SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 24, 2002
BOUNDLESS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-17977 13-3469637
State of Commission IRS Employer
Incorporation File Number I.D. Number
100 Marcus Blvd., Hauppauge, New York 11788
Address of principal executive offices
Registrant's telephone number: (631) 342-7400
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 5: Other Events
As of April 24, 2002, we entered into with our secured lenders a
Forbearance Agreement (the "Agreement") relating to our credit line with such
lenders (the "Chase Credit Line"). Under the Agreement, our lenders agreed not
to exercise their remedies under the Chase Credit Line, under which we are in
default, until May 31, 2002 unless we default under the Agreement or a new
default arises under the Chase Credit Line. We owe approximately $5.4 million
under the Chase Credit Line.
During the forbearance period, we are required to pay our lenders $50,000
per week against our loan balance and to continue to pay interest under the
Chase Credit Line. The Agreement in general allows us to use our collections
during the forbearance period to: (i) make these payments; (ii) to pay a
$120,000 commitment fee to a potential replacement lender, who on April 16,
2002, issued a commitment letter for a replacement line of credit; and, (iii) to
make the payments set forth in our budget of weekly expenses which must be
approved by the lenders. However, the Agreement caps the Chase Credit Line at
$5.4 million, to be reduced by our weekly $50,000 payments, and modifies our
borrowing base in several ways including by capping our eligible inventory at
$1.6 million. Our collections during the forbearance period that are available
for our use will depend on our borrowing base as may be applicable from time to
time.
As contemplated in the Agreement, we are making written offers to our
unsecured creditors to settle our debt to each of them in one of three ways: (1)
creditors who meet certain investor eligibility requirements can receive shares
of our convertible preferred stock with a stated value equal to the face amount
of the debt, or (2) any creditor can receive cash payment of a percentage of the
amount of the debt, with payment over a 120-day period commencing promptly after
we complete a refinancing of our credit facility, or (3) creditors who are owed
$10,000 or less (and those who voluntarily reduce their claim to $10,000) can
receive an amount equal to a certain higher percentage of their claim. Our offer
is contingent upon acceptance by our creditors holding at least 75% of our
unsecured debt.
Shares of our convertible preferred stock may be converted after the first
anniversary of their issuance into shares of our common stock at $3.00 per
share, carry certain registration rights and, unless sooner converted into our
common stock, must be redeemed by us on June 30, 2012 for their stated value.
Depending on the number of our trade creditors who agree to participate in the
debt for preferred stock exchange and the number of such creditors who
subsequently decide to convert the preferred stock into common stock, the number
of shares of our common stock that management estimates may ultimately be issued
to our existing trade creditors is approximately between 1,666,667 and 2,333,333
shares.
We will be in default under the Agreement unless, by May 3, 2002, we obtain
settlements from trade creditors holding at least 38% of our trade debt (which
is at least 90 days past due) and unless, by May 17, 2002, we obtain settlements
from trade creditors holding at least 75% of such trade debt.
As contemplated in the Agreement, we have received a commitment letter from
a potential replacement lender for a revolving line of credit which is intended
to replace the Chase
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Credit Line. However, our obtaining this line of credit is subject to a number
of conditions, including such potential lender being satisfied with our
financial condition, and there can be no assurance that we will be successful in
securing this line of credit. We will be in default under the Agreement if the
potential lender terminates its commitment or if we fail to meet any condition
set forth in the commitment letter by the date specified in such letter. If a
sufficient number of our trade creditors do not consent to settle their trade
debt with us, or if we are not able to either refinance the Chase Credit Line or
negotiate an extension of the Agreement, we may be forced to pursue other
alternatives including seeking protection under Chapter 11 of the Bankruptcy
Code.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 30, 2002
BOUNDLESS CORPORATION
By: /s/ Joseph Gardner
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Name: Joseph Gardner,
Title: Chief Financial Officer
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