Exhibit 99.4

Annual CEO Certification to the New York Stock Exchange

(Section 303A.12(a))

As the Chief Executive Office of Systemax Inc., and required by
Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, I
hereby certify that as of the date hereof I am not aware of any violation by the
Company of the NYSE's Corporate Governance listing standards, other than has
been notified to the Exchange pursuant to Section 303A.12(b) and disclosed as an
attachment hereto.

/s/ RICHARD LEEDS

Richard Leeds

Chief Executive Officer

Date: March 26, 2004

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of
SYSTEMAX INC.:

We have audited the accompanying consolidated balance sheets of
Systemax Inc. and its subsidiaries, (the "Company"), as of December 31, 2003 and
2002, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 2003 and 2002, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

As discussed in Note 1 to the consolidated financial statements,
the Company changed its method for accounting for goodwill and other intangible
assets in 2002 to conform to Financial Accounting Standards Board Statement No.
142 ("Goodwill and Other Intangible Assets").

/s/ DELOITTE & TOUCHE LLP
New York, New York
March 12, 2004

SYSTEMAX INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(IN THOUSANDS, except for share data)

`2003             2002
                                                                                           ----             ----
ASSETS:
   CURRENT ASSETS:
      Cash and cash equivalents                                                         $38,702          $62,995
      Accounts receivable, net of allowances of $10,000 (2003) and $11,275 (2002)       152,435          148,554
      Inventories                                                                       133,905           98,401
      Prepaid expenses and other current assets                                          26,849           31,343
      Deferred income tax assets                                                         10,132            9,073
                                                                                        -------          -------
           Total current assets                                                         362,023          350,366

   PROPERTY, PLANT AND EQUIPMENT, net                                                    68,647           71,133
   DEFERRED INCOME TAX ASSETS                                                            14,606           15,100
   OTHER ASSETS                                                                             376            1,305
                                                                                        -------          -------

           TOTAL                                                                       $445,652         $437,904
                                                                                       ========         ========

LIABILITIES AND SHAREHOLDERS' EQUITY:
   CURRENT LIABILITIES:
      Short-term borrowings, including current portions of long-term debt               $20,814          $21,211
      Accounts payable                                                                  141,106          131,510
      Accrued expenses and other current liabilities                                     51,037           64,349
                                                                                        -------          -------
           Total current liabilities                                                    212,957          217,070
                                                                                        -------          -------

   LONG-TERM DEBT                                                                        18,353           17,519
   OTHER LIABILITIES                                                                      1,768            1,398

   COMMITMENTS AND CONTINGENCIES

   SHAREHOLDERS' EQUITY:
   Preferred stock, par value $.01 per share, authorized 25 million shares,
      issued none
   Common stock, par value $.01 per share, authorized 150 million shares, issued
      38,231,990 shares; outstanding 34,288,068 (2003) and 34,104,290 (2002)
      shares                                                                                382              382
   Additional paid-in capital                                                           175,343          176,743
   Accumulated other comprehensive income (loss), net of tax                              2,157          (2,130)
   Retained earnings                                                                     81,022           75,411
                                                                                        -------          -------
                                                                                        258,904          250,406
   Less: common stock in treasury at cost - 3,943,922 (2003) and 4,127,700
      (2002) shares                                                                      46,330           48,489
                                                                                        -------          -------
                        Total shareholders' equity                                      212,574          201,917
                                                                                        -------          -------

           TOTAL                                                                       $445,652         $437,904
                                                                                       ========         ========

See notes to consolidated financial statements.`

SYSTEMAX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)

`2003             2002              2001
                                                                               ----             ----              ----
Net sales                                                                $1,657,778       $1,551,517        $1,546,975
Cost of sales                                                             1,389,509        1,285,929         1,270,051
                                                                     ---------------  ---------------  ---------------
Gross profit                                                                268,269          265,588           276,924
Selling, general and administrative expenses                                251,460          256,075           271,636
Restructuring and other charges                                               1,726           17,294             2,758
Goodwill impairment                                                           2,560
                                                                     ---------------  ---------------  ---------------
Income (loss) from operations                                                12,523           (7,781)            2,530
Interest and other income, net                                                 (755)            (427)             (276)
Interest expense                                                              2,344            1,653             1,764
                                                                     ---------------  ---------------  ----------------
Income (loss) before income taxes                                            10,934           (9,007)            1,042
Provision (benefit) for income taxes                                          5,323           (1,039)              389
                                                                     ---------------  ---------------  ----------------
Income (loss) before cumulative effect of change in accounting                5,611           (7,968)              653
  principle, net of tax
Cumulative effect of change in accounting principle, net of tax                              (50,971)
                                                                     ---------------  ---------------  ----------------
Net income (loss)                                                            $5,611         $(58,939)             $653
                                                                     ===============  ===============  ================

Net income (loss) per common share, basic and diluted:
Income (loss) before cumulative effect of change in accounting
  principle, net of tax                                                        $.16           $(.23)              $.02
Cumulative effect of change in accounting principle, net of tax                               (1.50)
                                                                     ---------------  ---------------  ----------------
Net income (loss)                                                              $.16          $(1.73)              $.02
                                                                     ===============  ===============  ================

See notes to consolidated financial statements.`

SYSTEMAX INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)

`Common Stock                         Accumulated
                                   -------------------------                     Other
                                                     Additional              Comprehensive       Treasury       Comprehensive
                                   Number of          Paid-in    Retained    Income (Loss),       Stock        Income (Loss),
                                    Shares   Amount   Capital    Earnings      Net of Tax        At Cost         Net of Tax
                                   --------- ------ ----------- ----------- ----------------- --------------- ------------------

Balances, January 1, 2001           34,104    $382    $176,743    $133,697          $(6,662)       $(48,489)

Change in cumulative translation
adjustment                                                                           (1,376)                       $(1,376)
Net income                                                             653                                             653
                                    ------    ----     -------         ---            -----          -------           ---

Total comprehensive loss                                                                                             $(723)
                                                                                                                     ======

Balances, December 31, 2001         34,104     382     176,743     134,350           (8,038)        (48,489)

Change in cumulative translation
adjustment                                                                            5,908                          $5,908
Net loss                                                           (58,939)                                         (58,939)
                                    ------    ----     -------     ------             -----          -------         ------

Total comprehensive loss                                                                                           $(53,031)
                                                                                                                   =========

Balances, December 31, 2002         34,104     382     176,743      75,411           (2,130)        (48,489)

Change in cumulative translation
adjustment                                                                            4,287                          $4,287
Exercise of stock options              184              (1,400)                                       2,159
Net income                                                           5,611                                            5,611
                                    ------    ----     -------       -----            -----           -----           -----

Total comprehensive income                                                                                           $9,898
                                                                                                                     ======

Balances, December 31, 2003         34,288    $382    $175,343     $81,022           $2,157        $(46,330)
                                    ======    ====    ========     =======           ======        =========

See notes to consolidated financial statements.`

SYSTEMAX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)

`2003            2002            2001
                                                                                     ----            ----            ----
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
   Net income (loss)                                                               $5,611        $(58,939)           $653
   Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities:
       Cumulative effect of change in accounting principle, net of tax                             50,971
       Goodwill impairment                                                          2,560
       Loss on dispositions and abandonment                                           595          14,843           2,003
       Depreciation and amortization, net                                          13,938          13,652          15,143
       Provision for deferred income taxes                                         (1,847)         (3,475)          7,929
       Provision for returns and doubtful accounts                                  3,906           4,581           3,696
   Changes in operating assets and liabilities:
       Accounts receivable                                                          6,182          (5,922)         40,124
       Inventories                                                                (30,089)         (2,644)         33,946
       Prepaid expenses and other current assets                                    7,972          (8,422)          9,048
       Income taxes receivable                                                     (3,915)          7,755          19,445
       Accounts payable, accrued expenses and other current liabilities           (11,861)         (7,532)        (36,381)
                                                                                   ------          ------          ------
           Net cash provided by (used in) operating activities                     (6,948)          4,868          95,606
                                                                                   ------          ------          ------

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
   Investments in property, plant and equipment                                    (8,699)        (15,367)        (24,682)
   Proceeds from disposals of property, plant and equipment                            11             635             856
   Purchase of minority interest                                                   (2,560)
                                                                                   ------          ------          ------
           Net cash used in investing activities                                  (11,248)        (14,732)        (23,826)
                                                                                   ------          ------          ------

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
   Issuance of long-term borrowings and capital lease obligations                   1,534          18,879
   Proceeds (repayments) of borrowings from banks                                  (2,951)         15,253         (45,762)
   Repayments of long-term debt and capital lease obligations                      (1,257)           (348)
   Exercise of stock options                                                          759
                                                                                   ------          ------          ------
           Net cash provided by (used in) financing activities                     (1,915)         33,784         (45,762)
                                                                                   ------          ------          ------

EFFECTS OF EXCHANGE RATES ON CASH                                                  (4,182)          2,611          (4,050)
                                                                                   ------          ------          ------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (24,293)         26,531          21,968
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                      62,995          36,464          14,496
                                                                                   ------          ------          ------

CASH AND CASH EQUIVALENTS - END OF YEAR                                           $38,702         $62,995         $36,464
                                                                                   ======          ======          ======

SUPPLEMENTAL DISCLOSURES:
       Interest paid                                                               $2,697          $1,375          $2,026
                                                                                   ======          ======          ======
       Income taxes paid                                                          $13,840          $5,397          $3,819
                                                                                   ======          ======          ======

See notes to consolidated financial statements.`

SYSTEMAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

| | Principles of Consolidation - The accompanying consolidated
financial statements include the accounts of Systemax Inc. and its wholly-owned
subsidiaries (collectively, the "Company" or "Systemax"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The equity method of accounting is used for the Company's investment in a
50%-owned joint venture. The results of operations of this investee are not
material to the results of operations of the Company. The joint venture brokers
paper, a significant portion of which is used by the Company in printing its
catalogs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Use of Estimates In Financial Statements - The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Foreign Currency Translation - The financial statements of the
Company's foreign entities are translated into U.S. dollars, the reporting
currency, using year-end exchange rates for balance sheet items and average
exchange rates for the statements of operations items. The translation
differences are recorded as a separate component of shareholders' equity.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash and Cash Equivalents - The Company considers amounts held in
money market accounts and other short-term investments with an original maturity
date of three months or less to be cash equivalents. The Company's investments
in cash equivalents are classified as debt securities available-for-sale and are
stated at fair market value. Unrealized holding gains and losses are not
significant for any of the years presented.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inventories - Inventories consist primarily of finished goods and
are stated at the lower of cost or market value. Cost is determined by using the
first-in, first-out method.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Property, Plant and Equipment - Property, plant and equipment is
stated at cost. Depreciation of furniture, fixtures and equipment is on the
straight-line or accelerated method over their estimated useful lives ranging
from three to ten years. Depreciation of buildings is on the straight-line
method over estimated useful lives of 30 to 50 years. Leasehold improvements are
amortized over the lesser of the useful lives or the term of the respective
leases.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Capitalized Software Costs - The Company capitalizes purchased
software ready for service and capitalizes software development costs incurred
on significant projects from the time that the preliminary project stage is
completed and management commits to funding a project until the project is
substantially complete and the software is ready for its intended use.
Capitalized costs include materials and service costs and payroll and
payroll-related costs. Capitalized software costs are amortized using the
straight-line method over the estimated useful life of the underlying system,
generally five years.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Goodwill - The cost in excess of fair value of net assets of
businesses acquired is recorded in the consolidated balance sheets as
"Goodwill." In accordance with Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets", the Company ceased
amortization of goodwill effective January 1, 2002. Prior to the adoption of
SFAS 142, goodwill was amortized on a straight-line basis over periods of 10 to
40 years. Amortization expense was $1,605,000 in 2001. The Company completed the
transitional impairment analysis required under SFAS 142 during 2002, which
resulted in an implied fair value of goodwill of zero. See Note 2 for the impact
of the adoption of SFAS 142 on the consolidated financial statements
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Evaluation of Long-lived Assets - Long-lived assets are evaluated
for recoverability in accordance with SFAS 144, "Accounting for the Impairment
or Disposal of Long-lived Assets", whenever events or changes in circumstances
indicate that an asset may have been impaired. In evaluating an asset for
recoverability, the Company estimates the future cash flows expected to result
from the use of the asset and eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset, an impairment loss, equal to the excess of the
carrying amount over the fair market value of the asset is recognized.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Product Warranties - Provisions for estimated future expenses
relating to product warranties for the Company's assembled PCs are recorded as
cost of sales when revenue is recorded. Liability estimates are determined based
on management judgment considering such factors as the number of units sold,
historical and anticipated rates of warranty claims and the likely current cost
of corrective action.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income taxes - Deferred tax assets and liabilities are recognized
for the expected tax consequences of temporary differences between financial
reporting and tax bases of assets and liabilities and are measured using enacted
tax laws and rates. Valuation allowances are provided for deferred tax assets to
the extent it is more likely than not that deferred tax assets will not be
recoverable against future taxable income.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue Recognition and Accounts Receivable - The Company
recognizes sales of products, including shipping revenue, at the time of
shipment. Allowances for estimated subsequent customer returns are provided when
revenues are recorded. Costs incurred for the shipping and handling of its
products are recorded as cost of sales. Revenue from extended warranty and
support contracts on the Company's assembled PCs is deferred and recognized over
the contract period.
Accounts receivable are shown in the consolidated balance sheets net of
allowances for doubtful collections and subsequent customer returns. The changes
in these allowance accounts are summarized as follows (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Years ended December 31,
                                                  -------------------------------------
                                                     2003           2002           2001
                                                     ----           ----           ----
          Balance, beginning of year              $11,275        $11,120        $15,329
          Charged to expense                        3,906          4,581          3,696
          Deductions                               (5,181)        (4,426)        (7,905)
                                                    -----          -----          -----
          Balance, end of year                    $10,000        $11,275        $11,120
                                                  =======        =======        =======`

| | Advertising Costs - Direct response advertising costs, consisting
primarily of catalog preparation, printing and postage expenditures are
amortized over the period of catalog distribution during which the benefits are
expected. Advertising expenditures relating to the Company's national
advertising campaign and other television advertising costs are expensed in the
period the advertising takes place.
Advertising costs, net of rebates from vendors, of $43.7 million in 2003, $44.1
million in 2002 and $53.0 million in 2001 are included in the accompanying
Consolidated Statements of Operations. Effective January 1, 2003 the Company
adopted Emerging Issues Task Force ("EITF") Issue No. 02-16, "Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a
Vendor." EITF 02-16 requires that consideration received from vendors, such as
advertising support funds, be accounted for as a reduction of cost of sales
unless certain conditions are met showing that the funds are used for a specific
program entirely funded by an individual vendor. If these specific requirements
related to individual vendors are met, the consideration is accounted for as a
reduction in the related expense category, such as advertising expense. EITF
02-16 applies to all agreements modified or entered into on or after January 1,
2003. The Company utilizes advertising programs to support vendors, including
catalogs, internet and magazine advertising, and receives payments and credits
from vendors, including consideration pursuant to volume incentive programs and
cooperative marketing programs. As a result of prospectively adopting EITF
02-16, the Company has recorded $14.5 million for the year ended December 31,
2003 of vendor consideration as a reduction of cost of sales. Adopting EITF
02-16 had no impact on income (loss) from operations, as the vendor
consideration recorded as a reduction of cost of sales would previously have
been recorded as a reduction of advertising expense.
Prepaid expenses at December 31, 2003 and 2002 include deferred advertising
costs of $4.2 million and $3.6 million, respectively, which are reflected as an
expense during the periods benefited, typically the subsequent fiscal quarter.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Research and Development Costs - Costs incurred in connection with
research and development are expensed as incurred. Such expenses for the years
ended December 31, 2003, 2002 and 2001 aggregated approximately $800,000,
$1,036,000 and $1,539,000, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Derivative Financial Instruments - The Company adopted SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended,
effective January 1, 2001. SFAS 133 requires that all derivative financial
instruments be recognized as either assets or liabilities in the balance sheet
based on their fair values. Changes in the fair values are required to be
reported in earnings or other comprehensive income depending on the use of the
derivative and whether it qualifies for hedge accounting. Derivative instruments
are designated and accounted for as either a hedge of a recognized asset or
liability (fair value hedge) or a hedge of a forecasted transaction (cash flow
hedge). For derivatives designated as effective cash flow hedges, changes in
fair values are recognized in other comprehensive income. Changes in fair values
related to fair value hedges as well as the ineffective portion of cash flow
hedges are recognized in earnings (see Note 6).
The Company does not use derivative instruments for speculative or trading
purposes. Derivative instruments may be used to manage exposures related to
changes in foreign currency exchange rates and interest rate risk on variable
rate indebtedness.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net Income (Loss) Per Common Share - The Company calculates net
income (loss) per share in accordance with SFAS 128, "Earnings Per Share". Net
income (loss) per common share-basic was calculated based upon the weighted
average number of common shares outstanding during the respective periods
presented. Net income (loss) per common share-diluted was calculated based upon
the weighted average number of common shares outstanding and included the
equivalent shares for dilutive options outstanding during the respective periods
except in loss periods, where the effect is anti-dilutive. The dilutive effect
of outstanding options issued by the Company are reflected in net income (loss)
per share  diluted using the treasury stock method. Under the treasury
stock method, options will only have a dilutive effect when the average market
price of common stock during the period exceeds the exercise price of the
options. The weighted average number of stock options outstanding excluded from
the computation of diluted earnings per share was 697,000 in 2003, 1,149,000 in
2002 and 1,979,000 in 2001 due to their antidilutive effect.
The weighted average common shares outstanding for the computation of basic
earnings per common share for 2003, 2002 and 2001 were 34.2 million, 34.1
million and 34.1 million, respectively. Additionally, in 2003, 715,000 of
equivalent common shares and in 2001, 19,000 of equivalent common shares were
included for the diluted calculation.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Comprehensive Income (Loss) - Comprehensive income (loss) consists
of net income (loss) and foreign currency translation adjustments and is
included in the Consolidated Statements of Shareholders' Equity. Comprehensive
income (loss) was $9,898,000 in 2003, $(53,031,000) in 2002 and $(723,000) in
2001, net of tax effects on foreign currency translation adjustments of
$(3,030,000) in 2003, $3,483,000 in 2002 and $1,338,000 in 2001.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock-based Compensation - The Company has three stock-based
compensation plans, two of which are for employees, consultants and advisors and
the third of which is for non-employee directors, which are more fully described
in Note 8. The Company has elected to follow the accounting provisions of
Accounting Principles Board ("APB") Opinion 25, "Accounting for Stock Issued to
Employees" for stock-based compensation and to provide the pro forma disclosures
required under SFAS 148, "Accounting for Stock-based Compensation 
Transition and Disclosure". No stock-based employee compensation cost is
reflected in net income (loss), as all options granted under the plans have an
exercise price equal to the market value of the underlying stock on the date of
grant. The following table illustrates the effect on net income (loss) and
earnings (loss) per share had compensation costs of the plans been determined
under a fair value alternative method as stated in SFAS 123, "Accounting for
Stock-Based Compensation" (in thousands, except per share data):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2003        2002        2001
                                                                   ----        ----        ----
     Net income (loss) - as reported                             $5,611    $(58,939)       $653
     Stock-based employee compensation expense determined
     under fair value based method, net of related tax effects      544         713         780
                                                                 ------    --------       -----
     Pro forma net income (loss)                                 $5,067    $(59,652)      $(127)
                                                                 ======    ========       =====

     Basic and diluted net income (loss) per common share:
     Net income (loss) - as reported                               $.16      $(1.73)       $.02
                                                                   ====      ======        ====
     Net income (loss) - pro forma                                 $.15      $(1.75)          -
                                                                   ====      ======        ====`

| | The fair value of options granted was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
| | -------------------------------------------------------------------------------------------------------------------------------------------------

`2003      2002      2001
                                                        ----      ----      ----
          Expected dividend yield                         0%        0%        0%
          Risk-free interest rate                       5.9%      5.6%      6.1%
          Expected volatility                          76.0%     71.0%     72.0%
          Expected life in years                        2.41      2.52      3.17`

| | The weighted average contractual life of the stock options outstanding was 7.7
years at December 31, 2003, 7.8 years at December 31, 2002 and 8.1 years at
December 31, 2001.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recent Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation 45 ("FIN 45") "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others", which
requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. However, the provisions related to recognizing a liability at
inception of the guarantee for the fair value of the guarantor's obligations
does not apply to product warranties or to guarantees accounted for as
derivatives. FIN 45 also elaborates on the disclosures to be made by a guarantor
in its interim and annual financial statements about its obligations under
certain guarantees it has issued. The initial recognition and initial
measurement provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002 and the
disclosure requirements in this Interpretation are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
adoption of the recognition and measurement provisions of FIN 45 did not have a
material effect on the Company's consolidated financial statements.
In December 2003, the FASB issued FIN 46 (Revised) ("FIN 46-R") to address
certain FIN 46 implementation issues. This interpretation clarifies the
application of Accounting Research Bulletin ("ARB") 51, "Consolidated Financial
Statements", for companies that have interests in entities that are Variable
Interest Entities (VIE) as defined under FIN 46. According to this
interpretation, if a company has an interest in a VIE and is at risk for a
majority of the VIE's expected losses or receives a majority of the VIE's
expected gains it shall consolidate the VIE. FIN 46-R also requires additional
disclosures by primary beneficiaries and other significant variable interest
holders. For entities acquired or created before February 1, 2003, this
interpretation is effective no later than the end of the first interim or
reporting period ending after March 15, 2004, except for those VIE's that are
considered to be special purpose entities, for which the effective date is no
later than the end of the first interim or annual reporting period ending after
December 15, 2003. For all entities that were acquired subsequent to January 31,
2003, this interpretation is effective as of the first interim or annual period
ending after December 31, 2003. The Company has adopted FIN 46R and is
evaluating the impact of this interpretation on its consolidated financial
statements.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies
SFAS 133 for the financial accounting and reporting of derivative instruments
and hedging activities and requires that contracts with similar characteristics
be accounted for on a comparable basis. The provisions of SFAS 149 are effective
for contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 did not
have a material impact on the Company's consolidated financial statements.
In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 did not have a material impact on the Company's
consolidated financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | BUSINESS COMBINATIONS AND GOODWILL
|-- | ----------------------------------

| | Effective January 1, 2002, the Company adopted SFAS 142, "Goodwill and Other
Intangible Assets," which established new accounting and reporting requirements
for goodwill and other intangible assets. SFAS 142 requires that goodwill
amortization be discontinued and replaced with periodic tests of impairment.
With the adoption of SFAS 142, management determined that the carrying value of
the Company was impaired in an amount greater than the carrying value of
goodwill at the date of adoption. As required by SFAS 142, the entire carrying
value of goodwill was written off. This write-off, $68 million ($51 million or
$1.50 per share, net of tax), was reported as a cumulative effect of a change in
accounting principle, on a net of tax basis, in the Company's Consolidated
Statements of Operations for the year ended December 31, 2002. The adoption of
SFAS 142 had no cash flow impact on the Company.
During the second quarter of 2003, the Company purchased the minority ownership
of its Netherlands subsidiary pursuant to the terms of the original purchase
agreement for approximately $2.6 million. All of the purchase price was
attributable to goodwill and, as a result of an impairment analysis, was written
off in accordance with SFAS 142.
Adoption of the non-amortization provisions of SFAS 142 as of January 1, 2001
would have increased net income for the year ended December 31, 2001 by
$1,126,000, or $.03 per diluted share.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | PROPERTY, PLANT AND EQUIPMENT
|-- | -----------------------------

| | Property, plant and equipment, net consists of the following (in thousands):
| | ----------------------------------------------------------------------------

`2003          2002
                                                                          ----          ----
     Land and buildings............................................... $ 46,898      $ 43,268
     Furniture and fixtures, office, computer and other equipment.....   78,327        71,453
     Leasehold improvements ..........................................   14,010        12,660
                                                                         ------        ------
                                                                        139,235       127,381
     Less accumulated depreciation and amortization...................   70,588        56,248
                                                                         ------        ------
     Property, plant and equipment, net............................... $ 68,647      $ 71,133
                                                                       ========      ========`

|4. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

| | The Company leased one warehouse and office facility from affiliates during the
year ended December 31, 2003 (see Note 10) and vacated a second warehouse and
office facility leased from affiliates during 2002. Rent expense under those
leases aggregated approximately $612,000 (2003), $1,071,000 (2002) and
$1,224,000 (2001).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | CREDIT FACILITIES
|-- | -----------------

| | The Company maintains a $70,000,000 revolving credit agreement with a group of
financial institutions which provides for borrowings in the United States. The
borrowings are secured by all of the domestic accounts receivable and
inventories of the Company and the Company's shares of stock in its domestic
subsidiaries. The credit facility expires and outstanding borrowings thereunder
are due on June 15, 2004. The borrowings under the agreement are subject to
borrowing base limitations of up to 75% of eligible accounts receivable and up
to 25% of qualified inventories. The interest on outstanding advances is payable
monthly, at the Company's option, at the agent bank's base rate (4.25% at
December 31, 2003) plus 0.25% to 0.75% or the bank's daily LIBOR rate (2.87% at
December 31, 2003) plus 2.25% to 3%. The facility also calls for a commitment
fee payable quarterly in arrears of 0.5% of the average daily unused portion of
the facility. The revolving credit agreement contains certain financial and
other covenants, including restrictions on capital expenditures and payments of
dividends. The Company was in compliance with all of the covenants as of
December 31, 2003. As of December 31, 2003, availability under the agreement was
$49.0 million. There were outstanding letters of credit of $8.0 million as of
December 31, 2003 and $6.1 million as of December 31, 2002 and there were no
outstanding advances as of December 31, 2003 and December 31, 2002.
The Company also has a £15,000,000 ($26,852,000 at the December 31, 2003
exchange rate) multi-currency credit facility with a United Kingdom financial
institution, which is available to its United Kingdom subsidiaries. Drawings
under the facility may be made by overdraft, trade acceptance or loan. The
facility does not have a termination date, but may be canceled with six months
notice beginning in December 2003. Borrowings under the facility are secured by
certain assets of the Company's United Kingdom subsidiaries and a portion of the
line is subject to a borrowing base limitation of 70% of eligible accounts
receivable. At December 31, 2003 there were £7.5 million ($13.3 million) of
borrowings outstanding under this line with interest payable at a rate of 5.85%.
At December 31, 2002 there were £12.4 million ($20.0 million at the
December 31, 2002 exchange rate) of borrowings outstanding under this line with
interest payable at a rate of 6.08%.
In October 2003, the Company's Netherlands subsidiary entered into a 5
million ($6,307,000 at the December 31, 2003 exchange rate) credit facility.
Borrowings under the facility are secured by the subsidiary's accounts
receivable and are subject to a borrowing base limitation of 85% of the eligible
accounts. At December 31, 2003 there were 4.5 million ($5.7 million) of
borrowings outstanding under this line with interest payable at a rate of 5.0%.
The facility expires in November 2005.
The weighted average interest rate on short-term borrowings was 5.2% in 2003,
6.3% in 2002 and 6.6% in 2001.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | LONG-TERM DEBT
|-- | --------------

| | Long-term debt consists of (in thousands):
| | ------------------------------------------

`2003             2002
                                                               ----             ----
          Mortgage note payable (a)                         $ 8,170          $ 8,319
          Term loan payable (b)                              10,338           10,360
          Capitalized equipment lease obligations             1,591               90
                                                              -----            -----
                                                             20,099           18,769
          Less: current portion                               1,746            1,250
                                                              -----            -----
                                                            $18,353          $17,519
                                                            =======          =======`

| | (a) Mortgage note payable. The Company has a ten year, $8.4 million mortgage
loan on its Georgia distribution facility. The mortgage has monthly principal
and interest payments of $62,000 through May 2012, with a final additional
principal payment of $6.4 million at maturity in May 2012. The mortgage bears
interest at 7.04% and is collateralized by the underlying land and building.
(b) Term loan payable. The Company has a term loan agreement which was used to
finance the construction of its United Kingdom facility and which is secured by
the underlying land and building. The loan matures in August 2012 and is
repayable in quarterly installments of(pound)165,000 ($295,000) plus interest.
The outstanding borrowing bears interest at LIBOR plus 160 basis points (5.25%
at December 31, 2003 and 5.69% at December 31,2002). The term loan agreement
also contains certain financial and other covenants related to the Company's
United Kingdom subsidiaries.
In connection with this term loan, the Company also entered into an interest
rate collar agreement to reduce its exposure to market rate fluctuations. The
collar agreement covers a period of three years, matures in the same amounts and
over the same periods as the related debt and has a cap of 6.0% and a floor of
4.5%. This derivative has been designated as a cash flow hedge for accounting
purposes. As of December 31, 2003, the notional amount of the interest rate
collar was £5,775,000 ($10,338,000). The collar was in a loss position of
approximately $39,000 as of December 31, 2003 and $117,000 as of December 31,
2002, and, accordingly, the aggregate fair value of the collar was recorded as a
liability. The changes in the fair value of this derivative for the years ended
December 31, 2003 and 2002 have been recognized in the Consolidated Statement of
Operations as this hedge was determined to be ineffective. The Company considers
the credit risk related to the interest rate collar to be low because such
instrument was entered into with a financial institution having a high credit
rating and is generally settled on a net basis.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The aggregate maturities of long-term debt outstanding at December 31, 2003 are
as follows (in thousands):
| | ----------------------------------------------------------------------------------------------------------

`2004      2005      2006      2007      2008   After 2008
                                ----      ----      ----      ----      ----   ----------
          Maturities          $1,746    $1,740    $1,745    $1,675    $1,516      $11,677`

|7. | RESTRUCTURING AND OTHER CHARGES
|-- | -------------------------------

| | The Company periodically assesses its operations to ensure that they are
efficient, aligned with market conditions and responsive to customer needs.
During the years ended December 31, 2001, 2002 and 2003, management approved and
implemented restructuring actions which included workforce reductions and
facility consolidations.
In the fourth quarter of 2003, the Company implemented a plan to consolidate the
warehousing facilities in its United States computer supplies business. The
Company recorded $713,000 of costs related to this plan, including $233,000 of
non-cash costs for impairment of the carrying value of fixed assets and $480,000
of charges for other exit costs.
During fiscal 2002 the Company implemented a restructuring plan to consolidate
the activities of its three United Kingdom locations into a new facility
constructed for the Company. The restructuring plan resulted in a pre-tax
charge, included in "Restructuring and other charges", of $4.1 million. Of the
total charge, $0.5 million was non-cash for the impairment in carrying value of
fixed assets, $1.9 million was for recruitment, staff relocation costs and
severance and benefits for approximately 150 terminated employees and $1.7
million was for other exit costs, primarily facilities closing costs and lease
termination costs. During the year ended December 31, 2003, the Company recorded
$2.2 million of additional costs, net of reductions, related to this plan as a
charge to operations. These charges consisted of $1.6 million of other
restructuring activities representing adjustments to the original estimates of
lease and contract termination costs and $600,000 of additional non-cash asset
impairments related to buildings vacated. Through December 31, 2003, total cash
charges of approximately $3.4 million had been expended under this plan.
The Company incurred approximately $750,000 of costs during the year ended
December 31, 2001 related to consolidation of one of its domestic warehouses.
The following table summarizes the components of the restructuring charges, the
cash payments, non-cash activities, and the remaining accrual as of December 31,
2003:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Severance and         Asset        Other
                                        Personnel Costs   Write-downs   Exit Costs     Total
                                        ---------------   -----------   ----------     -----
          Charged to expense in 2002             $1,870          $525       $1,656    $4,051
          Amounts utilized                       (1,693)         (525)        (851)   (3,069)
                                                 ------          ----         ----    ------
          Accrued at December 31, 2002              177                        805       982
          Charged to expense in 2003                 63           863        1,985     2,911
          Amounts utilized                         (177)                      (691)     (868)
                                                    ---           ---        -----       ---
          Accrued at December 31, 2003             $ 63          $863       $2,099    $3,025
                                                   ====          ====       ======    ======`

| | In August 2003, the Company settled its litigation with a software developer and
reversed a previously recorded liability of $1.3 million which was no longer
needed (See Note 10).
During the second quarter of 2003, the Company purchased the minority ownership
of its Netherlands subsidiary for approximately $2.6 million, pursuant to the
terms of the original purchase agreement. All of the purchase price was
attributable to goodwill and, as a result of an impairment analysis, was written
off in accordance with SFAS 142.
During the second quarter of 2002 the Company recorded a non-recurring write-off
of $13.2 million resulting from its decision to discontinue the development of
internal-use computer software.
During the year ended December 31, 2001, approximately $2 million of capitalized
costs associated with software projects abandoned were written off.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | SHAREHOLDERS' EQUITY
|-- | --------------------

| | As required by law, certain foreign subsidiaries must retain a percentage of
shareholders' capital in the respective company. Accordingly, a portion of
retained earnings is restricted and not available for distribution to
shareholders. Such amount at December 31, 2003 was not material.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock Option Plans - The Company has three fixed option plans
which reserve shares of common stock for issuance to key employees, directors,
consultants and advisors to the Company. The following is a description of these
plans:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The 1995 Long-term Stock Incentive Plan - This plan allows the
Company to issue qualified, non-qualified and deferred compensation stock
options, stock appreciation rights, restricted stock and restricted unit grants,
performance unit grants and other stock based awards authorized by the
Compensation Committee of the Board of Directors. Options issued under this plan
expire ten years after the options are granted and generally become exercisable
ratably on the third, fourth, and fifth anniversary of the grant date. A maximum
total number of 2.0 million shares may be granted under this plan of which a
maximum of 800,000 shares may be of restricted stock and restricted stock units.
No award shall be granted under this plan after December 31, 2005. A total of
991,828 options were outstanding under this plan as of December 31, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The 1995 Stock Option Plan for Non-Employee Directors - This plan
provides for automatic awards of non-qualified options to directors of the
Company who are not employees of the Company or its affiliates. All options
granted under this plan will have a ten year term from grant date and are
immediately exercisable. A maximum of 100,000 shares may be granted for awards
under this plan. This plan will terminate the day following the tenth annual
shareholders meeting. A total of 46,000 options were outstanding under this plan
as of December 31, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The 1999 Long-term Stock Incentive Plan, as amended - This plan
was adopted on October 25, 1999 with substantially the same terms and provisions
as the 1995 Long-term Stock Incentive Plan, restricting the awards to
non-qualified stock options authorized by the Compensation Committee of the
Board of Directors. A maximum of 5.0 million shares may be granted under this
plan. No award shall be granted under this plan after December 31, 2009. A total
of 1,783,474 options were outstanding under this plan as of December 31, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The following table reflects the plan activity for the years ended December 31,
2003, 2002 and 2001:
| | ----------------------------------------------------------------------------------------------------

`For Shares         Option Prices
                                                    ----------         -------------
               Outstanding, January 1, 2001          2,126,632        $  7.19 to $39.06
               Granted                                 849,917        $  1.95 to $ 2.45
               Cancelled                            (1,301,058)       $  1.95 to $26.88
               Outstanding, December 31, 2001        1,675,491        $  1.95 to $39.06
               Granted                                 591,375        $  3.05 to $ 3.39
               Cancelled                              (175,551)       $  1.95 to $18.41
               Outstanding, December 31, 2002        2,091,315        $  1.95 to $39.06
               Granted                               1,072,700        $  1.76 to $ 3.36
               Exercised                              (184,341)       $  1.76 to $ 3.05
               Cancelled                              (158,372)       $  1.76 to $39.06
               Outstanding, December 31, 2003        2,821,302        $  1.76 to $18.41`

| | The following table summarizes information for the three years ended December
31, 2003 concerning currently outstanding and exercisable options:
| | ------------------------------------------------------------------------------------------------------------------------------------------------

`2003                        2002                        2001
                                          ------------------------     ------------------------    ------------------------
                                                  Weighted-Average             Weighted Average            Weighted Average
                                          Shares   Exercise Price      Shares   Exercise Price     Shares   Exercise Price
                                          ------   --------------      ------   --------------     ------   --------------

     Outstanding at beginning of year  2,091,315       $ 5.01       1,675,491       $ 6.05      2,126,632      $14.70
     Granted ......................... 1,072,700       $ 1.80         591,375       $ 3.05        849,917      $ 1.96
     Exercised .......................  (184,341)      $ 2.27
     Cancelled .......................  (158,372)      $ 9.68        (175,551)      $ 8.36     (1,301,058)     $17.52
                                       ---------                    ---------                   ---------
     Outstanding at end of year ...... 2,821,302       $ 3.70       2,091,315       $ 5.01      1,675,491      $ 6.05
                                       =========                    =========                   =========

     Options exercisable at year end.. 1,483,287                    1,093,294                     478,413
     Weighted average fair value per
       option granted during the year.     $0.81                        $0.67                       $0.89



     As of December 31, 2003:
          Range of                               Weighted-Average   Weighted-Average                Weighted-Average
          Exercise               Number             Remaining           Exercise        Number          Exercise
           Price              Outstanding        Contractual Life        Price        Exercisable        Price
     -----------------        -----------        ----------------   ----------------  -----------   ----------------
     $  1.76 to $  5.00        2,152,602               8.42             $  2.15          814,587        $  2.69
     $  5.01 to $ 15.00          583,700               5.80             $  7.42          583,700        $  7.42
     $ 15.01 to $ 18.41           85,000               2.34             $ 17.62           85,000        $ 17.62
                               ---------                                               ---------
     $  1.76 to $ 18.41        2,821,302               7.69             $  3.70        1,483,287        $  5.41
                               =========                                               =========`

|9. | INCOME TAXES
|-- | ------------

| | The components of income (loss) before income taxes are as follows (in
thousands):
| | ----------------------------------------------------------------------------------

`Years Ended December 31                      2003           2002           2001
     -----------------------                      ----           ----           ----
          United States                         $ 18,359      $ (6,731)      $(10,390)
          Foreign                                 (7,425)       (2,276)        11,432
                                                --------      --------       --------
          Total                                 $ 10,934      $ (9,007)      $  1,042
                                                ========      ========       ========`

| | The provision (benefit) for income taxes consists of the following (in
thousands):
| | ----------------------------------------------------------------------------------

`Years Ended December 31                      2003           2002           2001
     -----------------------                      ----           ----           ----

          Current:
             Federal                           $  5,247       $ (3,037)      $ (9,256)
             State                                  709            758           (730)
             Foreign                              1,214          4,715          2,446
                                               --------       --------       --------
             Total current                        7,170          2,436         (7,540)
                                               --------       --------       --------

          Deferred:
             Federal                              1,932         (3,800)        6,777
             State                                 (864)          (604)          585
             Foreign                             (2,915)           929           567
                                               --------       --------       --------
             Total deferred                      (1,847)        (3,475)        7,929
                                               --------       --------       --------

             Total                             $  5,323       $ (1,039)      $   389
                                               ========       ========       =======`

| | Income taxes are accrued and paid by each foreign entity in accordance with
applicable local regulations.
| | ---------------------------------------------------------------------------------------------------------

| | A reconciliation of the difference between the income tax expense (benefit) and
the computed income tax expense based on the Federal statutory corporate rate is
as follows (in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Years Ended December 31                                     2003        2002        2001
     -----------------------                                     ----        ----        ----

     Income tax (benefit) at Federal statutory rate            $ 3,827     $(3,152)    $   365
     State and local income taxes, net of federal tax benefit      461        (111)        145
     Non-deductible goodwill impairment                            900
     Tax credits                                                              (906)
     Foreign operating losses with no benefit provided             158         542         575
     Foreign income taxed at different rates                        91         949
     Change in valuation allowances                             (1,174)        288      (1,118)
     Prior year assessments                                                  1,318
     Other items, net                                            1,060          33         422
                                                               -------     -------     -------
                                                               $ 5,323     $(1,039)    $   389
                                                               =======     =======     =======`

| | The deferred tax assets (liabilities) are comprised of the following (in
thousands):
| | ------------------------------------------------------------------------------------

`2003       2002
                                                                           ----       ----
     Current:
        Deductible assets.............................................  $  (640)   $  (855)
        Accrued expenses and other liabilities........................   11,069     10,700
        Non-deductible assets.........................................      837        615
        Other.........................................................     (436)       183
        Valuation allowances..........................................     (698)    (1,570)
                                                                        -------    -------
            Total current.............................................   10,132      9,073
                                                                        -------    -------

     Non-current:
        Net operating loss and credit carryforwards...................    8,766      4,359
        Foreign currency translation adjustments......................   (1,635)     1,395
        Accelerated depreciation......................................   (1,539)      (853)
        Intangible and other assets...................................   13,630     15,137
        Valuation allowances..........................................   (4,616)    (4,938)
                                                                        -------    -------
            Total non-current.........................................   14,606     15,100
                                                                        -------    -------
                Total.................................................  $24,738    $24,173
                                                                        =======    =======`

| | The Company has not provided for federal income taxes applicable to the
undistributed earnings of its foreign subsidiaries of $13.9 million as of
December 31, 2003, since these earnings are indefinitely reinvested. The Company
has foreign net operating loss carryforwards which expire from 2004 through 2008
except for carryforwards in the Netherlands, which have no expiration. In
accordance with SFAS 109 "Accounting for Income Taxes", the Company records
these benefits as assets to the extent that utilization of such assets is more
likely than not; otherwise, a valuation allowance has been recorded. The Company
has also provided valuation allowances for certain state net operating loss
carryforwards where it is not likely they will be realized.
The Company's federal income tax returns for fiscal years 2000 through 2002 are
currently being audited by the Internal Revenue Service. Although proposed
adjustments have not been received for these years and the outcome of tax audits
is always uncertain, management believes the ultimate outcome of the audit will
not have a material adverse impact on the Company's consolidated financial
statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
|--- | --------------------------------------------

| | Leases - The Company is obligated under operating lease agreements
for the rental of certain office and warehouse facilities and equipment which
expire at various dates through February 2014. The Company currently leases one
facility in New York from an entity owned by the Company's three principal
shareholders and senior executive officers (see Note 4).
At December 31, 2003, the future minimum annual lease payments for related and
third-party leases were as follows (in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Related
                                                           Third Party     Party
                                             Capitalized    Operating    Operating
                                                Leases        Leases       Lease       Total
                                             -----------   -----------   ----------    ------

     2004                                         $433        $6,666         $612      $7,711
     2005                                          403         6,516          612       7,531
     2006                                          388         5,899          612       6,899
     2007                                          299         5,002          612       5,913
     2008                                          125         3,984                    4,109
     2009-2013                                                11,031                   11,031
     2014                                                         32                       32
                                                ------       -------       ------     -------

     Total minimum lease payments                1,648       $39,130       $2,448     $43,226
                                                             =======       ======     =======
     Less amount representing interest              57
                                                ------
     Present value of minimum capitalized
     lease payments (including current
     portion of $405)                           $1,591
                                                ======`

| | Assets recorded under capital leases are included in Property, Plant and
Equipment as follows (in thousands):
| | -------------------------------------------------------------------------------------------------------------

`December 31,
                                                            -------------------
                                                              2003         2002
                                                            ------         ----
          Furniture and fixtures,  office, computer
              and other equipment                           $1,680         $117
          Accumulated amortization                             123           26
                                                            ------         ----
                                                            $1,557         $ 91
                                                            ======         ====`

| | Annual rent expense aggregated approximately $7,693,000, including $612,000 to
related parties, for 2003, $8,164,000, including $1,071,000 to related parties,
for 2002 and $7,869,000, including $1,224,000 to related parties, for 2001.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Guarantees - The Company has provided financial guarantees from
time to time to a number of vendors on behalf of its 50%-owned joint venture
(see Note 1) for trade obligations in the normal course of its business. The
amount of such guarantees is limited to $7 million pursuant to the terms of the
Company's revolving credit agreement. As of December 31, 2003 the amount of such
guarantees totaled $1.5 million. The Company has not been required to perform on
any of these guarantees and, as a result, estimates that the fair value of these
guarantees is minimal. Accordingly, the Company has recorded no liabilities for
these guarantees at December 31, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Litigation - In August 2003 the Company entered into a settlement
agreement with a software developer of a new customer order management software
system that was being written for the Company's internal use. The specific terms
of the settlement agreement are confidential; however, none of the terms had a
material effect on the business or the consolidated financial statements of the
Company.
The Company has also been named as a defendant in other lawsuits in the normal
course of its business, including those involving commercial, tax, employment
and intellectual property related claims. Management of the Company, based on
discussions with legal counsel, believes the ultimate resolution of these
lawsuits will not have a material effect on the Company's consolidated financial
statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Contingency - The Company is required to collect sales tax on
certain of its sales. In accordance with current laws, approximately 16% of the
Company's 2003, 2002 and 2001 domestic sales were subject to sales tax. Changes
in law could require the Company to collect sales tax in additional states.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Employee Benefit Plans - The Company's U.S. subsidiaries
participate in a defined contribution 401(k) plan covering substantially all
U.S. employees. Employees may invest 1% or more of their eligible compensation,
limited to maximum amounts as determined by the Internal Revenue Service. The
Company provides a matching contribution to the plan, determined as a percentage
of the employees' contributions. Aggregate expense to the Company for
contributions to such plans was approximately $408,000 in 2003, $442,000 in 2002
and $482,000 in 2001.
Liabilities accrued by certain foreign entities for employee termination
indemnities, determined in accordance with labor laws and labor agreements in
effect in the respective country, were not material.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Foreign Exchange Risk Management - The Company has no involvement
with derivative financial instruments and does not use them for trading
purposes. The Company may enter into foreign currency options or forward
exchange contracts to hedge certain foreign currency transactions. The intent of
this practice would be to minimize the impact of foreign exchange rate movements
on the Company's operating results. As of December 31, 2003, the Company had no
outstanding forward exchange contracts.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fair Value of Financial Instruments - Financial instruments
consist primarily of investments in cash, trade account receivables, accounts
payable and debt obligations. The Company estimates the fair value of financial
instruments based on interest rates available to the Company and by comparison
to quoted market prices. At December 31, 2003 and 2002, the carrying amounts of
cash and cash equivalents, accounts receivable, income taxes receivable and
accounts payable are considered to be representative of their respective fair
values due to their short-term nature. The carrying amounts of the notes payable
to banks and the term loan payable are considered to be representative of their
respective fair values as their interest rates are based on market rates. The
estimated fair value of the Company's mortgage loan payable was $8.8 million at
December 31, 2003 and 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Concentration of Credit Risk - Financial instruments that
potentially subject the Company to concentrations of credit risk consist of
cash, cash equivalents and accounts receivable. Concentrations of credit risk
with respect to accounts receivable are limited due to the large number of
customers and their geographic dispersion comprising the Company's customer
base.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | SEGMENT AND RELATED INFORMATION
|--- | -------------------------------

| | Pursuant to SFAS 131 "Disclosure About Segments of an Enterprise and Related
Information", the Company determined that it is engaged in a single reportable
segment which markets and sells various business products. The Company's product
offerings include personal computers (PCs), computer related products,
industrial products and office products and are monitored for sales trends and
profitability in these sub-categories. Products are marketed through an
integrated system of direct mail catalogs, a network of major account sales
representatives and proprietary e-commerce Internet web-sites.
Financial information relating to the Company's operations by geographic area
was as follows (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Net Sales
                                         ------------------------------------------
                                             2003           2002           2001
                                         ------------   ------------   ------------
     North America                        $1,026,233     $  963,805     $  982,615
     Europe                                  631,545        587,712        564,360
                                             -------        -------        -------
     Consolidated                         $1,657,778     $1,551,517     $1,546,975
                                          ==========     ==========     ==========`

| | Revenues are attributed to countries based on location of selling
subsidiary.
| | -----------------------------------------------------------------------------

`Long-Lived Assets
                                              -----------------
                                             2003           2002
                                             ----           ----
     North America                         $ 36,571       $ 41,832
     Europe                                  32,076         29,301
                                             ------         ------
     Consolidated                          $ 68,647       $ 71,133
                                           ========       ========`

|12. | QUARTERLY FINANCIAL DATA (UNAUDITED)
|--- | ------------------------------------

| | Quarterly financial data is as follows (in thousands, except for per share
amounts):
| | ------------------------------------------------------------------------------------

`First             Second             Third              Fourth
     2003                                       Quarter            Quarter           Quarter             Quarter
     ----                                       ------             -------           -------             -------
     Net sales..............................  $ 426,461           $ 388,798         $ 405,011           $ 437,508
     Gross profit............................ $  72,478           $  63,525         $  67,111           $  65,155
     Net income (loss)....................... $   5,035           $  (1,864)        $   1,907           $     533
     Net income (loss) per common share:
              Basic .........................     $ .15              $ (.05)            $ .06               $ .02
              Diluted........................     $ .15              $ (.05)            $ .05               $ .02


                                                 First             Second             Third              Fourth
     2002                                       Quarter            Quarter           Quarter             Quarter
     ----                                       ------             -------           -------             -------
     Net sales............................... $ 412,260           $ 363,771         $ 372,139           $ 403,347
     Gross profit............................ $  73,848           $  61,939         $  62,726           $  67,075
     Net income (loss) ...................... $ (50,386)          $  (8,827)        $    (727)          $   1,001
     Net income (loss) per common share:
              Basic and diluted..............   $ (1.48)             $ (.26)            $(.02)              $ .03`