PFSWEB, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Inventory and Working Capital Financing Agreement, Europe

     Supplies Distributors’ European subsidiaries have a short-term credit facility with IBM Belgium Financial Services S.A. (“IBM Belgium”) to finance their distribution of IPS products in Europe. The asset based credit facility with IBM Belgium provides up to 16.0 million Euros (approximately $22.3 million at December 31, 2008) in financing for purchasing IPS inventory and for certain receivables through its expiration in March 2009. As of December 31, 2008, Supplies Distributors’ European subsidiaries had 4.0 million Euros (approximately $5.6 million at December 31, 2008) of available credit under this facility. The credit facility contains cross default provisions, various restrictions upon the ability of Supplies Distributors and its European subsidiaries to, among others, merge, consolidate, sell assets, incur indebtedness, make loans and payments to related parties (including entities directly or indirectly owned by PFSweb, Inc.), provide guarantees, make investments and loans, pledge assets, make changes to capital stock ownership structure and pay dividends, as well as financial covenants, such as annualized revenue to working capital, net profit after tax to revenue, and total liabilities to tangible net worth, as defined, and are secured by certain of the assets of Supplies Distributors’ European subsidiaries, as well as collateralized guaranties of Supplies Distributors and PFSweb. Additionally, PFSweb is required to maintain a minimum Subordinated Note receivable balance from Supplies Distributors of $5.5 million and a minimum shareholders’ equity of $18.0 million. Borrowings under the credit facility accrue interest, after a defined free financing period, at Euribor plus 1.5% as of December 31, 2008 and 2007 (4.1% and 5.8% as of December 31, 2008 and 2007, respectively). Supplies Distributors’ European subsidiaries pay a monthly service fee on the commitment.

     On March 30, 2009, Supplies Distributors’ European subsidiaries entered into an amended credit facility with IBM Belgium, which extends the termination date through March 2010, reduces the minimum Subordinated Note balance to $5.0 million and increases the interest rate to Euribor plus 1.94% or Euribor plus 4.25%, depending on the type of borrowing utilized. Given the structure of this facility and as outstanding balances, which represent inventory purchase, are repaid within twelve months, the Company has classified the outstanding amounts under this facility as accounts payable in the consolidated balance sheets.

4. Debt and Capital Lease Obligations:

     Outstanding obligations under debt and capital lease obligations consist of the following (in thousands):

		December 31,				December 31,
		2008				2007
Loan and security agreements, United States:
Supplies Distributors		$	9,649			$	10,353
PFS			6,000				7,225
Credit facility — eCOST			—				—
Factoring agreement, Europe			2,577				1,212
Taxable revenue bonds			3,200				4,000
Master lease agreements			4,657				5,033
Other			1,119				793
Total			27,202				28,616
Less current portion of long-term debt			22,251				22,238
Long-term debt, less current portion		$	4,951			$	6,378

Loan and Security Agreement — Supplies Distributors

     Supplies Distributors has a loan and security agreement with Wachovia Bank, N.A. (“Wachovia”) to provide financing for up to $25 million of eligible accounts receivable in the United States and Canada. As of December 31, 2008, Supplies Distributors had $1.7 million of available credit under this agreement. The Wachovia facility expires on the earlier of March 2009 or the date on which the parties to the IPS master distributor agreement (see Note 6) no longer operate under the terms of such agreement and/or IPS no longer supplies products pursuant to such agreement. Borrowings under the Wachovia facility accrue interest at prime rate or Eurodollar rate plus 1.75% to