Electro Energy accused of being in default on $18.63 million of its 10% convertible debentures

By Devika Patel

Knoxville, Tenn., Sept. 25 - Electro Energy, Inc. received a notice of default from the Quercus Trust, which holds $18 million of the company's 10% senior secured convertible debentures, which were issued on Dec. 7, and $625,000 of its 10% senior secured convertible debentures, which were issued on Aug. 18, according to an 8-K filed Thursday with the Securities and Exchange Commission.

The company said in the filing that Quercus' default notice pertains to a Sept. 16 press release in which Electro Energy admitted it has nearly depleted its cash reserves, that it has been unsuccessful in its efforts to raise additional capital and, consequently, that the company would suspend operations immediately.

Under the debenture agreements with Quercus, an event of default occurs when "the company shall fail to pay, or shall state in writing that it is unable to pay its debts generally as they become due," according to the filing.

The notice of default also asserts that, as a consequence of this default, all payments due under each debenture have automatically accelerated, and if the company fails to pay this amount in full, Quercus will pursue all of its remedies, including enforcement of the security agreement that secures the obligations under each debenture.

Electro Energy said in the filing that it is not admitting it is in default, nor has it waived any of its legal rights in this matter.

Based in Danbury, Conn., Electro Energy develops hybrid battery technologies.

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