       --------------- -------------- --------------
                                                                           (DOLLARS IN THOUSANDS EXCEPT SHARE AND
                                                                                     PER SHARE AMOUNTS)
<S>                                                                        <C>            <C>            <C>
               REVENUE
                 First year commissions and related fees...........          $113,851       $124,106       $119,349
                 Renewal commissions and related fees..............           158,529        114,464         93,028
                 Consulting fees...................................            47,205         34,973         19,659
                 Reimbursable expenses.............................             6,344          5,043          4,848
                                                                       --------------- -------------- --------------
               TOTAL REVENUE.......................................           325,929        278,586        236,884
                                                                       --------------- -------------- --------------

               OPERATING EXPENSES
                 Commissions and fees..............................            88,259         89,998         84,002
                 General and administrative........................           159,279        140,583        102,853
                 Reimbursable expenses.............................             6,344          5,043          4,848
                 Amortization......................................            21,579          9,249         11,560
                 Write off of Insurance Alliance Group.............                 -              -          2,070
                 Settlement of litigation..........................            (1,500)             -              -
                 Human Capital Practice reorganization.............             7,490              -              -
                                                                       --------------- -------------- --------------
               TOTAL OPERATING EXPENSES............................           281,451        244,873        205,333
                                                                       --------------- -------------- --------------
               OPERATING INCOME....................................            44,478         33,713         31,551
               OTHER INCOME........................................               302            262            354
               INTEREST, NET.......................................
                 Income............................................               281            350            551
                 Expense...........................................           (24,290)        (4,070)        (5,738)
                 Interest rate swap settlement.....................                 -              -         (1,981)
                                                                       --------------- -------------- --------------
               TOTAL INTEREST, NET.................................           (24,009)        (3,720)        (7,168)
                                                                       --------------- -------------- --------------
               Income before taxes and cumulative effect of change
                in accounting principle............................            20,771         30,255         24,737
               Income taxes........................................             8,089         12,404          8,725
                                                                       --------------- -------------- --------------
               Income before cumulative effect of change in
                accounting principle, net of tax...................            12,682         17,851         16,012
               Cumulative effect of change in accounting principle,
                net of tax ........................................                 -           (523)             -
                                                                       --------------- -------------- --------------
               NET INCOME..........................................          $ 12,682       $ 17,328       $ 16,012
                                                                       =============== ============== ==============

               Basic earnings per common share, before cumulative
                effect of change in accounting principle...........             $0.69          $1.06          $1.22
               Cumulative effect of change in accounting principle.                 -          (0.03)             -
                                                                       --------------- -------------- --------------
               Basic earnings per common share.....................             $0.69          $1.03          $1.22
                                                                       =============== ============== ==============

               Weighted average shares outstanding - Basic.........        18,338,963     16,896,657     13,162,899
                                                                       =============== ============== ==============

               Diluted earnings per common share, before cumulative
                effect of change in accounting principle...........             $0.68          $1.02          $1.18
               Cumulative effect of change in accounting principle.                 -          (0.03)             -
                                                                       --------------- -------------- --------------
               Diluted earnings per common share...................             $0.68          $0.99          $1.18
                                                                       =============== ============== ==============

               Weighted average shares outstanding - Diluted.......        18,740,934     17,513,106     13,575,830
                                                                       =============== ============== ==============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       41
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001





<TABLE>
<CAPTION>
                                          COMMON STOCK
                                       -------------------
                                                                                             OTHER         TOTAL
                                                            PAID IN   RETAINED  TREASURY COMPREHENSIVE  STOCKHOLDERS'
                                        SHARES     AMOUNT   CAPITAL   EARNINGS    STOCK      SHARE         EQUITY
                                       ---------- --------- --------- --------- ---------- ----------   -------------
                                                                (DOLLARS IN THOUSANDS EXCEPT AMOUNTS)

<S>                                   <C>            <C>   <C>        <C>        <C>         <C>          <C>
Balance at January 1, 2001..........  12,675,309     $127  $ 89,471   $23,621    $  (661)    $  -         $112,558
  Issuance of common stock
   in connection with acquisitions..      84,664        1     1,548         -          -        -            1,549
  Sale of common stock in a private
   placement net of expenses.........  3,693,750       37    65,389         -          -        -           65,426
  Exercise of stock options-- net of
   redemptions and tax effect........     70,347        -     1,203         -       (625)       -              578
  Net activity related to employee
   stock purchase plan...............          -        -        69         -          -        -               69
  Net income.........................          -        -         -    16,012          -        -           16,012
                                       ---------- --------- --------- --------- ---------- --------    -----------
Balance at December 31, 2001......... 16,524,070      165   157,680    39,633     (1,286)       -          196,192
  Issuance of common stock in
   connection with acquisitions......  1,459,413       15    26,518         -          -        -           26,533
  Non-employee compensation..........          -        -       474         -          -        -              474
  Exercise of stock options - net of
   redemptions and tax effect........     72,664        1       697         -        (73)       -              625
  Issuance of stock to directors.....      4,371        -       100         -          -        -              100
  Net activity related to employee
   stock purchase plan...............          -        -      (130)        -          -        -            (130)
  Net income.........................          -        -         -    17,328          -        -           17,328
                                       ---------- --------- --------- --------- ---------- --------    -----------
Balance at December 31, 2002......... 18,060,518      181   185,339    56,961     (1,359)       -          241,122
  Issuance of common stock in
   connection with acquisitions......    289,542        3     3,682         -          -        -            3,685
  Non-employee compensation..........          -        -       330         -          -        -              330
  Exercise of stock options - net of
   redemptions and tax effect........    164,218        2     2,059         -        (73)       -            1,988
  Issuance of stock to directors.....        925        -        15         -          -        -               15
  Net activity related to employee
   stock purchase plan...............          -        -      (549)        -          -        -             (549)
  Purchase of company stock..........          -        -         -         -       (760)       -             (760)
  Change in fair value of interest
   rate swaps, net of tax............          -        -         -         -          -     (245)            (245)
  Net income.........................          -        -         -    12,682          -        -           12,682
                                      ---------- --------- --------- --------- ---------- --------    ------------
Balance at December 31, 2003......... 18,515,203     $186  $190,876   $69,643    $(2,192)   $(245)        $258,268
                                      ========== ========= ========= ========= ========== ========    ============
</TABLE>








          See accompanying notes to consolidated financial statements.


                                       42
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001


<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                          ----------------------------------
                                                                            2003        2002        2001
                                                                          ---------- ----------- -----------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                                         <C>          <C>         <C>
                       OPERATING ACTIVITIES
                         Net income .................................      $ 12,682    $ 17,328     $16,012
                         Adjustments to reconcile net income to cash
                            provided by operating activities:
                                 Depreciation and amortization.......        27,257      13,600      14,666
                                 Cumulative effect of change in
                                 accounting principle................             -         892           -
                                 Non-employee stock compensation.....           345         574           -
                                 Deferred taxes......................         6,131       1,129       1,089
                                 Loss on disposal of assets..........           596         351          93
                                 Interest rate swap settlement.......             -           -       2,043
                                 Write off of Insurance Alliance Group            -           -       2,070
                            Changes in operating  assets and liabilities
                            (excluding the effects of acquisitions):
                                 Accounts receivable.................        18,002      (7,924)    (15,907)
                                 Other current assets................          (305)     (1,045)        687
                                 Other assets........................           818      (6,825)     (4,253)
                                 Accounts payable....................          (334)      1,723      (6,351)
                                 Income taxes........................           678      (6,704)       (474)
                                 Accrued liabilities.................          (425)      4,262      18,641
                                 Deferred income.....................          (369)      1,829        (750)
                                 Other non-current liabilities.......         6,753       1,152           -
                                 Deferred compensation...............         2,784       1,178         856
                                                                          ---------- ----------- -----------
                       Cash provided by operating activities.........        74,613      21,520      28,422
                                                                          ---------- ----------- -----------

                       INVESTING ACTIVITIES
                         Purchase of businesses, net of cash acquired        (9,162)   (363,233)    (29,537)
                         Purchases of equipment......................        (4,423)     (7,772)     (5,005)
                         Other.......................................             -           -         300
                                                                          ---------- ----------- -----------
                       Cash used in investing activities.............       (13,585)   (371,005)    (34,242)
                                                                          ---------- ----------- -----------

                       FINANCING ACTIVITIES
                         Proceeds from borrowings....................        39,500     385,130      33,500
                         Repayment of borrowings.....................      (105,692)    (10,892)    (90,948)
                         Debt financing costs........................        (1,414)     (5,057)          -
                         Cash restricted for the repayment of
                         non-recourse notes..........................        (4,901)    (14,065)          -
                         Issuance of common stock....................             -           -      65,426
                         Exercise of stock options...................         1,633         601         382
                         Purchase of company stock for deferred comp
                         plan........................................          (760)          -           -
                         Net activity related to employee stock
                         purchase plan...............................          (505)       (130)         69
                         Settlement of interest rate swap............             -      (2,043)          -
                                                                          ---------- ----------- -----------
                       Cash (used in) provided by financing activities      (72,138)    353,544       8,429
                                                                          ---------- ----------- -----------
                       NET INCREASE (DECREASE) IN CASH AND CASH
                       EQUIVALENTS...................................       (11,110)      4,059       2,609
                       CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
                       YEAR..........................................        14,266      10,207       7,598
                                                                          ---------- ----------- -----------
                       CASH AND CASH EQUIVALENTS AT END OF THE YEAR..      $  3,156    $ 14,266     $10,207
                                                                          ========== =========== ===========

                       Supplemental Disclosure for Cash Paid during the
                       Period:
                            Interest paid............................       $21,779     $ 3,638      $8,600
                            Income taxes, net of refunds.............       $ 1,354     $17,636      $7,147

                       Supplemental Non-Cash Information:

                            Fair value of common stock issued in
                            connection with acquisition
                            contingent payouts...........                   $ 3,055     $ 5,289      $  504
                                                                          ========== =========== ===========
                           Fair value of common stock issued in
                           connection with acquisitions..............       $   630     $21,244      $1,000
                                                                          ========== =========== ===========
                          Asset-backed notes issued to sellers in
                          connection with acquisition................       $     -     $37,350      $    -
                                                                          ========== =========== ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       43
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          YEAR ENDED DECEMBER 31, 2003

   (TABLES SHOWN IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation -- The consolidated financial statements include
the accounts of Clark, Inc. (the "Company" or "Clark") and its wholly owned
subsidiaries. Through the Company's six operating segments, Executive Benefits
Practice, Banking Practice, Healthcare Group, Human Capital Practice, Pearl
Meyer & Partners, and Federal Policy Group, the Company designs, markets, and
administers compensation and benefit programs for companies supplementing and
securing employee benefits and provides executive compensation and related
consulting services to U.S. corporations, banks, and healthcare organizations.
The Company assists its clients in using customized life insurance products to
finance their long-term benefit liabilities. In addition, the Company owns Clark
Securities, Inc. ("CSI"), a registered broker-dealer through which it sells all
its securities products and receives related commissions. All significant
intercompany amounts and transactions have been eliminated in the accompanying
consolidated financial statements.

         On June 9, 2003, the Company, (formerly known as Clark/Bardes, Inc.)
changed its name to Clark, Inc. On May 7, 2003, the Company's wholly-owned
broker/dealer (formerly known as Clark/Bardes Financial Services, Inc.) changed
its name to Clark Securities, Inc. On April 24, 2003, the Company's operating
entity (formerly known as Clark/Bardes Consulting, Inc.) changed its name to
Clark Consulting, Inc.

         Use of Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. The Company
bases its estimates on historical experience, actuarial and other valuations,
and various other factors that are deemed to be reasonable under the
circumstances, the results of which form the basis for making judgements about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Some of these judgements can be subjective and complex and,
consequently, actual results may differ from these estimates under different
assumptions or conditions. While for any given assumption or estimate made by
the Company's management, there may be other assumptions and estimates that are
reasonable, the Company believes that, given the current facts and
circumstances, it is unlikely that applying any other such reasonable estimate
or assumption would materially impact the financial statements. The Company uses
estimates in its determination of allowances for accounts receivable and
chargebacks, restructuring provisions, the net present value and amortization of
inforce revenue acquired through acquisitions and various impairment analyses.
Actual results could differ from those estimates.

         Revenue Recognition -- First year commissions and related fees are
recognized as revenue in the amount due or paid by the carrier at the time the
policy application is substantially completed, the initial premium payment is
paid, and the insured party is contractually committed to purchase the insurance
policy. Renewal revenue is recognized on the date that the renewal premium is
due or paid by the client to the insurance company depending on the type of
policy. The Company is notified in advance if a client plans to surrender, so
adjustments in subsequent periods due to cancellations are infrequent and minor.
Revenue associated with policies to be surrendered is not recognized. While the
commission revenue is subject to chargeback, the Company's experience has
indicated that less than 1% of revenue recognized has ever been subject to such
chargeback provisions. Given the homogenous nature of such cases and historical
information about chargebacks, the Company is able to accurately estimate the
revenue earned. The Company currently maintains a chargeback allowance, which is
monitored on a quarterly basis for adequacy. Service fees are received annually
on the policy anniversary date. Fees related to future services to be provided
are recognized as the services are rendered and fees for program design and
placement are recognized in a manner consistent with commissions. Consulting fee
revenue consists of fees charged by Human Capital Practice, Pearl Meyer &
Partners, and Federal Policy Group for the services the Company performs in
advising its clients. These fees are generally based on a rate per hour
arrangement and are earned as the services are provided. Some of the Company's
consulting clients pay a retainer at the beginning of a project. These revenues
are recognized ratably over the term of the engagement.

         Cash and Cash Equivalents -- The Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents. The Company has cash balances at financial institutions in excess
of the $100 thousand limit insured by the Federal Deposit Insurance Corporation.
Uninsured cash in bank balances, including restricted cash, aggregated
approximately $22.0 million and $28.3 million at December 31, 2003 and 2002,
respectively. The Company has not experienced any


                                       44
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


losses in such accounts and believes it is not exposed to any significant credit
risk on cash and cash equivalents. At December 31, 2003 and 2002, the Company
had restricted cash of $19.0 million and $14.1 million related to the
asset-backed notes outstanding, respectively.

         Fair Value of Financial Instruments -- The carrying amount of cash and
cash equivalents, accounts and notes receivable, accounts payable, and other
financial instruments approximate their fair values principally because of the
short-term nature of these instruments. See Note 15 Financial Instruments for
additional information on financial instruments.

         Equipment and Leasehold Improvements -- Equipment and leasehold
improvements are carried at cost less accumulated depreciation. Depreciation
expense is provided in amounts sufficient to relate the cost of assets to
operations over the estimated service lives using straight line and accelerated
methods. The Company depreciates furniture, equipment, and computer software
over periods of three to seven years, while leasehold improvements are amortized
over the lease period. Under the provisions of SOP 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, the Company
capitalizes cost associated with software developed or obtained for internal use
when both the preliminary project stage is completed and management has
committed to funding the project. Thereafter, all direct costs are capitalized.
Capitalization of costs ceases no later than the point at which the project is
substantially complete and ready for its intended purpose.

         Goodwill -- With the adoption of Statements of Financial Accounting
Standard ("SFAS") No. 142, Goodwill and Other Intangible Assets as of January 1,
2002, amortization of goodwill ceased and will be tested annually for impairment
or whenever changes in circumstances indicate an impairment might exist. Prior
to the adoption of SFAS No. 142, goodwill was being amortized over a 20 to 40
year period on a straight-line basis. Amortization expense was $0 in 2003, $0 in
2002, and $4.0 million in 2001.

         Other Identifiable Intangible Assets -- The Company has identifiable
intangible assets representing the excess of the costs of acquired businesses
over the fair values of the tangible net assets associated with the acquisition.
Other identifiable intangible assets consist of the net present value of future
cash flows from existing business at the acquisition date, and non-compete
agreements with the former owners. Non-compete agreements are amortized over the
period of the agreements. The net present value of inforce revenue is typically
amortized between 20 to 30 years (the expected average policy duration).
Amortization expense related to identifiable intangible assets was $21.6 million
in 2003, $9.2 million in 2002, and $7.6 million in 2001. The Company's policy,
in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, is to review intangible and other long-lived assets for
impairment on an annual basis or whenever changes in circumstances indicate that
an impairment might exist. When any indicators are present, the estimated
undiscounted cash flows are compared to the carrying amount of the assets. If
the undiscounted cash flows are less than the carrying amount, an impairment
loss is recorded. Any write-downs are treated as permanent reductions in the
carrying amount of the asset.

         Commissions and Fee Expense -- Commissions and fee expense comprise the
portion of the total commission revenue that is earned by and paid to both
employee and independent sales consultants.

         Advertising -- Advertising and marketing costs are charged to
operations when incurred. Total expenses for 2003, 2002, and 2001 were $3.5
million, $2.5 million, and $2.1 million, respectively.

         Income Taxes -- Income taxes are accounted for under the liability
method. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled.

         Stock-Based Compensation -- The Company applies Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, in
accounting for its stock-based compensation plans for employees and directors as
allowed under Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation as Amended by SFAS No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure - An Amendment of FASB
Statement No. 123, and provide the pro forma disclosures required by SFAS No.
123. The Company accounts for stock options granted to non-employees other than
directors under the provisions of SFAS No. 123. The Company grants stock options
at an exercise price equal to the quoted market price of its stock on the grant
date. Since the stock options have no intrinsic value on the grant date, no
compensation expense is recorded in connection with the stock option grants.
Generally, stock options vest 25 percent on each anniversary of the grant date,
are fully vested five years from the grant date and have a term of ten years.
For purposes of calculating basic and diluted earnings per share, exercised
stock options are considered outstanding. Under the treasury stock method,
unexercised stock options with fair market values of the underlying stock
greater than the stock options' exercise prices are considered common stock
equivalents for the purposes of calculating diluted earnings per share for
periods when there are positive earnings and the incremental effect would be


                                       45
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


dilutive.

         The pro forma information regarding net income and earnings per share,
required by SFAS No. 123 has been determined as if the Company accounted for its
stock-based compensation plans under the fair value method. The fair value of
each option grant was estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in 2003, 2002, and 2001, respectively:

<TABLE>
<CAPTION>
                                                                   2003         2002       2001
                                                               ------------  ----------  ---------
<S>                                                               <C>          <C>        <C>
     Dividend yield........................................        None         None        None
     Volatility............................................       62.9%        64.8%      64.17%
     Risk-free interest rates..............................        5.2%         5.2%        5.4%
     Expected life (years).................................          5            5           6
</TABLE>

         The estimated average fair values of options outstanding in 2003, 2002,
and 2001 were $8.22, $10.63, and $9.00, respectively. Had compensation cost for
the Company's stock-based compensation plans been determined in accordance with
SFAS No. 123, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure - An Amendment of FASB Statement No.
123, the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                           -----------------------------------
                                                                              2003         2002        2001
                                                                           ------------ ------------ ---------
<S>                                                                            <C>          <C>       <C>
NET INCOME
  As reported......................................................            $12,682      $17,328   $16,012
  Add: stock-based compensation included in reported net income, net of tax        206          340         -
  Deduct: total stock-based compensation determined under fair value
  based method, net of tax.........................................             (1,799)      (2,472)   (1,876)
                                                                               -------      -------   -------
  Pro forma........................................................            $11,089      $15,196   $14,136
                                                                               =======      =======   =======

BASIC EARNINGS PER COMMON SHARE
  As reported......................................................              $0.69        $1.03     $1.22
  Pro forma........................................................              $0.60        $0.90     $1.07

DILUTED EARNINGS PER COMMON SHARE
  As reported......................................................              $0.68        $0.99     $1.18
  Pro forma........................................................              $0.59        $0.87     $1.04
</TABLE>

         These pro forma amounts are not likely to be representative of the
effect on reported net income for future years.

         Hedging Transactions -- The Company does not enter into derivative
transactions except to mitigate interest rate risk. The Company adopted SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No.
138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities--An Amendment of FASB Statement No. 133, in 2001.

               All derivative instruments are reported in the consolidated
financial statements at fair value. Changes in the fair value of derivatives are
recorded each period in earnings or other comprehensive income (loss), depending
on whether the derivative is designated and effective as part of a hedged
transaction, and on the type of hedge transaction. Gains or losses on derivative
instruments reported in other comprehensive income (loss) are reclassified as
earnings in the period in which earnings are affected by the underlying hedged
item, and the ineffective portion of all hedges are recognized in earnings in
the current period.

         In 2003, the Company entered into interest rate swaps to match floating
rate with fixed rate interest payments periodically for LIBOR-based debt. In
connection with execution of the amended credit agreement, one of the interest
rate swaps was terminated in November 2003.

         In 2001, the Company entered into interest rate swaps to match floating
rate with fixed rate interest payments periodically over the life of its term
loan agreement. As a result of the pay off of underlying debt in November 2001
with the proceeds from the secondary equity offering, the Company recorded $2.0
million as interest expense for the year ended December 31, 2001 related to the
interest rate swaps it had entered into.

         Reclassifications -- Certain 2002 and 2001 amounts have been
reclassified to conform to 2003 presentation.


                                       46
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2.       RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS ") No. 146, Accounting for
Costs Associated with Exit or Disposal Activities, which nullifies Emerging
Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred, rather than at the date of commitment to an exit or disposal plan.
Examples of costs covered by this statement include lease termination costs and
certain employee severances associated with a restructuring, discontinued
operation or the exit or disposal activity. The Company adopted the provisions
of SFAS No. 146 as of January 1, 2003.

         In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value, or market value, of the
obligations it assumes under that guarantee and must disclose that information
in its interim and annual financial statements. The initial recognition and
initial measurement provisions of FIN No. 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN No. 45 were effective for financial statements of interim or
annual periods ending after December 15, 2002. The Company adopted FIN No. 45 as
of January 1, 2003 and the adoption of this interpretation did not have a
material impact on the Company's consolidated financial statements.

         In January 2003 and December 2003, the FASB issued Interpretation No.
46, Consolidation of Variable Interest Entities (FIN 46), and its revision, FIN
46-R, respectively. FIN 46 and FIN 46-R address the consolidation of entities
whose equity holders have either not provided sufficient equity at risk to allow
the entity to finance its own activities or do not possess certain
characteristics of a controlling financial interest. FIN 46 and FIN 46-R require
the consolidation of these entities, known as variable interest entities (VIEs),
by the primary beneficiary of the entity. The primary beneficiary is the entity,
if any, that is subject to a majority of the risk of loss from the VIE's
activities, entitled to receive a majority of the VIE's residual returns, or
both. The requirements of FIN 46 and FIN 46-R are effective for financial
statements of interim or annual periods ending after December 15, 2003. The
Company adopted FIN 46 and FIN 46-R as of January 1, 2004 and the adoption of
this interpretation did not have a material impact on the Company's consolidated
financial statements.

         In accordance with EITF Issue No. 00-21, Revenue Arrangements with
Multiple Deliverables, a vendor should evaluate all deliverables in an
arrangement to determine whether they represent separate units of accounting.
The evaluation must be performed at the inception of the arrangement and as each
item in the arrangement is delivered. EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
Company adopted the requirements of the consensus reached in EITF Issue No.
00-21 as of July 1, 2003, of which did not have a material impact on its
consolidated financial statements.

         In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting of derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 149 is generally effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The Company adopted SFAS No. 149
as of July 1, 2003, and the adoption of this statement did not have a material
impact on its consolidated financial statements.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Instruments with Characteristics of Both Liabilities and Equity, which requires
certain financial instruments that were previously presented on the consolidated
balance sheets as equity to be presented as liabilities. Such instruments
include mandatorily redeemable financial instruments and certain options and
warrants. SFAS No. 150 establishes standards for classifying and measuring
certain financial instruments with characteristics of both liabilities and
equity. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company adopted SFAS No.
150 as of July 1, 2003, and the adoption of this statement did not have a
material impact on its consolidated financial statements.


                                       47
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

3.       ACQUISITIONS

         Following is a description of the acquisitions made during 2003, 2002,
and 2001. The results of operations for each acquired entity have been included
in the accompanying consolidated statements of income from the effective date of
the respective acquisition.

         2003 Acquisitions - In 2003, the Company acquired the following
entities for an aggregate purchase price of $4.2 million paid in cash (includes
expenses paid) and 44,298 shares of the Company's common stock valued at $630
thousand:

         o        Executive Benefit Solutions, LLC, located in Memphis,
                  Tennessee, specializes in providing strategic compensation,
                  benefit, and bank-owned life insurance portfolio consulting
                  services to banks in the Northeast is included in the
                  Company's Banking Practice segment;
         o        Blackwood Planning Corporation, located in West Palm Beach,
                  Florida, specializes in providing strategic compensation,
                  benefit, and bank-owned life insurance portfolio consulting
                  services to banks in the Southeast is included in the
                  Company's Banking Practice segment; and
         o        Inforce revenue from the president of one of the Company's
                  practices related to policies sold when the employee was a
                  consultant prior to his employment by the Company as practice
                  president is included in the Executive Benefits Practice
                  segment.

         The allocations of the purchase prices for the Executive Benefit
Solutions, LLC and Blackwood Planning Corporation is preliminary pending
completion of a valuation. Upon completion of such valuations, the allocation of
purchase prices will be finalized in accordance with SFAS No. 141, Business
Combinations.

         Additional consideration of $11.9 million in cash is payable if certain
objectives are met over the next three and one-half years. If earned, these
payments will be accounted for as additional goodwill. As of December 31, 2003,
additional consideration of $2.5 million was earned and accrued in the accrued
liabilities line item on the consolidated balance sheet.

         The net present value of inforce revenue and goodwill recorded in the
allocation of purchase price related to those acquisitions amounted to $980
thousand and $1.7 million, respectively. Inforce revenue was assigned to the
Executive Benefit Practice segment and the goodwill was assigned to the Banking
Practice segment. The remaining purchase price was allocated to non-compete
agreements, which are assigned to the Banking Practice segment, and have terms
of six years.

         Long, Miller & Associates, LLC. - On November 26, 2002, the Company
acquired Long, Miller & Associates, LLC ("LongMiller"). Based in Greensboro,
North Carolina, LongMiller specializes in bank-owned life insurance portfolio
services. The acquisition combined the two largest distributors of bank-owned
life insurance, as LongMiller was merged into the Company's existing Banking
Practice. The purchase price was $403.5 million before acquisition costs of
approximately $736 thousand, consisting of a cash payment at closing of $346.1
million, $37.4 million of asset-backed notes, and 1,196,888 shares of the
Company's common stock valued at $20 million. The cash portion of the
acquisition was financed by borrowing $87.5 million from the Company's existing
debt facility, with the remainder through a capital markets transaction
involving the securitization of a majority of the inforce revenues of
LongMiller. The Company allocated $4.4 million to tangible assets acquired, $5.2
million to non-compete agreements, and the remaining amount allocated to inforce
revenue. The non-compete agreements and inforce revenue are being amortized over
seven years and 30 years, respectively. The results of LongMiller are included
beginning November 26, 2002.

         The unaudited pro forma information below presents the Company's
results as if the acquisition of LongMiller had occurred on January 1, 2001.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                          -----------------------
                                                                             2002        2001
                                                                          ----------- -----------
<S>                                                                         <C>         <C>
                                        Pro Forma
                                          Revenue....................       $329,435    $302,715
                                          Net income.................         17,534      21,095
                                          Diluted earnings per share.           1.00        1.43
</TABLE>


                                       48
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Federal Policy Group - On February 25, 2002, the Company acquired the
Federal Policy Group of PricewaterhouseCoopers LLP. Based in Washington, D.C.,
Federal Policy Group is a consulting practice representing Fortune 500
companies, trade associations and other businesses before the government on
legislative and regulatory policy matters. This acquisition allows the Company
to continue to expand its service offerings to the corporate market. The
purchase price was $11.0 million before acquisition costs of approximately $28
thousand, consisting of a cash payment at closing of $5.0 million and $6.0
million of contingent payments over the four years based upon attainment of
established performance criteria. If earned, the contingent payments will be
paid in cash and recorded as additional goodwill. Since its acquisition by the
Company, Federal Policy Group has attained its total established performance
criteria. Accordingly, all amounts have been earned with $1.5 million paid and
$4.5 million accrued in the consolidated balance sheet as of December 31, 2003.
Of the purchase price, $2.3 million was allocated to non-compete agreements,
which are being amortized over six years with the remaining purchase price being
allocated to goodwill. The results of the Federal Policy Group are included
beginning February 25, 2002.

         Other 2002 Acquisitions - In 2002, the Company also acquired the
following entities for an aggregate purchase price of $5.0 million paid in cash
(cash amount includes expenses paid) and 57,478 shares of our common stock
valued at $1.2 million:

         o        Comiskey Kaufman, located in Houston, Texas, specializes in
                  executive benefits consulting for major companies in the
                  Southwest is included in the Company's Executive Benefits
                  Practice segment, and
         o        Hilgenberg and Associates, located in Minneapolis, Minnesota,
                  specializes in providing compensation, benefit and
                  business-owned life insurance consulting services to banks
                  located in the Midwest is included in the Company's Banking
                  Practice segment.

         If certain defined objectives are met over the three years since the
acquisition, additional purchase price is payable. As of December 31, 2003,
additional consideration of $1.0 million in cash and $338 thousand in common
stock is payable if certain objectives are met over the next year. If earned,
these payments will be accounted for as additional goodwill. An additional $1.0
million was earned during 2003 with $500 thousand included in accrued
liabilities and $500 thousand in other long-term liabilities in the consolidated
balance sheet as of December 31, 2003.

         The net present value of inforce revenue and goodwill recorded in the
allocation of purchase price related to those acquisitions amounted to $5.2
million and $500 thousand, respectively. Inforce revenue was assigned to the
Executive Benefit Practice segment and the goodwill was assigned to the Banking
Practice segment. The remaining purchase price was allocated to non-compete
agreements, which are assigned to the Banking Practice segment.

         Rich, Florin/Solutions, Inc. - On March 12, 2001, the Company acquired
certain assets, all of the business, and assumed certain liabilities of Rich,
Florin/Solutions, Inc., a Boston, Massachusetts compensation consulting company.
The purchase price was $20.8 million, before expenses, consisting of a cash
payment at closing of $11.3 million and $9.5 million of contingent payments over
the four years after acquisition based on the attainment of established
financial performance criteria. The Company acquired net assets of approximately
$1.8 million. The transaction was funded from the Company's existing line of
credit. It became the Company's fifth operating segment - Human Capital Practice
(previously Rewards and Performance).

         In connection with the formation of the Human Capital Practice (see
Note 4), the Asset Purchase Agreement for Rewards and Performance Group
(formerly Rich, Florin/Solutions, Inc.) was amended. Approximately $3.8 million
of the unearned contingent consideration will be paid annually in March 2003
through March 2005 regardless of performance of the practice and the other half
is contingent upon the results of the Human Capital Practice. During December
2003, the agreement was amended and accelerated the March 2004 payment of
approximately $1.3 million into December 2003. These payments will be made in
cash. As of December 31, 2003, there was $1.4 million remaining in other
long-term liabilities on the consolidated balance sheet.

         Other 2001 Acquisitions - In 2001, the Company also acquired the
following entities for an aggregate purchase price of $11.5 million paid in cash
(includes expenses paid) and 39,558 shares of its common stock valued at $1.0
million:

         o        Coates Kenny - a Berkeley, California based provider of
                  professional actuarial, consulting, and administrative
                  services to retirement plans and post-retirement plans is
                  included in the Human Capital Practice segment;
         o        Lyons Compensation and Benefits, LLC -a Waltham, Massachusetts
                  based provider of executive compensation and benefit plans is
                  included in the Healthcare Group segment; and
         o        Management Science Associates, Inc. and Partners First - both
                  St. Louis, Missouri-based consulting firms in the healthcare
                  industry are included in the Healthcare Group segment.


                                       49
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         During 2003, additional consideration of $200 thousand of Company stock
was earned and accrued in accrued liabilities in the consolidated balance sheet
as of December 31, 2003. As of December 31, 2003, additional consideration of
$4.5 million in cash and $1.7 million in common stock is payable if certain
objectives are met over the next two years. If earned, these payments will be
accounted for as additional goodwill.

         Inforce revenue and goodwill recorded in the allocation of purchase
price related to these acquisitions amounted to $5.7 million and $6.5 million,
respectively. Inforce revenue was assigned to the Executive Benefits Practice
segment along with $380 thousand of the goodwill and the remaining goodwill was
assigned to the Healthcare Group segment.

4.       HUMAN CAPITAL PRACTICE

         On May 16, 2002, the Company announced the formation of its Human
Capital Practice. The new practice included the Company's existing Rewards and
Performance Group and ten former partners ("partners") and 74 support staff from
the Human Capital Practice of Arthur Andersen LLP ("Andersen"). Prior to hiring,
the partners and Andersen mutually terminated their partnership interest and
association with each other free of all restrictive provisions under the
Andersen Partnership Agreement and under any agreements relating to the
employment with Andersen. The Company believes any successor liability was
mitigated by hiring those employees in a conventional employer/employee
relationship.

         Upon hiring, the former Andersen partners received full recourse and
interest-bearing loans in the amount of $8.4 million. Of these loans, $1.2
million have a term of two years and the remaining $7.2 million have a term of
six and one-half years. As long as the partner is employed on the hiring
anniversary date for the two-year loans and each December 31st for the six and
one-half year loans, a pro-rata portion of the loans will be forgiven at each
date. As a result, these loans are classified as other assets on the December
31, 2003 and December 31, 2002 balance sheets and are being amortized into
general and administrative expense.

         In addition, in May 2002, support staff received a total of $602
thousand in sign-on bonuses, which were amortized into the Human Capital
Practice results over the first twelve months of employment.

         In October 2002, the Company agreed with one of the partners to
terminate its relationship. In December 2002, the Company recorded a charge of
approximately $575 thousand related to the forgiveness of part of the partner's
loan under the terms of the separation agreement. As of December 31, 2003, there
was $182 thousand outstanding with payments scheduled through 2008.

         In May 2003, an additional partner agreed to terminate employment with
the Company. Under terms of the separation agreement, $298 thousand of the
partner's loan balance was forgiven and expensed leaving a balance of $100
thousand with payments scheduled through 2006.

         In the fourth quarter of 2003, the Company reorganized its executive
compensation consulting practices. As part of the reorganization, certain of the
operations and employees of the Human Capital Practice were transferred to the
Pearl Meyer & Partners practice. In addition, four partners and six staff
members were terminated which resulted in exiting certain activities of the
practice and creating unused leased office space in numerous cities. The Company
recorded a charge of $7.5 million in the fourth quarter of 2003 relating to the
reorganization of which $7.1 million remains accrued on the consolidated balance
sheet as of December 31, 2003. The components of the $7.5 million charge
included $1.1 million for costs associated with employee terminations, $5.1
million for exit costs relating to the expected remaining future cash outlays
associated with leases on vacated facilities until lease termination, bonuses of
$1.0 million related to renegotiations of certain bonus agreements to new
arrangements necessary to facilitate the reorganization, and $300 thousand for
impairment of assets previously utilized by the Human Capital Practice.

         The remaining business of the Human Capital Practice consists of
actuarial/retirement plan and investment advisory services.

         The remaining loan balances are expected to be amortized into operating
expense as follows:


               2004.............................       $1,052
               2005.............................          826
               2006.............................          826
               2007.............................          826
               2008.............................          826


                                       50
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         The Company will continue to evaluate the remaining restructuring
reserve as plans are being executed. As a result, there may be additional
charges or reversals in future periods. The following summarizes the component
of the charge and cash payments during the year ended December 31, 2003 and the
ending reserve balance for the year then ended.

<TABLE>
<CAPTION>
                                                                                      NON-CASH                       RESERVE
                                               2003 CHARGES       CASH PAYMENTS         ITEMS        REVERSALS       BALANCE
                                               ------------       -------------       --------       ---------       -------
<S>                                               <C>                  <C>               <C>             <C>       <C>
    Employee termination costs                    $1,049                $  -             $-              $-        $1,049
    Lease costs                                    5,120                (388)             -               -         4,732
    Bonus payments                                 1,027                   -              -               -         1,027
    Other                                            294                  (3)             -               -           291
                                                  ------               -----             --              --        ------
    Total                                         $7,490               $(391)            $-              $-        $7,099
                                                  ======               =====             ==              ==        ======
</TABLE>

5.       EXECUTIVE BENEFITS PRACTICE RESTRUCTURING COSTS

         During the first quarter of 2003, the Company committed to a plan to
consolidate the business support services of the Executive Benefits Practice in
Dallas, Texas. As a result, the Company intends to significantly reduce
operations in the Los Angeles, California and Bethesda, Maryland offices. The
moves from Los Angeles and Bethesda are expected to be substantially completed
by July 31, 2004 and September 30, 2004, respectively. There were 68 employees
notified of the restructuring with some being offered relocation packages and
others being terminated with severance packages that include varying retention
bonus incentives. The total expected cost of this restructuring (approximately
$1.6 million) is being recognized ratably starting in March 2003. During the
year ended December 31, 2003, the Company recorded expense of approximately $800
thousand. In the third and fourth quarters of 2003, there were adjustments to
the reserve related to employees who forfeited their severance by not staying
through their retention date. The above amounts are included in general and
administrative expenses on the consolidated income statement. A summary of the
activity in the reserve account as of December 31, 2003 is follows:


<TABLE>
<CAPTION>
                                 RESERVE BALANCE      YEAR TO DATE          CASH                             RESERVE BALANCE
                                 JANUARY 1, 2003         EXPENSE          PAYMENTS      ADJUSTMENTS         DECEMBER 31, 2003
                                ------------------    --------------     -----------    -------------     -----------------------

<S>                                   <C>                 <C>              <C>             <C>                     <C>
Employee termination benefits         $ -                 $800             $(606)          $(49)                   $145
</TABLE>

6.       CONTINGENT CONSIDERATION

         As a result of the Company's acquisition program, it has $30.4 million
of contingent consideration potentially due to the former owners of its acquired
companies, including $10.5 million that has been earned and is accrued on the
consolidated balance sheet at December 31, 2003. These amounts are payable as
additional consideration for the acquired operating unit having met certain
performance criteria negotiated at the time of the purchase. A summary of the
amounts payable if the criteria are met is as follows for acquisitions that were
completed as of December 31, 2003:


<TABLE>
<CAPTION>
                                POTENTIAL AMOUNT                              SHARE VALUE
                                   PAYABLE IN           CASH       SHARES         (1)
                              ---------------------- ----------- ----------- --------------
<S>                                                     <C>         <C>             <C>
                                      2004              $ 6,361      56,185         $1,081
                                      2005               10,691      99,131          1,907
                                      2006                5,328      19,491            375
                                      2007                3,603           -              -
                                      2008                1,103           -              -
                                                     ----------- ----------- --------------
                                                        $27,086     174,807         $3,363
                                                     =========== =========== ==============
</TABLE>

                           (1)      Shares determined using the share value
                                    computed using the closing price of the
                                    Company's common stock at December 31, 2003
                                    of $19.24 per share.


                                       51
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7.       ASSET DISPOSITION

         The Company acquired Insurance Alliances Group in May 2000 with the
intent of establishing it as its estate-planning segment. The Company was unable
to develop this business to the size and scope it contemplated at the time of
its acquisition and on September 21, 2001, the Company sold substantially all of
the assets of this business for $300 thousand. During 2001, the Company recorded
as operating expense, a write down of approximately $2.1 million in the carrying
value of the goodwill and inforce revenue intangible assets arising from this
acquisition, which were considered unrecoverable.

8.       ACCOUNTS RECEIVABLE

         Major categories of accounts receivable are as follows:

<TABLE>
<CAPTION>
                                                                 AS OF DECEMBER 31,
                                                                 --------------------
                                                                   2003       2002
                                                                 ---------- ---------
<S>                                                                <C>       <C>
                             Accounts receivable - trade....       $48,467   $63,853
                             Loans receivable...............           307     1,170
                             Accounts receivable allowance..        (1,296)   (1,089)
                                                                 ---------- ---------
                                                                   $47,478   $63,934
                                                                 ========== =========
</TABLE>

         The rollforward of the accounts receivable allowance is as follows:

<TABLE>
<CAPTION>
                                                                       AS OF DECEMBER 31,
                                                                       ------------------
                                                                   2003       2002       2001
                                                                 ---------- --------- ----------
<S>                                                                <C>       <C>          <C>
                           Beginning balance.................      $(1,089)    $(822)     $(555)
                           Write offs........................          999       638        343
                           Expense...........................       (1,206)     (905)      (610)
                                                                 ---------- --------- ----------
                           Ending balance....................      $(1,296)  $(1,089)     $(822)
                                                                 ========== ========= ==========
</TABLE>


         As of December 31, 2003 and 2002, there were approximately $2.3 million
and $1.6 million, respectively, of unbilled receivables included in accounts
receivable on the consolidated balance sheets. These unbilled amounts, the
majority of which relate to in-process consulting projects, are typically billed
during the quarter immediately following the reporting period.

9.       GOODWILL AND OTHER INTANGIBLE ASSETS

         The Company adopted SFAS No. 142 in the first quarter of 2002. The
Company tested goodwill for impairment in 2002 using the two-step process
prescribed in SFAS No. 142. The first step is a determination of potential
impairment, while the second step measures the amount of the impairment, if any.
The Company performed the required impairment tests of goodwill as of January 1,
2002 in the first quarter of 2002. An after-tax impairment charge of $523
thousand $(892 thousand before tax) resulting from these impairment tests is
reflected as the cumulative effect of a change in accounting principle in 2002.
The Company performs its annual goodwill impairment analysis in the fourth
quarter of each year. No additional impairment was recorded in 2003.

         In accordance with SFAS No. 142, the Company discontinued the
amortization of goodwill effective January 1, 2002. While SFAS No. 142 prohibits
restatement for comparison purposes, the following presents reported net income
and earnings per share adjusted to exclude amortization related to goodwill that
is no longer being expensed in 2003 and 2002, net of the related income tax
effect.


                                       52
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                              2003             2002             2001
                                                                          -------------   -------------    -------------

<S>                                                                            <C>              <C>              <C>
            Reported net income, before cumulative effect of change in
             accounting principle........................................      $12,682          $17,851          $16,012
               Add:  Goodwill amortization, net of tax...................            -                -            2,590
                                                                          -------------    -------------    -------------
            Adjusted net income, before cumulative effect of change in
             accounting principle........................................      $12,682          $17,851          $18,602
                                                                          =============    =============    =============

            Basic earnings per common share, before cumulative effect
             of change in accounting principle...........................        $0.69           $ 1.06           $ 1.22
               Add:  Goodwill amortization, net of tax...................            -                -             0.19
                                                                          -------------    -------------    -------------
            Adjusted basic earnings per common share, before cumulative
             effect of change in accounting principle....................        $0.69           $ 1.06           $ 1.41
                                                                          =============    =============    =============

            Diluted earnings per common share, before cumulative effect
             of change in accounting principle...........................        $0.68            $1.02           $ 1.18
                Add:  Goodwill amortization, net of tax                              -                -             0.19
                                                                          -------------    -------------    -------------
            Adjusted diluted earnings per common share, before
             cumulative effect of change in accounting principle.........        $0.68           $ 1.02           $ 1.37
                                                                          =============    =============    =============
</TABLE>

         Changes in the carrying amount of goodwill between December 31, 2002
and December 31, 2003 by reporting units are as follows:


<TABLE>
<CAPTION>
                                               BALANCE             ACQUIRED DURING                                BALANCE
                                          DECEMBER 31, 2002           THE YEAR            EARNOUTS           DECEMBER 31, 2003
                                          -----------------        ---------------        --------           -----------------

<S>                                            <C>                      <C>                <C>                  <C>
  Executive Benefits Practice                  $ 16,288                 $    -             $  150               $ 16,438
  Banking Practice                               40,488                  1,698              2,537                 44,723
  Healthcare Group                               14,076                      -                  -                 14,076
  Management Science Associates                   5,010                      -                  -                  5,010
  Human Capital Practice                            664                      -                200                    864
  Pearl Meyer & Partners                         36,981                      -                  -                 36,981
  Federal Policy Group                            4,266                      -              4,500                  8,766
  Corporate                                          30                      -                  -                     30
                                               --------                 ------             ------               --------
  TOTAL                                        $117,803                 $1,698             $7,387               $126,888
                                               ========                 ======             ======               ========
</TABLE>


Information regarding the Company's other intangible assets follows:

<TABLE>
<CAPTION>
                                       AS OF DECEMBER 31, 2003                             AS OF DECEMBER 31, 2002
                         -----------------------------------------------    ------------------------------------------------
                         CARRYING       ACCUMULATED                           CARRYING        ACCUMULATED
                          AMOUNT       AMORTIZATION          NET               AMOUNT         AMORTIZATION         NET
                         --------      ------------          ---              --------        ------------         ---

<S>                     <C>                <C>             <C>                <C>                 <C>          <C>
Inforce revenue         $499,800           $(44,305)       $455,495           $503,895            $(24,334)    $479,561
Non-compete
 agreements               10,669             (3,249)          7,420              4,472              (1,641)       2,831
                          ------             ------           -----              -----              ------        -----
     Total              $510,469           $(47,554)       $462,915           $508,367            $(25,975)    $482,392
                        ========           ========        ========           ========            ========     ========
</TABLE>


         Amortization expense of other intangible assets was $21.6 million, $9.2
million, and $7.6 million for the years ended December 31, 2003, 2002, and 2001,
respectively.

         Net present value of future cash flows from inforce revenues are
amortized over 20 to 30 years, periods representative of policy duration, and
non-compete agreements are amortized over five to ten years according to the
terms of the agreements. Goodwill generated from acquisitions completed prior to
July 1, 2001 was amortized over periods of 20 to 40 years. Amortization of
goodwill ceased January 1, 2002 upon the Company's adoption of SFAS No. 142.


                                       53
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         For the past three years, the Company's amortization of intangibles has
been comprised of the following:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                 -------------------------------------
                                                                      2003        2002         2001
                                                                 ----------- ------------ -------------
      <S>                                                        <C>         <C>          <C>
       Present value of future cash flows from inforce revenue       $19,971       $8,641       $ 7,282
       Goodwill.............................................               -            -         4,003
       Non-compete agreements...............................           1,608          608           275
                                                                 ----------- ------------ -------------
       Total................................................         $21,579       $9,249       $11,560
                                                                 =========== ============ =============
</TABLE>

         The Company estimates that its amortization for 2004 through 2008 for
all acquisitions consummated to date will be as follows:

<TABLE>
<CAPTION>
                                                             NON-COMPETE
                                          INFORCE REVENUE     AGREEMENTS      TOTAL
                                         ----------------    ------------   ---------
                    <S>                  <C>                 <C>            <C>
                    2004................     $16,677           $1,293        $17,970
                    2005................      13,862            1,268         15,130
                    2006................      13,334            1,268         14,602
                    2007................      13,007            1,243         14,250
                    2008................      13,078              827         13,905
</TABLE>

10.  ACCRUED LIABILITIES

Major categories of accrued liabilities are as follows:

                                                    AS OF DECEMBER 31,
                                                   --------------------
                                                      2003      2002
                                                   --------- ----------
   Bonuses payable.............................     $15,603    $13,970
   Commissions payable.........................       9,692     14,723
   Earnouts payable............................       7,442      7,587
   Other.......................................      13,911     10,903
                                                   --------- ----------
                                                    $46,648    $47,183
                                                   ========= ==========

11. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         Major classifications of equipment and leasehold improvements are as
follows:

                                                    AS OF DECEMBER 31,
                                                   --------------------
                                                      2003      2002
                                                   --------- ----------
   Computer software, office furniture and
   equipment...................................     $20,346    $18,161
   Capitalized software........................       5,729      3,931
   Leasehold improvements......................       3,118      3,502
                                                   --------- ----------
                                                     29,193     25,594
   Accumulated depreciation and amortization...     (15,909)   (10,459)
                                                   --------- ----------
                                                    $13,284    $15,135
                                                   ========= ==========

         Depreciation expense was $5.7 million, $4.4 million, and $3.1 million
for 2003, 2002, and 2001, respectively.

12. TAXES

         Income tax expense from operations consists of the following
components:

                                                 YEAR ENDED DECEMBER 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           ------------ ----------- -----------
    Current:
     Federal..............................    $1,396     $ 8,328      $4,887
     State and local......................       371       2,947       1,727
    Deferred:
     Federal..............................     5,548         908       1,704
     State and local......................       774         221         407
                                           ------------ ----------- -----------
                                              $8,089     $12,404      $8,725
                                           ============ =========== ===========

                                       54
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Total income taxes incurred consists of the following components:

                                                 YEAR ENDED DECEMBER 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           ------------ ----------- -----------
    Income tax expense from operations.....    $8,089    $12,404      $8,725
    Income tax benefit in equity from
       exercise of options.................      (195)       (24)       (196)
                                           ------------ ----------- -----------
    Total income tax incurred..............    $7,894    $12,380      $8,529
                                           ============ =========== ===========

         A reconciliation of the 2003, 2002, and 2001 income tax expense
computed by applying the statutory rate to income before income taxes to the
actual taxes is as follows:

                                                 YEAR ENDED DECEMBER 31,
                                           ------------------------------------
                                              2003         2002        2001
                                           ------------ ----------- -----------
    U.S. Federal statutory rate............   $7,062      $10,589      $8,657
    State income tax-- net of federal
    benefit................................      970        1,950       1,448
    Prior year warrant extinguishment......        -            -      (1,650)
    Non-deductible goodwill amortization...        -            -         299
    Non-taxable life insurance proceeds....        -            -         (67)
    Tax liability adjustment and prior
    year taxes.............................     (146)        (123)       (362)
    Other - net............................      203          (12)        400
                                           ------------ ----------- ------------
                                              $8,089      $12,404      $8,725
                                           ============ =========== ============

         The December 31, 2003 effective tax rate reflects an anticipated $283
thousand net state tax refund. The decrease in the effective tax rate is
primarily related to the true up of the estimated 2002 state tax liability.

         As a result of a Circuit Court case allowing the deductibility of such
expenses, the Company filed an amended Federal income tax return for the year
ended December 31, 1998 for an additional deduction of $4.8 million in 1998 for
the repurchase of certain put warrants. During an audit of the Company's Federal
income tax return for the years 1998 and 1999, the Internal Revenue Service
approved the Company's amended return and approved a refund of approximately
$1.7 million, before interest, for the years under audit. No other audit
adjustments were made. Without the benefit of this refund, the Company's
effective tax rate would have been 41.9% for the year ended December 31, 2001.

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets are as follows:

                                                           AS OF DECEMBER 31,
                                                        ------------------------
                                                            2003         2002
                                                        ------------ -----------
    LONG-TERM:
         Intangible assets..........................      $(19,989)    $(11,453)
         Depreciation...............................        (1,077)           -
         Accrued liabilities........................         1,270            -
         Reorganization costs.......................         2,375            -
         Deferred compensation......................         2,229        1,383
         Net operating loss.........................         1,135        1,264
         Other......................................             -          (31)
                                                        ------------ -----------
    TOTAL LONG-TERM NET DEFERRED TAX LIABILITIES          $(14,057)    $ (8,837)
                                                        ============ ===========

    CURRENT:
        Accrued liabilities........................        $ 1,263      $ 1,003
        Prepaid expenses...........................         (1,236)           -
        Net operating loss.........................            226          249
                                                        ------------ -----------
    TOTAL CURRENT NET DEFERRED TAX ASSETS..........        $   253      $ 1,252
                                                        ============ ===========

         In assessing the realizability of deferred tax assets, the Company
considers the likelihood that some portion or all of the deferred tax assets may
not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which the
temporary differences become deductible. The Company considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods with respect to which the deferred tax assets are deductible, the
Company believes it is more likely than not that it will realize the benefits of
these deductible differences. Accordingly, no valuation allowance is deemed
necessary.

                                       55
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

13. LONG-TERM DEBT

                                                           AS OF DECEMBER 31,
                                                        -----------------------
                                                            2003         2002
                                                        ------------ ----------

    Term loan payable to banks..........................  $ 15,495     $ 50,000
    Revolving credit loan payable to banks..............    15,400       56,980
    Notes payable to former stockholder of
    acquired businesses.................................     5,897        6,733
    Asset-backed notes..................................   288,729      305,000

    Trust preferred debt................................    27,000            -
                                                        ----------   ----------
                                                           352,521      418,713
    Less current maturities.............................    16,553       22,675
                                                        ----------   ----------
                                                          $335,968     $396,038
                                                        ==========   ==========

         Securitization -- In order to finance the acquisition of LongMiller,
the Company entered into a $305 million gross securitization of a majority of
the inforce revenues of LongMiller. In connection with the securitization
transaction, CBC Insurance Revenue Securitization, LLC, a wholly-owned
subsidiary of the Company ("CBC IRS"), issued $305 million aggregate principal
amount of notes secured by insurance commission streams (the "Securitized
Notes") in a private placement (the "Securitization Transaction"). CBC IRS
purchased such insurance commission streams from LongMiller. CBC IRS is a
special purpose company that holds certain rights to commissions and other
compensation arising from the sale of bank-owned or company-owned life insurance
policies. While CBC IRS is included in the Company's consolidated financial
statements and has elected to be treated as a disregarded entity for federal
income tax purposes, it is a separate legal entity. The assets held by CBC IRS
are legally owned by CBC IRS and are not available to creditors of the Company,
LongMiller, or the Company's other subsidiaries. The securitization is broken
into four traunches, each rated by Standard & Poors. The traunches consist of
the A-1 and A-2 class totaling approximately $167 million and each rated "AAA",
the B-class traunch of $108 million rated "A" and the C-class traunch of $30
million rated "BBB". The weighted average interest cost over the 20-year life of
the asset-backed notes is approximately seven percent. The securitized inforce
revenues, which are approximately $38.7 million in 2003, are used to pay
interest and principal to the noteholders. Assuming the securitized notes
amortize as expected, the securitization will provide residual cash flow to the
Company of approximately five percent for the securitized inforce revenue in the
initial years, and the Company's total residual interest would equal
approximately 28 percent of the total securitized inforce revenue over the life
of the notes. The securitization is treated as debt and is included in the
Banking Practice segment, and is non-recourse to the Company. The note agreement
requires cash flow from the assets securitizing the notes to be held in a
separate account. As of December 31, 2003, there was restricted cash of $19.0
million related to such requirements.

         Credit Facility -- In November 2003, the Company amended and restated
its December 28, 1999 Credit Agreement revising the amount available under the
credit facility to $80.0 million. In December 2003, a new participant bank was
added to the facility increasing the facility amount to $90 million. The Company
converted $50 million of amounts under the revolving credit facility to term
debt at December 31, 2002. The term debt is being paid quarterly over five years
under the credit facility agreement. The Company had $59.1 million available
under its credit line at December 31, 2003. The Company's assets are pledged to
the bank group as part of the credit facility except for cash flows from
commissions to be received upon the renewals of the inforce policies acquired in
connection with the acquisition of LongMiller.

         Interest on the revolver is based upon prime or LIBOR, plus a spread,
at the Company's option. Interest on the revolver is paid monthly for prime rate
borrowings and at maturity of each LIBOR borrowing. The Company's average
interest rate at December 31, 2003 is 3.45%. Interest on the term loan is paid
quarterly and is based on LIBOR plus a spread (3.17% at December 31, 2003). The
Company's spread may change depending on its financial leverage.

         The restrictive covenants under the credit facility provide for the
maintenance of a minimum ratio of fixed charges, a maximum allowable leverage
ratio, a minimum level of net worth (stockholders' equity), and a maximum ratio
of debt to capitalization. The Company was in compliance with all its
restrictive covenants as of December 31, 2003. The Company's restrictive
covenants may limit its borrowing ability under its credit line.

         The Company is obligated to pay a commitment fee based on the daily
average of undrawn funds under the credit agreement. The fee is a minimum of
..35% and a maximum of .50% based on the ratio of consolidated indebtedness to
income before interest, taxes, depreciation and amortization for the most recent
four quarters on a rolling quarterly basis.

                                       56
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         Trust Preferred Debt -- On May 23, 2003, the Company received proceeds
of approximately $14.5 million from its participation in a pooled trust
preferred transaction, in which it issued $15.0 million aggregate principal
amount of long-term subordinated debt securities with a floating rate based on
three month LIBOR plus a spread of 420 basis points (5.37% as of December 31,
2003). The Company used the net proceeds to pay down the term portion of its
credit facility. The pooled trust preferred debt is payable in one payment due
in 30 years with interest paid quarterly.

         On December 16, 2003, the Company received proceeds approximately $11.5
million from its participation in a pooled trust preferred transaction, in which
it issued $12.0 million aggregate principal amount of long-term subordinated
debt securities with a floating rate based on three month LIBOR plus a spread of
410 basis points (5.27% as of December 31, 2003). The Company used the net
proceeds to pay down the term portion of its credit facility. The pooled trust
preferred debt is payable in one payment due in 30 years with interest paid
quarterly.

         Phynque, Inc. Notes -- In connection with the purchase of Phynque, Inc.
d/b/a Management Compensation Group/Healthcare, the Company issued an $8.7
million promissory note payable in thirty-two equal quarterly installments of
principal and interest at 10%. A portion of the promissory note is guaranteed
personally by the Company's Chairman and Chief Executive Officer.

         At December 31, 2003, future payments under all debt arrangements are
as follows:

                  2004...................     $ 16,553
                  2005...................       20,072
                  2006...................       30,621
                  2007...................       13,945
                  2008...................       13,297
                  2009 and thereafter....      258,033
                                             ---------
                                              $352,521
                                             =========

14.  STATEMENT OF COMPREHENSIVE INCOME

         Under SFAS No. 130, Comprehensive Income, the comprehensive income for
the Company consists of net income and changes in fair value, net of tax, of
interest rate swaps. Shown below is the Company's comprehensive income:

                                                  YEAR ENDED DECEMBER 31,
                                         ------------------------------------
                                             2003         2002        2001
                                         ----------- ------------ -----------
        Net income.......................   $12,682      $17,328      $16,012
        Change in fair value of interest
           rate swaps, net of tax........      (245)           -            -
                                         ----------- ------------ -----------
        Comprehensive income.............   $12,437      $17,328      $16,012
                                         =========== ============ ===========

15. FINANCIAL INSTRUMENTS

         Derivative Financial Instruments. The Company has used derivatives only
for hedging purposes to mitigate interest rate risk. The following is a summary
of the Company's risk management strategies and the effect of these strategies
on its consolidated financial statements.

         Cash Flow Hedging Strategy. The Company has limited transactions that
fall under the accounting rules of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, SFAS No. 138 and
SFAS No. 149. From time to time, the Company uses financial instruments,
including interest rate swap agreements, to manage exposure to interest rate
risk. On January 7, 2003, the Company entered into two interest rate swaps with
a total notional value of $50 million to hedge $50 million of outstanding
LIBOR-based debt. These swaps have been designated as cash flow hedges. As such,
the changes in the fair value of the interest rate swaps are recorded in other
comprehensive income ("OCI") for the effective portion of the hedge, while the
ineffective portion is recorded immediately in earnings. Amounts are
reclassified from OCI to earnings as the interest rate swaps affect earnings.
There have been no charges to earnings for ineffectiveness for the year ended
December 31, 2003. The fair value of these interest rate swap agreements, based
upon market quotes, was a liability of approximately $157 thousand at December
31, 2003. The notional amount of the remaining interest rate swap amortizes $1.4
million per quarter. In November 2003, in conjunction with the renewal of the
credit facility, one of the interest rate swaps was terminated. The remaining
swap has a notional amount of $22.4 million, which the Company is paying a fixed
rate of 2.85% and receiving LIBOR. There were no outstanding interest rate swaps
at December 31, 2002.

                                       57
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         On December 21, 2001, the Company repaid $41.2 million of hedged term
debt from the proceeds of the sale of 3,693,750 shares of its common stock in a
public offering on November 15, 2001. As a result of the repayment, the cash
flow hedge was effectively discontinued and therefore $2.0 million related to
the settlement of the swaps was recognized as a component of interest expense in
the Company's December 31, 2001 statement of income.

         The following methods and assumptions were used in estimating the fair
value disclosures for financial instruments:

         Long- and Short-Term Debt. The carrying amounts of the borrowings under
the Company's loan arrangements approximate their fair value. The fair values of
the long-term debt are estimated using discounted cash flow analysis, based on
the Company's current incremental borrowing rates for similar types of borrowing
arrangements.

         Interest rate swaps. The carrying amount of interest rate swaps is
based upon confirmation from the counterparty.

         The carrying amounts and fair values of the Company's financial
instruments at December 31 are as follows:

                                           AS OF DECEMBER 31,
                               ------------------------------------------
                                      2003                   2002
                               -------------------    -------------------
                               CARRYING    FAIR       CARRYING     FAIR
                                AMOUNT     VALUE       AMOUNT     VALUE
                               --------   --------    --------   --------
  Short-term debt.............   16,553    17,525       22,675    23,202
  Long-term debt..............  335,967   342,046      396,038   395,487
  Interest rate swaps.........      157       157            -         -

16. BENEFIT PLANS

         Incentive Stock Option Plan. The Incentive Stock Option Plan provided
certain employees options to purchase shares for $4.80 and $7.00 per share;
190,832 options were granted and no additional options may be granted under this
program. The $4.80 and $7.00 options became fully vested at the date of the
Initial Public Offering. The options expire ten years from the grant date and
are voided within 90 days of the employee's termination or one year from date of
death. No future options will be granted under this plan.

         1998 Stock Option Plan. In 1998, the Board of Directors approved a
stock option plan providing for certain employees, directors, and consultants to
purchase shares at the fair market value at the time the option is granted. The
Plan is administered by a committee of non-employee directors who have full
discretion to determine participation, vesting, and term of the option at the
time of the grant providing that no option may have a term greater than ten
years from the date of the grant. A total of 2.0 million shares are reserved for
issuance under this plan. The vesting period of the stock options is generally
between three and five years. As of December 31, 2003, 1,924,832 options have
been granted under this program and a total of 75,168 shares of the Company's
common stock remain available for grant.

         1998 Non-Employee Director Stock Option Plan. A total of 100 thousand
shares of the Company's common stock have been reserved for issuance under its
Non-Employee Director Plan, as amended, by the Board of Directors in January
2000. The non-employee director plan is administered by the compensation
committee of the board. Only nonqualified options may be granted and all of the
Company's non-employee directors participate in the plan. The plan provides for
the automatic grant of stock options to purchase 10 thousand shares of the
Company's common stock to each newly elected non-employee director on the first
day of the month following their election. The plan also provides for the
automatic grant of stock options to purchase 4 thousand shares of the Company's
common stock to continuing non-employee directors on the first day of the month
immediately following its annual stockholders meeting. The exercise price for
stock options granted under the non-employee director plan is the fair market
value of the Company's common stock on the date of grant. The vesting period of
the stock options is generally between one and three years. No option may have a
term greater than three years from the date of the grant. As of December 31,
2003, 98,110 options had been granted under the non-employee director plan and a
total of 1,890 shares of the Company's common stock remain available for grant.

         2002 Stock Option Plan - On April 30, 2002, the Board of Directors
approved the Clark, Inc. 2002 Stock Option Plan (the "2002 Plan"). A total of
500 thousand shares of the Company's common stock have been reserved for
issuance under the 2002 Plan. The exercise price for stock options granted under
the 2002 Plan is the fair market value of the Company's common stock on the date
of grant. The vesting period of the stock options is generally between three and
five years. No option may have a term greater than ten years from the date of
the grant. As of December 31, 2003, 189,500 options had been granted under this
plan and a total of 310,500 shares of the Company's common stock remain
available for grant.

                                       58
<PAGE>
                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         2003 Stock Option Plan - On January 28, 2003, the Board of Directors
approved the Clark, Inc. 2003 Stock Option Plan (the "2003 Plan"). A total of 2
million shares of the Company's common stock have been reserved for issuance
under the 2003 Plan. The exercise price for stock options granted under the 2003
Plan is the fair market value of the Company's common stock on the date of
grant. The vesting period of the stock options is generally between three and
five years. No option may have a term greater than ten years from the date of
the grant. As of December 31, 2003, 10 thousand options had been granted under
this plan and a total of 1,990,000 shares of the Company's common stock remain
available for grant.

         The following table summarizes the combined status of all of the
Company's stock option plans:

<TABLE>
<CAPTION>
                                                                                                   WEIGHTED
                                                                                                   AVERAGE
                                                                           OPTIONS              EXERCISE PRICE
                                                                      ------------------      -------------------
<S>                                                                   <C>                     <C>
OUTSTANDING AT JANUARY 1, 2001....................................            1,377,276                   $12.56
  Granted.........................................................              541,100                    17.28
  Exercised.......................................................             (119,440)                    8.44
  Forfeited.......................................................              (38,300)                   15.40
                                                                      ------------------      -------------------
OUTSTANDING AT DECEMBER 31, 2001..................................            1,760,636                    14.23
  Granted.........................................................              351,964                    23.25
  Exercised.......................................................              (75,400)                   23.55
  Forfeited.......................................................             (118,768)                   18.20
                                                                      ------------------      -------------------
OUTSTANDING AT DECEMBER 31, 2002..................................            1,918,432                    15.94
  Granted.........................................................              285,000                    14.33
  Exercised.......................................................             (167,998)                   10.17
  Forfeited.......................................................             (450,162)                   16.94
                                                                      ------------------      -------------------
OUTSTANDING AT DECEMBER 31, 2003..................................            1,585,272                    15.41
                                                                      ==================
EXERCISABLE AT DECEMBER 31, 2003..................................              868,148
                                                                      ==================
EXERCISABLE AT DECEMBER 31, 2002..................................            1,132,515
                                                                      ==================
EXERCISABLE AT DECEMBER 31, 2001..................................              824,742
                                                                      ==================
</TABLE>

         The following table summarizes the stock options outstanding and
exercisable as of December 31, 2003:

<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING                               OPTIONS EXERCISABLE
 -----------------------------------------------------------------   -----------------------------
                                       WEIGHTED
                                       AVERAGE         WEIGHTED                       WEIGHTED
                                      REMAINING        AVERAGE                        AVERAGE
     RANGE OF          NUMBER     CONTRACTUAL LIFE     EXERCISE         NUMBER        EXERCISE
 EXERCISE PRICES    OUTSTANDING        (YEARS)          PRICE         EXERCISABLE      PRICE
------------------- ------------- ------------------ -------------   -------------- -------------
<S>                 <C>           <C>                <C>             <C>            <C>

   $4.80 - $7.00        61,101            3.5            $ 5.70           61,101        $ 5.70
           $9.00       182,916            3.9              9.00          182,916          9.00
  $9.88 - $11.50       231,900            8.4             10.31           96,427         10.16
 $11.60 - $14.50       292,800            9.4             13.41          120,832         12.95
 $14.75 - $15.93       134,370            6.6             14.93           87,274         14.89
 $16.65 - $18.13       107,546            5.7             17.33           67,286         17.57
 $18.49 - $22.04       134,000            9.1             18.71            6,667         21.50
 $22.90 - $25.28       388,639            8.9             24.37          202,565         24.85
 $27.49 - $30.30        52,000            6.7             27.49           43,080         27.49
                  -------------                                    --------------
                     1,585,272                                           868,148
                  =============                                    ==============
</TABLE>

         Savings Investment Plan. The Savings Investment Plan is a defined
contribution profit sharing plan, qualifying under Section 401(k) of the
Internal Revenue Code, covering substantially all eligible employees. At the
Company's discretion, it may contribute up to 100% of an eligible participant's
contributions to the Plan, up to a maximum of 3% of the participants' salary.
The Company's contributions to the Plan were $1.8 million, $2.0 million, and
$1.1 million for the years ended December 31, 2003, 2002, and 2001,
respectively.

         Stock Purchase Plan. On January 28, 2003, the Board of Directors
adopted the amended and restated Employee Stock Purchase Plan ("ESPP"), under
which a total of 400 thousand shares of common stock have been reserved for
issuance. Any employee who has been employed for 30 days is eligible to
participate in offerings under the Stock Purchase Plan.

         The Stock Purchase Plan consists of eight semi-annual offerings of
common stock beginning on each January 1 and July 1 in each of the years 2003 to
2006, and terminating on June 30 and December 31 of each such year. The maximum
number of shares issued in such years was 50 thousand in 2003, and 50 thousand
plus the number of unissued shares from prior offerings for subsequent periods.
The price of the shares under each offering segment is 85% of the lower of the
closing market price on the day before the offering period begins or on the day
the offering period ends.

                                       59
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         The Company has, for the expired periods prior to December 31, 2003,
determined that it will purchase the requisite shares on the open market and
have not issued any additional shares to fulfill this obligation. Future
fulfillment under this Plan may be made through open market purchases or
unissued shares, at the Company's discretion.

         During 2003, 2002, and 2001, the Company's employees purchased 90,484,
49,824, and 52,663 shares, respectively of common stock at an average cost to
them of $10.16, $17.89, and $13.00 per share, respectively. The Company's open
market purchases of these shares for the employees were made at an average cost
of $13.82, $21.18, and $11.67 per share during 2003, 2002, and 2001,
respectively.

         Key Executive Life Insurance. The Company maintains key man life
insurance policies of $50.0 million on its Chairman and Chief Executive Officer
and policies ranging from $1.0 million to $10.0 million on certain other key
executives. As part of the Company's Chairman and Chief Executive Officer's
employment agreement, it agrees to use the proceeds from the key man life
insurance to purchase from the Chairman's estate up to $20 million of common
stock at the closing price on the last trading day immediately preceding his
death.

17. COMMITMENTS

         Leases -- The Company conducts operations from leased office
facilities. The Company expects that, in the normal course of business, leases
that expire will be renewed or replaced by other leases; thus it is anticipated
that future minimum lease commitments will not be less than the amount shown in
the table below.

         Rental expense for the years ended December 31, 2003, 2002, and, 2001
was $16.7 million, $9.4 million, and $6.0 million, respectively.

         At December 31, 2003, approximate minimum rental commitments under all
non-cancelable leases having terms in excess of a year are as follows:

                    2004....................  $10,882
                    2005....................   10,579
                    2006....................   10,074
                    2007....................    9,085
                    2008....................    7,668
                    2009 and Thereafter.....   14,092
                                              -------
                                              $62,380
                                              =======


                                       60
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

18.  EARNINGS PER SHARE

         The following table sets forth the computation of basic and diluted
earnings per common share:
<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31,
                                                            ---------------------------------------------------
                                                                   2003             2002             2001
                                                            ---------------- ----------------- ----------------
         <S>                                                         <C>              <C>               <C>
NUMERATOR:
Income,   before   cumulative   effect   of  change  in
 accounting principle.......................................         $12,682          $17,851          $16,012
Cumulative  effect of change in  accounting  principle,
 net of tax.................................................               -             (523)               -
                                                            ---------------- ----------------- ----------------
Numerator  for basic and  diluted  earnings  per common
 share......................................................         $12,682          $17,328          $16,012
                                                            ================ ================= ================
DENOMINATOR
Basic earnings per common share -
   weighted average shares outstanding......................      18,338,963       16,896,657       13,162,899
Effect of dilutive securities:
   Stock options............................................         189,871          456,490          412,931
   Contingent shares earned not issued......................         212,099          159,959                -
                                                            ---------------- ----------------- ----------------
Diluted  earnings per share - weighted  average  shares
 plus assumed conversions...................................      18,740,934       17,513,106       13,575,830
                                                            ================ ================= ================

PER COMMON SHARE
Basic  Earnings  per common  share,  before  cumulative
 effect of change in accounting principle...................           $0.69            $1.06            $1.22
Cumulative effect of change in accounting principle.........               -            (0.03)               -
                                                            ---------------- ----------------- ----------------
Basic earnings per common share                                        $0.69            $1.03            $1.22
                                                            ================ ================= ================
Diluted  Earnings per common share,  before  cumulative                                 $1.02            $1.18
 effect of change in accounting principle...................           $0.68
Cumulative effect of change in accounting principle.........               -            (0.03)               -
                                                            ================ ================= ================
Diluted Earnings per common share...........................           $0.68            $0.99            $1.18
                                                            ---------------- ----------------- ----------------
</TABLE>

         For the years ended December 31, 2003, 2002, and 2001 there are
approximately 868 thousand, 582 thousand, and 225 thousand, respectively, of
outstanding stock options which are not included in the computation of diluted
earnings per share because the exercise prices of the options were greater than
the average market prices of the Company's common shares during the respective
years. The range of exercise prices for these antidilutive stock options was
between $14.31 and $30.30 at December 31, 2003, $21.50 and $30.30 at December
31, 2002, and $23.55 and $25.28 at December 31, 2001.

                                       61
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


19. CARRIER INCENTIVE CONTRACTS

         During the third quarter of 2003, the Company completed agreements with
two of its insurance carriers, which will generate additional revenue on its
existing blocks of business with these carriers. The length of one of the
contracts is five and one half years and the other contract is one year. The
contracts automatically renew at the end of each term unless notice is given by
one of the parties. The agreements resulted in revenue of $3.5 million for the
year ended December 31, 2003, and provide for additional payments upon certain
conditions and measurement dates. The future payment amounts are based on the
cash value (or fair value) of the Company's existing inforce business with these
carriers at specified dates of measurement. Future payment amounts would be
negatively impacted by potential future surrenders of the inforce business or
non-renewal of the agreements and positively impacted by asset growth of the
Company's business with these carriers.

         On September 25, 2002, the Company entered into an Administrative
Services Agreement and Bonus Forfeiture Agreement with an affiliate of AUSA
Holding, Inc., one of its principal stockholders and insurance carrier. The
Company received payments and recognized revenue of approximately $2.5 million
during the year ended December 31, 2003 under the terms of this agreement.
During 2002, the Company received $2.5 million for services rendered prior to
and through September 30, 2002 and recognized a total of $3.1 million in 2002,
pursuant to this agreement. Under the terms of this agreement, the Company
expects to continue to receive approximately $2.5 million annually from the
carrier for a period of 30 years, depending upon certain conditions. Of this
annual amount, $2.0 million is included in the cash flows securitizing the
asset-backed notes issued to finance the acquisition of LongMiller, and the
Company will not have access to this cash for general corporate purposes until
the securitized notes are fully paid. This revenue, net of amounts provided for
chargebacks, is being recognized on a monthly basis beginning in October 2002.
The amounts received are subject to chargeback (reimbursement of a portion of
amounts received) if any policies under this agreement are surrendered or
exchanged. Any chargeback amounts would be deducted from the next scheduled
payment.

20. SEGMENTS AND RELATED INFORMATION

         The Company has six reportable segments:

         o        Executive Benefits Practice - markets, designs, implements,
                  administers, and finances non-qualified benefit plans for
                  companies of all sizes including Fortune 1000 companies and
                  other companies which can benefit from the Company's products
                  and services.

         o        Banking Practice - offers compensation consulting, executive,
                  and director benefit programs and bank-owned life insurance to
                  the bank market.

         o        Healthcare Group - provides specialized compensation and
                  benefit services for large and medium sized not-for-profit
                  healthcare organizations.

         o        Human Capital Practice - provides compensation, benefits, and
                  human resources consulting services and products to major
                  companies including technology and intellectual capital
                  companies.

         o        Pearl Meyer & Partners - specializes in executive compensation
                  and retention programs.

         o        Federal Policy Group - provides a variety of legislative and
                  regulatory strategic services.

         As of January 1, 2003, the Company transferred the operations of Coates
Kenney from its Executive Benefits Practice to its Human Capital Practice. As a
result, the segment information as of, and for the periods ended December 31,
2003 and 2002, have been reclassified to reflect this transfer.

         LongMiller, acquired on November 26, 2002, became part of the existing
Banking Practice.

         The segment information as of, and for the periods ended December 31,
2003, 2002 and 2001 for the Pearl Meyer & Partners segment reflects the results
of, and information related to, the Rewards and Performance Group and certain
Human Capital Practice employees, who were transferred to Pearl Meyer & Partners
as of October 1, 2003.

         On February 25, 2002, the Company acquired the Federal Policy Group
from PricewaterhouseCoopers LLP.

         The six reportable segments operate as independent and autonomous
business units with a central corporate staff in North Barrington, Illinois
responsible for finance, strategic planning, human resources, and company-wide
policies. Each segment has its own client base as well as its own marketing,
administration, and management.

                                       62
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         The Company has disclosed income from operations as the primary measure
of segment earnings (loss). This is the measure of profitability used by the
Company's chief operating decision-maker and the most consistent with the
presentation of profitability reported within the consolidated financial
statements. The accounting policies of the business segments reports are the
same as those described in Note 1, "Nature of Operations and Summary of
Significant Accounting Policies".

         The Company evaluates performance and allocates resources based on
operating income before income taxes, interest and corporate administrative
expenses. There are no inter-segment revenue or expenses.

         Segment information for the years ended December 31, 2003, 2002, and
2001, is as follows:

<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                           -------------------------------------
                                                              2003         2002         2001
                                                           ------------ ------------ -----------
     <S>                                                   <C>          <C>          <C>
     REVENUES FROM EXTERNAL CUSTOMERS
     Executive Benefits Practice......................        $ 69,988     $ 82,847    $ 94,238
     Banking Practice.................................         165,839      116,036      91,890
     Healthcare Group.................................          36,100       37,906      27,527
     Human Capital Practice...........................           8,540        5,043           -
     Pearl Meyer & Partners...........................          26,871       22,333      21,628
     Federal Policy Group.............................          14,855        9,520           -
                                                           ------------ ------------ -----------
          Total segments-- reported...................         322,193      273,685     235,283
     Corporate/CSI....................................           3,736        4,901       1,601
                                                           ------------ ------------ -----------
          Total consolidated-- reported...............        $325,929     $278,586    $236,884
                                                           ============ ============ ===========
     OPERATING INCOME (LOSS) AND INCOME BEFORE TAXES
     Executive Benefits Practice ......................       $  2,616     $  3,683    $ 11,523
     Banking Practice..................................         55,221       37,153      31,265
     Healthcare Group..................................          4,847        4,818      (1,334)
     Human Capital Practice............................        (11,358)      (5,421)          -
     Pearl Meyer & Partners............................          1,098         (116)      3,844
     Federal Policy Group..............................          6,598        4,094           -
                                                           ------------ ------------ -----------
          Total segments-- reported....................         59,022       44,211      45,298
     Corporate/CSI.....................................        (14,544)     (10,498)    (11,677)
     Write-off of Insurance Alliance Group.............              -            -      (2,070)
     Other income......................................            302          262         354
     Interest-- net (1) ...............................        (24,009)      (3,720)     (7,168)
                                                           ------------ ------------ -----------
          Income before taxes..........................       $ 20,771     $ 30,255    $ 24,737
                                                           ============ ============ ===========
     DEPRECIATION AND AMORTIZATION
     Executive Benefits Practice.......................       $  5,040     $  5,207    $  6,778
     Banking Practice..................................         16,784        3,666       2,128
     Healthcare Group..................................          2,945        2,947       3,256
     Human Capital Practice............................            422           71           -
     Pearl Meyer & Partners............................            679          830       2,149
     Federal Policy Group..............................            403          330           -
                                                           ------------ ------------ -----------
          Total segments-- reported....................         26,273       13,051      14,311
     Corporate/CSI.....................................            984          549         355
                                                           ------------ ------------ -----------
          Total consolidated-- reported................       $ 27,257     $ 13,600    $ 14,666
                                                           ============ ============ ===========
     IDENTIFIABLE ASSETS
     Executive Benefits Practice.......................       $ 72,867     $ 82,988    $ 93,743
     Banking Practice..................................        509,370      526,485      79,720
     Healthcare Group..................................         32,996       36,899      41,520
     Human Capital Practice............................          5,282       13,863           -
     Pearl Meyer & Partners............................         47,362       44,403      48,034
     Federal Policy Group..............................         11,893        7,413
                                                           ------------ ------------ -----------
          Total segments-- reported....................        679,770      712,051     263,017
     Deferred tax asset................................            253        1,252         690
     Corporate/CSI.....................................         19,280       21,372       6,224
                                                           ------------ ------------ -----------
          Total consolidated-- reported................       $699,303     $734,675    $269,931
                                                           ============ ============ ===========
     CAPITAL EXPENDITURES
     Executive Benefits Practice.......................       $    978     $    797    $  1,352
     Banking Practice..................................          1,595        1,657         724
     Healthcare Group..................................            539        2,049       1,117
     Human Capital Practice............................            187          501           -
     Pearl Meyer & Partners............................             95          550       1,258
     Federal Policy Group..............................             44           67           -
                                                           ------------ ------------ -----------
          Total segments-- reported....................          3,438        5,621       4,451
     Corporate/CSI.....................................            985        2,151         554
                                                           ------------ ------------ -----------
          Total consolidated-- reported................       $  4,423     $  7,772    $  5,005
                                                           ============ ============ ===========

<FN>
(1)      In 2001, the Company incurred $2.0 million of interest expense related
         to its interest rate swaps.
</FN>
</TABLE>

         Geographic Information -- Virtually all the Company's revenue is
derived from clients located in the United States.

                                       63
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Major Customers and Clients --The Company generated in excess of 25% of
its revenue in 2003 from 37 clients, in 2002 from 41 clients and in 2001 from 22
clients. None of the clients individually accounted for more than 10% of
consolidated revenue. Substantially all of the policies underlying the programs
marketed by the Company are underwritten by 20 life insurance companies, of
which seven accounted for approximately 55.7% of the Company's first year
revenue for the year ended December 31, 2003, 48.3% of its first year revenue
for the year ended December 31, 2002, and 60.0% for the year ended December 31,
2001.

21. RELATED PARTY TRANSACTIONS

         The Company entered into compensation and employment agreements with
certain key employees. The agreements provide for an indefinite employment term,
compensation, stock bonuses, expense reimbursements, participation in benefit
plans and stock-based/incentive programs and are subject to the employees'
compliance with certain provisions. Two administrative employees of the
Company's Healthcare Group are entitled to a severance payment in the event they
voluntarily terminate their employment. This was an obligation of MCG/Healthcare
at the time of its acquisition and was valued and included in the Company's
consolidated balance sheet at approximately $84 thousand, and $138 thousand at
December 31, 2003 and 2002, respectively.

         The Company leases 17,783 square feet of office space and hangar space
for the corporate aircraft from entities owned by the Company's Chairman and
Chief Executive Officer, with base rent of approximately $458 thousand annually.
The office space lease expires on February 21, 2009.

         During the first quarter 2003, the Company paid Randy Pohlman, a member
of its Board of Directors, $40 thousand as a referral fee. This amount was
accrued in the Company's consolidated financial statements as of December 31,
2002.

         In 2001, Mr. Wamberg and Richard Chapman, Executive Vice-President of
Clark, Inc. and President of the Banking Practice, have collectively invested $1
million in a company of which George Dalton, a member of the Company's Board of
Directors is founder and majority stockholder.

         Mr. Wamberg's two stepsons, Jason French and Chuck French, are employed
by the Company. Jason is a consultant with Pearl Meyer & Partners and Chuck is a
consultant with the Executive Benefits Practice. Neither of them reports
directly to Mr. Wamberg.

         William Archer, a member of the Company's Board of Directors since
February 2001, is a senior policy advisor at PricewaterhouseCoopers LLP. The
Company previously engaged PricewaterhouseCoopers LLP to perform various
consulting related to the installation of its wide area network and a knowledge
management system at one of its compensation consulting practices. In addition,
PricewaterhouseCoopers LLP was retained by one of the Company's practices to
perform certain legislative work. During 2003, 2002 and 2001, the Company paid
approximately $0, $380 thousand, and $726 thousand, respectively, to
PricewaterhouseCoopers LLP for these services.

         On February 25, 2002, the Company acquired the Federal Policy Group of
PricewaterhouseCoopers LLP. The purchase price was $11.0 million before
acquisition costs of approximately $28 thousand, consisting of a cash payment at
closing of $5.0 million and $6.0 million of contingent payments all of which was
earned by December 31, 2003 upon attainment of established performance criteria.

         Robert Long became a member of the Company's Board of Directors in
January 2003 as a result of the LongMiller acquisition. He received a
substantial amount of the proceeds, including a portion of the Company's
asset-backed notes from the Company's November 2002 purchase of LongMiller.

         During the years ended December 31, 2003 and 2002, the Company received
payments of approximately $2.5 million in each year pursuant to an
Administrative Services Agreement and Bonus Forfeiture Agreement with an
affiliate of AUSA Holding, Inc., one of its principal stockholders. See Note 19,
"Carrier Incentive Contracts".

         In 2003, the Company terminated split dollar policies with four of its
officers.

         Fox-Pitt Kelton, co-manager of the Company's November 2001 secondary
offering owns Conning Capital Partners. Steve Piaker, a member of the Company's
Board of Directors, is a partner with Conning Capital Partners.

                                       64
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         The Company currently employs a financial planner and an administrative
assistant who perform certain functions and services for Mr. Wamberg's personal
business, in addition to certain services for the Company. Mr. Wamberg
reimburses the Company for the salary, benefits and bonus for these individuals.

22. LITIGATION

         From time to time, the Company is involved in various claims and
lawsuits incidental to its business, including claims and lawsuits alleging
breaches of contractual obligations under agreements with its consultants.
During the year ended December 31, 2003, the Company received $1.5 million from
the favorable settlement of a lawsuit. The following is a summary of the current
significant legal proceedings pending against the Company.

WILLIAM L. MACDONALD, SR. V. CLARK/BARDES CONSULTING, INC.

         On April 10, 2003, William L. MacDonald, Sr., the former Chairman of
the Executive Benefits Practice, filed suit in Los Angeles, California Superior
Court alleging wrongful termination and seeking damages of $10.1 million and a
declaration that all of his non-competition and non-solicitation provisions were
unenforceable. On April 11, 2003, the Company filed proceedings in the Circuit
Court of Cook County, Illinois to enforce the non-competition and
non-solicitation covenants agreed to by Mr. MacDonald when the Company purchased
Mr. MacDonald's business, Compensation Resource Group, Inc., in September of
2000. In light of the California suit, the Illinois litigation was stayed
pending the outcome of proceeding in the California court.

         The Company responded to Mr. MacDonald's suit by requesting the
California court to transfer the matter to arbitration as provided for in
several of the contracts at issue, and to enter a temporary restraining order
prohibiting Mr. MacDonald from competing with the Company and contacting its
clients, in aid of and pending the outcome of the arbitration. On May 1, 2003,
the court granted the Company's motion and entered a temporary restraining order
prohibiting Mr. MacDonald from contacting certain clients of the Company. On
June 5, 2003, the court entered a preliminary injunction, which prohibits Mr.
MacDonald and persons acting in concert with him from soliciting clients of the
Company's Executive Benefits Practice. On July 24, 2003, the court issued its
order granting the Company's Motion to Compel Arbitration and those proceedings
have been commenced by both the Company and Mr. MacDonald. The Company denies
any wrongdoing and intends to vigorously defend Mr. MacDonald's claims. The
Company also intends to vigorously pursue the enforcement of Mr. MacDonald's
non-competition and non-solicitation covenants.

FRIEDA SHUSTER, ET AL. V. HYDER MIRZA, ET AL. INCLUDING CLARK/BARDES, INC.

         On May 30, 2001, the Company was named a defendant in a lawsuit
initially filed in the District Court of LaSalle County, Texas, now in Dallas
County, Texas, alleging gross negligence in connection with the death of an
employee when the private aircraft in which he was traveling on company business
crashed. Damages are unspecified. On February 12, 2004, settlement was reached
with the lead plaintiff. The trial for the remaining plaintiffs has been
continued indefinitely by the court. The Company denies any and all claims and
allegations in this action and intends to vigorously defend this matter. The
matter, including the settlement, is covered by existing insurance.

                                       65
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

23. INTERIM FINANCIAL DATA (UNAUDITED)

         The following table presents a summary of key revenue and expense
statistics for the most recent eight calendar quarters. This information is not
necessarily indicative of results for any full year or for any subsequent
period.

<TABLE>
<CAPTION>
                                                                          QUARTER ENDED
                                     DEC.      SEPT.      JUNE        MAR.       DEC.         SEPT.         JUNE        MAR.
                                     2003      2003       2003        2003       2002         2002          2002        2002
                                    ------    ------     ------      ------     ------       ------        ------      ------
  <S>                               <C>        <C>        <C>        <C>        <C>          <C>           <C>         <C>
  REVENUE
       First year commissions
        and related fees..........  $25,984    $30,295    $29,961    $27,611    $38,568      $35,246       $26,281      $24,011
       Renewal commissions and
        related fees..............   46,983     34,419     34,763     42,364     43,324       17,889        18,376       34,875
       Consulting fees............   11,090     11,668     11,066     13,381     11,354        8,910         8,911        5,798
       Reimbursable expenses......    2,124      1,470      1,468      1,282      1,603          768         1,322        1,350
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  TOTAL REVENUE...................   86,181     77,852     77,258     84,638     94,849       62,813        54,890       66,034
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  % of annual.....................    26.4%      23.9%      23.7%      26.0%      34.0%        22.6%         19.7%        23.7%

  OPERATING EXPENSES
       Commissions and fees.......   20,271     21,166     21,716     25,106     30,790       18,971        16,183       24,054
       % of revenue...............    23.5%      27.2%      28.1%      29.7%      32.5%        30.2%         29.5%        36.4%
       General and administrative.   37,197     38,953     41,861     41,268     40,388       37,237        32,832       30,126
       % of revenue...............    43.2%      50.0%      54.2%      48.8%      42.6%        59.3%         59.8%        45.6%
       Reimbursable expenses......    2,124      1,470      1,468      1,282      1,603          768         1,322        1,350
       Amortization...............    5,435      5,769      5,197      5,178      3,158        2,163         2,097        1,831
       Settlement of litigation...        -          -     (1,500)         -          -            -             -            -
       HCP reorganization.........    7,490          -          -          -          -            -             -            -
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  TOTAL OPERATING EXPENSES........   72,517     67,358     68,742     72,834     75,939       59,139        52,434       57,361
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  OPERATING INCOME................   13,664     10,494      8,516     11,804     18,910        3,674         2,456        8,673
  % of revenue....................    15.9%      13.5%      11.0%      13.9%      19.9%         5.8%          4.5%        13.1%

  INTEREST AND OTHER INCOME.......      104        146        146        187        155          145           155          157
  INTEREST EXPENSE................    6,043      6,080      6,164      6,003      2,642          588           458          382
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  INCOME BEFORE TAXES.............    7,725      4,560      2,498      5,988     16,423        3,231         2,153        8,448
  INCOME TAXES....................    3,367      1,809        506      2,407      6,597        1,487           823        3,497
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  INCOME BEFORE CUMULATIVE
  EFFECT IN CHANGE IN ACCOUNTING
  PRINCIPLE, NET OF TAX...........    4,358      2,751      1,992      3,581      9,826        1,744         1,330        4,951
  Cumulative effect of change in
   accounting principle, net of
   tax............................        -          -          -          -          -            -             -          523
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  NET INCOME......................  $ 4,358    $ 2,751    $ 1,992    $ 3,581    $ 9,826      $ 1,744       $ 1,330      $ 4,428
                                   --------- ---------- ---------- ---------- ---------- ------------ ------------- ------------
  Basic Earnings per common share.    $0.24      $0.15      $0.11      $0.20      $0.55        $0.10         $0.08        $0.27
                                   ========= ========== ========== ========== ========== ============ ============= ============

  Diluted Earnings per common
   share..........................    $0.23      $0.15      $0.11      $0.19      $0.55        $0.10         $0.08        $0.26
                                   ========= ========== ========== ========== ========== ============ ============= ============
</TABLE>



                                       66
<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.


                                                   CLARK, INC.

                                               By: /s/ TOM WAMBERG
                                                   ----------------------------
                                                   Tom Wamberg
                                                   Chief Executive Officer


Date: March 12, 2004

         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>
<S>                                               <C>                                         <C>
                 /s/ TOM WAMBERG                  Chairman of the Board and                    March 12, 2004
    ------------------------------------------    Chief Executive Officer and Director
                   Tom Wamberg

             /s/ JEFFREY W. LEMAJEUR              Chief Financial Officer,                     March 12, 2004
    ------------------------------------------    Principal Accounting Officer
               Jeffrey W. Lemajeur

             /s/ RANDOLPH A. POHLMAN              Director                                     March 12, 2004
    ------------------------------------------
               Randolph A. Pohlman

             /s/ L. WILLIAM SEIDMAN               Director                                     March 12, 2004
    ------------------------------------------
               L. William Seidman

              /s/ GEORGE D. DALTON                Director                                     March 12, 2004
    ------------------------------------------
                George D. Dalton

              /s/ STEVEN F. PIAKER                Director                                     March 12, 2004
    ------------------------------------------
                Steven F. Piaker

                 /s/ BILL ARCHER                  Director                                     March 12, 2004
    ------------------------------------------
                   Bill Archer

                 /s/ ROBERT LONG                  Director                                     March 12, 2004
    ------------------------------------------
                   Robert Long
</TABLE>


                                       67
<PAGE>


                                  EXHIBIT INDEX

2.1      Reorganization Agreement, dated as of July 30, 1998, by and among
         Clark/Bardes Holdings, Inc., Clark/Bardes, Inc. and the Predecessor
         Company (Incorporated herein by reference to Exhibit 2.1 of our
         Registration Statement on Form S-1, File No. 333-56799, filed with the
         SEC on July 12, 1998).

2.2      Asset Purchase Agreement, dated April 15, 1999, by and among
         Clark/Bardes, Inc., Clark/Bardes Holdings, Inc., Phynque, Inc., and
         certain stockholders of Phynque, Inc. (Incorporated herein by reference
         to Exhibit 2.1 of our Current Report on Form 8-K, File No. 000-24769,
         filed with the SEC on April 20, 1999).

2.3      Stock Purchase Agreement, dated June 21, 2000, by and among
         Clark/Bardes, Inc. and Clark/Bardes Holdings, Inc. as Purchasers and
         Pearl Meyer, Diane Posnak, Steven E. Hall, Rhonda C. Edelman, Claude E.
         Johnston and David E. Swinford as Stockholders (Incorporated herein by
         reference to Exhibit 2.1 of our Current Report on Form 8-K, File No.
         000-24769, filed with the SEC on July 5, 2000).

2.4      Agreement of Merger and Plan of Reorganization, dated September 6,
         2000, by and among Clark/Bardes Holdings, Inc., and Clark/Bardes
         Acquisition, Inc., and Compensation Resource Group, Inc. and William L.
         MacDonald, Sr. (Incorporated herein by reference to Exhibit 2.1 of our
         Current Report on Form 8-K, File No. 000-24769, filed with the SEC on
         September 11, 2000).

2.5      Asset Purchase Agreement, dated March 12, 2001, by and among
         Clark/Bardes, Inc., Clark/Bardes Holdings, Inc., Rich,
         Florin/Solutions, Inc., Rich, Florin/Solutions Trust and certain
         stockholders of Rich, Florin/Solutions, Inc. (Incorporated herein by
         reference to Exhibit 2.8 of our Registration Statement on Form S-3,
         File No. 333-72232, filed with the SEC on November 2, 2001).

2.6      Asset Purchase Agreement, dated August 31, 2001, by and among
         Clark/Bardes Consulting, Inc., Clark/Bardes, Inc. Lyons Compensation &
         Benefits, LLC and certain stockholders of Lyons Compensation &
         Benefits, LLC (Incorporated herein by reference to Exhibit 29 of our
         Registration Statement on Form S-3, File No. 333-72232, filed with the
         SEC on November 2, 2001).

2.7      Membership Interests Purchase Agreement regarding FTPG LLC, dated
         February 25, 2002, by and among Clark/Bardes, Inc., Clark/Bardes
         Consulting, Inc. and PricewaterhouseCoopers LLP, Kenneth J. Kies,
         Patrick J. Raffaniello and FTPG LLC (Incorporated herein by reference
         to Exhibit 2.10 of our Annual Report on Form 10-K, File No. 000-31256,
         filed with the SEC on March 27, 2002).

3.1      Certificate of Incorporation of Clark/Bardes, Inc. (Incorporated herein
         by reference to Exhibit 3.1 of our Registration Statement on Form S-1,
         File No. 333-56799, filed with the SEC on July 12, 1998).

3.2      Certificate of Amendment of Certificate of Incorporation of
         Clark/Bardes, Inc. (Incorporated herein by reference to Exhibit 3.3 to
         Amendment No.1 to our Registration Statement on Form S-1, File No.
         333-56799, filed with the SEC on July 27, 1998).


<PAGE>

3.3      Certificate of Amendment of Certificate of Incorporation of
         Clark/Bardes, Inc. (Incorporated herein by reference to Exhibit 5 of
         our Registration Statement on Form 8-A, filed with the SEC on February
         28, 2002).

3.4      Bylaws of Clark/Bardes, Inc. (Incorporated herein by reference to
         Exhibit 3.2 of our Registration Statement on Form S-1, File No.
         333-56799, filed with the SEC on July 12, 1998)

3.5      Certificate of Designation (Incorporated herein by reference to Exhibit
         3.4 of our Registration Statement on Form S-1, File No. 333-56799,
         filed with the SEC on July 12, 1998).

3.6      Certificate of Amendment of the Certificate of Incorporation of
         Clark/Bardes, Inc. (Incorporated herein by reference to Exhibit 3.6 of
         our Quarterly Report on Form 10-Q, File No. 000-31256, filed with the
         SEC on August 14, 2002).

4.1      Specimen Certificate for shares of common stock, par value $.01 per
         share, of Clark/Bardes Holdings, Inc. (Incorporated herein by reference
         to Exhibit 4.1 to Amendment No. 1 to our Registration Statement on Form
         S-1, File No. 333-56799, filed with the SEC on July 27, 1998).

4.2      Rights Agreement, dated as of July 10, 1998, by and between
         Clark/Bardes Holdings, Inc. and The Bank of New York (Incorporated
         herein by reference to Exhibit 4.4 of our Quarterly Report on Form
         10-Q, File No. 000-24769, filed with the SEC on November 16, 1998).

10.1     Clark/Bardes, Inc. 1998 Stock Option Plan (Incorporated herein by
         reference to Exhibit 10.1 of our Registration Statement on Form S-1,
         File No. 333-56799, filed with the SEC on July 12, 1998).

10.2     Clark/Bardes Consulting, Inc. Execu-FLEX Benefit Plan, restated
         effective as of June 1, 2001 (Incorporated herein by reference to
         Exhibit 10.2 of our Annual Report on Form 10-K, File No. 000-31256,
         filed with the SEC on March 27, 2002).

         (a)      Amendment No. 1 to Clark/Bardes Consulting, Inc. Execu-FLEX
                  Benefit Plan, effective as of January 1, 2002 (Incorporated
                  herein by reference to Exhibit 10.2 of our Annual Report on
                  Form 10-K, File No. 000-31256, filed with the SEC on March 27,
                  2002).

10.3     Administration and Services Agreement, by and between Clark/Bardes,
         Inc. and Clark/Bardes Securities, Inc. (Incorporated herein by
         reference to Exhibit 10.3 of our Registration Statement on Form S-1,
         File No. 333-56799, filed with the SEC on July 12, 1998).

10.4     Administration and Services Agreement, by and between Clark/Bardes,
         Inc. and Clark/Bardes, Inc. of Pennsylvania (Incorporated herein by
         reference to Exhibit 10.4 of our Registration Statement on Form S-1,
         File No. 333-56799, filed with the SEC on July 12, 1998).

10.5     Letter of Agreement, dated July 24, 1998, to Great-West, Life Investors
         and Nationwide (Incorporated herein by reference to Exhibit 10.34 of
         our Registration Statement on Form S-1, File No. 333-56799, filed with
         the SEC on July 12, 1998).

10.6     Tax Indemnity Agreement by and between Clark/Bardes Holdings, Inc.,
         Clark/ Bardes, Inc. and certain former stockholders of the Predecessor
         Company (Incorporated herein by reference to Exhibit 10.28 of our
         Registration Statement on Form S-1, File No. 333-56799, filed with the
         SEC on July 12, 1998).


<PAGE>

10.7     Lease Agreement, dated April 24, 1998, by and between Northland Center
         Limited Partnership and Clark/Bardes, Inc. (Incorporated herein by
         reference to Exhibit 10.16 of our Registration Statement on Form S-1,
         File No. 333-56799, filed with the SEC on July 12, 1998).

10.8     Sublease Agreement, dated as of September 1, 1999, between
         Clark/Bardes, Inc. and The Wamberg Organization (Incorporated herein by
         reference to Exhibit 10.49 of our Quarterly Report on Form 10-Q, File
         No. 000-24769, filed with the SEC on November 12, 1999).

10.9     Form of Employee Stock Purchase Plan (Incorporated herein by reference
         to Exhibit 10.29 of our Registration Statement on Form S-1, File No.
         333-56799, filed with the SEC on July 12, 1998).

10.10    1998 Non-Employee Director Stock Option Plan (Incorporated herein by
         reference to Exhibit 4.7 of our Registration Statement on Form S-8,
         File No. 333-68163, filed with the SEC on December 1, 1998).

10.11    Form of Clark/Bardes, Inc. 401(k) Savings Plan (Incorporated herein by
         reference to Exhibit 4.3 of our Registration Statement on Form S-8,
         File No. 333-68982, filed with the SEC on September 5, 2001).

10.12    Form of Employment Agreement, dated October 30, 2001, by and between
         Clark/Bardes, Inc. and Thomas M. Pyra (Incorporated herein by reference
         to Exhibit 10.12 of our Annual Report on Form 10-K, File No. 000-31256,
         filed with the SEC on March 27, 2002).

10.13    Employment Agreement, effective August 14, 2001, by and between
         Clark/Bardes, Inc. and Richard C. Chapman (Incorporated herein by
         reference to Exhibit 10.14 of our Annual Report on Form 10-K, File No.
         000-31256, filed with the SEC on March 27, 2002).

10.14    Employment Agreement, dated as of September 1, 1999, by and between
         Clark/Bardes Holdings, Inc. and W.T. Wamberg (Incorporated herein by
         reference to Exhibit 10.48 of our Quarterly Report on Form 10-Q, File
         No. 000-24769, filed with the SEC on November 12, 1999).

         (a)      First Amendment, dated March 6, 2002, to the Employment
                  Agreement by and between Clark/Bardes Holdings, Inc. and W.T.
                  Wamberg (Incorporated herein by reference to Exhibit 10.15 of
                  our Annual Report on Form 10-K, File No. 000-31256, filed with
                  the SEC on March 27, 2002).

         (b)      Second Amendment, dated May 1, 2003, to the Employment
                  Agreement by and between Clark/Bardes Holdings, Inc.,
                  Clark/Bardes Consulting, Inc. and W.T. Wamberg (Incorporated
                  herein by reference to Exhibit 10.1(b) of our Quarterly Report
                  on Form 10-Q, File No. 000-31256, filed with the SEC on
                  November 13, 2003).

         (c)      Third Amendment, dated October 1, 2003, to the Employment
                  Agreement by and between Clark/Bardes Holdings, Inc.,
                  Clark/Bardes Consulting, Inc. and W.T. Wamberg (Incorporated
                  herein by reference to Exhibit 10.1(c) of our Quarterly Report
                  on Form 10-Q, File No. 000-31256, filed with the SEC on
                  November 13, 2003).

10.15    Employment Agreement, dated as of March 1, 2001, by and between
         Clark/Bardes Holdings, Inc. and James C. Bean (Incorporated herein by
         reference to Exhibit 10.16 of our Annual Report on Form 10-K, File No.
         000-31256, filed with the SEC on March 27, 2002).

<PAGE>

10.16    Second Amended and Restated Credit Agreement, dated as of November 26,
         2003 among Clark, Inc. as Borrower, Bank One Texas, NA, as
         Administrative Agent, Certain Financial Institutions as Lenders, and
         Bank One Capital Markets, Inc. as Lead Arranger and Sole Book Runner.*

10.17    Promissory Note, dated September 6, 2000, by and among Clark/Bardes
         Holdings, Inc. and William L. MacDonald, Sr. (Incorporated herein by
         reference to Exhibit 10.1 of our Current Report on Form 8-K, File No.
         000-24769, filed with the SEC on September 20, 2000).

10.18    Clark/Bardes, Inc. 2002 Stock Option Plan (Incorporated herein by
         reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q, File
         No. 000-31256, filed with the SEC on August 14, 2002).

10.19    Membership Interest Purchase Agreement, dated as of September 25, 2002,
         by and among Clark/Bardes, Inc., Clark/Bardes Consulting, Inc., Long,
         Miller & Associates, LLC and certain other parties named therein
         (Incorporated herein by reference to Exhibit 2.1 of our Quarterly
         Report on Form 10-Q, File No. 000-31256, filed with the SEC on November
         14, 2002).

10.20    Bonus Forfeiture Agreement, dated as of September 25, 2002, among Life
         Investors Insurance Company of America, Transamerica Life Insurance
         Company and Clark/Bardes Consulting, Inc. (Incorporated herein by
         reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q, File
         No. 000-31256, filed with the SEC on November 14, 2002).

10.21    Administrative Services Agreement, dated as of September 25, 2002,
         among Life Investors Insurance Company of America, Transamerica Life
         Insurance Company and Clark/Bardes Consulting, Inc. (Incorporated
         herein by reference to Exhibit 10.2 of our Quarterly Report on Form
         10-Q, File No. 000-31256, filed with the SEC on November 14, 2002).

10.22    Sale and Servicing Agreement, dated as of October 1, 2002, by and among
         CBC Insurance Revenue Securitization, LLC, Long, Miller & Associates,
         LLC, Clark/Bardes Consulting, Inc., BNY Midwest Trust Company and BNY
         Asset Solutions LLC (Incorporated herein by reference to Exhibit 10.23
         of our Annual Report on Form 10-K, File No. 000-31256, filed with the
         SEC on March 27, 2003).

10.23    Indenture, dated as of October 1, 2002, by and among CBC Insurance
         Revenue Securitization, LLC and BNY Midwest Trust Company (Incorporated
         herein by reference to Exhibit 10.24 of our Annual Report on Form 10-K,
         File No. 000-31256, filed with the SEC on March 27, 2003).

10.24    Employment Letter, dated August 29, 2003, between Clark, Inc. and
         Jeffrey W. Lemajeur (Incorporated herein by reference to Exhibit 10.2
         of our Quarterly Report on Form 10-Q, File No. 000-31256, filed with
         the SEC on November 13, 2003).

21.1     Subsidiaries of the Registrant*

23.1     Consent of Deloitte and Touche LLP*

23.2     Consent of Ernst & Young LLP*

31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.*

<PAGE>

31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.*

32.1     Certification of Chief Executive Officer and Chief Financial Officer
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

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*  filed herewith