Algo strengthens financial position



    MONTREAL, June 8 /CNW Telbec/ - Algo Group Inc. ("Algo" or "Company")
announced today that it has entered into an agreement with its primary lenders
which should result in a significant improvement to its shareholders'
deficiency and future cash flows as debt repayment and service costs will be
reduced dramatically. The agreement calls for a combination of debt repayment
and cancellation of revolving and non - revolving bank facilities within
specified terms which shall, together with the private placement proceeds of
$3 million previously announced, improve Algo's shareholders' deficiency by
approximately $17 million. This agreement will replace and is in lieu of the
agreement previously reached between Algo and its primary lenders as was
detailed in various press releases issued by Algo commencing on November 23,
2006.
    The principal elements of the agreement include:

    
    Revolving Loan Facilities
    -------------------------

    - Immediate payment of $500,000 from Algo with additional payments of
      $3.6 million by August 5, 2007 in complete satisfaction of operating
      loans in the amount of approximately $7.7 million;
    - Upon receipt of these payments, the primary lenders will forgive all
      other outstanding debt under the revolving loan facilities and will
      release and discharge all of their security in respect of such
      facilities. This shall result in an improvement to the shareholders
      deficiency of the Company of approximately $3.6 million;
    - Mr. Dan Elituv, Chairman of the Board and a significant shareholder of
      Algo, has guaranteed to pay the balance of the $3.6 million to the
      primary lenders should the Company not meet its objective by August 5,
      2007;

    Non - Revolving Term Loan Facilities
    ------------------------------------

    - In exchange for the reduction and cancellation of non-revolving bank
      loans of approximately $9.3 million, Algo must issue 50 million common
      shares to the primary lenders or cause one or more of its shareholders
      to transfer the same amount of existing common shares to the primary
      lenders. The above must be completed by December 5, 2007;
    - Alternatively, in lieu of issuing such shares, the primary lenders have
      agreed to accept a payment of $500,000 either from the Company, or
      Mr. Elituv within the same time period;
    - The person making the payment is, at their option, entitled to receive
      the 50 million common shares from Algo;
    - Upon receipt of the aforementioned shares or the $500,000 payment, the
      primary lenders will forgive all other outstanding debt under the non-
      revolving loan facilities;
    - This transaction is expected to decrease the shareholders' deficiency
      by approximately $9.3 million;
    

    Algo is currently in discussions with potential lenders in order to
secure new sources of funding. In the interim, Algo has recently received
additional private placement proceeds of $1 million from investors, including
insiders, to be used for working capital and to fund the agreement detailed
above.
    Marc Kakon, President and CEO of Algo Group Inc, indicates that: "This
Agreement is fantastic for Algo, its shareholders, employees and all
stakeholders of the Company. This is a significant hurdle that we have
overcome on the road to achieving our goal of returning the Company to good
health. We have worked hard to plant the seeds for Algo's future success and
look forward to seeing the rewards from everyone's strong efforts".

    Regulatory Approvals
    --------------------

    In consideration of the aggregate private placement proceeds of
$4 million received by Algo from various investors, Algo has agreed to issue a
combination of common shares and convertible notes, which could, on a fully
diluted basis, increase the common shares outstanding of the Company by
40 million which represents 23.5% of the total currently outstanding.
Approximately 50% of the $4 million was provided by insiders of Algo, namely
by a company controlled by Mr. Elituv (who currently owns directly and
indirectly 48.7 million shares representing 29% of the shares of the Company,
and who, following such issuance, will own 63.3 million shares representing
30% of the shares of the Company), a company controlled by Mr. Marc Kakon,
President, Chief Executive Officer and a shareholder of Algo (who currently
owns directly and indirectly 18.1 million shares representing 11% of the
shares of the Company, and who, following such issuance, will own 19.8 million
shares representing 9.4% of the shares of the Company), and by a company
controlled by Mr. Max Azria, a former director and a significant shareholder
of Algo (who currently owns directly and indirectly 52.4 million shares
representing 31.0% of the shares of the Company, and who, following such
issuance, will own 55.7 million shares representing 26.5% of the shares of the
Company).
    The issuance of such shares in respect of the above is subject to the
receipt by Algo of all necessary regulatory approvals, including the approval
of the Toronto Stock Exchange. In order to complete the issuance of common
shares described above, the Company intends to avail itself of the financial
hardship exemption provisions under Section 604(e) of the TSX Company Manual
and of similar provisions contained in applicable provincial securities
legislation. A company's reliance on the financial hardship exemption
provisions is based on a determination by its independent directors that the
company is in serious financial difficulty, that the transaction being pursued
on reliance thereof is designed to improve the financial position of the
company and that the terms of the transaction are reasonable under the
circumstances of the company. By relying on the financial hardship exemptions,
Algo will be exempted from the requirement to obtain shareholder approval and
to complete a formal valuation in connection with these share issuances.
    Algo intends to affect the foregoing issuance of shares as soon as
practicable following the receipt of all necessary regulatory approvals,
including the approval of the Toronto Stock Exchange. The Toronto Stock
Exchange has notified Algo that it will review the eligibility of Algo for
continued listing based on Algo's continuing financial condition.
    Further details of the foregoing will be available in a "material change
report" that will be filed by Algo with the provincial securities commissions.
A copy of the material change report will be available under Algo's corporate
profile on www.sedar.com.

    ALGO GROUP PROFILE
    ------------------

    Algo Group is a Canadian importer of ladies' fashion apparel, as well as
men's, boy's and children's sportswear that is marketed throughout North
America. The Company also imports home furnishing products that it markets to
major retailers in North America, and holds licenses to sell various brand
products such as Levi's Home in Canada and the United States.
    Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of
future events. Such factors may include, without excluding other
considerations, fluctuations in quarterly results, evolution in customer
demand for the Company's products and services, the impact of price pressures
exerted by competitors, and general market trends or economic changes. As a
result, readers are advised that actual results may differ from expected
results.




For further information:

For further information: ALGO GROUP INC.: Ken Labelle, C.A., Chief
Financial Officer, (514) 908-7804; INVESTOR RELATIONS: Maison Brison: Rick
Leckner, (514) 731-0000

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ALGO GROUP INC.

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