PFSweb, Inc. and Subsidiaries

Notes to Unaudited Interim Condensed Consolidated Financial Statements

bank accounts held $1.0 million and $2.2 million, respectively, which was restricted for payment to Wachovia.

Loan and Security Agreement – PFSweb

     PFS has a Loan and Security Agreement (“Comerica Agreement”) with Comerica Bank (“Comerica”). The Comerica Agreement provides for up to $10.0 million of eligible accounts receivable financing (“Working Capital Advances”) through April 2008, a Term Loan of $1.5 million due in monthly installments through December 2007 and $2.5 million of equipment financing (“Equipment Advances”) through June 15, 2008. Outstanding Working Capital Advances, $6.4 million as of June 30, 2007, accrue interest at prime rate plus 1% (9.25% as of June 30, 2007). Outstanding Equipment Advances, ($0.2 million as of June 30, 2007) and the Term Loan ($0.7 million outstanding as of June 30, 2007), accrue interest at prime rate plus 1.5% (9.75% as of June 30, 2007). As of June 30, 2007, PFS had $2.2 million of available credit under the Working Capital Advance portion of this facility and no available credit under the Equipment Advance or Term Loan portions of this facility. In July 2007, the Company repaid the $6.4 million of Working Capital Advances outstanding as of June 30, 2007. The Comerica Agreement contains cross default provisions, various restrictions upon PFS’ ability to, among other things, merge, consolidate, sell assets, incur indebtedness, make loans and payments to related parties (including entities directly or indirectly owned by PFSweb, Inc.), make investments and loans, pledge assets, make changes to capital stock ownership structure, as well as financial covenants of a minimum tangible net worth of $20 million, as defined, a minimum earnings before interest and taxes, plus depreciation, amortization and non-cash compensation accruals, if any, as defined, and a minimum liquidity ratio, as defined. The Comerica Agreement restricts the amount of the subordinated note receivable from Supplies Distributors to a maximum of $8 million. Subject to certain restrictions, Comerica has provided approval for PFS to advance $8.5 million in cash to fund the cash flow requirements of eCOST, with certain restrictions, if needed, of which $6.9 million had been advanced as of June 30, 2007. The Comerica Agreement is secured by all of the assets of PFS, as well as a guarantee of PFSweb, Inc.

Credit Facility – eCOST

     eCOST has an asset-based line of credit facility of up to $7.5 million from Wachovia Capital Finance Corporation (Western), through May 2009, which is collateralized by substantially all of eCOST’s assets. Borrowings under the facility are limited to a percentage of eligible accounts receivable and inventory. Outstanding amounts under the facility bear interest at rates ranging from the prime rate to the prime rate plus 0.5% (8.75% as of June 30, 2007), depending on eCOST’s financial results. As of June 30, 2007, eCOST had $1.8 million of letters of credit outstanding and $1.2 million of available credit under this facility. In connection with the line of credit, eCOST entered into a cash management arrangement whereby eCOST’s operating amounts are swept and used to repay outstanding amounts under the line of credit. The credit facility restricts eCOST’s ability to, among other things, merge, consolidate, sell assets, incur indebtedness, make loans, investments and payments to subsidiaries, affiliates and related parties (including entities directly or indirectly owned by PFSweb, Inc.), make investments and loans, pledge assets, make changes to capital stock ownership structure, and requires a minimum tangible net worth of $0 million, as defined. PFSweb has guaranteed all current and future obligations of eCOST under this line of credit.

Factoring Agreement

     Supplies Distributors’ European subsidiary has a factoring agreement with Fortis Commercial Finance N.V. (“Fortis”) to provide factoring for up to 7.5 million euros (approximately $10.1 million) of eligible accounts receivables through March 2008. As of June 30, 2007, Supplies Distributors’ European subsidiary had approximately 2.3 million euros ($3.1 million) of available credit under this agreement. Borrowings accrue interest at Euribor plus 0.6% (4.7% at June 30, 2007). This agreement contains various restrictions upon the ability of Supplies Distributors’ European subsidiary to, among other things, merge, consolidate and incur indebtedness, as well as financial covenants, such as minimum net worth. This agreement is secured by a guarantee of Supplies Distributors, up to a maximum of 200,000 euros.