RPT Resources Signs Definitive Agreement with ArPetrol for Business Combination

RPT Resources Ltd. (TSX VENTURE:RPT) has announced that RPT and ArPetrol Inc. have now entered into a definitive agreement dated December 23, 2010 in connection with the arm's length business combination of RPT and ArPetrol which was previously announced on November 22, 2010.

The Agreement contemplates the following (collectively, the "Transactions"):

• under the terms of the Agreement, a wholly-owned subsidiary of RPT will amalgamate by way of a plan of arrangement (the "Amalgamation") with ArPetrol and pursuant thereto RPT will issue 7.494 common shares of RPT (each an "RPT Share") for each common share of ArPetrol (each an "ArPetrol Share") at a deemed price of $0.13 per RPT Share for aggregate deemed consideration of approximately $27.9 million;
• a new management team will be appointed led by Timothy Thomas as President and Chief Executive Officer, Ian Habke as Chief Financial Officer, Ian Moffat as Vice President, Exploration and Troy Wagner as Vice President, Argentina (the "New Management") (see biographical information below);
• a new board of directors will be comprised of five of the current directors of ArPetrol: Claudio Ghersinich (Chairman), Abdel Badwi, Jeffrey Boyce, Timothy Thomas and Ronald Williams, as well as Michelle Gahagan who is a current director of RPT (the "New Directors") (see biographical information below);
• RPT will be recapitalized through the previously announced private placement (the "Private Placement") of up to 207,693,000 subscription receipts of RPT ("Subscription Receipts") at a price of $0.13 per Subscription Receipt for aggregate gross proceeds of up to approximately $27 million which is expected to close on January 11, 2011 and for which the agents have been granted a 10% option (the "Agents' Option") to increase the size of the Private Placement prior to closing by up to an additional 20,769,300 Subscription Receipts or approximately $2.7 million. Notwithstanding the above, the Agreement provides that receipt of a minimum of $14.3 million in gross proceeds from the Private Placement is a mutual condition precedent for both parties to the closing of the Amalgamation (unless amended or waived); and
• RPT will be continued to the Province of Alberta under the name "ArPetrol Ltd.".

Trading of RPT Shares has been halted pending finalization of the terms of the Transactions and this news release describing the Transactions. Trading of RPT Shares is expected to resume on or about December 29, 2010.

Pro-Forma Highlights

Assuming the completion of the Transactions (which is targeted for on or around March 15, 2011), the Corporation is expected to have the following attributes (on a pro forma basis):

Upon completion of the Transactions, the Corporation is expected to be debt free with a working capital position of approximately $39 million (net of transaction costs and based on the assumptions in note 3 above). In Argentina, the Corporation will own and operate 100% of approximately 375 boepd of production from its Faro Virgenes concession. The Corporation's Argentine assets will also include expected high productivity redevelopment wells, several anticipated high impact, low cost exploration targets, a strategically located 85 MMcf/d gas plant (at full capacity) and a 65% working interest in 60,244 gross acres of undeveloped lands.

Merits of the Transaction and Corporate Strategy

The Transactions will provide the Corporation with an experienced management team and board of directors to execute a fully-funded capital program on an inventory of drilling opportunities in Argentina. The Transactions are expected to provide the resources necessary for growth of ArPetrol's current production and reserves base.

The Corporation's growth strategy is expected to have the following elements:

- Focus on expanding its core operation and cash-flow base in Argentina;
- Drill low cost and high reward exploration wells identified in Argentina;
- Drill low risk and high impact redevelopment wells at Faro Virgenes in Argentina; and
- Pursue strategic acquisitions in South America.

The Corporation's target for organic growth is projected to be approximately 2,000 boepd by the end of 2011 based on the planned capital program, development success and other assumptions set forth elsewhere in this press release.

Boards of Directors' Recommendations

The board of directors of each of RPT and ArPetrol has considered the Amalgamation at length and has, based upon the verbal fairness opinion of its respective financial advisors and other considerations, unanimously determined that the Transactions are fair to their respective shareholders and are in the best interests of RPT and ArPetrol, respectively, and recommends that its respective shareholders approve the Transactions. The board of directors and officers of each of RPT (holding approximately 0.4% of the RPT Shares) and ArPetrol (holding approximately 46% of the ArPetrol Shares) have entered into support agreements in which they have agreed, among other things, to vote in favour of the Transactions, subject to certain conditions.

New Management Team

The New Management brings a long and successful track record in the international and Canadian oil and gas sectors. This experience spans all areas of the upstream oil and gas business, including conventional and unconventional resource plays and operational success in numerous countries worldwide, including Canada, Argentina, Colombia, Peru, UK, the Middle East, Africa and Indonesia. The New Management has demonstrated operational expertise and helped build international oil and gas organizations.

Board of Directors

The New Directors have strong track records in the oil and gas industry. The New Directors have held executive and director positions with a number of successful companies with operations in Canada, USA, Europe, Africa, Asia, the Middle East, Australia and South America.

The New Directors will become the board of directors of the Corporation immediately following the effective time of the Amalgamation.

Private Placement

As previously announced, on December 16, 2010, RPT entered into an agreement with a syndicate of agents led by Raymond James Ltd. and including Canaccord Genuity Corp. (the "Agents") providing for the issuance on a private placement agency basis of up to 207,693,000 Subscription Receipts at a price of $0.13 per Subscription Receipt for aggregate gross proceeds of up to $27 million. In addition, RPT has granted the Agents the Agents' Option to increase the size of the Private Placement by up to an additional 20,769,300 Subscription Receipts or $2.7 million, exercisable prior to the closing of the Private Placement. Closing of the Private Placement is expected to occur on or about January 11, 2011 and is subject to receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange ("TSXV"). Each Subscription Receipt will represent the right to automatically receive one RPT Share and one common share purchase warrant ("RPT Financial Warrant"). Each RPT Financial Warrant will entitle the holder thereof to purchase one RPT Share at a price of $0.26 at any time prior to the date that is two years after the closing of the Private Placement.

The Subscription Receipts will be issued pursuant to the terms of a subscription receipt agreement and the gross proceeds of the Private Placement will be held in escrow by an escrow agent. Each Subscription Receipt will automatically be exchanged, without payment of any additional consideration or further action on the part of the holder thereof, into one RPT Share and one RPT Financial Warrant upon delivery of a notice to the escrow agent that the escrow release conditions have been satisfied, including the receipt of any necessary government, regulatory and shareholder approvals.

Provided that the notice is delivered to the escrow agent on or before March 31, 2011 pursuant to the terms of the subscription receipt agreement, the net proceeds of the Private Placement will be released from escrow to the Corporation. If the notice is not provided to the escrow agent on or before March 31, 2011 pursuant to the terms of the subscription receipt agreement, the Agreement is terminated, or RPT or ArPetrol advises the Agents or announces to the public that it does not intend to proceed with the Amalgamation, each Subscription Receipt will be cancelled and each holder of Subscription Receipts will be entitled to receive its investment plus interest.

The Agreement provides that receipt of a minimum of $14.3 million in gross proceeds from the Private Placement is a mutual condition precedent for both parties to the closing of the Amalgamation (unless amended or waived). The Agents will receive a commission of 4.5% of the gross proceeds raised under the Private Placement. The net proceeds from the Private Placement will be used to fund the Corporation's exploration and redevelopment program and for general working capital purposes.

In addition, ArPetrol has recently issued to certain board members convertible debentures in the aggregate principal amount of $1.2 million ("ArPetrol Convertible Debentures") and 1,231,753 common share purchase warrants ("ArPetrol Financial Warrants"). In accordance with the their terms, immediately prior to the Amalgamation, the ArPetrol Convertible Debentures will be converted into ArPetrol Shares on the basis of one ArPetrol Share per $0.97422 of principal amount outstanding. Pursuant to the Amalgamation, these ArPetrol Shares will then be exchanged for RPT Shares at a ratio of 7.494:1. The ArPetrol Financial Warrants will also be exchanged at a ratio of 7.494:1 on the Amalgamation for common share purchase warrants of RPT having the same terms as the RPT Financial Warrants issued pursuant to the conversion of the Subscription Receipts.

Overview of the Transaction, Incentives and Capitalization

Under the terms of the Agreement, each outstanding ArPetrol Share will be exchanged for 7.494 RPT Shares at a deemed price of $0.13 per RPT Share for aggregate deemed consideration of approximately $27.9 million. RPT currently has approximately 117.0 million RPT Shares outstanding and ArPetrol currently has approximately 28.5 million ArPetrol Shares outstanding. There are no control persons of either RPT or ArPetrol.

Following the closing of the Transactions, assuming completion of the maximum Private Placement and exercise in full of the Agents' Option and the other assumptions set forth below: (i) the Corporation will have approximately 570 million RPT Shares outstanding, of which approximately 14% of the RPT Shares will be owned or controlled by the New Management and New Directors; (ii) on a diluted basis, the New Management and New Directors will own or control approximately 14% of approximately 835 million diluted RPT Shares; and (iii) there will be outstanding options representing on an aggregate basis approximately 4.3% of the issued and outstanding RPT Shares. The Corporation's options (which are described below) will be subject to a rolling option plan for up to 10% of the RPT Shares outstanding from time to time and will be subject to TSXV policies and guidelines.

1. This assumes completion of the minimum of $14.3 million in gross proceeds under the Private Placement.
2. This assumes completion of the maximum Private Placement and exercise in full of the Agents' Option.
3. This assumes the exercise of 200,000 existing "in-the-money" options of ArPetrol prior to completion of the Amalgamation.
4. Includes RPT Shares ultimately issued as a result of the conversion of the ArPetrol Convertible Debentures and RPT common share purchase warrants issued for the ArPetrol Financial Warrants pursuant to the Amalgamation.
5. A finder's fee of 2,000,000 common shares of the combined entity will be issued to Sam Charanek at a deemed price of $0.13 per share upon completion of the Transaction. Mr. Charanek is a principal of CEE Merchant Group and has over 12 years of capital markets consulting experience.
6. Each RPT Financial Warrant will entitle the holder thereof to acquire one RPT Share at a price of $0.26 for a period of 24 months.
7. Continuing options: This amount includes an aggregate of 20,703,815 of options which will be held by persons who will be New Management, New Directors or employees of the Corporation: 18,517,485 options with an exercise price of $0.13 (which will expire in 2017), 725,000 options with an exercise price of $0.20 (which will expire in 2014), 1,124,100 options with an exercise price of $0.27 (which expire between 2015 and 2017) and 337,230 options with an exercise price of $0.24 (which will expire in 2017). This does not include any option allocations for future hires.
8. Expiring Options: This amount also includes an aggregate of 3,835,800 of options which will be held by persons who will not be New Management, New Directors or employees of the Corporation and which are expected to be exercised or expire within a certain period following completion of the Amalgamation as follows: 2,175,000 options with an exercise price of $0.20, 12,000 options with an exercise price of $0.27 and 150,000 options with an exercise price of $0.40, all of which will be exercised or expire within 180 days following closing.
9. Continuing Performance Warrants: This amount includes performance warrants with an exercise price of $0.134 which will be held by one member of New Management. These RPT performance warrants will be issued pursuant to the Amalgamation for the existing performance warrants granted to ArPetrol management around the time of their original subscription in ArPetrol. One-third of the performance warrants will be vested and the remainder will be subject to vesting thresholds of $0.400 and $0.534 and will expire on January 10, 2015. These performance warrants are not expected to be part of the "security based compensation arrangements" of the Corporation because they were granted at the time of earlier financings of ArPetrol.
10. Expiring Performance Warrants: This amount also includes 1,498,800 of performance warrants which reflects the vested portion performance warrants with an exercise price of $0.134 which will be held by persons who will not be New Management, New Directors or employees of the Corporation and which are expected to expire within 30 days following completion of the Amalgamation. This amount excludes 2,997,600 of performance warrants which represents the unvested portion of such persons' performance warrants with the same exercise price but which are subject to vesting thresholds of $0.400 and $0.534 and which will also expire within 30 days following completion of the Amalgamation. These performance warrants are also not expected to be part of the "security based compensation arrangements" of the Corporation because they were granted at the time of earlier financings of ArPetrol.

Timing and Required Approvals

Completion of the Amalgamation is subject to the satisfaction of a number of conditions under the Agreement, including receipt of the approval of the TSXV, approval of the Amalgamation and election of the New Directors by not less than 50% of the shareholders of RPT who vote at the RPT shareholder meeting, approval of the Amalgamation by not less than two-thirds of the shareholders of ArPetrol who vote at the ArPetrol shareholder meeting and approval by the Court of Queen's Bench of Alberta. RPT has applied for and received a sponsorship exemption pursuant to the policies of the TSXV. A joint information circular is expected to be mailed to RPT and ArPetrol shareholders in early-February and the annual and special meetings of shareholders of each of RPT and ArPetrol are expected to be held in early-March 2011.

It is expected that the Amalgamation will be closed on or about March 15, 2011 on the assumption that RPT and ArPetrol receive the requisite approvals and all of the conditions to closing are satisfied. In light of the pending shareholder meeting to vote on the Amalgamation and election of the New Directors, RPT applied to the British Colombia Registrar of Companies and obtained an extension of the deadline for its annual general meeting until March 31, 2011.

Source: RPT Resources Ltd.