ePals Completes $12 Million Bought Deal Private Placement of Senior Secured Convertible Debentures

TORONTO — (Marketwire) — 10/19/12 — ePals Corporation (TSX VENTURE: SLN) (“ePals” or the “Company”) is pleased to announce that it has completed its previously announced bought deal private placement of an aggregate principal amount of $12,000,000 senior secured convertible debentures (the “Debentures”). The Debentures were sold through a syndicate of underwriters led by Canaccord Genuity Corp. and including Cormark Securities Inc.

The Debentures have an initial maturity date of October 31, 2014 (“Initial Maturity Date”). The maturity date may be extended, at ePals’ option, to October 31, 2016. The Debentures bear interest at a rate of 6.50% per annum payable semi-annually in arrears on April 30 and October 31 in each year, with the first interest payment date being April 30, 2013. Each $1,000 principal amount of Debentures is convertible at any time, at the option of the holder, into approximately 1,667 voting common shares of ePals (“Common Shares”), representing a conversion price of $0.60 per share (the “Conversion Price”).

The Debentures may not be redeemed by ePals prior to the Initial Maturity Date, and not prior to October 31, 2015, if the maturity date is extended. If ePals exercises this option to redeem the Debentures, it must redeem them at par plus accrued and unpaid interest to the redemption date (in cash).

Also, on or after October 31, 2014 (and only in the event that ePals extends the maturity date of the Debentures), the Company may, at its option, convert the Debentures into Common Shares at the Conversion Price, provided that the volume weighted average trading price of the Common Shares during the preceding 10 trading days is not less than 200% of the Conversion Price. Holders of Debentures so converted will be accrued and unpaid interest to the conversion date (in cash).

The Company intends to use the net proceeds of the offering for general corporate purposes and working capital.

The Debentures issued in connection with the offering, as well as the underlying Common Shares, will be subject to resale restrictions under applicable Canadian securities laws for a period of four months from the closing date.

The definitive terms and conditions of the Debentures are set forth in the trust indenture (the “Indenture”) dated October 19, 2012 between the Company and Olympia Transfer Services Inc., as trustee, a copy of which will be available under the Company’s SEDAR profile. The description of the Debentures in this press release is qualified in its entirety by the terms and conditions of the Debentures as set out in the Indenture.

The securities described herein have not been registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), and may not be offered or sold in the United States unless registered under the U.S. Securities Act or unless an exemption from registration is available.

About ePals Corporation

ePals Corporation is an education media company connecting K-12 schools, students, teachers and parents around the world for shared, 21st century learning. ePals operates the K-12 market’s premier social learning network, connecting millions of users in over 330,000 schools for collaboration around high quality content and educational projects. ePals also publishes industry-leading children’s literature in physical and digital formats. These magazines, books and mobile apps are subscribed to by hundreds of thousands of families and approximately one-third of all US middle schools. ePals’ award-winning products and brands include: the ePals Global Community™; SchoolMail®365; LearningSpace®; In2Books®; Cricket® and Cobblestone®. ePals customers and partners include the International Baccalaureate, Microsoft Corporation, Dell Inc., IBM Corp. and leading school districts across the United States and globally. ePals reaches approximately 800,000 classrooms and millions of teachers, students and parents in approximately 200 countries and territories.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements
This press release contains statements that may constitute “forward-looking statements” within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the expected use of proceeds therefrom. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by the Company and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits the Company will derive therefrom. The forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.


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