Denver, CO–Ultimate Electronics Inc. has filed for bankruptcy protection so it can stay in business while restructuring its operations.
The company has named Mark J. Wattles as board chairman and agreed to sell him 6.85 million shares of company stock for $4.4 million, with a two-year option plan for 1.85 million additional shares at a price of $1.2 million.
Additionally, Ultimate Electronics has obtained $118 million in debtor-in-possession financing, subject to a borrowing base formula, to fund on-going operations.
Former chairman William J. Pearse and all of the company’s directors resigned from the board, last week, according to Ultimate Electronics. Pearse entered a two-year option agreement to sell 1.8 million common shares to Wattles for the lesser of 65 cents apiece or a five-day average closing price.
In a letter to its customers that was posted on the company’s website, Ultimate president and CEO Dave Workman guaranteed that all customer programs currently in place, such as warranties, gift cards, and rebates, will continue to be honored, as part of the banruptsy court agreement.
“This was a difficult decision for us to make, but we believe it is the right solution to ensure the long-term viability of our business,” Workman also said in the letter. “We are a proud company with a rich history and are committed to taking the difficult but necessary steps to ensure our future. We thank you for your support and understanding.”
The Chapter 11 filing came a day after Ultimate Electronics said sales at stores open at least a year plunged 18 percent in December and have continued declining this in January.