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                                                                   EXHIBIT 10.11

                           GENERAL SECURITY AGREEMENT

         This General Security Agreement ("Agreement") dated March 29, 2002 is
by Priority Fulfillment Services, Inc., a Delaware corporation ("Guarantor"), in
favor of Congress Financial Corporation (Southwest), a Texas corporation
("Lender").

                                   WITNESSETH

         WHEREAS, Lender has entered or is about to enter into certain financing
arrangements with Supplies Distributors, Inc., a Delaware corporation (herein
referred to as "Borrower") pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and

         WHEREAS, Guarantor has executed and delivered or is about to execute
and deliver to Lender a guarantee in favor of Lender pursuant to which Guarantor
absolutely and unconditionally guarantees to Lender the payment and performance
of all now existing and hereafter arising obligations, liabilities and
indebtedness of Borrower to Lender; and

         NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

SECTION I. DEFINITIONS

         All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Guarantor, Borrower and Lender
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns. The words
"hereof," "herein," "hereunder," "this Agreement" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. The word "including" when used in this Agreement shall mean
"including, without limitation." An Event of Default shall exist or continue or
be continuing until such Event of Default is waived in accordance with Section
7.3 or is cured in a manner satisfactory to Lender, if such Event of Default is
capable of being cured as determined by Lender. Any accounting term used herein
unless otherwise defined in this Agreement shall have the meanings customarily
given to such term in accordance with GAAP. For purposes of this Agreement, the
following terms shall have the respective meanings given to them below:

         1.1. "Event of Default" shall have the meaning set forth in Section 6.1
hereof.

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         1.2. "Financing Agreements" shall mean, collectively, the Loan
Agreement, this Agreement and all notes, guarantees, security agreements and
other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower, Guarantor or any Obligor in connection
with the Loan Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

         1.3. "Foreign Subsidiary" shall mean any wholly owned subsidiary of any
Guarantor that is organized under the laws of any jurisdiction other than the
United States, any state or territory thereof or the District of Columbia.

         1.4. "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 5.14 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.

         1.5. "IBM Inventory" shall have the meaning set forth in Section 2.1
hereof.

         1.6. "Information Certificate" shall mean the Information Certificate
(as defined in the Loan Agreement) of each Guarantor containing material
information with respect to Guarantor, its business and assets provided by or on
behalf of Guarantor to Lender in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.

         1.7. "Loan Agreement" shall mean the Loan and Security Agreement, dated
March 29, 2002, by and between Borrower and Lender, as the same now exists and
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

         1.8. "Obligations" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by Guarantor to Lender
and/or its affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Loan Agreement or after the commencement of
any case with respect to Borrower or Guarantor under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.

         1.9. "Obligor" shall mean any other guarantor, endorser, acceptor,
surety or other person liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations, other than
Borrower.

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         1.10. "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.

         1.11. "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of Guarantor: (a) all accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; (c) all
payment intangibles of Guarantor; (d) letters of credit, indemnities,
guarantees, security or other deposits and proceeds thereof issued payable to
Guarantor or otherwise in favor of or delivered to Guarantor in connection with
any Account; or (e) all other accounts, contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing to
Guarantor, whether from the sale and lease of goods or other property, licensing
of any property (including intellectual property or other general intangibles),
rendition of services or from loans or advances by Guarantor or to or for the
benefit of any third person (including loans or advances to any affiliates or
subsidiaries of Guarantor) or otherwise associated with any accounts, inventory
or general intangibles of Guarantor (including, without limitation, choses in
action, causes of action, tax refunds, tax refund claims, any funds which may
become payable to Guarantor in connection with the termination of any employee
benefit plan and any other amounts payable to Guarantor from any employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, casualty
or any similar types of insurance and any proceeds thereof and proceeds of
insurance covering the lives of employees on which Guarantor is a beneficiary).

         1.12. "Records" shall mean all of Guarantor's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Guarantor with
respect to the foregoing maintained with or by any other person).

SECTION II. GRANT AND PERFECTION OF SECURITY INTEREST

         2.1. Grant of Security Interest. To secure payment of all of
Guarantor's current and future debts and obligations to Lender, whether under
this Guaranty or any other agreement between Lender and Guarantor and to secure
the Obligations, whether direct or contingent, Guarantor does assign, pledge and
give to Lender a security interest in all of Guarantor's personal property,
whether now owned or hereafter acquired or existing and wherever located,
including the following: (a) all inventory and equipment manufactured or sold by
or bearing the trademark or tradename of International Business Machines
Corporation ("IBM") or any other authorized supplier and all parts thereof,
attachments, additions, accessories and accessions thereto, all substitutions,
repossessions, exchanges, replacements and returns thereof, all price protection
credits, rebates, discounts and incentive payments relating to the foregoing,
products,

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insurance and proceeds thereof and documents therefor ("IBM Inventory"); (b) all
accounts, chattel paper, instruments, negotiable documents, promissory notes,
general intangibles (including contract rights, software and licenses), deposit
accounts, commercial tort claims, intellectual property, investment property,
pledged notes, letter of credit rights, supporting obligations, obligations of
any kind owing to Guarantor, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services and all books, invoices,
documents and other records in any form evidencing or relating to any of the
foregoing; (c) all substitutions and replacements for all of the foregoing; and
(d) all products or proceeds of all of the foregoing (all of the above assets
are defined pursuant to the provisions of Article 9 of the Uniform Commercial
Code and are hereinafter referred to as the "Collateral"). Collateral shall not
include inventory and equipment of the Guarantor that is not IBM Inventory (as
defined above).

         2.2. Perfection of Security Interests.

                  (a) Guarantor irrevocably and unconditionally authorizes
         Lender (or its agent) to file at any time and from time to time such
         financing statements with respect to the Collateral naming Lender or
         its designee as the secured party and Guarantor as debtor, as Lender
         may require, and including any other information with respect to
         Guarantor or otherwise required by part 5 of Article 9 of the Uniform
         Commercial Code of such jurisdiction as Lender may determine, together
         with any amendment and continuations with respect thereto, which
         authorization shall apply to all financing statements filed on, prior
         to or after the date hereof. Guarantor hereby ratifies and approves all
         financing statements naming Lender or its designee as secured party and
         Guarantor, as debtor with respect to the Collateral (and any amendments
         with respect to such financing statements) filed by or on behalf of
         Lender prior to the date hereof and ratifies and confirms the
         authorization of Lender to file such financing statements (and
         amendments, if any). Guarantor hereby authorizes Lender to adopt on
         behalf of Guarantor any symbol required for authenticating any
         electronic filing. In the event that the description of the collateral
         in any financing statement naming Lender or its designee as the secured
         party and Guarantor as debtor includes assets and properties of
         Guarantor that do not at any time constitute Collateral, whether
         hereunder, under any of the other Financing Agreements or otherwise,
         the filing of such financing statement shall nonetheless be deemed
         authorized by such Guarantor to the extent of the Collateral included
         in such description and it shall not render the financing statement
         ineffective as to any of the Collateral or otherwise affect the
         financing statement as it applies to any of the Collateral. In no event
         shall Guarantor at any time file, or permit or cause to be filed, any
         correction statement or termination statement with respect to any
         financing statement (or amendment or continuation with respect thereto)
         naming Lender or its designee as secured party and Guarantor as debtor.

                  (b) Guarantor shall take any other actions reasonably
         requested by Lender from time to time to cause the attachment,
         perfection and first priority of, and the ability of Lender to enforce,
         the security interest of Lender in any and all of the Collateral,
         including, without limitation, (i) executing, delivering and, where
         appropriate, filing financing statements and amendments relating
         thereto under the UCC or other applicable law, to the extent, if any,
         that Guarantor's signature thereon is required therefor,

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         (ii) causing Lender's name to be noted as secured party on any
         certificate of title for a titled good if such notation is a condition
         to attachment, perfection or priority of, or ability of Lender to
         enforce, the security interest of Lender in such Collateral, (iii)
         complying with any provision of any statute, regulation or treaty of
         the United States as to any Collateral if compliance with such
         provision is a condition to attachment, perfection or priority of, or
         ability of Lender to enforce, the security interest of Lender in such
         Collateral, (iv) obtaining the consents and approvals of any
         governmental authority or third party, including, without limitation,
         any consent of any licensor, lessor or other person obligated on
         Collateral, and taking all actions required by any earlier versions of
         the UCC or by other law, as applicable in any relevant jurisdiction.

SECTION III. COLLATERAL COVENANTS

         3.1. Accounts Covenants. Lender may, at any time or times that an Event
of Default exists or has occurred and is continuing, (i) notify any or all
account debtors that the accounts have been assigned to Lender and that Lender
has a security interest therein and Lender may direct any or all accounts
debtors to make payment of accounts directly to Lender, (ii) extend the time of
payment of, compromise, settle or adjust for cash, credit, return of merchandise
or otherwise, and upon any terms or conditions, any and all accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Guarantor shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any accounts as Lender may require.

         3.2. Inventory Covenants. With respect to the inventory, Guarantor
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of inventory, Guarantor's cost therefor and daily
withdrawals therefrom and additions thereto.

         3.3. Equipment Covenants. With respect to the equipment which is
included as Collateral: (a) upon Lender's request, Guarantor shall, at its
expense, at any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the equipment in form, scope and methodology acceptable to
Lender and by appraiser acceptable to Lender; (b) Guarantor shall keep the
equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Guarantor shall use the equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws; (d) the equipment is and shall be
used in Guarantor's business and not for personal, family, household or farming
use;

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(e) the equipment is now and shall remain personal property and Guarantor shall
not permit any of the equipment to be or become a part of or affixed to real
property; and (g) Guarantor assumes all responsibility and liability arising
from the use of the equipment.

         3.4. Power of Attorney. Guarantor hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Guarantor's true and
lawful attorney-in-fact, and authorizes Lender, in Guarantor's or Lender's name,
at any time an Event of Default or event which with notice or passage of time or
both would constitute an Event of Default exists or has occurred and is
continuing, to; (i) demand payment on Receivables or other proceeds of inventory
or other Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of Guarantor's rights and remedies to collect any
Receivables or other Collateral, (iv) sell or assign any Receivables upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Receivables, (vii) prepare, file and sign Guarantor's name on any
proof of claim in bankruptcy or other similar document against an account debtor
or other Obligor in respect of any Receivables or other Collateral, (viii)
notify the post office authorities to change the address for delivery of
remittances from account debtors or other Obligors in respect of the Receivables
or other proceeds of Collateral to an address designated by Lender, and open and
dispose of all mail addressed to Guarantor and handle and store all mail
relating to the Collateral, (ix) do all acts and things which are necessary, in
Lender's determination, to fulfill Guarantor's obligations under this Agreement
and the other Financing Agreements, (x) take control in any manner of any item
of payment in respect of Receivables or constituting Collateral or otherwise
received in or for deposit in any blocked accounts or otherwise received by
Lender, (xi) have access to any lockbox or postal box into which remittances
from account debtors or other Obligors in respect of Receivables or other
proceeds of Collateral are sent or received are deposited, (xii) endorse
Guarantor's name upon any items of payment in respect of Receivables
constituting Collateral or otherwise received by Lender and deposit the same in
the Lender's account for application to the Obligations, (xiii) endorse
Guarantor's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Receivable or any goods pertaining
thereto or any other Collateral including any warehouse or other receipts, or
bills of lading and other negotiable or non-negotiable documents, and (xiv) sign
Guarantor's name on any verification of Receivables and notices thereof to
account debtors and/or any secondary obligors or other obligors in respect
thereof. Guarantor hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Lender's own gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.

         3.5. Right to Cure. Lender may, at its option, (a) cure any default by
Guarantor under any agreement with a third party that affects the Collateral,
its value or the ability of Lender to collect, sell or otherwise dispose of the
Collateral or the rights and remedies of Lender therein or the ability of
Guarantor or any Obligor to perform it obligations hereunder or under any of the
Financing Agreements, (b) pay or bond on appeal any judgment entered against
Guarantor, (c) discharge taxes, liens, security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (d) pay any
amount, incur any expense or perform any act which, in Lender's judgment, is
necessary or appropriate to preserve, protect, insure or

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maintain the Collateral and the rights of Lender with respect thereto. Lender
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Guarantor or any Obligor. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.

         3.6. Access to Premises. From time to time as requested by Lender, at
the cost and expense of Guarantor, (a) Lender or its designee shall have
complete access to all of Guarantor's premises during normal business hours and
after notice to Guarantor, or at any time and without notice to Guarantor if an
Event of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Guarantor's books
and records, including the Records, and (b) Guarantor shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Guarantor's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Receivables and realization of other Collateral.

SECTION IV. REPRESENTATIONS AND WARRANTIES

         Guarantor hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement):

         4.1. Corporate Existence, Power and Authority; Subsidiaries. Guarantor
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Guarantor's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Guarantor's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Guarantor's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Guarantor is a party or by which Guarantor or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Guarantor enforceable in
accordance with their respective terms. Guarantor does not have any subsidiaries
except as set forth on the Information Certificate.

         4.2. Name; State of Organization; Chief Executive Office; Collateral
Locations.

                  (a) The exact legal name of Guarantor is as set forth on the
         signature page of this Agreement and in the Information Certificate.
         Guarantor has not, during the past five years, been known by or used
         any other corporate or fictitious name or been a party to any merger or
         consolidation, or acquired all or substantially all of the assets of
         any Person, or acquired any of its property or assets out of the
         ordinary course of business, except as set forth in the Information
         Certificate.

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                  (b) Guarantor is an organization of the type and organized in
         the jurisdiction set forth in the Information Certificate. The
         Information Certificate accurately sets forth the organizational
         identification number of Guarantor or accurately states that Guarantor
         has none and accurately sets forth the federal employer identification
         number of Guarantor.

                  (c) The chief executive office and mailing address of
         Guarantor and Guarantor's Records concerning accounts are currently
         located and for the past five years have only been located at the
         address set forth below and its only other places of business and the
         only other locations of Collateral, if any, during such time periods
         are the addresses set forth in the Information Certificate, subject to
         the rights of Guarantor to establish new locations in accordance with
         Section 5.2 below. The Information Certificate correctly identifies any
         of such locations which are not owned by Guarantor and sets forth the
         owners and/or operators thereof.

         4.3. Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 4.4
hereto and the other liens permitted under Section 5.8 hereof. Guarantor has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 4.4 hereto or permitted under Section 5.8 hereof.

         4.4. Tax Returns. Guarantor has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Guarantor has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Guarantor and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.

         4.5. Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Guarantor's knowledge threatened, against or affecting Guarantor, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Guarantor's knowledge threatened, against
Guarantor or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Guarantor
would result in any material adverse change in the assets, business or prospects
of Guarantor or which would impair the ability of Guarantor to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Lender to enforce the Obligations or realize upon any
Collateral.

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         4.6. Compliance with Other Agreements and Applicable Laws. Guarantor is
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Guarantor is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority.

         4.7. Intellectual Property. Guarantor owns or licenses or otherwise has
the right to use all intellectual property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Guarantor does not have any intellectual property registered, or subject
to pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 4.9 hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 4.9 hereto. No event has occurred which permits or
would permit after notice or passage of time or both, the revocation, suspension
or termination of such rights. To the best of Guarantor's knowledge, no slogan
or other advertising device, product, process, method, substance or other
intellectual property or goods bearing or using any intellectual property
presently contemplated to be sold by or employed by Guarantor infringes any
patent, trademark, servicemark, tradename, copyright, license or other
intellectual property owned by any other Person presently and no claim or
litigation is pending or threatened against or affecting Guarantor contesting
its right to sell or use any such intellectual property. Schedule 4.9 hereto
sets forth all of the agreements or other arrangements of Guarantor pursuant to
which Guarantor has a license or other right to use any trademarks, logos,
designs, representations or other intellectual property owned by another person
as in effect on the date hereof and the dates of the expiration of such
agreements or other arrangements of Guarantor as in effect on the date hereof.

         4.8. Accuracy and Completeness of Information. All information
furnished by or on behalf of Guarantor in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of Guarantor,
which has not been fully and accurately disclosed to Lender in writing.

         4.9. Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation under the Loan Agreement and shall be conclusively
presumed to have been relied on by Lender regardless of any investigation made
or information possessed by Lender. The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which Guarantor shall now or hereafter give, or cause to be given, to
Lender.

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SECTION V. AFFIRMATIVE AND NEGATIVE COVENANTS

         5.1. Maintenance of Existence.

                  (a) Guarantor shall at all times preserve, renew and keep in
         full, force and effect its corporate existence and rights and
         franchises with respect thereto and maintain in full force and effect
         all permits, licenses, trademarks, tradenames, approvals,
         authorizations, leases and contracts necessary to carry on the business
         as presently or proposed to be conducted.

                  (b) Guarantor shall not change its name unless each of the
         following conditions is satisfied: (i) Lender shall have received not
         less than thirty (30) days' prior written notice from Guarantor of such
         proposed change in its corporate name, which notice shall accurately
         set forth the new name; and (ii) Lender shall have received a copy of
         the amendment to the Certificate of Incorporation of Guarantor
         providing for the name change certified by the Secretary of State of
         the jurisdiction of incorporation of Guarantor as soon as it is
         available.

                  (c) Guarantor shall not change its chief executive office or
         its mailing address or organizational identification number (or if it
         does not have one, shall not acquire one) unless Lender shall have
         received not less than thirty (30) days' prior written notice from
         Guarantor of such proposed change, which notice shall set forth such
         information with respect thereto as Lender may require and Lender shall
         have received such agreements as Lender may reasonably require in
         connection therewith. Guarantor shall not change its type of
         organization, jurisdiction of organization or other legal structure.

         5.2. New Collateral Locations. Guarantor may only open any new location
within the continental United States provided Guarantor (a) gives Lender thirty
(30) days' prior written notice of the intended opening of any such new location
and (b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including UCC financing statements.

         5.3. Compliance with Laws, Regulations, Etc. Guarantor shall, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, State or local
governmental authority applicable to it.

         5.4. Payment of Taxes and Claims. Guarantor shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Guarantor and with respect to which adequate reserves have been
set aside on its books. Guarantor shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for herein
and Guarantor agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Guarantor such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Guarantor to pay
any income or franchise taxes attributable to the income of Lender from

Security Agreement
                                       10
<PAGE>

any amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations, the termination of this Agreement and
the termination or non-renewal of the Loan Agreement.

         5.5. Insurance. Guarantor shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to form,
amount and insurer. Guarantor shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Guarantor fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Guarantor. All policies shall provide for at
least thirty (30) days' prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Guarantor in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance.
Guarantor shall cause Lender to be named as a loss payee and an additional
insured (but without any liability for any premiums) under such insurance
policies and Guarantor shall obtain non-contributory lender's loss payable
endorsements to all insurance policies in form and substance satisfactory to
Lender. Such lender's loss payable endorsements shall specify that the proceeds
of such insurance shall be payable to Lender as its interests may appear and
further specify that Lender shall be paid regardless of any act or omission by
Guarantor or any of its affiliates. At its option, Lender may apply any
insurance proceeds received by Lender at any time to the cost of repairs or
replacement of Collateral and/or to payment of the Obligations, whether or not
then due, in any order and in such manner as Lender may determine or hold such
proceeds as cash collateral for the Obligations.

         5.6. Encumbrances. Guarantor shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Guarantor and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Guarantor's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Guarantor, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Guarantor as presently conducted thereon or materially impair the value of
the real property which may be subject thereto; (e) purchase money security
interests in equipment and purchase money mortgages on real estate (including
capital leases) not to exceed $500,000 in the aggregate at any time outstanding
so long as such security interests and mortgages do not apply to any property of
Guarantor other than the equipment or real estate so acquired, and the
indebtedness secured thereby does not exceed the cost of the equipment or

Security Agreement
                                       11
<PAGE>

real estate so acquired, as the case may be; (f) liens on cash not to exceed
$5,000,000 in the aggregate at any time to secure Guarantor's obligations under
capital leases; (g) liens and security interests of IBM Credit Corporation; and
(h) the security interests and liens set forth on Schedule 4.4 hereto.

         5.7. Transactions with Affiliates. Guarantor shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with Guarantor, except in the ordinary course of and pursuant to the
reasonable requirements of Guarantor's business and upon fair and reasonable
terms no less favorable to Guarantor than Guarantor would obtain in a comparable
arm's length transaction with an unaffiliated person or (b) make any payments of
management, consulting or other fees for management or similar services, or of
any indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Guarantor except reasonable compensation to officers,
employees and directors for services rendered to Guarantor in the ordinary
course of business.

         5.8. Costs and Expenses. Guarantor shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) insurance premiums,
appraisal fees and search fees; (c) costs and expenses of preserving and
protecting the Collateral; (d) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); and (e) the fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.

         5.9. Further Assurances. At the request of Lender at any time and from
time to time, Guarantor shall, at its expense, at any time or times duly execute
and deliver, or cause to be duly executed and delivered, such further
agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Where permitted by law, Guarantor hereby authorizes
Lender to execute and file one or more UCC financing statements signed only by
Lender.

Security Agreement
                                       12
<PAGE>

SECTION VI. EVENTS OF DEFAULT AND REMEDIES

         6.1. Events of Default. The occurrence or existence of any Event of
Default under the Loan Agreement is referred to herein individually as an "Event
of Default," and collectively as "Events of Default."

         6.2. Remedies.

                  (a) At any time an Event of Default exists or has occurred and
         is continuing, Lender shall have all rights and remedies provided in
         this Agreement, the other Financing Agreements, the Uniform Commercial
         Code and other applicable law, all of which rights and remedies may be
         exercised without notice to or consent by Guarantor or any Obligor,
         except as such notice or consent is expressly provided for hereunder or
         required by applicable law. All rights, remedies and powers granted to
         Lender hereunder, under any of the other Financing Agreements, the
         Uniform Commercial Code or other applicable law, are cumulative, not
         exclusive and enforceable, in Lender's discretion, alternatively,
         successively, or concurrently on any one or more occasions, and shall
         include, without limitation, the right to apply to a court of equity
         for an injunction to restrain a breach or threatened breach by
         Guarantor of this Agreement or any of the other Financing Agreements.
         Lender may, at any time or times, proceed directly against Guarantor or
         any Obligor to collect the Obligations without prior recourse to the
         Collateral.

                  (b) Without limiting the foregoing, at any time an Event of
         Default exists or has occurred and is continuing, Lender may, in its
         discretion and without limitation, (i) accelerate the payment of all
         Obligations and demand immediate payment thereof to Lender (provided,
         that, upon the occurrence of any Event of Default described in Sections
         10.1(g) and 10.1(h) of the Loan Agreement, all Obligations shall
         automatically become immediately due and payable), (ii) with or without
         judicial process or the aid or assistance of others, enter upon any
         premises on or in which any of the Collateral may be located and take
         possession of the Collateral or complete processing, manufacturing and
         repair of all or any portion of the Collateral, (iii) require
         Guarantor, at Guarantor's expense, to assemble and make available to
         Lender any part or all of the Collateral at any place and time
         designated by Lender, (iv) collect, foreclose, receive, appropriate,
         setoff and realize upon any and all Collateral, (v) remove any or all
         of the Collateral from any premises on or in which the same may be
         located for the purpose of effecting the sale, foreclosure or other
         disposition thereof or for any other purpose, (vi) sell, lease,
         transfer, assign, deliver or otherwise dispose of any and all
         Collateral (including entering into contracts with respect thereto,
         public or private sales at any exchange, broker's board, at any office
         of Lender or elsewhere) at such prices or terms as Lender may deem
         reasonable, for cash, upon credit or for future delivery, with the
         Lender having the right to purchase the whole or any part of the
         Collateral at any such public sale, all of the foregoing being free
         from any right or equity of redemption of Guarantor, which right or
         equity of redemption is hereby expressly waived and released by
         Guarantor. If any of the Collateral is sold or leased by Lender upon
         credit terms or for future delivery, the Obligations shall not be
         reduced as a result thereof until payment therefor is finally collected
         by Lender. If notice of disposition of Collateral is required by law,
         five (5) days' prior notice by Lender to Guarantor designating the time
         and place of any public

Security Agreement
                                       13
<PAGE>

         sale or the time after which any private sale or other intended
         disposition of Collateral is to be made, shall be deemed to be
         reasonable notice thereof and Guarantor waives any other notice. In the
         event Lender institutes an action to recover any Collateral or seeks
         recovery of any Collateral by way of prejudgment remedy, Guarantor
         waives the posting of any bond which might otherwise be required.

                  (c) Lender may apply the cash proceeds of Collateral actually
         received by Lender from any sale, lease, foreclosure or other
         disposition of the Collateral to payment of the Obligations, in whole
         or in part and in such order as Lender may elect, whether or not then
         due. Guarantor shall remain liable to Lender for the payment of any
         deficiency with interest at the highest rate provided for in the Loan
         Agreement and all costs and expenses of collection or enforcement,
         including attorneys' fees and legal expenses.

SECTION VII. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

         7.1. Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.

                  (a) The validity, interpretation and enforcement of this
         Agreement and the other Financing Agreements and any dispute arising
         out of the relationship between the parties hereto, whether in
         contract, tort, equity or otherwise, shall be governed by the internal
         laws of the State of Texas (without giving effect to principles of
         conflicts of law).

                  (b) Guarantor irrevocably consents and submits to the
         non-exclusive jurisdiction of the State of Texas and the United States
         District Court for the Northern District of Texas and waives any
         objection based on venue or forum non conveniens with respect to any
         action instituted therein arising under this Agreement or any of the
         other Financing Agreements or in any way connected or related or
         incidental to the dealings of Guarantor and Lender in respect of this
         Agreement or the other Financing Agreements or the transactions related
         hereto or thereto, in each case whether now existing or hereafter
         arising, and whether in contract, tort, equity or otherwise, and agrees
         that any dispute with respect to any such matters shall be heard only
         in the courts described above (except that Lender shall have the right
         to bring any action or proceeding against Guarantor or its property in
         the courts of any other jurisdiction which Lender deems necessary or
         appropriate in order to realize on the Collateral or to otherwise
         enforce its rights against Guarantor or its property).

                  (c) Guarantor hereby waives personal service of any and all
         process upon it and consents that all such service of process may be
         made by certified mail (return receipt requested) directed to its
         address set forth on the signature pages hereof and service so made
         shall be deemed to be completed five (5) days after the same shall have
         been so deposited in the U.S. mails, or, at Lender's option, by service
         upon Guarantor in any other manner provided under the rules of any such
         courts. Within thirty (30) days after such service, Guarantor shall
         appear in answer to such process, failing which Guarantor shall be
         deemed in default and judgment may be entered by Lender against
         Guarantor for the amount of the claim and other relief requested.

Security Agreement
                                       14
<PAGE>

                  (d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
         CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
         AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
         CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF GUARANTOR
         AND LENDER IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
         AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
         WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
         TORT, EQUITY OR OTHERWISE. GUARANTOR HEREBY AGREES AND CONSENTS THAT
         ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
         COURT TRIAL WITHOUT A JURY AND THAT GUARANTOR OR LENDER MAY FILE AN
         ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
         WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR AND LENDER TO THE WAIVER
         OF THEIR RIGHT TO TRIAL BY JURY.

                  (e) Lender shall not have any liability to Guarantor (whether
         in tort, contract, equity or otherwise) for losses suffered by
         Guarantor in connection with, arising out of, or in any way related to
         the transactions or relationships contemplated by this Agreement, or
         any act, omission or event occurring in connection herewith, unless it
         is determined by a final and non-appealable judgment or court order
         binding on Lender that the losses were the result of acts or omissions
         constituting gross negligence or willful misconduct. In any such
         litigation, Lender shall be entitled to the benefit of the rebuttable
         presumption that it acted in good faith and with the exercise of
         ordinary care in the performance by it of the terms of this Agreement
         and the other Financing Agreements.

         7.2. Waiver of Notices. Guarantor hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Guarantor which Lender may elect to give shall entitle Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.

         7.3. Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Guarantor. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.

         7.4. Waiver of Counterclaims. Guarantor waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any

Security Agreement
                                       15
<PAGE>

action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.

         7.5. Indemnification. Guarantor shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, Guarantor shall pay the maximum portion which it is permitted to
pay under applicable law to Lender in satisfaction of indemnified matters under
this Section. The foregoing indemnity shall survive the payment of the
Obligations, the termination of this Agreement and the termination or
non-renewal of the Loan Agreement.

SECTION VIII. MISCELLANEOUS

         8.1. Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at 1201 Main Street, Suite 1625, Dallas, Texas
75202 and to Guarantor at its chief executive office set forth below, or to such
other address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.

         8.2. Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

         8.3. Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon Guarantor and
its successors and assigns and inure to the benefit of and be enforceable by
Lender and its successors and assigns, except that Guarantor may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender.

         8.4. Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning

Security Agreement
                                       16
<PAGE>

the subject matter hereof and thereof between the parties hereto, and supersede
all other prior agreements, understandings, negotiations and discussions,
representations, warranties, commitments, proposals, offers and contracts
concerning the subject matter hereof, whether oral or written. In the event of
any inconsistency between the terms of this Agreement and any schedule or
exhibit hereto, the terms of this Agreement shall govern.

         8.5. Additional Financings. In connection with any working capital
financing Guarantor receives from another financial institution or commercial
lender ("New Lender"), Guarantor may request that Lender subordinate its
interest in the Collateral (excluding the IBM Inventory) and Lender will not
unreasonably withhold its consent provided that:

                  (a) No Event of Default shall have occurred or be continuing;

                  (b) Lender and New Lender shall have entered into a
         subordination agreement in form and substance satisfactory to Lender in
         all respects in its sole discretion;

                  (c) Lender shall be satisfied that the IBM Inventory shall be
         segregated from the other property of Guarantor and its customers and
         Lender shall have a perfected priority security interest in the IBM
         Inventory; and

                  (d) The books and records maintained on behalf of Borrower
         shall be kept separately from Guarantor's other books and records and
         Guarantor shall have conspicuously noted on the Borrower's books and
         records that such books and records are the property of Borrower.

         [REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]

Security Agreement
                                       17
<PAGE>

         IN WITNESS WHEREOF, Guarantor has caused these presents to be duly
executed as of the day and year first above written.

                                        GUARANTOR:

                                        PRIORITY FULFILLMENT SERVICES, INC.

                                        By:
                                               ---------------------------------
                                               Thomas J. Madden
                                               Executive Vice President and
                                               Chief Financial Officer

                                        CHIEF EXECUTIVE OFFICE:

                                        500 North Central Expressway, 5th Floor
                                        Plano, Texas  75074

Security Agreement<PAGE>

                                                                   EXHIBIT 10.12

Dated as of March 29, 2002

To:      Congress Financial Corporation (Southwest) ("Lender")

Re:      Inducement Letter

Gentlemen:

         Each of the undersigned, Priority Fulfillment Services, Inc., a
Delaware corporation ("PFS"), and PFSweb, Inc., a Delaware corporation
("PFSweb"), directly or indirectly manages certain business operations and other
affairs of Supplies Distributors, Inc. ("Borrower"). Capitalized terms used but
not otherwise defined in this letter agreement, are defined in that certain Loan
and Security Agreement, dated as of March 29, 2002, by and between Lender and
Borrower (as amended from time to time, the "Loan Agreement").

         PFS and PFSweb will each derive substantial direct or indirect benefit
from the extension of credit to Borrower pursuant to the Loan Agreement.

         In order to induce the Lender to enter into the Loan Agreement and the
Financing Agreements and to consummate the transactions contemplated thereby,
and in consideration therefor, the parties hereto agree as follows:

         1. If at any time the aggregate amount of Revolving Loans shall exceed
the amounts available to Borrower in accordance with Section 2.1 of the Loan
Agreement (the amount of any such excess, the "Overadvance Amount") then PFS
agrees that within two (2) Business Days from such time, PFS shall make an
infusion of capital into Borrower, in an amount not less than the Overadvance
Amount, in the form of equity or indebtedness that shall be, in either case,
subject to and subordinate in right of payment to the right of Lender to receive
the prior final payment and satisfaction in full of the Obligations in
accordance with the terms of that certain Notes Payable Subordination Agreement
dated as of the date hereof by PFS in favor of Lender or on such other terms and
conditions as may be satisfactory to Lender in its sole discretion.

         2. PFSweb shall deliver to Lender as soon as available and in any event
(i) within ninety (90) days after the end of each fiscal year of PFSweb the Form
10-K filed with the Securities and Exchange Commission for such fiscal year;
(ii) within forty-five (45) days after the end of each fiscal quarter of PFSweb,
the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission
for such quarter; (iii) within five (5) days after the same are sent, copies of
all financial statements and reports which PFSweb sends to its stockholders, and
(iv) within five (5) days after the same are filed, copies of all financial
statements and reports which PFSweb may make to, or file with, the Securities
and Exchange Commission or any successor or analogous governmental authority. In
the event PFSweb is no longer a public company, PFSweb shall deliver to Lender
the same financial statements, notices and such other documentation relating to
PFSweb as are required to be delivered or reported by Borrower to Lender
pursuant to Section 9.6 of the Loan Agreement.

Inducement Letter

                                       1
<PAGE>

         In the event of a breach of this letter agreement by PFS or PFSweb,
Lender may proceed to protect and enforce its rights by an action at law, a suit
in equity or other appropriate proceeding whether for the specific performance
of this agreement or for an injunction against a violation of any of the terms
and conditions of this letter agreement. The provisions of this letter agreement
shall continue in full force and effect notwithstanding the commencement of any
case under Title 11 of the United States Code by or against Borrower or any of
its property.

         This letter agreement has been executed, delivered and accepted at and
shall be deemed to have been made in Dallas, Texas, and shall be interpreted and
the rights and obligations of the parties under this letter agreement shall be
governed by, and construed and interpreted in accordance with, the internal laws
of the State of Texas. This letter agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, transferees
and assigns. Neither this letter agreement nor any of the terms hereof may be
amended, waived, discharged or terminated unless such amendment, waiver,
discharge or termination is in writing signed by each of the parties hereto.
This letter agreement may be executed by one or more of the parties hereto in
any number of separate counterparts, each of which shall be an original, but all
of which shall constitute but one agreement.

         [REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]

Inducement Letter

                                       2
<PAGE>

         IN WITNESS WHEREOF, each of the undersigned have executed this
Inducement Letter as of the day and year first written above.

                                  PRIORITY FULFILLMENT SERVICES, INC.
                                  a Delaware corporation

                                  By:
                                     -------------------------------------------
                                     Thomas J. Madden
                                     Chief Financial Officer and
                                     Executive Vice President

                                  PFSWEB, INC.
                                  a Delaware corporation

                                  By:
                                     -------------------------------------------
                                     Thomas J. Madden
                                     Chief Financial Officer and
                                     Executive Vice President

ACKNOWLEDGED AND AGREED TO BY:

CONGRESS FINANCIAL CORPORATION (SOUTHWEST)

By:
   ----------------------------------
   Mike Sheff
   Senior Vice President

Inducement Letter

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