Exhibit 10.2


 


 


OPTION AGREEMENT


 


 


by and between


 


 


ULTIMATE ELECTRONICS, INC.


 


 


and


 


 


MARK WATTLES ENTERPRISES, LLC


 


 


Dated as of January 11, 2005


 





















 


OPTION AGREEMENT


 


This
OPTION AGREEMENT, entered into as of January 11, 2005 (the “Agreement”)
by and between ULTIMATE ELECTRONICS, INC., a Delaware corporation (the “Company”),
and MARK WATTLES ENTERPRISES, LLC, a Delaware limited liability company (the “Investor”).


 


W I T N E S S E T H:


 


WHEREAS,
as of the date hereof, the Company and the Investor are entering into a Stock
Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which
the Investor is agreeing to purchase from the Company certain shares of its
common stock, par value $.01 per share (“Common Stock”);


 


WHEREAS,
in order to induce the Investor to enter into the Stock Purchase Agreement and
consummate the transactions contemplated thereby, the Company is willing to
grant an option to the Investor to acquire certain additional authorized but
unissued shares of Common Stock from the Company upon the terms and conditions
set forth herein; and


 


WHEREAS,
capitalized terms used herein without definition have the respective meanings
set forth in the Stock Purchase Agreement;


 


NOW,
THEREFORE, in consideration of the premises, the terms and provisions set forth
herein, the mutual benefits to be gained by the performance thereof and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:


 


SECTION 1.           Grant of Option.  Upon
the terms and subject to the conditions set forth in this Agreement, the
Company hereby grants to the Investor an option (the “Option”) to
purchase an aggregate of 1,850,000 authorized but unissued shares of Common
Stock (the “Option Shares”), which Option shall be exercisable in whole
or in part at any time during the Exercise Period (as hereinafter defined).


 


SECTION 2.           Exercise of Option.


 


(a)           The Option shall be exercisable during the
period (the “Exercise Period”) commencing fourteen calendar days after
the filing by or against the Company of a petition under Chapter 11 or any
other applicable section or chapter of the United States Bankruptcy Code,
as amended from time to time (the “Bankruptcy Code”), and  ending on the earlier of (i) two years after the
commencement of the Exercise Period or (ii) the effective date of any plan or
reorganization approved by the bankruptcy court in


 





















 


any bankruptcy proceedings
commenced by or against the Company under Chapter 11 or any other applicable section or
chapter of the Bankruptcy Code.  The
Option shall expire and be of no further effect if the Exercise Period has not
commenced prior to or on the date that is six months from the date hereof.


 


(b)           The Option may be exercised by the Investor
with respect to all or any part of the Option Shares at any time during the
Exercise Period by delivering a written notice (the “Exercise Notice”)
to the Company, which notice shall state that the Investor irrevocably elects
to exercise the Option with respect to the Option Shares identified in such
notice and pay the exercise price therefor, which shall be equal to $0.65 per
Option Share to be purchased by the Investor (the “Exercise Price”).


 


SECTION 3.           Closing.  The closing of any exercise of
the Option pursuant to this Agreement (a “Closing”) shall take place at
the offices of Baker Botts L.L.P., 2001 Ross Avenue, Dallas, Texas 75201 at
10:00 a.m., Dallas, Texas time, on the second business day following the
delivery of the Exercise Notice by the Investor pursuant to Section 2(b),
or on such other date as shall have been mutually agreed by the parties.  At any Closing, (i) the Investor shall make
payment to the Company of the aggregate Exercise Price for the Option Shares
being purchased upon the exercise of the Option by delivery to the Company of a
certified bank cashier’s check or wire transfer of funds and (ii) the Company
shall deliver, or shall cause to be delivered, to the Investor a stock
certificate or certificates representing the aggregate number of Option Shares
being purchased by the Investor, registered in the name of the Investor (which
certificate may be a temporary certificate manually executed by the appropriate
officers of the Company).


 


SECTION 4.           Representations and Warranties of the Company.   The
Company represents and warrants to the Investor as follows:


 


(a)           Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.


 


(b)           Authorization; No Breach.  The
execution, delivery and performance of this Agreement by the Company have been
duly authorized by the Company.  This
Agreement has been duly executed by the Company and constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms.  The execution and delivery of
this Agreement, the fulfillment of and compliance with the terms hereof and the
consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach of the terms, conditions or provisions of,
constitute a default under, result in the creation of any Lien upon the Company’s
or any Subsidiary’s capital stock or assets pursuant to, give any third party
the right to modify, terminate or accelerate any obligation under, result in a
violation of, or require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency or other Person pursuant to, (i)
the charter or bylaws of the Company or any


 





















 


Subsidiary, (ii) any law,
statute, rule, regulation, order, judgment, decree to which the Company or any
Subsidiary is subject and which is material to the business of the Company or
any Subsidiary or (iii) any contract, agreement or other instrument to which
the Company or any Subsidiary is a party.


 


(c)           Governmental Authorizations. 
There is no requirement applicable to the Company to obtain any consent,
approval or authorization of, or to make or effect any declaration, filing or
registration with, any governmental agency or body for the valid execution and
delivery of this Agreement, the fulfillment of and compliance with the terms
hereof and the lawful consummation of the transactions contemplated hereby.


 


(d)           Option Shares.  The
issuance and sale of the Option Shares to the Investor upon the exercise of the
Option has been duly authorized by all necessary corporate action on the part
of the Company and all necessary action, if any, on the part of its
shareholders.  The Option Shares have
been reserved for issuance pursuant to this Agreement and, when issued and
delivered to and paid for by the Investor, will be validly issued, fully paid
and nonassessable.  None of the Option
Shares will be issued in violation of, or subject to, any statutory stockholders
preemptive or similar contractual rights. 
The offer, issuance and sale of the Option Shares upon the exercise of
the Option do not require registration under, and have been and will be made in
compliance with, the applicable securities laws of the United States of America
and any state or other political subdivision thereof.


 


(e)           Stock Purchase Agreement Representations.  Each
of the representations and warranties of the Company contained in the Stock
Purchase Agreement is true and correct as of the date hereof (including all
schedules attached thereto).


 


SECTION 5.           Representations and Warranties of the
Investor.  The Investor represent and warrant to the
Company as follows:


 


(a)           Enforceability.  This
Agreement has been duly authorized, executed and delivered by the Investor and
constitutes a valid and binding obligation of the Investor, enforceable against
the Investor in accordance with its terms.


 


(b)           No Conflict.  The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement and shall
not conflict with, or result in any violation of, any United States or foreign
Law applicable to the Investor or by which any property or asset of the
Investor is bound or affected.


 


(c)           Consents, Approvals, Etc.  No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notification to, any governmental authority or body is required
by or with respect to the Investor in connection with the execution and
delivery of this Agreement by the Investor or the


 





















 


consummation by the Investor
of the transactions contemplated by this Agreement, except the filing with the
SEC of such reports under the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated hereby.


 


SECTION 6.           Notices.  All notices and other
communications hereunder shall be in writing and shall be given by delivery in
person, by registered or certified mail (return receipt requested and with
postage prepaid thereon) or by cable, telex or facsimile transmission to the
parties at the following addresses (or at such other address as either party
shall have furnished to the other in accordance with the terms of this Section 6):


 


if
to the Investor:


 


Mark
Wattles Enterpises, LLC


7945
W. Sahara #205


Las
Vegas, Nevada 89114


Facsimile:
(702) 341-1603


 


with
copies to:


 


Baker
& Botts L.L.P.


2001
Ross Avenue


Dallas,
Texas 75201


Facsimile:  (214) 953-6503


Attention:
Geoffrey L. Newton


 


if
to the Company, to:


 


Ultimate
Electronics, Inc.


321
West 84th Avenue, Suite A


Thornton,
Colorado 80260


Attention:  Chief Executive Officer


Facsimile:  (303) 412-2501


 


with a copy to:


 


Hogan & Hartson L.L.P. 


1200 17th Street,


Suite 1500


Denver, Colorado  80202


Attention: 
Paul Hilton


Facsimile: 
(303) 899 7333


 


All notices and other
communications hereunder that are addressed as provided in or pursuant to this Section 6
shall be deemed duly and validly given (a) if delivered in person, upon delivery,
(b) if delivered by registered or certified mail (return receipt


 





















 


requested and with postage
paid thereon), 72 hours after being placed in a depository of the United States
mails and (c) if delivered by cable, telex or facsimile transmission, upon
transmission thereof and receipt of the appropriate answerback.


 


SECTION 7.           Further Assurances. Each of the Company and the Investor hereby
covenant and agree to execute and deliver any additional documents reasonably
necessary to complete the issuance and sale of all or any portion of the Option
Shares with respect to which an Option is exercised and consummate the other
transactions contemplated by this Agreement.


 


SECTION 8.           Expenses.  The Company shall bear all
costs, expenses and fees incurred by any of the parties in connection with this
Agreement and the transactions contemplated hereby (including, but not limited
to, all fees and expenses of counsel, financial advisors, consultants,
actuaries and independent accountants).


 


SECTION 9.           Amendments.  The terms and provisions of
this Agreement may be modified or amended only by a written instrument executed
by each of the parties hereto, and compliance with the terms and provisions
hereof may be waived only by a written instrument executed by each party entitled
to the benefits of the same.


 


SECTION 10.         Assignment.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.


 


SECTION 11.         Governing Law.  This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State of New York, without regard to the principles of
conflicts of law that would result in the application of the laws of any other
jurisdiction.


 


SECTION 12.         Severability.  In
the event any provision contained in this Agreement shall be held to be
invalid, illegal or unenforceable for any reason, the invalidity, illegality or
unenforceability thereof shall not affect any other provisions hereof, all of
which shall remain in full force and effect.


 


SECTION 13.         Interpretation.  When
a reference is made in this Agreement to a party or to a Section or
Schedule, such reference shall be to a party to, or a Section of or a Schedule to,
this Agreement unless otherwise indicated. 
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.  Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to
be followed by the words “without limitation.” 
The words “hereof,” “herein,” “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not
to any particular provision of this Agreement. 
The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.


 





















 


SECTION 14.          Entire Agreement; No Third-Party
Beneficiaries.  This Agreement (including the documents and
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; and (ii) is
not intended to confer upon any Person other than the parties any rights or remedies
hereunder.


 


SECTION 15.          Non-Waiver.  The
failure of any party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at law or in
equity, or to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.


 


SECTION 16.          Counterparts; Effectiveness.  This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.


 


 


[Signature page follows]


 





















 


IN
WITNESS WHEREOF, the undersigned parties have duly executed this Agreement as
of the date first above written.


 


	
   

  	
  ULTIMATE ELECTRONICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David J. Workman

  	
   

  
	
   

  	
  Name: 

  	
  David J. Workman

  	
   

  
	
   

  	
  Title: 

  	
  President and Chief
  Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MARK WATTLES ENTERPRISES,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mark J. Wattles

  	
   

  
	
   

  	
  Name: 

  	
  Mark J. Wattles

  	
   

  
	
   

  	
  Title: 

  	
  President

  	
   

  
						



 


[Signature Page to Company Option Agreement]