FORBEARANCE AGREEMENT AND NOTICE OF CONTINUING DEFAULT

EXHIBIT 10.1

FORBEARANCE AGREEMENT AND NOTICE OF CONTINUING DEFAULT

(NOTICE - CONTAINS A WAIVER OF TRIAL BY JURY)

This Forbearance Agreement and Notice of Continuing Default by and between PC Universe, Inc. ("Customer") and IBM Credit LLC ("IBM Credit") is dated August 29, 2008 (the "Forbearance Agreement").

WITNESSETH:

WHEREAS , Customer and IBM Credit have entered into that certain Agreement for Wholesale Financing dated as of November 1, 2007 (as amended, supplemented or otherwise modified from time to time, the "Financing Agreement"); and all loans made by IBM Credit to the Customer, and all other liabilities and obligations at any time owing by the Customer to IBM Credit are secured by security interests granted by the Customer to IBM Credit pursuant to the terms of the Financing Agreement in all of the Customer's then existing and thereafter acquired inventory, equipment, accounts receivables, chattel paper, contract rights, documents, instruments, general intangibles and other items of personal property described in the Financing Agreement;

WHEREAS , certain Events of Default (as defined in the Financing Agreement) have occurred and are continuing;

WHEREAS , the Customer requests that IBM Credit forbear from exercising certain remedies available to IBM Credit under the Financing Agreement as a consequence of the Customer's defaults in order to afford the Customer an opportunity to reorganize its affairs and to pay the indebtedness owing to IBM Credit under the terms of the Financing Agreement and this Forbearance Agreement;

WHEREAS , IBM Credit previously delivered to PC Universe a Notice of Event of Default, dated March 20, 2008 and a Line Reduction Letter, dated April 2, 2008 and other default notices (collectively the “Default Notices”);

WHEREAS , IBM Credit has agreed to forbear from exercising those certain remedies available under the Financing Agreement pursuant to the terms and conditions of this Forbearance Agreement.

NOW, THEREFORE , in consideration of the foregoing and the promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Customer, and IBM Credit agree as follows:

Section 1.

Capitalized Terms.  All capitalized terms not herein defined shall have the meaning set forth in the Financing Agreement.

Section 2.

Customer Acknowledgement.  

(A)

Customer acknowledges that the Default Notices accurately set forth that the Customer is in Default of certain of its Obligations to IBM Credit under the Financing Agreement.  

(B)

Customer acknowledges in particular that the Financing Agreements contain the following covenant requirements and, as indicated in Customer’s Form 10-Q filed with the Securities Exchange Commission for the quarter ended June 30, 2008, the Customer acknowledges that it is in default of such covenants due to Customer’s level of achievement being only as follows:

(C)

Customer further acknowledges that the preceding Defaults described in (A) and

(B) above have occurred under the Financing Agreement and are continuing.

Section 3.

Collection Costs and Expenses.  Customer reaffirms the terms of the Financing Agreement and agrees to reimburse IBM Credit for all collection costs and expenses including out of pocket costs of representatives of IBM Credit in connection with visits to Customer on August 26, 2008 through August 29, 2008, expenses of IBM Credit’s outside attorneys in connection with review of the Financing Agreement and advice to IBM Credit in connection with Customer’s defaults and any all other costs which IBM Credit may incur in connection with or arising out of the Defaults or any other current or future Event of Default and any bankruptcy filing by Customer or against Customer or other insolvency proceeding involving Customer.  IBM Credit agrees that the expenses of its representatives for visits to the Customer and of its counsel for review and advice for periods prior to August 30, 2008 shall not exceed $4000.

Section 4.

Forbearance Conditions.  IBM Credit is willing to forbear, subject to the terms of this Forbearance Agreement, from exercising its remedies as a result of the Defaults for the period from the date hereof until October 15, 2008 ("Termination Date"), provided that each and all of the following conditions (the "Forbearance Conditions") are satisfied at all times to the satisfaction of IBM Credit in its sole discretion:

(A)

Effective immediately, the Credit Line is reduced to Nine Hundred Fifty Thousand Dollars ($950,000.00), and the Credit Line will terminate on October 15, 2008.

(B)

The Customer shall duly and punctually observe, perform and discharge each and every obligation and covenant to be performed under this Forbearance Agreement, the   Financing Agreement, and any other agreement between IBM Credit and the Customer;

(C)

Customer shall, at all times, maintain a minimum credit line availability of at least $65,000 computed on the same basis as are currently reported on Collateral Management Reports (CMR)  being submitted by Customer to IBM Credit;

(D)

Customer will submit CMR reports with all backups weekly with the first CMR being computed based on data as of the close of business on August 28, 2008 and will provide a complete copy of each of the CMR reports no later than noon the following business day.

(E)

Customer will immediately deposit all payments received from Patriot in the lockbox under the control of IBM Credit.

(F)

On or before September 5, 2008, Customer shall execute and deliver to IBM Credit the form of Voluntary Surrender Acknowledgement in the form attached hereto.  On or before the close of business on Friday, September 5, 2008, all inventory of Customer shall be removed from its premises and delivered to Suddath United Van Line for storage except such items of inventory which are to be returned for credit on a basis approved by IBM Credit.  Items in storage with Suddath United Van Lines may be released for shipment to the customers of Customer upon such terms and conditions as may be

approved by IBM Credit in its own discretion.  In lieu of the removal of the inventory, Customer may establish an irrevocable letter of credit with a financial institution acceptable to IBM Credit in an amount not less than the amount of inventory included in the CMR computation.

(G)

Customer shall provide such detail as IBM Credit may request concerning the reasons for amounts to be included in working capital advances, including names, dates of work and other information for employees and others to be included in advances to cover payroll, details of monthly rent payments, and other detail for items to be funded from such advances.

(H)

Customer will be available during regular business hours to provide such financial and business information to IBM Credit and discuss developments affecting the financial accommodations provided by IBM Credit as IBM Credit may request.  In particular, Customer shall provide current information and documentation related to all financing, buyout, equity infusions and other similar matters as may come into the possession of Customer.

(I)

The financial accommodations provided to Customer by IBM Credit under the Financing Agreement as modified by this Forbearance Agreement will cease and terminate on October 15, 2008 unless earlier terminated under the Financing Agreements as modified by this Forbearance Agreement.  At the time of the termination, Customer shall pay all obligations then due IBM Credit.  

(J)

No representation or warranty made by the Customer in this Forbearance Agreement or the Financing Agreement, shall prove to have been in error, or untrue;

(K)

No additional Defaults or Event of Defaults shall occur, other than the existing events of Default referred to in this Forbearance Agreement;

(L)

There shall occur no further deterioration of Customer's financial

position, insolvency or any other event that could reasonably be expected to have a material adverse effect, (i) on the business, operations, results of operations, assets or financial condition of the Customer, (ii) on the aggregate value of the collateral granted to IBM Credit in connection with the Financing Agreement or any Other Documents ("Collateral") or the aggregate amount which IBM Credit would be likely to receive (after giving consideration to reasonably likely delays in payment and reasonable costs of enforcement) in the liquidation of such Collateral to recover the Obligations in full, or (iii) on the rights and remedies of IBM Credit under this Forbearance Agreement, the Financing Agreement;

(M)

Customer shall not assign any of its rights, title and interest in and to the Collateral, to any other party; and

(N)

By no later than September 8, 2008, Customer shall provide detail as to application of the One-Hundred and Forty Seven Thousand Dollar ($147,000.00) payment transaction.

The failure to comply with the foregoing covenants within the time frames set forth above shall constitute an immediate Event of Default under the Financing Agreement and a default hereunder.

Section 5.

No Liens, Etc.  The Customer shall not, and will not permit any of its Subsidiaries to, create, incur, assume, grant or suffer to exist any lien, claim, mortgage, security interest, attachment or other encumbrance of any kind, (whether consensual or arising by operation of law) upon any of its property, assets or revenues, whether now owned or hereafter acquired, except upon the prior written consent of IBM Credit.

Section 6.

Termination.  

(A)

IBM Credit may, at it sole discretion, declare all of Customer's Outstanding Advances under the Financing Agreement to be immediately due and payable and immediately terminate the Financing Agreement and this Forbearance Agreement. Customer's Outstanding Advances under the

Financing Agreement will be due and payable on the Termination Date (unless due sooner according to its terms or pursuant to the provisions hereof).

(B)

In the event that any one or more of the Forbearance Conditions is not fulfilled to IBM Credit's satis