PFSWEB, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

2.25%, dependent on excess availability, as defined. The interest rate as of December 31, 2008 was 4.0% for $5.6 million of outstanding borrowings and 2.5% for $4.0 million of outstanding borrowings. As of December 31, 2007, the interest rate was 7.25% for $6.4 million of outstanding borrowings and 7.2% for $4.0 million of outstanding borrowings. This agreement contains cross default provisions, various restrictions upon the ability of Supplies Distributors 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.), 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 minimum net worth, as defined, and is secured by all of the assets of Supplies Distributors, as well as a collateralized guaranty of PFSweb. Additionally, PFSweb is required to maintain a Subordinated Note receivable balance from Supplies Distributors of no less than $5.5 million and restricted cash of less than $5.0 million, and is restricted with regard to transactions with related parties, indebtedness and changes to capital stock ownership structure. Supplies Distributors has entered into blocked account agreements with its banks and Wachovia pursuant to which a security interest was granted to Wachovia for all U.S. and Canadian customer remittances received in specified bank accounts. At December 31, 2008 and December 31, 2007, these bank accounts held $0.1 million and $1.4 million, respectively, which was restricted for payment to Wachovia.

     On January 6, 2009, Supplies Distributors entered into an amended loan and security agreement with Wachovia, which extends the termination date through March 2011, reduces the minimum Subordinate Note balance to $5.0 million and amends the interest rate to prime rate plus 0.25% to 0.75% or Eurodollar rate plus 2.5% to 3.0%.

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 through April 2009. As of December 31, 2008, PFS had $3.8 million of available credit under this facility. This agreement accrues interest at prime rate plus 1% (4.25% and 8.25% as of December 31, 2008 and 2007, respectively). 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 capital expenditures, 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 $6.5 million. The Comerica Agreement is secured by all of the assets of PFS, as well as a guarantee of PFSweb, Inc.

     On March 31, 2009, PFS entered into an amended agreement with Comerica, which extends the termination date through March 2010, modifies certain financial covenants, increases the interest rate and provides the approval for PFS to advance incremental amounts subject to certain cash inflows to PFS, as defined, to certain of its subsidiaries and/or affiliates, including eCOST, with certain restrictions, if needed.

Credit Facility — eCOST

     eCOST has an asset-based line of credit facility that provides for borrowings of up to $7.5 million from Wachovia, 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 prime rate to the prime rate plus 0.5% (3.25% and 7.75% as of December 31, 2008 and 2007, respectively, depending on eCOST’s financial results. As of December 31, 2008, eCOST had $1.1 million of letters of credit outstanding and $2.0 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, as defined. PFSweb has guaranteed all current and future obligations of eCOST under this line of credit.