10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: June 30, 2004

OR

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

For the transition period from __________ to __________

Commission File Number: 0-25092

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 86-0766246
(I.R.S. Employer Identification Number)

1305 West Auto Drive, Tempe, Arizona 85284
(Address of principal executive offices) (Zip Code)

(480) 902-1001
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [   ]

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [   ]

The number of shares outstanding of the issuer’s common stock as of August 2, 2004 was 48,505,227.

INSIGHT ENTERPRISES, INC.
FORM 10-Q QUARTERLY REPORT
Three Months Ended June 30, 2004

TABLE OF CONTENTS

	Page
PART I - Financial Information
Item 1 – Financial Statements:
Condensed Consolidated Balance Sheets - June 30, 2004 and December 31, 2003		4
Condensed Consolidated Statements of Earnings - Three and Six Months Ended June 30, 2004 and 2003		5
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2004 and 2003		6
Notes to Condensed Consolidated Financial Statements		7
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3 – Quantitative and Qualitative Disclosures about Market Risk		31
Item 4 – Controls and Procedures		31
PART II - Other Information		33
Item 1 – Legal Proceedings		33
Item 2 – Changes in Securities and Use of Proceeds		33
Item 3 – Defaults Upon Senior Securities		33
Item 4 – Submission of Matters to a Vote of Security Holders		34
Item 5 – Other Information		34
Item 6 – Exhibits and Reports on Form 8-K		35
Signatures		36
Certifications		37
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

2

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS

     Certain statements in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I Item 2, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include: projections of matters that affect net sales, gross profit, operating expenses, earnings from operations or net earnings; projections of capital expenditures; projections for growth; hiring plans; plans for future operations; financing needs or plans; plans relating to our products and services; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statement. Some of the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following:

• changes in the economic environment and/or IT industry;

• actions of competitors, including manufacturers of products we sell;

• reliance on suppliers for product availability, marketing funds, purchasing incentives and competitive products to sell;

• reliance on a limited number of outsourcing clients;

• disruptions in our information and telephone communication systems;

• risks associated with international operations;

• dependence on key personnel;

• decreased effectiveness of equity compensation and proposed changes in accounting for equity compensation;

• rapid changes in product standards;

• integration and operation of future acquired businesses;

• ability to renew or replace short-term financing facilities;

• recently enacted and proposed changes in securities laws and regulations;

• results of litigation;

• intellectual property infringement claims; and

• risks that are otherwise described from time to time in our Securities and Exchange Commission (“SEC”) reports, including but not limited to the items discussed in “Factors that Could Affect Future Results” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I Item 2 of this report.

We assume no obligation to update, and do not intend to update, any forward-looking statements.

3

PART 1- FINANCIAL INFORMATION

Item 1. Financial Statements

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	June 30,		December 31,
	2004		2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	60,607	$	41,897
Accounts receivable, net of allowances for doubtful accounts of $20,194 and $20,175, respectively		391,597		381,968
Inventories		88,287		89,254
Inventories not available for sale		14,087		22,031
Deferred income taxes and other current assets		37,151		35,645
Total current assets		591,729		570,795
Property and equipment, net		119,560		120,247
Goodwill		101,275		100,478
Other assets		280		604
	$	812,844	$	792,124
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	192,617	$	209,060
Accrued expenses and other current liabilities		48,978		66,437
Short-term financing facility		65,000		55,000
Total current liabilities		306,595		330,497
Line of credit		—		10,004
Deferred income taxes		16,254		12,254
Stockholders’ equity:
Preferred stock, $.01 par value, 3,000 shares authorized; no shares issued		—		—
Common stock, $.01 par value, 100,000 shares authorized; 48,441 shares at June 30, 2004 and 47,116 shares at December 31, 2003 issued and outstanding		484		471
Additional paid-in capital		287,721		266,803
Retained earnings		179,967		150,351
Accumulated other comprehensive income - foreign currency translation adjustment		21,823		21,744
Total stockholders’ equity		489,995		439,369
	$	812,844	$	792,124

See accompanying notes to condensed consolidated financial statements.

4

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)
(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004			2003
Net sales	$	769,054	$	725,414	$	1,501,706		$	1,436,685
Costs of goods sold		672,503		637,153		1,311,501			1,263,439
Gross profit		96,551		88,261		190,205			173,246
Operating expenses:
Selling and administrative expenses		73,554		73,628		146,166			147,284
Restructuring expenses		—		639		—			3,465
Reductions in liabilities assumed in previous acquisition		—		—		(3,160	)		(2,504	)
Earnings from operations		22,997		13,994		47,199			25,001
Non-operating expense, net		542		1,025		129			2,242
Earnings before income taxes		22,455		12,969		47,070			22,759
Income tax expense		9,427		4,800		17,454			7,563
Net earnings	$	13,028	$	8,169	$	29,616		$	15,196
Earnings per share:
Basic	$	0.27	$	0.18	$	0.62		$	0.33
Diluted	$	0.26	$	0.18	$	0.60		$	0.33
Shares used in per share calculation:
Basic		48,394		46,136		48,041			46,114
Diluted		49,194		46,255		49,036			46,192

See accompanying notes to condensed consolidated financial statements.

5

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except per share data)
(unaudited)

	Six Months Ended
	June 30,
	2004			2003
Cash flows from operating activities:
Net earnings	$	29,616		$	15,196
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		11,109			15,044
Provision for losses on accounts receivable		3,167			4,717
Write-downs of obsolete, slow-moving and non-salable inventories		2,737			5,275
Equity in loss of investee		131			—
Tax benefit from stock options exercised		4,281			—
Deferred income taxes		3,943			(4,082	)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(12,273	)		38,910
Decrease in inventories		6,160			5,901
(Increase) decrease in other current assets		(1,377	)		8,233
Increase in other assets		(105	)		(2,635	)
Decrease in accounts payable		(17,366	)		(8,722	)
(Decrease) increase in accrued expenses and other current liabilities		(17,590	)		8,731
Net cash provided by operating activities		12,433			86,568
Cash flows from investing activities:
Purchases of property and equipment		(10,252	)		(12,988	)
Investment in equity method investee		(400	)		—
Net cash used in investing activities		(10,652	)		(12,988	)
Cash flows from financing activities:
Net repayments on short-term financing facility and line of credit		(4	)		(76,182	)
Net repayment of long-term debt and capital leases		—			(1,792	)
Proceeds from sales of common stock through employee stock plans		16,650			1,076
Net cash provided by (used in) financing activities		16,646			(76,898	)
Foreign currency impact on cash flow		283			893
Increase (decrease) in cash and cash equivalents		18,710			(2,425	)
Cash and cash equivalents at beginning of period		41,897			30,930
Cash and cash equivalents at end of period	$	60,607		$	28,505

See accompanying notes to condensed consolidated financial statements.

6

INSIGHT ENTERPRISES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

     In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the Company’s financial position as of June 30, 2004, the results of operations for the three and six months ended June 30, 2004 and 2003, and the cash flows for the six months ended June 30, 2004 and 2003. The condensed consolidated balance sheet as of December 31, 2003 was derived from the audited consolidated financial statements at such date. The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America (“GAAP”).

     The results of operations for such interim periods are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements, including the related notes thereto, in our Annual Report on Form 10-K for the year ended December 31, 2003.

     The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

     The condensed consolidated financial statements include the accounts of Insight Enterprises, Inc. and its subsidiaries, which primarily are wholly-owned. Intercompany accounts and transactions have been eliminated in consolidation. References to “the Company,” “we,” “us,” “our” and the like refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context otherwise requires.

     The equity method of accounting is used for an investment in a company over which we have significant influence, but do not control. Significant influence is generally deemed to exist when we have an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. We have an equity investment in our June 30, 2004 balance sheet and statement of earnings for the three months ended June 30, 2004. See Note 4 for additional information regarding our equity method investment.

2. Stock Based Compensation

     We apply the intrinsic value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations including FASB Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation — an interpretation of APB Opinion No. 25” to account for our fixed plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, we have elected to continue to apply the intrinsic value-based method of accounting described above and have adopted the disclosure requirements of SFAS No. 123. Accordingly, we do not recognize compensation expense for any of our stock-based plans because we do not issue options at exercise prices below the market value at date of grant. Had compensation cost for our stock-based plans been determined consistent with SFAS No. 123, our net earnings and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share data):

7

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2004			2003		2004			2003
Net earnings as reported	$	13,028		$	8,169	$	29,616		$	15,196
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(2,242	)		52		(4,167	)		(2,067	)
Pro forma net earnings	$	10,786		$	8,221	$	25,449		$	13,129
Basic earnings per share:
As reported	$	0.27		$	0.18	$	0.62		$	0.33
Pro forma	$	0.22		$	0.18	$	0.53		$	0.28
Diluted earnings per share:
As reported	$	0.26		$	0.18	$	0.60		$	0.33
Pro forma	$	0.22		$	0.18	$	0.52		$	0.28

     For purposes of the SFAS No. 123 pro forma net earnings and net earnings per share calculations, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants of stock options in Insight Enterprises, Inc. during the three months ended June 30, 2004: dividend yield – 0%; expected volatility – 74%; risk-free interest rate – 3.24%; and expected lives – 3.01 years. We did not issue any stock options in PlusNet or Direct Alliance during the three and six months ended June 30, 2004.

3. Earnings Per Share (“EPS”)

     Basic EPS is computed by dividing net earnings available to common stockholders by the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes the effect of stock options assumed to be exercised using the treasury stock method. The reconciliation of the numerators and denominators of the basic and diluted EPS calculations were as follows for the three and six month periods ended June 30, 2004 and 2003 (in thousands, except per share data):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Numerator:
Net earnings	$	13,028	$	8,169	$	29,616	$	15,196
Denominator:
Weighted-average shares used to compute basic EPS		48,394		46,136		48,041		46,114
Dilutive potential common shares due to dilutive options and other stock based awards, net of tax effect		800		119		995		78
Weighted-average shares used to compute diluted EPS		49,194		46,255		49,036		46,192
Earnings per share:
Basic	$	0.27	$	0.18	$	0.62	$	0.33
Diluted	$	0.26	$	0.18	$	0.60	$	0.33

8

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

     The following weighted average outstanding stock options during the three and six month periods ended June 30, 2004 and 2003 were not included in the diluted EPS calculations because the exercise prices of these options were greater than the average market price of our common stock during the respective periods.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Weighted-average outstanding stock options having no dilutive effect (in thousands)		4,865		7,276		3,620		7,728

4. Equity Method Investment

     In March 2004, we invested in ExecTechDirect Technology, Inc. dba Executive Technology (“ET”), a minority-owned reseller of information technology products and services. We recorded the initial investment of $400,000 at cost in “other assets” on our condensed consolidated balance sheet. Our investment represents 20% of the total outstanding common and preferred shares of ET in the form of Series A Preferred shares and is accounted for under the equity method. Accordingly, 20% of ET’s earnings or losses is recorded in non-operating expense, net. At the time of investment, the entire basis of our investment exceeded the underlying equity in the net assets of the investee. Therefore, we accounted for the investment as goodwill embedded in our investment. We will not record amortization expense associated with such embedded goodwill but will assess whether such embedded goodwill is impaired on an annual basis. In addition to the 20% net earnings or loss recorded, we will increase our investment, to the extent deemed recoverable, by the amount of cumulative distributions of profit sharing equal to 20% of ET’s cumulative net earnings. These cumulative dividends are accrued but not paid until twenty-four months after the date of the original agreement and then only if ET has achieved certain financial ratios. For the three months ended June 30, 2004, we recorded $131,000 of non-operating expenses, representing 20% of ET’s losses, and $0 for cumulative dividends.

     ET also purchases products and services from other of our subsidiaries at rates and terms that we believe are no different than would be negotiated in arm’s length transactions. Where appropriate, intercompany transactions and balances have been eliminated. At June 30, 2004, certain of our subsidiaries held receivables, net, from ET in the amount of $215,000.

5. Goodwill

     The changes in the carrying amount of goodwill for the six months ended June 30, 2004 are as follows (in thousands):

	Insight
	North
	America			PlusNet		Total
Balance at December 31, 2003	$	85,703		$	14,775	$	100,478
Final earn-out payment related to the Comark acquisition		733			—		733
Currency translation adjustment		(167	)		231		64
Balance at June 30, 2004	$	86,269		$	15,006	$	101,275

9

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

6. Financing Facilities

     Our financing facilities include a $200,000,000 accounts receivable securitization financing facility, a $30,000,000 revolving line of credit and a $40,000,000 inventories financing facility.

     We have an agreement to sell receivables periodically to a special purpose accounts receivable and financing entity (the “SPE”), which is exclusively engaged in purchasing receivables from us. The SPE is a wholly-owned, bankruptcy-remote entity that we have included in our condensed consolidated financial statements. The SPE funds its purchases by selling undivided interests in up to $200,000,000 of eligible trade accounts receivable to a multi-seller conduit administered by an independent financial institution. The sales to the conduit do not qualify for sale treatment under SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” as we maintain control over the receivables that are sold. Accordingly, the receivables remain recorded on our condensed consolidated financial statements. At June 30, 2004, the SPE owned $324,400,000 of receivables that were recorded at fair value and included in our condensed consolidated balance sheet, of which $180,300,000 was eligible for funding. The financing facility expires December 30, 2004, and, accordingly, the $65,000,000 outstanding at June 30, 2004 is recorded in current liabilities. Interest is payable monthly, and the interest rate at June 30, 2004 on borrowed funds was 1.69% per annum. We also pay a commitment fee on the facility equal to 0.35% of the unused balance. At June 30, 2004, $115,300,000 was available under the facility. We have no reason to believe the facility will not be renewed at the end of its current term.

     As of June 30, 2004, there were no amounts outstanding under our $30,000,000 revolving line of credit. The line of credit bears interest, payable quarterly, at a rate chosen by us among available rates subject to our leverage ratio and other terms and conditions. The available rates are the financial institution’s floating rate or the London Interbank Offered Rate (LIBOR) based rate (5.55% and 2.92%, respectively, at June 30, 2004). The credit facility expires on December 31, 2005 and accordingly, any amounts outstanding are recorded as long-term liabilities. We have an outstanding letter of credit that reduces the availability on this line of credit by $10,000,000. At June 30, 2004, $20,000,000 was available under the line of credit.

     Our $40,000,000 secured inventories financing facility can be used to facilitate the purchases of inventories from certain suppliers and amounts outstanding are recorded as accounts payable. As of June 30, 2004, there was $5,600,000 outstanding under the inventories financing facility and $34,400,000 was available. This facility is non-interest bearing if paid within its terms and expires on December 31, 2005.

     Our facilities contain various covenants including the requirement that we maintain a specified amount of tangible net worth and comply with leverage and minimum fixed charge requirements. We were in compliance with all such covenants at June 30, 2004.

7. Income Taxes

     Our effective tax rates for the three and six months ended June 30, 2004 were 42.0% and 37.1%, respectively. For the three months ended June 30, 2004, our effective tax rates differ from the United States federal statutory rate of 35% primarily due to (i) the accrual of deferred tax expense resulting from our determination that the investment in PlusNet no longer met the indefinite reversal criteria as defined by GAAP, (ii) the recognition of an income tax benefit for valuation allowance releases related primarily to the utilization of depreciation allowance carryforwards, and (iii) state income taxes, net of federal income tax benefit. In addition to the foregoing, for the six months ended June 30, 2004, the effective tax rate was reduced by the recognition of an income tax benefit for valuation allowance releases related to a reduction of liabilities assumed in a previous acquisition and the utilization of capital loss carryforwards.

10

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

     Our effective tax rates for the three and six months ended June 30, 2003 were 37.0% and 33.2%, respectively. For the three and six months ended June 30, 2003, state income taxes, net of federal income tax benefit, and lower tax rates on earnings in Canada and the United Kingdom caused our effective tax rates to differ from the United States federal statutory rate of 35%. In addition, for the six months ended June 30, 2003, the effective tax rate was reduced by the recognition of an income tax benefit for income resulting from a reduction of liabilities assumed in a previous acquisition which was nontaxable.

8. Restructuring and Acquisition Integration Activities

Acquisition-Related Restructuring Costs Expensed in 2003

     During the year ended December 31, 2003, Insight North America recorded $2,283,000 in restructuring expenses associated with costs incurred to close Insight North America’s distribution facility in Indiana and $639,000 in connection with the elimination of certain support and management positions. Of the remaining $458,000 still recorded at December 31, 2003 for facilities based costs, $390,000 was paid and the remaining $68,000 was adjusted and recorded as a reduction of selling and administrative expenses during the six months ended June 30, 2004.

     Also during the year ended December 31, 2003, Insight UK recorded $543,000 of restructuring expenses relating to severance associated with the elimination of service technicians and certain support and management functions. The remaining $46,000 still recorded at December 31, 2003 for employee based costs was adjusted and recorded as a reduction of selling and administrative expenses during the six months ended June 30, 2004.

     The following table details the changes in restructuring liabilities for the six months ended June 30, 2004 (in thousands):

	Insight North
	America			Insight UK
	Facilities			Employee
	Based			Termination			Consolidated
	Costs			Benefits			Total
Balance at December 31, 2003	$	458		$	46		$	504
Adjustments		(68	)		(46	)		(114	)
Cash payments		(390	)		—			(390	)
Balance at June 30, 2004	$	—		$	—		$	—

Acquisition-Related Restructuring Costs Capitalized in 2001 as a Cost of Acquisition of Action

     In 2001, Insight UK recorded costs of $18,440,000 relating to restructuring the operations of Action plc (“Action”) as part of the integration of this acquisition. These costs consisted of employee termination benefits and facilities based costs of $3,532,000 and $14,908,000, respectively, of which $9,117,000 of facilities based costs remained accrued at December 31, 2003. Adjustments to the accrued facilities based costs during the six months ended June 30, 2004 includes the settlement of a liability assumed with the acquisition for $3,160,000 less than the amounts originally recorded and an increase of $272,000 related to fluctuations in the British pound sterling exchange rates. Facilities based costs of $2,570,000 were paid during the six months ended June 30, 2004, resulting in an ending accrual balance at June 30, 2004 of $3,659,000. Although the facilities based costs represent contractual payments under long-term leases, we are actively pursuing opportunities to negotiate a termination of these leases and have recorded the obligations as current accrued liabilities.

11

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

     The following table details the change in these liabilities for the six months ended June 30, 2004 (in thousands):

	Facilities
	Based
	Costs
Balance at December 31, 2003	$	9,117
Adjustments		(2,888	)
Cash payments		(2,570	)
Balance at June 30, 2004	$	3,659

9. Contingencies

Employment Contracts

     We have employment agreements with certain officers and management employees under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If all such persons were terminated, and the severance payments under the current employment agreements were to become payable, the maximum contingent severance payment calculated as of June 30, 2004 would be approximately $13,900,000.

Guaranties

     In conjunction with a significant product sale made by ET, our equity method investee described in Note 4, we have provided performance and financial guaranties to a customer and a third-party product supplier on behalf of ET.

     Under the customer guaranty, we would be required to deliver products and perform under the Purchase Agreement between ET and the customer, if ET is unable to do so. With respect to this guaranty, we assessed the fair value of our obligation to stand ready to perform by considering the likelihood of occurrence of the specified triggering events or conditions requiring performance, as well as other assumptions and factors. We determined that the fair value of this guaranty is not material to our financial position, results of operations or cash flow, and, accordingly, no liability has been recorded related to this guaranty.

     Under the third-party supplier guaranty, we would be required to remit payments to the third-party supplier for the product purchased pursuant to the customer purchase order, if ET is unable to make such payments. This guaranty expires on September 5, 2004, and the maximum aggregate amount of this guaranty was $7,285,000 at June 30, 2004. Due to the fact that the customer has a strong financial and credit history, we fully expect ET to be paid in full, which increases the likelihood that the third-party supplier will be paid. In addition, the product purchased from the third-party supplier could be resold if the customer does not remit payment. We have determined that the fair value of this guaranty is $0, and, accordingly, no liability has been recorded.

Indemnifications

     In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify either our customer or a third party service provider in the arrangement from any losses incurred relating to services performed on our behalf or for losses arising from certain defined events, which may include litigation or claims relating to past performance. These arrangements include, but are not limited to, our indemnification of our officers and directors to the maximum extent under the laws of the State of Delaware, the indemnification of our lessors for certain claims arising from our use of the leased facilities, and the indemnification of the bank that provides our credit facilities for certain claims arising from the bank’s grants of

12

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

credit to us. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments, if any, related to these indemnifications have been immaterial, and we have not accrued any liabilities related to such indemnifications in our condensed consolidated financial statements.

Legal Proceedings

     We are a defendant in a lawsuit, which is a consolidation of four separate actions brought by stockholders in July 2002 in the United States District Court, District of Arizona. The lawsuit alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the SEC. The plaintiffs in this action allege we, and certain of our officers, made false and misleading statements pertaining to our business, operations and management in an effort to inflate the price of our common stock. The lawsuit also names as co-defendants: Eric J. Crown, the Chairman of our Board of Directors; Timothy A. Crown, our Chief Executive Officer and President and a director; and Stanley Laybourne, our Executive Vice President, Chief Financial Officer and Treasurer and a director. The plaintiffs seek class action status to represent all buyers of our common stock from September 3, 2001 through July 17, 2002. On September 27, 2003, the court granted our motion to dismiss plaintiffs’ amended complaint, but allowed plaintiffs leave to file an amended complaint, which they did on October 31, 2003. On May 11, 2004, the court granted our motion to dismiss the second amended complaint with prejudice and without leave to amend. Plaintiffs have appealed the dismissal to the Ninth Circuit Court of Appeals. We will continue to defend the case vigorously. The costs associated with defending the allegations in this lawsuit and the potential outcome cannot be determined at this time and, accordingly, no estimate for such costs has been included in these condensed consolidated financial statements.

     We are also a party to various legal proceedings arising in the ordinary course of business, including asserted preference payment claims in customer bankruptcy proceedings and claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights.

     In accordance with SFAS No. 5, “Accounting for Contingencies,” we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Although litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that the results of our operations or cash flows could be materially and adversely affected in any particular period by the resolution of a legal proceeding.

10. Segment Information

     SFAS No. 131 requires disclosures of certain information regarding operating segments, products and services, geographic areas of operation and major customers. The method for determining what information to report under SFAS No. 131 is based upon the “management approach,” or the way that management organizes the operating segments within the Company, for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is our chief executive officer.

     We have the following reportable operating segments:

• Single-source provider of IT products and services – North America (“Insight North America”);

• Single-source provider of IT products and services – United Kingdom (“Insight UK”);

• Business process outsourcing provider (“Direct Alliance”); and

• Internet service provider (“PlusNet”).

     All intercompany transactions are eliminated upon consolidation and there are no differences between the accounting policies used to measure profit and loss for our segments and on a consolidated basis. Net sales are

13

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

defined as net sales from external customers. None of our customers exceeded ten percent of consolidated net sales.

     As a result of the completion of the initial public offering (“IPO”) of PlusNet in the United Kingdom, discussed in Note 11, starting in the quarter ending September 30, 2004, PlusNet will no longer be reported as a separate operating segment.

     The table below presents information about our reportable operating segments as of and for the three months ended June 30, 2004 and 2003 (in thousands):

	Three Months Ended June 30, 2004
	Insight
	North		Insight		Direct
	America		UK		Alliance		PlusNet		Consolidated
Net sales	$	634,451	$	105,171	$	17,438	$	11,994	$	769,054
Costs of goods sold		561,810		89,956		12,641		8,096		672,503
Gross profit		72,641		15,215		4,797		3,898		96,551
Operating expenses:
Selling and administrative expenses		56,649		12,928		1,659		2,318		73,554
Earnings from operations	$	15,992	$	2,287	$	3,138	$	1,580	$	22,997
Total assets	$	809,347	$	113,823	$	61,880	$	34,067	$	812,844	*

	Three Months Ended June 30, 2003
	Insight
	North		Insight		Direct
	America		UK		Alliance		PlusNet		Consolidated
Net sales	$	609,906	$	90,702	$	18,292	$	6,514	$	725,414
Costs of goods sold		540,872		78,763		13,344		4,174		637,153
Gross profit		69,034		11,939		4,948		2,340		88,261
Operating expenses:
Selling and administrative expenses		59,624		11,249		1,143		1,612		73,628
Restructuring expenses		639		—		—		—		639
Earnings from operations	$	8,771	$	690	$	3,805	$	728	$	13,994
Total assets	$	647,226	$	99,901	$	53,079	$	26,720	$	719,251	*

*Condensed consolidated total assets include net intercompany eliminations and corporate assets of $206,273 and $107,675 at June 30, 2004, and 2003, respectively.

14

INSIGHT ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

     The table below presents information about our reportable operating segments as of and for the six months ended June 30, 2004 and 2003 (in thousands):

	Six Months Ended June 30, 2004
	Insight
	North		Insight			Direct
	America		UK			Alliance		PlusNet		Consolidated
Net sales	$	1,216,763	$	225,648		$	36,134	$	23,161	$	1,501,706
Costs of goods sold		1,075,360		193,714			26,535		15,892		1,311,501
Gross profit		141,403		31,934			9,599		7,269		190,205
Operating expenses:
Selling and administrative expenses		111,879		26,233			3,189		4,865		146,166
Reductions in liabilities assumed in previous acquisition		—		(3,160	)		—		—		(3,160	)
Earnings from operations	$	29,524	$	8,861		$	6,410	$	2,404	$	47,199
Total assets	$	809,347	$	113,823		$	61,880	$	34,067	$	812,844	*

	Six Months Ended June 30, 2003
	Insight
	North		Insight			Direct
	America		UK			Alliance		PlusNet		Consolidated
Net sales	$	1,201,302	$	185,129		$	37,910	$	12,344	$	1,436,685
Costs of goods sold		1,067,303		160,126			28,251		7,759		1,263,439
Gross profit		133,999		25,003			9,659		4,585		173,246
Operating expenses:
Selling and administrative expenses		118,354		23,246			2,341		3,343		147,284
Restructuring expenses		2,922		543			—		—		3,465
Reductions in liabilities assumed in previous acquisition		—		(2,504	)		—		—		(2,504	)
Earnings from operations	$	12,723	$	3,718		$	7,318	$	1,242	$	25,001
Total assets	$	647,226	$	99,901		$	53,079	$	26,720	$	719,251	*

*Condensed consolidated total assets include net intercompany eliminations and corporate assets of $206,273 and $107,675 at June 30, 2004, and 2003, respectively.

11. Subsequent Event

     We successfully completed an IPO of 13,900,000 shares of PlusNet at a public offering price of £0.90 per share (approximately $1.67 a share). Trading in PlusNet shares began on July 14, 2004 under the symbol “PNT” on AIM, a market of the London Stock Exchange. Insight Enterprises, Inc. sold 11,111,111 shares which resulted in gross proceeds to Insight Enterprises of £10,000,000 (approximately $18,600,000). PlusNet’s market value, based on the public offering price, was £25,110,000 (approximately $46,705,000) compared to the £9,126,000 (approximately $16,933,000) that we paid for PlusNet. We will record a gain in the three month period ending September 30, 2004 on our sale of shares of approximately $6,176,000. Additionally, in the three month period ending September 30, 2004, we will record bonus expenses of approximately $830,000 related to a management incentive plan with the top executives at PlusNet that compensates them, as a group, approximately 12.5% of the gain, after certain adjustments, related to the sales in the IPO, as well as future sales of PlusNet shares owned by Insight Enterprises. The sale of shares in the offering reduced our percentage ownership of PlusNet to approximately 45%. As a result of the sale, our investment in PlusNet, starting in the three month period ending September 30, 2004, will be accounted for under the equity method, and we will no longer report PlusNet as a separate operating segment. We are restricted from selling additional shares of PlusNet prior to

15

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

the announcement of PlusNet’s interim results for the six month period ending June 30, 2005, without the prior consent of Robert W. Baird, the underwriters of the IPO.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion should be read in conjunction with the condensed consolidated financial statements and the related notes that appear elsewhere in Part I Item 1 of this report.

Overview

     We are a leading provider of information technology (“IT”) products and services to businesses in the United States, Canada and the United Kingdom. Our offerings include brand name computing products, IT services and outsourcing of business processes. During the three months ended June 30, 2004, we were organized in the following four operating segments:

• Single-source provider of IT products and services – North America (“Insight North America”);

• Single-source provider of IT products and services – United Kingdom (“Insight UK”);

• Business process outsourcing provider (“Direct Alliance”); and

• Internet service provider (“PlusNet”).

     As a result of the initial public offering (“IPO”) of PlusNet shares in the United Kingdom on July 14, 2004, our ownership interest in PlusNet declined to approximately 45%. Therefore, starting in the three month period ending September 30, 2004, PlusNet will no longer be reported as a separate operating segment.

     We evaluate the performance of our operating segments based on results of operations before non-recurring items, such as restructuring expenses and reductions in liabilities assumed in previous acquisition. Reconciliations of our operating segments to consolidated results of operations can be found in Note 10 to the condensed consolidated financial statements in Part I Item 1 of this report.

     Net sales for the three months ended June 30, 2004 increased 6% to $769.1 million from $725.4 million for the three months ended June 30, 2003. Net earnings for the three months ended June 30, 2004 increased 60% to $13.0 million from $8.2 million for the three months ended June 30, 2003. For the three months ended June 30, 2004, diluted earnings per share increased 44% to $0.26 from $0.18 for the three months ended June 30, 2003. Net earnings and diluted earnings per share for the three months ended June 30, 2004 included the net effect of income tax adjustments of $853,000 related to the announcement of the PlusNet IPO and releases of deferred tax valuation allowances related to Insight UK. Net earnings and diluted earnings per share for the three months ended June 30, 2003 included Insight North America restructuring expenses of $407,000, net of taxes.

     Insight North America reported year over year and sequential sales growth of 4% and 9%, respectively, for the three months ended June 30, 2004. The sales growth was due primarily to the completion of the IT system conversion last quarter allowing a renewed focus on the customers and to businesses increasing their IT spending in a generally improving economy. Internal initiatives are now focused on ways to deliver technology solutions to business customers more effectively and efficiently. We are designing and implementing enhancements to our system and website to increase our customers’ ease of doing business with us and to further enhance the productivity of our account executives and support personnel.

     Insight UK continued to focus on increasing awareness of our single-source business model with small- and medium-sized business (“SMB”) customers. The three months ended June 30, 2004 represented Insight UK’s sixth consecutive quarter of operating profitability with earnings from operations increasing 231% over the second quarter of 2003. The second quarter is a weaker quarter for Insight UK due to a seasonally strong first quarter for large corporate and public sector customers.

     Direct Alliance continued to contribute earnings from operations and is investing in and focused on business development efforts. During the three months ended June 30, 2004, Direct Alliance signed a new client whose program is scheduled to start during the three months ended September 30, 2004. As is the case for all

16

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

new programs, it will take some time for the program to contribute positively to earnings from operations. However, the program provides us with opportunities for growth and client diversification.

     As discussed in Note 11 to the condensed consolidated financial statements in Part I Item 1 of this report, we successfully completed an IPO of PlusNet in the United Kingdom in July 2004. The sale of shares in the offering reduced our percentage ownership of PlusNet to approximately 45%. As a result of the sale, our investment in PlusNet, starting in the three month period ending September 30, 2004, will be accounted for under the equity method.

     During the three months ended June 30, 2004, we recorded deferred income taxes of $2.1 million for the excess of the financial statement carrying amount over the tax basis of PlusNet at June 30, 2004, reflecting the fact that United States federal income taxes will become payable as our investment in PlusNet is sold. Partially offsetting this increase in income tax expense was the recognition of a United Kingdom income tax benefit of approximately $1.3 million for valuation allowance releases primarily related to the utilization of depreciation allowance carry forwards.

     Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our condensed consolidated financial statements, the changes in certain key items in those condensed consolidated financial statements from year to year, the primary factors that contributed to those changes, as well as how certain critical accounting policies and estimates affect our condensed consolidated financial statements.

Critical Accounting Policies and Estimates

General

     Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Members of our senior management have discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results, however, may differ from estimates we have made.

     An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and either different estimates reasonably could have been used, or changes in the accounting estimates are reasonably likely to occur periodically, that could materially affect the condensed consolidated financial statements. We believe there have been no significant changes during the six months ended June 30, 2004 to the items we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2003.

17

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

RESULTS OF OPERATIONS

     The following table sets forth for the period presented certain financial data as a percentage of net sales:

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		87.4			87.8			87.3			87.9
Gross profit		12.6			12.2			12.7			12.1
Operating expenses:
Selling and administrative expenses		9.6			10.2			9.7			10.4
Restructuring expenses		—			0.1			—			0.2
Reductions in liabilities assumed in previous acquisition		—			—			(0.2	)		(0.2	)
Earnings from operations		3.0			1.9			3.2			1.7
Non-operating expense, net		0.1			0.1			0.1			0.1
Earnings before income taxes		2.9			1.8			3.1			1.6
Income tax expense		1.2			0.7			1.1			0.5
Net earnings		1.7	%		1.1	%		2.0	%		1.1	%

Three and Six Months Ended June 30, 2004 Compared to Three and Six Months Ended June 30, 2003

     Net Sales. Net sales for the three months ended June 30, 2004 increased 6% to $769.1 million from $725.4 million for the three months ended June 30, 2003. Net sales for the six months ended June 30, 2004 increased 5% to $1,501.7 million from $1,436.7 million for the six months ended June 30, 2003. Our net sales by operating segment were as follows (in thousands):

	Three Months Ended June 30,				%			Six Months Ended June 30,				%
	2004		2003		Change			2004		2003		Change
Insight North America	$	634,451	$	609,906		4	%	$	1,216,763	$	1,201,302		1	%
Insight UK		105,171		90,702		16	%		225,648		185,129		22	%
Direct Alliance		17,438		18,292		(5	%)		36,134		37,910		(5	%)
PlusNet		11,994		6,514		84	%		23,161		12,344		88	%
Consolidated	$	769,054	$	725,414		6	%	$	1,501,706	$	1,436,685		5	%

     Insight North America’s sales increased for the three months ended June 30, 2004 by 4% to $634.5 million from $609.9 million for the three months ended June 30, 2003. This increase was primarily attributable to the completion of the IT system conversion allowing a renewed focus on customers and to businesses increasing their IT spending in a generally improving economy. Net sales increased for the six months ended June 30, 2004 by 1% to $1,216.8 million from $1,201.3 million for the six months ended June 30, 2003. The overall increase was the result of a strong second quarter, offset by decreases in net sales in the first quarter due primarily to distractions associated with the migration of account executives serving SMB customers in the United States to our Maximus system during January 2004. Insight North America had 1,252 account executives at June 30, 2004 compared with 1,309 at June 30, 2003. The decrease in account executives was due to planned headcount reductions during 2003, based on performance, in order to reduce costs and increase the productivity of the remaining account executives, offset by an increase of 58 net account executives during the six months ended June 30, 2004. For the remainder of 2004, we are not currently planning to add net account executives in Insight North America but instead will be focusing on increasing productivity and training of existing account executives.

     Insight UK’s net sales increased 16% to $105.2 million for the three months ended June 30, 2004 from $90.7 million for the three months ended June 30, 2003. Increases in the British pound sterling exchange rates accounted for $10.9 million of the increase in net sales for the three months ended June 30, 2004 over the same period last year. Excluding the effect of fluctuations in the British pound sterling exchange rates, net sales

18

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

increased approximately 4% compared to the same period in 2003. Insight UK’s net sales increased 22% to $225.6 million for the six months ended June 30, 2004 from $185.1 million for the six months ended June 30, 2003. Increases in the British pound sterling exchange rates accounted for $26.3 million of the increase in net sales for the six months ended June 30, 2004 over the same period last year. Excluding the effect of fluctuations in the British pound sterling exchange rates, net sales increased approximately 8% compared to the same period in 2003. The increases in net sales for the 2004 periods compared to the 2003 periods was due primarily to increasing productivity of account executives and increases in market demand from SMB and public sector customers. Insight UK had 321 account executives at June 30, 2004 compared to 272 at June 30, 2003. The increase is due to the addition of 89 net account executives during the six months ended June 30, 2004, offset by planned headcount reductions, based on performance, during 2003. For the remainder of 2004, we plan to continue to add 15 to 25 net account executives per quarter in Insight UK.

     Direct Alliance’s net sales decreased 5% to $17.4 million for the three months ended June 30, 2004, compared to $18.3 million for the three months ended June 30, 2003. Net sales decreased 5% to $36.1 million for the six months ended June 30, 2004 from $37.9 million for the six months ended June 30, 2003. Net sales declined in the 2004 periods due primarily to the wind-down of one client relationship that ended, as scheduled, during the second quarter of 2003. This client represented approximately 3% and 6%, respectively, of Direct Alliance’s net sales for the three and six months ended June 30, 2003. Direct Alliance’s net sales are concentrated with a few manufacturers of IT products. For the three and six months ended June 30, 2004, Direct Alliance’s largest outsourcing client accounted for 61% of Direct Alliance’s net sales compared to 67% and 64%, respectively, for the three and six months ended June 30, 2003. For the three and six months ended June 30, 2004, Direct Alliance’s top three outsourcing clients accounted for approximately 90% of Direct Alliance’s net sales compared to 90% and 89%, respectively, for the three and six months ended June 30, 2003.

     PlusNet grew net sales 84% to $12.0 million for the three months ended June 30, 2004, compared to net sales of $6.5 million for the three months ended June 30, 2003. Net sales increased 88% to $23.2 million for the six months ended June 30, 2004, compared to net sales of $12.3 million for the six months ended June 30, 2003. PlusNet continues to grow its broadband customer base primarily from customers migrating from “dial-up” to broadband Internet access. Increases in the British pound sterling exchange rates accounted for $1.3 million of the increase in net sales for the three months ended June 30, 2004 over the same period last year. Excluding the effect of fluctuations in the British pound sterling exchange rates, net sales increased approximately 65% compared to the same period in 2003. Increases in the British pound sterling exchange rates accounted for $2.8 million of the increase in net sales in the six months ended June 30, 2004 over the same period last year. Excluding the effect of fluctuations in the British pound sterling exchange rates, net sales increased approximately 65% from the same period in 2003.

     As discussed in Note 11 to the condensed consolidated financial statements in Part I Item 1 of this report, we successfully completed an IPO of PlusNet in the United Kingdom in July 2004. The sale of shares in the offering reduced our percentage ownership of PlusNet to approximately 45%. As a result of the sale, our investment in PlusNet, starting in the three months ending September 30, 2004, will be accounted for under the equity method.

     Gross Profit. Gross profit increased 9%, to $96.6 million for the three months ended June 30, 2004 from $88.3 million for the three months ended June 30, 2003. As a percentage of sales, gross margin increased from 12.2% for the three months ended June 30, 2003 to 12.6% for the three months ended June 30, 2004. The increase in gross margin was due primarily to:

• a surge in referral fees from Microsoft for enterprise agreement renewals for the three months ended June 30, 2004 for Insight North America and Insight UK;

• increases in supplier reimbursements for Insight North America and Insight UK; and

• increases in freight margins for Insight UK.

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

These increases were offset partially by decreased product and service gross margins for Insight North America due to increasing pricing pressure and an increase in the percentage of sales to large corporate and public sector customers, which are at lower gross margins.

     Gross profit for the six months ended June 30, 2004, increased 10% to $190.2 million from $173.2 million for the six months ended June 30, 2003. As a percentage of sales, gross margin increased from 12.1% for the six months ended June 30, 2003 to 12.7% for the six months ended June 30, 2004 due primarily to:

• a surge in referral fees from Microsoft for enterprise agreement renewals for the six months ended June 30, 2004 for Insight North America and Insight UK;

• increases in supplier reimbursements for Insight North America and Insight UK;

• decreases in the write-downs of obsolete, slow moving and non-salable inventories for Insight North America and Insight UK due to enhanced inventory management policies and procedures; and

• increases in freight margins and supplier discounts for Insight UK.

These increases were offset partially by decreased service gross margins for Insight North America.

     Operating Expenses.

     Selling and Administrative Expenses. Selling and administrative expenses remained consistent at $73.6 million for the three months ended June 30, 2004 and 2003, but decreased as a percent of net sales to 9.6% for the three months ended June 30, 2004 from 10.2% for the three months ended June 30, 2003. For the six months ended June 30, 2004, selling and administrative expenses decreased 1% to $146.2 million from $147.3 million for the six months ended June 30, 2003. For the six months ended June 30, 2004 selling and administrative expenses as a percentage of net sales decreased to 9.7% from 10.4% for the six months ended June 30, 2003. The decrease in selling and administrative expenses as a percentage of net sales in the 2004 periods compared to the 2003 periods was due primarily to the cost savings from completing the system conversion which eliminated accelerated depreciation, stay bonuses and redundant personnel. Also contributing to the decrease was an increase in net sales and a continued focus on cost controls in non-investment areas. These decreases were partially offset by investments in marketing, business development and hiring of senior management personnel.

     Reductions in Liabilities Assumed in Previous Acquisition. During the six months ended June 30, 2004, Insight UK settled certain liabilities assumed in the acquisition of Action in late 2001 for $3.2 million less than the amounts originally recorded. The book tax expense recorded in the condensed consolidated financial statements related to this income was only $272,000 due to the release of the valuation allowance on the related deferred tax asset.

     Non-Operating Expense, Net. Non-operating expense, net, which typically consists primarily of interest expense and interest income, decreased to $542,000 for the three months ended June 30, 2004 from $1.0 million for the three months ended June 30, 2003. Non-operating expense for the six months ended June 30, 2004 decreased to $129,000 from $2.2 million for the six months ended June 30, 2003. Interest expense of $479,000 and $658,000 for the three months ended June 30, 2004 and 2003, respectively, and $870,000 and $1.5 million for the six months ended June 30, 2004 and 2003, respectively, primarily relates to borrowings under our financing facilities. Interest expense has decreased due to decreases in outstanding interest-bearing debt during the three and six months ended June 30, 2004 compared with the 2003 periods. Interest income of $365,000 and $188,000 for the three months ended June 30, 2004 and 2003, respectively, and $726,000 and $375,000 for the six months ended June 30, 2004 and 2003, respectively, was generated through short-term investments. The increase in interest income is due to increases in the amount in cash invested in short-term investments during the three and six months ended June 30, 2004. Additionally, the majority of the cash is invested in the United Kingdom at higher interest rates than currently available in the United States.

20

INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

     Non-operating expenses, other than interest expense, for the three months ended June 30, 2004 and 2003 consist primarily of bank fees associated with our financing facilities and cash management. Non-operating expense, other than interest, decreased to $428,000 for the three months ended June 30, 2004 from $552,000 for the three months ended June 30, 2003. Additionally, included in non-operating expense for the three months ended June 30, 2004 is $131,000 of investment in net loss of an equity method investee as described in Note 4 to the condensed consolidated financial statements in Part I Item 1 of this report. Non-operating expense, other than interest, increased to $15,000 of income for the six months ended June 30, 2004 from $1.1 million of expense for the six months ended June 30, 2003. The increase was due primarily to two separate gains on investments that occurred during the three months ended March 31, 2004. Insight UK sold a building for a gain of $328,000, $317,000 net of tax, and Direct Alliance realized a gain of $516,000 from selling stock upon the exercise of stock options that were received from a client several years ago as compensation for a note payable extension. This gain was non-taxable due to the utilization of capital loss carry forwards.

     Income Tax Expense. Our effective tax rates for the three months ended June 30, 2004 and 2003 were 42.0% and 37.0%, respectively. The increase in the effective tax rate is due to an increase in deferred taxes related to PlusNet. As a result of the decision during the three months ended June 30, 2004 to pursue an IPO of PlusNet, we determined that the investment in PlusNet no longer met the indefinite reversal criteria. Accordingly, during the three months ended June 30, 2004, we recorded deferred income taxes of $2.1 million for the excess of the financial statement carrying amount over the tax basis of PlusNet at June 30, 2004, reflecting the fact that United States federal income taxes will become payable as our investment in PlusNet is sold. Partially offsetting this increase in the effective tax rates was the recognition of a United Kingdom income tax benefit of approximately $1.3 million for valuation allowance releases primarily related to the utilization of depreciation allowance carry forwards.

     Our effective tax rates for the six months ended June 30, 2004 and 2003 were 37.1% and 33.2%, respectively. In addition to the items noted above for the three months ended June 30, 2004 and 2003, the effective tax rate for the six months ended June 30, 2004 and 2003 was also reduced due to the treatment of the income resulting from reductions in liabilities assumed in a previous acquisition. For the six months ended June 30, 2004, the remaining valuation allowance on the related deferred tax asset was released. For the six months ended June 30, 2003, the income from the reduction of acquired liabilities was substantially non-taxable. The rate in 2004 was also reduced due to increases in net earnings in our United Kingdom operations, which are taxed at lower rates than the United States, and due to the utilization of capital loss carry forwards. These decreases are offset partially by an overall increase in our United States effective tax rate due to corporate organizational changes effective September 1, 2003, as part of our decision to collect sales tax across all applicable states.

Liquidity and Capital Resources

     The following table sets forth for the periods presented certain consolidated cash flow information (in thousands):

	Six Months Ended June 30,
	2004			2003
Net cash provided by operating activities	$	12,433		$	86,568
Net cash used in investing activities		(10,652	)		(12,988	)
Net cash provided by (used in) financing activities		16,646			(76,898	)
Foreign currency exchange impact on cash flow		283			893
Increase (decrease) in cash and cash equivalents	$	18,710		$	(2,425	)
Cash and cash equivalents at beginning of quarter	$	41,897		$	30,930
Cash and cash equivalents at end of quarter	$	60,607		$	28,505

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cash and Cash Flow

     Our cash balances are held in the United States, Canada and the United Kingdom, with the majority in the United Kingdom. The cash held in Canada and the United Kingdom could be repatriated to the United States, but, under current law, would be subject to United States federal income taxes, less applicable foreign tax credits. Our present intent is that the cash balances will remain in these countries for future growth and investments, and we will meet any liquidity requirements in the United States through ongoing cash flows, external borrowings or both.

     Our primary use of cash in the past few years has been to fund our working capital requirements, capital expenditures and acquisitions.

     Net cash provided by operating activities. Cash flows from operations for the six months ended June 30, 2004 and 2003 were $12.4 million and $86.6 million, respectively. Cash flows from operations for the six months ended June 30, 2004 resulted primarily from net earnings before depreciation, offset by increase in accounts receivable due to increased sales compared to prior year and decreases in accounts payable and accrued expenses. Cash flows from operations for the six months ended June 30, 2003 resulted primarily from net earnings before depreciation and a decrease in accounts receivable. The decrease in accounts receivable at June 30, 2003 was due to reduced sales compared to the prior year and improved collection efforts.

     Our consolidated cash flow operating metrics are as follows:

	Six Months Ended June 30,
	2004		2003
Days sales outstanding in ending accounts receivable (“DSOs”)		47		45
Inventory turns (excluding inventories not available for sale)		30		34

     DSOs increased in the six months ended June 30, 2004 compared with the six months ended June 30, 2003 due to increases in net sales and a higher percentage of the sales being made in the last month of the six- month period. The decrease in annualized inventory turns resulted primarily from an increase in inventories due to increases in opportunistic purchases and changes in a manufacturer’s buying programs. The $14.1 million of inventories not available for sale represents inventories segregated pursuant to binding customer contracts, which will be recorded as net sales when the criteria for sales recognition are met.

     Cash flows from operations for the past three years have exceeded net earnings (loss). However, if sales increase in the future, we expect that cash flow from operations will be used, at least partially, to fund working capital as we typically increase balances in our inventories and pay our suppliers, in order to take advantage of supplier discounts, on average terms that are shorter than the average terms granted to our customers.

     Net cash used in investing activities. Capital expenditures for the six months ended June 30, 2004 primarily relate to capitalized costs of computer software developed for internal use and computer equipment. Capital expenditures for six months ended June 30, 2003 primarily relate to software, hardware and capitalized computer software development costs associated with the IT system conversion in Insight North America and capitalized costs of computer software developed for internal use. We expect capital expenditures in 2004, primarily relating to purchased software and internal development of software enhancements related to our IT systems and purchases of computer equipment, to be between $15.0 million and $20.0 million.

     Net cash provided by (used in) financing activities. The total outstanding balance under our line of credit and accounts receivable securitization facility was $65.0 million at June 30, 2004 and December 31, 2003 and at June 30, 2004, we had $60.6 million on hand in cash and cash equivalents. At June 30, 2004, a total of $135.3 million was available under our line of credit and accounts receivable securitization facility.

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

     We anticipate that cash flow from operations, together with the funds available under our financing facilities, will be adequate to support our presently anticipated cash and working capital requirements for operations through 2004 and longer if we successfully renew our short-term finance facility when its current term ends on December 30, 2004. We have no reason to believe the facility will not be renewed at the end of its current term.

     We may need additional debt or equity financing to continue funding our internal growth beyond 2004. In addition, as part of our long-term growth strategy, we intend to consider acquisition opportunities from time to time, which may require additional debt or equity financing.

Financing Facilities

     Our financing facilities include a $200.0 million accounts receivable securitization financing facility, a $30.0 million revolving line of credit and a $40.0 million inventories financing facility.

     We have an agreement to sell receivables periodically to a special purpose accounts receivable and financing entity (the “SPE”), which is exclusively engaged in purchasing receivables from us. The SPE is a wholly-owned, bankruptcy-remote entity that we have included in our condensed consolidated financial statements. The SPE funds its purchases by selling undivided interests in up to $200.0 million of eligible trade accounts receivable to a multi-seller conduit administered by an independent financial institution. The sales to the conduit do not qualify for sale treatment under SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” as we maintain effective control over the receivables that are sold. Accordingly, the receivables remain recorded on our condensed consolidated financial statements. At June 30, 2004, the SPE owned $324.4 million of receivables recorded at fair value and included in our condensed consolidated balance sheet, of which $180.3 million was eligible for funding. The financing facility expires December 30, 2004 and accordingly, the $65.0 million outstanding at June 30, 2004 is recorded in current liabilities. Interest is payable monthly, and the interest rate at June 30, 2004 on borrowed funds was 1.69%. We also pay a commitment fee on the facility equal to 0.35% of the unused balance. At June 30, 2004, $115.3 million was available under the facility. We have no reason to believe the facility will not be renewed at the end of its current term.

     As of June 30, 2004, no amounts were outstanding under our $30.0 million revolving line of credit. The line of credit bears interest, payable quarterly, at a rate chosen by us among available rates subject to our leverage ratio and other terms and conditions. The available rates are the financial institution’s floating rate or the LIBOR based rate (5.55% and 2.92%, respectively at June 30, 2004). The credit facility expires on December 31, 2005 and accordingly, amounts outstanding are recorded as long-term liabilities. We have an outstanding letter of credit that reduces the availability on this line of credit by $10.0 million. At June 30, 2004, $20.0 million was available under the line of credit.

     Our $40.0 million secured inventories financing facility can be used to facilitate the purchases of inventories from certain suppliers and amounts outstanding are recorded as accounts payable. As of June 30, 2004, there was $5.6 million outstanding under the inventories financing facility and $34.4 million available. This facility is non-interest bearing if paid within its terms and expires December 31, 2005.

     Our financing facilities contain various covenants including the requirement that we maintain a specified amount of tangible net worth and comply with leverage and minimum fixed charge requirements. We were in compliance with all such covenants at June 30, 2004.

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Off Balance Sheet Arrangements

     We have entered into off-balance sheet arrangements as defined by the SEC’s Final Rule 67, “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations,” including guaranties and indemnifications as discussed in Note 9 to the condensed consolidated financial statements in Part I Item 1 of this report. None of these off-balance sheet arrangements either has or is reasonably likely to have, a material current or future effect on financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources.

Factors That May Affect Future Results and Financial Condition

     Changes in the economic environment and/or IT industry may reduce demand for the products and services we sell. Our results of operations are influenced by a variety of factors, including general economic conditions, the condition of the IT industry, shifts in demand for or availability of computer and related products and industry introductions of new products, upgrades or methods of distribution. Additionally, the potential for future terrorist attacks, the national and international responses to terrorist attacks or perceived threats to national security and other acts of war or hostility have created many economic and political uncertainties that could adversely affect our business and results of operations in ways that cannot presently be predicted. Over the past few years, the computer industry in general has felt the effects of the slowdown in the United States and European economies, and we specifically saw a decrease in demand for the products and services we sell. Net sales can be dependent on demand for specific product categories, and any change in demand for or supply of such products could have a material adverse effect on our net sales if we fail to react in a timely manner to such changes. Our operating results are also highly dependent upon our level of gross profit as a percentage of net sales which fluctuates due to numerous factors, including changes in prices from suppliers, reductions in the amount of supplier reimbursements and marketing funds that are made available, volumes of purchases, changes in customer mix, the relative mix of products sold during the period, general competitive conditions, the availability of opportunistic purchases and opportunities to increase market share. In addition, our expense levels, including the costs and salaries incurred in connection with the hiring of account executives, are based, in part, on anticipated net sales. Therefore, we may not be able to reduce spending in a timely manner to compensate for any unexpected net sales shortfall. As a result, comparisons of our quarterly financial results should not be relied upon as an indication of future performance.

     Actions of competitors, including manufacturers of products we sell, can negatively affect our business. The IT products and services industry is intensely competitive. Competition is based primarily on price, product availability, speed of delivery, credit availability, ability to tailor specific solutions to customer needs and quality and breadth of product lines. We compete with manufacturers, including manufacturers of products we sell, as well as a large number and wide variety of marketers and resellers of IT products and services. Product manufacturers, in particular, have implemented programs to sell directly to the business customer, particularly larger corporate customers and, thus, are a competitive threat to us. In addition, manufacturers may attempt to increase the volume of software products distributed electronically to end-users. An increase in the volume of products sold through any of these competitive programs or distributed electronically to end-users could have a material adverse effect on our business, results of operations and financial condition.

     Additionally, product resellers and direct marketers are combining operations or acquiring or merging with other resellers and direct marketers to increase efficiency and market share. Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their product and service offerings. Accordingly, it is possible that new competitors or alliances among competitors may emerge and acquire significant market share. Generally, pricing is very aggressive in the industry, and we expect pricing pressures to continue. There can be no assurance that we will be able to negotiate prices as favorable as those negotiated by our competitors or that we will be able to offset the effects of price reductions with an increase in the number of customers, higher net sales, cost reductions or otherwise. Price

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

reductions by our competitors that we either cannot or choose not to match could result in an erosion of our market share and/or reduced sales or, to the extent we match such reductions, could result in reduced operating margins, any of which could have a material adverse effect on our business, results of operations and financial condition.

     Certain of our competitors in each of our operating segments have longer operating histories and greater financial, technical, marketing and other resources than we do. In addition, some of these competitors may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Many current and potential competitors also have greater name recognition and engage in more extensive promotional activities, offer more attractive terms to customers and adopt more aggressive pricing policies than we do. Additionally, some of our competitors have lower operating cost structures, allowing them to profitably employ more aggressive pricing strategies. There can be no assurance that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not have a material adverse effect on our business, results of operations and financial condition.

     We rely on our suppliers for product availability, marketing funds, purchasing incentives and competitive products to sell. We acquire products for resale both directly from manufacturers and indirectly through distributors. The loss of a supplier could cause a disruption in the availability of products. The reduction in the amount of credit granted to us by our suppliers could increase our cost of working capital and have a material adverse effect on our business, results of operations and financial condition. Additionally, there is no assurance that as manufacturers continue to sell directly to end users, they will not limit or curtail the availability of their product to resellers, such as us. Certain of the products offered from time to time by us may become subject to manufacturer allocation, which limits the number of units of such products available to us. Our inability to obtain a sufficient quantity of product or an allocation of products from a manufacturer in a way that favors one of our competitors relative to us could cause us to be unable to fill customers’ orders in a timely manner, or at all, which could have a material adverse effect on our business, results of operations and financial condition.

     Certain manufacturers provide us with substantial incentives in the form of payment discounts, supplier reimbursements, marketing funds, price protections and rebates. Supplier funds are used to offset, among other things, cost of goods sold, marketing costs and other operating expenses. Certain of these funds are based on our volume of net sales or purchases, growth rate of net sales or purchases and marketing programs. If we do not grow our net sales over prior periods, this could have a material negative effect on the amount of incentives offered to us by our manufacturers. No assurance can be given that we will continue to receive such incentives or that we will be able to collect outstanding amounts relating to these incentives in a timely manner, or at all. A reduction in, the discontinuance of, a significant delay in receiving or the inability to collect such incentives could have a material adverse effect on our business, results of operations and financial condition.

     Although product is available from multiple sources via the distribution channel as well as directly from manufacturers, we rely on the manufacturers of products we offer for not only product availability and supplier reimbursements, but also for development of products that compete effectively with products of manufacturers we do not currently offer, particularly Dell. We do have the ability to sell Dell product if it is specifically requested by our customers and approved by Dell, although we do not proactively advertise or offer Dell products.

     We rely on a limited number of outsourcing clients. Through our Direct Alliance operating segment, which represented 2% and 14% of our consolidated net sales and earnings from operations, respectively, for the three months ended June 30, 2004, we perform business process outsourcing services for a small number of manufacturers in the computer and consumer electronics industry pursuant to various arrangements. For the three and six months ended June 30, 2004, one outsourcing client accounted for 61% of Direct Alliance’s net sales. For the three and six months ended June 30, 2004, the top three clients represented 90% of Direct Alliance’s net sales. Although the contracts with these clients are generally multi-year contracts, these clients may cancel their contracts under certain circumstances on relatively short notice, elect to not renew them upon expiration or renew

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

them only on terms that are less favorable to us. There is no assurance that we will be able to replace any outsourcing clients that terminate or fail to renew their relationships with us or that we will be able to renew existing contracts on terms that are as favorable to us as the current terms. Additionally, we seek to expand our offerings both within and outside of the computer industry. The failure to maintain current arrangements or the inability to enter into new ones within or outside the computer industry could have a material adverse effect on our business, results of operations and financial condition. Substantially all of our current outsourcing clients are manufacturers in the computer industry, and, therefore, are subject to the same industry risks as we are with respect to our Insight North America and Insight UK operations. These risks may negatively affect the amount of business our clients outsource to us and the performance fees we receive from clients that are based on the volume of client product we sell or process through our systems.

     Disruptions in our information and telephone communication systems could affect our ability to service our customers and cause us to incur additional expenses. We believe that our success to date has been, and future results of operations will be, dependent in large part upon our ability to provide prompt and efficient service to customers. Our ability to provide such services is largely dependent on the accuracy, quality and utilization of the information generated by our information systems, which affect our ability to manage our sales, customer service, distribution, inventories and accounting systems and the reliability of our telephone communication systems. In January 2004, we completed the IT system conversion across all of Insight’s operations serving United States customers. We have been, and will continue, making enhancements to the system. In 2006, we will likely convert Insight’s United Kingdom and Canadian operations to this software platform. There can be no assurances that these enhancements or conversions will not cause disruptions in our business, and any such disruption could have a material adverse effect on our results of operations and financial condition. Although we have built redundancy into most of our systems, have documented system outage policies and procedures and have comprehensive data backup, we do not have a formal disaster recovery or business continuity plan; therefore, a substantial interruption in our information systems or in our telephone communication systems would have a material adverse effect on our business, results of operations and financial condition.

     There are risks associated with international operations that are different than those inherent in the United States business. We currently have operations in the United Kingdom and Canada and may expand operations further into Europe. In implementing our international strategy, we face barriers to entry and competition from local companies and other companies that already have established global businesses, as well as the risks generally associated with conducting business internationally. These risks include local labor conditions and regulations, the ability to attract and retain suitable local management, exposure to currency fluctuations, limitations on foreign investment and the additional expense and risks inherent in operating in geographically and culturally diverse locations. Because we may continue to develop our international business through acquisitions, we may also be subject to risks associated with such acquisitions, including those relating to the marriage of different corporate cultures and shared decision-making. There can be no assurance that we will succeed in increasing our international business or do so in a profitable manner.

     We depend on certain key personnel. Our future success will be largely dependent on the efforts of key management personnel. The loss of one or more of these key employees could have a material adverse effect on our business, results of operations and financial condition. We have also stated our intention to hire a new chief executive officer. We cannot assure you that we will be able to attract or retain highly qualified executive personnel or that any such executive personnel, including a new chief executive officer, will be able to lead the Company in directions that will increase stockholder value. We also believe that our future success will be largely dependent on our continued ability to attract and retain highly qualified management, sales, service and technical personnel. We cannot assure you that we will be able to attract and retain such personnel. Further, we make a significant investment in the training of our sales account executives. Our inability to retain such personnel or to train them rapidly enough to meet our expanding needs could cause a decrease in the overall quality and efficiency of our sales staff, which could have a material adverse effect on our business, results of operations and financial condition.

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

     Decreased effectiveness of equity compensation could adversely affect our ability to attract and retain employees, and proposed changes in accounting for equity compensation could adversely affect earnings. We have historically used stock options as key components of our total employee compensation program in order to align employees’ interests with the interests of our stockholders, encourage employee retention, and provide competitive compensation packages. Volatility or lack of positive performance in our stock price may also adversely affect our ability to retain key employees, all of whom have been granted stock options, or attract additional highly qualified personnel. Many of our outstanding employee stock options have exercise prices in excess of our current stock price. To the extent these circumstances continue or recur, our ability to retain present employees may be adversely affected. In addition, the Financial Accounting Standards Board has proposed changes to GAAP that would require us and other companies to record a charge to earnings for employee stock option grants and other equity incentives. Moreover, applicable stock exchange listing standards relating to obtaining stockholder approval of equity compensation plans could make it more difficult or expensive for us to grant options to employees in the future, which may result in changes in our equity compensation strategy. These and other developments in the provision of equity compensation to employees could make it more difficult to attract, retain and motivate employees and result in additional expense.

     Rapid changes in product standards may result in substantial inventory obsolescence. The IT industry is characterized by rapid technological change and the frequent introduction of new products and product enhancements, which can decrease demand for current products or render them obsolete. In addition, in order to satisfy customer demand, protect ourselves against product shortages, obtain greater purchasing discounts and react to changes in original equipment manufacturers’ terms and conditions, we may carry relatively high inventory levels of certain products that may have limited or no return privileges. There can be no assurance that we will be able to avoid losses related to inventory obsolescence on these products.

     The integration and operation of future acquired businesses may disrupt our business, create additional expenses and utilize cash or debt availability. Over the past few years, we completed acquisitions in the United States, the United Kingdom and Canada. These acquired operations have been fully integrated and now comprise a material portion of our business. Our strategy includes the possible acquisition of other businesses to expand or complement our operations. An acquisition involves numerous risks, including difficulties in the conversion of information systems and assimilation of operations of the acquired company, the diversion of management’s attention from other business concerns, risks of entering markets in which we have had no or only limited direct experience, assumption of unknown liabilities and the potential loss of key employees and/or customers of the acquired company, all of which in turn could have a material adverse effect on our business, results of operations and financial condition. The magnitude, timing and nature of any future acquisitions will depend on a number of factors, including the availability of suitable acquisition candidates, the negotiation of acceptable terms, our financial capabilities and general economic and business conditions. There is no assurance that we will identify acquisition candidates that would result in successful combinations or that any such acquisitions will be consummated on acceptable terms. Any future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of additional debt, the utilization of cash, amortization of expenses related to identifiable intangible assets and future impairments of acquired goodwill, all of which could adversely affect our profitability.

     Our principal financing facility expires on December 30, 2004, and if we are unable to renew this facility or replace it on acceptable terms, we may incur higher interest expenses or your equity interest may be diluted. Our financing facilities include a $200 million accounts receivable securitization financing facility, a $30 million revolving line of credit and a $40 million inventories financing facility. The availability under each of these facilities is subject to formulas based on our eligible trade accounts receivable or inventories. As of June 30, 2004, the aggregate outstanding balance under these facilities was $65.0 million, and we had $135.3 million available. The accounts receivable securitization financing facility expires December 30, 2004, and the line of credit and inventories facility expire on December 31, 2005. We have no reason to believe the accounts receivable securitization financing facility will not be renewed on or before December 30, 2004. However, it is

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

possible that we may be unable to renew our existing accounts receivable securitization financing facility or secure alternative financing or, if we are able to renew our existing accounts receivable securitization financing facility or secure alternative financing, it may be on less favorable terms, such as higher interest rates. If we were unable to renew our existing accounts receivable securitization financing facility or secure alternative financing, we may be required to seek other financing alternatives such as selling additional equity securities or convertible debt securities that would dilute the equity interests of current stockholders. We cannot assure you that we will be able to obtain such financing on terms favorable to us or at all.

     Recently enacted and proposed changes in securities laws and regulations will increase our costs and divert management’s attention from operations. The Sarbanes-Oxley Act of 2002 (the “Act”) became law in July 2002 and has required changes in some of our corporate governance, public disclosure and compliance practices. The Act also requires the SEC to promulgate new rules on a variety of subjects, many of which are already in place. In addition, the NASD adopted revisions to its corporate governance requirements for companies, like us, that are listed on Nasdaq. To maintain high standards of corporate governance and public disclosure, we have invested and will continue to invest all reasonably necessary resources to comply with evolving standards. This significant investment in these areas increases our legal, internal audit, board of directors and financial costs and diverts management time and attention from other activities. The risk of litigation and claims of personal liability for corporate action or inaction could make it more difficult for us to attract and retain executive officers, including a new chief executive officer, and qualified members for our board of directors, particularly to serve on the audit committee.

     The results of litigation may affect our operating results. From time to time we will be made defendants to lawsuits both in the ordinary course of business and as a result of other circumstances. Depending on the claims made and the nature of the relief sought, any such lawsuit, if decided against us, could adversely affect our results of operations. We are a defendant in a lawsuit, which is a consolidation of four separate actions brought by stockholders in July 2002 in the United States District Court, District of Arizona. The lawsuit alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the SEC. The plaintiffs in this action allege we, and certain of our officers, made false and misleading statements pertaining to our business, operations and management in an effort to inflate the price of our common stock. The lawsuit also names as co-defendants: Eric J. Crown, the Chairman of our Board of Directors; Timothy A. Crown, our Chief Executive Officer and President and a director; and Stanley Laybourne, our Executive Vice President, Chief Financial Officer and Treasurer and a director. The plaintiffs seek class action status to represent all buyers of our common stock from September 3, 2001 through July 17, 2002. On September 27, 2003, the court granted our motion to dismiss plaintiffs’ amended complaint, but allowed plaintiffs leave to file an amended complaint, which they did on October 31, 2003. On May 11, 2004, the court granted our motion to dismiss the second amended complaint with prejudice and without leave to amend. Plaintiffs have appealed the dismissal to the Ninth Circuit Court of Appeals. We will continue to defend the case vigorously. Any adverse decision in this case could have a material adverse effect on our business, results of operations and financial condition.

     We may be subject to intellectual property infringement claims, which are costly to defend and could limit our ability to provide certain content or use certain technologies in the future. Many parties are actively developing search, indexing, e-commerce and other Web-related technologies, as well as a variety of online business models and methods. We believe that these parties will continue to take steps to protect these technologies, including, but not limited to, seeking patent protection. As a result, disputes regarding the ownership of these technologies and rights associated with online business are likely to arise in the future. In addition to existing patents and intellectual property rights, we anticipate that additional third party patents related to our services will be issued in the future. From time to time, parties assert patent infringement claims against us in the form of cease-and-desist letters, lawsuits and other communications. If there is a determination that we have infringed the proprietary rights of others, we could incur substantial monetary liability, be forced to stop selling infringing products or providing infringing services, be required to enter into costly royalty or licensing agreements, if available, or be prevented from using the rights, which could force us to change our business

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

practices in the future. As a result, these types of claims could have a material adverse effect on our business, results of operations and financial condition.

     We issue options under our stock option plans and sell shares under our employee stock purchase plan, which dilute the interest of stockholders. We have reserved shares of our common stock for issuance under our Employee Stock Purchase Plan, our 1998 Long Term Incentive Plan (the “1998 LTIP”) and our 1999 Broad–Based Incentive Plan. As approved by our stockholders, our 1998 LTIP provides that additional shares of common stock may be reserved for issuance based on a formula contained in that plan. The formula provides that the total number of shares of common stock remaining for grant under the 1998 LTIP and any of our other option plans, plus the number of shares subject to unexercised options granted under any stock plan, shall not exceed 20% of the outstanding shares of our common stock at the time of calculation of the additional shares. Therefore, we reserve additional shares on an ongoing basis for issuance under this plan. At June 30, 2004, we had options outstanding to acquire 7,926,564 shares of common stock with a weighted average exercise price of $17.47. Based on the 1998 LTIP formula, we had 1,761,705 shares of common stock available for grant of stock options at June 30, 2004.

     Additionally, we have reserved shares of common stock of our subsidiaries, Direct Alliance Corporation and PlusNet Technologies Limited under the Direct Alliance 2000 Long-Term Incentive Plan and the PlusNet Technologies Limited 2000 Long-Term Incentive Plan, respectively. The amount of shares of common stock reserved for issuance under these plans represents 15% of the outstanding common stock of the respective subsidiaries. At June 30, 2004, we had options outstanding to acquire 2,777,500 shares of common stock of Direct Alliance Corporation at a weighted average exercise price of $1.42 and options to acquire 4,473,000 shares of common stock of PlusNet Technologies Limited at a weighted average exercise price of $0.33.

     When stock options with an exercise price lower than the current market price are exercised, our stockholders will experience dilution in the price of their shares and may experience a dilution of earnings per share due to the increased number of shares outstanding. Also, the terms upon which we will be able to obtain equity capital may be affected, because the holders of outstanding options can be expected to exercise them at a time when we would, in all likelihood, be able to obtain needed capital on terms more favorable to us than those provided in outstanding options.

     Our stock price has experienced volatility. The price for our common stock has experienced in the past, and could experience in the future, substantial volatility as a result of a number of factors, including:

• quarterly increases or decreases in net sales, gross profit or earnings, and changes in our business, operations or prospects of any of our segments;

• announcements by us, our competitors or our vendors;

• changes in net sales or earnings estimates by the investment community; and

• general economic conditions.

     The stock market has also experienced extreme price and volume fluctuations, which have affected the market price of many companies and which, at times, have been unrelated to the operating performance of the specific companies whose stock is traded. Broad market fluctuations, developments in the IT industry, general economic conditions and political and current events may adversely affect the market price of our common stock.

     In addition, if our current security holders sell substantial amounts of our common stock, including shares issued upon acquisitions or exercise of outstanding options, in the public market, the market price of our common stock could decline.

     Some anti-takeover provisions contained in our certificate of incorporation, bylaws and stockholders rights agreement, as well as provisions of Delaware law and executive employment contracts, could impair a takeover attempt. We have provisions in our certificate of incorporation and bylaws which could have the effect

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(separately, or in combination) of rendering more difficult or discouraging an acquisition deemed undesirable by our Board of Directors. These include provisions:

• authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

• limiting the liability of, and providing indemnification to, directors and officers;

• limiting the ability of our stockholders to call special meetings;

• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board of Directors;

• controlling the procedures for conduct of Board and stockholder meetings and election and removal of directors; and

• specifying that stockholders may take action only at a duly called annual or special meeting of stockholders.

     These provisions, alone or together, could deter or delay hostile takeovers, proxy contests and changes in control or management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

     On December 14, 1998, each stockholder of record received one Preferred Share Purchase Right (“Right”) on each outstanding share of common stock owned. Each Right entitles stockholders to buy .00148 of a share of our Series A Preferred Stock at an exercise price of $88.88. The Rights will be exercisable if a person or group acquires 15% or more of our common stock or announces a tender offer for 15% or more of the common stock. Should this occur, the Right will entitle its holder to purchase, at the Right’s exercise price, a number of shares of common stock having a market value at the time of twice the Right’s exercise price. Rights held by the 15% holder will become void and will not be exercisable to purchase shares at the bargain purchase price. If we are acquired in a merger or other business combination transaction after a person acquires 15% or more of the our common stock, each Right will entitle its holder to purchase at the Right’s then current exercise price a number of the acquiring company’s common shares having a market value at the time of twice the Right’s exercise price.

     Additionally, we have employment agreements with certain officers and management employees under which severance payments would become payable under certain circumstances after a change in control. If all such persons were terminated, and the severance payments under the current employment agreements were to become payable, the maximum contingent severance payment calculated as of June 30, 2004 would be approximately $13.9 million.

     Any provision of our certificate of incorporation, bylaws or employment agreements, or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and also could affect the price that some investors are willing to pay for our common stock.

     Sales of additional common stock and securities convertible into our common stock may dilute the voting power of current holders. We may issue equity securities in the future whose terms and rights are superior to those of our common stock. Our certificate of incorporation authorizes the issuance of up to 3,000,000 shares of preferred stock. These are “blank check” preferred shares, meaning our board of directors is authorized to designate and issue the shares from time to time without stockholder consent. No preferred shares are outstanding, and we currently do not intend to issue any shares of preferred stock in the foreseeable future. Any shares of preferred stock that may be issued in the future could be given voting and conversion rights that could dilute the voting power and equity of existing holders of shares of common stock and have preferences over shares of common stock with respect to dividends and liquidation rights.

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INSIGHT ENTERPRISES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Recently Issued Accounting Pronouncements

     We believe there have been no significant changes during the six months ended June 30, 2004 to items we disclosed as recently issued accounting pronouncements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2003.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We have interest rate exposure arising from our financing facilities, which have variable interest rates. These variable interest rates are affected by changes in short-term interest rates. We manage interest rate exposure by maintaining a conservative debt to equity ratio. At June 30, 2004, the fair value of our long-term debt approximated its carrying value.

     We believe that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations and cash flows should not be material. Our financing facilities expose net earnings to changes in short-term interest rates since interest rates on the underlying obligations are variable. Borrowings outstanding under the interest-bearing financing facilities totaled $65.0 million at June 30, 2004. A change in net earnings resulting from a hypothetical 10% increase or decrease in interest rates would not be material.

     We also have foreign currency translation exposure arising from the operation of foreign entities. We monitor our foreign currency exposure and may from time to time enter into hedging transactions to manage this exposure. There were no hedging transactions during the three months ended June 30, 2004 or hedging instruments outstanding at June 30, 2004.

Item 4. Controls and Procedures

Quarterly Controls Evaluation and Related CEO and CFO Certifications.

     We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this Quarterly Report. The controls evaluation was done under the supervision and with the participation of management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”).

     Attached as exhibits to this Quarterly Report are certifications of the CEO and the CFO, which are required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Definition of Disclosure Controls.

     Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with GAAP. To the extent that components of our internal

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control over financial reporting are included within our Disclosure Controls, they are included in the scope of our quarterly controls evaluation.

Limitations on the Effectiveness of Controls

     Our management, including the CEO and CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation

     The evaluation of our Disclosure Controls included a review of the objectives and design of the controls, our implementation of the controls and the effect of the controls on the information generated for use in this Quarterly Report. In the course of the controls evaluation, we sought to identify data errors, controls problems or acts of fraud and confirm that appropriate corrective action, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the CEO and CFO, concerning controls effectiveness can be reported in our Quarterly Reports on Form 10-Q and to supplement the disclosures made in our Annual Report on Form 10-K. Many of the components of our Disclosure Controls are also evaluated on an ongoing basis by our Internal Audit Department and by other personnel in our finance organization, as well as our independent auditors who evaluate them in connection with determining their auditing procedures related to their report on our annual financial statements although not to provide assurance on our controls. Our goal is to monitor our Disclosure Controls and modify them as necessary. Our intent is to maintain the Disclosure Controls as dynamic systems that change as conditions warrant.

     Among other matters, we also considered whether our evaluation identified any “significant deficiencies” or “material weaknesses” in our internal control over financial reporting, and whether we had identified any acts of fraud involving personnel with a significant role in our internal control over financial reporting. This information was important both for the controls evaluation generally and because item 5 in the certifications of the CEO and CFO require that the CEO and CFO disclose that information to our Board’s Audit Committee and to our independent auditors. We interpret “significant deficiencies” to mean a control deficiency, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. We understand that the term “material weakness in internal control” is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected. We also sought to address other controls matters in the controls evaluation, and in each case if a problem was identified, we considered what revision, improvement and/or correction to make in accordance with our ongoing procedures.

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Conclusions

     Based upon the controls evaluation, our CEO and CFO have concluded that, subject to the limitations noted above, as of the end of the period covered by this Quarterly Report, our Disclosure Controls were effective to provide reasonable assurance that material information relating to Insight Enterprises, Inc. and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

     We are a defendant in a lawsuit, which is a consolidation of four separate actions brought by stockholders in July 2002 in the United States District Court, District of Arizona. The lawsuit alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the SEC. The plaintiffs in this action allege we, and certain of our officers, made false and misleading statements pertaining to our business, operations and management in an effort to inflate the price of our common stock. The lawsuit also names as co-defendants: Eric J. Crown, the Chairman of our Board of Directors; Timothy A. Crown, our Chief Executive Officer and President and a director; and Stanley Laybourne, our Executive Vice President, Chief Financial Officer and Treasurer and a director. The plaintiffs seek class action status to represent all buyers of our common stock from September 3, 2001 through July 17, 2002. On September 27, 2003, the court granted our motion to dismiss plaintiffs’ amended complaint, but allowed plaintiffs leave to file an amended complaint, which they did on October 31, 2003. On May 11, 2004, the court granted our motion to dismiss the second amended complaint with prejudice and without leave to amend. Plaintiffs have appealed the dismissal to the Ninth Circuit Court of Appeals. We will continue to defend the case vigorously.

     We are also party to various legal proceedings arising in the ordinary course of business. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies,” we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Although litigation is inherently unpredictable, we believe that we have valid defenses with respect to material legal matters pending against us, as well as adequate provisions for any probable and estimable losses. It is possible, nevertheless, that the results of our operations or cash flows could be affected in any particular period by the resolution of a legal proceeding.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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INSIGHT ENTERPRISES, INC.

Item 4. Submission of Matters to a Vote of Security Holders

(a)	Insight Enterprises, Inc. Annual Stockholders’ Meeting was held on April 29, 2004.
(b)	At the Annual Stockholders’ Meeting, the following proposals were considered:

• the election of Eric J. Crown, Michael M. Fisher and Bennett Dorrance as Class I directors to serve until the 2007 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified; and

• the ratification of the appointment of KPMG LLP as the Company’s independent public auditors for the year ending December 31, 2004.

     The proposals were approved with the following voting results:

Proposal 1	Votes For		Votes Withheld		Abstentions		Broker Non-Votes
Election of Eric J. Crown as Class I Director		41,817,949		3,458,875		2,160,556		—
Election of Bennett Dorrance as Class I Director		41,650,278		3,626,546		2,160,556		—
Election of Michael M. Fisher as Class I Director		40,866,011		4,408,813		2,160,556		—

Proposal 2	Votes For		Votes Withheld		Abstentions		Broker Non-Votes
Ratification of the appointment of KPMG LLP as the Company’s independent public auditors		43,897,037		1,379,787		6,232		—

In addition, Class II Directors (Larry A. Gunning and Robertson C. Jones) and Class III Directors (Timothy A. Crown and Stanley Laybourne) continued their respective terms of office following the Annual Meeting of Stockholders.

Item 5. Other Information

None.

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Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits. (unless otherwise noted, exhibits are filed herewith)

Exhibit No.	Description
3.1	Composite Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of our annual report on Form 10-K for the year ended December 31, 2001 filed on April 1, 2002).
3.2	Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of our annual report on Form 10-K for the year ended December 31, 1999 filed on March 30, 2000).
4.1	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form S-1 (No. 33-86142) declared effective January 24, 1995).
4.2	Stockholder Rights Agreement (incorporated by reference to Exhibit 4.1 of our current report on Form 8-K filed on March 17, 1999).
10.1 (1)	Employment Agreement between Direct Alliance Corporation and Branson M. Smith dated as of February 14, 2004, effective November 1, 2003.
10.2	Guaranty Agreement by Insight Enterprises, Inc. in favor of Dell Corporation dated June 17, 2004.
10.3	PlusNet Placing Agreement between PlusNet plc, The Executive Directors, The Non-Executive Directors, Insight Direct (GB) Limited, Insight Enterprises, Inc. and Robert W. Baird Limited dated as of July 8, 2004.
31.1	Certification of Chief Executive Officer Pursuant to Securities and Exchange Act Rule 13a-14, as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Securities and Exchange Act Rule 13a-14, as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.

     (1) Management contract or compensatory plan or arrangement.

(b) Current Reports on Form 8-K furnished during the quarter covered by this Form 10-Q are as follows:

A Form 8-K was furnished on June 7, 2004, and included, under Items 7 and 9, a press release entitled “Insight Enterprises, Inc. Announces Intention to Pursue Initial Public Offering of PlusNet.”

A Form 8-K was furnished on May 12, 2004, and included, under Item 9, a press release entitled “Insight Enterprises, Inc. Announces Dismissal of Securities Litigation.”

A Form 8-K was furnished on April 22, 2004, and included, under Items 7 and 12, a press release entitled “Insight Enterprises, Inc. Reports First Quarter Results” containing condensed consolidated financial statements and other information for the three months ended March 31, 2004.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 9, 2004	INSIGHT ENTERPRISES, INC.
	By:	/s/ Timothy A. Crown
		Timothy A. Crown
		Chief Executive Officer
	By:	/s/ Stanley Laybourne
		Stanley Laybourne
		Executive Vice President,
		Chief Financial Officer and Treasurer
		(Principal financial officer)

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Exhibit Index

Exhibit No.	Description
3.1	Composite Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of our annual report on Form 10-K for the year ended December 31, 2001 filed on April 1, 2002).
3.2	Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of our annual report on Form 10-K for the year ended December 31, 1999 filed on March 30, 2000).
4.1	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form S-1 (No. 33-86142) declared effective January 24, 1995).
4.2	Stockholder Rights Agreement (incorporated by reference to Exhibit 4.1 of our current report on Form 8-K filed on March 17, 1999).
10.1 (1)	Employment Agreement between Direct Alliance Corporation and Branson M. Smith dated as of February 14, 2004, effective November 1, 2003.
10.2	Guaranty Agreement by Insight Enterprises, Inc. in favor of Dell Corporation dated June 17, 2004.
10.3	PlusNet Placing Agreement between PlusNet plc, The Executive Directors, The Non-Executive Directors, Insight Direct (GB) Limited, Insight Enterprises, Inc. and Robert W. Baird Limited dated as of July 8, 2004.
31.1	Certification of Chief Executive Officer Pursuant to Securities and Exchange Act Rule 13a-14, as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Securities and Exchange Act Rule 13a-14, as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.

     (1) Management contract or compensatory plan or arrangement.

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EX-10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of February 14, 2004 between DIRECT ALLIANCE CORPORATION, an Arizona corporation (“Company”), and BRANSON SMITH (“Executive”) to be effective as of November 1, 2003.

R E C I T A L S

A. Effective as of November 1, 2003 Executive shall be employed by Company in the position of President. Prior to such date, Executive was employed by Insight Enterprises, Inc. (“Parent”).

B. Executive and Parent are parties to an Employment Agreement that was entered into on July 1, 1999, as amended as of July 1, 2001 (the “Old Agreement”).

C. Company has decided to offer Executive a new employment agreement, the terms and provisions of which are set forth below.

NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:

     1. TERMS OF AGREEMENT.

          (a) Replacement of Old Agreement. Except as specifically provided in this Agreement, this Agreement shall replace and supersede the Old Agreement for all purposes as of November 1, 2003.

          (b) Initial Term. Executive shall be employed by Company for the duties set forth in Section 2 for a two-year term, commencing as of November 1, 2003 and ending on October 31, 2005 (the “Initial Term”), unless sooner terminated in accordance with the provisions of this Agreement.

          (c) Renewal Term; Employment Period Defined. On each successive day after the commencement of the Initial Term, without further action on the part of Company or Executive, this Agreement shall be automatically renewed for a new 2-year term dated effective and beginning upon each such successive day (the “Renewal Term”); provided, however, that Company may notify Executive, or the Executive may notify the Company, at any time, that there shall be no renewal of this Agreement, and in the event of such notice,the Agreement shall immediately cease to renew and shall terminate naturally at the end of the then current Renewal Period. No severance or other post-termination compensation will be due or payable in the event of a termination resulting from non-renewal. The period of time commencing as of the date hereof and ending on the effective date of the termination of employment of Executive under this or any successor Agreement shall be referred to as the “Employment Period.”

     2. POSITION AND DUTIES.

          (a) Job Duties. Company does hereby employ, engage and hire Executive as its President, and Executive does hereby accept and agree to such employment, engagement, and hiring. Executive’s duties and authority during the Employment Period shall be such executive and managerial duties as the Board of Directors of Parent (the “Board”) shall reasonably determine. Executive will devote full time on behalf of the Company, or such lesser amount of time as the Board may determine, reasonable absences because of illness, personal and family exigencies excepted.

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          (b) Best Efforts. Executive agrees that at all times during the Employment Period he will faithfully, and to the best of his ability, experience and talents, perform the duties that may be required of and from him and fulfill his responsibilities hereunder pursuant to the express terms hereof. Executive’s ownership of, or participation (including any board memberships) in, any entity (other than Company) must be disclosed to the Board; provided, however, that Executive need not disclose any equity interest held in any public company or any private company that is not engaged in a competing business as defined in Section 10 of this Agreement when such interest constitutes less than 5% of the issued and outstanding equity of such public or private company.

     3. COMPENSATION.

          (a) Base Salary. Company shall pay Executive a “Base Salary” in consideration for Executive’s services to Company at the rate of $250,000 per annum. The Base Salary shall be payable as nearly as possible in equal semi-monthly installments or in such other installments as are customary from time to time for Company’s or Parent’s executives. The Base Salary may be adjusted from time to time in accordance with the procedures established by Company or Parent for salary adjustments for executives, provided that the Base Salary shall not be reduced.

          (b) Incentive Compensation..

	Executive shall be entitled to an incentive bonus, calculated and payable quarterly, equal to two percent (2.0%) of Company’s “net earnings”.The Compensation Committee of the Board (the “Committee”) may, but is not required to, award additional bonus amounts for extraordinary performance or to adjust for inequities resulting from application of the formula.
(1)	For purposes of calculating Executive’s incentive bonus pursuant to this Subsection (b), Company’s “net earnings” shall be Company’s consolidated net after tax earnings calculated in accordance with accounting principles generally accepted in the United States (US GAAP) and applicable Securities and Exchange Commission regulations, prior to any incentive bonus amounts for Executive and other executives of Company. All allocations of overhead expense from Parent to determine Company’s “net earnings” shall be on a basis consistent with the allocation methods applied for prior accounting periods, provided, however, that changes thereto required by U.S. Generally Accepted Accounting Principles shall be deemed acceptable. The amounts payable pursuant to this subparagraph (b) shall be paid on or before thirty (30) days after the public financial reporting by Parent at the end of the applicable fiscal quarter.
(2)	If upon final presentation of consolidated financial statements to Parent by the Parent’s outside Certified Public Accountants, the “net earnings” of Company requires adjustment, then, within thirty (30) days after such presentation, Company or Executive, as the case may be, shall pay to the other the amount necessary to cause the net amount of incentive bonus paid to be the proper amount after adjustment; provided that if Executive shall pay Company pursuant to the provisions of this clause (3), then the amount the Executive shall pay will be reduced by the taxes withheld by Company attributable to such amount (“Withheld Portion”), and the Company shall apply the Withheld Portion toward Company’s withholding obligations with regard to any subsequent payments of Base Salary and incentive compensation made pursuant to Sections 3(a) and 3(b).

          (c) Incentive and Benefit Plans. Executive will be entitled to participate in those incentive compensation and benefit plans reserved for Company’s or Parent’s executives, including any stock option plan maintained by Parent, in accordance with the terms of such compensation and benefit plans. Additionally,

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Executive shall be entitled to participate in any other benefit plans sponsored by Company or Parent, including but not limited to, any savings plan, life insurance plan and health insurance plan available generally to employees of Company or Parent from time to time, subject to any restrictions specified in, or amendments made to, such plans.

     4. BUSINESS EXPENSES.

          The Company will reimburse Executive for any and all necessary, customary and usual expenses which are incurred by Executive on behalf of Company, provided Executive provides Company with receipts to substantiate the business expense in accordance with Company’s policies or otherwise reasonably justifies the expense to the Company.

     5. DEATH OR DISABILITY.

          (a) Death. This Agreement shall terminate upon Executive’s death. Executive’s estate shall be entitled to receive the Base Salary due through the date of his death. Company shall also pay to Executive’s estate a prorated portion of any incentive compensation to which Executive would have been entitled (had Executive not died) for the year in which this Agreement terminated due to Executive’s death. No Base Salary or other payment or benefit will be payable with respect to any period after death except as expressly provided elsewhere in this Agreement.

          (b) Disability. This Agreement shall also terminate in the event of Executive’s “Disability”. For purposes of this Agreement, “Disability” means the total and complete inability of Executive to perform the essential duties associated with his normal position with Company (after any accommodations required by the Americans with Disabilities Act or applicable state law) due to a physical or mental injury or illness that occurs while Executive is actively employed by Company. Any dispute concerning whether Disability has occurred will be determined by a physician selected by mutual agreement of Company and Executive. If this Agreement is terminated due to Executive’s Disability, Executive shall receive all of the payments and benefits called for by Section 6(c).

     6. TERMINATION BY COMPANY.

          (a) Termination for Cause. Company may terminate this Agreement at any time during the Initial Term or any Renewal Terms for “Cause” upon written notice to Executive. If Company terminates this Agreement for “Cause,” Executive’s Base Salary shall immediately cease, and Executive shall not be entitled to severance payments, incentive compensation payments or any other payments or benefits pursuant to this Agreement, except for any vested rights pursuant to any benefit plans in which Executive participates and any accrued compensation, vacation pay and similar items. For purposes of this Agreement, the term “Cause” shall mean the termination of Executive’s employment by Company for one or more of the following reasons:

     (1) The criminal conviction for any felony involving theft or embezzlement from Company or any affiliate;

     (2) The criminal conviction for any felony involving moral turpitude that reflects adversely upon the standing of Company in the community; or

     (3) The criminal conviction for any felony involving fraud committed against Company, any affiliate or any individual or entity that provides goods or services to, receives goods or services from or otherwise deals with Company or any affiliate.

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     (4) Acts by Executive that constitute repeated and material violations of this Agreement, any written employment policies of Company or any written directives of Company. A violation will not be considered to be “repeated” unless such violation has occurred more than once and after receipt of written notice from Company of such violation.

          Any termination of Executive when there is not Cause is “without Cause.” If Company terminates Executive for Cause, and it is later determined as provided in Section 11 of this Agreement that Cause did not exist, Company will pay Executive the amount he would have received under this Agreement if his employment had been terminated by Company without Cause, plus interest at the Prime Rate published by the Wall Street Journal on the date of termination. Such payments and interest shall be calculated as of the effective date of the initial termination. Payment shall be made within fifteen (15) days after such later determination is made.

          (b) Termination Without Cause. Company also may terminate Executive’s employment at any time during the Initial Term or any Renewal Term without Cause. If Company terminates this Agreement pursuant to this paragraph, Company shall provide Executive with ninety (90) days advance written notice. This Agreement shall continue during such notice period. The termination of this Agreement shall be effective on the ninetieth (90th) day (the “Termination Date”) following the day on which the notice is given.

     Company may, at its discretion, place Executive on a paid administrative leave during all or any part of said notice period. During the administrative leave, Company may bar Executive’s access to Company’s offices or facilities if reasonably necessary to the smooth operation of Company, or may provide Executive with access subject to such reasonable terms and conditions as Company chooses to impose.

          (c) Severance Compensation. Should Executive’s employment by Company be terminated without Cause, Executive shall receive as a lump sum immediately upon such termination an amount equal to the total amount of his Base Salary for the remainder of the Initial Term or Renewal Terms, if later, less 90 days, determined as if the employment of the Executive had not been terminated prior to the end of such term and as if the Executive had continued to perform all of his obligations under this Agreement and as an employee and officer of the Company. Executive shall have no duty to mitigate damages in order to receive the compensation described by this Subsection and the compensation shall not be reduced or offset by other income, payments or profits received by Executive from any source.

          (d) Incentive Compensation. Executive shall not be entitled to receive any incentive compensation payments for the fiscal year in which his employment is terminated for Cause or any later years. If Executive is terminated without Cause, Executive shall receive as a lump sum immediately upon such termination the bonus that would have been awarded determined as if the employment of the Executive had not been terminated prior to the end of the latest Renewal Term, as if Executive had continued to perform all of his obligation under this Agreement and as an employee of the Company, and as if the financial performance of Company and/or Parent continues as it had been for the immediately preceding last four (4) fiscal quarters ended prior to the Termination Date, consistent with the following five sentences. If the Termination Date occurs during Q1 2004, the incentive compensation payment shall be based on Executive’s percentage under the Old Agreement and the financial performance of Parent during all of FY 2003. If the Termination Date occurs during Q2 2004, Executive’s incentive compensation payments shall be based on his percentage under the Old Agreement and Parent’s performance during the last three quarters of FY 2003, plus his percentage under Section 3(b) of this Agreement and Company’s performance during Q1 2004. If the Termination Date occurs during Q3 2004, Executive’s incentive compensation payments would be based on his percentage under the Old Agreement and Parent’s performance during the last two quarters of FY 2003, plus his percentage under Section 3(b) of this

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Agreement and Company’s performance during the first two quarters of 2004. If the Termination Date occurs during Q4 2004, Executive’s incentive compensation payments would be based on his percentage under the Old Agreement and Parent’s performance during the last quarter of FY 2003, plus his percentage under Section 3(b) of this Agreement and Company’s performance during the first three quarters of 2004. If the Termination Date is after December 31, 2004, the incentive compensation payment shall be based on the financial performance of Company for the immediately preceding last four (4) fiscal quarters ended prior to the Termination Date and shall be consistent with Section 3(b) of this Agreement. Executive shall have no duty to mitigate damages in order to receive the compensation described by this Subsection and the compensation shall not be reduced or offset by other income, payments or profits received by Executive from any source. If there is no binding incentive compensation program, policy, or practice in effect on the effective date of the termination, Company, in the exercise of its discretion, may elect to pay Executive a portion of the incentive compensation to which he would have been entitled (had his employment not terminated) for the prorated portion, up to the date of termination, of the year in which his employment is terminated without Cause.

          (e) Other Plans. Except to the extent specified in this Section 6 and as provided in this Subsection (e), termination of this Agreement shall not affect Executive’s participation in, distributions from, and vested rights under any employee benefit, stock option, restricted stock or other equity-based plan of Company, which will be governed by the terms of those respective plans, in the event of Executive’s termination of employment. If Company terminates Executive without Cause on or before December 31, 2004, at the time the termination is effective, Company shall extend the time within which Executive may exercise any then vested stock options until April 11, 2005. Executive shall have no duty to mitigate damages in order to receive the compensation described by this Subsection and the compensation shall not be reduced or offset by other income, payments or profits received by Executive from any source.

     7. TERMINATION BY EXECUTIVE

          (a) General. Executive may terminate this Agreement at any time, with or without “Good Reason.” If Executive terminates this Agreement without Good Reason, Executive shall provide Company with ninety (90) days advance written notice. If Executive terminates this Agreement with Good Reason, Executive shall provide Company with thirty (30) days advance written notice. Company may, at its discretion, place Executive on a paid administrative leave during all or any part of any such notice period. During the administrative leave, Company may bar Executive’s access to Company’s offices or facilities if reasonably necessary to the smooth operation of Company, or may provide Executive with access subject to such reasonable terms and conditions as Company chooses to impose

          (b) Good Reason Defined. For purposes of this Agreement, “Good Reason” shall mean and include each of the following (unless Executive has expressly agreed to such event in a signed writing):

     (1) The removal of Executive’s title of President of Company or the assignment to Executive by Company of duties that are not senior executive duties by nature except in connection with the termination of Executive’s employment by Company either without Cause or for Cause, Executive’s death or Disability, termination by Executive either with or without Good Reason, or the expiration of the Agreement without renewal;

     (2) The recommended travel of Executive by the Board in furtherance of Company business which is materially more extensive than at November 1, 2003 (the “Relevant Date”);

     (3) The assignment of Executive by the Company to a location more than 50 miles from the present executive offices of the Company.

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     (4) Reduction by Company of Executive’s Base Salary as set forth in this Agreement or as the same may be increased from time to time.

     (5) Failure by Company to compensate Executive pursuant to the same incentive and equity formulas as are used for all senior executives of Company whose incentive is based on Company performance or to continue in effect any savings, life insurance, health and accident or disability plan in which Executive is participating on the Relevant Date (or plans which provide Executive with substantially similar benefits) or the taking of any action by Company which would adversely affect Executive’s participation in or materially reduce his benefit under any of such plans or deprive him of any material fringe benefit enjoyed by him as of the Relevant Date or any later date. Amendment or modification of said plans, to the extent required pursuant to applicable federal law and the procedures set forth in the respective plan, or amendments of such plans that apply to either all employees generally or all senior executives shall not be considered to be “Good Reason” for purposes of this clause (5).

     (6) Failure of Company to obtain a specific written agreement satisfactory to Executive from any successor to the business, or substantially all the assets, of Company to assume this Agreement or issue a substantially similar agreement.

     (7) The termination of this Agreement by Company without Cause or any attempted termination by Company purportedly for Cause if it is thereafter determined that Cause did not exist under this Agreement with respect to the termination.

     (8) Breach of any material provisions of this Agreement by Company which is not cured within thirty (30) days after receipt by Company of written notice of such breach from Executive.

     (9) Any action taken by Company over the specific, contemporaneous, written objection of the Executive that is likely (i) to cause a material reduction in the value of this Agreement to Executive or (ii) to materially impair Executive’s abilities to discharge his duties hereunder. This provision is not intended to affect either the Company’s or Executive’s right to terminate this Agreement as provided for elsewhere herein.

          (c) Effect of Good Reason Termination. If Executive terminates this Agreement for Good Reason (as defined in Section 7(b)), it shall for all purposes be treated as a termination by Company without Cause. Without limiting the generality of the previous sentence, if Executive terminates his employment with Good Reason on or before December 31, 2004, at the time the termination is effective, Company shall extend the time within which Executive may exercise any then vested stock options until April 11, 2005.

          (d) Effect of Termination without Good Reason. If Executive terminates this Agreement without Good Reason, while the termination shall not be characterized as a termination for Cause, it shall for all purposes, result in the same compensation and have the same effect on other benefits, including options, as a termination for Cause.

     8. CHANGE IN CONTROL OF COMPANY

          (a) General. Company considers the maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of Parent and its shareholders. Company recognizes that the continuing possibility of an unsolicited tender offer or other takeover bid for Parent or a sale of all or

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substantially all of the assets or stock of Company may be unsettling to Executive and other senior executives of Company and may result in the departure or distraction of management personnel to the detriment of Parent and its shareholders. The Board and the Committee have previously determined that it is in the best interests of Parent and its shareholders for Company to minimize these concerns by making this Change in Control provision an integral part of this Employment Agreement, which would provide the Executive with a continuation of benefits in the event the Executive’s employment with Company terminates under certain limited circumstances.

          This provision is offered to help assure a continuing dedication by Executive to his duties to Company notwithstanding the occurrence of a tender offer or other takeover bid involving Parent or a sale of the stock or assets of Company. In particular, the Board and the Committee believe it important, should Parent receive proposals from third parties with respect to the future of Parent or Company, to enable Executive, without being influenced by the uncertainties of his own situation, to assess and advise the Board whether such proposals would be in the best interests of Parent and its shareholders and to take such other action regarding such proposals as the Board might determine to be appropriate. The Board and the Committee also wish to demonstrate to Executive that Company is concerned with his welfare and intends to see he is treated fairly.

          (b) Continued Eligibility to Receive Benefits. In view of the foregoing and in further consideration of Executive’s continued employment with Company, if a Change in Control occurs, Executive shall be entitled to a lump-sum severance benefit provided in subparagraph (c) of this Section 8 if, prior to the expiration of twenty-four (24) months after the Change in Control, Executive notifies Company of his intent to terminate his employment with Company for Good Reason or Company terminates Executive’s employment without Cause. If Executive triggers the application of this Section by terminating employment for Good Reason, he must do so within one hundred twenty (120) days following his receipt of notice of the occurrence of the last event that constitutes Good Reason. The full severance benefits provided by this Section shall be payable regardless of the period remaining until the expiration of the Agreement without renewal.

          (c) Receipt of Benefits. If Executive is entitled to receive a severance benefit pursuant to Section 8(b) hereof, Company will provide Executive with the following benefits:

     (1) A lump sum severance payment within ten (10) days following Executive’s last day of work equal to the sum of (i) two (2) times the greater of Executive’s annualized Base Salary in effect on the date of termination of employment or Executive’s highest annualized Base Salary in effect on any date during the term of this Agreement and (ii) two (2) times the higher annual bonus that would have been awarded, based on the method of calculation then in effect, during the one of the two immediately preceding fiscal years which would produce the higher award.

     (2) Executive shall be vested in any and all stock bonus and stock option plans and agreements of Company in which Executive had an interest, vested or contingent. If applicable law prohibits such vesting, then Company shall pay Executive an amount equal to the value of benefits and rights that would have, but for such prohibition, have been vested in Executive.

     (3) Executive shall be compensated in a manner selected by the Company to provide for life, disability, accident and group health and dental insurance benefits, at substantially the levels Executive was receiving immediately prior to his termination, for a period of time expiring upon the earlier of (i) the end of the period of 42 months following his termination of employment or (ii) the day on which he becomes eligible to receive any substantially similar continuing health care benefits under any plan or program of any other employer or source without being required to pay any premium with respect thereto. At Company’s option, Company may satisfy the obligation to provide the benefits pursuant to this Section by either (1) paying for or reimbursing

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Executive at reasonable intervals for the actual cost of such benefits (and Executive shall cooperate with Company in all respects in securing and maintaining such benefits, including exercising all appropriate COBRA elections and complying with all terms and conditions of such coverage in a manner to minimize the cost), (2) payment of a lump sum in the amount of the present value, discounted at Company’s effective borrowing rate, of the premiums for such benefits for the continuing coverage period (which shall be calculated based on the conclusive presumption that the cost or premiums will remain constant at the rate existing for COBRA coverage immediately following termination), or (3) a combination of the foregoing options (for example, Company may elect to pay Executive’s premiums during the period of time covered by COBRA, and thereafter pay a lump sum to cover the present value of the remaining cost).

     Executive shall have no duty to mitigate damages or loss in order to receive the benefits provided by this Section or in this Agreement. If Executive is entitled to receive the payments called for by this Section 8(c), Executive’s right to receive the compensation provided by Section 6(c) or 7(c) shall to the extent of such payments be reduced.

          (d) Change in Control Defined. For purposes of this Agreement, a “Change in Control” means any one or more of the following events:

     (1) When the individuals who, at the beginning of any period of two years or less, constituted the Board cease, for any reason, to constitute at least a majority thereof unless the election or nomination for election of each new director was approved by the vote of at least two thirds of the directors then still in office who were directors at the beginning of such period;

     (2) A change of control of the Parent or the Company through a transaction or series of transactions, such that any person (as that term is used in Section 13 and 14(d)(2) of the Securities Exchange Act of 1934 (1934 Act”)), excluding affiliates of the Company as of the Effective Date, is or becomes the beneficial owner (as that term is used in Section 13(d) of the 1934 Act) directly or indirectly, of securities of the Parent representing 20% or more of the combined voting power of the Parent’s then outstanding securities or securities of the Company representing a majority of the combined voting power of the Company’s then outstanding securities;

     (3) Any merger, consolidation or liquidation of the Parent in which the Parent is not the continuing or surviving company or pursuant to which stock would be converted into cash, securities or other property, other than a merger of the Parent in which the holders of the shares of stock immediately before the merger have the same proportionate ownership of common stock of the surviving company immediately after the merger;

     (4) Any merger, consolidation or liquidation of Company with non-affiliated parties in which the Company is not the continuing or surviving company or pursuant to which Company’s stock would be converted into cash, securities or other property;

     (5) The shareholders of the Parent or Company approve any plan or proposal for the liquidation or dissolution of Parent or the Company; or

     (6) Substantially all of the assets of the Parent or Company are sold or otherwise transferred to parties that are not within a “controlled group of corporations” (as defined in Section 1563 of the Code) in which Company is a member at the Relevant Date.

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          (e) Good Reason Defined. For purposes of this Section, “Good Reason” shall have the meaning assigned to it in Section 7(b), except that for this purpose only, Section 7(b)(1) shall read, “[t]the failure of Company and any ultimately controling successor entity to continue Executive’s title of President of Company or the equivalent successor entity or the assignment to Executive by Company or such successor entity of duties that are materially different from Executive’s duties before the Change in Control or that are inconsistent with his position as President of Company or such successor entity unless Executive accepts a position at Parent or one of its subsidiaries.”

          (f) Notice of Termination by Executive. Any termination by Executive under this Section 8 shall be communicated by written notice to Company which shall set forth generally the facts and circumstances claimed to provide a basis for such termination.

          (g) Gross-Up Allowance

          (1) General Rules. The Code places significant tax consequences on Executive and Company if the total payments made to Executive due, or deemed due, to a Change in Control exceed prescribed limits. For example, if Executive’s “Base Period Income” (as defined below) is $100,000 and Executive’s “Total Payments” exceed 299% of such Base Period Income (the “Cap”), Executive will be subject to an excise tax under Section 4999 of the Code of 20% of all amounts paid to him in excess of $100,000. In other words, if Executive’s Cap is $299,999, he will not be subject to an excise tax if he receives exactly $299,999. If Executive receives $300,000, he will be subject to an excise tax of $40,000 (20% of $200,000). In the event such a consequence occurs, for any reason, due to this Agreement or otherwise, Company shall pay to Executive a “gross-up allowance” equal in amount to the sum of (i) the excise tax liability of Executive on the Total Payments, and (ii) all the total excise, income, and payroll tax liability of Executive on the “gross-up allowance,” further increased by all additional excise, and income, and payroll tax liability thereon, which increase shall be part of the “gross-up allowance” for purpose of computing the gross-up allowance. Company shall indemnify and hold Executive harmless from such additional tax liability for the income and payroll tax arising from the “gross-up allowance” and all excise tax arising with respect to compensation and other payments made to Executive under this Agreement and excise, income, and payroll tax on the “gross-up allowance, and all penalties and interest thereon. The purpose and effect of the gross-up allowance is to cause Executive to have the same net compensation after income, excise, and payroll taxes that Executive would have if there was no tax under Code § 4999.

          (2) Special Definitions. For purposes of this Section, the following specialized terms will have the following meanings:

(i)

“Base Period Income”. “Base Period Income” is an amount equal to Executive’s “annualized includable compensation” for the “base period” as defined in Sections 28OG(d)(1) and(2)of the Code and the regulations adopted thereunder. Generally, Executive’s “annualized includable compensation” is the average of his annual taxable income from the Company for the “base period,” which is the five calendar years prior to the year in which the Change of Control occurs.

(ii)

“Cap” or 280G Cap”. “Cap” or “28OG Cap” shall mean an amount equal to 2.99 times Executive’s “Base Period Income.” This is the maximum amount which he may receive without becoming subject to the excise tax imposed by Section 4999 of the

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	Code or which Company may pay without loss of deduction under Section 28OG of the Code.
(iii)	“Total Payments”. The “Total Payments” include any “payments in the nature of compensation” (as defined in Section 280G of the Code and the regulations adopted thereunder), made pursuant to this Agreement or otherwise, to or for Executive’s benefit, the receipt of which is contingent or deemed contingent on a Change of Control and to which Section 28OG of the Code applies.

          (h) Effect of Repeal. In the event that the provisions of Sections 28OG and 4999 of the Code are repealed without succession, this Section shall be of no further force or effect.

          (i) Employment by Successor. For purposes of this Agreement employment by a successor of Company or a successor of any subsidiary of Company that has assumed this Agreement, or continuing employment by Parent, Company or any other subsidiary of Parent after a Change in Control, shall be considered to be employment by Company or one of its subsidiaries. As a result, if Executive is employed by Company or by such a successor, or by Parent or one of its other subsidiaries, following a Change in Control, he will not be entitled to receive the benefits provided by Section 8 unless his employment with the Company or the successor is subsequently terminated without Cause or he terminates his employment for Good Reason.

     9. CONFIDENTIALITY.

          Because of Executive’s knowledge of and participation in executive issues and decisions as a result of his present and former executive positions, for purposes of Sections 9 and 10 of this Agreement, “Company” shall be interpreted to include Parent, Company and all of Parent’s direct and indirect subsidiaries.

          Executive covenants and agrees to hold in strictest confidence, and not disclose to any person, firm or company, without the express written consent of Company , any and all of Company’s confidential data, including but not limited to information and documents concerning Company’s business, customers, and suppliers, market methods, files, trade secrets, or other “know-how” or techniques or information not of a published nature or generally known (for the duration they are not published or generally known) which shall come into his possession, knowledge, or custody concerning the business of Company, except as such disclosure may be required by law or in connection with Executive’s employment hereunder or except as such matters may have been known to Executive at the time of his employment by Company. This covenant and agreement of Executive shall survive this Agreement and continue to be binding upon Executive after the expiration or termination of this Agreement, whether by passage of time or otherwise so long as such information and data shall be treated as confidential by Company.

     10. RESTRICTIVE COVENANTS.

          (a) Covenant-not-to-Compete. In consideration of Company’s agreements contained herein and the payments to be made by it to Executive pursuant hereto, Executive agrees that, for a period of time equal to the time remaining in the Initial Term or any Renewal Term (or if, but only if, a court or tribunal of final authority finds that this period is unenforceable because it is unreasonably long, then, if it would shorten the duration, for one (1) year) following his termination of employment and so long as Company is continuously not in default of its obligations to provide payments or employment-type benefits to Executive hereunder or under any other agreement, covenant, or obligation, he will not, without prior written consent of Company, consult with or act as an advisor to another company about activity which is a “Competing Business” of such company in the Restricted Territory, as defined below. For purposes of this Agreement, Executive shall be deemed to be engaged

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in a “Competing Business” if, in any capacity, including proprietor, shareholder, partner, officer, director or employee, he engages or participates, directly or indirectly, in the operation, ownership or management of the activity of any proprietorship, partnership, company or other business entity which activity is competitive with the then actual business in which Company is engaged on the date of, or any business contemplated by the Company’s business plan in effect on the date of notice of, Executive’s termination of employment. Nothing in this subparagraph is intended to limit Executive’s ability to own equity in a public company constituting less than five percent (5%) of the outstanding equity of such company, when Executive is not actively engaged in the management thereof. If requested by Executive, Company shall furnish Executive with a good-faith written description of the business or businesses in which Company is then actively engaged or which is contemplated by Company’s current business plan within 30 days after such request is made, and only those activities so timely described in which Company is, in fact, actively engaged or which are so contemplated may be treated as activities which are competitive with Company.

          (b) Non-Solicitation. Executive recognizes that Company’s customers are valuable and proprietary resources of Company. Accordingly, Executive agrees that for a period of one year following his termination of employment, and only so long as Company is continuously not in default of its obligations to provide payments or employment-type benefits to Executive hereunder or under any other agreement, covenant, or obligation, he will not directly or indirectly, through his own efforts or through the efforts of another person or entity, solicit business in the Restricted Territory for or in connection with any Competing Business from any individual or entity which obtained products or services from Company at any time during Executive’s employment with Company; he will not solicit business for or in connection with a Competing Business from any individual or which may have been solicited by Executive on behalf of Company and he will not solicit, hire or engage employees of Company who would have the skills and knowledge necessary to enable or assist efforts by Executive to engage in a Competing Business.

          (c). Remedies: Reasonableness. Executive acknowledges and agrees that a breach by Executive of the provisions of this Section 10 will constitute such damage as will be irreparable and the exact amount of which will be impossible to ascertain and, for that reason, agrees that Company will be entitled to an injunction to be issued by any court of competent jurisdiction restraining and enjoining Executive from violating the provisions of this Section. The right to an injunction shall be in addition to and not in lieu of any other remedy available to Company for such breach or threatened breach, including the recovery of damages from Executive.

          Executive expressly acknowledges and agrees that (i) the Restrictive Covenants contained herein are reasonable as to time and geographical area and do not place any unreasonable burden upon him; (ii) the general public will not be harmed as a result of enforcement of these Restrictive Covenants; and (iii) Executive understands and hereby agrees to each and every term and condition of the Restrictive Covenants set forth in this Agreement.

          Executive also expressly acknowledges and agrees that Executive’s covenants and agreements in this Section 10 shall survive this Agreement and continue to be binding upon Executive after the expiration or termination of this Agreement, whether by passage of time or otherwise

          (d) Restricted Territory. Executive and Company understand and agree that Company’s business is not geographically restricted and is unrelated to the physical location of Company facilities or the physical location of any Competing Business, due to extensive use of the Internet, telephones, facsimile transmissions and other means of electronic information and product distribution. Executive and Company further understand and agree that Executive will, in part, work toward expanding the Company’s markets and geographic business territories, and will be compensated for performing this work on behalf of Company.

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          Accordingly, Company has a protectable business interest in, and the parties intend the Restricted Territory to encompass, each and every location from which Executive could engage in Competing Business in any country, state, province, county or other political subdivision in which Company has customers, employees, suppliers, distributors or other business partners or operations. If, but only if, this Restrictive Territory is held to be invalid on the ground that it is unreasonably broad, the Restricted Territory shall include each location from which Executive can conduct business in any of the following locations: the United States (including each state in which the Company conducts sales or operations), Canada, the United Kingdom, and each political subdivision of each of the foregoing countries. If, but only if, this Restrictive Territory is held to be invalid on the grounds that it is unreasonably broad, then the restricted territory shall be the United States (including each state in which the Company conducts sales or operations), Canada, the United Kingdom, any other country in which the Company conducts sales or operations, and each political subdivision of each of the foregoing countries in which Company can articulate a legitimate protectable business interest.

     11. DISPUTE RESOLUTION.

          (a) Mediation. Any and all disputes arising under, pertaining to or touching upon this Agreement, or the statutory rights or obligations of either party hereto, shall, if not settled by negotiation, be subject to non-binding mediation before an independent mediator. Notwithstanding the foregoing, both Executive and Company may seek preliminary injunctive or other judicial relief if such action is necessary to avoid irreparable damage during the pendency of the proceedings described in this Section 11. Any demand for mediation shall be made in writing and served upon the other party to the dispute, by certified mail, return receipt requested, at the address specified in Section 13. The demand shall set forth with reasonable specificity the basis of the dispute and the relief sought. The mediation hearing will occur at a time and place convenient to the parties in Maricopa County, Arizona, within thirty (30) days of the date of selection or appointment of the mediator. Mediation or the waiver of mediation by both parties shall be a condition precedent to Arbitration.

          (b) Arbitration. In the event that the dispute is not settled through mediation, the parties shall then proceed to binding arbitration before an independent arbitrator. The mediator shall not serve as the arbitrator. EXCEPT AS PROVIDED IN SECTION 11 (a), ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY, INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS SECTION 11 AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL.

The arbitration hearing shall occur at a time and place convenient to the parties in Maricopa County, Arizona, within sixty (60) days of selection or appointment of the arbitrator unless such time period is extended by the arbitrator for good cause shown. If Company has adopted, with the consent of Executive, a policy that is applicable to arbitrations with executives, the arbitration shall be conducted in accordance with said policy, to the extent that the policy is consistent with this Agreement and the Federal Arbitration Act, 9 U.S.C. §§ 1-16. If no such policy has been adopted, the arbitration shall be governed by the National Rules f or the Resolution of Employment Disputes of the American Arbitration Association (“AAA”) in effect on the date of the first notice of demand for arbitration. Notwithstanding any provisions in such rules to the contrary, the arbitrator shall issue findings of fact and conclusions of law, and an award, within f if teen (15) days of the date of the hearing unless the parties otherwise agree.

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          (c) Procedure. Issues of procedure, arbitrability, or confirmation of award shall be governed by the Federal Arbitration Act, 9 U.S. C. SS 1-16, except that court review of the arbitrator’s award shall be that of an appellate court reviewing a decision of a trial judge sitting without a jury.

          (d) Expenses. The costs and expenses of any arbitration shall be borne by Company. Should Executive or Company, at any time, initiate mediation or arbitration for breach of this Agreement, Company shall reimburse Executive for all amounts spent by Executive to pursue such mediation or arbitration (including reasonable attorneys fees and costs), regardless of the outcome, unless the mediator or arbitrator finds Executive’s action to have been frivolous and without merit.

     12. BENEFIT AND BINDING EFFECT

          This Agreement shall inure to the benefit of and be binding upon Company, its successors and assigns, including but not limited to any company, person, or other entity which may acquire all or substantially all of the assets and business of Company or any company with or into which Company may be consolidated or merged, and Executive, his heirs, executors, administrators, and legal representatives, provided that the obligations of Executive may not be delegated.

     13. NOTICES

          All notices hereunder shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid and return receipt requested:

If to Company, to:	Insight Enterprises, Inc.
	Attn: CEO and General Counsel
	1305 West Auto Drive
	Tempe, Arizona 85283
With a copy to:	The Chairman of Parent’s
	Compensation Committee
If to Executive, to:	Branson Smith
	6862 N. La Place
	Tucson, AZ 85750

Either party may change the address to which notices are to be sent to it by giving ten (10) days written notice of such change of address to the other party in the manner above provided for giving notice. Notices will be considered delivered on personal delivery or on the date of deposit in the United States mail in the manner provided for giving notice by mail.

     14. ENTIRE AGREEMENT

          The entire understanding and agreement between the parties has been incorporated into this Agreement, and this Agreement supersedes all other agreements and understandings between Executive and Company with respect to the relationship of Executive with Company, except with respect to other continuing or future bonus, incentive, stock option, health, benefit and similar plans or agreements.

     15. GOVERNING LAW

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          This Agreement shall be governed by and interpreted in accordance with the laws of the State of Arizona.

     16. CAPTIONS

          The captions included herein are for convenience and shall not constitute a part of this Agreement.

     17. DEFINITIONS

          Throughout this Agreement, certain defined terms will be identified by the capitalization of the first letter of the defined word or the first letter of each substantive word in a defined phrase. Whenever used, these terms will be given the indicated meaning.

     18. SEVERABILITY

          If any one or more of the provisions or parts of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity or unenforceability shall not affect any other provision or part of a provision of this Agreement, but this Agreement shall be reformed and construed as if such invalid, illegal or unenforceable provision or part of a provision had never been contained herein and such provisions or part thereof shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted by law. Any such reformation shall be read as narrowly as possible to give the maximum effect to the mutual intentions of Executive and Company.

     19. TERMINATION OF EMPLOYMENT

          The termination of this Agreement by either party also shall result in the termination of Executive’s employment relationship with Company in the absence of an express written agreement providing to the contrary. Neither party intends that any oral employment relationship continue after the termination of this Agreement.

     20. TIME IS OF THE ESSENCE

          Company and Executive agree that time is of the essence with respect to the duties and performance of the covenants and promises of this Agreement.

     21. NO CONSTRUCTION AGAINST EITHER PARTY

          This Agreement is the result of negotiation between Company and Executive and both have had the opportunity to have this Agreement reviewed by their legal counsel and other advisors. Accordingly, this Agreement shall not be construed for or against Company or Executive, regardless of which party drafted the provision at issue. The language in all parts of this Agreement shall in all cases be construed as a whole according to its fair meaning and not strictly for or against either party. The Section headings contained in this Agreement are for reference purposes only and will not affect the meaning or interpretation of this Agreement in any way. Whenever the words “include,” “includes,” or “including” are used in the Agreement, they shall be deemed to be followed by the words “without limitation.

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DIRECT ALLIANCE CORPORATION, an

Arizona Corporation

By: /s/Timothy A. Crown

Timothy A. Crown

Its CEO

/s/ Branson Smith

Branson Smith

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EX-10.2

EXHIBIT 10.2

CORPORATE GUARANTY

Insight Enterprises, Inc., a Delaware corporation, hereby agrees to guarantee fully and unconditionally payment of amounts due to Dell Marketing L.P. from ExecTechDirect Technology/Direct Alliance Corporation, including reimbursement of Dell Marketing L.P. collection expense and/or legal expenses, for obligations arising from purchases initiated by ExecTechDirect Technology/Direct Alliance Corporation. Such guarantee shall not exceed $7,284,554 excluding collection and legal expenses, and shall expire on September 5, 2004.

Insight Enterprises, Inc. will remit to Dell Marketing L.P. the total of the amounts incurred above, within ten (10) days of receipt of a statement from Dell Marketing L.P. stating the ExecTechDirect Technology/Direct Alliance Corp. is in default of its obligations to Dell Marketing L.P.

Insight Enterprises, Inc. previously executed a Corporate Guaranty in favor of Dell Marketing L.P. for payments due from ExecTechDirect Technology/Direct Alliance Corporation, which guaranty specified an amount not to exceed of $7,600,000 (the “Original Guaranty”). Dell Marketing L.P. acknowledges and agrees that this Corporate Guaranty replaces and supersedes the Original Guaranty in its entirety as of the date of the Original Guaranty and that, accordingly, the total amount guaranteed by Insight Enterprises, Inc. is $7,284,554 and not the sum of the amounts guaranteed by Original Guaranty and this Guaranty.

No modification to this Corporate Guaranty will be effective unless signed in advance by Insight Enterprises, Inc.

All signatures to this agreement warrant that they have full and complete authority to enter into this agreement and to sign said agreement on behalf of themselves and/or the entity of whose behalf they are signing.

Authorized Signatures:

/s/ P. Robert Moya Date: June 17, 2004

EX-10.3

Exhibit 10.3

CONFORMED COPY

Placing Agreement

PlusNet PLC

and

The Executive Directors

and

The Non-Executive Directors

and

Insight Direct (GB) Limited

and

Insight Enterprises Inc.

and

Robert W. Baird Limited

8 July 2004

CONTENTS

CLAUSE	PAGE
1.     DEFINITIONS AND INTERPRETATION		2
2.     CONDITIONS		6
3.     APPOINTMENT OF BAIRD AS AGENT		7
4.     PLACING BY BAIRD OF SALE SHARES		7
5.     PLACING BY BAIRD OF SUBSCRIPTION SHARES		8
6.     APPLICATION FOR ADMISSION AND APPLICATION TO CREST		8
7.     DOCUMENT DELIVERY		9
8.     SUPPLEMENTARY ADMISSION DOCUMENT		9
9.     REGISTRATION AND PAYMENT		10
10.   FEES, COMMISSIONS AND EXPENSES AND SUBSCRIPTION		11
11.   WARRANTIES		13
12.   INDEMNITY		15
13.   TAXATION INDEMNITY		17
14.   WARRANTIES AND INDEMNITIES — GENERAL PROVISIONS		17
15.   TERMINATION		17
16.   ANNOUNCEMENTS AND INFORMATION		18
17.   TIME OF ESSENCE		19
18.   WAIVER		19
19.   INVALIDITY AND SEVERABILITY		19
20.   NOTICES		19
21.   COUNTERPARTS		21
22.   ENTIRE AGREEMENT		21
23.   ASSIGNMENT		21
24.   RIGHTS OF THIRD PARTIES		22
25.   GOVERNING LAW AND JURISDICTION		22
SCHEDULE 1		23
Part A — The Executive Directors		23
Part B — The Non-Executive Directors		23
SCHEDULE 2		24
Warranties		24
SCHEDULE 3		33
Tax Indemnity		33
SCHEDULE 4		40
Confirmation Letter		40
SCHEDULE 5		41
Documents		41

AGREED FORM DOCUMENTS

1.   Admission Document
2.   Dealing Code
3.   Insurance Brokers’ Letter
4.   Legal Due Diligence Report
5.   Long Form Report
6.   Nominated Adviser Agreement
7.   Orderly Marketing Deeds
8.   Placing Letter
9.   Presentation
10. Pricing Announcement
11. Resolution
12. Short Form Report
13. Statement of Adjustments
14. Working Capital Report

THIS AGREEMENT is made on 8 July 2004

BETWEEN:

(1)	PLUSNET PLC (No. 3279013) whose registered office is at Technology Building, Terry Street, Sheffield S9 2BU (the “Company”);
(1)	THE EXECUTIVE DIRECTORS of the Company whose names and addresses are set out in part A of schedule 1;
(2)	THE NON-EXECUTIVE DIRECTORS of the Company whose names and addresses are set out in part B of schedule 1;
(3)	INSIGHT DIRECT (GB) LIMITED (No. 3604424) whose registered office is Technology Building, Insight Campus, Terry Street, Sheffield S9 2BU (“Insight Direct”);
(4)	INSIGHT ENTERPRISES INC., a company organised under the laws of the state of Arizona whose offices are at 1305 West Auto Drive, Tempe, Arizona 85284, USA (“Insight”); and
(5)	ROBERT W. BAIRD LIMITED (No. 1745463) whose registered office is at Mint House, 77 Mansell Street, London E1 8AF (“Baird”).

RECITALS

(A)	The Company is a public company limited by shares. Details of the Company’s incorporation, registration and share capital are set out in Part VI of the Admission Document.
(B)	Following the passing of the Resolution, the authorised share capital of the Company will be £100,000.00 divided into 50,000,000 Ordinary Shares and Insight Direct will be the registered and beneficial owner of 23,750,000 Ordinary Shares.
(C)	On the terms and subject to the conditions referred to in this agreement, Insight Direct has agreed to sell 11,111,111 Ordinary Shares and the Company proposes to raise additional working capital by the issue of 2,450,102 Ordinary Shares for cash and to obtain admission to trading on AIM of its ordinary share capital in issue and to be issued pursuant to the Placing.
(D)	In reliance upon the various representations, warranties, covenants, indemnities and undertakings contained in this agreement, Baird has agreed on the terms and subject to the conditions set out in this agreement to effect the Placing and:

(1)	as agent for Insight Direct, to use its reasonable endeavours to procure buyers for the Sale Shares;
(2)	as agent for the Company, to use its reasonable endeavours to procure subscribers for the Subscription Shares (other than the Committed Shares); and
(3)	as principal, to purchase any Sale Shares for which it is unable to procure buyers and to subscribe for any Subscription Shares (other than the Committed Shares) for which it is unable to procure subscribers,

in each case at a price of £0.90 per share.

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THE PARTIES AGREE AS FOLLOWS:

1.	DEFINITIONS AND INTERPRETATION
1.1	In this agreement (including the recitals and the schedules) the following words and expressions shall, unless the context otherwise requires, have the following meanings:
	“Accounts Date” means 31 December 2003;
	“Act” means the Companies Act 1985;
	“Admission” means the admission to trading on AIM of the whole of the ordinary share capital of the Company, issued and to be issued pursuant to the Placing and a reference to Admission “becoming effective” is to be construed in accordance with rule 6 of the AIM Rules;
	“Admission Document” means the document comprising a prospectus in the agreed form proposed to be published on behalf of the Company in connection with the AIM Application as required by rule 3 of the AIM Rules;
	“AIM” means AIM, a market of the London Stock Exchange;
	“AIM Application” means the application to be made to the London Stock Exchange for Admission;
	“AIM Rules” means the rules published by the London Stock Exchange governing admission to trading on AIM and the regulation of AIM companies as amended or reissued from time to time;
	“Baird Group” means Baird, or any undertaking which is, on or after the date of this agreement, a parent company of Baird or a subsidiary undertaking of Baird or of any such parent company;
	“Baird Shares” has the meaning given in clause 10.2(b);
	“Broker” means a person appointed by the Company as broker pursuant to rule 33 of the AIM Rules;
	“Committed Shareholders” means Messrs Stafford, Makanji, Potesta, Wyse, Sadler and Comer;
	“Committed Shares” means the 297,511 Ordinary Shares which the Committed Shareholders have agreed to subscribe pursuant to the Placing as described in the Admission Document;
	“Covenantors” means, for the purposes of schedule 3, Insight, Insight Direct and the Executive Directors;
	“CREST” means the relevant system (as defined in the Regulations) in respect of which CRESTCo is the operator (as defined in the Regulations);
	“CRESTCo” means CRESTCo Limited;
	“Dealing Code” means the code for dealings in the securities of the Company in the agreed form;
	“Dealing Day” means a day upon which dealings in domestic securities may take place on AIM with the authority of the London Stock Exchange;

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“Directors” means the Executive Directors and the Non-Executive Directors;

“Engagement Letter” means the letter of engagement between the Company, Insight and Baird dated 5 March 2004, relating to the appointment of Baird as financial adviser, nominated adviser and broker in connection with Admission and the Placing;

“Executive Directors” means the Directors named in part A of schedule 1;

“FSA” means the Financial Services Authority;

“FSMA” means the Financial Services and Markets Act 2000;

“Group” means the Company and its subsidiary undertakings;

“Indemnified Persons” means Baird or any other member of the Baird Group and all persons who are, on or at any time after the date of this agreement, directors, officers or employees of Baird or any other member of the Baird Group, each of whom shall be an “Indemnified Person” for the purposes of this agreement;

“Indemnity” means the indemnity set out in clause 12.2;

“Insight Sale Shares” has the meaning given in clause 4.1;

“Insurance Brokers’ Letter” means the letter in the agreed form from the Company’s insurance brokers regarding the adequacy of the Group’s insurance;

“Legal Due Diligence Report” means the legal due diligence report in the agreed form prepared by Eversheds LLP in relation to the business of the Group;

“Lock-in and Orderly Marketing Deed (Corporate Shareholder)” means the orderly marketing deed in the agreed form to be entered into by Insight, Insight Direct, Baird and the Company and relating to the disposal of Ordinary Shares following Admission;

“Lock-in and Orderly Marketing Deed (Individuals)” means the orderly marketing deed in the agreed form to be entered into by the persons named therein and relating to the disposal of Ordinary Shares following Admission;

“London Stock Exchange” means London Stock Exchange plc;

“Long Form Report” means the report on the business and affairs of the Group prepared by the Reporting Accountants in the agreed form;

“Long Stop Date” means 31 July 2004;

“Nominated Adviser” means a person who assumes the responsibilities set out in rule 37 and schedule 6 of the AIM Rules;

“Nominated Adviser Agreement” means the agreement in the agreed form to be entered into between the Company, the Directors and Baird providing, amongst other things, for the appointment of Baird as the Nominated Adviser and broker to the Company for the purposes of the AIM Rules;

“Non-Executive Directors” means the Directors named in part B of schedule 1;

“Orderly Marketing Deeds” means the Lock-in and Orderly Marketing Deed (Individuals) and the Lock-in and Orderly Marketing Deed (Corporate Shareholder);

“Ordinary Shares” means ordinary shares of 0.2 pence each in the capital of the Company;

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“Placees” means the persons whom Baird procures to subscribe for the Subscription Shares and/or purchase the Sale Shares in accordance with this agreement and the Selling Shareholder Agreement (including the Committed Shareholders);

“Placing” means the proposed placing by Baird of the Placing Shares in accordance with this agreement and the Selling Shareholder Agreement and as more particularly described in the Admission Document;

“Placing Documents” means the Admission Document and the Placing Letter;

“Placing Letter” means collectively, the two forms of letter, each in the agreed form to be sent by Baird to proposed Placees pursuant to the Placing including the accompanying letter of confirmation and, where applicable, registration schedule;

“Placing Price” means 90 pence per Placing Share;

“Placing Shares” means the Sale Shares and the Subscription Shares;

“POS Regulations” means The Public Offers of Securities Regulations 1995 (as amended);

“Presentation” means the presentation in the agreed form for use by the Company in the marketing of the Placing to institutional and other potential investors;

“Pricing Announcement” means the press announcement in the agreed form giving details of, amongst other things, the Placing Price proposed to be released on the date of this agreement;

“Properties” means the principal properties occupied by the Group as at the date of this agreement, particulars of which are set out in the Legal Due Diligence Report under the heading “Real Estate”;

“prospectus” means a prospectus for the purposes of the POS Regulations;

“Registrars” means Lloyds TSB Registrars;

“Regulation S” means Regulation S promulgated under the Securities Act;

“Regulations” means the Uncertificated Securities Regulations 2001 (as amended);

“Relationship Agreement” means the agreement in the agreed form to be entered into between the Company and Insight;

“Reporting Accountants” means KPMG LLP;

“Resolution” means the written resolution of the Company to reorganise the share capital of the Company in the agreed form;

“Sale Shares” means the Ordinary Shares to be sold by Insight Direct pursuant to the Placing and the Ordinary Shares to be sold by the Sellers pursuant to the Selling Shareholder Agreement, amounting in aggregate to 11,460,117 Ordinary Shares;

“Securities Act” means the US Securities Act of 1933, as amended;

“Sellers” means the persons whose names are set out in column (1) of schedule 1 to the Selling Shareholder Agreement;

“Selling Shareholder Agreement” means the agreement in the agreed form to be entered into between the Sellers and Baird;

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	“Short Form Report” means the report on the Group prepared by the Reporting Accountants and to be reproduced in Part IV of the Admission Document in the agreed form;
	“Statement of Adjustments” means the statement of adjustments prepared by the Reporting Accountants in relation to the Short Form Report in the agreed form;
	“Subscription Shares” means the 2,450,102 Ordinary Shares to be issued by the Company and subscribed by potential placees pursuant to the Placing, including the Committed Shares and the Baird Shares (unless the content requires otherwise);
	“Supplementary Admission Document” means any supplementary admission document prepared in accordance with clause 8;
	“Tax Indemnity” means the indemnity set out in clause 13;
	“US” or “United States” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
	“Verification Notes” means the verification notes prepared by Eversheds LLP and the Directors in connection with the Placing for the purpose of substantiating the accuracy and completeness of the information contained in the Admission Document and the Presentation;
	“Warranties” means the warranties contained in schedule 2 and clauses 11.3 and 11.4 and “Warranty” shall be construed accordingly;
	“Warrantors” means Insight, Insight Direct, the Company and the Directors;
	“Working Capital Period” means the period from Admission to 31 December 2005; and
	“Working Capital Report” means the report on the cashflow and working capital projections of the Group covering the Working Capital Period in the agreed form.
1.2	In this agreement, unless otherwise specified, reference to:

(a)	“includes” and “including” shall mean including without limitation;
(b)	a “subsidiary undertaking” or “parent undertaking” is to be construed in accordance with section 258 of the Act, a “subsidiary” or “holding company” is to be construed in accordance with section 736 of the Act and an “associated company” is to be construed in accordance with section 416 et seq. of the Income and Corporation Taxes Act 1988;
(c)	a document in the “agreed form” is a reference to that document in the form approved and for the purposes of identification signed by or on behalf of the Company, Insight and Baird;
(d)	a party means a party to this agreement and includes its permitted assignees and/or the successors in title to that part of its undertaking which includes this agreement and, in the case of an individual, to his or her estate and personal representatives;
(e)	a person includes any person, individual, company, firm, corporation, government, state or agency of a state or any undertaking or organisation (whether or not having separate legal personality and irrespective of the jurisdiction in or under the law of which it was incorporated or exists);

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(f)	a statute or statutory instrument or any of their provisions is to be construed as a reference to that statute or statutory instrument or such provision as the same may have been or may from time to time hereafter be amended or re-enacted;
(g)	recitals, clauses, paragraphs or schedules are to recitals, clauses and paragraphs of and schedules to this agreement. The schedules form part of the operative provisions of this agreement and references to this agreement shall, unless the context otherwise requires, include references to the recitals and the schedules;
(h)	writing shall include typewriting, printing, lithography, photography and other modes of representing words in a legible form (other than writing on an electronic or visual display screen) or other writing in non-transitory form;
(i)	words denoting the singular shall include the plural and vice versa and words denoting any gender shall include all genders; and
(j)	the time of day is reference to time in London, England.

1.3	The index to and the headings in this agreement are for information only and are to be ignored in construing the same.
2.	CONDITIONS
2.1	The obligations of Baird under clauses 4, 5 and 10.9 of this agreement are in all respects conditional upon the satisfaction of each of the following conditions in each case by the relevant time and/or date referred to below (or such later time and/or date as Baird and the Company may determine, being no later than 8.00 a.m. on the Long Stop Date):

(a)	the Nominated Adviser Agreement, Orderly Marketing Deeds and the Relationship Agreement being entered into by not later than the date of this agreement;
(b)	the delivery of six copies of the Admission Document and the completed AIM Application (in the form specified by the AIM Rules) to the London Stock Exchange, together with the applicable fee as required by rule 5 of the AIM Rules;
(c)	the delivery of one copy of the Admission Document to the Registrar of Companies in England and Wales as required by regulation 4(2) of the POS Regulations by not later than 4.00 p.m. on the date of this agreement;
(d)	the delivery by the Company to Baird, on the day immediately prior to Admission of a letter signed by a Director or duly authorised officer for and on behalf of the Company, signed by a duly authorised officer of Insight on behalf of Insight, signed by a duly authorised director/officer on behalf of Insight Direct and signed by all of the Directors in the form set out in schedule 4;
(e)	Admission becoming effective by not later than 8.00 a.m. on 14 July 2004;
(f)	the Sellers (or their duly appointed agents/attorneys) each having complied with their respective obligations under the Selling Shareholder Agreement to the extent that the same fall to be performed prior to Admission and the Selling Shareholder Agreement having become unconditional in all respects (other than in relation to any condition (or part thereof) relating to this agreement having become unconditional); and
(g)	the passing of the Resolution by the shareholders of the Company at a duly convened extraordinary general meeting of the Company without amendment.

2.2 The Company, the Directors, Insight and Insight Direct shall (so far as it is within their respective power or control) each use their respective reasonable endeavours to procure

6

	the fulfilment of each condition set out in clause 2.1 on or before the relevant time and/or date specified therein.
2.3	If any one or more of the conditions set out in clause 2.1 is not fulfilled in all respects, or is not waived by Baird or becomes incapable of being fulfilled (and is not so waived) on or before the required time and/or date specified or, where no time and/or date is specified for the fulfilment thereof, 8.00 a.m. on 14 July 2004 (or such later time and/or date (being no later than 8.00 a.m. on the Long Stop Date) as Baird, Insight and the Company may determine), this agreement and all obligations of each of the parties under it shall cease to have any effect except as provided in clause 15.2;
3.	APPOINTMENT OF BAIRD AS AGENT
3.1	Insight Direct hereby irrevocably appoints Baird to act as its agent to procure buyers to purchase the Insight Sale Shares at the Placing Price in accordance with and subject to the terms and conditions set out in this agreement and in the Placing Documents. This appointment confers on Baird, on behalf of Insight Direct, all powers, authorities and discretions on its behalf which are necessary for, or reasonably incidental to, the procuring of buyers for the Insight Sale Shares on such terms and conditions as aforesaid. Insight Direct agrees to ratify and confirm everything which Baird lawfully and properly does in the exercise of those powers, authorities and discretions granted by the appointment and Baird irrevocably accepts such appointment on such terms and conditions.
3.2	The Company hereby irrevocably appoints Baird to act as its agent to procure subscribers to subscribe for the Subscription Shares at the Placing Price in accordance with and subject to the terms and conditions set out in this agreement and in the Placing Documents. This appointment confers on Baird, on behalf of the Company, all powers, authorities and discretions on its behalf which are necessary for, or reasonably incidental to, the procuring of subscribers for the Subscription Shares on and subject to such terms and conditions as aforesaid. The Company agrees to ratify and confirm everything which Baird lawfully and properly does in the exercise of those powers, authorities and discretions pursuant to such appointment and Baird irrevocably accepts such appointment on those terms and conditions.
4.	PLACING BY BAIRD OF SALE SHARES
4.1	Insight Direct agrees to sell at the Placing Price 11,111,111 of the Sale Shares (the “Insight Sale Shares”) free from all liens, mortgages, charges, pledges, encumbrances and equities and other third party rights or interests (legal or equitable) or restrictions of any nature whatsoever and together with all rights of any nature whatsoever attaching to such Sale Shares at the date of this agreement and Baird agrees, as agent for Insight Direct, to use its reasonable endeavours to procure buyers to purchase the Insight Sale Shares at the Placing Price or, failing which as principal, to purchase at the Placing Price any such Insight Sale Shares for which it is unable to procure buyers.
4.2	Immediately after the execution of this agreement, Insight Direct shall deliver to Baird for the purpose of enabling the Insight Sale Shares to be transferred pursuant to this agreement and the Placing a stock transfer form duly executed by or on behalf of Insight Direct in respect of the Insight Sale Shares to be sold by it as provided in this agreement accompanied by the share certificate(s) to which they relate.
4.3	Insight Direct hereby irrevocably appoints any director of Baird as its attorney in his name and on his behalf to complete the stock transfer form in respect of the Insight Sale Shares to be sold by it pursuant to clause 4.1 in favour of Baird or such other persons as Baird may direct.

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4.4	Insight Direct agrees with Baird that, without prejudice to clause 4.3, Insight Direct shall, forthwith following any request from Baird, generally execute, deliver and register any other document or deed and to do any other act or thing which Baird reasonably requires or believes to be necessary or advisable for the sale and/or transfer of the Insight Sale Shares pursuant to clause 4.1.
4.5	Insight Direct shall not give any instruction to the Company or the Directors or Baird or take any action which is inconsistent with its obligations under this agreement or the Placing Documents or with the appointment made under clause 3.1 or which prevents registration of the Insight Sale Shares in accordance with clause 9.2.
4.6	Insight Direct hereby agrees and acknowledges that nothing in this agreement or in relation to the Placing constitutes the giving of investment advice by Baird to Insight Direct or constitutes Insight Direct as a customer of Baird (within the meaning of the FSA’s Handbook of rules and guidance) and that Baird is acting for the Company in relation to the Placing and is not acting for Insight Direct and is not responsible to Insight Direct for providing protections afforded to customers of Baird or advising it in relation to the Placing.
5.	PLACING BY BAIRD OF SUBSCRIPTION SHARES
5.1	Baird agrees, as agent for the Company, to use its reasonable endeavours to procure subscribers to subscribe at the Placing Price for the Subscription Shares (other than the Committed Shares and the Baird Shares), or failing which as principal to subscribe itself at the Placing Price for any Subscription Shares (other than the Committed Shares and the Baird Shares) for which it is unable to procure subscribers.
5.2	The Company shall immediately upon the execution of this agreement, conditionally upon Admission becoming effective, procure that the board of directors of the Company (or a duly established and authorised committee of the board):

(a)	allot the Subscription Shares at the Placing Price to the Placees or (as the case may be) to Baird (or such other person(s) as Baird shall nominate) in the manner and in the numbers as may be notified to it by Baird pursuant to clause 9.1; and
(b)	approve (subject to stamping) the sale and transfer of all of the Sale Shares to Placees or Baird and/or such other person as Baird shall nominate.

5.3	The Company undertakes to Baird that on Admission all Subscription Shares shall be allotted and issued fully paid, free from all liens, mortgages, charges, encumbrances and other third party rights and ranking pari passu in all respects with all other Ordinary Shares and that the subscribers of the Subscription Shares will be entitled to all dividends and other distributions declared, made or paid on or in respect of the Ordinary Shares at or at any time after the date of Admission.
6.	APPLICATION FOR ADMISSION AND APPLICATION TO CREST
6.1	The Company hereby authorises Baird on its behalf to make an application to the London Stock Exchange for Admission. The Company shall, at its own expense, supply or (so far as it is within its power or control) procure to be supplied, all such information and documentation, give or (so far as it is within its power or control) procure the giving of all such undertakings, execute, or procure (so far as it is within its power or control) the execution of all such documents, pay all such fees and generally do, or procure to be done, all such things, in each case as may be necessary, or properly required by the London Stock Exchange, in connection with Admission.
6.2	Baird shall, consistent with its obligations as Nominated Adviser, take all appropriate steps and provide to the Company appropriate advice and guidance for the purposes of obtaining approval of the AIM Application and shall prepare and deliver to the London

8

	Stock Exchange the declarations required under rules 5 and 37 of the AIM Rules in connection therewith.
6.3	Prior to Admission becoming effective, the Company shall apply to CRESTCo for the admission of the Ordinary Shares to CREST as participating securities and take all reasonable steps necessary for the Ordinary Shares to become participating securities in CREST as at the date of (and immediately following) Admission, including supplying all information, giving all such undertakings, paying all such fees and executing all such documents as may reasonably be required in connection therewith.
6.4	The Company undertakes to Baird not to take any action between the date hereof and the date falling 30 days after Admission, without the prior written consent of Baird, which would or could cause any of the Placing Shares to be disabled in the CREST system.
7.	DOCUMENT DELIVERY
7.1	The Company shall procure that:

(a)	the Pricing Announcement is released to a Regulatory Information Service (as defined in the AIM Rules) not later than 8.00 a.m. on the date of this agreement;
(b)	there are delivered to Baird the documents referred to in schedule 5 at the times specified in, and otherwise in accordance with the requirements of that schedule;
(c)	one copy of the Admission Document is delivered to the Registrar of Companies in England and Wales for registration as required by regulation 4(2) of the POS Regulations by not later than 4.00 p.m. on the date of this agreement;
(d)	six copies of the Admission Document and the completed application form (in the form specified by the AIM Rules) are delivered to the London Stock Exchange, together with the applicable fee as required by rule 5 of the AIM Rules by not later than three Dealing Days prior to Admission; and
(e)	copies of the Admission Document are published in accordance with the requirements of the AIM Rules.

8.	SUPPLEMENTARY ADMISSION DOCUMENT
8.1	Without prejudice to clauses 2 and 15, if after publication of the Admission Document but before Admission becomes effective, there is a significant change affecting any matter required to be included, or a significant new matter which would have been required to be included, in the Admission Document by regulation 10 of the POS Regulations or by the AIM Rules, Insight, Insight Direct, the Company and/or the Directors shall, upon becoming aware of the same, immediately notify the change or new matter to Baird in writing and promptly prepare a Supplementary Admission Document containing details of the change or new matter in a form agreed by Baird and the Company and which complies with the AIM Rules.
8.2	Immediately upon authorisation of the issue by Baird of the Supplementary Admission Document, the Company shall deliver one copy thereof to the Registrar of Companies in England and Wales for registration as required by regulation 10(3) of the POS Regulations and shall thereafter make available free of charge sufficient copies in accordance with the requirements of the POS Regulations.
8.3	Baird shall provide all reasonable and timely assistance in connection with the preparation and issue of the Supplementary Admission Document.
8.4	If a Supplementary Admission Document is published in connection with the Placing, references in this agreement to the Admission Document are as the context permits, to be

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	read as references to the Supplementary Admission Document, or as the context may require, the Admission Document and Supplementary Admission Document taken together.
9.	REGISTRATION AND PAYMENT
9.1	Baird shall not later than three Dealing Days prior to Admission supply the Company with a schedule of the Placees (specifying their names and addresses) procured by it and the number of Placing Shares which the Placees are subscribing and/or purchasing, specifying whether such Placing Shares are to be held in certificated or uncertificated form (and if they are to be held in uncertificated form, details of the participant and member account ID of the CREST account of Baird (or such other person as Baird may nominate) to which uncertificated Placing Shares are to be credited to be held by Baird as nominee on behalf of the relevant Placees, pending transfer through CREST, together with confirmation that Baird has authorised the Company to credit its stock account in CREST in respect of the relevant number of Placing Shares).
9.2	The Company agrees with Baird that:

(a)	it will, immediately following Admission, procure that the Registrars promptly register (without registration fee) the persons named by Baird in accordance with clause 9.1 as the holders of the Subscription Shares; and
(b)	against delivery to the Company of the duly executed stock transfer forms in respect of the Sale Shares and the share certificates relating thereto, it will, immediately following Admission, procure that the Registrars promptly register (without registration fee) the persons named by Baird in accordance with clause 9.1 as the transferees of the Sale Shares as the holders thereof.

9.3

The Company shall provide, or procure the provision of, all information and authorisations required by the Registrars to effect the registration as members of the Company of the persons with whom Placing Shares have been placed (or Baird, as the case may be) in accordance with and as contemplated by the provisions of this agreement, the Selling Shareholder Agreement, the Placing Documents and any agreement between the Company and the Registrars.

9.4

The Company shall procure that the Registrars:

(a)	not later than five Dealing Days after Admission issue definitive share certificates to those persons registered as members of the Company pursuant to clause 9.2 above who have requested to hold their Placing Shares in certificated form; and
(b)	not later than 8.00 a.m. on the date of Admission credit the CREST stock account of Baird (or such other person as Baird shall nominate) with the appropriate number of Placing Shares in respect of those persons who have requested to hold their Placing Shares in uncertificated form.

9.5	In the event of any difficulties or delays in obtaining admission of the Ordinary Shares to CREST as participating securities or the use of CREST in respect of the Placing, Baird may require that all Placing Shares be held in certificated form in which case the provisions of this agreement relating to the holding of Placing Shares in uncertificated form will be deemed to be modified accordingly.
9.6	As soon as reasonably practicable after Admission and the receipt by Baird in full of the relevant amounts specified in (a) or (b) below (as the case may be) and in any event by no later than three Dealing Days after Admission, Baird shall (in the case of clause 9.6(a) only, subject to receipt by Baird of the bank account details referred to therein) pay or procure to be paid:

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(a)

to the Company, the total subscription price payable for the Subscription Shares (being the number of such shares (including, for the avoidance of doubt, the Committed Shares) multiplied by the Placing Price) plus the Agreed Tax Amount (as defined in clause 9.6(b)) less (i) the fee and commission referred to in clause 10.2, (ii) that part of the fee payable to Baird under this agreement pursuant to clause 10.1 of the Nomad Agreement and (iii) any costs and expenses which Baird may have incurred and in respect of which it is entitled to be reimbursed pursuant to clause 10.5, such payment to be made to such bank account of the Company as the Company shall notify to Baird not less than two Business Days prior to Admission; and

(b)

to Insight Direct, the purchase consideration for the Insight Sale Shares (being the relevant number of such shares multiplied by the Placing Price) less (i) the commission payable by it pursuant to clause 10.1 and an amount equal to the stamp duty or stamp duty reserve tax payable by it pursuant to clause 10.3, (ii) an amount equal to the value of the Committed Shares at the Placing Price (in respect of which the Committed Shareholders have agreed that Baird shall pay such amounts to the Company) and (iii) an amount (the “Agreed Tax Amount”) equal to £178,508.54 (representing tax payable by the Committed Shareholders in respect of the payment to the Committed Shareholders of cash pursuant to the Insight Incentive Scheme (as defined in the Admission Document)), such payment to be made to such account at such bank as Insight Direct shall have notified to Baird not fewer than three Dealing Days before the due date for payment, or failing such notification, to the Company’s account identified in clause 9.6(a) above.

9.7	Payment of such monies to the accounts mentioned in clauses 10.6(a) and (b) shall constitute a complete discharge of Baird’s obligations pursuant to clauses 4 and 5 of this agreement.
10.	FEES, COMMISSIONS AND EXPENSES AND SUBSCRIPTION
10.1	Subject to clause 15 and the satisfaction of the conditions set out in clause 2.1, Insight shall pay a commission to Baird of four (4) per cent. of the value of the Insight Sale Shares at the Placing Price (together with any value added tax thereon).
10.2	Subject to clause 15 and the satisfaction of the conditions set out in clause 2.1, the Company shall:

(a)	pay to Baird a commission of four (4) per cent. of the value of the Subscription Shares (but excluding for these purposes, the Committed Shares) at the Placing Price, together with any value added tax thereon; and
(b)	pay to Baird a fee in cash of £600,000 (i) less the aggregate amount of any Advisory Fees (as defined in clause 2(a) of the Engagement Letter) which have paid to Baird prior to Admission but (ii) plus an amount which is sufficient to enable Baird to subscribe 279,001 Placing Shares at the Placing Price (the “Baird Shares”), together in each case with any value added tax thereon.

10.3

Insight Direct shall pay all stamp duty and/or stamp duty reserve tax arising in respect of the transfer of/agreement to transfer the Insight Sale Shares to be sold by it pursuant to this agreement at the rate of 50p per £100 (or part thereof) of the value of the Insight Sale Shares at the Placing Price.

10.4

The Company shall pay all costs, charges and expenses of, or incidental to, the Placing (save for any costs, charges or expenses agreed to be payable by Insight, Insight Direct or any of the Sellers) and the AIM Application including without limitation all accountancy, legal and other professional fees and expenses of the Company and the legal fees of Baird (subject to a cap of £100,000), the fees and expenses payable to the Registrars and the

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	costs of printing, advertising and circulating the Placing Documents and other documents in connection with the Placing (together with any value added tax payable in each such case).
10.5	The Company shall immediately upon request by Baird reimburse Baird the amount of any expenses for which the Company shall be responsible as provided pursuant to clause 10.4 but which Baird may have paid or incurred on behalf of the Company in connection with the Placing and the AIM Application.
10.6	Where pursuant to clause 10.4 or 10.5 a sum (a “Relevant Sum”) is to be paid or reimbursed to Baird in respect of any cost or expense paid or incurred by Baird on behalf of the Company in connection with the Placing and/or Admission and that cost or expense includes an amount in respect of value added tax (the “VAT Element”), the Company shall pay an amount to Baird in respect of the VAT Element that shall be determined as follows:

(a)	if the Relevant Sum constitutes for value added tax purposes the reimbursement of the consideration for the supply of goods or services to Baird, a sum equal to the proportion of the VAT Element that Baird certifies acting in good faith as representing irrecoverable input tax in the hands of Baird, that certificate to be conclusive save in the case of manifest error; and
(b)	if the Relevant Sum constitutes for value added tax purposes the reimbursement of a cost or expense incurred by Baird as agent for the Company, a sum equal to the whole of the VAT Element,

	and where a sum equal to the VAT Element has been reimbursed to Baird under clause 10.6(b) above, Baird shall provide the Company with a proper tax invoice in respect of the supply to which the Relevant Sum relates, that is to say a tax invoice naming the Company as the recipient of the supply and issued either by Baird or, if Baird has treated the relevant cost or expense as a disbursement for value added tax purposes, by the person making the supply.
10.7	If the performance by Baird of any of its obligations under this agreement shall represent for value added tax purposes the making by Baird of any supply of goods or services to the Company that is taxable at a positive rate, the Company shall pay to Baird, in addition to the amounts otherwise payable by the Company to Baird pursuant to this agreement (including, without limitation, amounts payable by the Company to Baird pursuant to clause 10.6(a)), an amount equal to the value added tax chargeable on any such supply, that payment to be made within seven days of Baird requesting the same and against production by Baird of a proper tax invoice.
10.8	The Company, Insight and Baird agree that the Engagement Letter shall be amended by the deletion therein of paragraph 2(d) and further agree that provisions of clause 10.2(b) above shall prevail over paragraph 2(b) of the Engagement Letter and the Engagement Letter shall be deemed to be amended accordingly.
10.9	Without prejudice to its obligations under clauses 4 and 5 of this agreement, Baird shall at Admission subscribe the Baird Shares with effect from Admission and:

(a)	agrees that it shall take such shares subject to the memorandum and articles of association of the Company; and
(b)	consents to the entry of the name of Baird in the register of members of the Company in respect of such shares.

10.10 With effect from Admission, Baird undertakes to the Company not at any time prior to the announcement of the Company’s interim results for the six month period ending 30 June

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2005 without the prior consent of the Company (such consent not to be unreasonably withheld or delayed) to:

(i)	offer, dispose of, or agree to offer or dispose of, directly or indirectly, any of the Baird Shares or any interest in such shares; or
(ii)	enter into or agree to enter into any derivative transaction of any type whatsoever (including, without limitation, any swap, contract for differences, option, warrant or futures transaction or arrangement) in respect of, or referenced to, any such shares,

whether any such transaction in clause 10.10(i) or clause 10.10(ii) above is settled by delivery of Ordinary Shares or other securities, in cash or otherwise; provided that the foregoing provisions of clause 10.10 shall not apply:

(a)	(i)	to an acceptance of an offer for the entire issued share capital of the Company (excluding any Ordinary Shares already held by the offeror) by a person who is not acting in concert with Baird (a “Third Party Offer”);
	(ii)	to the giving of an irrevocable undertaking to accept a Third Party Offer;
	(iii)	to selling any of the Baird Shares to a person making a Third Party Offer or a person who has announced an intention to make a Third Party Offer; or
	(iv)	to making a counter-bid following a Third Party Offer;

(b)	upon an intervening court order;
(c)	to any scheme of reconstruction under section 110 of the Insolvency Act 1986 in relation to the Company;
(d)	the transfer of Ordinary Shares pursuant to any offer by the Company to purchase its own shares which is made on identical terms to all holders of Ordinary Shares;
(e)	the transfer or disposal of the Baird Shares pursuant to a compromise or arrangement between the Company and its creditors or any class of them or between the Company and its members or any class of them which is agreed to by the creditors or members and sanctioned by the court under sections 425-427A of the Act;
(f)	to any disposal required by any statutory or regulatory requirement; or
(g)	to transfers of Baird Shares by Baird to any member of the Baird Group provided that:

(i)	the proposed transferee agrees by deed in a form reasonably acceptable to the Company to be bound by the provisions of this clause 10.10; and
(ii)	in the event of any such member ceasing to be a member of the Baird Group, immediately prior thereto, the Baird Shares owned by such member shall be transferred to another member of the Baird Group.

11.	WARRANTIES
11.1	The Company severally warrants to Baird, Insight and Insight Direct jointly and severally warrant to Baird and each of the Directors hereby severally warrants to Baird in the terms set out in schedule 2 as at the date of this agreement by reference to the facts and circumstances subsisting at such date.

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11.2	Save in respect of the warranties contained in clause 11.3, each Warranty given by the Non-Executive Directors is given subject to the best of his knowledge, information and belief.
11.3	Each of the Directors severally represents and warrants to Baird that the information in respect of his own details in the declaration and in the completed Director’s questionnaire given by him to Baird and the information in respect of the details relating to him and the director’s family (within the meaning of AIM Rules) in the Admission Document is true and accurate and not misleading.
11.4	Insight Direct represents and warrants to Baird in respect of the Insight Sale Shares that it has, or will have at Admission, good title to, or is, or will be the beneficial owner of, and has, or will have at Admission the necessary power and authority to enable it to sell all the Insight Sale Shares, in each case free from all liens, mortgages, charges, pledges, encumbrances and other third party rights or interests (legal or equitable) or restrictions of any nature whatsoever and together with all rights of any nature whatsoever attaching to the Insight Sale Shares (including the rights to all dividends and other distributions (if any) declared, made or paid) at or at any time after the date of Admission.
11.5	Each of the Company, Insight, Insight Direct and the Directors acknowledges that Baird is entering into this agreement in reliance upon each of the Warranties. Each of the Warranties shall be construed separately and shall not be limited or restricted by reference to or inference from the terms of any other Warranty.
11.6	Each of the Company, Insight, Insight Direct and the Directors severally undertakes to Baird to notify Baird:

(a)	immediately if he, the Company, Insight or Insight Direct (as the case may be) becomes aware at any time up to Admission of any fact or circumstance which would or is likely to indicate that any of the Warranties is or has become untrue or inaccurate or misleading by reference to the facts or circumstances from time to time subsisting; and
(b)	as soon as reasonably practicable at any time up to the close of business on the day which is 90 days after (but not including) the date on which Admission occurs if he, the Company, Insight or Insight Direct (as the case may be) becomes aware that any of the Warranties was untrue or inaccurate or misleading as at the date of this agreement.

11.7

Where any Warranty is expressed to be qualified by a reference to awareness and/or knowledge and/or information and/or belief of any person or words to similar effect (including pursuant to clause 11.2), that reference shall be deemed to include an additional statement to the effect that it has been given after making all such enquiries as were reasonable and there having been made all such investigations as could reasonably be expected to be made in the context of the Placing. Notwithstanding anything to the contrary in this agreement, each of the Directors shall be deemed to be aware of all information contained in the Long Form Report, the Legal Due Diligence Report and the Working Capital Report.

11.8

Except where clause 11.9 applies:

(a) the aggregate liability of each of the Directors for all claims under the Warranties, the Executive Directors for all claims under the Indemnity or the Covenantors (other than Insight and Insight Direct) for all claims under the Tax Indemnity or, in respect of any of them, for any other provision of this agreement, shall not exceed the amount set out opposite his name in part A or B (as the case may be) of schedule 1;

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(b)	the aggregate liability of Insight and Insight Direct for all claims under the Warranties, the Indemnity and the Tax Indemnity or any other provision of this agreement shall not exceed the amount paid to Insight pursuant to clause 9.6(b);
(c)	no claims may be made against Insight, Insight Direct or any Director for any breach of the Warranties or Indemnity or any other provision of this agreement unless written notice of the claim (giving reasonable details of the circumstances giving rise to the claim) has been given by Baird to Insight, Insight Direct or that Director (as the case may be) before 5.00 p.m. on the date which is thirty (30) days after (but not including) the date of publication of the audited report and accounts of the Company for the year ending 31 December 2005;
(d)	Baird agrees with each of the Executive Directors that it will not seek to recover any sum pursuant to the Indemnity from any of such Directors unless it shall first have taken all reasonable steps (having regard to the facts and circumstances affecting the Company at the relevant time) to recover any such sum from the Company; and
(e)	no claim may be made against any of the Directors under the Warranties or the Indemnity (but for the avoidance of doubt, not the Tax Indemnity) unless the amount of the claim or claims (when taken together with all costs and expenses) exceeds in aggregate the sum of £100,000 provided that if the amount of the claim or claims (when taken together with all costs and expenses) exceeds £100,000, then Baird shall be entitled to recover the full amount and not just the excess over £100,000.

11.9	The limitations in clause 11.8 shall not apply in relation to any breach of Warranty or any other provision of this agreement resulting from fraud or wilful default on the part of the person for whose benefit the limitation would otherwise have applied.
11.10	The Indemnified Persons shall not be entitled to recover more than once against any party (whether under this agreement or the Selling Shareholders Agreement or otherwise) in respect of the same loss.
12.	INDEMNITY
12.1	No claim shall be made against an Indemnified Person by Insight, Insight Direct, the Company or any of the Directors to recover any damage, loss, cost or expense which any such person may suffer or incur (or claim to have suffered or incurred) by reason of or arising out of the carrying out or performance by Baird (or by an Indemnified Person on its behalf) of any of its obligations (or the exercise of rights) or the provision of services to the Company whether under this agreement or otherwise in connection with the Placing unless and only to the extent that such damage, loss, cost, charge or expense results from the negligence or wilful default of the relevant Indemnified Person or any breach by Baird of any of its obligations under this agreement or any of the Placing Documents or any breach by that Indemnified Person of its obligations under FSMA or the regulatory system (as set out in the FSA’s Handbook of rules and guidance) or is of such a nature that liability is not permitted to be excluded pursuant to FSMA or the regulatory system or otherwise.
12.2	Insight and Insight Direct jointly and severally, the Company, and each of the Executive Directors severally, undertakes with Baird to the fullest extent permitted by law to indemnify and hold harmless each Indemnified Person fully and effectively against all claims (whether or not successful, compromised or settled), actions, demands, proceedings, liabilities and judgments (each a “Claim”) which may be made, brought, threatened or established against an Indemnified Person in any jurisdiction by any subscriber, allottee, acceptor, placee or underwriter of any of the Placing Shares pursuant to the Placing or any subsequent buyer or transferee thereof or by any governmental

15

agency or regulatory body or by any other person whatsoever and against all liabilities, losses, damages, costs, charges, expenses (including legal fees) and taxes (each a “Loss” and together “Losses") which an Indemnified Person may pay, suffer or incur in connection therewith (including, but not limited to, all Losses paid, suffered or incurred in investigating, seeking advice as to defending or disputing any such Claim and/or in establishing its right to be indemnified pursuant to this clause 12.2 and/or in seeking advice as to any such Claim or in any way related to or in connection with this indemnity or the Placing) and which in any such case is occasioned by or results from or is attributable to or would not have arisen but for (in each case whether directly or indirectly):

(a)	any breach, or alleged breach, by Insight, Insight Direct, the Company or any of the Directors of any of their respective obligations under this agreement or any breach of any of the Warranties; or
(b)	the Placing Documents not containing, or being alleged not to contain, all the information required by law or regulation (including, for the avoidance of doubt, the AIM Rules) to be contained therein or any statement contained in the Placing Documents, the Presentation or the Pricing Announcement being, or being alleged to be, untrue, inaccurate, misleading or defamatory in any respect or not based on reasonable grounds or any misrepresentation or alleged misrepresentation by whomsoever being contained or being alleged to be contained in the Placing Documents; or
(c)	any breach, or alleged breach, of the laws or regulations of any country in connection with the Placing or the distribution of the Placing Documents or any failure, or alleged failure, to comply with any such laws or regulations; or
(d)	the proper performance by or on behalf of Baird of any of its obligations (or exercise of rights) under this agreement or otherwise in connection with the Placing and the preparation and distribution of the Placing Documents; or
(e)	the issue or approval by Baird for the purposes of section 21 of FSMA of any financial promotion relating to the Company or in connection with the Placing; or
(f)	the sale and purchase of the Sale Shares and the allotment and issue of the Subscription Shares and the rescission of any contract to subscribe for or purchase any Placing Shares,

	unless, in relation to an Indemnified Person and only to the extent that, such Claim or Loss results from the negligence or wilful default of the relevant Indemnified Person or any breach by Baird of its obligations under this agreement or breach by any Indemnified Person of its obligations under FSMA or the regulatory system (as set out in the FSA’s Handbook of rules and guidance). This indemnity is in addition to any rights that any Indemnified Person may have at common law or otherwise (including, but not limited to, any right of contribution) and any other liability which Insight, Insight Direct, the Company or any Executive Director may have to any Indemnified Person but shall have no effect to the extent it is prohibited under any applicable law or regulation.
12.3	Baird shall, promptly after becoming aware of any claim made or threatened against an Indemnified Person in respect of which indemnity may be sought pursuant to clause 12.2, notify the Company in writing thereof and enter into and thereafter maintain consultation with the Company on all material aspects of such claim.
12.4	All sums payable to any Indemnified Person under this clause 12 shall be paid free and clear of all deductions or withholdings unless the deduction or withholding is required by law, in which event the person making payment shall pay such additional amount as shall be required to ensure that the net amount received by the relevant Indemnified Person

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	will equal the full amount which would have been received by it had no such deduction or withholding been made.
12.5	If the United Kingdom Inland Revenue or any other taxing authority in any jurisdiction brings into any charge to tax (or into any computation of income, profits or gains for the purposes of any charge to tax) any sum payable to any Indemnified Person under this clause 12 then the amount so payable shall be grossed up by such amount as will ensure that after payment of the tax so chargeable, the relevant Indemnified Person shall retain a sum equal to the amount that it would otherwise have retained had no such tax been payable (additional payments being made on demand as may be necessary).
13.	TAXATION INDEMNITY
	Each of the Covenantors hereby severally undertakes with the Company for itself and as trustee for each other member of the Group and, as a separate covenant, with Baird, that he will pay, discharge and indemnify the Company and each other member of the Group in the terms set out in schedule 3.
14.	WARRANTIES AND INDEMNITIES — GENERAL PROVISIONS
14.1	Each of the Warranties, the Indemnity and the Tax Indemnity shall remain in full force and effect notwithstanding the completion of the subscription of the Subscription Shares, the sale and purchase of the Sale Shares and the Placing.
14.2	Notwithstanding any rule of law or equity to the contrary, any release, waiver or compromise or any other arrangement of any kind whatsoever which Baird or any other Indemnified Person may agree to or effect as regards one or more of the Company, the Directors, Insight or Insight Direct in connection with this agreement and, in particular (but without limitation), the Warranties, the Indemnity and the Tax Indemnity, shall not affect the rights of the Indemnified Person as regards any other of such parties.
14.3	Each of the Directors, Insight and Insight Direct hereby agrees that, if and to the extent that he or it (as the case may be) incurs any liability under the Warranties, the Indemnity or the Tax Indemnity, he or it (as the case may be) will not seek any contribution or seek to recover any sum from the Company or any other member of the Group in respect of such liability.
15.	TERMINATION
15.1	If at any time prior to Admission:

(a)	there shall develop, occur or come into effect any substantial change in national or international financial, industrial, economic, political, military, diplomatic or stock market conditions or currency exchange rates or controls or any outbreak or escalation of hostilities or any acts of terrorism or any change in financial markets or any calamity or crisis which, in the reasonable opinion of Baird, would be likely to prejudice materially the success of the Placing or which would make it impracticable or inadvisable to proceed with the Placing;
(b)	there shall have been an adverse change, or any development involving a prospective adverse change, in or affecting the general affairs, prospects, management, financial or trading position, shareholders’ funds or results of the Company or any other member of the Group, whether or not arising in the ordinary course of business, which, in any such case, in the reasonable opinion of Baird, would be so material and adverse as to prejudice the success of the Placing or which would make it impracticable or inadvisable to proceed with the Placing;
(c)	Baird becomes aware (whether by receipt of a notification pursuant to clause 11.6 or otherwise) that any of the Warranties was untrue or inaccurate or misleading in

17

	any material respect when given and/or that any of the Warranties has become untrue or inaccurate or misleading in any material respect if such Warranties were to be repeated at any time prior to Admission by reference to the facts and circumstances from time to time subsisting; or
(d)	Insight, Insight Direct, the Company or any of the Directors, or any of the Sellers, shall fail in any material respect to comply with their respective obligations under this agreement or the Selling Shareholder Agreement (as the case may be); or
(e)	there occurs or arises a significant change affecting any matter required to be included, or a significant new matter which would have been required to be included, in the Admission Document by regulation 10 of the POS Regulations or by the AIM Rules requiring a Supplementary Admission Document to be published by or on behalf of the Company,

	then and in any such case Baird may in its absolute discretion by notice in writing to the Company to be served prior to Admission elect to terminate this agreement and its obligations hereunder.
15.2	If this agreement is terminated pursuant to clause 2.3 or if clause 15.1 applies, the obligations of Baird shall cease immediately and, except in relation to any breaches of any provision of this agreement prior to the date of such termination, no party shall have any claim against any other party for any costs, damages, compensation or otherwise under or in respect of this agreement except that:

(a)	the Company shall within two Dealing Days pay to Baird (without prejudice to the Company’s obligations under the Engagement Letter) any costs and expenses in respect of which Baird is entitled to be reimbursed pursuant to clause 10.4;
(b)	Baird shall within two Dealing Days return all moneys received from Placees pursuant to the Placing and arrange for the return of the Insight Sale Shares (if applicable), transfers and certificates referred to in clause 4.2 to Insight and each of the respective Sellers entitled thereto;
(c)	the Company shall cancel any instructions given to CRESTCo; and
(d)	the provisions of clauses 1, 12, 14 and 18 to 25 shall remain in full force and effect.

16.	ANNOUNCEMENTS AND INFORMATION
16.1	Subject to clause 16.2, the Company and each of the Directors hereby severally undertakes to Baird that none of them will at any time between the date of this agreement and the date on which Admission takes place make any public statement or communication regarding any member of the Group or the Placing or otherwise relating to the financial condition or trading or financial prospects of any member of the Group, whether in response to enquiries or otherwise, without the prior consent of a director of Baird, such consent not to be unreasonably withheld or delayed. Such consent will be deemed to have been given to any such statement given at a press conference organised or attended by a representative of Baird insofar as it is based on and is consistent with the information contained in the Admission Document.
16.2	The provisions of clause 16.1 shall not apply where a public statement or communication is required to be made under this agreement, by law or by the London Stock Exchange in which case the Company and the Directors agree so far as possible, to consult with Baird regarding the timing and content of such statement.

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17.	TIME OF ESSENCE
	Save as otherwise expressly provided, time is of the essence in respect of every obligation under this agreement and any agreement amending or substituting its terms.
18.	WAIVER
18.1	A waiver of any term, provision or condition of, or consent granted under, this agreement shall be effective only if given in writing and signed by the waiving or consenting party and then only in the instance and for the purpose for which it is given.
18.2	No failure or delay on the part of any party in exercising any right, power or privilege under this agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
18.3	No breach of any provision of this agreement shall be waived or discharged except with the express written consent of the parties.
18.4	The rights and remedies herein provided are cumulative with and not exclusive of any rights or remedies provided by law.
19.	INVALIDITY AND SEVERABILITY
	If any provision of this agreement is or becomes (whether or not pursuant to any judgement or otherwise) invalid, illegal or unenforceable in any respect under any law of any jurisdiction:

(a)	the validity, legality and enforceability under the law of that jurisdiction of any other provision;
(b)	the validity, legality and enforceability under the law of any other jurisdiction of that or any other provision,

	shall not be affected or impaired in any way thereby.
19.2	If any provision of this agreement shall be held to be void or illegal, invalid or unenforceable, in whole or in part, for any reason whatsoever, such provision or part shall to that extent be deemed not to form part of this agreement but the legality, validity and enforceability of the remaining provisions of this agreement shall not be affected.
20.	NOTICES
20.1	Any notice, demand or other communication given or made under or in connection with the matters contemplated by this agreement shall be in writing and shall be delivered personally or sent by facsimile or prepaid first class post (air mail if posted to or from a place outside the United Kingdom):
	In the case of the Insight to:

Address:	1305 West Auto Drive
	Tempe
	Arizona, 85284
	USA
Fax:	+1 480 760 7162
Attention:	Chief Financial Officer and General Counsel

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In the case of the Company and the Directors (other than Robert Moya):

Address:	Technology Building
	Terry Street
	Sheffield
	S9 2BU
Fax:	+44 870 703 8532
Attention:	Neil Comer/Ashok Makanji

In the case of Insight Direct and Robert Moya:

Address:	c/o Insight Direct
	Alperton House
	Bridgewater Road
	Wembley
	Middlesex HAO 1EH
Fax:	+44 208 403 6366
Attention:	Legal and Commercial Director (with a copy to the Managing Director)

In the case of Baird to:

Address:	Robert W. Baird Limited
	Mint House
	77 Mansell Street
	London E1 8AF
Fax:	+44 20 7702 3134
Attention:	Shaun Dobson

and shall be deemed to have been duly given or made as follows:

(a)	if personally delivered, upon delivery at the address of the relevant party;
(b)	if sent by first class post, two Dealing Days after the date of posting;
(c)	if sent by air mail, five Dealing Days after the date of posting; and
(d)	if sent by facsimile, when despatched,

	provided that if, in accordance with the above provision, any such notice, demand or other communication would otherwise be deemed to be given or made after 5.00p.m. such notice, demand or other communication shall be deemed to be given or made at 9.00a.m. on the next Dealing Day.
20.2	A party may notify the other parties to this agreement of a change to its name, relevant addressee, address or facsimile number for the purposes of clause 20.1 provided that such notification shall only be effective:

(a) on the date specified in the notification as the date on which the change is to take place; or

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(b) if no date is specified or the date specified is less than five Dealing Days after the date on which notice is given, the date falling five Dealing Days after notice of any such change has been given.

21.	COUNTERPARTS
21.1	This agreement may be executed in any number of counterparts which together shall constitute one agreement. Any party may enter into this agreement by executing a counterpart and this agreement shall not take effect until it has been executed by all parties.
21.2	Delivery of an executed counterpart of a signature page by facsimile transmission shall take effect as delivery of an executed counterpart of this agreement. If such method is adopted, without prejudice to the validity of such agreement, each party shall provide the others with the original of such page as soon as reasonably practicable thereafter.
22.	ENTIRE AGREEMENT
22.1	Each of the parties acknowledges and agrees with the other parties that:

(a)

this agreement together with the Engagement Letter and the other documents referred to in this agreement (together the “Transaction Documents”) constitute the entire and only agreement and understanding between the parties in connection with the Placing and subject matter of the Transaction Documents; and

(b)

it has not been induced to enter into any Transaction Document in reliance upon, nor has it been given, any warranty, representation, statement, assurance, covenant, agreement, undertaking, indemnity or commitment of any nature whatsoever other than as are expressly set out in the Transaction Documents and, to the extent that any of them have been it unconditionally and irrevocably waives any claims, rights or remedies which any of them might otherwise have had in relation thereto;

	PROVIDED THAT the provisions of this clause 22.1 shall not exclude any liability which any of the parties would otherwise have to any other party or any right which any of them may have to rescind this agreement in respect of any statements made fraudulently by any of them prior to the execution of this agreement or any rights which any of them may have in respect of fraudulent concealment by any of them.
22.2	This agreement may be varied only by a document signed by all of the parties and expressly incorporating the terms of this agreement as varied into that document.
23.	ASSIGNMENT
	No party to this agreement may assign, transfer or charge all or any of any other parties’ obligations nor any of its rights or benefits arising under this agreement without the prior written consent of all the other parties.

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24.	RIGHTS OF THIRD PARTIES
24.1	Each Indemnified Person shall have the right under the Contracts (Rights of Third Parties) Act 1999 to enforce its rights against the Company under clauses 11 and 12 of this agreement provided that an Indemnified Person (other than Baird, and in respect of clause 12) must obtain the written consent of Baird (which Baird may give or refuse in its absolute discretion) before it may bring proceedings to enforce the terms of clause 12 and, save to the extent notified in writing by Baird to the relevant Indemnified Person, Baird (without obligation) shall have the sole conduct of any such action on behalf of the Indemnified Person.
24.2	Save as provided in clause 24.1, a person who is not a party to this agreement shall have no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement but this does not affect any right or remedy of a third party which exists or is available apart from that Act.
24.3	Notwithstanding the provisions of clause 24.1, any rights arising by virtue of the Contracts (Rights of Third Parties) Act 1999 may be rescinded or varied in any way or at any time by the parties to this agreement without the consent of any Indemnified Person.
25.	GOVERNING LAW AND JURISDICTION
25.1	This agreement (and any dispute, controversy or claim of whatever nature arising out of or in any way relating to this agreement or its formation) shall be governed by and construed in accordance with English law.
25.2	Each of the Company and the Directors irrevocably agree that the courts in England shall have jurisdiction to hear and decide any suit, action or proceedings, and/or to settle any disputes, which may arise out of or in connection with this agreement or its formation (respectively, “Proceedings” and “Disputes”) and, for these purposes, each party irrevocably submits to the jurisdiction of the courts of England.
25.3	Without prejudice to any other permitted mode of service the parties agree that service of any claim form, notice or other document (“Documents”) for the purpose of any Proceedings begun in England shall be duly served upon it if delivered personally or sent by registered post, in the case of Insight the address of the Company set out in this document (marked for the attention of the Legal and Commercial Director, with a copy to the Managing Director), or such other person and address in England and/or Wales as Insight shall notify Baird in writing from time to time. Nothing contained in this clause 25.3 affects the right to serve process in another manner permitted by law.

IN WITNESS whereof this agreement has been executed as a deed on the date first above written.

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SCHEDULE 1

Part A — The Executive Directors

		(3)
(1)	(2)	Maximum liability
Name	Address	(Clause 10.7)
1. Lee Strafford	Technology House, Terry Street,	£280,000
	Sheffield, S9 2BU
2. Ashok Makanji	Technology House, Terry Street,	£200,000
	Sheffield, S9 2BU
3. Neil Comer	Technology House, Terry Street,	£200,000
	Sheffield, S9 2BU

Part B — The Non-Executive Directors

		(3)
(1)	(2)	Maximum liability
Name	Address	(Clause 10.7)
1. Kevin Adams	Technology House, Terry Street,	£	120,000
	Sheffield, S9 2BU
2. Robert Moya	c/o Insight Direct, Alperton	£	60,000
	House, Bridgewater Road,
	Wembley, Middlesex HAO 1EH
3. Michael Sherwin	Technology House, Terry Street,	£	60,000
	Sheffield, S9 2BU

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SCHEDULE 2

Warranties

1.   Admission Document

1.1	The information contained in the Admission Document is in accordance with the facts and all statements of fact contained in the Admission Document are true and accurate and are not misleading.
1.2	All statements, forecasts, estimates and expressions of opinion, intention or expectation contained in the Admission Document are fairly and honestly given, expressed or held and have been the subject of all reasonable care and attention and are fairly based upon facts within the knowledge of Insight, Insight Direct, the Company or any of the Directors and are made on reasonable grounds after due and proper consideration of all the information currently available to Insight, Insight Direct, the Company and the Directors.
1.3	There are no facts or considerations known to Insight, Insight Direct, the Company or any of the Directors which are not disclosed in the Admission Document and which by their omission would or might reasonably be considered to:

(a)	be likely to affect the import of the information contained therein; or
(b)	make any statement therein (whether of fact or opinion) inaccurate or misleading; or
(c)	invalidate or qualify any assumption made in support of any statement therein (whether of fact or opinion); or
(d)	be material for disclosure to Baird or a potential subscriber or purchaser of any of the Placing Shares.

1.4 The Admission Document contains all such information as, having regard to the matters referred to in regulation 9(3) of the POS Regulations, investors would reasonably require, and reasonably expect to find there, for the purpose of making an informed assessment of:

(a)	the assets and liabilities, financial position, profits and losses and prospects of the Group; and
(b)	the rights attaching to the Ordinary Shares.

1.5	The Admission Document contains all items of information required to be included by the AIM Rules and the POS Regulations.
1.6	So far as the Warrantors are aware, all factual information supplied to Baird for the purposes of the Placing and the Admission Document was when given true and accurate and in accordance with the facts and not incomplete or misleading and all statements, forecasts, estimates and expressions of opinion, intention and expectation so supplied have been made after due and proper consideration, are fair and honest and represent reasonable expectations based on facts known to the Warrantors.
2.	Presentation
2.1	The information contained in the Presentation is in accordance with the facts and all statements of fact contained in the Presentation are true and accurate and are not misleading.

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2.2 All statements, forecasts, estimates and expressions of opinion, intention or expectation contained in the Presentation are fairly and honestly given, expressed or held and have been the subject of all reasonable care and attention and are fairly based upon facts within the knowledge of Insight, Insight Direct, the Company or any of the Directors and are made on reasonable grounds after due and proper consideration of all the information currently available to Insight, the Company and the Directors.

2.3 There are no facts or considerations known to Insight, Insight Direct, the Company or any of the Directors which are not disclosed in the Presentation and which by their omission would or might reasonably be considered to:

(a)	be likely to affect the import of the information contained therein; or
(b)	make any statement therein (whether of fact or opinion) inaccurate or misleading; or
(c)	invalidate or qualify any assumption made in support of any statement therein (whether of fact or opinion).

3.	Financial Statements
3.1	The financial statements of the Group as at and for the three financial years ended on the Accounts Date as summarised in the Short Form Report:

(a)	have been prepared in accordance with the historical cost convention and generally accepted United Kingdom accounting principles, practices and standards (“UK GAAP”) consistently applied and comply with the Act; and
(b)	give a true and fair view of the state of affairs of the Group as at the end of each of the relevant financial periods and of the profit and loss for each such period; and
(c)	fairly set out the assets, liabilities and reserves of the Group and either make proper provision for or, where appropriate in accordance with generally accepted United Kingdom accounting principles, practices and standards, include a note in respect of all liabilities or commitments, whether actual, deferred or contingent of the Group as at the relevant dates.

3.2

Save as disclosed in the Long Form Report, the profits of the Group for the three financial years ended on the Accounts Date as shown in the Short Form Report and the trend of profits thereby disclosed have not resulted to a material extent from inconsistencies of accounting practice, the inclusion of non-recurring items of income or expenditure, transactions entered into otherwise than on normal commercial terms or any other factors rendering such profits for all or any of such periods abnormally high or low.

3.3

The estimates of turnover, gross profit and operating profit for the Company for the six months ended 30 June 2004 set out in Part III of the Admission Document have been prepared after due and careful enquiry by the Company and the Directors on the basis of the assumptions set out therein and on a basis consistent with the accounting policies adopted in relation to the preparation of the latest published and audited financial statements of the Group and the assumptions upon which such estimates are based are fair and reasonable and there are no facts known or which could on reasonable enquiry have been known to the Company or any of the Directors which have not been taken into account in the preparation of such estimates and which could reasonably be expected to have a material effect thereon.

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4.	Current Financial Period
4.1	Since the Accounts Date:

(a)	each member of the Group has carried on its respective businesses in the ordinary and usual course;
(b)	save as disclosed in the Admission Document, there has been no material depletion in the net assets of the Group and there has been no material adverse change, nor, so far as the Warrantors are aware, any development likely to give rise to a material adverse change, in the financial or trading position or prospects of the Group (“Material Adverse Effect”);
(c)	save as disclosed in the Admission Document, no member of the Group has entered into any contract or commitment of a long term or unusual nature or which could involve an obligation of a material nature or magnitude which is material for disclosure;
(d)	save as disclosed in the Admission Document, no member of the Group has acquired or disposed of or agreed to acquire or to dispose of any business, company or asset or assumed or acquired any liability (including any contingent liability);
(e)	save as disclosed in the Admission Document, no dividends or other distributions have been, or have been treated as having been, declared, made or paid by any member of the Group; and
(f)	no member of the Group has been involved in any transaction which has resulted, or could result, in any liability for taxation otherwise than in the ordinary and usual course of trading.

5.	Financial Procedures
5.1	The Company has established procedures which provide a reasonable basis for the Directors to make proper judgements of the financial position and prospects of the Group.
6.	Working Capital
6.1	The cashflow and working capital projections the subject of the Working Capital Report have been prepared with all reasonable care and attention by the Company and the Directors on the basis of the assumptions set out in such projections and such assumptions are fair and reasonable and there are no facts known to Insight, Insight Direct, the Company or the Directors which have not been taken into account in the preparation of such projections and which could reasonably be expected to have a material effect thereon and all information supplied to Baird for the purpose of its examination and review of the working capital projections of the Group was when given true and accurate in all material respects and not misleading in any material respect.
6.2	The working capital available to the Group will, from the date of Admission, be sufficient for its present requirements, that is for at least the next 12 months from the date of Admission.
7.	Indebtedness
	All of the Group’s term loans and overdraft facilities are in full force and effect. No event or circumstance has occurred or arisen or is likely to occur or arise which entitles any person, or would (with the giving of notice or the lapse of time or both) entitle any person to require payment of any such loan or facility in whole or in part prior to its stated date of maturity or to require security therefor or which would cause the lender’s commitment

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	thereunder to be cancelled or reduced. All undrawn amounts under such facilities are capable of drawdown and all conditions precedent to such drawdown have been met. In relation to overdraft facilities the continued availability of which has been assumed for the purposes of the Working Capital Report, the Company has obtained appropriate comfort from the lenders providing such overdraft facilities as to the continued availability of such facilities over the Working Capital Period and copies of such comfort letters have been provided to Baird. There is nothing known to Insight, Insight Direct, the Company or the Directors that might give cause to believe that repayment might be demanded under such facilities or that any undrawn amount thereof might not be available for drawing. So far as Insight, Insight Direct, the Company and the Directors are aware, no person to whom any indebtedness for borrowed money of the Group which is payable on demand presently proposes to demand payment of, or security for, the same.
8.	Long Form and Reports
8.1	All information supplied by the Company and its subsidiaries or any of such person’s officers or employees to the Reporting Accountants for the purposes of their Long Form Report and/or the Short Form Report and/or the Working Capital Report and/or any of their other reports in connection with the Placing (collectively, the “Reports”), and in respect of any updates to such information was when supplied true and accurate in all material respects and no further information has been withheld the absence of which might reasonably have affected the contents of the Reports in any material respect.
8.2	All statements of fact set out in the Reports are true and accurate in all material respects and are not misleading in any material respect and no fact or matter has been omitted from the Reports which would be necessary to make the information therein not misleading in any material respect; and the Company and the Directors have read and do no disagree with the statements of opinion contained in, or the contents of, the Reports and (where relevant) the statements of opinion, intention or expectation attributed to the Company or the Directors in the Reports are accurate statements of the opinions, intentions or expectations held by the Company or the Directors (as the case may be) which are fairly based upon facts within the knowledge of the Company or the Directors (as the case may be) and have been made after due and careful enquiry.
8.3	All statements of fact set out in the Legal Due Diligence Report relating to the Group and its business, assets, properties and liabilities and matters relating thereto are true and accurate, no fact has been omitted therefrom (or information withheld) which is material for disclosure to Baird and no fact has been omitted the omission of which would make any statement of fact therein misleading in any material respect and the expressions of opinion, expectation and intention attributed to the Company, the Directors or Insight (as the case may be) therein are honestly held and either fairly based upon facts which are within their knowledge (having made all reasonable enquiries) or made on reasonable grounds after due and proper consideration of all of the information currently available to Insight, Insight Direct, the Company and the Directors.
8.4	All factual information and documentation supplied to Eversheds LLP for the purposes of the Legal Due Diligence Report were when given and remain true and accurate in all material respects and not misleading in any material respect.
9.	The Properties
9.1	The Group has no interest in any freehold property. No member of the Group is in breach of the terms of any lease in respect of the Properties and there is no fact or circumstance as a result of which the Company or any of its subsidiaries may be required to vacate the Properties or any of them or to cease to carry on any of the businesses which it presently carries on at the Properties.

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9.2	The Properties comprise the only material properties owned or occupied by the Group.
9.3	So far as the Warrantors are aware, no member of the Group has any actual or contingent liability (whether as owner, former owner, or as tenant or former tenant, or as an original contracting party, or guarantor of any party, to any deed, document, lease or license connected therewith) in relation to any freehold or leasehold property, other than in respect of the Properties.
10.	Verification Notes
	The information contained in the replies to the Verification Notes is true and accurate in all material respects and not misleading in any material respect and all expressions of opinion and expectation therein contained are honestly held and fairly based; such replies have been prepared or approved by persons having appropriate knowledge and responsibility to enable them properly to provide such replies and all such replies have been given in good faith.
11.	Insurances
11.1	The Directors and the Company believe that the Group is insured to adequate levels against all risks against which the Group might reasonably be expected to insure in the particular circumstances of the businesses carried on by each member thereof, all such insurances are in full force and effect and not void or voidable and there is no material insurance claim pending, threatened or outstanding against any member of the Group and all premiums due in respect of all insurances have been duly paid.
11.2	Insight, Insight Direct, the Company and the Directors have read and do not disagree with the statements of opinion contained in the Insurance Brokers’ Letter. All information supplied by the Company and its subsidiaries or any of such person’s officers or employees to the Company’s insurance brokers for the purposes of the Insurance Brokers’ Letter was when supplied true and accurate in all material respects and no further information has been withheld the absence of which might reasonably have affected the contents of the Insurance Brokers’ Letter in any material respect.
12.	Defaults
	No member of the Group is (i) in violation of its memorandum or articles of association or (ii) in default in the performance of any obligation, agreement, covenant or condition contained in any contract, document of title, bond, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any other member of the Group is a party or by which the Company or any other member of the Group may be bound, or to which any of their properties or assets is subject (collectively, “Agreements or Instruments”), or (iii) in violation of or has violated any applicable law, statute, rule, regulation, judgement, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or its subsidiary or any of their respective assets or properties, except for such defaults under any Agreements or Instruments, or violations that would not result in, a Material Adverse Effect.
13.	Insolvency
	No member of the Group nor Insight Direct has taken any action nor, so far as the Warrantors are aware, have any other steps been taken or legal proceedings started or threatened against any member of the Group or Insight Direct for its administration, winding-up or dissolution or for it to enter into any arrangement or composition for the benefit of creditors or for the appointment of an administrative receiver, an administrator or a receiver, trustee or similar officer of it or any of its properties, revenues or assets nor have any orders been made for any of the foregoing.

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14.	Effect of the Placing on Group Obligations
	Neither the creation, allotment or issue of the Placing Shares nor their admission to AIM nor the performance of this agreement by the Company will infringe any borrowing limits, powers or restrictions of, or the terms of any contract, indenture, security, obligation, commitment or arrangement binding upon the Company or any member of the Group or any of its or their respective properties, revenues or assets or result in the implementation of any right of pre-emption or any other material provision thereof.
15.	Licences and Intellectual Property
15.1	Save as disclosed in the Legal Due Diligence Report, each member of the Group has obtained all material licences, permissions, authorisations and consents required for the carrying on of its business as presently conducted and such licences, permissions, authorisations and consents are in full force and effect and, so far as the Warrantors are aware, there are no circumstances which indicate that any of such licences, permissions, authorisations or consents may be revoked or not renewed or withdrawn or (except to an immaterial or beneficial extent) amended, in whole or in part, in the ordinary course of events.
15.2	Save as disclosed in the Legal Due Diligence Report, the Group has taken all steps reasonably necessary to protect all intellectual property rights currently used by the Group which are material to its business and which are, or could through registration or the taking of any other steps become, its property and all agreements whereby any member of the Group is authorised to use any such intellectual property rights are in full force and effect and all fees and royalties due thereunder have been paid and, so far as the Warrantors are aware, no event has occurred or is about to occur which would or could entitle any third party to terminate such agreements prematurely nor, so far as the Company is aware, has there been any infringement by any member of the Group of intellectual property rights held by third parties. For the purposes of this paragraph 16.2, the expression “intellectual property rights” shall mean patents, registered designs, trade marks and service marks (whether registered or not), trade names, copyright, design right and all similar property rights including those subsisting (in any part of the world) in inventions, designs, drawings, performances, computer programs, semi-conductor topographies, confidential information, business names, goodwill and the style of presentation of goods or services and any applications for the protection thereof.
15.3	So far as the Warrantors are aware, no member of the Group is or has been a party to or is or has been concerned, in any agreement, or arrangement or conducted itself (whether by omission or otherwise) in a manner which infringes the Chapter I prohibition and/or the Chapter II prohibition of the Competition Act 1998 or Articles 81 or 82 of the Treaty establishing the European Economic Community or their equivalent provisions under the European Economic Area Agreement.
15.4	Save as disclosed in the Legal Due Diligence Report, the Company has not been notified (orally or in writing) that any of the intellectual property rights owned by the Group are under challenge or attack by any third party or competent authority and in respect of all the intellectual property rights owned by the Group which had been registered and continued to be registered, all renewal fees and steps reasonably required for the maintenance or prosecution of such rights have been paid or taken.
16.	Litigation and Labour Disputes
16.1	Save as disclosed in the Admission Document or the Legal Due Diligence Report, no member of the Group nor any Director nor any person for whom any member of the Group is or, so far as the Warrantors are aware, may be vicariously liable has any claim outstanding against them or is engaged in or has been engaged in any legal or arbitration or similar proceedings which, individually or collectively, are of material importance and

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	no such legal or arbitration or similar proceedings are threatened or pending nor, to the best of the knowledge, information and belief of the Directors, are there any circumstances which are likely to give rise to any such legal or arbitration or similar proceedings; for this purpose “similar proceedings” includes any civil or criminal proceedings and any action by any governmental, public or regulatory authority (including any investment exchange and any authority or body which regulates investment business or takeovers or which is concerned with mergers or taxation matters) which did or could result in public censure.
16.2	Save as disclosed in the Legal Due Diligence Report, no labour dispute with the employees of the Company or any member of the Group exists or, so far as the Directors are aware, is imminent and the Directors are not aware of any existing or imminent labour disturbance by the employees of any member of the Group.
17.	Pension Schemes
17.1	Save as disclosed in the Long Form Report or the Legal Due Diligence Report, the Group is not paying, and is not under any liability (actual or contingent) to pay or secure (other than by payment of employers’ contributions under national insurance or social security legislation), any pension or other benefit on retirement, death or disability or on the attainment of a specified age or on the completion of a specified number of years of service.
18.	Absence of Minority Interests
	Save as disclosed in the Admission Document the Company (or another member of the Group) is the beneficial owner free from all encumbrances of the whole of the issued share capital of each of the other members of the Group.
19.	Options
	Save as disclosed in the Admission Document there are in force no options or other agreements which call for the issue of or accord to any person the right to call for the issue of any shares or other securities in the capital of the Company or any of its subsidiary undertakings now or at any time hereafter.
20.	Rights of Existing Shareholders
	Save as disclosed in the Admission Document, none of the shareholders of the Company have any rights, in their capacity as such, in relation to any member of the Group other than as set out in the articles of association of the Company which would be material for disclosure in the context of the Placing.
21.	Conflicts of Interest
	The Admission Document contains all information concerning any foreseeable, actual or potential conflicts of interest between the Group and any Director or any company of which any Director is a director or in which he has a material interest and all statements contained in the Admission Document concerning such conflicts or concerning the future relationship between such Director or any of such companies are truly and honestly made and are not misleading and there are no other facts concerning the same the omission of which makes any statement therein false or misleading in any respect.
22.	Capacity
22.1	Insight Direct, the Company and its subsidiary have been duly incorporated under the laws of England and Wales and have the requisite power and authority to own, lease and operate their respective properties and the Company has the requisite power and authority to conduct its business as described in the Placing Documents.

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22.2	The Company has the power and has taken all corporate action required to create, allot and issue the Placing Shares in the manner proposed and to enter into and perform this agreement and all authorisations, approvals, consents and licences required for the allotment and issue of the Placing Shares and the entering into of this agreement by the Company have been obtained and remain in full force and effect.
23.	Compliance with UK Securities Laws
	The Admission Document and the Pricing Announcement contain all information required by, and the allotment and issue of the Placing Shares and the issue of the Pricing Announcement and the issue and distribution of the Admission Document in the manner proposed will comply with, the Act, the FSMA, the AIM Rules, the rules and regulations of London Stock Exchange and all other applicable laws, rules and regulations of the United Kingdom and all other relevant jurisdictions.
24.	Subscription Shares
	The Subscription Shares will, upon allotment, be free from all claims, mortgages, charges, pledges, liens, encumbrances and equities and any third party rights or interests (legal or equitable) or restrictions of any nature whatsoever and will, save as provided in the Admission Document, rank pari passu in all respects with the Ordinary Shares in the issued share capital of the Company.
25.	Tax
25.1	Each member of the Group has, within any applicable time limit, paid all tax which it has become liable to pay, duly made all returns, given all notices and supplied all other information required to be made, given or supplied to any tax authority, and all such returns, notices and information were and remain true and accurate in all material respects and were made on a proper basis and no member of the Group is involved in any dispute with, or subject to any investigation by, any tax authority and, so far as the Directors are aware, there are no facts or circumstances which are likely to give rise to any such dispute or investigation.
25.2	All payments made by any member of the Group to any person which ought to have been made under deduction of tax have been so made and the Group has, where appropriate, duly accounted to the relevant tax authority for such tax.
25.3	Save as disclosed in the Long Form Report, each member of the Group is, to the extent required, registered for the purposes of value added tax and has complied with the terms of value added tax legislation in all material respects.
25.4	All national insurance contributions and sums payable to the Inland Revenue under the PAYE system, due and payable by any member of the Group, have been paid.
25.5	No member of the Group is, nor at any time has been, a close company for the purposes of UK tax.
26.	Directors
	The Directors are all the directors of the Company and there is no other person who is or could be deemed to be a shadow director of the Company within the meaning of section 741 of the Act.

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27.	Environmental Matters
	So far as the Warrantors are aware, each member of the Group has at all times complied in all material respects with all laws concerning environmental and health and safety matters, is in possession of all relevant consents, or other authorisations (together the “consents”) and has complied in all material respects with the conditions therein, and there are no facts or circumstances of which the Directors are aware entitling a regulatory agency to revoke, vary or not renew any of the consents; no member of the Group is required to make any material investment under the terms of any of the consents or the terms of any relevant legislation in order to renew any of the consents or maintain the same in full force and effect.
28.	US Securities Laws
28.1	The company is a “foreign issuer” as defined in Rule 902(e) under Regulation S) that reasonably believes there is no “substantial US market interest” (as defined under Rule 902(j) under Regulation S) in any of the Company’s securities that are the same class as the Placing Shares.
28.2	None of the Company, any subsidiary undertaking or the Company or any person acting on its or their behalf has engaged or will engage in any “direct selling efforts” (as defined in Rule 902(c) under Regulation S) with respect to the Placing Shares.
28.3	None of the Company, any subsidiary undertaking or any person acting on its or their behalf has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of any securities of the same or similar class as the Placing Shares under circumstances that would require the Placing Shares to be registered under the Securities Act.
29.	General
	Eversheds LLP have explained to the Directors the nature of the responsibilities and obligations of directors of a company whose securities are traded under the AIM Rules and each Director has received and read a copy of a memorandum prepared by Eversheds LLP summarising such responsibilities and obligations.

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SCHEDULE 3

Tax Indemnity

1.1	Subject to paragraph 1.2 and unless the context otherwise indicates, words, expressions and abbreviations defined in this agreement shall have the same meanings in this schedule and any provisions of this agreement concerning matters of construction or interpretation shall mutatis mutandis apply to this schedule.
1.2	The following words, expressions and abbreviations used in this schedule shall, unless the context otherwise requires, have the following meanings:
	“Accounts” means the audited balance sheet and profit and loss account of each of the Company and its subsidiaries as at, and for the financial period ended on, the Accounts Date;
	“Accounts Relief” means any Relief to the extent that the same has either been shown as an asset of the Company or the relevant subsidiary in the Accounts or been taken into account in computing, and so reducing or extinguishing any provision for deferred Tax which appears, or would otherwise have appeared, in the Accounts;
	“Claim for Tax” means:

(a)	any claim, assessment, demand, notice, determination or other document issued or action taken by or on behalf of any Tax Authority or any other person by virtue of which the Company or any of the subsidiaries is or may have a Tax Liability; and/or
(b)	any self-assessment made by the Company or any of the subsidiaries in respect of any Tax Liability which it considers that it is or may become liable to pay;

“Covenantors” means Insight, Insight Direct and the Executive Directors;

“Connected Person” in relation to any Covenantor means any person connected to that Covenantor as determined by section 839 of the Income and Corporation Taxes Act 1988 and/or any associate of that Covenantor as defined in section 417 of that Act;

“Event” means every event, act, omission, default, occurrence, circumstance, transaction, dealing or arrangement of any kind whatsoever done or omitted to be done by the Covenantors or the Company or any of the Subsidiaries or which in any way concerns or affects the Company or any of the Subsidiaries whether or not done or omitted to be done by the Company or any of the Subsidiaries or the Covenantors;

“income profits or gains” includes any other measure by reference to which Tax is computed;

“Instalment” means any payment which is or becomes due and payable by the Company in accordance with Instalment Payments Regulations;

“Instalment Payments Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 [SI 1998/3175];

“Relief” means any allowance, credit, exemption, deduction or relief (including without prejudice to the generality of the foregoing loss relief) from, in computing, against or in respect of Tax or any right to the repayment of Tax;

“Subsidiaries” means the subsidiary undertakings of the Company;

“Tax” means any tax, and any duty, impost, levy or charge in the nature of tax, whether domestic or foreign, and any fine, penalty or interest connected therewith, including

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(without prejudice to the foregoing) corporation tax, advance corporation tax, income tax, national insurance and social security contribution, capital gains tax, inheritance tax, capital transfer tax, petroleum revenue tax, value added tax, customs excise and import duties, stamp duty, stamp duty land tax, stamp duty reserve tax, capital duty, and any other payment whatsoever which the Company or any of the Subsidiaries is or may be or become bound to make to any person as a result of any taxation statute in each case irrespective of whether the same is chargeable directly or primarily to the Company or any of the Subsidiaries or whether an amount in respect thereof is recoverable from any other person but excluding water rates and any other charges for the use of utilities, business property rates and other rates or charges relating to the use or occupation of property;

“Tax Authority” means any authority, whether of the United Kingdom or elsewhere competent to impose, assess or collect tax;

“Tax Liability” means:

(a)	any liability of the Company to make an actual payment of Tax, including an Instalment, or in respect of Tax (including in relation to a group payment arrangement entered into in accordance with section 36 of the Finance Act 1998), in which case the amount of the Tax Liability shall be the amount of the actual payment;
(b)	the loss, non-availability or reduction of any Accounts Relief, in which case the amount of the Tax Liability shall be the amount of Tax paid by the Company which would not have been paid but for such loss, non-availability or reduction; or
(c)	the use by the Company of any Accounts Relief to reduce or eliminate any liability of the Company to make an actual payment of Tax in which case the amount of the Tax Liability shall be the amount of Tax saved by the Company as a result of the use of the Relief in question.

	“taxation statutes” means all statutes, and all foreign laws, decrees, orders and regulations, providing for or imposing any Tax.
1.3	References to income, profits or gains being earned, accrued or received before a particular date shall include deemed income profits or gains treated as earned, accrued or received prior thereto.
2.	Indemnity
2.1	Subject to paragraph 2.2, each Covenantor for himself and his legal and personal representatives hereby severally covenants with Baird and, as a separate covenant, with the Company (for itself and as trustee for the Subsidiaries) to indemnify the Company and each of the Subsidiaries against:

(a) any Tax Liability in respect of, by reference to or in consequence of:

(i)	any failure by that Covenantor or any Connected Person of that Covenantor (other than the Company) to discharge any liability for Tax, or the death, dissolution, liquidation or winding-up of any such person, where the Tax Liability would not have arisen but for an Event occurring or period ending on or before Admission;
(ii)	income, profits, gains, emoluments or benefits belonging to, beneficially owned or enjoyed by that Covenantor or any Connected Person of that Covenantor (other than the Company) and which are attributable to any Event occurring or period ending on or before Admission, excluding any liability which can properly and fully be discharged out of moneys deducted

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	for the purpose from sums payable or paid by the Company or a Subsidiary, but including any increased liability to Tax of the Company or any of the Subsidiaries attributable to the cost of any emoluments or benefits not being allowable as a deduction in computing profits for Tax purposes, and including (for the avoidance of doubt) any liability to Tax arising in respect of any distribution or deemed distribution by the Company or any Subsidiary (whether within section 209, 418 or 419 of the Taxes Act 1988 or otherwise);
(iii)	the application of chapter I of part XVII of the Taxes Act 1988 (cancellation of tax advantage resulting from transactions in securities) in relation to any transaction effected on or before Admission (whether the tax advantage has been obtained or is obtainable in consequence of that transaction alone, or that transaction together with another transaction or other transactions) from which that Covenantor or any Connected Person of that Covenantor (other than the Company) derived any benefit or tax advantage or realised any profit or gain;
(iv)	the application of section 776 of the Taxes Act 1988 (artificial transactions in land) in respect of profits or gains not actually accruing to the Company or any of the Subsidiaries in respect of any transactions entered into on or before Admission from or in connection with which that Covenantor or any Connected Person of that Covenantor (other than the Company) derived any benefit or tax advantage or realised any profit or gain;
(v)	any chargeable transfer or other transfer of value (actual, deemed or notional) for the purposes of the Inheritance Tax Act 1984 made or treated as made at any time on or before Admission by or to the Covenantor or any Connected Person of that Covenantor (other than the Company) (and for the avoidance of doubt such indemnity shall extend to the imposition or effect of any Inland Revenue charge pursuant to section 237 of that Act);
(vi)	the Company or any of the Subsidiaries ceasing or having ceased to be associated with that Covenantor or any Connected Person of that Covenantor (other than the Company) before Admission;
(vii)	the disposal of any asset (including trading stock) on or before Admission in circumstances where (and only to the extent that) the consideration actually received (if any) for such disposal is less than the consideration deemed to have been received for tax purposes which relates to a transaction or event from or in connection with which that Covenantor or any Connected Person of that Covenantor (other than the Company) derived any benefit or tax advantage or realised any profit or gain;
(viii)	any liability of the Company or any of the Subsidiaries under chapter II of part XI of the Taxes Act 1988 (loans to participators etc) which relates to a transaction or event from or in connection with which the Covenantor or any Connected Person of that Covenantor (other than the Company) derived any benefit or tax advantage;
(ix)	any liability of the Company or any of the Subsidiaries pursuant to section 418 of the Taxes Act 1988 arising as a result of any expense incurred by the Company or any of the Subsidiaries on behalf of the Covenantor or any Connected Person of that Covenantor (other than the Company) or the provision of any benefit to the Covenantor or any Connected Person of that Covenantor (other than the Company) at any time before Admission; and

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(x) any liability of the Company or any of the Subsidiaries under section 69 or section 282 of the Taxation of Chargeable Gains Act 1992 (recovery of capital gains tax or corporation tax on chargeable gains from beneficiary under trust or donee of gift) in respect of the transfer of an asset or the proceeds of sale of an asset (or any part of any asset by way of gift) in any case to the Covenantor or any Connected Person of that Covenantor (other than the Company) on or before Admission;

(b) all costs and expenses incurred or payable by the Company or any of the Subsidiaries or Baird in connection with any claim under this schedule.

2.2 The indemnities contained in paragraph 2.1 of this schedule shall not cover any Tax Liability to the extent that:

(a)	provision or reserve in respect thereof has been made in the Accounts; or
(b)	it arises or is increased by reason of any change in law (including an increase in rates of Tax) or in the published practice of any Tax Authority first announced or enacted after Admission with retrospective effect; or
(c)	it has been disclosed in the Admission Document; or
(d)	it was discharged on or before Admission and the discharge of such Tax Liability was taken into account in the Accounts; or
(e)	payment has already been made by the Covenantors in respect of it under this schedule 3 or for breach of any Warranty.

2.3 All sums payable by any Covenantor under this schedule shall be paid free and clear of all deductions or withholdings (including Tax) unless the deduction or withholding is required by law, in which event or in the event that the Company or any of the Subsidiaries shall incur any liability for Tax chargeable or assessable in respect of any payment pursuant to this schedule, that Covenantor shall pay such additional amounts as shall be required to ensure that the net amount received and retained by the Company or the Subsidiary in question (after Tax) will equal the full amount which would have been received and retained by it had no such deduction or withholding been made and/or no such liability to tax been incurred and:

(a)

in applying this paragraph 2.3 no account shall be taken of the extent to which any liability for Tax may be mitigated or offset by any Relief available to the Company or the Subsidiary in question so that where such Relief is available the additional amount payable hereunder shall be the amount which would have been payable in the absence of such availability; and

(b)

if following the payment of an additional amount under this paragraph 2.3 the Company or the Subsidiary in question subsequently obtains a saving in Tax or a repayment in respect of the deduction, withholding or liability for Tax giving rise to such amount (other than a reduction in Tax which would have given rise to a claim under this schedule or been taken into account in a claim for damages under the Warranties) the Company or the Subsidiary in question shall pay to that Covenantor a sum equal to the amount of such repayment or saving (in both cases to the extent only of the said additional amount) such payment to be made within 14 days of the receipt of the repayment or the reduction of Tax due and payable as the case may be.

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3.	Timing
3.1	Where the Covenantors become liable to make any payment pursuant to paragraph 2, the due date for the making of that payment (the “Due Date”) shall be the later of the date falling seven days after the date of demand to the Covenantors and:

(a)	insofar as the claim arises in respect of a Tax Liability involving the payment of one or more Instalments, in the case of each Instalment, the date falling seven days before the date on which that Instalment becomes due and payable in accordance with the Instalment Payments Regulations;
(b)	insofar as the claim arises in respect of any Tax Liability involving an actual payment of Tax but not falling within paragraph 3.1(a), the date falling seven days before the last day on which a payment of Tax may be made by the Company without incurring any liability to interest and/or penalties;
(c)	insofar as the claim arises in respect of a Tax Liability:

(i)	which relates to the loss, non-availability or reduction of a repayment of Tax, the date falling seven days before the day on which such repayment (or increased repayment) of Tax would have been due and for this purpose it shall be assumed that the repayment would have become due at the earliest possible date;
(ii)	which relates to the loss, non-availability or reduction of any Accounts Relief other than a repayment of Tax, the date falling seven days before the date on which the Company becomes due to pay any Tax which it would not, but for such loss, non-availability or reduction have had to pay.

3.2	If any sum due under paragraph 2 of this schedule is not paid by the Covenantors by the later of the Due Date the same shall carry interest (from such later date until the date of payment) at the rate of two per cent. over base rate for the time being of National Westminster Bank Plc (or in the absence of such rate at such equivalent rate as Baird shall select) save that interest shall not start to run in respect of any payments of Tax falling within paragraph 3.1(a) above until seven days before the day on which the Company or the Subsidiary in question makes the payment of Tax due.
4.	Right to Reimbursements and Credits
4.1	Subject to paragraph 4.3, in calculating amounts due from the Covenantors under this schedule no account shall be taken of any entitlement of the Company or any of the Subsidiaries to make any recovery in respect of that amount or the circumstances giving rise to the same from some other person or of any Relief or other benefit which may become available to the Company or any of the Subsidiaries in consequence of the Tax Liability in question or the circumstances giving rise to the same.
4.2	If the Company or any of the Subsidiaries is or becomes entitled to recover from some other person (not being the Company or any Subsidiary but including, inter alia, any Tax Authority) any amount in respect of the Tax Liability resulting in a payment by the Covenantors under this schedule, then, if so required by the Covenantors and if the Covenantors shall undertake to pay all costs and expenses incurred by the Company or any of the Subsidiaries and shall provide reasonable security for the same, shall take all reasonable steps to enforce or procure that the Company or the Subsidiary so entitled shall enforce that recovery (keeping the Covenantors fully informed of progress) and shall apply the same in accordance with paragraph 4.3.

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4.3 If the Company or the Subsidiary in question receives:

(a)

a recovery as mentioned in paragraph 4.2; or

(b)

a benefit being either a reduction in Tax due and payable or any increased repayment of Tax in either case as a result of credit being obtained for a Tax Liability giving rise to a claim under the terms of this schedule (other than a reduction in a liability to Tax which would otherwise have itself given rise to a payment hereunder or been taken into account in a claim for damages under the Warranties),

then the Company or the Subsidiary in receipt thereof shall promptly pay to the Covenantors an amount equal to so much of the benefit received or sum recovered (less any Tax paid by the recipient in respect thereof) as does not exceed the amount which the Covenantors paid in respect of the Tax Liability in question (together with so much of any interest or repayment supplement paid to the recipient of the recovery or benefit in respect thereof as corresponds to the proportion of the recovery or benefit accounted for under this paragraph 4.3, less any Tax thereon).

4.4

Where any recovery or benefit is accounted for under paragraph 4.3:

(a)	the amount of the payment originally made by the Covenantors under paragraph 2 shall be treated as reduced for all purposes of this schedule (including any further application of this paragraph 4) and of the agreement; and
(b)	the same shall not prejudice the right of the Company or any of the Subsidiaries to make further recoveries under this schedule whether in respect of matters to which the original claim related or otherwise.

5.

Resistance of Claims

5.1

Without prejudice to the indemnities contained in paragraph 2.1, if the Company or any of the Subsidiaries becomes aware of any matter or circumstance or of any Claim for Tax or receives any Claim for Tax which may result in a claim against the Covenantors under this schedule, the Company or the Subsidiary concerned shall give notice thereof to the Covenantors giving reasonable details (including the amount) thereof as soon as reasonably practicable and shall (except where an allegation of fraud or wilful default or neglect is made) take such appropriate action as the Covenantors may reasonably request to dispute, resist, appeal, postpone, compromise or defend the matter or Claim for Tax at the expense of the Covenantors PROVIDED THAT:

(a)	neither the Company nor the Subsidiary concerned shall be required to take any action unless each of the Company and the Subsidiaries is indemnified and secured to their satisfaction against all losses (including additional Tax liabilities, costs, damages and expenses) which may thereby be incurred;
(b)	neither the Company nor the Subsidiary concerned shall be required to take any action which consists of a hearing before any tribunal or court of law requested by the Covenantors unless they have been advised by leading independent tax counsel acceptable to the Company or the Subsidiary concerned in its reasonable discretion, after disclosure of all relevant documentation, that it is reasonable to take such action;
(c)	neither the Company nor the Subsidiary concerned shall be requested by the Covenantors to take any action to resist, settle or compromise the claim in question which action the Company considers likely materially to affect adversely the future liability of the Company or any of the Subsidiaries to Tax; and

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(d) neither the Company nor the Subsidiary concerned shall be obliged to appeal against any assessment, notice, demand or decision or take any other action requested by the Covenantors in relation thereto, if having given the Covenantors written notice of receipt thereof in accordance with the foregoing, neither the Company nor the Subsidiary concerned has within 21 days thereafter received instructions in writing from the Covenantors to do so, and in such circumstances the Company or the Subsidiary concerned shall be free to satisfy or settle the relevant claim on such terms as it may in its absolute discretion think fit.

6.	Time Limit
	The Covenantors will not be liable under this schedule 3 or for breach of any Warranty in respect of a Tax Liability of the Company unless within seven years after the date of this Agreement the Company or any of the Subsidiaries has given notice to the Covenantors of any Claim relating to such Tax Liability or of any Event which may give rise to such a claim.

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SCHEDULE 4

Confirmation Letter

To:	Robert W. Baird Limited
	Mint House
	77 Mansell Street
	London E1 8AF
	For the attention of: Shaun Dobson

2004

Dear Sirs,

PLACING OF • ORDINARY SHARES

We refer to the placing agreement between us dated • 2004 relating to the above-mentioned Placing (the “Placing Agreement”). Words and expressions defined in the Placing Agreement have the same meanings herein.

We hereby confirm to you as follows:

1.	each of the conditions referred to in paragraphs (a) to (d) (inclusive) and (f) to [(g)] (inclusive) of clause 2.1 of the Placing Agreement has been fulfilled in accordance with its terms;
2.	London Stock Exchange has granted permission for the whole of the ordinary share capital of the Company, issued and to be issued pursuant to the Placing to be admitted to trading on AIM (subject only to allotment);
3.	we have complied with our respective obligations under the Placing Agreement to the extent that the same fall to be performed prior to Admission; and
4.	none of the Warranties was untrue or inaccurate or misleading at the date of the Placing Agreement or has become untrue or inaccurate or misleading by reference to the facts and circumstances subsisting at the date hereof.

Yours faithfully,
[Director/Officer], duly authorised,	[Director/Officer], duly authorised
for and on behalf of	for and on behalf of
Paris plc	Insight Enterprises Inc.
[Director/Officer], duly authorised,
for and on behalf of
Insight Direct (GB) Limited
[Director]	[Director]

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SCHEDULE 5

Documents

1.	Insight, the Company and the Directors shall procure that the following documents are delivered to Baird immediately after the execution of this agreement (or as soon thereafter as Baird shall agree):
1.1	two copies of Admission Document signed by each Director or by his agent or attorney duly authorised in writing (together with the original of any such authorisation and such number of certified copies thereof as Baird may reasonably require);
1.2	two original signed copies of the Short Form Report and two original signed copies of the Statement of Adjustments;
1.3	two original signed copies of the Long Form Report;
1.4	two original signed copies of the Working Capital Report;
1.5	two original signed copies of the report prepared by the Reporting Accountants addressed to Baird reviewing the estimates of the turnover, gross profit and operating profit for the Company for the six months ended 30 June 2004 set out in Part III of the Admission Document;
1.6	the original signed copy of the Legal Due Diligence Report addressed to the Company and Baird;
1.7	a certified copy of the duly executed Resolution and a certified copy of the certificate of incorporation of re-registration of a Company as a public limited company dated 7 July 2004;
1.8	two original signed copies of the written consent of the Reporting Accountants to the inclusion in the Admission Document of the Short Form Report and the references thereto and to their name in the form and context in which they are included;
1.9	two original signed copies of the engagement letter dated as of the date of this agreement between the Company, Baird and the Reporting Accountants;
1.10	two original signed copies of the comfort letters from the Reporting Accountants in the form required by the engagement letter referred to in paragraph 1.9 above in connection with, inter alia, the working capital of the Group, no significant change in the financial or trading position of the Group, financial reporting procedures, pro forma financial information, financial extraction, financial projections, responsibilities and tax comfort;
1.11	two copies of the agreement between Insight and those persons who are entitled to participate in the Insight Incentive Scheme (as defined in the Admission Document), duly executed by the relevant parties thereto;
1.12	one copy of the Verification Notes duly signed by or on behalf of each of the persons named therein as being responsible for the replies to any of the questions contained therein;
1.13	one original signed copy of the Insurance Brokers’ Letter;
1.14	original signed responsibility statements and powers of attorney executed by each Director in the form previously approved by Baird;
1.15	a certified copy of a letter from Eversheds LLP to Baird dated on or about 7 July 2004 in connection with the use of the name “PlusNet”;

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1.16	one certified copy of the minutes of the meeting of the Directors at which, inter alia, resolutions were passed approving and authorising the issue of the Placing Documents, authorising the execution of this agreement by the Company, conditionally allotting the Subscription Shares, approving the transfer of the Sale Shares and adopting the Dealing Code and, if the resolution of the Directors as aforesaid is a resolution of a committee of the board of Directors, a certified copy of the resolution of the board of Directors appointing such committee;
1.17	one certified copy of the minutes of the meeting of the directors of Insight at which, inter alia, resolutions were passed approving the execution of this agreement and approving the transfer of the Insight Sale Shares and the transfer to the Sellers (prior to Admission) of the other Sale Shares pursuant to the exercise of their respective options over such             shares, and if the resolutions as aforesaid are resolutions of a committee of the board of directors of Insight, a certified copy of the resolution of the board of directors of Insight appointing such committee;
1.18	one certified copy of the memorandum and articles of association of the Company;
1.19	one certified copy of the rules of the Company’s new share option scheme;
1.20	one certified copy of each of the service agreements described in Part VI of the Admission Document;
1.21	one certified copy of each of the letters of appointment for the Non-Executive Directors described in Part VI of the Admission Document;
1.22	one certified copy of each of the Assignment, Software Agreement, Tax Sharing Agreement, lease and licence as such terms are defined in the minutes of the meeting of the directors of the Company held on 7 July 2004;
1.23	one original signed copy of the Nominated Adviser Agreement;
1.24	one original signed copy of the Relationship Agreement;
1.25	one original signed copy of the Orderly Marketing Deeds;
1.26	one original signed copy of a letter from the Directors to Baird confirming the sufficiency of information contained in the Admission Document;
1.27	one original signed copy of a letter from Eversheds LLP in respect of the matters contemplated by rule 37 of the AIM Rules;
1.28	one original signed copy of the application for admission to AIM in the appropriate form issued by the London Stock Exchange;
1.29	two original signed copies of a letter from the Company addressed to Baird confirming that the working capital available to the Group is sufficient for its present requirements in the agreed form;
1.30	two certified copies of the share certificate for the Ordinary Shares; and
1.31	all such further information and documentation (including copies of documents stated in the Admission Document as being available for inspection) as Baird may require in connection with the matters referred to in this agreement and the Placing.

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Executed as a deed by	)
PLUSNET PLC	)
acting by:	)
		Director     /s/ LEE STRAFFORD
		Director/Secretary     /s/ ASHOK MAKANJI
Executed as a deed	)
by INSIGHT DIRECT (GB)	)
LIMITED	)
acting by:
		Director     /s/ STANLEY LAYBOURNE
		Director/Secretary     /s/ JET GOLIA
Executed as a deed	)
by INSIGHT ENTERPRISES	)	/s/ STANLEY LAYBOURNE
INC.	)
acting by:
Executed as a Deed	)
by LEE STRAFFORD	)	/s/ LEE STRAFFORD
in the presence of:	)
Nick Bryans
Solicitor
5 Appold Street
London EC2
Executed as a Deed	)
by ASHOK MAKANJI	)	/s/ ASHOK MAKANJI
in the presence of:	)
Emma Millar
Trainee Solicitor
Senator House
85 Queen Victoria Street
London EC4

43

Executed as a Deed	)
by NEIL COMER	)	/s/ NEIL COMER
in the presence of:	)
Emma Millar
Executed as a Deed	)
by KEVIN ADAMS	)	/s/ KEVIN ADAMS
in the presence of:	)
Nick Bryans
Solicitor
5 Appold Street
London EC2
Executed as a Deed	)
by MICHAEL SHERWIN	)	/s/ MICHAEL SHERWIN
in the presence of:	)
Nick Bryans
Solicitor
5 Appol Street
London EC2
Executed as a Deed	)
by ROBERT MOYA	)	/s/ ROBERT MOYA
in the presence of:	)
Emma Millar
Trainee Solicitor
85 Queen Victoria Street
London EC4
Signed by Shaun Dobson	)
for and on behalf of	)	/s/ SHAUN DOBSON
ROBERT W. BAIRD	)
LIMITED	)

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EX-31.1

INSIGHT ENTERPRISES, INC.

Exhibit 31.1

CERTIFICATION

I, Timothy A. Crown, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Insight Enterprises, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2004

By:	/s/ Timothy A. Crown
	Timothy A. Crown
	Chief Executive Officer

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EX-31.2

INSIGHT ENTERPRISES, INC.

Exhibit 31.2

CERTIFICATION

I, Stanley Laybourne, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Insight Enterprises, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2004

By:	/s/ Stanley Laybourne
	Stanley Laybourne
	Chief Financial Officer

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EX-32.1

INSIGHT ENTERPRISES, INC.

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Insight Enterprises, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Timothy A. Crown, Chief Executive Officer of the Company and Stanley Laybourne, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

          (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Timothy A. Crown
	Timothy A. Crown
	Chief Executive Officer
	August 9, 2004
By:	/s/ Stanley Laybourne
	Stanley Laybourne
	Chief Financial Officer
	August 9, 2004

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Insight Enterprises, Inc. and will be retained by Insight Enterprises, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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