<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

                FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2002, OR

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

                        FOR THE TRANSITION PERIOD FROM TO

                         COMMISSION FILE NUMBER 0-21485

                    SUPERIOR CONSULTANT HOLDINGS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                           38-3306717
     (State or Other Jurisdiction of                          (I.R.S. Employer
     Incorporation or Organization)                          Identification No.)

17570 WEST TWELVE MILE ROAD, SOUTHFIELD, MICHIGAN                    48076
   (Address of Principal Executive Offices)                        (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 226-8300

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

                SECURITIES PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

     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
filings 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. [ ]

The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing sale price of the stock as reported on the
NASDAQ National Market on March 28, 2003 was $9,905,286. At March 28, 2003,
10,764,891 shares of the registrant's Common Stock were outstanding, excluding
treasury shares.




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                                     PART I

ITEM 1. BUSINESS

SUMMARY

     Superior Consultant Holdings Corporation (the "Company") is a nationally
deployed, integrated technology services company that provides Digital Business
Transformation(TM) services to the healthcare industry, connecting online
technologies to business processes that have traditionally been conducted
offline. We conduct our business through our primary operating subsidiary,
Superior Consultant Company, Inc. ("Superior"). The term "Company" as used
herein refers collectively to the Company together with its principal operating
subsidiary, Superior. Superior offers business process and information
technology ("IT") outsourcing, management and consulting services and solutions
to healthcare organizations including health plans and technology providers with
special emphasis on hospital systems and integrated delivery networks. Superior
has deep expertise in clinical, financial and administrative systems consulting,
including planning, selection and implementation. With extensive industry
application knowledge and experience, and specialists in business process
improvement, Superior brings critical industry context and expertise to bear in
its engagements. Superior's best practices outsourcing model includes a full
range of flexible business process and IT solutions, including 24/7/365 network
monitoring and help desk services through our network control center, facility
management, interim management, and application outsourcing services. By
participating in Superior's world-class processing center, clients gain the
benefits of purchasing power, application integration and shared initiatives in
addition to consistent service levels and a single source of accountability.

     Superior's solutions are designed to enable clients to reap the benefits of
their investments in information technology by improving financial performance,
increasing productivity, and improving clinical and operational performance.

     In order to address the increased industry-wide focus on patient safety,
clinical excellence, compliance with security regulations and financial
performance, Superior's services and solutions are designed to give the
healthcare industry the tools and strategies they need to serve their customers
effectively, improve the quality and safety of clinical care, secure and
authenticate online healthcare transactions, reduce cost and ensure compliance
with evolving government and industry requirements, including the Health
Insurance Portability and Accountability Act ("HIPAA").

     From education, visioning and planning to implementation and outsourcing,
Superior provides the following services and solutions that are designed to help
client organizations perform better:

     Outsourcing

        -  Business Process Outsourcing

        -  Full-service IT Outsourcing

        -  Processing Center

        -  Network Control Center with Remote Network Monitoring, Management and
           Help Desk Services 24/7/365

        -  Outsourcing Consortium

        -  Facilities Management

        -  Application Management

        -  Interim Management

     Consulting

        -  Strategy Formulation

        -  Financial Systems

        -  Application Delivery

        -  Systems Integration

     Because of our deep knowledge of the healthcare industry and our clients'
needs and our range of healthcare operations and workflow, IT and clinical
systems, we are able to work with clients to enable them to leverage their
existing legacy information system investments and accelerate their return on
those investments by connecting them to web-based or other technologies. We
believe that our long-term relationships, in-depth knowledge of the healthcare
industry and our clients' needs coupled with our range of service offerings
endow us with significant advantages over our competitors in marketing
additional services and winning new engagements. We believe we are well
positioned to help



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healthcare providers bridge traditional services to a digital environment and
capitalize on inherent market, care delivery and business efficiency benefits.
Our goal is to be the preferred, if not sole, provider of a broad range of
outsourcing and consulting solutions for each of our clients.

INDUSTRY BACKGROUND

GENERAL

     Healthcare providers today face external and internal pressures to meet the
competitive demands of the marketplace, pursue their strategic initiatives and
comply with increasing government regulations, while also improving their bottom
line. The United States healthcare industry continues to undergo rapid, profound
change. In recent years, healthcare expenditures have increased at approximately
twice the rate of inflation. In 2001, healthcare spending rose 8.7% to $1.4
trillion and accounted for 14.1% of the nominal gross domestic product ("GDP"),
its largest share of GDP on record. Healthcare expenditures are expected to
outpace GDP growth by 2.5% per year from 2001 to 2011, reaching $2.8 trillion in
2011, which is double 2001 levels, according to a CMS Office of the Actuary
report published in Health Affairs. There is a greater emphasis placed on issues
of patient safety and the prevention of medical errors, competition in clinical
care quality and IT innovation, as well as heightened awareness of the urgency
to implement digital security measures and compliance strategies. We believe
that these factors, combined with changes in federal, state and
commercial/private payer reimbursement, slowed growth of Medicare payments, the
aging of the U.S. population and the growing acceptance of the Internet and
web-based technologies, and spurred by the increasingly vocal demands of
consumers for quality care, will result in continued dramatic change in the
healthcare industry.

HEALTHCARE INFORMATION TECHNOLOGY

     The healthcare IT environment is increasingly complex and costly as a
result of the challenges inherent in deploying new technologies, maintaining or
integrating older systems and deploying an IT function capable of meeting new
objectives designed to improve clinical quality and patient safety, achieve
regulatory compliance and ensure secure digital transactions while at the same
time improving business operations and the revenue cycle as well as reducing
supply costs. With all of these pressures, healthcare organizations must become
more efficient and effective. As a result, we believe that the healthcare
industry will increase the percentage of its budget devoted to IT solutions.
Integrating web-based or Internet technology, computerized practitioner order
entry ("CPOE"), computer-based patient record systems and other technologies
into the healthcare delivery process can enable organizations to improve their
bottom line. These technologies help healthcare organizations reduce costs
through clinical and supply chain efficiencies, enhance communications with
physicians, patients, payers and other constituencies, improve care delivery and
patient safety and streamline activities such as claims processing, eligibility
verification and billing.

     With the increased move to digital communications by virtually all segments
of the industry -- providers, payers, consumers, health plans, employers and
employees -- all participants have the opportunity to effectively address the
cost-containment pressures of federal, state, commercial/private payers and to
meet strict privacy and standards mandates and regulations. Superior's extensive
experience with all major healthcare software vendors along with a multitude of
other applications, enables our company to implement and integrate "best
practices" IT solutions to improve our clients' performance and leverage their
existing IT investments.

     We believe that healthcare participants will continue to turn to outside
consultants, external management of internal information systems, application
support and full outsourcing arrangements as a means of coping with the
financial and technical demands of information systems management and
integration of web-based solutions. Superior responds to these demands by
providing information technology and management consulting services and
solutions along with flexible business process and information technology
outsourcing solutions. Clients can choose any combination of support, including
full outsourcing with data center consolidation, 24/7/365 network monitoring and
help desk through our network control center, as well as facility management,
application unification, application outsourcing and interim management of
business process and IT operations. Through outsourcing, clients can achieve
their business process and information technology goals while remaining focused
on expanding their primary businesses and reducing related capital outlay.


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OUTSOURCING

     We believe that the competitive, technical, clinical and economic
challenges facing healthcare providers today will spur those providers, in
increasing numbers, to consider outsourcing of their business processes and/or
information technology functions. With the range of business process, management
and information technology outsourcing solutions the Company offers, we can
assist clients to address many of the challenges they face while allowing them
to focus on their primary business objectives. The Company's outsourcing
solutions offer clients cost effective operation of their business processes and
information technology function and potential reduction in related capital
outlay. The Company delivers to its outsourcing clients best practice solutions
and the technical advances and expertise that Superior develops through its
outsourcing and consulting services. Our flexible continuum of outsourcing
solutions allows our clients to select the level of support most suitable to
their situation. Superior offers full Business Process and IT Management and
Operations Outsourcing, including data center consolidation in its world-class
processing center. The Company also offers 24/7/365 network monitoring and help
desk support from its network control center. The Company's outsourcing
solutions enable clients to meet critical completion timetable needs by
providing availability of the expertise resident in the Company's nationally
deployed specialists, thus allowing the clients to pursue a greater number of IT
initiatives concurrently. Further, the Company's experience and expertise in the
implementation and operation of various applications provides its outsourcing
clients with ever-evolving, best practices operational models. Other outsourcing
alternatives offered by the Company include facility management, application
unification, application outsourcing and interim management of business process
and IT operations.

CONSULTING

     The changing business environment has also produced an evolving range of
strategic and operating options for healthcare entities. In response, healthcare
participants are formulating and implementing new strategies and tactics,
redesigning business processes and workflows, acquiring better technology to
improve operations and patient care, integrating legacy systems with web-based
technologies, developing e-commerce abilities and adopting or remodeling
customer service, patient care and marketing programs. We believe that
healthcare participants will continue to turn to outside consultants to assist
in this vast array of initiatives for several reasons: the pace of change is
eclipsing the capacity of their own internal resources to identify, evaluate and
implement the full range of options; consultants enable healthcare participants
to develop better solutions in less time and can be more cost effective. By
employing outside expertise, healthcare providers can often improve their
ability to compete by more rapidly deploying new processes.

     In 2002, the healthcare consulting industry was highly fragmented and
consisted primarily of:

        -  Larger systems integration firms, including the consulting divisions
           of the national accounting firms and their spin-offs, which may or
           may not have a particular healthcare focus or offer healthcare
           consulting as one of several specialty areas;

        -  Healthcare information systems vendors that focus on services
           relating to the software solutions they offer;

        -  Healthcare consulting firms, many of which focus on selected
           specialty areas, such as strategic planning or vendor-specific
           implementation;

        -  Large general management consulting firms that may or may not
           specialize in healthcare consulting and/or do not offer systems
           implementation; and

        -  Boutique firms that offer one or two specialized services, or who
           service a particular geographic market.

     We believe that, increasingly, the competitive advantage in healthcare
consulting will be gained by those consulting firms which:

        -  Are able to coordinate the necessary expertise and resources to offer
           comprehensive skill sets and packaged solutions to clients;

        -  Have the vision, strength and consistency to advise clients along the
           entire service continuum, from strategy to selection to
           implementation to operation;




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        -  Offer the flexibility to meet the challenges of the rapidly changing
           healthcare, e-commerce and IT environment; and

        -  Have assets to bring total solutions including offerings that address
           the clients' need for market expansion and capital replacement.

THE SUPERIOR SOLUTION

     Superior's outsourcing and consulting services provide all segments of the
healthcare industry with the critical tools and strategies needed to effectively
serve customers, manage patient care and workflows, enhance financial
performance, improve patient safety, and capitalize on e-commerce and other new
technology opportunities while ensuring digital security. The Company offers
custom-tailored services and packaged solutions based on an assessment of each
client's needs.

     Our continuum of solutions includes: strategy formulation, information
technology and e-commerce planning and capital resources planning; operations
and revenue cycle management, organizational change and business process
redesign and outsourcing; automation of workflows, practitioner order entry,
clinical activities and patient records; information technology design and
construction, application implementation, information systems implementation
and integration; and IT interim management, application unification, application
support, business process and information technology outsourcing. For each
client and engagement, we structure a project team that understands the impact
of the changing healthcare environment on that particular client and can address
the management, operational and technical ramifications of change and
improvement. In structuring an engagement, we draw upon our solutions framework
to bring our clients the most efficient, cost effective solution to meet their
needs. Our nationally deployed professionals are aided by instant access, via
our proprietary information and communication system, to our knowledge and
client resource databases and to collaboration with colleagues. Our unified team
approach helps to ensure high quality, consistent and geographically seamless
client service.

OUTSOURCING

     Superior's outsourcing offers a variety of solutions designed to meet
client needs, which include complete or partial business process and/or IT
outsourcing, interim management and remote network support. Superior provides
clients with a complete solution for effective management of information and
technology and IT cost control. Superior's best practices outsourcing model
includes a full range of flexible business process and IT solutions, including
24/7/365 network monitoring and help desk services, facility management, interim
management, and application outsourcing services. By participating in Superior's
common processing center, clients gain the benefits of purchasing power,
application integration and shared initiatives in addition to consistent service
levels.

Clients can choose one or any combination of:

Full-Service Business Process and IT Outsourcing - Superior offers single-source
accountability and a state-of-the-art processing center to help clients achieve
higher performance and lower costs. Superior's outsourcing clients may join a
consortium of healthcare organizations that offers them an opportunity to drive
down the cost of information systems through resource and systems sharing
including hardware, software and infrastructure.

NetLinc - Remote Network Monitoring and Help Desk Services 24/7/365 - Superior's
NetLinc control center offers solutions designed specifically as an element of
clients' IT functions, such as help desk and network management, application
support and development, and network monitoring.

Facilities Management - Superior becomes the client's full technology partner by
operating IT (hardware and application functions) and managing/transitioning
staff on the client's site or remotely.

Application Management - Superior provides ongoing services to support the
efficient operation of critical applications.

Interim Management - Superior provides senior-level technology executives to
guide the operations and initiatives of clients' IT functions, including interim
privacy/security officers.



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CONSULTING

Superior's services are the building blocks of every solution it offers,
integrating management consulting and technology expertise to meet the entire
range of clients' needs as they deal with the financial challenges and
operational issues all healthcare providers face today. Superior's services and
solutions - from boardroom strategy planning to implementation to fine-tuning of
technical and operational project details - enable clients to maximize and build
upon their existing IT investments and leverage digital technology for future
growth.

Strategy Formulation - Combining the knowledge of healthcare managers,
consultants, clinicians and renowned futurists, Superior helps clients to better
understand the competitive market within which they operate and to develop and
execute business strategies that address market dynamics, quality of care,
financial performance, technology development and resource allocation across
their entire organization. The Company's multi-disciplinary approach integrates
strategic/business planning, operations redesign and clinical and financial
analysis, as well as reconfiguration of existing technology architecture to
achieve new functionality.

From readiness assessments to strategic planning to implementation, Superior
helps clients to take advantage of new technologies and processes to improve
digital proficiency and security and comply with HIPAA, HCFA, JCAHO and other
applicable regulations. By integrating Superior's comprehensive methodologies
for security / compliance / policy assessment and strategy formulation with
pre-built healthcare policy frameworks and managed public key infrastructure
(PKI) solutions, health organizations can securely leverage their online market
strategies and protect their assets and brand image, while achieving compliance
with security and privacy regulations. This approach to establishing Digital
Trust(TM) delivers clients a systematic foundation for issuance of digital
identification, authentication, access control, policy development and
education, authorization, auditing, digital signatures for non-repudiation and
encryption for confidentiality and data integrity.

Financial Systems - Superior's resource planning solutions promote
enterprise-wide integration and help organizations respond to changing market
conditions. The Company assesses infrastructure needs (financial, human
resources, and materials management), reengineers business processes to optimize
infrastructure operations and ROI, and implements appropriate financial systems.

Superior manages the revenue cycle - from redesigning business processes to
installing or troubleshooting information systems - to help clients accelerate
cash flow and positively affect their bottom line. The Company works closely
with client staff to reduce accounts receivable, re-deploy assets and improve
operational efficiencies.

Application Delivery - Superior specializes in selecting, customizing, and
implementing all major healthcare software applications. Services include
pre-implementation planning, system implementation and integration, revenue
cycle and business improvement, and system optimization.

Superior's integrated solutions are designed to automate, track and assure the
quality of the medication process to dramatically reduce medication errors - the
most common and costly of medical mistakes. Combining clinical discovery,
assessment, benchmarking, troubleshooting and decision support tools, the
Company helps clients create optimal care models and methodologies that reduce
medical mishaps and improve clinical outcomes.

To assist its clients in achieving the optimal strategic, clinical, operational,
IT and e-commerce solutions for their business needs, Superior draws upon its
expertise with the products of a vast array of vendors. Through this in-depth
product knowledge, the Company is able to fully assess the advantages and
disadvantages of each particular strategic, clinical, operational, IT and
e-commerce solution in the context of the individual client's needs.
Additionally, through select alliances and partnerships, Superior is able to
bring an aggregation of products and services packaged to suit client needs.
Superior has experience with the products of hundreds of vendors.

Systems Integration - Superior has a national focus on promoting the use of
electronic information exchange to address the opportunities and challenges of
the healthcare industry. Superior assists its clients with network and
telecommunication design and acquisition, enterprise messaging, intranet and web
strategies and design, workgroup consulting, as well as software and application
development solutions. The Company provides a bridge between existing and
emerging technologies by supplying vendors with needed knowledge to develop
innovations focused on the changing needs of the marketplace and by assisting
healthcare industry participants to assess, select and implement new
technologies. This enables





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the Company to help its clients take advantage of the opportunities presented by
technologies such as the Internet and intranets, local and wide area
communication networks and network medicine.

DEVELOPMENTS IN 2002

     In 2002 we continued to experience the difficult market conditions that
have existed since mid-1999. Driven, we believe, by the impact of changes in
federal, state and commercial payer reimbursements and an ongoing slowdown in
our clients' rate of investment in IT initiatives, and exacerbated by the
shakeout in the Internet sector, the market reflected reduced demand for many of
our services. The healthcare and technology sectors in which we operate were
adversely impacted by weak demand throughout the year. These market conditions
contributed to our continued losses, consumption of cash and reduced capital.

     Significant developments include:

        -  Completed construction and launch of world-class processing center;

        -  Established outsourcing consortium;

        -  Added three multi-year, multi-million dollar full outsourcing
           contracts with a base value of $145 million;

        -  Generated positive cash flow from operations of $1.2 million for the
           year ended December 31, 2002;

        -  Strengthened outsourcing sales capability and increased outsourcing
           prospect pipeline by 27%;

        -  Continued to implement disciplined cost controls resulting in a
           reduction in operating expenses, excluding impairment and
           restructuring charges, to $100.5 million for the year ended
           December 31, 2002 from $108.0 million and $164.6 million for the
           years ended December 31, 2001 and 2000, respectively;

        -  Achieved ninth consecutive quarter of improved operating efficiencies
           in SG&A;

        -  Added 127 new clients in 2002; and

        -  Eliminated or restructured certain unprofitable alliances and service
           offerings.

EMPLOYEES

     We believe that one of our key strengths lies in our ability to attract,
develop, motivate and retain a talented, creative and highly skilled work force
of senior-level professionals who are specialists in one or more areas of
healthcare, information technology and e-commerce. Our consultants are highly
experienced and many have established their credentials as healthcare executives
and senior management of healthcare organizations, senior technical officers,
business office managers, medical records administrators, nurse administrators,
nurses, laboratory technicians, physician assistants, medical technologists,
physicians, hospital admissions directors and information management and
information systems technical personnel. As of December 31, 2002, we employed
586 employees, 449 of whom were consultants. Of the 137 non-consultants, a
significant number of the Company's senior and middle management perform a
variety of line functions, including client billable consulting and advisory
services.

     We believe we have a unique corporate culture built upon open communication
across geographic regions and Competency Centers fostered by our proprietary
information and communications system, which currently runs on a robust
intranet, and a motivational and interactive work environment that features
professional development opportunities and productivity incentives.

     An integral part of the on-going education process at Superior takes place
through our communications system. This allows our consultants to continue to
upgrade their skills while remaining deployed in the field. We also maintain a
formal and active network of former employees. These alumni provide expertise on
projects, introduce us to new client leads and in many cases have returned to
Superior from experiences elsewhere in the healthcare industry.


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SALES AND MARKETING

     Superior's executive leadership and our client relationship leadership
(Client Partner Organization leaders) focus intensely on client development
strategies, geographic market penetration, cross-selling, and on securing larger
and more profitable engagements. Business development is an integral part of the
formal responsibilities at all levels of our management, including Competency
Center leaders, and we set business development goals on both a departmental and
individual basis. Superior utilizes a sales methodology which is successfully
employed by many Fortune 500 companies. Superior's senior executives lead the
company's outsourcing sales program and manage specialized outsourcing sales
teams as well as prospecting, proposal development, negotiation, transition and
delivery.

     Our business development efforts focus primarily on identifying key
decision makers in the healthcare industry, determining the value we can bring
to each potential client and then managing the sales process to completion
through a sophisticated sales program and proprietary client resource database,
developed and maintained internally. Our client resource database enables our
personnel to access information on our efforts with respect to a client or
client prospect, identify other Superior contacts with that client and highlight
the particular needs expressed by the client.

     We further our business development efforts through our reputation in the
marketplace, the personal contacts and networking of our professionals, direct
industry marketing programs, trade shows, our Internet web site (located at
www.superiorconsultant.com), and the industry presence maintained by our
professionals. Our marketing profile within the healthcare industry is enhanced
by our employees' speaking engagements and publications on topics affecting
healthcare. Our views on a wide range of healthcare and IT topics are frequently
solicited and quoted for articles in major industry journals and books. Our
healthcare consultants have been published extensively on current and emerging
topics in healthcare information and management and have participated in
external speaking engagements and presentations to industry associations and
client audiences internationally.

     We operate our healthcare outsourcing and consulting businesses through a
combination of our national presence, regional relationships and our Competency
Centers. Each Competency Center offers a selected variety of our healthcare
consulting services and often two or more of these areas work synergistically
together and with other industry leaders to develop and package repeatable
solutions or market offerings for clients. Each Competency Center is managed by
a leader who is responsible for achieving performance-based goals for the
specific area and is responsible for its growth. We actively market the
subject-matter expertise of our Competency Centers through the focus of our
Client Partner Organizations. Each Competency Center is responsible for
developing and enhancing knowledge of local regulation and market factors, as
well as developing and nurturing relationships with specific client and partner
organizations. This enables us to combine the expertise of our Competency
Centers to form customized, as well as repeatable packaged solutions that are
responsive to local conditions and of value to specific clients.

     We provide a compensation system designed to foster an active focus on
growth and business development at all levels within the organization.
Management has the potential to earn incentive compensation on a quarterly
and/or annual basis based on individual, group and company-wide performance
goals.

COMPETITION

     The market for our services is highly fragmented, highly competitive and is
subject to rapid change. We believe that we currently compete principally with
systems integration firms, national consulting firms, including the consulting
divisions of the national accounting firms and their spin-offs, outsourcers,
information system vendors, service groups of computer equipment companies,
facilities management companies, general management consulting firms and
regional and specialty consulting firms. Many of our competitors have
significantly greater financial, technical and marketing resources than we have,
generate greater revenues and have greater name recognition than we have.
Moreover, those competitors that sell or license their own software may in the
future attempt to limit or eliminate the use of third party consultants, such as
Superior, to implement and/or customize such software. In addition, vendors
whose systems may enjoy wide market acceptance and large market share could
enter into exclusive or restrictive agreements with other consulting firms which
could eliminate or substantially reduce our implementation work for those
systems. There are relatively low barriers to entry into our markets (other than
outsourcing) and we have faced and expect to continue to face additional
competition from new entrants into our markets. In addition, combinations and
consolidations in the consulting and outsourcing industry will give rise to
larger competitors, whose relative strengths we cannot predict. We also compete
with our clients' internal resources, particularly where these resources
represent a fixed cost to the client. This internal client competition may
heighten as consolidation of




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healthcare providers creates organizations large enough to support internal
information management capabilities. Superior competes with new entrants and
other smaller companies which often compete very aggressively on price, and at
the same time we compete, particularly on outsourcing and other large
engagements, with companies that enjoy greater financial and technical resources
than our own, as well as greater brand recognition and marketing resources.

     We believe that the principal competitive factors in our market include
reputation, corporate commitment to the healthcare market, size and capital
resources, highly experienced workforce, industry expertise, full array of
offerings, project management expertise, price, quality of service,
responsiveness, speed of implementation and delivery, assured performance and
willingness to share risk. There can be no assurance that we will be able to
compete effectively on pricing or other requirements with current and future
competitors or that competitive pressures faced by us will not cause our revenue
or operating margins to decline, or otherwise materially adversely affect our
business, financial condition and results of operations.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

     Our success is in part dependent upon our proprietary internal information
and communications systems, databases, services and market offerings, best
practices, tools and the methods and procedures that we have developed
specifically to serve our clients. In addition, we have and will continue to
develop proprietary groupware/collaborative tools and applications. Through
acquisitions, we have acquired numerous development tools and methodologies. We
have no patents or registered copyrights and, consequently, we rely on a
combination of non-disclosure and other contractual arrangements and copyright,
trademark and trade secret laws to protect our proprietary systems, information
and procedures. There can be no assurance that the steps taken by us to protect
our proprietary rights will be adequate to prevent misappropriation of such
rights or that we will be able to detect unauthorized use and take appropriate
steps to enforce our proprietary rights. We believe that our systems and
procedures and other proprietary rights do not infringe upon the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims against us in the future or that any such
claims will not require us to enter into materially adverse license arrangements
or result in protracted and costly litigation, regardless of the merits of such
claims.

RISK FACTORS

     Some of the information in this report contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "intend," "promise," "should," "conditioned
upon," "project," "predict," "continue" and similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial condition or state other "forward-looking" information. We believe it
is important to communicate our expectations to our investors. However, there
will be events in the future that we are not able to accurately predict or over
which we will have no control. The risk factors listed in this section, as well
as any other cautionary language in this report, provide examples of just a few
of the many risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. You should be aware that the occurrence of the events described in
the following risk factors and elsewhere in this report, or in our other
publicly filed reports which we may file from time to time, could have a
material adverse effect on our business, operating results and financial
condition. In that event, the market price of our common stock could decline,
and you could lose all or part of your investment. Other risks not currently
known to us, or which we believe to not be material may also have a material
adverse effect on our business. In addition, any one or more of these risks,
including those outlined below could have a greater or lesser impact on our
business at any particular point in time and you should not give any greater or
lesser emphasis or weight to any single factor merely by virtue of the order of
its presentation or the depth of its discussion in this report.


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VARIABILITY OF QUARTERLY OPERATING RESULTS

    We have experienced significant quarterly fluctuations in our operating
results. Variations in our revenues and operating results may continue from
quarter to quarter as a result of a number of factors, including, but not
limited to:

     -    The relatively longer sales cycle in obtaining new clients and larger
          contracts, including outsourcing;

     -    Fluctuations in sales of our services and market offerings and in
          consultant billing and utilization rates;

     -    Client and employee retention;

     -    The failure to secure and deliver new client contracts at the budgeted
          rate and the resulting negative impact on utilization of our
          consultants;

     -    Industry spending patterns and market conditions that may adversely
          affect the buying decisions of our current and prospective clients,
          such as the reduced level of spending on information technology which
          began in 1999, driven by the continuing impacts of changes in federal,
          state and commercial payer reimbursements;

     -    The number and significance of active client engagements during a
          quarter;

     -    Increased investment by us in new services, implementation of new
          client relationships and other strategic initiatives;

     -    The decision of clients to defer commitments on new projects until
          after the end of the calendar year or the client's fiscal year;

     -    Client budgetary cycles and pressures;

    -     Timing and collection of client payments;

    -     The loss or reduction in scope of significant client relationships;

     -    Significant write-offs of billable time, expenses or accounts
          receivable;

     -    Unforeseen disruptions in transportation, communications or other
          infrastructure components; and

     -    General economic conditions and adverse developments in the financial
          condition of our clients.

     Our existing consulting clients can generally reduce the scope of or cancel
their use of our services without penalty and with little or no notice. If a
client defers, modifies or cancels an engagement or chooses not to retain us for
additional phases of a project, we must be able to rapidly redeploy our
employees to other engagements in order to minimize underutilization of
employees and the resulting harm to our operating results.



                                       10
<PAGE>
     Because a substantial percentage of our expenses, particularly personnel,
facilities and technology, are relatively fixed in advance of any particular
quarter, variations in the size or number of client assignments or the timing of
the initiation or the completion of client assignments can cause significant
variations in operating results from quarter to quarter. Given the possibility
of such fluctuations, we believe that comparisons of our results of operations
for preceding quarters are not necessarily meaningful and that you should not
rely upon the results for one quarter as an indication of future performance.
Based on the preceding factors, or others, it is possible that we may experience
a shortfall in revenue or earnings from expected levels or otherwise fail to
meet expectations of securities analysts or the market in general. In such
event, the price of our common stock could be materially adversely affected.


OUR LONG SALES AND PROJECT DELIVERY CYCLES EXPOSE US TO POTENTIAL LOSSES

     Our sales process for outsourcing, network-related and other large scale
projects is often subject to delays associated with the lengthy approval process
that typically accompanies significant capital expenditures by our clients.
During this process, we expend substantial time, effort and resources marketing
our services, preparing contract proposals and negotiating contracts. Any
failure or delay in obtaining a signed contract and receiving payment for our
services after expending significant time, effort and resources could materially
and adversely affect our revenues and financial condition. Expenses incurred in
the pursuit and winning of a large scale contract must be recovered over the
life of the contract. If the contract is terminated prior to its scheduled
expiration, the Company may not be able to recover expenses incurred in
procuring the contract. As the Company places increasing focus and emphasis on
the sale of outsourcing, network-related and other large scale engagements,
these potential adverse effects of the longer sales and delivery cycles can be
magnified. Moreover, outsourcing, network-related and other related large scale
projects generate more intense competition and competition from larger and
better financed competitors. This contributes to lengthening the sales cycle and
also makes the winning of the engagements more difficult. Any failure of the
Company to close and perform its budgeted number of large scale transactions on
its budgeted schedule could contribute to a shortfall in revenue or earnings
from expected levels and a failure to meet expectations of securities analysts
or the market in general. In such an event, the price of our common stock could
be materially adversely affected.

HEALTHCARE INDUSTRY CONCENTRATION

     We derive a substantial majority of our revenues from clients involved in
the healthcare industry. As a result of our focus on healthcare outsourcing and
consulting, our business, financial condition and results of operations are
influenced by conditions affecting this industry, including changing political,
economic and regulatory influences that may affect the procurement practices and
operation of healthcare providers. Current conditions affecting the healthcare
industry and some of the risks they create include, but are not limited to:

     -    Regulatory Change. Federal, state and commercial payer changes
          resulted in substantial limitations on capital expenditures and
          investments in the healthcare industry. In addition, many federal and
          state legislators have announced that they intend to propose programs
          to reform the United States healthcare system at both the federal and
          state level and government agencies have intensified efforts to
          monitor fraud and abuse in healthcare programs reimbursed by federal
          and state agencies. Further, HIPAA requires that providers and other
          healthcare participants comply with a complex set of regulations.
          Although these efforts could increase demand for our services, they
          could also adversely affect our clients, result in lower reimbursement
          rates and change the environment in which providers operate and could
          otherwise adversely affect service providers such as ourselves. The
          ongoing impact of federal, state and commercial payer reimbursement
          changes on the Company's healthcare industry clients cannot be
          predicted with certainty. Reduced revenues to the healthcare industry
          could adversely affect service providers like us. In addition, ongoing
          change in government regulation of the healthcare industry can affect
          the Company in a number of ways. Government regulation can affect the
          ways in which our healthcare clients procure and pay for services such
          as those that we offer. Regulation can also have significant effects
          on the operations of our healthcare clients. If the Company is not
          successful in developing and maintaining our ability to assist and
          serve our clients in the evolving environment of government
          regulation, our ability to win and retain clients may suffer, which
          could materially and adversely affect our business.

     -    Cost Pressure. Large private purchasers of healthcare services are
          placing increasing cost pressure on providers. Healthcare providers
          have and may continue to react to these cost pressures and other
          uncertainties by curtailing or deferring investments, including
          investments in our services.

     The impact of these developments in the healthcare industry is difficult to
predict and could have a material adverse effect on our business.


                                       11
<PAGE>
OUTSOURCING RISKS

    We provide healthcare business process and IT outsourcing solutions which
include any combination of support from full outsourcing with data center
consolidation, 24/7/365 network monitoring and help desk through our network
control center, facility management, application unification, application
outsourcing, business process and interim management. These solutions may
involve personnel acquisition and/or the transfer of a client's information
system assets -- hardware/software and human resources -- from an internal
business function to an outsourced service.

    To implement our outsourcing program, we are required to make substantial
investments in capital assets and personnel for certain outsourcing contracts.
We expect that certain aspects of our outsourcing contracts will be met with
capital or operating leases. If we are unable to obtain acceptable terms for
such capital or leases, there may be a negative impact on our revenue and
profitability for outsourcing contracts which could materially and adversely
affect our business.

    We may also be dependent upon our ability to hire and retain some or all of
an outsourcing client's former IT staff or certain business operations in order
to provide appropriate service levels. We cannot predict whether we will in each
instance be able to either assess accurately the investment required for an
outsourcing contract or negotiate and perform any of our outsourcing contracts
in a profitable manner. We anticipate that competitors will continue to increase
their focus on this market. Our business plan depends upon our ability to secure
new outsourcing contracts. The increased focus from competitors has to date and
may continue to adversely affect our ability to obtain new outsourcing contracts
as well as the profitability of any such contracts. In addition, any failure,
perceived or actual, to perform adequately under our outsourcing agreements
could adversely affect our ability to obtain future consulting engagements from
these or other clients. Some of our agreements call for penalties, or allow for
early termination in the event we fail to meet certain service levels. If we
fail to meet required performance standards in our outsourcing, or other
engagements, we could incur contractual penalties, or the agreements could
terminate before we are able to recover the investments we made in the pursuit
and initiation of the engagement. In either event, we could suffer adverse
financial consequences, as well as damage to our reputation in the industry,
which could adversely and materially affect our business, financial condition,
results of operations and the price of our common stock. In addition, one key to
the success of the expansion of our outsourcing business is to operate one or
more data centers to run the data processing, network monitoring and other IT
functions of our outsourcing clients. Our ability to achieve optimum economies
of scale is dependent upon our ability to win outsourcing engagements of a
sufficient number and size. Further, a demonstrated ability to successfully
close and execute outsourcing engagements is critical to the development of
increasing recognition and credibility in the marketplace which, in turn, is
important to the future growth of the outsourcing business. An inability to
successfully win, execute and manage outsourcing engagements could have a
material adverse affect on our business and on the price of our common stock.

RISK OF NEW BUSINESS INITIATIVES

     We will continue to evaluate opportunities from time to time for strategic
affiliations with alliance partners and investments in solution sets and
expanded outsourcing, e-commerce and other web based initiatives focused on the
healthcare industry. There is no assurance that an investment, if made, in any
particular venture will yield any investment return or produce any appreciable
amount of services revenue.

     As healthcare and other sectors move increasingly to Internet and web-based
technologies and applications and as we continue to innovate services and
solutions to develop and capitalize on this growing market, we will incur risks
related to our participation in such untested opportunities, markets and quickly
evolving lines of business. Such risks can include, but are not limited to, new
and unforeseen technologies superseding development of the Internet, web
technologies and/or the systems integration platforms and other technologies in
which we have invested; increased competition in the outsourcing business from
larger and better capitalized competitors who may also enjoy better name
recognition and other competitive advantages; failure by us to develop and offer
new services and solutions demanded by the market; failure of our services and
solutions to generate sufficient demand in the market; potential government
regulation of the Internet; slowness of traditional healthcare clients to adopt
new technologies; and increased competition for consultant talent, increasing
our cost of providing services.

     As a result of the financial and technological pressures that face the
healthcare industry, and as a result of the rapid rate of evolution in
technology, the technical solutions and marketing initiatives in which the
Company invests may fail to gain acceptance in the marketplace. As a result, the
Company may be forced to abandon certain initiatives without having recouped its
costs of development. In addition, solutions and market offerings invested in by
the Company may encounter competitive products in the marketplace that enjoy
competitive pricing advantages, better brand recognition or other advantages
over solutions offered by the Company. A failure by the Company to invest in and
develop successful market offerings could have a material adverse affect on the
Company's business and the price of the Company's common stock.

    Superior offers its Digital Trust services through its wholly-owned
subsidiary, ComTrust LLC, formed in 2000. ComTrust has a business and
contractual relationship with an alliance partner, and has generally provided
its services in collaboration with its alliance partner. Superior has invested
in the development of ComTrust's Digital Trust offerings and in the marketing,
sale and delivery of those services to ComTrust clients. ComTrust competes in a
new and rapidly evolving market. It is likely that ComTrust will face increasing
competition from competitors who may be in a position to compete more
effectively based on price, brand recognition and other competitive factors.
There can be no assurance that ComTrust's offerings will find favor in the
marketplace or that ComTrust will be successful in its endeavors to increase its
sales, revenues and customer base. Therefore, there can be no assurance that
Superior will recover its investment in the ComTrust business.


                                       12
<PAGE>

PROJECT RISKS

     Many of our engagements involve projects which are critical to the
operations of our clients' business and which provide benefits that may be
difficult to measure. A failure, perceived or actual, to meet a client's
expectations in the performance of our services could damage our reputation and
adversely affect our ability to attract new business with that client or with
others. In addition, we could incur substantial costs and expend significant
resources correcting errors in our work and could possibly become liable for
damages caused by such errors. We could incur substantial costs and expend
significant resources working to ensure client satisfaction even in situations
where our services met contract requirements. A negative impact on client
relationships could materially and adversely affect our business whether or not
we bear any responsibility, legal or otherwise, for the occurrence of those
problems. A successful legal claim against us could damage our reputation in the
industry and have a material adverse effect on our business. We attempt to limit
liability contractually, but there can be no assurance that such limitations
will be effective. We also maintain insurance against such claims, but there can
be no assurance that our insurance will provide adequate coverage for successful
claims against us.

FIXED PRICE CONTRACTS

     As a result of obtaining additional outsourcing contracts and introducing
and selling repeatable, pre-packaged solutions, an increasing portion of our
projects are billed on a fixed-fee basis as opposed to time and materials. Our
inability to estimate accurately the resources and related expenses required for
a fixed-fee project or failure to complete our contractual obligations in a
manner consistent with the project plan upon which our fixed-fee contract was
based could result in cost overruns that could materially and adversely affect
our business.

RECRUITMENT AND RETENTION OF PROFESSIONAL STAFF

     Our business involves the delivery of professional services and is
labor-intensive. Our success depends in large part upon our ability to attract,
develop, motivate and retain highly skilled consultants. Other consulting firms,
healthcare providers and other healthcare industry participants, including
health information systems vendors, clients, systems integrators and many other
enterprises, compete with us for employees with the skills required to perform
the services we offer. We may not be able to attract and retain a sufficient
number of highly skilled employees in the future and we may not continue to be
successful in training, retaining and motivating employees. The loss of a
significant number of consultants and/or our inability to hire a sufficient
number of qualified consultants could adversely affect our ability to secure,
service and complete client engagements and could have a material adverse effect
on our business.

MANAGEMENT OF GROWTH

     We may identify opportunities to continue to expand our geographic
presence, industry expertise and technical scope through strategic acquisitions
and alliances with companies that provide additional and complementary products,
services or skills or have strategic client relationships. If suitable
acquisition candidates are identified, we may not be able to acquire such
companies on suitable terms. Moreover, many other companies are competing for
acquisition candidates, which could increase the price of acquisition targets
and decrease the number of attractive companies available for acquisition.
Acquisitions also involve a number of special risks, including but not limited
to:

     -    Adverse effects on our reported operating results including increased
          intangible asset amortization and interest expense;

     -    Diversion of management attention;

     -    Risks associated with unanticipated problems, liabilities or
          contingencies;

     -    Difficulties related to the integration and management of the acquired
          business;

     -    Risks of entering markets in which we have limited or no direct
          expertise; and

     -    The potential loss of key employees of the acquired companies.

     In addition, acquisitions may require us to spend significant funds. An
acquisition may not result in long-term benefits and management may not be able
to manage effectively the resulting business. The occurrence of some or all of
the events described in these risks could have a material adverse effect on our
business.


                                       13
<PAGE>

CLIENT CONCENTRATION

     We derive a significant portion of our revenues from a relatively limited
number of clients. For example, during 2002 our five largest clients accounted
for approximately 35.0% of our revenues. Three of our top five clients in 2001
were also among our five largest clients during 2002. Except for our outsourcing
contracts, which typically are for more than one year, clients engage us on an
assignment-by-assignment basis and a client can generally terminate an
assignment at any time without penalty. In addition, the level of our consulting
services required by any individual client can diminish over the life of its
relationship with us and we cannot give any assurance that we will be successful
in establishing relationships with new clients as this occurs. Moreover, we
cannot give any assurance that our existing clients will continue to engage us
for additional projects or do so at the same revenue level. The loss of any
significant client or significant contract (such as a large outsourcing
agreement) could materially and adversely affect our business. Significant
write-offs, or the insolvency of a significant client could materially and
adversely affect our business.

VENDOR SYSTEMS CONCENTRATION

     The healthcare industry can choose among numerous healthcare information
systems solutions. Vendors of these products come into and out of favor
depending on a variety of factors. Although our consultants have expertise with
the information systems developed by numerous healthcare information system
vendors, we have historically experienced periodic revenue concentration from
client projects involving the products of an evolving but relatively small group
of vendors. We believe that this concentration generally reflects the current
preference of the healthcare industry participants that we serve. Should any one
or more of these vendors (or any other vendors with whose products we have
substantial involvement) lose favor in the healthcare industry, we would be
required to refocus our efforts on alternative information systems products of
other vendors. The loss of a major portion of our business with respect to any
one of these vendors could materially and adversely affect our business.

DEPENDENCE ON SENIOR MANAGEMENT

     Our success is highly dependent upon the efforts, abilities and business
generation capabilities of our senior management team. Although we manage client
relationships at many levels, the unplanned loss of the services of one or more
of the Company's key executives for any reason could adversely affect our
business. Moreover, certain client and industry relationships and areas of
expertise depend on the efforts, abilities and business generation capabilities
of other members of our management team. The loss of any of these management
team members could materially and adversely affect our business.

COMPETITION

    The market for our services is highly fragmented, highly competitive and is
subject to rapid change. We believe that we currently compete principally with a
variety of companies, including but not limited to:

     -    outsourcing firms;
     -    systems integration firms;
     -    national consulting firms, including the consulting divisions of large
          accounting firms or their spin-offs;
     -    general management consulting firms;
     -    regional and specialty consulting firms;
     -    web development and e-commerce firms; - information system vendors;
     -    service groups of computer equipment companies; and
     -    facilities management companies.

     Many of our competitors have significantly greater financial, technical and
marketing resources, generate greater revenues and have greater name recognition
than we do. Moreover, those competitors that sell or license their own software
may in the future attempt to limit or eliminate the use of third party
consultants, such as ourselves, to implement and/or customize such software. In
addition, vendors whose systems may enjoy wide market acceptance and large
market share could enter into exclusive or restrictive agreements with other
consulting firms which could eliminate or substantially reduce our
implementation work for those systems. Entry barriers into our markets are
relatively low, except for outsourcing, and we have faced and expect to face
additional competition from new entrants into the healthcare consulting
industry. Our competitors may prove better able to leverage their financial and
technological resources to develop and market their competitive services; to
introduce innovative solutions to the market; and to compete on price and other
factors with the products and services offered by the Company. As a result,
there is no certainty that the Company will be able to retain or expand its
existing base of clients. In addition, combinations and consolidations in the
consulting industry will give rise to


                                       14
<PAGE>
larger competitors whose relative strengths we cannot predict. We also compete
with our clients' internal resources, particularly where these resources
represent a fixed cost to the client. This internal client competition may
heighten as consolidation of healthcare providers creates organizations large
enough to support more sophisticated internal information management
capabilities. Our inability to compete effectively with current and future
competitors and competitive pressures facing us may reduce our revenue or
operating margins or otherwise materially and adversely affect our business and
the price of our common stock

LIMITED PROTECTION OF PROPRIETARY SYSTEMS AND PROCEDURES

     Our success depends in part upon our information and communication systems,
databases, service and market offerings, best practices, tools and the methods
and procedures that we have developed specifically to serve our clients. In
addition, we offer enterprise-wide communications services and will continue to
develop groupware/collaboration tools and applications. Because we have no
patents or registered copyrights, we rely on a combination of nondisclosure and
other contractual arrangements and copyright, trademark and trade secret laws to
protect our proprietary systems, information and procedures. We can offer no
assurance that the steps we have taken to protect these rights will be adequate
to prevent theft or detect unauthorized use and we may not take appropriate
steps to enforce our proprietary rights. We believe that our systems and
procedures and other proprietary rights do not infringe upon the rights of third
parties. However, if a party sues us in the future claiming that our business or
systems infringe on their intellectual property, we may have to enter into
expensive litigation regardless of the merits of such claims. In addition, any
infringement claim that causes us to discontinue use of, or having to acquire
licenses for, applications, tools, systems or software used or marketed by the
Company, could have a material adverse affect on the Company's business.

INFLUENCE OF PRINCIPAL STOCKHOLDER; CONCENTRATED INSIDER OWNERSHIP

     Our principal stockholder and Chief Executive Officer, Richard D. Helppie,
Jr., beneficially owns approximately 33% of our outstanding shares of common
stock, excluding treasury shares. Collectively, our directors' and executive
officers beneficially own approximately 51% of our outstanding common stock,
excluding treasury shares. Mr. Helppie, as a result, acting alone, and our
officers and directors, as a group, possess the voting power to exercise
effective control over the outcome of many of the matters requiring a
stockholder vote, including the election of directors and the approval of
significant corporate matters such as mergers, sales of all or substantially all
of our assets, and authorization and issuance of additional shares of stock.

STOCK PRICE VOLATILITY

     The trading price of our common stock has fluctuated widely. In addition,
in recent years the stock market has experienced extreme price and volume
fluctuations. The overall market and the price of our common stock may continue
to fluctuate greatly in the future.

     Our common stock has been publicly traded since our initial public offering
of common stock to the public in 1996. In 2002, the sale price ranged from a low
of $1.77 per share to a high of $8.86 per share. The market price of our common
stock could continue to fluctuate substantially due to a variety of factors,
including, but not limited to:

     -    Quarterly fluctuations in results of operations;
     -    Announcements of unprofitable operations, consumption of cash and
          reduced capital;
     -    Acquisition or loss of material outsourcing contracts and other
          material engagements;
     -    Changes in the healthcare and IT consulting environments;
     -    Announcement and market acceptance of acquisitions;
     -    Adverse circumstances affecting the introduction or market acceptance
          of new solutions and services we might offer in the future;
     -    Announcements of key developments by competitors;
     -    Changes in earnings estimates by analysts;
     -    Sales of common stock by existing holders;
     -    General economic or market conditions; and


                                       15
<PAGE>
     -    Loss of key personnel.

     The market price for our common stock has and could also be affected by our
ability to meet analysts' expectations. Failure to meet such expectations has in
the past, and could in the future, have a material adverse effect on the market
price of our common stock. In addition, the stock market is subject to extreme
price and volume fluctuations. This volatility has had a significant effect on
the market prices of securities issued by many companies for reasons unrelated
to the operating performance of these companies. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. If similar
litigation were instituted against us, it could result in substantial costs and
a diversion of our management's attention and resources, which could have a
material adverse effect on our business, operating results and financial
condition.

IMPACT OF ANTI-TAKEOVER PROVISIONS AND OTHER FACTORS ON OUR STOCK PRICE

     Our certificate of incorporation and by-laws and the Delaware General
Corporation Law include provisions that may be deemed to have anti-takeover
effects and may delay, defer or prevent a takeover attempt that stockholders
might consider in their best interests. Our board of directors is divided into
three classes, each of which is elected for staggered, three-year terms. Our
by-laws contain provisions under which only the chairman of the board, a
majority of the board of directors or stockholders owning at least 50% of our
capital stock may call meetings of stockholders and which require certain
advance notice procedures for nominating candidates for election to the board of
directors. Our board of directors is empowered to issue up to 1,000,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges of such shares, without any further stockholder action. The existence
of this "blank-check" preferred stock could make more difficult or discourage an
attempt to obtain control of the Company by means of a tender offer, merger,
proxy contest or otherwise. In addition, this "blank check" preferred stock and
an issuance thereof, may have an adverse effect on the market price of our
common stock. Furthermore, we are subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law that prohibit us from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
first becomes an "interested stockholder," unless the business combination is
approved in a prescribed manner. The application of Section 203 and certain
other provisions of the certificate of incorporation could also have the effect
of delaying or preventing a change of control of the Company, which could
adversely affect the market price of our common stock.

     Our obligation to pay certain amounts to a business partner under an
existing agreement could be accelerated if we are involved in certain change of
control transactions without that partner's prior consent. The amounts payable
by the Company in such event could potentially be material. Acceleration of the
payment obligation could increase the cost of acquiring control of the Company,
which could discourage attempts to obtain control of the Company that
stockholders might otherwise consider in their best interests, or lower the
price of any such transaction.


                                       16
<PAGE>
                      EXECUTIVE OFFICERS OF THE REGISTRANT

     Our executive officers are as follows:

     Richard D. Helppie, Jr. (age 47) has served as our Chief Executive Officer
since he founded Superior in 1984. He also served as our President from May
1984 to January 1999, and as Chairman from May 1984 to October 2000. Mr. Helppie
also currently serves as a Director of the Company. Mr. Helppie has more than 28
years of experience in the healthcare and information systems industries. He
currently serves as a director of Neoforma, Inc. and Med-i-Bank Inc.

     George S. Huntzinger (age 53) has served as our President and Chief
Operating Officer since October 2000. Previously, Mr. Huntzinger served in
senior management roles for several healthcare organizations, including a
12-year term as President of CSC Healthcare. He is a member of numerous national
organizations and associations and previously served on the boards of several
healthcare and financial organizations and has served the healthcare industry
for over 30 years.

     Charles O. Bracken (age 53) has served as a Director since January 1999 and
has served as our Executive Vice President since joining Superior in March 1987.
Mr. Bracken has more than 30 years of experience in the healthcare and
information




                                       17
<PAGE>
systems industries. Prior to joining Superior, Mr. Bracken spent three years as
Vice President of Marketing of a healthcare information software firm, preceded
by 10 years of related experience in healthcare information systems management,
including positions as Chief Information Officer for single and multi-hospital
corporations.

     Richard R. Sorensen (age 47) has provided his financial expertise to
Superior in an advisory capacity since our inception in 1984. He joined Superior
as Controller in August of 1998 and became Chief Financial Officer in October
2000. Previously, he served as an audit partner with Plante & Moran, LLP. He is
a Certified Public Accountant.

ITEM 2. PROPERTIES

     Our headquarters is located in approximately 24,000 square feet of owned
office space in Southfield, Michigan. We also lease an aggregate of
approximately 203,000 square feet of additional office space in Alpharetta,
Georgia; Atlanta, Georgia; San Diego, California; Woodland Hills, California;
Ann Arbor, Michigan; Dearborn, Michigan; Southfield, Michigan; Cheshire,
Connecticut; Englewood, Colorado; Minneapolis, Minnesota; and Pittsburgh,
Pennsylvania. Of our total space described above, we have sublet approximately
79,000 square feet. After giving effect to space reductions from our recent
restructurings, we believe that our facilities are adequate for our current
needs and that additional facilities can be leased or acquired to meet future
needs. We continue to consolidate offices and have undertaken initiatives to
sublet office space in Woodland Hills, California, San Diego, California,
Cheshire, Connecticut, Ann Arbor, Michigan and Southfield, Michigan.

ITEM 3. LEGAL PROCEEDINGS

     We are a party to litigation from time to time. However, we are not now a
party to, and are not aware of, any pending or threatened litigation that we
currently anticipate would have a material adverse effect on our company.

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

     Not Applicable.

                                     PART II

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

     Our common stock is traded on the NASDAQ National Market under the symbol
SUPC. The following table shows high and low closing prices as reported by
NASDAQ for the fiscal years 2001 and 2002.

                                          HIGH       LOW
                                         ------     ------
                  FISCAL 2001
                     First Quarter ..... $ 4.25     $ 2.75
                     Second Quarter ....   4.99       2.72
                     Third Quarter .....   6.26       3.25
                     Fourth Quarter ....   8.99       4.06
                  FISCAL 2002
                     First Quarter ..... $ 8.86     $ 5.41
                     Second Quarter ....   7.00       5.00
                     Third Quarter .....   5.70       2.80
                     Fourth Quarter ....   3.29       1.77

     At March 28, 2003, we had approximately 108 stockholders of record.

     We have not paid cash dividends to the holders of our common stock. It is
our present intention to retain earnings for use in the growth of our business.
Accordingly, we do not anticipate that cash dividends will be paid in the
foreseeable future.


                                       18
<PAGE>


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     You should read the following selected financial data in conjunction with
our consolidated financial statements, the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere in this report. The selected financial data as of December
31, 2000, 2001 and 2002 have been derived from our audited consolidated
financial statements included elsewhere in this report. The selected financial
data as of December 31, 1998 and 1999 have been derived from our audited
consolidated financial statements not included elsewhere in this report.


<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                       --------------------------------------------------------------------
                                                        1998(1)       1999(1)        2000            2001           2002
                                                       ---------     ---------      ---------      ---------      ---------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
       STATEMENT OF OPERATIONS DATA:
       -----------------------------
<S>                                                    <C>           <C>            <C>            <C>            <C>
Net revenue ......................................     $ 124,746     $ 149,349      $  99,237      $  86,721      $  84,108
Net cost of services .............................        65,026        91,714         77,674         56,721         59,131
Selling, general and administrative expenses .....        48,333        65,597         73,278         40,833         32,816
Costs incurred in connection with new
   business initiative ...........................          --           4,840           --             --             --
Restructuring charges, net .......................          --            --            4,165          3,112          3,308
Impairment of assets .............................          --            --             --             --              571
Impairment of goodwill ...........................          --            --           10,221           --            8,223
                                                       ---------     ---------      ---------      ---------      ---------
Earnings (loss) from operations ..................        11,387       (12,802)       (66,101)       (13,945)       (19,941)
Other income (expense), net ......................         4,572         1,874          6,056         (3,620)           176
                                                       ---------     ---------      ---------      ---------      ---------
Earnings (loss) before income taxes ..............        15,959       (10,928)       (60,045)       (17,565)       (19,765)
Provision (benefit) for income taxes .............         6,331        (3,967)        (2,492)          --           (2,301)
                                                       ----------    ---------      ---------      ---------      ---------
Net earnings (loss) ..............................     $   9,628     $  (6,961)     $ (57,553)     $ (17,565)     $ (17,464)
                                                       =========     =========      =========      =========      =========
Net earnings (loss) per share - basic ............     $    0.94     $   (0.67)     $   (5.48)     $   (1.61)     $   (1.62)
Net earnings (loss) per share - diluted ..........     $    0.91     $   (0.67)     $   (5.48)     $   (1.61)     $   (1.62)
Shares used in calculating net
   earnings (loss) per share - basic .............        10,266        10,340         10,511         10,920         10,751
Shares used in calculating net
   earnings (loss) per share - diluted ...........        10,580        10,340         10,511         10,920         10,751
</TABLE>


<TABLE>
<CAPTION>
                                                                                    AT DECEMBER 31,
                                                        -------------------------------------------------------------------
     BALANCE SHEET DATA:                                  1998          1999           2000           2001            2002
--------------------------                              --------      --------       --------       --------       --------
<S>                                                     <C>           <C>            <C>            <C>            <C>
Working capital ..................................      $ 78,445      $ 61,811       $ 29,622       $ 19,033       $ 12,360
Total assets .....................................       133,726       186,597         78,632         58,607         43,656
Total debt .......................................            61          --            5,125          2,925          4,318
Total stockholders' equity .......................       121,494       150,935         58,340         42,224         25,167
</TABLE>


(1) Statement of operations data for fiscal 1998 and 1999 includes results of
acquired businesses.

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

OVERVIEW

     We are organized into the two business segments of outsourcing and
consulting. The outsourcing segment helps healthcare providers simplify their
management agendas, improve their return on information systems investment and
strengthen their technology management by taking on responsibility for managing
and operating all or part of the client's IT functions. We deploy specialized
resources to deliver higher quality IT functionality at lower cost and help
clients avoid or reduce certain capital expenses. The outsourcing segment offers
the client an array of services, functions and economic elements that can be
tailored to the specific client program/agenda, including business process
management, IT management, IT planning and budgeting, applications support,
applications implementation, IT operations, data center consolidation in our
world-class processing center, 24/7/365 network monitoring and help desk in our
network control center, financial management and risk sharing, facility
management, application unification, application outsourcing and interim
management. The consulting segment provides information technology, as well as
strategic and operations management consulting and solutions, and application
support to a broad cross-section of healthcare industry participants and
information systems vendors. The consulting segment also provides the tools,
strategies and solutions necessary to improve patient safety, enhance financial
performance, and ensure secure and private HIPAA compliant transactions.

     In recent years, we have expanded our outsourcing and solution sales
capabilities. As healthcare and other sectors implement web-based technologies
and applications, we may incur risks related to participation in such
opportunities, markets and quickly evolving lines of business. Such risks can
include, but are not limited to: new and unforeseen technologies superseding
development of web-based applications and/or the systems integration platforms
and other




                                       19
<PAGE>
technologies in which we have invested; increased competition in the outsourcing
business from larger and better capitalized competitors who may also enjoy
better name recognition and other competitive advantages; failure by us to
develop and offer new services and solutions demanded by the market; failure of
our services and solutions to generate sufficient demand in the market;
potential government regulation of the Internet; slowness of traditional
healthcare clients to adopt new technologies; and increased competition for
consultant talent, increasing our cost of providing services.

     We derive substantially all of our revenue from fees for professional
services. We establish standard-billing guidelines based on the type and level
of service offered. Actual billing rates are established on a project-by-project
basis and may vary from the standard guidelines. Billings for time and materials
engagements are generally contracted to be made on a bi-weekly basis to monitor
client satisfaction and manage outstanding accounts receivable balances. Revenue
on time and materials contracts is recognized as the services are provided.
Outsourcing contracts, fixed-fee projects and pre-packaged solution sales are
billed by deliverable or on a periodic basis, typically monthly. Revenue on
these contracts is generally recognized ratably over the life of the contract or
based on progress toward project milestones. As of December 31, 2002, we have
six significant contracts to provide healthcare IT outsourcing services. In
addition, we provide help desk and call center support, which are typically
billable on a per seat per month basis; and managed trust (digital security)
services, which are generally billed annually and recognized ratably over the
life of the contract. We also derive revenue from fees generated from our
Digital Business TransformationTM partnerships. This revenue is generally
recognized ratably over the life of the contract.

     There can be no assurance that we will be able to achieve profit margins on
existing and new contracts, which are consistent with our historical levels of
profitability. In addition, profit margins on outsourcing and support contracts
are generally lower than other traditional consulting engagements. On occasion,
we may collect payment prior to providing services. These payments are recorded
as deferred revenue and reflected as a liability on our consolidated balance
sheet. Increased use of fixed-fee contracts subjects us to increased risks,
including cost overruns. Moreover, we incur significant expense in the process
of seeking, developing and negotiating large fixed-fee contracts, such as
outsourcing contracts. In addition, the implementation of certain outsourcing
contracts requires significant initial investment by us in the hiring of
personnel and the acquisition of equipment to perform the contract. Such
expenses must be recovered over the life of the agreement. Some of our
agreements call for penalties, or allow for early termination in the event we
fail to meet certain service levels. If we fail to meet required performance
standards in our outsourcing, or other engagements, we could incur contractual
penalties, or the agreements could terminate before we are able to recover the
investments we made in the pursuit and initiation of the engagement. In either
event, we could suffer adverse financial consequences, as well as damage to our
reputation in the industry, which could adversely and materially affect our
business, financial condition, results of operations and the price of our common
stock.

     We seek to increase revenue through various means, including an increased
emphasis on outsourcing contracts, an increase in the value and duration of
projects for existing and new clients, as well as continued additions to our
recurring revenue base. In addition, we seek to increase revenue by expanding
our range of specialty services with a focus on opportunities arising from the
demand for clinical quality and patient safety, financial improvement, digital
communications, system security and privacy expertise. We manage our client
development efforts through our internal Client Partner Organizations ("CPO")
having specific geographic responsibility and focus. Within a geography, our CPO
members develop relationships and pursue opportunities with strategic clients,
maintain relationships with various stakeholders (buyers, suppliers and
advisors) and develop other business opportunities. Our success in increasing
our revenue will be dependent upon, among other factors, the recovery of the
marketplace, timely sales, the type, range and quality of our services and
solutions, competitive prices, growth and improvement in proposal acceptance
rates in outsourcing and consulting, and successful competition in the
marketplace. Many of the entities with whom we compete have greater financial
resources, larger customer bases and greater technical and sales and marketing
resources, which may impact our ability to compete against them successfully. In
addition, our revenues have and can be impacted by unforeseen disruptions in
transportation, communications or other infrastructure components. We have
experienced weaker than anticipated revenue in recent quarters, particularly in
the consulting segment. This trend could continue if fiscal conservatism in
healthcare organizations leads to continued unpredictability in the market for
consulting services. Should we be unsuccessful in increasing or sustaining our
revenue, for these or for other reasons, we may fail to meet the public market's
expectations of our financial performance and operating results, which could
have a material adverse effect on our common stock price.



                                       20
<PAGE>

     Our most significant expense is cost of services, which consists primarily
of consultant compensation expense and operating costs associated with our full
outsourcing contracts.

     Historically, consultant compensation expense has grown faster than
consultant billing rates, resulting in an increase in our cost of services as a
percentage of revenue. We have sought to address the consultant compensation
issue by adding an additional variable portion of compensation payable upon the
achievement of measurable performance goals. In addition, we have sought to
address compensation expense pressures through increased use of stock options as
an overall part of our compensation package. These efforts have been hampered in
the past by the impact of our stock price and could be affected in the future
depending upon market conditions. The market in which we compete for our
talented and highly skilled consultant work force is highly competitive. Many of
the entities with whom we compete for employees have greater financial and other
resources than us, and may be able to offer more attractive compensation
packages to candidates than we can, including salary, benefits, stock and stock
options. Our ability to successfully operate our business and compete in our
market is dependent upon our ability to recruit and retain skilled and motivated
sales, management, administrative and technical personnel. If we are unable to
recruit and retain consultants to perform new and existing client engagements,
our reputation in the industry and our ability to generate revenue will both
suffer, which could have a material adverse effect on our business, financial
condition and on the price of our common stock. Moreover, our consultants are
often key to our client relationships. Loss of key consultants could impair
client relationships and adversely affect our ability to gain recurring
engagements, which could adversely affect our financial condition.

     Our operating costs associated with the full outsourcing contracts have and
will continue to increase as additional clients are serviced. Additionally, as
we continue to migrate additional clients to the processing center, we expect to
incur incremental normative costs, which will be offset with savings over time
as additional clients are added and we are able to leverage our investment.
These costs consist primarily of, but are not limited to: equipment lease costs,
depreciation, telecommunication and facility related expenditures. We expect to
recover our investment in our processing and network management centers through
the performance of multiple outsourcing contracts and network management
(NetLinc) contracts utilizing processing center resources. If we are
unsuccessful in winning sufficient new outsourcing and NetLinc contracts, or if
the terms of outsourcing or NetLinc contracts are not sufficiently favorable to
us, or if any of the existing outsourcing or NetLinc contracts were to be
terminated early for any reason, our ability to recover our processing center
investments would be impaired, which could have a material adverse effect on our
financial condition. In addition, we will be performing data processing and
other client information systems functions through our processing centers, which
are critical to the clients' operations. Any failure by us to successfully
perform our processing center functions could adversely affect our clients'
operations, which could result in contractual performance penalties to us, early
termination of one or more contracts, potential legal liabilities and damage to
our reputation in the industry, any or all of which could have a material
adverse effect on our financial condition, results of operations and the price
of our common stock.

     Our cost of services as a percentage of revenue is primarily driven by how
efficiently we utilize our consultant resources and deliver our consulting and
outsourcing services and solutions. We attempt to optimize efficient deployment
of our consultants through initial engagement planning and by continuously
monitoring project requirements, timetables, and service and solution
deliveries. The number of consultants assigned to a project will vary according
to the type, size, complexity, duration and demands of the project. Project
terminations, completions and scheduling delays, and incremental costs
associated with the full outsourcing contracts have and can continue to cause us
to experience lower gross margins.

     In recent years the healthcare industry has experienced a slow-down in
consulting expenditures as fiscal constraints imposed by federal, state and
commercial/private payers, and lingering Y2K transition effects combined forces
to dampen overall industry demand for new IT service consulting projects. These
forces continued to hamper demand for our services in 2002. Furthermore, changes
in federal, state and commercial/private payer reimbursement may continue to
adversely affect the financial stability and viability of our clients and may
impact their ability to contract for and pay for professional services such as
those offered by us. We record a provision for estimated uncollectible amounts
based on prior collection experience.

During 2001, the events of September 11 and resulting disruptions in air travel
adversely affected our business. In addition, the aftermath of September 11,
including increased federal spending on defense and homeland security, could
adversely affect the federal and state governments' spending on Medicare,
Medicaid and other healthcare initiatives as well as state budget deficits and
increased defense spending in connection with U.S. war activities which could
adversely affect our clients' revenues and cause them to defer or cancel
projects that would create demand for our services. In addition, our consultants
often perform services at the client's site, away from their own city or state
of residence. We are therefore, highly dependent upon effective air travel for
the performance of a majority of our client engagements. If, as a result of the
September 11, 2001 terrorist attacks, current armed hostilities in the Middle
East and other unsettling world events, air travel becomes increasingly costly,




                                       21
<PAGE>

time consuming, limited or unreliable, or should our employees become reluctant
to travel, it could harm our ability to timely and cost effectively perform our
client engagements, which could have a material adverse effect on our financial
condition and results of operations.

     In addition, our establishment of new services and market offerings and
hiring of consultants in peak hiring periods have and can from time to time
adversely affect margins. Also, seasonal factors, such as vacation days,
holidays and total business days in a quarter have and can affect margins.
Variations in services and market offering solution sales, longer outsourcing
sales cycles, uneven deployment of resources and failure to secure large
engagements can also result in quarterly variability of our cost of services as
a percentage of revenue. Our consultants are generally employed on a full-time
basis and therefore we will, in the short run, incur substantially all of our
employee-related costs even during periods of low utilization, as the majority
of employment costs of these personnel are fixed. In addition, we have and may
from time to time discontinue service offerings that have not been successful in
the market. Exiting a service offering can result in lower margins, as there may
not be immediate opportunities for the reassignment of personnel, or there may
be costs associated with the separation of personnel from us. In addition, as we
have responded to the diminishing demand for certain of our consulting services
by contracting operations and reducing costs, we have and may again incur costs
associated with business contractions, and may also lose the ability to recover
investments made in personnel, equipment, office space and other assets
associated with the service lines that are reduced or eliminated. In the event
that office space is closed by us, there can be no assurance that we will be
able to sublease that space, or that sublease rents will offset our obligations
under our prime lease(s). In addition, there can be no assurance that existing
sublessees under our leases will not default in their rent or other obligations.
Default by our sublessees, or an inability by us to sublease excess office space
could have an adverse effect on our financial condition.

     Selling, general and administrative expenses include the costs of
recruiting, training and re-training, continuing education, technology, sales
and marketing, facilities, administration, outside professional fees and
depreciation. Prior to 2002, selling, general and administrative expenses also
included amortization of goodwill. However, on January 1, 2002, we adopted the
provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), which specifies that goodwill is no
longer subject to amortization, but is subject to an impairment assessment at
least annually. During the three months ended December 31, 2002, we completed
our annual assessment. Based on our findings, we concluded that goodwill was
fully impaired, and recorded approximately $8.2 million of impairment losses.

     In connection with our continuing efforts to reduce our cost structure, we
incurred restructuring charges of approximately $3.3 million during the year
ended December 31, 2002. These charges primarily related to the termination of a
business alliance, which included the accelerated expense associated with a
certain lease obligation and the write-off of leasehold improvements and
capitalized software development costs. Also included in the restructuring
charges are severance costs related to our continued organizational
restructuring and the write-off of property and equipment, partially offset by a
reduction to the accrual for restructuring costs as of December 31, 2001. As a
result of our restructuring plan and cost savings initiatives, we have reduced
operating expenses, excluding impairment and restructuring charges, to
approximately $100.5 million for the year ended December 31, 2002, from
approximately $108.0 million and $164.6 million for the years ended December 31,
2001 and 2000, respectively.

     Impairment of assets includes the difference between the carrying value and
fair value of non-essential real estate that we decided to sell during the
quarter ended December 31, 2002, in order to reduce operating costs and improve
liquidity. We listed the real estate, an office building and undeveloped land
adjacent to the building, with an agent during the fourth quarter of 2002, and
sold the real estate in February 2003. The fair value of the real estate was
determined based on the ultimate sale price less costs to sell.

     In November 2001, the Financial Accounting Standards Board issued Staff
Announcement Topic No. D-103, "Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred," which states that
reimbursements received for out-of-pocket expenses should be characterized as
revenue in the income statement. The application of Staff Announcement Topic No.
D-103 does not have an impact on current or previously reported net earnings
(loss) or earnings (loss) per share. We will continue to use net revenue
(revenue before out-of-pocket reimbursements) and net cost of services (cost of
services before out-of-pocket reimbursements) to compute percentage and margin
calculations, as well as for purposes of comparing the results of operations for
the year ended December 31, 2002, to the year ended December 31, 2001, and the
year ended December 31, 2001 to the year ended December 31, 2000.



                                       22
<PAGE>
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The preparation of consolidated financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America, requires management to make judgments, assumptions and
estimates that affect the amounts reported in our consolidated financial
statements and the accompanying notes to consolidated financial statements. Our
estimates are based on prior experience, current business and market conditions,
as well as various other assumptions we believe are necessary to form a basis
for making judgments related to the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Significant judgments, assumptions and
estimates made by management include, but are not limited to: the allowance for
doubtful accounts, goodwill and intangible asset impairment and restructuring
charges. Actual results could differ from these estimates. The following
critical accounting policies reflect our more significant judgments, assumptions
and estimates used in the preparation of the consolidated financial statements.
Refer to our audited consolidated financial statements and notes thereto for the
years ended December 31, 2000, 2001 and 2002 included herein, for information
regarding our significant accounting policies.

     Accounts Receivable Valuation. Virtually all of our accounts receivable are
due from companies in the healthcare industry. Credit is extended based on
evaluation of a customer's financial condition and, generally, collateral is not
required. Accounts receivable are due within 30 days and are stated at amounts
due from customers net of an allowance for doubtful accounts. We determined our
allowance by considering a number of factors, including the length of time trade
accounts receivable are past due, our previous loss history, the customer's
current ability to pay its obligation to us, and the condition of the general
economy and the industry as a whole. We write off accounts receivable when they
become uncollectible, and payments subsequently received on such receivables are
credited to the allowance for doubtful accounts. We typically do not assess
interest on past due accounts.

     Goodwill and Intangible Asset Impairment. We are subject to a goodwill
impairment assessment at least annually in accordance with the provisions of
SFAS 142. During the three months ended December 31, 2002, we completed our
annual impairment assessment. We estimated fair value using market
capitalization, the expected present value of future cash flows and other
available information. Based on our findings, we concluded that goodwill was
fully impaired, and recorded impairment losses of approximately $8.2 million.

     Restructuring Charges. We accrue for restructuring charges when we are
specifically able to identify actions that need to be taken in response to a
change in our strategic plan, product demand, increased costs or other business
factors. We routinely evaluate the prior restructuring accruals and make any
necessary adjustments to reflect any changes in the costs of the restructuring
activities. During the year ended December 31, 2002, we recorded a reduction to
the 2001 accrual for future lease obligations, as the result of subletting
office space during 2002, which was previously included in the accrual. We also
recorded an additional accrual for future lease obligations for office space we
vacated during 2002 and were unable to sublet. Estimates are based on
anticipated costs to exit such activities and are subject to change based on our
actual ability to sublet.

     As of December 31, 2002, the restructuring-related accrual amounted to
approximately $3.1 million, which represents the present value of future
operating lease obligations for facilities no longer used by us, but not sublet
or sublet at amounts less than our obligation, as well as severance costs
related to our continued organizational restructuring. Our restructuring accrual
may be adjusted in the future, based on our actual success in subleasing
compared to our estimate.

     Our key accounting estimates and policies are reviewed with our auditors
and the Audit Committee of our Board of Directors.


                                       23
<PAGE>
RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, selected
statement of operations data expressed as a percentage of net revenue. The
trends illustrated in the following table may not necessarily be indicative of
future results.

                                    PERCENTAGE OF NET REVENUE
                                     YEAR ENDED DECEMBER 31,
                                 --------------------------------
                                  2000         2001         2002
                                 -----        -----        -----
Net revenue                      100.0%       100.0%       100.0%
Net cost of services              78.3%        65.4%        70.3%
Selling, general and
  administrative expenses         72.6%        46.2%        39.0%
Amortization of goodwill           1.2%         0.9%         0.0%
Restructuring charges, net         4.2%         3.6%         3.9%
Impairment of assets               0.0%         0.0%         0.7%
Impairment of goodwill            10.3%         0.0%         9.8%
                                 -----        -----        -----
Loss from operations             (66.6%)      (16.1%)      (23.7%)
Other income (expense), net        6.1%        (4.2%)        0.2%
                                 -----        -----        -----
Loss before income tax benefit   (60.5%)      (20.3%)      (23.5%)
Income tax benefit                (2.5%)        0.0%        (2.7%)
                                 -----        -----        -----
Net loss                         (58.0%)      (20.3%)      (20.8%)
                                 =====        =====        =====

2002 COMPARED TO 2001

Net Revenue.

     Consulting. Net revenue in this segment decreased by $3.8 million or 6.7%,
to $53.6 million for the year ended December 31, 2002, as compared to $57.4
million for the year ended December 31, 2001. The revenue decrease was primarily
due to a decline in demand for this segment's services.

     Outsourcing. Net revenue in this segment increased by $1.2 million, or
4.2%, to $30.5 million for the year ended December 31, 2002, as compared to
$29.3 million for the year ended December 31, 2001. The revenue increase was
primarily the result of the signing of a new outsourcing agreement during late
2001 and two new outsourcing agreements during 2002, partially offset by the
planned completion of two outsourcing agreements during 2001.

Net Cost of Services.

     Consulting. Net cost of services in this segment decreased by $2.3 million,
or 6.6%, to $33.1 million for the year ended December 31, 2002, as compared to
$35.4 million for the year ended December 31, 2001. The decrease was due
primarily to reductions in personnel and related costs in this segment. Net cost
of services as a percentage of net revenue for this segment increased to 61.8%
for the year ended December 31, 2002, as compared to 61.7% for the year ended
December 31, 2001.

     Outsourcing. Net cost of services in this segment increased by $4.7
million, or 22.3%, to $26.0 million for the year ended December 31, 2002, as
compared to $21.3 million for the year ended December 31, 2001. The increase was
primarily due to costs related to new contracts. Net cost of services as a
percentage of net revenue for this segment increased to 85.3% for the year ended
December 31, 2002, as compared to 72.6% for the year ended December 31, 2001.
The increase was primarily attributable to the initial costs associated with the
signing of the new full outsourcing contracts, including costs associated with
the opening of our new processing center.

     Selling, general and administrative expenses. Selling, general and
administrative expenses decreased by $8.0 million, or 19.6%, to $32.8 million
for the year ended December 31, 2002, as compared to $40.8 million for the year
ended December 31, 2001. The decrease was primarily attributable to reductions
in: personnel and related costs, facility, technology, communication and
marketing expenditures, goodwill amortization and charges related to the
accounts receivable allowance, litigation and claims, as well as efficiencies
achieved in continuing education programs. Selling, general and administrative
expenses as a percentage of net revenue decreased to 39.0% for the year ended
December 31, 2002, as compared to 47.1% for the year ended December 31, 2001.
The decrease was primarily attributable to increased operating efficiencies as a
result of our disciplined cost controls.

     Restructuring charges. Restructuring charges were $3.3 million for the year
ended December 31, 2002, as compared to $3.1 million for the year ended December
31, 2001. Restructuring charges recorded during the year ended December 31,
2002, consisted primarily of costs associated with the termination of a business
alliance, which included the accelerated lease




                                       24
<PAGE>
costs related to office space we determined was no longer necessary and were
unable to sublet as of December 31, 2002, as well as the write-off of leasehold
improvements and capitalized software development costs. The restructuring
charges also included severance costs related to our continued organizational
restructuring and the write-off of property and equipment, partially offset by a
reduction to the accrual for restructuring costs as of December 31, 2001.
Restructuring charges recorded during the year ended December 31, 2001,
consisted primarily of costs incurred as a result of the acceleration of lease
costs associated with office space we determined was no longer necessary based
on our current business model and had been unable to sublet as of December 31,
2001, or sublet at amounts less than our obligations. The restructuring charges
also consisted of the write-off of property and equipment associated with closed
office facilities, the write-off of leasehold improvements related to closed or
sublet office space and severance costs related to our continued organizational
restructuring, partially offset by a reduction to the accrual for restructuring
costs included in accrued liabilities as of December 31, 2000. Refer to Note 10
("Restructurings") of our consolidated financial statements included herein, for
further details on the components of the restructuring charges.

     Impairment of assets. During the year ended December 31, 2002, we recorded
an impairment loss of approximately $0.6 million to write-down the carrying
value of non-essential real estate that we decided to sell during the quarter
ended December 31, 2002, in order to reduce operating costs and improve
liquidity, to its current fair value. We listed the real estate, an office
building and undeveloped land adjacent to the building, with an agent during the
fourth quarter of 2002, and sold the real estate in February 2003. The fair
value of the real estate was determined based on the ultimate sale price less
costs to sell.

     Impairment of goodwill. During the year ended December 31, 2002, we
completed our annual impairment assessment and concluded, based on market
capitalization, the expected present value of future cash flows and other
available information, that goodwill was fully impaired and as a result,
recorded an impairment loss of approximately $8.2 million.

     Other income and expense. Other income was $176,000 for the year ended
December 31, 2002, as compared to other expense of $3.6 million for the year
ended December 31, 2001. The change was primarily the result of the $4.1 million
loss recognized on the sale of our remaining investment securities during the
year ended December 31, 2001, as well as the reduced interest earned on our
short-term investments during the year ended December 31, 2002.

2001 COMPARED TO 2000

Net Revenue.

     Consulting. Net revenue in this segment decreased by $13.8 million, or
19.3%, to $57.4 million for the year ended December 31, 2001, as compared to
$71.2 million for the year ended December 31, 2000. The revenue decrease was
primarily due to a decline in demand for this segment's services.

     Outsourcing. Net revenue in this segment increased by $1.3 million, or
4.5%, to $29.3 million for the year ended December 31, 2001, as compared to
$28.0 million for the year ended December 31, 2000. The revenue increase was
primarily the result of the signing of a significant outsourcing agreement
during the second quarter of 2001, partially offset by the planned completion of
two outsourcing agreements during 2001.

Net Cost of Services.

     Consulting. Net cost of services in this segment decreased by $21.0
million, or 37.1%, to $35.4 million for the year ended December 31, 2001, as
compared to $56.4 million for the year ended December 31, 2000. The decrease was
due primarily to lower consultant compensation expenses as a result of the
reduction in consultant headcount in this segment. Net cost of services as a
percentage of net revenue for this segment decreased to 61.7% for the year ended
December 31, 2001, as compared to 79.2% for the year ended December 31, 2000.
The decrease was attributable to lower consultant headcount in this segment.

     Outsourcing. Net cost of services in this segment were $21.3 million for
the year ended December 31, 2001, which is consistent with the year ended
December 31, 2000. Net cost of services as a percentage of net revenue for this
segment decreased to 72.6% for the year ended December 31, 2001, as compared to
76.0% for the year ended December 31, 2000. The decrease was attributable to
increased consultant utilization in this segment.



                                       25
<PAGE>
     Selling, general and administrative expenses. Selling, general and
administrative expenses decreased by $32.5 million, or 44.3%, to $40.8 million
for the year ended December 31, 2001, as compared to $73.3 million for the year
ended December 31, 2000. The decrease was primarily attributable to reductions
in: personnel and related costs, marketing, communication, facility and outside
professional fee expenditures, depreciation, goodwill amortization and charges
related to the accounts receivable allowance, litigation and claims, as well as
efficiencies achieved in continuing education programs. Selling, general and
administrative expenses as a percentage of net revenue decreased to 47.1% from
73.8%. The decrease is primarily attributable to increased operating
efficiencies as a result of our cost-cutting measures.

     Restructuring charges. Restructuring charges were $3.1 million for the year
ended December 31, 2001, as compared to $4.2 million for the year ended December
31, 2000. The decrease was primarily due to the majority of the charges
associated with the implementation of the restructuring plan during the year
ended December 31, 2000, being recorded during the third and fourth quarter of
2000. Restructuring charges recorded during the year ended December 31, 2001,
consisted primarily of costs incurred as a result of the acceleration of lease
costs associated with office space we determined was no longer necessary in our
current business model and had been unable to sublet as of December 31, 2001.
The restructuring charges also consisted of the write-off of property and
equipment associated with closed office facilities, the write-off of leasehold
improvements related to closed or sublet office space and severance costs
related to our continued organizational restructuring, partially offset by a
reduction to the accrual for restructuring costs included in accrued liabilities
as of December 31, 2000. Restructuring charges recorded during the year ended
December 31, 2000, consisted primarily of severance costs related to the
reduction in workforce, the write-off of property and equipment and the closing
of various office facilities. Refer to Note 10 ("Restructurings") of our
consolidated financial statements included herein, for further details on the
components of the restructuring charges.

     Other income and expense. Other expense was $3.6 million for the year ended
December 31, 2001, as compared to other income of $6.1 million for the year
ended December 31, 2000. The change was primarily the result of the $4.1 million
loss recognized on the sale of investment securities during the year ended
December 31, 2001, compared to the $5.2 million net gain recognized on the sale
of investment securities during the year ended December 31, 2000. We received
proceeds of $571,000 from the sale of our remaining 81,678 shares of Neoforma,
Inc. common stock in 2001.

LIQUIDITY AND CAPITAL RESOURCES

     In connection with the restructuring plan initiated during 2000, we
recorded restructuring charges of approximately $3.1 million during the year
ended December 31, 2001. These charges primarily related to the accelerated
expense associated with certain lease obligations, the write-off of property and
equipment and leasehold improvements, and severance costs related to our
continued organizational restructuring, partially offset by a reduction to the
2000 accrual for restructuring costs. During the year ended December 31, 2002,
we recorded additional restructuring charges of approximately $3.3 million,
which consisted primarily of costs associated with the termination of a business
alliance, which included the accelerated expense associated with a certain lease
obligation and the write-off of leasehold improvements and capitalized software
development costs. The restructuring charges also included severance costs
related to our continued organizational restructuring and the write-off of
property and equipment, partially offset by a reduction to the 2001 accrual for
restructuring costs. Refer to Note 10 ("Restructurings") of our consolidated
financial statements included herein, for further details on the components of
the restructuring charges. During the year ended December 31, 2002, we had cash
outflows associated with these restructuring charges of approximately $951,000,
of which approximately $840,000 related to the accelerated expense associated
with certain lease obligations, which was accrued for as of December 31, 2001
and approximately $111,000 related to severance costs, which was included in
additional charges recorded during 2002. The current accrued liability for
additional cash outflows, related to severance costs and the accelerated expense
associated with certain lease obligations, is approximately $3.1 million and
will be payable as follows: $1,373,000 during 2003, $798,000 during 2004,
$466,000 during 2005, $239,000 during 2006 and $183,000 during 2007.

     Our primary capital needs have been, and will be, to fund our outsourcing
and solution sales initiatives, as well as our capital expenditures. We believe
after giving effect to the restructuring plan, and assuming appropriate cost
control initiatives and revenue consistent with recent levels, that our current
cash and cash equivalents, cash generated from operations, plus available credit
under our current and/or anticipated credit agreements with our lenders, will be
sufficient to finance our working capital and capital expenditure requirements
for at least the next twelve months. The nature, amount and timing of our
long-term capital needs can be affected by a number of factors. For example, our
strategic plan includes a heightened focus on the development of our outsourcing
business and the winning of large contracts. Implementation of a new outsourcing
contract has and can involve the need for capital investment by us, including
the hiring of new personnel




                                       26
<PAGE>

and the acquisition of a client's IT assets, including hardware and software. An
additional element of our outsourcing business strategy includes offering data
center consolidation to our clients, which has and will continue to require
investment by us in data or processing center facilities. The timing, number and
scale of potential future outsourcing contracts can impact our need for capital
resources. In addition, our future long-term capital needs will be affected by
the nature and timing of our market and service offerings, in addition to
outsourcing, and the degree and timing of success enjoyed by such offerings in
the market. A failure of our offerings to meet success in the market, and our
inability to adjust our operating expenses to an appropriate level commensurate
with operating revenues, can also affect our need for capital resources. For all
of these reasons and those identified in the other risk factors discussed
herein, our ability to project long-term revenue levels and capital needs is
subject to substantial uncertainty.

     If our available funds and cash generated from operations are insufficient
to satisfy our long-term liquidity requirements, and if we do not obtain the
expected credit agreements, or if an event of default occurs under our current
and/or anticipated credit agreements with our lenders and we are required to
repay all outstanding indebtedness under the credit agreements, we may need to
seek additional sources of funding, such as selling additional equity or debt
securities or obtaining additional lines of credit. We could also, in such
event, face the need to delay or reduce the development of services or the
pursuit of contracts that would require significant investment to complete. We
could also face the need to reduce staffing levels and related expenses or
potentially to liquidate or mortgage selected assets.

     If the Company decides that it is in our best interest to raise cash to
strengthen our balance sheet, broaden our investor base, increase liquidity of
our pool of publicly traded stock or for any other reason, we may decide to
issue equity or debt, notwithstanding that our currently available funds are
sufficient to meet our anticipated needs for working capital and capital
expenditures through the next twelve months. We may decide to enter into such a
transaction to raise cash even if all of our current funding sources remain
available to us. If we issue additional securities to raise funds, those
securities may have rights, preferences, or privileges senior to those of our
common stock and our shareholders may experience dilution. We cannot be certain
that additional financing will be available to us on favorable terms when
required, or at all. Our inability to obtain additional financing when needed
could impair our ability to develop products and services for the market; to
enter into or implement new outsourcing contracts; to implement our business
strategies; and may otherwise materially and adversely affect our financial
condition.

     At December 31, 2002, we had cash and cash equivalents of $14.6 million
and working capital of $12.4 million, as compared with cash and cash equivalents
of $16.9 million and working capital of $19.0 million at December 31, 2001.

     As of December 31, 2002, we have a line of credit arrangement at Comerica
Bank N.A. allowing for borrowings of up to $8.0 million, based on qualifying
accounts receivable. Based on the eligibility provisions in the loan agreement,
we could have borrowed $6.1 million on the line of credit as of December 31,
2002; $2.9 million was outstanding. Borrowings under the line mature in April
2003. Borrowings bear interest at the greater of the prime rate or 1% plus the
Federal funds effective rate. The interest rate at December 31, 2002 was 4.25%.
The line is collateralized by accounts receivable and any deposits held by the
bank. We did not meet certain financial operating covenants as of December 31,
2002, and have repaid the outstanding balance. We are currently negotiating a
new line of credit. In addition, we have letters of credit of approximately $1.6
million issued by a bank, secured by bank deposits.

     Our net cash provided by operations increased to $1.2 million for the year
ended December 31, 2002, compared with $1.1 million for the year ended December
31, 2001.

     Net cash of $3.8 million used in investing activities during the year ended
December 31, 2002, consists of additions to property, equipment and software,
which primarily relate to the new full outsourcing contracts.

     Net cash of $331,000 provided by financing activities during the year ended
December 31, 2002, was the result of the exercises of stock options and
principal payments received for stockholders' notes receivables, partially
offset by payments on our capital lease obligations.

     We do not believe that inflation has had a material effect on the results
of our operations.



                                       27
<PAGE>
QUARTERLY RESULTS

    The following table sets forth certain unaudited quarterly operating
information for each of the last eight quarters.

<Table>
<Caption>
                                                                             QUARTER ENDED
                                        MAR. 31,   JUNE 30,   SEPT. 30,  DEC. 31,    MAR. 31,  JUNE 30,    SEPT. 30,  DEC. 31,
                                         2001        2001       2001       2001       2002       2002        2002       2002
                                       --------    --------   --------   --------   --------   --------    --------   --------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>         <C>        <C>        <C>        <C>        <C>         <C>        <C>
Net revenue ........................   $ 21,778    $ 22,115   $ 21,308   $ 21,520   $ 21,257   $ 22,021    $ 20,826   $ 20,004
Net cost of services ...............     15,298      14,221     13,649     13,553     14,190     14,626      14,992     15,323
Selling, general and
  administrative expenses ..........     10,903      10,825      9,615      9,490      8,467      8,396       8,007      7,946
Restructuring charges, net .........       --           169        216      2,727       --         --          --        3,308
Impairment of assets ...............       --          --         --         --         --         --          --          571
Impairment of goodwill .............       --          --         --         --         --         --          --        8,223
                                       --------    --------   --------   --------   --------   --------    --------   --------
Loss from operations ...............     (4,423)     (3,100)    (2,172)    (4,250)    (1,400)    (1,001)     (2,173)   (15,367)
Other income (expense), net ........         (8)        235        129     (3,976)        72         57          50         (3)
                                       --------    --------   --------   --------   --------   --------    --------   --------

Loss before income tax benefit .....     (4,431)     (2,865)    (2,043)    (8,226)    (1,328)      (944)     (2,123)   (15,370)
Income tax benefit .................       --          --         --         --       (2,301)      --          --         --
                                       --------    --------   --------   --------   --------   --------    --------   --------
Net earnings (loss) ...............    $ (4,431)   $ (2,865)  $ (2,043)  $ (8,226)  $    973   $   (944)   $ (2,123)  $(15,370)
                                       ========    ========   ========   ========   ========   ========    ========   ========
Net earnings  (loss) per share
  - basic .........................    $  (0.40)   $  (0.26)  $  (0.19)  $  (0.77)  $   0.09   $  (0.09)   $  (0.20)  $  (1.43)
Net earnings  (loss) per share
  - diluted .......................    $  (0.40)   $  (0.26)  $  (0.19)  $  (0.77)  $   0.08   $  (0.09)   $  (0.20)  $  (1.43)
Shares used in calculating net
  earnings  (loss) per share -
  basic ............................     10,990      10,990     10,977     10,725     10,733     10,748      10,758     10,765
Shares used in calculating net
  earnings (loss) per share -
  diluted ..........................     10,990      10,990     10,977     10,725     11,513     10,748      10,758     10,765
</Table>

     Revenues and operating results fluctuate from quarter to quarter due to
several factors, such as the number and significance of client engagements
commenced and completed during a quarter, delays incurred in connection with
projects, fluctuations in sales of our market offerings, slow adoption rate of
new solutions, and deployment of resources. The timing of revenues varies from
quarter to quarter because our sales cycle can be relatively long and may depend
on factors such as the size and scope of assignments, the general ability of
clients to terminate engagements without penalty, long outsourcing sales cycles
and general economic conditions. In addition, the timing of the establishment of
new Competency Centers, services and market offerings, geographic expansion and
the hiring of key individuals have and can adversely affect margins. Seasonal
factors such as vacation days, total business days in a quarter or the business
practices of clients, such as deferred commitments on new projects until after
the end of the calendar or the client's fiscal year, have and can affect
margins. Because a significant percentage of our expenses are relatively fixed,
a variation in the number or size of client assignments or the timing of the
initiation or the completion of client assignments can cause significant
variations in operating results from quarter to quarter.

     As a result of the factors above, and others, period-to-period comparison
of our revenue and operating results may not be meaningful. You should not rely
on these comparisons as indicators of future performance as no assurances can be
given that quarterly results will not fluctuate, causing a material adverse
effect on our operating results and financial conditions.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to interest rate change market risk in connection with our
credit facilities with our bank. The interest rates on these facilities are tied
to the bank's prime rate, and changes in the variable rate will have an impact
on our interest expense.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements are annexed to this Report as pages F-2 through
F-18. An index to such statements appears on page F-1.

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

     Not applicable.


                                       28
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     We have set forth information regarding executive officers (two of whom are
also directors) in Part I of this report. The following are our additional
directors as of this date:

     John L. Silverman (age 61) has served as our Chairman since March 2003 and
as a Director since October 1997. Mr. Silverman is currently an independent
consultant to the healthcare industry. From 1995 through 1997, he served as
chief executive officer of AsiaCare, Inc., a southeast Asian healthcare
investment company. From 1990 to August 1997, he was the Vice President and
Chief Financial Officer of Chi Systems, Inc., a healthcare consulting company.
Mr. Silverman is currently a director of Integrated Health Services, Inc., MHM
Services, Inc., Tangerine Technologies, Inc. and DocNet.com Inc.

     Ronald V. Aprahamian (age 56) has served as Director since October 2000. He
served as Chairman of the Company from October 2000 to March 2003. Previously,
Mr. Aprahamian founded and served as chairman and chief executive officer of
Compucare, Inc. and The Compucare Company. Mr. Aprahamian has served as chairman
of the Center for Healthcare Information Management, and is a board member and
investor of Sunrise Assisted Living, Inc. Mr. Aprahamian was a director of
Metrocall, Inc. from May, 1995 until September, 2002. He currently serves as a
consulting director at Riggs National Bank of Washington, D.C.

     Richard P. Saslow (age 56) has served as a Director since August 1996. Mr.
Saslow practiced business law and commercial litigation with the firm of Butzel
Long, PC from January 1991 to January 1997. Prior to that period, Mr. Saslow
practiced law with the firm of Butzel, Keidan, Simon, Meyers & Graham from 1974
to 1990. Mr. Saslow joined the Company in January 1997 and has served since that
time as Vice President and General Counsel.

     Douglas S. Peters (age 59) has served as a Director since August 1996. Mr.
Peters previously served as the President and Chief Executive Officer of
Jefferson Health System from its formation in 1995 until 2002. Previous to that,
Mr. Peters served in the same capacity for Main Line Health, Inc. Mr. Peters was
a Senior Vice President with Blue Cross Blue Shield of Illinois and prior to
that was the President of Henry Ford Health System. Mr. Peters has 36 years of
healthcare industry experience. Mr. Peters is also a director of the
Philadelphia Contributionship. Mr. Peters is a Fellow of the American College of
Healthcare Executives ("ACHE").

     Satish K. Tyagi (age 46) has served as a Director since April 2001. Mr.
Tyagi has been a Principal Partner with Delta Capital & Research ("DC&R") since
he founded DC&R in 2000. He is also engaged with Schroder Ventures Life Sciences
as Venture Partner. From 1997 until 2000, Mr. Tyagi was Managing Director,
Institutional Research at SG Cowen Securities Corp. Prior to that he was
Managing Director, Equity Research at Jefferies Group, Inc. Mr. Tyagi has over
18 years of experience in the healthcare industry, including six years in
healthcare management consulting.

     Reginald M. Ballantyne III (age 59) has served as a Director since August
1996. Mr. Ballantyne was initially appointed to the Company's Advisory Council
in 1995. He has held the position of Corporate Officer and Senior Vice
President, Market Strategy and Government Affairs, for Vanguard Health Systems,
Inc. since May 2001. From 1984 to 2001, he served as President of PMH Health
Resources, Inc. ("PMH"), a not-for-profit, multi-unit healthcare organization
whose mission was serving a large indigent and disadvantaged patient population
in the Phoenix, Arizona area. In February 2001, PMH filed a
reorganization/section 363 proceeding in order to implement the sale of the
business and assets of PMH to Vanguard Health Systems, Inc. ("Vanguard"). Prior
to serving as President of PMH, Mr. Ballantyne served as President of Phoenix
Memorial Hospital. Mr. Ballantyne was elected Chairman of the American Hospital
Association ("AHA") in 1997 and served as Speaker of the AHA House of Delegates
in 1998. He is a Fellow of the American College of Healthcare Executives
("ACHE") and a recipient of the ACHE Gold Medal Award for Management Excellence.
Mr. Ballantyne also served as a member of the national Board of Commissioners
for the Joint Commission on Accreditation of Healthcare Organizations and as
Chairman of the AHA Committee of Commissioners.



                                       29
<PAGE>
SECTION 16(a) BENEFICIAL OWNER REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act requires our directors and
executive officers, and any persons who own more than ten percent (10%) of our
Common Stock, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they file.

     To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended December 31, 2002, all such Section 16(a) filing
requirements were complied with, except for a Form 5 which was required to be
filed by Mr. Tyagi by February 14, 2003 and was filed on February 20, 2003, and
Form 4s which were required to be filed on December 13, 2002 and December 15,
2002 by each of Mr. Helppie, Mr. Aprahamian, Mr. Huntzinger and Mr. Sorensen and
were filed on March 20, 2003.

ITEM 11. EXECUTIVE COMPENSATION

GENERAL

     The following table sets forth all compensation awarded or earned during
the last three fiscal years by our Chief Executive Officer, and the three other
executive officers who were serving at the end of our last completed fiscal year
(the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                LONG TERM
                                                              ANNUAL COMPENSATION(1)          COMPENSATION
                                                     ---------------------------------------  -------------
                                                                                              SECURITIES
      NAME AND PRINCIPAL                    FISCAL                              OTHER ANNUAL   UNDERLYING     ALL OTHER
           POSITION                          YEAR     SALARY(4)        BONUS    COMPENSATION   OPTIONS(#)   COMPENSATION(2)
-------------------------------             ------   ---------       --------   ------------   ----------   ---------------
<S>                                         <C>      <C>             <C>        <C>            <C>          <C>
Richard D. Helppie, Jr. ................... 2002     $327,615        $      0     $      0       43,214       $  1,136
  Chief Executive Officer                   2001      337,012               0            0            0          1,178
  of the Company                            2000      329,236               0            0       45,000          1,405

Charles O. Bracken ........................ 2002     $312,746        $      0     $      0       20,000       $  1,110
  Executive Vice President                  2001      320,000               0            0       50,000          1,149
  of the Company                            2000      320,008          20,000            0       50,000          1,376

George S. Huntzinger ...................... 2002     $291,771        $      0     $      0       20,000       $  1,070
  President and Chief Operating             2001      286,000               0            0      200,000          1,106
  Officer of the Company                    2000       58,300(3)            0            0            0            222

Richard R. Sorensen ....................... 2002     $215,008        $      0     $      0       20,000       $    978
   Chief Financial Officer of               2001      219,231               0            0       50,000          1,005
   the Company                              2000      200,000               0            0       20,000          1,203
</TABLE>


(1)  Effective January 4, 1999, we entered into agreements with Messrs. Helppie
     and Bracken which provided them with aggregate potential annual
     compensation of $967,000, comprised of base salary and bonus compensation
     under their 2002 bonus plan that is awarded at the discretion of the Board
     of Directors and is based on various factors set by the Board such as
     achievement of performance criteria. Effective September 15, 2002, we
     entered into an agreement with Mr. Huntzinger which provided him with
     annual compensation of $336,000. Effective January 7, 2001, we entered into
     an agreement with Mr. Sorensen, which provided him with annual compensation
     of $220,000.

(2)  Represents approximate amounts paid by us during fiscal 2002 for (i)
     long-term and short-term disability insurance premiums as follows: Messrs.
     Helppie, Bracken, Huntzinger and Sorensen - $688 each; and (ii) life
     insurance premiums for which we are not the beneficiary as follows: Mr.
     Helppie - $448, Mr. Bracken - $422, Mr. Huntzinger - $382 and Mr. Sorensen
     - $290.

(3)  Represents Mr. Huntzinger's compensation from October 11, 2000, the date on
     which he joined our Company, until December 31, 2000.


(4)  The aggregate compensation opportunity, including both salary and bonus,
     of the Named Executive Officers as a group in 2002 was $1,633,000. However,
     the Named Executive Officers received actual compensation in 2002 of
     approximately $1,147,000 due to our financial performance. The Named
     Executive Officers voluntarily forfeited a portion of their salaries and
     did not receive bonuses in 2002.


                                       30
<PAGE>
EXECUTIVE OPTION GRANTS

     The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in 2002.

OPTION GRANTS IN FISCAL 2002

<TABLE>
<CAPTION>
                                            INDIVIDUAL GRANTS
                           ---------------------------------------------------                          POTENTIAL REALIZABLE
                                           PERCENT                                                         VALUE AT ASSUMED
                            NUMBER OF      OF TOTAL                                                     ANNUAL RATES OF STOCK
                           SECURITIES      OPTIONS      EXERCISE                    STOCK PRICE          PRICE APPRECIATION
                           UNDERLYING     GRANTED TO     PRICE                  COMPOUNDED ANNUALLY      FOR OPTION TERM(1)
                            OPTIONS      EMPLOYEES IN     PER       EXPIRATION  --------------------    ---------------------
       NAME                 GRANTED       FISCAL 2002   SHARE(2)       DATE       5%          10%         5%        10%
----------------------     ----------    ------------   --------    ----------  -------      -------    --------   --------
<S>                         <C>           <C>           <C>         <C>         <C>          <C>         <C>        <C>
Richard D. Helppie, Jr.     18,750          2.7%          $8.500       1/7/12    $13.85      $22.05     $100,313   $254,063
                             8,569          1.2%           6.699      2/27/12     10.91       17.38       36,084     91,525
                            11,431          1.6%           6.090      2/27/12      9.92       15.80       43,781    110,995
                             4,464          0.6%           1.960     11/11/12      3.19        5.08        5,491     13,928

Charles O. Bracken          20,000          2.9%           6.090      2/27/12      9.92       15.80       76,600    194,200

George S. Huntzinger        20,000          2.9%           6.090      2/27/12      9.92       15.80       76,600    194,200

Richard R. Sorensen         20,000          2.9%           6.090      2/27/12      9.92       15.80       76,600    194,200
</TABLE>


----------

(1)  In accordance with SEC rules, these columns show gains that might exist for
     the option over the life of the option, a period of ten years. This
     valuation is hypothetical; if the stock price does not increase above the
     exercise price, compensation to the Named Executive Officers will be zero.

(2)  Of the 43,214 options granted to Mr. Helppie, 18,750 become exercisable on
     a quarterly basis (1,875 options per quarter), beginning on April 1, 2002;
     20,000 become exercisable on February 29, 2004; and of the remaining 4,464
     options, 1,785 became exercisable on December 31, 2002, and 2,679 become
     exercisable on May 20, 2003. The options granted to Messrs. Bracken,
     Huntzinger and Sorensen become exercisable on February 29, 2004.

OPTION EXERCISES AND HOLDINGS

     The following table sets forth information concerning stock options
exercised by the Named Executive Officers during 2002, as well as the value of
unexercised options held by such persons on December 31, 2002. The values for
in-the-money options (which represent the positive spread between the exercise
price of any existing stock options and $2.64 per share, the closing price of
the Common Stock as reported by the NASDAQ National Market on December 31, 2002)
also are included.

                    AGGREGATE OPTION EXERCISES IN FISCAL 2002
                        AND FISCAL YEAR-END OPTION VALUES

<Table>
<Caption>

                                                                      NUMBER OF SECURITIES
                                                                     UNDERLYING UNEXERCISED          VALUE OF UNEXERCISED
                                          SHARES                           OPTIONS AT               IN-THE-MONEY OPTIONS AT
                                         ACQUIRED                       DECEMBER 31, 2002              DECEMBER 31, 2002
                                           UPON         VALUE     ----------------------------    ---------------------------
        NAME                              EXERCISE   REALIZED(1)  EXERCISABLE    UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
----------------------                   ---------  -----------   -----------    -------------    -----------   -------------
<S>                                      <C>        <C>           <C>            <C>              <C>           <C>
Richard D. Helppie, Jr. ............         0       $     0           52,410         35,804        $ 1,214         $ 1,822

Charles O. Bracken .................         0             0          120,000         75,000              0               0

George S. Huntzinger ...............         0             0           10,000        220,000              0               0

Richard R. Sorensen ................         0             0           22,600         88,400              0               0
</Table>

----------

(1)  Calculated as the difference between the fair market value of our Common
     Stock at the time of the option exercise and the exercise price.

COMPENSATION OF DIRECTORS

    Pursuant to the terms of the formula program of the Long-Term Incentive
Plan, each of our directors who is not otherwise employed by the Company
automatically will be granted an option to purchase 5,000 shares of Common Stock
upon the day the director joins the Board and again thereafter on the first day
of the quarter following each anniversary of the day the




                                       31
<PAGE>

director joined the Board during his or her term, for so long as he/she remains
a director. The options will have an exercise price equal to the fair market
value of the Common Stock as of the grant date. Three thousand of the shares
subject to each option will be fully vested on the date of the grant, and the
remaining 2,000 shares subject to the option will become fully vested on the
first anniversary of the date of the grant, provided that the director/grantee
shall have attended all regularly scheduled meetings of the Board and shall have
participated in not less than 80% of all Board conference calls scheduled on
notice of not less than 48 hours. In 2002, the Board granted a discretionary
option to purchase an additional 5,000 shares of Common Stock to each
non-employee director under the terms of the Long-Term Incentive Plan. These
options have an exercise price equal to the fair market value of the Common
Stock as of the grant date. One thousand shares subject to the option were fully
vested on the date of grant, and the remaining 4,000 shares subject to the
option will become fully vested on the first anniversary of the date of the
grant, provided that the director shall have attended all regularly scheduled
meetings of the Board and shall have participated in not less than 80% of all
Board conference calls scheduled on notice of not less than 48 hours. In
addition, each non-employee director receives an annual fee of $10,000 in
compensation for attendance at four regularly scheduled Board meetings, and for
participation in special meetings of the Board and Board conference calls.
Directors are also reimbursed for travel expenses incurred in connection with
attending board and committee meetings.

EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS

     Richard D. Helppie, Jr.'s compensation agreement provided for an annual
salary of up to $337,000 in 2002 and his bonus plan provides for an annual bonus
in 2002 of an amount not more than $150,000. Mr. Helppie's compensation shall be
subject to review of the Compensation Committee of the Board.

     Charles O. Bracken's employment agreement provided for his employment as
Executive Vice President at an annual base salary of up to $320,000 in 2002 and
his bonus plan provides for an annual bonus of up to $160,000. Under the
employment agreement, Mr. Bracken is subject to noncompetition, nonsolicitation
and nondisclosure covenants.

     The employment or compensation agreements with each of Mr. Helppie and Mr.
Bracken provide salary continuation benefits in the event that the executive
officer's employment is terminated by us for any reason other than for cause,
which means gross misconduct, embezzlement or attempted embezzlement of money or
property of ours or a subsidiary or an affiliate, the executive officer's
perpetration or attempted perpetration of fraud on us or a subsidiary or an
affiliate, or the executive officer's participation in a fraud or attempted
fraud on us. Upon termination for any reason other than for cause, the officer
shall receive his base salary for a period of two years in the case of Mr.
Helppie and one year in the case of Mr. Bracken from the date of termination and
his bonus, if any, earned up through and including the date of termination. In
addition, any stock options granted up to the date of termination vest
immediately upon termination, but no new stock options will be granted after the
date of termination.

     The employment or compensation agreements with each of Mr. Helppie and Mr.
Bracken also provide salary continuation benefits in the event that the
executive officer's employment is terminated due to a Change in Control of the
Company. Upon such termination, the executive officer will receive a lump sum
payment in an amount equal to three times the full annual base salary in effect
for the year of termination plus three times the full year's bonus opportunity
in effect for the year of termination. In addition, stock options granted up to
the date of termination vest immediately upon termination; however, no new stock
options will be granted after the date of termination.

     George S. Huntzinger's employment agreement provided for his employment, as
President and Chief Operating Officer at an annual base salary of up to $336,000
in 2002. Under the employment agreement, Mr. Huntzinger is subject to
noncompetition, nonsolicitation and nondisclosure covenants.

     The employment agreement with Mr. Huntzinger provides salary continuation
benefits in the event that his employment is terminated by us for any reason
other than for cause, which means the commission of a felony or a crime
involving moral turpitude or the commission of any other act or omission
involving dishonesty or fraud with respect to us or any of our subsidiaries or
any of our respective customers or suppliers, conduct causing us or any of our
subsidiaries substantial public disgrace or disrepute, substantial and repeated
failure continuing after written notice thereof to perform duties of the office
held by Mr. Huntzinger as reasonably directed by the Chief Executive Officer,
gross negligence or willful misconduct with respect to us or any of our
subsidiaries, or any material breach of the noncompetition, nonsolicitation and
nondisclosure covenants of the employment agreement. Upon termination for any
reason other than for cause, Mr. Huntzinger shall receive his base salary as if
he were employed through December 31, 2003, or for a period of six months from
the date of termination, whichever is less. Mr. Huntzinger's rights under our
other benefit plans and programs shall be determined in




                                       32
<PAGE>

accordance with the terms of such plans and programs as in effect on the date of
termination.

     Richard R. Sorensen's employment agreement provided for an annual base
salary of up to $220,000 in 2002 and a bonus opportunity of up to $110,000 in
2002. Under the employment agreement, Mr. Sorensen is subject to noncompetition,
nonsolicitation and nondisclosure covenants. In the event of Mr. Sorensen's
employment termination due to a Change in Control of the Company, Mr. Sorensen
will receive salary continuation benefits in a lump sump payment in an amount
equal to three times his full annual base salary in effect for the year of
termination.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Ronald V. Aprahamian served as a member of our Compensation Committee in
2002. In October 2000, we issued 200,000 shares of common stock to Mr.
Aprahamian, for which he paid in part by issuing a promissory note to the
Company in the amount of $305,540. Effective July 25, 2002, the promissory note
was amended to reduce the interest rate from 9.5% per annum to a per annum rate
equal to the prime rate plus 1%. The effective interest rate at December 31,
2002 was 5.25%. The note was also amended to extend the payment due date of all
unpaid accrued interest and principal to December 31, 2003. The largest amount
of indebtedness outstanding under such note during fiscal 2002 was approximately
$366,000 as of December 31, 2002. In May 2001, in connection with the purchase
of common stock from a former executive of ours, Mr. Aprahamian assumed an
existing term promissory note payable to the Company bearing interest at 7.71%
per annum with the entire unpaid principal balance due on December 31, 2015. The
largest amount of indebtedness outstanding under such note during fiscal 2002
was approximately $211,000 as of December 29, 2002.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     Responsibilities and Composition of the Committee

     The Compensation Committee of our Board of Directors (the "Committee") is
responsible for (i) establishing compensation programs for our executive
officers, designed to attract, motivate and retain key executives responsible
for our success; (ii) administering and maintaining such programs in a manner
that will benefit our long-term interests and our stockholders; and (iii)
determining the compensation of our Chief Executive Officer. The Committee is
composed of two directors, John L. Silverman and Ronald V. Aprahamian. Both of
these directors have never served as our employees.

     This report describes the philosophy that underlies the cash and
equity-based components of our executive compensation program. It also describes
the details of each element of the program, as well as the rationale for
compensation paid to our Chief Executive Officer and our executive officers in
general.

     Compensation Philosophy and Objectives

     The Committee believes that our executive officer compensation should be
determined according to a competitive framework and based on overall financial
results, individual contributions and teamwork that help build value for our
stockholders. Within this overall philosophy, the Committee bases the
compensation program on the following principles:

     Compensation of Executive Officers Generally

     Our executive compensation program is designed to link executive pay to our
performance and to provide an incentive to executives to manage us with a
principal view of enhancing stockholder value.

     Generally, our executive compensation program makes a significant portion
of each executive's cash compensation contingent upon growth and improvement in
our results of operations, with the potential to earn exceptional rewards for
exceptional performance. More specifically, the program is designed to provide
compensation for meeting and exceeding internal goals and to provide incentives
to increase the market value of our Common Stock. The program is also designed
to attract and retain talented executives who are essential to our long-term
success within a highly competitive industry that demands unique talents, skills
and capabilities.

     Compensation criteria are evaluated annually to ensure they are appropriate
and consistent with the business objectives which are important in meeting our
earnings per share, operating profits and revenue goals and in enhancing
stockholder value. Our executive compensation policies and programs are intended
to: (i) provide rewards contingent upon our and individual performance; (ii)
link executive compensation to sustainable increases in and the preservation of
stockholder value; (iii) promote teamwork among executives and our other
employees; (iv) retain a strong management team; and (v) encourage personal and
professional development and growth.


                                       33
<PAGE>
     Base Salary. The Committee reviews the compensation of each of its
executive officers not less than annually. The Committee's review takes into
consideration both our performance with respect to earnings per share, operating
profits and revenue, and also the duties and performance of each executive. In
making salary recommendations or decisions, the Committee exercises its
discretion and judgment based on the foregoing criteria, without applying a
specific formula to determine the weight of each factor considered. The
Committee also considers equity and fairness when comparing base salaries of
executives.

     Incentive Bonuses. Each of our Named Executive Officers was covered under a
bonus plan in 2002. Named Executive Officers have annual and other periodic
bonus opportunities in amounts up to $160,000. The bonus paid to each Named
Executive Officer, if any, is discretionary up to the dollar levels in their
respective bonus plans and may be based on various factors, such as financial
performance criteria.

     Executive Compensation in 2002. The aggregate compensation opportunity,
including both salary and bonus, of the Named Executive Officers as a group in
2002 was $1,633,000. However, the Named Executive Officers received actual
compensation in 2002 of approximately $1,147,000 due to our financial
performance. The Named Executive Officers voluntarily forfeited a portion of
their salaries and did not receive bonuses in 2002.

     LONG-TERM INCENTIVE COMPENSATION PLAN

     The Committee believes that the granting of stock options and other forms
of equity compensation is an important method of rewarding and motivating
management by aligning management's interests with those of our stockholders on
a long-term basis. In addition, the Committee recognizes that we conduct our
business in an increasingly competitive industry and that, in order for us to
remain highly competitive and at the same time pursue a high-growth strategy, we
must employ the best and most talented executives and managers who possess
demonstrated skills and experience. We believe that stock options and other
forms of equity compensation have given and continue to give us a significant
advantage in attracting and retaining such employees. The Committee believes the
Incentive Plan is an important feature of our executive compensation package.
Under the Incentive Plan, the Committee may grant options and other forms of
equity compensation to executive officers who are expected to contribute
materially to our future success. In determining the size of stock option and
other equity grants, the Committee focuses primarily on our performance and the
perceived role of each executive in accomplishing such performance objectives,
as well as the satisfaction of individual performance objectives. The Committee
also considers the number of options held, if any, by each executive when making
option grants to executive officers. Mr. Helppie received an option grant on
January 7, 2002, in connection with our stock option exchange program. Mr.
Helppie received an option grant on November 11, 2002, in connection with a
special stock program. Also, Mr. Helppie received an option grant on February
28, 2002. The other Named Executive Officers received option grants on February
28, 2002.

     The Committee intends to continue using stock options and other forms of
equity compensation as the primary long-term incentive for our executive
officers, as they generally provide rewards to executives only to the extent our
stock price increases after the options or other equity awards are granted. The
Committee feels that stock options and other equity awards granted under the
Incentive Plan are an appropriate means to provide executives with incentives
that closely align their interests with those of stockholders and thereby
encourage them to promote our ongoing success.

     In February 1999, the Board authorized the creation of the Nonstatutory
Stock Option Plan (the "Nonstatutory Plan") and reserved 1,000,000 shares of
Common stock for issuance under the Nonstatutory Plan. Under the Nonstatutory
Plan, we may grant stock options in connection with our acquisitions and other
special circumstances. The Nonstatutory Plan has substantially the same form,
terms and substance as our Incentive Plan, except that grants issued under the
Nonstatutory Plan will not qualify as "incentive stock options" for tax
purposes, and our directors and executive officers are not eligible to receive
grants under the Nonstatutory Plan.

     POLICY ON DEDUCTIBILITY OF COMPENSATION

     It is the responsibility of the Committee to comply with the provisions of
Section 162(m) of the Internal Revenue Code which, except in the case of
"performance-based compensation" and certain other types of compensation, limit
to $1,000,000 the amount of our federal income tax deduction for compensation
paid to each of the Chief Executive Officer and the other four most highly paid
executive officers. The Committee believes that our current compensation
arrangements, which are




                                       34
<PAGE>
primarily based on performance, are appropriate and in our best interests and
the best interests of our stockholders, without regard to tax considerations.
Thus, if the tax laws or their interpretation change or other circumstances
occur which might make some portion of the executive compensation non-deductible
for federal tax purposes, the Committee would not anticipate making significant
changes in the basic philosophy and practices reflected in our executive
compensation program.

     CHIEF EXECUTIVE OFFICER COMPENSATION

     The Chief Executive Officer's salary, bonus and long-term awards follow the
policies set forth above, and are based on both our performance and the
satisfaction of individual performance objectives. For the 2002 fiscal year, Mr.
Helppie was paid approximately $328,000, and Mr. Helppie received 18,750 options
on January 7, 2002, in connection with our stock option exchange program, 20,000
options on February 28, 2002, in connection with his annual compensation review
and 4,464 options on November 11, 2002, in connection with our new stock option
compensation program. Mr. Helppie did not receive a bonus in 2002.

     The foregoing report has been approved by all of the members of the
Committee.

                                                  THE COMPENSATION COMMITTEE

                                                  John L. Silverman, Chairperson



                                       35
<PAGE>

STOCKHOLDER RETURN PERFORMANCE GRAPH

     Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on our Common Stock against the NASDAQ
Market Index and our selected peer group of providers of consulting and/or
information services (the "Peer Group"). The graph assumes that $100 was
invested on December 31, 1996, in each of the Company's Common Stock, at a price
of $24.75 per share, the NASDAQ Market Index and the Peer Group, and that all
dividends were reinvested.

         Performance Graph For Superior Consultant Holdings Corporation
                       Prepared by Media General Financial
               Services Produced on March 24, 2003 including data
                              to December 31, 2002

                               [PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                            12/31/97    12/31/98     12/31/99     12/31/00    12/31/01   12/31/02
------------------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>           <C>          <C>        <C>         <C>
Superior Consultant Holdings Corporation     100.00      145.00        47.50        9.17       28.00       8.80
------------------------------------------------------------------------------------------------------------------
NASDAQ Market Index                          100.00      141.04       186.38       112.28      140.40      41.89
------------------------------------------------------------------------------------------------------------------
Peer Group Index                             100.00      141.04       248.76       156.35      124.64      86.94
------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:

(1)  The Peer Group return is weighted by market capitalization.

(2)  The Peer Group is comprised of the common stock of the following companies:
     Computer Task Group Inc.; Compuware Corp.; DAOU Systems, Inc.; Electronic
     Data Systems; First Consulting Group, Inc.; Perot Systems Corp.; and
     Sapient Corporation. Scient Inc., which was included in last year's Peer
     Group, has filed bankruptcy. Viant Inc., which was included in last year's
     Peer Group, was acquired by Divine Inc. Scient Inc. and Viant Inc. have
     been replaced in the Peer Group by Electronic Data Systems and Perot
     Systems Corp.*



--------
*  Pursuant to Item 402(a)(9) of Regulation S-K promulgated by the Securities
   and Exchange Commission (the "SEC"), neither the "Compensation Committee
   Report on Executive Compensation" nor the material under the caption
   "Stockholder Return Performance Graph" shall be deemed to be filed with the
   SEC for purposes of the Securities Exchange Act, as amended (the "Exchange
   Act"), nor shall such report or such material be deemed to be incorporated by
   reference in any past or future filing by the Company under the Exchange Act
   or the Securities Act of 1933, as amended (the "Securities Act").


                                       36
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 28, 2003 by: (i) each person known by us
to own beneficially more than five percent (5%) of the outstanding shares of
Common Stock; (ii) each of our directors; (iii) each of the Named Executive
Officers; and (iv) all directors and Named Executive Officers as a group. Each
person named below has an address in care of our principal executive offices.
Except as provided in the footnotes below, we believe that each person named
below has sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by such holder, subject to community property
laws where applicable.


                                                  SHARES BENEFICIALLY OWNED(1)
                                                  ----------------------------
           NAME OF BENEFICIAL OWNER                  NUMBER          PERCENT
           ------------------------                ---------         -------
Richard D. Helppie, Jr.(2)(3)..................    3,571,751            33.0
Laird Norton Financial Group, Inc.(4) .........    1,009,800             9.4
Ronald V. Aprahamian(3)(5).....................      878,148             8.1
Heartland Advisors, Inc.(6) ...................      726,800             6.8
Charles O. Bracken(3)..........................      515,148             4.7
George S. Huntzinger(3)........................      488,319             4.4
Richard P. Saslow(3)...........................      114,221             1.1
Richard R. Sorensen(3).........................       94,249               *
John L. Silverman(3)...........................       69,519               *
Douglas S. Peters(3)...........................       60,071               *
Reginald M. Ballantyne III(3)..................       57,000               *
Satish K. Tyagi(3) ............................       36,637               *
                                                   =========         =======
All Directors, Executive Officers and 5%
stockholders as a group........................    7,621,663            65.6

----------

 *  less than 1%

(1)  Applicable percentage of ownership as of March 28, 2003 is based upon
     10,764,891 shares of Common Stock, which represents all shares
     outstanding, excluding treasury shares, and is determined by assuming the
     exercise of options that are held by such persons (but not those held by
     any other person) which are exercisable within 60 days of the date hereof.
     Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission, and includes voting and investment
     power with respect to the shares shown as beneficially owned.

(2)  3,385,729 shares are held by The Richard D. Helppie, Jr. Trust, of which
     Mr. Helppie is the sole trustee.

(3)  Includes shares issuable upon exercise of options currently exercisable or
     exercisable within 60 days from the date hereof as follows: Mr. Helppie
     58,839 shares; Mr. Aprahamian 34,000 shares; Mr. Bracken 175,000 shares;
     Mr. Huntzinger 210,000 shares; Mr. Saslow 106,200 shares; Mr. Silverman
     54,000 shares; Mr. Peters 57,000 shares; Mr. Ballantyne 57,000 shares; Mr.
     Sorensen 78,800 shares; and Mr. Tyagi 20,000 shares.

(4)  According to the Amendment No. 2 to the Report on SEC's Schedule 13G, as of
     February 14, 2003, Laird Norton Financial Group, Inc. ("LNFG") may be
     deemed to share voting and dispositive power of 1,009,800 shares of our
     common stock. Of the 1,009,800 shares of our common stock, a subsidiary of
     LNFG, Wentworth, Hauser & Voilich ("Wentworth"), may be deemed to share
     voting and dispositive power of 790,000 shares of common stock with certain
     persons to whom Wentworth serves as an investment adviser. The remaining
     219,800 shares of common stock are held by another subsidiary of LNFG,
     Laird Norton Trust Company.

(5)  Includes 3,000 shares held for the benefit of Polly Aprahamian, Mr.
     Aprahamian's mother, over which Mr. Aprahamian exercises voting and
     dispositive power.

(6)  According to the Report on SEC's Schedule 13G, as of February 13, 2003,
     Heartland Advisors, Inc. ("Heartland") may be deemed to have dispositive
     power over 726,800 shares of our common stock by virtue of its investment
     discretion and in some cases voting power over client securities, which may
     be revoked; and William J. Nasgovitz may be deemed to




                                       37
<PAGE>
     have voting power over 726,800 shares of our common stock as a result of
     his position with and stock ownership of Heartland and his position as an
     officer and director of Heartland Group, Inc. which could be deemed to
     confer upon him voting and/or investment power over the shares Heartland
     beneficially owns.


EQUITY COMPENSATION PLAN INFORMATION

      The following table contains information, as of December 31, 2002,
about our Common Stock that may be issued upon the exercise of options, warrants
and rights under all of our existing equity compensation plans.

<TABLE>
<CAPTION>
                          Number of securities
                           to be issued upon                                            Number of securities remaining
                              exercise of          Weighted-average exercise          available for future issuance under
                          outstanding options,    price of outstanding options,       equity compensation plans (excluding
Plan category             warrants and rights         warrants and rights             securities reflected in column (a))
-------------             -------------------     -----------------------------   -----------------------------------------
<S>                            <C>                            <C>                                 <C>
Equity compensation            3,042,395                      $11.42                                957,605
plans approved by
security holders(1)

Equity compensation              284,380                      $14.37                                715,620
plans not approved by
security holders(2)

                               ---------                                                          ---------
   TOTAL                       3,326,775                      $11.66                              1,673,225
                               =========                                                          =========
</TABLE>

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

(1)  Consists of shares obtainable from options outstanding under the
     Company's Long-Term Incentive Plan.

(2)  Consists of shares obtainable from options outstanding under the Company's
     Nonstatutory Stock Option Plan.


NONSTATUTORY STOCK OPTION PLAN

     In February of 1999, the Company adopted the Superior Consultant Holdings
Corporation Nonstatutory Stock Option Plan (the "Option Plan"). The Option Plan
was subsequently amended in November of 2000. Under the Option Plan, a total of
1,000,000 shares of common stock have been made available for issuance of
nonstatutory options. The Option Plan will, unless earlier terminated by the
Board, expire on February 24, 2009.

     Options may be granted to employees (other than officers and directors of
the Company), consultants and independent contractors of the Company. The Option
Plan is administered by the Compensation Committee of our Board. At the time an
option is awarded, the Committee shall specify the date or dates upon which the
option, or portions of the option, becomes exercisable. The stated term of each
option is determined by the Committee at the time an option is granted,
provided, however, that the term of the option shall expire earlier upon a
termination of the optionee's employment with or engagement by the Company. A
participant who ceases to be an employee or other service provider



                                       38
<PAGE>
of the Company for any reason other than death, disability, or termination for
"cause" will generally be permitted to exercise any option, to the extent it was
exercisable on the date of such cessation, but only within three months of such
cessation. A participant who is terminated for "cause," as defined in the Option
Plan, shall immediately lose all rights to exercise any options. In the case of
either death or disability, the option must be exercised within twelve (12)
months after the date of death or onset of disability, and prior to the original
expiration date of the option. Because the Option Plan excludes officers and
directors from participation, it is exempt from the stockholder approval
requirements under the current NASDAQ Stock Market listing requirements. As
such, we did not seek stockholder approval for the Option Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    In April 1995, we loaned Mr. Bracken $500,000, evidenced by a term
promissory note bearing interest at 7.71% per annum. The note provides for equal
annual payments of principal and interest of $50,000, payable on December 31 of
each year beginning December 31, 1995 with the entire unpaid principal balance
due on December 31, 2015. At our option, the entire outstanding indebtedness
under the note may be accelerated in the event that Mr. Bracken's employment
with us is terminated. The largest amount of indebtedness outstanding under such
note during fiscal 2002 was approximately $522,000 as of December 30, 2002.

    In May 2001, in connection with the purchase of common stock from a former
executive of ours, Mr. Aprahamian assumed an existing term promissory note
payable to the Company in the principal amount of $203,907. This note bears
interest at 7.71% per annum and provides for equal annual payments of principal
and interest of $25,000, payable on December 31, of each year, with the entire
unpaid principal balance due on December 31, 2015. All amounts due under this
note will become immediately payable in the event that (a) Mr. Aprahamian
resigns as a director, (b) Mr. Aprahamian elects not to stand for reelection as
a director or (c) there is a Change in Control of the Company, as defined in a
certain Shareholder Agreement entered into by Mr. Aprahamian and the Company.
The largest amount of indebtedness outstanding under such note during fiscal
2002 was approximately $211,000 as of December 29, 2002.

    During 2000, we sold 200,000 shares of our common stock for fair market
value to each of Mr. Aprahamian and Mr. Huntzinger, in exchange for cash and
promissory notes totaling $611,080. The original notes bore interest at 9.5% per
annum and required payment of all accrued interest and principal in October
2002. Effective July 25, 2002, the promissory notes were amended to reduce the
interest rate of the notes to a per annum rate equal to the prime rate plus 1%
and extend the payment due date of all unpaid accrued interest and principal to
December 31, 2003. The effective interest rate at December 31, 2002, was 5.25%.
The largest amount of indebtedness outstanding under Mr. Aprahamian's note
during fiscal 2002 was approximately $366,000 as of December 31, 2002. The
largest amount of indebtedness outstanding under Mr. Huntzinger's note during
fiscal 2002 was approximately $366,000 as of December 31, 2002.

    We lease an office facility from an entity partially owned by two
stockholders. Net rent expense for this lease was approximately $470,000,
$450,000 and $411,000 for the years ended December 31, 2000, 2001 and 2002,
respectively. The rent expense was offset by sublease income of approximately
$69,000, $107,000 and $190,000 for the years ended December 31, 2000, 2001 and
2002, respectively.

    Previously, we chartered aircraft from Clearwater Aviation, Inc., of which
Mr. Helppie was the sole stockholder. Payments under this arrangement with
Clearwater Aviation, Inc. totaled approximately $260,000 in 2000 and $71,000 in
2001. In 2002, we chartered aircraft from RDH II, LLC, of which Mr. Helppie is
the sole member. Payments under this arrangement with RDH II, LLC totaled
approximately $20,000 in 2002. These arrangements were approved by a majority of
all of the independent and disinterested members of the Board of Directors.

    Mr. Saslow, a Director, was a shareholder in the law firm of Butzel Long,
PC, Detroit, Michigan. Butzel Long and Mr. Saslow's prior firm Butzel, Keidan,
Simon, Myers & Graham, have been our outside general counsel since 1985. Mr.
Saslow joined us as a Vice President and General Counsel in January 1997.

    During the years ended December 31, 2000 and 2001, we recognized revenue of
approximately $4,100,000 and $1,587,000, respectively, from entities in which we
had an equity interest. During the year ended December 31, 2002, we did not
recognize any revenue from entities in which we had an equity interest.

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     Within the 90-day period prior to the filing date of this report, our
management, under the supervision of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Rule 13a-14
of the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon their
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in alerting them
timely to material information required to be included in our Exchange Act
filings. There have not been any significant changes in our internal controls
or in other factors that could significantly affect these controls subsequent to
the date of the evaluation.

CHANGES IN INTERNAL CONTROLS

     There were no significant changes in our internal controls or any other
factors that could significantly affect these controls subsequent to the date of
the evaluation referred to above.

                                     PART IV

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

     The financial statements filed as part of this report are listed in the
accompanying Index to Consolidated Financial Statements. The exhibits filed as
part of this report are listed in the accompanying Index to Exhibits. We will
furnish a copy of any exhibit listed to requesting stockholders upon payment of
our reasonable expenses in furnishing those materials. We did not file any
reports on Form 8-K during the last quarter of the period covered by this
report.


                                       39

<PAGE>
ITEM 8.  FINANCIAL STATEMENTS




            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                             PAGE
                                                                                                             ----
<S>                                                                                                          <C>
Report of Independent Certified Public Accountants..........................................................  F-2

Consolidated Balance Sheets as of December 31, 2001 and 2002................................................  F-3

Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002..................  F-4

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 2001 and 2002........  F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002..................  F-6

Notes to Consolidated Financial Statements..................................................................  F-7
</TABLE>




                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





To the Board of Directors
Superior Consultant Holdings Corporation

     We have audited the accompanying consolidated balance sheets of Superior
Consultant Holdings Corporation (a Delaware corporation) and Subsidiaries as of
December 31, 2001 and 2002, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2002. 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 audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Superior Consultant Holdings Corporation and Subsidiaries as of December 31,
2001 and 2002, and the results of their consolidated operations and their
consolidated cash flows for each of the three years in the period ended December
31, 2002, in conformity with accounting principles generally accepted in the
United States of America.

     As discussed in Note 6 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" on January 1, 2002.

/s/ GRANT THORNTON LLP





Southfield, Michigan
February 27, 2003



                                      F-2
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                          December 31,
                                                                                                     ----------------------
                                                               ASSETS                                  2001          2002
                                                                                                     --------      --------
                                                                                                         (In thousands)
<S>                                                                                                   <C>          <C>
Current assets
    Cash and cash equivalents .................................................................     $  16,902      $  14,575
    Accounts receivable, net ..................................................................        14,164         11,959
    Accrued interest receivable and prepaid expenses ..........................................         3,644          3,139
    Refundable income taxes ...................................................................           706            238
                                                                                                    ---------      ---------
                 Total current assets .........................................................        35,416         29,911

Property and equipment, net ...................................................................        14,071         12,737
Real estate held for sale .....................................................................          --              991
Goodwill, net .................................................................................         8,223           --
Other long-term assets, net ...................................................................           897             17
                                                                                                    ---------      ---------
                 Total Assets .................................................................     $  58,607      $  43,656
                                                                                                    =========      =========
                                                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Notes payable to bank .....................................................................     $   2,925      $   2,925
    Current portion of capital lease obligations ..............................................          --              455
    Accounts payable ..........................................................................         8,565          9,135
    Accrued liabilities, deferred bonuses and compensation ....................................         2,752          2,842
    Deferred revenue ..........................................................................         2,141          2,194
                                                                                                    ---------      ---------
                 Total current liabilities ....................................................        16,383         17,551

Capital lease obligations .....................................................................          --              938
Commitments and contingencies (Note 15) .......................................................          --             --
Stockholders' equity
    Preferred stock; authorized, 1,000,000 shares of $.01 par value; no shares issued or
       outstanding as of December 31, 2001 and December 31, 2002 ..............................          --             --
    Common stock; authorized, 30,000,000 shares of $.01 par value; issued and outstanding,
       11,080,042 shares as of December 31, 2001 and 11,116,991 shares as of
       December 31, 2002 ......................................................................           111            111
    Additional paid-in capital ................................................................       116,062        116,154
    Stockholders' notes receivable ............................................................        (1,536)        (1,221)
    Treasury stock - at cost; 352,100 shares as of December 31, 2001 and December 31, 2002 ....        (3,270)        (3,270)
    Accumulated deficit .......................................................................       (69,143)       (86,607)
                                                                                                    ---------      ---------
                 Total stockholders' equity ...................................................        42,224         25,167
                                                                                                    ---------      ---------
                 Total Liabilities and Stockholders' Equity ...................................     $  58,607      $  43,656
                                                                                                    =========      =========
</TABLE>

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






                                      F-3
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                         ---------------------------------------
                                                                           2000           2001           2002
                                                                         ---------      ---------      ---------
                                                                           (In thousands, except per share data)
<S>                                                                      <C>            <C>            <C>
Revenue
    Revenue before reimbursements (net revenue) ........................ $  99,237      $  86,721      $  84,108
    Out-of-pocket reimbursements .......................................    13,618         10,485          8,517
                                                                         ---------      ---------      ---------
         Total revenue .................................................   112,855         97,206         92,625


Operating costs and expenses
    Cost of services before reimbursements (net cost of services) ......    77,674         56,721         59,131
    Out-of-pocket reimbursements .......................................    13,618         10,485          8,517
                                                                         ---------      ---------      ---------
         Total cost of services ........................................    91,292         67,206         67,648

    Selling, general and administrative expenses .......................    73,278         40,833         32,816
    Restructuring charges, net .........................................     4,165          3,112          3,308
    Impairment of assets ...............................................      --             --              571
    Impairment of goodwill .............................................    10,221           --            8,223
                                                                         ---------      ---------      ---------
         Total operating costs and expenses ............................   178,956        111,151        112,566
                                                                         ---------      ---------      ---------
         Loss from operations ..........................................   (66,101)       (13,945)       (19,941)

Other income (expense), net ............................................     6,056         (3,620)           176
                                                                         ---------      ---------      ---------
         Loss before income tax benefit ................................   (60,045)       (17,565)       (19,765)

Income tax benefit .....................................................    (2,492)          --           (2,301)
                                                                         ---------      ---------      ---------
         Net loss ...................................................... $ (57,553)     $ (17,565)     $ (17,464)
                                                                         =========      =========      =========


Net loss per share
    Basic .............................................................. $   (5.48)     $   (1.61)     $   (1.62)
                                                                         =========      =========      =========
    Diluted ............................................................ $   (5.48)     $   (1.61)     $   (1.62)
                                                                         =========      =========      =========
Weighted average number of common shares outstanding
    Basic ..............................................................    10,511         10,920         10,751
                                                                         =========      =========      =========
    Diluted ............................................................    10,511         10,920         10,751
                                                                         =========      =========      =========
</TABLE>



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



                                      F-4
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                     Preferred Stock      Common Stock     Additional  Stockholders'
                                                                   ------------------   ----------------    Paid-In        Notes
                                                                   Shares     Amount    Shares   Amount     Capital     Receivable
                                                                   ------     -------   ------   -------   ----------  -------------
                                                                                            (In thousands)
<S>                                                                <C>       <C>        <C>      <C>        <C>          <C>
Balance at January 1, 2000 ...................................           2     $  --      10,426   $104    $ 114,174     $    (636)
Net loss .....................................................        --          --          --     --         --            --
Net unrealized loss on investment securities .................        --          --          --     --         --            --
                                                                   -------     -----      ------   ----    ---------     ---------

    Total comprehensive loss .................................
Issuance of common stock .....................................        --          --         600      6          917          (917)
Shares issued (cancelled) in connection with acquisition .....          (1)       --          47      1          652          --
Exercise of stock options ....................................        --          --           2     --           32          --
Expense recognized for fair value of stock options and
    warrants granted .........................................        --          --          --     --          228          --
                                                                   -------     -----      ------   ----    ---------     ---------

Balance at December 31, 2000 .................................           1        --      11,075    111      116,003        (1,553)
Net loss .....................................................        --          --          --     --         --            --
Net unrealized gain on investment securities .................        --          --          --     --         --            --
                                                                   -------     -----      ------   ----    ---------     ---------

    Total comprehensive loss .................................
Tax benefit relating to stock options exercised ..............        --          --          --     --            6          --
Exercise of stock options ....................................        --          --           5     --           16          --
Purchase of 267,100 shares of treasury stock .................        --          --          --     --         --            --
Cancellation of shares issued in connection with acquisition .          (1)       --          --     --           (1)         --
Compensation expense recognized for fair value of stock
 options granted .............................................        --          --          --     --           38          --
Payment on stockholders' notes receivable ....................        --          --          --     --         --              17
                                                                   -------     -----      ------   ----    ---------     ---------

Balance at December 31, 2001 .................................        --          --      11,080    111      116,062        (1,536)
Net loss .....................................................        --          --          --     --         --            --
Tax benefit relating to stock options exercised ..............        --          --          --     --           27          --
Exercise of stock options ....................................        --          --          37     --          115          --
Reversal of compensation expense recognized during 2001 for
    fair value of stock options granted ......................        --          --          --     --          (50)         --
Payments on stockholders' notes receivable ...................        --          --          --     --         --             315
                                                                   -------     -----      ------   ----    ---------     ---------
Balance at December 31, 2002 .................................        --       $  --      11,117   $111    $ 116,154     $  (1,221)
                                                                   =======     =====      ======   ====    =========     =========


<Caption>
                                                                                                   Accumulated
                                                                       Treasury     Retained         Other
                                                                         Stock      Earnings     Comprehensive
                                                                        Amount      (Deficit)    Income (Loss)         Total
                                                                       --------     ---------    -------------      ----------
<S>                                                                    <C>         <C>           <C>                <C>
Balance at January 1, 2000 ........................................    $  (2,270)   $  5,975       $  33,588        $ 150,935
Net loss ..........................................................         --       (57,553)           --            (57,553)
Net unrealized loss on investment securities ......................         --           --          (35,961)         (35,961)
                                                                       ---------    --------        --------        ---------
    Total comprehensive loss ......................................                                                   (93,514)
Issuance of common stock ..........................................         --           --             --                  6
Shares issued (cancelled) in connection with acquisition ..........         --           --             --                653
Exercise of stock options .........................................         --           --             --                 32
Expense recognized for fair value of stock options and
    warrants granted ..............................................         --           --             --                228
                                                                       ---------    --------        --------        ---------

Balance at December 31, 2000 ......................................       (2,270)    (51,578)         (2,373)          58,340
Net loss ..........................................................         --       (17,565)           --            (17,565)
Net unrealized gain on investment securities ......................         --           --            2,373            2,373
                                                                       ---------    --------        --------        ---------
    Total comprehensive loss ......................................                                                   (15,192)
Tax benefit relating to stock options exercised ...................         --           --             --                  6
Exercise of stock options .........................................         --           --             --                 16
Purchase of 267,100 shares of treasury stock ......................       (1,000)        --             --             (1,000)
Cancellation of shares issued in connection with acquisition ......         --           --             --                 (1)
Compensation expense recognized for fair value of stock
 options granted ..................................................         --           --             --                 38
Payment on stockholders' notes receivable .........................         --           --             --                 17
                                                                       ---------    --------        --------        ---------

Balance at December 31, 2001 ......................................       (3,270)    (69,143)           --             42,224
Net loss ..........................................................         --       (17,464)           --            (17,464)
Tax benefit relating to stock options exercised ...................         --           --             --                 27
Exercise of stock options .........................................         --           --             --                115
Reversal of compensation expense recognized during 2001 for
    fair value of stock options granted ...........................         --           --             --                (50)
Payments on stockholders' notes receivable ........................         --           --             --                315
                                                                       ---------    --------        --------        ---------
Balance at December 31, 2002 ......................................    $  (3,270)   $(86,607)       $   --          $  25,167
                                                                       =========    ========        ========        =========
</TABLE>




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



                                      F-5
<PAGE>

            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                  Year Ended December 31,
                                                                                           ------------------------------------
                                                                                             2000          2001          2002
                                                                                           --------      --------      --------
                                                                                                         (In thousands)
<S>                                                                                        <C>           <C>           <C>
Cash flows from operating activities:
    Net loss .........................................................................     $(57,553)     $(17,565)     $(17,464)
    Adjustments to reconcile net loss to net
       cash provided by (used in) operating activities:
          Depreciation and amortization of property and equipment ....................        5,290         4,083         4,451
          Goodwill amortization ......................................................        1,203           749          --
          Impairment of goodwill .....................................................       10,221          --           8,223
          Bad debt expense ...........................................................        6,378           395          --
          Gain on sale of property and equipment .....................................          (85)         --            --
          Impairment of assets .......................................................         --            --             571
          Restructuring charge - write-off of property and equipment .................        2,356           527            55
          Restructuring charge - write-off of leasehold improvements .................         --             305           888
          Restructuring charge - write-off of capitalized software development costs .         --            --             586
          Restructuring charge - future lease obligations ............................         --           2,231         1,429
          (Gain) loss on sale of investment securities ...............................       (5,161)        4,081          --
          Interest income on marketable debt security ................................         (239)         --            --
          Options and warrants issued to non-employees ...............................          228            38           (50)
          Warrants from business partner .............................................           29          --            --
          Deferred income taxes (benefits) ...........................................        3,171          --            --
          Changes in operating assets and liabilities:
              Accounts receivable ....................................................       12,876         4,915         2,205
              Accrued interest receivable and prepaid expenses .......................       (1,090)         (128)          505
              Refundable income taxes ................................................         (617)        5,399           495
              Accounts payable .......................................................        1,536        (1,295)         (859)
              Accrued liabilities, deferred bonuses and compensation .................          149        (1,021)           90
              Deferred revenue .......................................................       (2,489)       (1,624)           53
                                                                                           --------      --------      --------
                 Net cash provided by (used in) operating activities .................      (23,797)        1,090         1,178

Cash flows from investing activities:
    Purchase of businesses ...........................................................         (873)         --            --
    Proceeds from sale of investment securities ......................................       27,861           571          --
    Purchase of property and equipment ...............................................       (4,382)       (1,747)       (3,836)
    Proceeds from sale of property and equipment .....................................          277          --            --
    Changes in other long-term assets ................................................         (115)         (670)         --
                                                                                           --------      --------      --------
                 Net cash provided by (used in) investing activities .................       22,768        (1,846)       (3,836)

 Cash flows from financing activities:
    (Repayment of) proceeds from line of credit ......................................        5,125        (2,200)         --
    Payments on capital lease obligations ............................................         --            --             (99)
    Proceeds from issuance of common stock ...........................................            6          --            --
    Principal payments on stockholders' notes receivable .............................         --              17           315
    Exercise of stock options ........................................................           32            16           115
    Stock repurchased ................................................................         --          (1,000)         --
                                                                                           --------      --------      --------
                 Net cash provided by (used in) financing activities .................        5,163        (3,167)          331
                                                                                           --------      --------      --------
Net increase (decrease) in cash and cash equivalents .................................        4,134        (3,923)       (2,327)
Cash and cash equivalents, beginning of period .......................................       16,691        20,825        16,902
                                                                                           --------      --------      --------
Cash and cash equivalents, end of period .............................................     $ 20,825      $ 16,902      $ 14,575
                                                                                           ========      ========      ========

 Supplemental disclosure of cash flow information - cash paid for income taxes .......     $     25      $      6      $     73
                                                    cash paid for interest ...........          247           281           160

 Non-Cash Transactions:
    Shares issued in connection with acquisitions ....................................     $    653      $   --        $   --
    Net unrealized gain (loss) on investments, net of deferred income taxes ..........      (35,961)        2,373          --
    Tax benefit from exercise of stock options .......................................         --               6            27
    Purchase of property and equipment financed by capital lease obligations .........         --            --           1,492
</TABLE>



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


                                      F-6
<PAGE>

            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
Superior Consultant Holdings Corporation and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.

     Business Activities and Reportable Segments

     We are organized into the two business segments of consulting and
outsourcing. The consulting segment provides information technology, as well as
strategic and operations management consulting and solutions, and application
support to a broad cross-section of healthcare industry participants and
information systems vendors. The outsourcing segment helps healthcare providers
simplify their management agendas, improve their return on information systems
investment and strengthen their technology management by taking on
responsibility for managing and operating all or part of the client's
information technology functions.

     Cash and Cash Equivalents

     For purposes of the statement of cash flows, we consider all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. At December 31, 2001 and 2002, we have $1,000,000 and $1,572,000 of
cash restricted for letters of credit, respectively.

     Accounts Receivable

     Virtually all of our accounts receivable are due from companies in the
healthcare industry. Credit is extended based on evaluation of a customer's
financial condition and, generally, collateral is not required. Accounts
receivable are due within 30 days and are stated at amounts due from customers
net of an allowance for doubtful accounts. Accounts outstanding longer than the
contractual payment terms are considered past due. We determine our allowance by
considering a number of factors, including the length of time trade accounts
receivable are past due, our previous loss history, the customer's current
ability to pay its obligation to us, and the condition of the general economy
and the industry as a whole. We write off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are
credited to the allowance for doubtful accounts. We typically do not assess
interest on past due accounts.

     Property and Equipment

     Property and equipment are stated at cost. Expenditures for renewals and
improvements that extend the useful life of property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation is provided over the estimated useful lives of
depreciable assets using the straight-line method.

     Investment Securities

     We follow Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS 115"). Under SFAS
115, debt and marketable equity securities must be classified in one of three
categories: trading, available-for-sale, or held to maturity. A decline in the
market value of an available-for-sale security below cost that is deemed other
than temporary would be charged to earnings and result in the establishment of a
new cost basis for the security. Realized gains and losses are determined on the
specific identification method and reflected in earnings.

     Income Taxes

     We account for income taxes using the asset and liability approach.
Deferred income taxes are provided for the differences between the tax bases of
assets or liabilities and their reported amounts in the financial statements.
This method also requires the recognition of future tax benefits such as net
operating loss carryforwards, to the extent that realization of such benefits is
more likely than not. The tax benefit from the exercise of certain stock options
reduces our accrued income tax liability and increases additional paid-in
capital.


                                      F-7
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from these estimates.

     Fair Value of Financial Instruments

     The carrying value of the cash equivalents approximates their estimated
fair values based upon quoted market prices. The fair value of stockholders'
notes receivables approximates their carrying values based on current rates for
instruments with similar characteristics.

     Revenue Recognition

     We recognize revenue on time and materials engagements as the services are
provided. For outsourcing contracts, fixed-fee projects and pre-packaged
solution sales, we generally recognize revenue ratably over the life of the
contract or based on progress toward project milestones. We recognize revenue
from our Digital Business Transformation(TM) partnerships, managed trust
(digital security) services and support and maintenance agreements ratably over
the life of the contract. Deferred revenue represents collections made in
advance of services being performed. Reimbursements for out-of-pocket expenses
are recorded as revenue.

     Stock-Based Compensation

     Our incentive plan is described more fully in Note 9 "Stock Options and
Warrants." We apply the intrinsic value method under APB Opinion 25, "Accounting
for Stock Issued to Employees" and its related interpretations, for options
granted to employees and Board members. No compensation expense is recognized
because we award options at the fair market value on the date of grant. For
options and warrants to non-employees, we apply Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), and accordingly, recognize expense using a fair market value method.

     The following table illustrates the effect if we had applied the fair value
recognition provisions of SFAS 123 to options and warrants issued to employees
and Board members, using the assumptions described in Note 9. Certain
adjustments have been made to the 2000 and 2001 pro forma amounts previously
reported, primarily to take into account the effect of forfeitures. The
previously reported pro forma net loss for 2000 and 2001 was $67,925 ($6.46 per
share) and $33,114 ($3.03 per share), respectively.


<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                            --------------------------------
                                                                               2000        2001       2002
                                                                            --------    --------    --------
<S>                                                                         <C>         <C>         <C>
     Net loss, as reported..............................................    $(57,553)   $(17,565)   $(17,464)
     Deduct stock-based employee compensation expense
        determined under the fair value-based method for
        awards granted, modified, or settled, net of related
        tax effects.....................................................      (7,535)     (7,483)     (5,260)
                                                                            --------    --------    --------
     Pro forma net loss.................................................    $(65,088)   $(25,048)   $(22,724)
                                                                            ========    ========    ========

     Loss per share:
       Basic and diluted - as reported..................................    $  (5.48)   $  (1.61)   $  (1.62)
       Basic and diluted - pro forma....................................    $  (6.19)   $  (2.29)   $  (2.11)

</TABLE>



                                      F-8
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Comprehensive Income (Loss)

     Comprehensive loss, which is included as a component of stockholders'
equity, includes net unrealized gains and losses on investments in marketable
equity and debt securities. We sold our remaining holdings of marketable equity
securities during the year ended December 31, 2001. The total comprehensive loss
is summarized as follows:

<Table>
<Caption>
                                                                                                Year Ended December 31,
                                                                                           --------------------------------
                                                                                             2000        2001        2002
                                                                                           --------    --------    --------
<S>                                                                                        <C>         <C>         <C>
     Net loss...................................................................           $(57,553)   $(17,565)   $(17,464)

     Other comprehensive income (loss), net of tax:

        Unrealized holding losses on securities arising
           during the period....................................................            (32,890)        (55)       --

        Less:   Reclassification adjustment for realized
                gains (losses) on securities included in net
                loss, net of tax benefit (expense) of $(2,090),
                $1,653 and $0 for the years ended December 31, 2000,
                2001 and 2002, respectively.....................................              3,071      (2,428)       --
                                                                                           --------    --------    --------
     Other comprehensive income (loss), net of tax..............................            (35,961)      2,373        --
                                                                                           --------    --------    --------
     Total comprehensive loss...................................................           $(93,514)   $(15,192)   $(17,464)
                                                                                           ========    ========    =========
</Table>


     New Accounting Pronouncements

     Accounting for Costs Associated with Exit or Disposal Activities. In June
2002, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities." This statement requires entities to recognize
costs associated with exit or disposal activities when liabilities are incurred
rather than when the entity commits to an exit or disposal plan, as currently
required. Examples of costs covered by this guidance include one-time employee
termination benefits, costs to terminate contracts other than capital leases,
costs to consolidate facilities or relocate employees, and certain other exit or
disposal activities. This statement is effective for fiscal years beginning
after December 31, 2002, and will impact any exit or disposal activities we
initiate after that date.

     Stock-Based Employee Compensation. In December 2002, the FASB issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123" ("SFAS 148"), to provide alternative transition methods for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
123 to require prominent disclosures in annual financial statements about the
method of accounting for stock-based employee compensation and the pro forma
effect on reported results of applying the fair value based method for entities
that use the intrinsic value method of accounting. The pro forma effect
disclosures are also required to be prominently disclosed in interim period
financial statements. This statement is effective for financial statements for
fiscal years ending after December 15, 2002 and is effective for financial
reports containing condensed financial statements for interim periods beginning
after December 15, 2002, with earlier application permitted. We do not plan a
change to the fair value based method of accounting for stock-based employee
compensation and have included the disclosure requirements of SFAS 148 in the
accompanying consolidated financial statements.

     Accounting for Guarantees. In November 2002, the FASB issued FASB
Interpretation 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
FIN 45 requires a guarantor entity, at the inception of a guarantee covered by
the measurement provisions of the interpretation, to record a liability for the
fair value of the obligation undertaken in issuing the guarantee. We previously
did not record a liability when guaranteeing obligations unless it became
probable that we would have to perform under the guarantee. FIN 45 applies
prospectively to guarantees we issue or modify subsequent to December 31, 2002,
but has certain disclosure requirements effective for interim and annual periods
ending after December 15, 2002. We have historically issued guarantees only on a
limited basis and do not anticipate FIN 45 will have a material effect on our
2003 consolidated financial statements.


                                      F-9
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Variable Interest Entities. In January 2003, the FASB issued FASB
Interpretation 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN
46 clarifies the application of Accounting Research Bulletin 51, "Consolidated
Financial Statements," for certain entities that do not have sufficient equity
at risk for the entity to finance its activities without additional subordinated
financial support from other parties or in which equity investors do not have
the characteristics of a controlling financial interest ("variable interest
entities"). Variable interest entities within the scope of FIN 46 will be
required to be consolidated by their primary beneficiary. The primary
beneficiary of a variable interest entity is determined to be the party that
absorbs a majority of the entity's expected losses, receives a majority of its
expected returns, or both. FIN 46 applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. We are in the process of determining what
impact, if any, the adoption of the provisions of FIN 46 will have upon our
financial condition or results of operations.

     Revenue Recognition. In November 2002, the Emerging Issues Task Force
("EITF") reached a consensus opinion on EITF Issue No. 00-21, "Revenue
Arrangements with Multiple Deliverables" ("EITF 00-21"). The consensus provides
that revenue arrangements with multiple deliverables should be divided into
separate units of accounting if certain criteria are met. The consideration for
the arrangement should be allocated to the separate units of accounting based on
their relative fair values, with different provisions if the fair value of all
deliverables are not known or if the fair value is contingent on delivery of
specified items or performance conditions. Applicable revenue recognition
criteria should be considered separately for each separate unit of accounting.
EITF 00-21 is effective for revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. Entities may elect to report the change as a
cumulative effect adjustment in accordance with APB Opinion 20, "Accounting
Changes." We have not determined the effect of adoption of EITF 00-21 on our
consolidated financial statements or the method of adoption we will use.

     Reclassifications

     Certain reclassifications were made to the 2000 and 2001 consolidated
financial statements to conform to 2002's presentation.

2.   INVESTMENTS

     Securities classified as available-for-sale under Statement No. 115 as of
December 31, 2000, consisted of our investment in Neoforma, Inc. common stock,
which had a cost basis of $4,652,000, gross unrealized holding losses of
$3,988,000 and a market value of $664,000. As of December 31, 2000, the excess
of cost over market value of $3,988,000, less the deferred tax benefit of
$1,615,000, was charged to the separate component of stockholders' equity called
"accumulated other comprehensive income (loss)."

     During the year ended December 31, 2001, we sold our remaining shares of
Neoforma, Inc. common stock and recorded a $2,373,000 credit to "accumulated
other comprehensive income (loss)."

3.   ALLOWANCE FOR DOUBTFUL ACCOUNTS

     A summary of activity in connection with the allowance for doubtful
accounts follows:


<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                       --------------------------
                                                                        2000       2001      2002
                                                                       ------     ------   ------
<S>                                                                    <C>       <C>       <C>
     Allowance for doubtful accounts at beginning of year...........  $ 1,750    $ 6,375  $ 5,200
     Write-offs.....................................................   (1,753)    (1,570)  (1,212)
     Charged to bad debt expense....................................    6,378        395     --
                                                                      -------    -------  -------
     Allowance for doubtful accounts at end of year.................  $ 6,375    $ 5,200  $ 3,988
                                                                      =======    =======  =======
</TABLE>


                                      F-10
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


4.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

<Table>
<Caption>

                                                            December 31,        Range of
                                                         --------------------    Useful
                                                           2001       2002       Lives
                                                         --------   --------   ---------
<S>                                                      <C>        <C>        <C>
Office furniture and equipment.........................  $  6,020   $  6,024   5-7 Years
Computer equipment.....................................     7,942     10,233   3-5 Years
Computer software......................................     5,439      6,712   3-5 Years
Capital leases.........................................       -        1,492     5 Years
Building...............................................     4,113      2,825    40 Years
Leasehold improvements.................................     2,777      1,616   2-7 Years
                                                           ------    -------
                                                           26,291     28,902

    Less:  accumulated depreciation and amortization...   (12,618)   (16,185)

Land...................................................       398         20
                                                         --------    -------
Property and equipment, net............................  $ 14,071    $12,737
                                                         ========    =======
</Table>

     We lease computer equipment under various agreements that expire in 2005.
The leases have been accounted for as capital leases for financial reporting
purposes, and include interest at rates ranging from 5.4% to 11.7% per annum.
Future minimum lease payments under the leases consist of the following:

                                                         Lease
     Years Ending December 31,                          Payments    Principal
     -----------------------                            --------    ---------
       2003.........................................    $   590      $   455
       2004.........................................        590          509
       2005.........................................        449          429
                                                        -------      -------
       Total minimum lease payments.................      1,629      $ 1,393
                                                                     =======
       Less:  amounts representing interest.........       (236)
                                                        -------
       Present value of net minimum lease payments..    $ 1,393
                                                        =======

     The property and equipment classification includes approximately $1,492,000
of items under capital leases as of December 31, 2002. As of December 31, 2002,
accumulated amortization of approximately $50,000 was recorded on these assets.

5.   REAL ESTATE HELD FOR SALE

     We recognized an impairment loss of approximately $571,000 on real estate
in 2002. During the quarter ended December 31, 2002, we decided to sell
non-essential real estate in order to reduce operating costs and improve
liquidity. We listed the real estate, an office building and undeveloped land
adjacent to the building, with an agent in the fourth quarter of 2002, and
sold the real estate in February 2003. The fair value of the real estate,
approximately $991,000, was based on the ultimate sale price less costs to sell.



                                      F-11
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)

6.   GOODWILL AND GOODWILL IMPAIRMENT

     Effective January 1, 2002, we adopted the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"), issued by the Financial Accounting Standards Board. SFAS 142
addresses how intangible assets that are acquired should be accounted for upon
acquisition. SFAS 142 specifies, among other things, that goodwill is not
subject to amortization. During 2002, in accordance with SFAS 142, we ceased the
amortization of goodwill. The following table shows on a comparative basis what
net loss and net loss per share would have been exclusive of amortization
expense (including any related tax effects):

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                         -------------------------------------
                                                            2000          2001         2002
                                                          --------     --------      --------
<S>                                                       <C>          <C>           <C>
     Reported net loss.................................   $(57,553)    $(17,565)     $(17,464)
     Add:  goodwill amortization.......................      1,203          749           -
                                                          --------     --------      --------
     Adjusted net loss.................................   $(56,350)    $(16,816)     $(17,464)
                                                          ========     ========      ========

     Basic and diluted net loss per share:
        Reported net loss per share....................   $  (5.48)    $  (1.61)     $ (1.62)
        Add:  goodwill amortization....................       0.11         0.07           -
                                                          --------     --------      --------
        Adjusted net loss per share....................   $  (5.37)    $  (1.54)     $ (1.62)
                                                          ========     ========      ========
</TABLE>

     As of January 1, 2002, we have recorded goodwill of approximately $22.8
million and accumulated amortization of approximately $14.6 million. In
addition, as a result of ceasing the amortization of goodwill, we are required
under SFAS 142 to perform an impairment assessment at least annually. During the
fourth quarter ended December 31, 2002, we performed our annual assessment. We
estimated fair value using market capitalization, the expected present value of
future cash flows, and other available information. Based on our findings, we
concluded that goodwill was fully impaired, and recorded approximately $8.2
million of impairment losses.

         The following are changes in the carrying amount of goodwill for the
years ended December 31, 2001 and 2002, respectively.


<TABLE>
<CAPTION>
                                                                      Consulting   Outsourcing
                                                                        Segment      Segment       Total
                                                                      ---------    -----------   --------
<S>                                                                   <C>          <C>           <C>
Balance as of January 1, 2001.....................................    $  6,569     $  2,404      $  8,973
Amortization of goodwill..........................................        (554)        (195)         (749)
Cancellation of shares issued in connection with acquisition......          (1)        --              (1)
                                                                      --------     --------      --------
Balance as of December 31, 2001...................................       6,014        2,209         8,223

Impairment losses.................................................      (6,014)      (2,209)       (8,223)
                                                                      --------     --------      --------
Balance as of December 31, 2002...................................    $   --       $   --        $   --
                                                                      ========     ========      ========
</TABLE>

7.   DEBT

     At December 31, 2001, borrowings under a bank line of credit bear interest
at the greater of the prime rate or 1% plus the Federal funds effective rate.
The interest rate at December 31, 2001 was 4.75%. The line is collateralized by
accounts receivable and any deposits held by the bank. There are no compensating
balance requirements. The loan agreement contains covenants, including financial
ratios concerning liquidity, working capital and operating results. We did not
meet a certain financial operating covenant as of December 31, 2001. Subsequent
to December 31, 2001, the credit agreement was amended to waive the covenant
default as of December 31, 2001 and the term extended. In addition, we have
letters of credit totaling $1,000,000 issued by a bank, secured by bank
deposits.

     At December 31, 2002, we have a line of credit with a bank allowing for
borrowings of up to $8.0 million, based on qualifying accounts receivable. Based
on the eligibility provisions in the loan agreement, we could have borrowed $6.1
million on the line of credit as of December 31, 2002; $2.9 million was
outstanding. Borrowings bear interest at the greater of the prime rate or 1%
plus the Federal funds effective rate. The interest rate at December 31, 2002
was 4.25%. The line is collateralized by accounts receivable and any deposits
held by the bank. There are no compensating balance requirements. The loan
agreement contains covenants, including financial ratios concerning liquidity,
working capital and operating results. We did not meet certain financial
operating covenants as of December 31, 2002, and have repaid the outstanding
balance subsequent to year-end. We are currently negotiating a new line of
credit. In addition, at December 31, 2002, we have letters of credit of
approximately $1.6 million issued by a bank, secured by bank deposits.



                                      F-12
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


8.   ACCRUED LIABILITIES

     Accrued liabilities consist of the following:
                                                             December 31,
                                                         -------------------
                                                          2001          2002
                                                         ------       -------
         Payroll and withholding taxes................   $2,032       $1,858
         Commissions..................................      400          567
         Bonuses......................................      320          379
         Other........................................      -             38
                                                         ------       ------
                    Total accrued liabilities.........   $2,752       $2,842
                                                         ======       ======

9.   STOCK OPTIONS AND WARRANTS

     Pursuant to our Long-Term Incentive Plan ("Incentive Plan"), a maximum of
4,000,000 shares of common stock are reserved for the granting of incentive,
nonstatutory or formula options, restricted stock grants and other equity based
compensation. The options, other than the director formula options, may have
terms not exceeding ten years when granted. The exercise price of each option
equals the market price of our stock on the date of grant. Pursuant to the
Company's Nonstatutory Stock Option Plan (The "Nonstatutory Plan"), a maximum of
1,000,000 shares of common stock are reserved for issuance under the
Nonstatutory Plan. Under the Nonstatutory Plan, we may grant stock options in
connection with our acquisitions and other special circumstances. The
Nonstatutory Plan has substantially the same form, terms and substance as our
Incentive Plan, except that grants issued under the Nonstatutory Plan will not
qualify as "incentive stock options" for tax purposes, and our directors and
executive officers are not eligible to receive grants under the Nonstatutory
Plan. As of December 31, 2002, we have 300,000 stock warrants outstanding,
all of which will expire in 2009.

     For purposes of pro forma disclosures in Note 1 "Summary of Significant
Accounting Policies", the estimated fair value of the stock options are
amortized to expense over the options' vesting period. The fair value of these
stock options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:

                                                     Year Ended December 31,
                                                  ----------------------------
                                                   2000       2001       2002
                                                  ------     ------     ------
     Risk free interest rate..................     5.81%      3.95%      3.16%
     Dividend yield...........................        0%         0%         0%
     Volatility factor........................       .92        .93        .88
     Expected option term life in years.......       5.0        5.0        5.0

     A summary of the status of our options and warrants as of December 31,
2000, 2001 and 2002, and changes during the years then ended, is presented
below:


<TABLE>
<CAPTION>
                                                                       2000                 2001                 2002
                                                                 ----------------   -------------------   ------------------
                                                                         Weighted              Weighted             Weighted
                                                                          Average               Average              Average
                                                                 Shares  Exercise    Shares    Exercise    Shares   Exercise
                                                                 (000)     Price      (000)      Price      (000)     Price
                                                                 -----    -------    -------   --------    ------   --------
<S>                                                              <C>      <C>         <C>      <C>          <C>     <C>
     Outstanding at beginning of year........................     2,311    $32.13      2,924    $24.42       3,380   $ 14.03
     Granted.................................................     1,308    $11.97      1,483    $ 3.32         633   $  6.21
     Exercised...............................................        (2)   $16.00         (5)   $ 3.18         (37)  $  3.10
     Forfeited...............................................      (693)   $24.91     (1,022)   $26.32        (349)  $  5.88
                                                                 ------               ------                ------

     Outstanding at year-end.................................     2,924    $24.42      3,380    $14.03       3,627   $ 13.46
     Exercisable at year-end.................................     1,184    $30.53      1,678    $20.65       2,231   $ 17.59
</TABLE>

     The weighted-average grant date fair value of grants during 2000, 2001 and
2002 were $8.80, $2.43 and $4.35, respectively.


                                      F-13
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


9.   STOCK OPTIONS AND WARRANTS (CONTINUED)

     The following information applies to options and warrants outstanding at
December 31, 2002:

<Table>
<Caption>                                               Number      Weighted-Average      Weighted-Average
Range of Exercise Prices                              Outstanding    Exercise Price        Remaining Life
------------------------                              -----------   ----------------      ----------------
<S>                                                   <C>           <C>                   <C>
$ 1.75 - $10.31.................................        1,885            $ 4.12               8.1 years
$11.75 - $24.75.................................          964            $14.55               5.1 years
$28.00 - $35.75.................................          484            $32.16               2.5 years
$36.00 - $45.13.................................          304            $38.35               5.4 years
                                                        -----
                                                        3,637
                                                        =====
</Table>

10.  RESTRUCTURINGS

     We have experienced a decline in demand for our services as compared to
prior years. Beginning in 2000, we have implemented restructuring plans,
endorsed by our Board of Directors, aimed at improving future overall financial
performance through operating cost reductions and optimization of our workforce.
As a result, we recorded restructuring charges of approximately $4,165,000,
$3,112,000 and $3,308,000 during the years ended December 31, 2000, 2001 and
2002, respectively. The restructuring charges are summarized as follows:


<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                                   -------------------------
                                                                   2000      2001      2002
                                                                  ------    ------    ------
                                                                  <C>       <C>      <C>
Severance costs...........................................        $1,615    $  215   $   350
Write-off of property and equipment.......................         2,356       527        55
Write-off of leasehold improvements.......................           --        305       888
Write-off of capitalized software development costs.......           --        --        586
Closing of various office facilities......................           103       (30)     --
Future lease obligations..................................           --      2,231     1,728
Reduction of accrual related to estimated future
   lease obligations initially recorded during 2001.......           --        --       (299)
Reduction of accrual related to estimated severance
   costs initially recorded during 2000...................           --       (136)     --
Other.....................................................            91       --       --
                                                                  ------    ------   -------
                                                                  $4,165    $3,112   $ 3,308
                                                                  ======    ======   =======
</TABLE>


     A summary of the activity of the restructuring-related liabilities,
included in accounts payable, is as follows:


<TABLE>
<CAPTION>
                                                              Liabilities                                        Liabilities
                                                                as of                                 2001         as of
                                                               January 1,     2001        2001      Change in   December 31,
                                                                 2001       Additions   Payments     Estimate       2001
                                                               ----------  ----------   --------    ----------   -----------
<S>                                                            <C>           <C>         <C>        <C>          <C>
Severance .................................................     $   400     $   215      $  (479)     $  (136)     $  --
Closing of office facilities ..............................          80        --            (50)         (30)        --
Future lease obligations ..................................        --         2,231         --           --          2,231
                                                                -------     -------      -------      -------      -------
    Total .................................................     $   480     $ 2,446      $  (529)     $  (166)     $ 2,231
                                                                =======     =======      =======      =======      =======
</TABLE>


<TABLE>
<CAPTION>
                                                               Liabilities                                       Liabilities
                                                                 as of                                 2002        as of
                                                               January 1,     2002         2002       Change in   December 31,
                                                                  2002      Additions    Payments     Estimate       2002
                                                               ----------   ---------   --------    ---------    ------------
<S>                                                             <C>         <C>         <C>          <C>          <C>
Severance .................................................     $  --       $   350      $  (111)     $  --        $   239
Future lease obligations ..................................       2,231       1,728         (840)        (299)       2,820
                                                                -------     -------      -------      -------      -------
     Total ................................................     $ 2,231     $ 2,078      $  (951)     $  (299)     $ 3,059
                                                                =======     =======      =======      =======      =======
</TABLE>



                                      F-14
<PAGE>
            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


10.  RESTRUCTURINGS (CONTINUED)

     The 2001 and 2002 expense for future lease obligations represents the
present value of our operating lease commitments for facilities no longer being
used by us, but not sublet or sublet at amounts less than our obligation. This
obligation is payable as follows: $1,134,000 during 2003, $798,000 during 2004,
$466,000 during 2005, $239,000 during 2006 and $183,000 during 2007. We
anticipate the remaining severance liabilities will be paid during 2003.

11.  OTHER INCOME

     Other income (expense) consists of the following:


<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                                      ------------------------
                                                                       2000     2001      2002
                                                                      ------    ------   -----
<S>                                                                   <C>      <C>        <C>
Interest income....................................................   $1,665   $   951   $ 325
Net realized gain (loss) on sale of investment securities..........    5,161    (4,081)    -
Interest expense...................................................     (289)     (251)   (149)
Sundry.............................................................     (481)     (239)    -
                                                                      ------   -------   -----
                                                                      $6,056   $(3,620)  $ 176
                                                                      ======   =======   =====
</TABLE>


12.  INCOME TAXES

     The income tax benefit consists of the following:


<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                          -----------------------------
                                                                            2000       2001      2002
                                                                          --------   -------   --------
<S>                                                                       <C>        <C>       <C>
Current federal income tax benefit.................................       $ (5,417)  $    -    $(2,236)
Deferred federal income taxes......................................        (14,649)   (5,805)   (4,259)
Current state income taxes.........................................           (243)      -         (65)
Deferred state income taxes........................................         (2,800)   (1,070)     (842)
Tax benefit from exercise of stock options credited
   directly to additional paid-in capital..........................            -           6        27
Valuation allowance................................................         20,617     6,869     5,074
                                                                          --------   -------   -------
                                                                          $ (2,492)  $   -     $(2,301)
                                                                          ========   =======   =======
</TABLE>


     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31
are as follows:


<TABLE>
<CAPTION>
                                                                                2001          2002
                                                                             ----------     -------
<S>                                                                          <C>            <C>
Deferred tax assets:
    Deferred compensation..............................................      $      379     $   676
    Allowance for bad debts............................................           2,106       1,615
    Deferred revenue...................................................             867         889
    Options or warrants issued to non-employees........................           1,338       1,318
    Impairment of goodwill.............................................           4,140       7,470
    Net operating loss carryforward....................................          19,773      22,035
    Other..............................................................             431         -
                                                                             ----------     -------
       Total deferred tax assets.......................................          29,034      34,003

Deferred tax liabilities:
    Depreciation.......................................................          (1,531)     (1,426)
    Other..............................................................             (17)        (17)
                                                                             ----------     -------
       Total deferred tax liabilities..................................          (1,548)     (1,443)
       Deferred tax asset valuation allowance..........................         (27,486)    (32,560)
                                                                             ----------     -------
       Total net deferred tax asset....................................      $      -       $    -
                                                                             ==========     =======
</TABLE>



                                      F-15
<PAGE>

            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


12.  INCOME TAXES (CONTINUED)

     A reconciliation of the provision for income taxes follows:


<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                             -------------------------------
                                                                                2000       2001       2002
                                                                             --------    -------     -------
<S>                                                                          <C>         <C>         <C>
         Expected benefit at the statutory rate........................      $(20,415)   $(5,972)    $(6,720)
         Permanent differences and other...............................           349        173         252
         State income tax benefit......................................        (3,043)    (1,070)       (907)
         Change in valuation allowance.................................        20,617      6,869       5,074
                                                                             --------    -------     -------
             Total income tax benefit..................................      $ (2,492)   $   -       $(2,301)
                                                                             ========    =======     =======
</TABLE>


     We have net operating loss carryforwards for federal income tax purposes of
approximately $54,407,000, the last of which will expire in 2022 if not
utilized.

13.   PROFIT-SHARING

     We have a profit-sharing plan which qualifies under Section 401(a) of the
Internal Revenue Code. Eligible employees may contribute up to the maximum
allowable under tax regulations. Company contributions are fully discretionary.
There were no contributions made during the years ended December 31, 2000, 2001
and 2002.

14.  NET LOSS PER SHARE

     Loss per share data was computed as follows:


<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                        --------------------------------
                                                                          2000        2001        2002
                                                                        ----------  ---------   ---------
<S>                                                                      <C>         <C>        <C>
         Basic:
             Net loss..................................................  $ (57,553)  $(17,565)  $(17,464)
             Weighted-average common shares outstanding................     10,511     10,920     10,751
                                                                         --------    --------   --------
             Basic loss per share......................................  $  (5.48)   $  (1.61)  $  (1.62)
                                                                         ========    ========   ========
         Diluted:
             Net loss..................................................  $ (57,553)  $(17,565)  $(17,464)
             Weighted-average common shares outstanding................     10,511     10,920     10,751
             Dilutive effect of stock options..........................        -          -          -
                                                                         --------    --------   --------
             Weighted-average shares assuming dilution.................     10,511     10,920     10,751
                                                                         --------    --------   --------
             Diluted loss per share....................................  $  (5.48)   $  (1.61)  $  (1.62)
                                                                         =========   ========   ========
</TABLE>


     Options and warrants to purchase approximately 2,924,000, 3,380,000 and
3,637,000 shares of common stock with a weighted average exercise price of
$24.42, $14.03 and $13.48 were outstanding at December 31, 2000, 2001 and 2002,
respectively, but were excluded from the computation of diluted net loss per
share because to do so would have been antidilutive for the periods presented.




                                      F-16
<PAGE>

            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


15.  COMMITMENTS AND CONTINGENCIES

     We lease office facilities, certain equipment and vehicles under lease
agreements classified as operating leases. Future minimum lease payments under
such noncancelable operating leases as of December 31, 2002 are summarized as
follows:


<TABLE>
<CAPTION>
                                                           Related       All      Sublease
      Years ending December 31:                             Party       Other       Income       Total
      -------------------------                            -------     -------    ---------     -------
<S>                                                        <C>         <C>         <C>          <C>
         2003 ........................................     $   567     $ 4,106     $(1,290)     $ 3,383
         2004 ........................................         567       2,931        (823)       2,675
         2005 ........................................         567       2,624        (823)       2,368
         2006 ........................................         237       1,264        (142)       1,359
         2007 ........................................        --           743        --            743
         Thereafter ..................................        --           598        --            598
                                                           -------     -------     -------      -------

         Total future minimum lease payments .........     $ 1,938     $12,266     $(3,078)     $11,126
                                                           =======     =======     =======      =======
</TABLE>


     Net rent expense amounted to approximately $5,032,000, $3,819,000 and
$2,655,000 for the years ended December 31, 2000, 2001 and 2002, respectively,
and has been included in selling, general and administrative expenses in the
accompanying consolidated statements of operations. The rent expense was offset
by sublease income of approximately $444,000, $1,031,000 and $1,252,000 for the
years ended December 31, 2000, 2001 and 2002, respectively.

     Effective July 1, 2001, we are required to pay a business partner a royalty
of approximately 3.4% of a certain portion of our systems integration revenue.
The royalty, up to a cumulative maximum amount of $5.7 million, will be payable
in the years the related revenue is recognized. Royalty expense was $27,000 and
$26,000 for the years ended December 31, 2001 and 2002, respectively.

     We are involved in various legal proceedings, including business and
employment matters of a nature considered normal to our operations. We accrue
for amounts related to these legal matters if it is probable that a liability
has been incurred and an amount is reasonably estimable. In our opinion,
although the outcome of any legal proceeding cannot be predicted with certainty,
our ultimate liability in connection with our current legal proceedings will not
have a material adverse effect on our financial position or results of
operations.

16.  RELATED PARTY TRANSACTIONS

     We lease an office facility from an entity partially owned by two
stockholders. Net rent expense for this lease was approximately $470,000,
$450,000 and $411,000 for the years ended December 31, 2000, 2001 and 2002,
respectively. The rent expense was offset by sublease income of approximately
$69,000, $107,000, and $190,000 for the years ended December 31, 2000, 2001 and
2002, respectively.

     During 2000, we sold 600,000 shares of our common stock for fair market
value to three newly hired executives, in exchange for cash and promissory notes
totaling $916,620. The original notes bore interest at 9.5% per annum and
required payment of all accrued interest and principal in October 2002. During
the year ended December 31, 2002, one of the original promissory notes was
repaid, including all accrued interest. Effective July 25, 2002, two of the
promissory notes were amended to reduce the interest rate of the notes to a per
annum rate equal to the prime rate plus 1% and extend the payment due date of
all unpaid accrued interest and principal to December 31, 2003. The effective
interest rate at December 31, 2002 was 5.25%. During 1995, we issued 658,833
shares of our common stock to two stockholders in exchange for promissory notes
totaling $750,000, and the cancellation of outstanding stock options. The notes
bear interest at 7.71% per annum and require periodic cash payments. Interest
income on all notes totaled approximately $70,000, $104,000 and $117,000 for the
years ended December 31, 2000, 2001 and 2002, respectively.

     We charter aircraft from an entity owned by an officer/stockholder.
Payments to the entity were approximately $260,000, $71,000 and $20,000 for the
years ended December 31, 2000, 2001 and 2002, respectively.

     During the years ended December 31, 2000 and 2001, we recognized revenue of
approximately $4,100,000 and $1,587,000, respectively, from entities in which we
had an equity interest. During the year ended December 31, 2002, we did not
recognize any revenue from entities in which we had an equity interest.

     During the year ended December 31, 2000, we incurred additional operating
costs in connection with the execution of the alliance agreement we entered into
in May 1999 with a business partner. A portion of these costs was funded by our
business partner, and was recorded as a reduction to expense. The reduction in
cost of services and selling, general and administrative expenses for the year
ended December 31, 2000 was $748,000 and $1,702,000, respectively.


                                      F-17
<PAGE>

            SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
              (TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT SHARE DATA)


17.  SEGMENT FINANCIAL INFORMATION

     See Note 1 "Summary of Significant Accounting Policies" for a description
of our segments. Our reportable segments are business units that offer and
provide different services through different means. Our training, information
technology, accounting and finance, facilities, sales and marketing, legal,
senior management and other selling, general and administrative ("SG&A")
functions are combined into the unallocated SG&A expenses. Unallocated assets
consist principally of cash, accrued interest receivable and prepaid expenses.

     We evaluate segment performance and allocate resources based on gross
profit. Intrasegment services are provided at cost. The accounting policies of
the reportable segments are the same as those described in the summary of
significant accounting policies in Note 1.

     The following is a summary of certain financial information by segment for
the years ended December 31, 2000, 2001 and 2002 (segment information for 2000
has been restated to conform to the 2001 and 2002 segments):


<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                     ---------------------------------------
                                                                       2000           2001           2002
                                                                     ---------      ---------      ---------
<S>                                                                  <C>            <C>            <C>
Revenue:
    Consulting:
       Revenue before reimbursements (net revenue) .............     $  71,242      $  57,463      $  53,634
       Out-of-pocket reimbursements ............................        11,588          8,827          7,997
                                                                     ---------      ---------      ---------
          Total consulting revenue .............................        82,830         66,290         61,631

    Outsourcing:
       Revenue before reimbursements (net revenue) .............        27,995         29,258         30,474
       Out-of-pocket reimbursements ............................         2,030          1,658            520
                                                                     ---------      ---------      ---------
          Total outsourcing revenue ............................        30,025         30,916         30,994
                                                                     ---------      ---------      ---------
             Consolidated revenue ..............................     $ 112,855      $  97,206      $  92,625
                                                                     =========      =========      =========
Gross Profit and Statement of Operations Reconciliation:
          Consulting ...........................................     $  14,843      $  21,993      $  20,500
          Outsourcing ..........................................         6,720          8,007          4,477
                                                                     ---------      ---------      ---------
             Consolidated gross profit .........................        21,563         30,000         24,977

Impairment of goodwill:
          Consulting ...........................................        10,221           --            6,014
          Outsourcing ..........................................          --             --            2,209
                                                                     ---------      ---------      ---------
             Consolidated impairment of goodwill ...............        10,221           --            8,223

Unallocated:
          Selling, general and administrative expenses .........        73,278         40,833         32,816
          Restructuring charges, net ...........................         4,165          3,112          3,308
          Impairment of assets .................................          --             --              571
          Other (income) expense, net ..........................        (6,056)         3,620           (176)
                                                                     ---------      ---------      ---------
             Subtotal ..........................................        71,387         47,565         36,519
                                                                     ---------      ---------      ---------
             Consolidated loss before income tax benefit .......     $ (60,045)     $ (17,565)     $ (19,765)
                                                                     =========      =========      =========
Depreciation and amortization:
          Consulting ...........................................     $   6,216      $   4,637      $   4,131
          Outsourcing ..........................................           277            195            320
                                                                     ---------      ---------      ---------
             Consolidated depreciation and amortization ........     $   6,493      $   4,832      $   4,451
                                                                     =========      =========      =========
Identifiable assets:
          Consulting ...........................................     $  37,788      $  31,082      $  17,477
          Outsourcing ..........................................         7,898          6,982          6,783
          Unallocated ..........................................        32,946         20,543         19,396
                                                                     ---------      ---------      ---------
             Consolidated total assets .........................     $  78,632      $  58,607      $  43,656
                                                                     =========      =========      =========
Expenditures for long-term assets:
          Consulting ...........................................     $   4,463      $   1,747      $   1,440
          Outsourcing ..........................................           792           --            3,888
                                                                     ---------      ---------      ---------
             Consolidated expenditures for long-term assets ....     $   5,255      $   1,747      $   5,328
                                                                     =========      =========      =========
</TABLE>



                                      F-18
<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.

                                      SUPERIOR CONSULTANT HOLDINGS CORPORATION

March 31, 2003                        By: /s/ RICHARD D. HELPPIE, JR.
                                         ---------------------------------------
                                         Richard D. Helppie, Jr.
                                         Chief Executive Officer

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.



            SIGNATURES                     TITLE                       DATE
            ----------                     -----                       ----

                                       Director                   March 31, 2003
----------------------------------
Ronald V. Aprahamian

/s/ REGINALD M. BALLANTYNE III         Director                   March 31, 2003
----------------------------------
Reginald M. Ballantyne III

/s/ CHARLES O. BRACKEN                 Executive Vice President   March 31, 2003
----------------------------------     and Director
Charles O. Bracken


/s/ RICHARD D. HELPPIE, JR.            Chief Executive Officer    March 31, 2003
---------------------------------      (Principal Executive
Richard D. Helppie, Jr.                Officer) and
                                       Director

/s/ DOUGLAS S. PETERS                  Director                   March 31, 2003
---------------------------------
Douglas S. Peters

/s/ RICHARD P. SASLOW                  Vice President,            March 31, 2003
---------------------------------      General Counsel
Richard P. Saslow                      and Director


/s/ JOHN L. SILVERMAN                  Chairman                   March 31, 2003
---------------------------------
John L. Silverman

/s/ RICHARD R. SORENSEN                Chief Financial            March 31, 2003
---------------------------------      Officer (Principal
Richard R. Sorensen                    Financial and
                                       Accounting Officer)


/s/ SATISH K. TYAGI                    Director                   March 31, 2003
---------------------------------
Satish K. Tyagi


<PAGE>
                                 CERTIFICATIONS

                 CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14
         OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Richard D. Helppie, Jr., Chief Executive Officer of Superior Consultant
Holdings Corporation, certify that:

     1) I have reviewed this annual report on Form 10-K of Superior Consultant
Holdings Corporation;

     2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

     5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

         a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

     6) The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


                                          /s/ RICHARD D. HELPPIE, JR.
March 31, 2003                            --------------------------------------
                                          Richard D. Helppie, Jr.
                                          Chief Executive Officer


<PAGE>
                 CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14
         OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Richard R. Sorensen, Chief Financial Officer of Superior Consultant Holdings
Corporation, certify that:

     1) I have reviewed this annual report on Form 10-K of Superior Consultant
Holdings Corporation;

     2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

     5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

         a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

     6) The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


March 31, 2003                            /s/ RICHARD R. SORENSEN
                                          --------------------------------------
                                          Richard R. Sorensen
                                          Chief Financial Officer




<PAGE>
                                INDEX TO EXHIBITS

<Table>
<Caption>
 EXHIBIT
 NUMBER                                   DESCRIPTION                                                                          PAGE
 ------                                   -----------                                                                          ----
<S>       <C>                                                                                                                  <C>
   3.1    Amended and Restated Certificate of Incorporation of the Company, as amended                                          (5)

   3.2    Form of By-Laws of the Company                                                                                        (2)

   4.1    Specimen Common Stock Certificate                                                                                     (2)

  10.1    Form of Indemnification Agreement between the Company and each of its directors and officers                          (2)

  10.2    Form of Long-Term Incentive Compensation Plan                                                                         (2)

  10.3    Amendment to Long-Term Incentive Plan                                                                                 (3)

  10.4    Second Amendment to Long-Term Incentive Plan                                                                          (6)

  10.5    Lease dated March 21, 1996 between PMTC Limited Partnership and Superior                                              (2)

  10.6    Compensation Agreement dated January 5, 1998, as amended, between Richard D. Helppie, Jr. and the Company             (5)

  10.7    Amendment effective January 4, 1999, to Compensation Agreement dated January 5, 1998, between Richard D.
          Helppie, Jr. and the Company                                                                                          (9)

  10.8    Employment Agreement dated January 5, 1998, as amended, between Charles O. Bracken and the Company                    (5)

  10.9    Amendment effective January 4, 1999, to Employment Agreement dated January 5, 1998, between Charles O.
          Bracken and the Company                                                                                               (9)

  10.10   Employment Agreement dated January 20, 1997, as amended, between Richard P. Saslow and the Company                    (5)

  10.11   Amendment effective January 4, 1999, to Employment Agreement dated January 20, 1997, between Richard P.
          Saslow and the Company                                                                                                (9)

  10.12   Amendment effective January 7, 2001, to Employment Agreement dated January 20, 1997, between Richard P.
          Saslow and the Company                                                                                                (9)

  10.13   Employment Agreement dated October 11, 2000, as amended, between George S. Huntzinger and the Company                 (8)

  10.14   Amendment effective June 29, 2001, to Employment Agreement dated October 11, 2000, between George S.
          Huntzinger and the Company                                                                                            (9)

  10.15   Amendment effective September 15, 2002, to Employment Agreement dated October 11, 2000, between George S.
          Huntzinger and the Company                                                                                             *

  10.16   Employment Agreement dated August 10, 1998, as amended January 7, 2001, between Richard R. Sorensen
          and the Company                                                                                                       (8)

  10.17   Promissory Note dated April 20, 1995, executed by Charles O. Bracken in favor of the Company                          (1)

  10.18   Pledge Agreement dated April 20, 1995, between Charles O. Bracken and the Company                                     (1)

  10.19   Stock Purchase Agreement dated October 11, 2000, between Ronald V. Aprahamian and the Company                         (7)

  10.20   Promissory Note dated October 11, 2000, executed by Ronald V. Aprahamian in favor of the Company                      (7)

  10.21   Amendment effective July 25, 2002, to Promissory Note dated October 11, 2000, executed by Ronald V.
          Aprahamian in favor of the Company                                                                                   (10)

  10.22   Pledge Agreement dated October 11, 2000, between Ronald V. Aprahamian and the Company                                 (7)

  10.23   Amendment effective July 25, 2002, to Pledge Agreement dated October 11, 2000, between Ronald V.
           Aprahamian and the Company                                                                                          (10)

  10.24   Stock Purchase Agreement dated October 11, 2000, between George S. Huntzinger and the Company                         (7)

  10.25   Promissory Note dated October 11, 2000, executed by George S. Huntzinger in favor of the Company                      (7)

  10.26   Amendment effective July 25, 2002, to Promissory Note dated October 11, 2000, executed by George S.
          Huntzinger in favor of the Company                                                                                   (10)

  10.27   Pledge Agreement dated October 11, 2000, between George S. Huntzinger and the Company                                 (7)

  10.28   Amendment effective July 25, 2002, to Pledge Agreement dated October 11, 2000, between George S.
          Huntzinger and the Company                                                                                           (10)

  10.29   Shareholder Agreement, dated May 4, 2001, by and between Ronald V. Aprahamian and the Company                         (9)

  10.30   Amended and Restated Promissory Note dated May 4, 2001, executed by Ronald V. Aprahamian in favor
          of the Company                                                                                                        (9)

  10.31   Asset Purchase Agreement, dated August 20, 1998 among the Company, Enterprise Consulting Group, Inc.,
          Whittaker Corporation and Aviant Information, Inc.                                                                    (4)

  10.32   Amended and Restated Credit Agreement, dated September 12, 2000, between the Company and Comerica Bank                (8)

  10.33   First Amendment to Amended and Restated Credit Agreement, dated October 26, 2000, between the Company
          and Comerica Bank                                                                                                     (8)

</TABLE>


<PAGE>
<TABLE>
<S>       <C>                                                                                                                   <C>

  10.34   Second Amendment to Amended and Restated Credit Agreement, dated March 23, 2001, between the Company and
          Comerica Bank                                                                                                         (8)

  10.35   Third Amendment to Amended and Restated Credit Agreement, dated August 23, 2001, between the Company and
          Comerica Bank                                                                                                         (9)

  10.36   Fourth Amendment to Amended and Restated Credit Agreement, dated March 29, 2002, between the Company and
          Comerica Bank                                                                                                         (9)

  10.37   Fifth Amendment to Amended and Restated Credit Agreement, dated September 30, 2002, between the Company
          and Comerica Bank                                                                                                      *

  21.1    Subsidiaries of Superior Consultant Holdings Corporation                                                              (5)

</TABLE>


*     Filed herewith.

(1) Incorporated by reference from the Registrant's Amendment No. 1 to Form S-1
    Registration Statement No. 333-10213 as filed on September 20, 1996.

(2) Incorporated by reference from the Registrant's Form S-1 Registration
    Statement No. 333-10213 as filed on August 15, 1996.

(3) Incorporated by reference from the Registrant's Information Statement on
    Form 14C as filed on November 7, 1997.

(4) Incorporated by reference from the Registrant's Form 8-K as filed on
    September 2, 1998.

(5) Incorporated by reference from the Registrant's Form 10-K as filed on
     March 31, 1999.

(6) Incorporated by reference from the Registrant's Information Statement on
    Form 14A as filed April 9, 1999.

(7) Incorporated by reference from the Schedule 13D filed with respect to the
    Company's securities on November 13, 2000.

(8) Incorporated by reference from the Registrant's Form 10-K as filed on
     April 2, 2001.

(9) Incorporated by reference from the Registrant's Form 10-K as filed on
     April 1, 2002.

(10) Incorporated by reference from the Registrant's Form 10-Q as filed on
     November 14, 2002