Rapid Brands Announces Secured Loan Agreement



    MINNEAPOLIS, Feb. 2 /CNW/ - Further to Rapid Brands Inc. (the "Company")
(TSX-V: RAP) press release dated December 2, 2008, the Company is pleased to
announce that its wholly-owned subsidiary, Rapid Refill Corp. ("RRC") has
entered into a secured loan agreement with Roger Block, a director,
Vice-Chairman and CEO of the Company and Michael Batt, a director of the
Company (each individually a "Lender" and collectively the "Lenders").
Additionally, the current secured creditor of RRC, Oregon Ink, LLC, a limited
liability company controlled by Daniel P. White, a director of the Company,
has agreed to subordinate its security interest in the assets of RRC and has
entered into a settlement and release agreement (the "Settlement and Release
Agreement") with RRC which supersedes all previous arrangements.
    The loan made by the Lenders is in the aggregate principal amount of
US$300,000 with each Lender advancing US$150,000. RRC will issue a promissory
note in the principal amount of US$150,000 to each Lender (the "Notes") to
evidence the indebtedness. Each Note will be for a term of three years and the
outstanding principal balance will bear interest at a rate of 6.25% per annum.
No interest payments will be payable during the first year of the term of the
loan. During the first year of the loan, interest will accrue monthly and will
be added to the principal balance. Commencing January 31, 2010 and continuing
on the last day of each month thereafter until November 30, 2011, interest
only payments will be due and payable. On December 31, 2011, the entire unpaid
principal balance together with all accrued but unpaid interest shall become
immediately due and payable. The principal balance may be fully or partially
prepaid at any time during the term without penalty or premium. As security
for the obligation under the Notes, RRC will, pursuant to the terms of a
security agreement entered into between RRC and the Lenders, grant a security
interest over all of its assets and undertaking to each of the Lenders, pari
passu. The Company has not guaranteed the loan to RRC or pledged any of its
assets in connection with the loan. RRC is in the process of restructuring its
operations and capital structure in order to streamline operations, reduce
expenditures and increase cash flow. The proceeds of the loan will be used for
working capital purposes. There is no assurance that the proceeds of the loan
will be sufficient to meet the on-going capital requirements of the Company
throughout 2009.
    As part of the consideration for the risk in providing the loan to RRC,
the Company will issue to each Lender 150,000 non-transferable warrants to
purchase common shares in the capital of the Company, exercisable at Cdn$1.00
per common share. The term of the warrants is for three years in order to
match the term and risk profile of the loan. The TSX Venture Exchange Inc.
(the "TSXV") has conditionally approved the issuance and term of the warrants.
    Under the Settlement and Release Agreement, RRC will issue to Oregon Ink,
LLC a promissory note in the principal amount of US$126,000 (the "Oregon
Note") at a rate of interest of 6.25% per annum, in full and complete
satisfaction of and in replacement for the outstanding balance. The Oregon
Note represents a reduction from the amount of approximately US$298,000
currently outstanding and the elimination of a contingent payment of
approximately US$200,000. During the calendar year 2009, the Oregon Note shall
require monthly principal payments of US$500 per month, plus accrued interest,
payable on the last day of each month; during calendar year 2010, the monthly
payments will be US$3,000 per month, plus accrued interest; and calendar year
2011 and until the Oregon Note is paid in full, the monthly payments will be
US$4,000 per month, plus accrued interest. These monthly payments are reduced
from the current obligation of $30,625 per month.
    Oregon Ink, LLC will be entitled to an additional US$100,000 payment if
either of the following events occurs: (i) RRC generates positive cash flow in
excess of US$250,000 for each of two consecutive calendar quarters between
January 1, 2009 and December 31, 2013; or (ii) if RRC enters into a
transaction between January 1, 2009 to December 31, 2013 that results in
either: (1) the sale of all or substantially all of its assets; (2) the sale
of all or substantially all of its capital stock; or (3) a merger that
effectively results in a change of control of RRC. Finally, in connection with
the settlement of the indebtedness, and subject to the approval of the TSXV,
Oregon Ink, LLC will be issued 34,000 non-transferable warrants to purchase
common shares in the Company, exercisable for a period of two years at a price
of CDN$1.00 per common share.
    RRC has also entered into a settlement and release agreement with Daniel
P. White, a director of the Company, which among other things, terminates the
employment relationship between RRC and Mr. White. Mr. White served as
Chairman of RRC. The employment relationship was terminated and settled for,
among other things, consideration of US$100,000, US$20,000 of which has been
paid and the balance payable in US$4,000 monthly installments between February
15, 2009 and September 15, 2010.
    For more information, please see the Company's interim financial
statements and management discussion and analysis which are available on SEDAR
at www.sedar.com.

    
    The TSX Venture Exchange Inc. has not reviewed and does
    not accept responsibility for the adequacy and accuracy of this release.
    

    Forward Looking Statements

    By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, which give rise to the
possibility that predictions, forecasts, projections and other forward-looking
statements will not be achieved. We caution you not to place undue reliance on
these statements as a number of important factors could cause our actual
results to differ materially from those expressed in such forward-looking
statements. These statements are not a guarantee of future performance and are
subject to risks and uncertainties that could cause actual results to differ
materially including management of market, liquidity and funding and
operational risks, the effects of competition in the markets in which we
operate, the timing and technological advancement of new products introduced
by us or by our competitors, timely development of new products and services,
the impact of changes in laws and enforcement thereof, the strength of the US
economy, our ability to maintain operating service levels, our ability to
manage technology costs and other variable operating expenses and other
factors set forth in reports and other documents filed with the relevant
Canadian securities regulatory authorities from time to time including our
quarterly and annual management discussion and analysis and annual information
form. We caution that the foregoing list of factors that may affect future
results is not exhaustive.
    In addition, we have made assumptions in the preparation of this release
including that the operating requirements of our current business will not
materially change necessitating material change to our operating expense
structure. The foregoing assumptions, although considered reasonable by us at
the date of this release, could prove to be inaccurate and consequently our
actual results could differ materially from expectations set out herein. This
assumption covers significant areas, but is not comprehensive in scope. Please
see previously issued documents to provide additional information and details
as well as other potential risks.

    About Rapid Brands: Chanhassen, Minnesota-based Rapid Brands, Inc.,
through its wholly owned subsidiary Rapid Refill Corp., is a retail franchise
in the multi-billion dollar ink and toner industry. The shares of Rapid Brands
Inc. trade on the TSX Venture Exchange under the stock symbol RAP. For more
information, visit http://www.rapidrefill.com.





For further information:

For further information: Roger Block, Chief Executive Officer, Rapid
Refill, Tel: (877) 880-4465, Email: rblock@rapidbrandsinc.com

Organization Profile

RAP Acquisition Corp.

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