Amerex, after admitting default on line of credit, concedes new privileges to Camofi

By Devika Patel

Knoxville, Tenn., Jan. 7 - Amerex Group, Inc. amended its agreement with Camofi Master LDC in regard to a line of credit that settled on Aug. 31, 2006, according to an 8-K filed Monday with the Securities and Exchange Commission.

The agreement was for the lesser of $1.5 million or 80% of account receivables less than 90 days old and was issued in exchange for a five-year warrant to purchase 750,000 common shares at $0.01 per share.

The filing said that Amerex was in default of this agreement as of Sept. 30.

The company also sold 10% senior secured convertible notes on Nov. 21, 2005 to Camofi and other investors.

The principal amount was $6 million, which was increased to $6.8 million on Feb. 23, 2006.

The notes are convertible at any time into common stock at a conversion price of $0.50 per share. The noteholders also were issued five-year warrants to buy 2 million common shares at $0.01 per share. When the notes were increased, the number of warrants issued also was increased to 2,266,667.

Under the new agreement between the two companies, the maturity will be extended to Nov. 21, 2010 from Nov. 21, 2007 and interest payments, due on Jan. 1, Feb. 1 and March 1, will be deferred until April 1, at which time the full amounts, as well as the April 1 interest payment, will be paid.

Amerex will issue a new note to Camofi for $2,027,123 with the same terms as the outstanding note. The new note will have limitations on debt, liens, dividends, transactions with affiliates and will require that Amerex have at a minimum EBITDA of $400,000 per month through the end of 2008 as well as a minimum annual EBITDA of $2.5 million for 2008 and 2009.

The monthly redemption amount for the notes now will equal $250,000. If Camofi receives at least $3 million from Amerex selling its Kaiser facility and other assets, the monthly redemption amount will be reduced to $150,000.

The monthly redemption date will be changed to the first of every month beginning in August.

The company will pay Camofi the entirety of any proceeds it receives from selling its Kaiser facility and other real estate assets. In addition, Amerex will pay Camofi the $400,000 that is being held in escrow on its Kaiser facility. These proceeds will be used to repay the notes. Agents will be retained to sell these assets by Jan. 15, and all of the assets will be sold by April 30 on terms satisfactory to Camofi.

Amerex has agreed to raise at least $2.5 million by March 31 on terms satisfactory to Camofi.

The filing date will be extended to the earlier of the filing of a registration statement for Amerex's next equity offering and June 30 from Nov. 21, 2005.

The effectiveness date will be amended to the earlier of 90 days after the filing date and Sept. 30. The term "registrable securities" will be amended to include the equity underlying the new note.

Camofi will have the right to convert the note into common stock and will receive notice at least 10 business days before any prepayments or repayments, during which time Camofi will have the right to convert all or any portion of the note.

Camofi also will receive 4.5% of Amerex's outstanding common stock.

Amerex will extend the term of all of Camofi's warrants to five years from the date of the agreement, Dec. 31.

Camofi or its representatives, its executive officers and financial personnel also will have the right to conduct an onsite review of Amerex's financial condition, including a detailed analysis of its expenses. Amerex will reimburse Camofi for all costs and expenses related to this review.

Based in New York, Amerex is an apparel importer.

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