compliance with law and promote ethical behavior. Copies of the Companys code of business conduct
and ethics may be found on the Companys website at www.pfsweb.com.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Murray and Reilly, neither of
whom are employees of the Company and both of whom are considered independent directors under the
applicable NASDAQ rules. There were no interlocks or insider participation between any member of
the Board or Compensation Committee and any member of the board of the directors or Compensation
Committee of another company.
Report of the Audit Committee for the Fiscal Year Ended December 31, 2007
The following is the report of the Audit Committee with respect to the Companys audited
financial statements for the fiscal year ended December 31, 2007. The information contained in this
report shall not be deemed to be soliciting material or to be filed with the Securities and
Exchange Commission, nor shall such information be incorporated by reference into any future filing
under the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as amended,
except to the extent that the Company specifically incorporates such information by reference in
The Audit Committee of the Companys Board of Directors is comprised of three independent
directors. The current members of the Audit Committee are Messrs. Reilly, Beatson and Jacobs.
Management is responsible for the Companys internal controls and the financial reporting
process. The independent accountants (auditors) are responsible for performing an independent
audit of the Companys consolidated financial statements in accordance with generally accepted
auditing standards and issuing a report thereon. The Audit Committees responsibility is to monitor
these processes. The Audit Committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Companys financial statements. The
Audit Committee approved the appointment of the Companys auditors, KPMG LLP for the fiscal year
ended December 31, 2007.
In fulfilling its oversight responsibility of appointing and reviewing the services performed
by the Companys independent auditors, the Audit Committee carefully reviews the policies and
procedures for the engagement of the independent auditor, including the scope of the audit, audit
fees, auditor independence matters and the extent to which the independent auditor may be retained
to perform non-audit related services. The Audit Committee considered the independent auditors
provision of non-audit services in 2007 and determined that the provision of those services is
compatible with and does not impair the auditors independence.
The Audit Committee discussed with the Companys auditors the scope and plans for the
independent audit. Management represented to the Audit Committee that the Companys consolidated
financial statements were prepared in accordance with generally accepted accounting principles. The
Audit Committee has reviewed and discussed with management and the auditors the Companys audited
financial statements, including the auditors judgments about the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements. The Audit Committee also discussed with the
auditors the matters required by Statement on Auditing Standards No. 61 Communication with Audit
The Audit Committee has received the written disclosures and the letter from the Companys
independent accountants required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and the Audit Committee discussed with the auditors their
independence from the Company and its management.
Based on the Audit Committees discussion with management and the auditors and the Audit
Committees review of the representations of management and the report of the auditors to the Audit
Committee, the Audit Committee recommended to the Board that the audited consolidated financial
statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31,
2007, which was filed with the Securities and Exchange Commission.
James F. Reilly
David I. Beatson
Dr. Neil W. Jacobs
Members of the Audit Committee