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ePals Shareholders, Including Chairman & CEO, Miles Gilburne, Commit to Purchase $7.5 Million of New Issue of up to $10 Million of Senior Secured Convertible Debentures

WASHINGTON, DC -- (Marketwire) -- 03/13/13 -- ePals Corporation (TSX VENTURE: SLN) ("ePals" or the "Company") announced today that it intends to issue, on a non-brokered private placement basis, senior secured convertible debentures of the Company (the "Debentures") in an aggregate principal amount of up to $10 million (the "Placement"). Existing ePals shareholders, Difference Capital Funding Inc. ("DCF") and Zolt-Gilburne 2012 Family Trust ("ZG"), an entity controlled by ePals Chairman and Chief Executive Officer, Miles Gilburne, and co-founder and Board member, Nina Zolt, have committed to purchase Debentures in an aggregate principal amount of up to $7.5 million. Each $1,000 principal amount of Debentures will be convertible into 2500 voting common shares of ePals ("Common Shares"), at the option of the holder, representing a conversion price of $0.40 per share (the "Conversion Price").

The Debentures will rank senior to other indebtedness of the Company, including the secured debentures issued by ePals on October 19, 2012, and will bear interest at a rate of 10.0% per annum, payable annually in arrears on April 30 in each year, with the initial interest payment date being April 30, 2014. The Debentures will have a maturity date of October 31, 2014 (extendable, at ePals' option, to October 31, 2016).

"The terms of this financing reflect our prudent capitalization commitments at a time of subpar capital market for ePals' valuation," explained Mr. Gilburne. "We believe the enterprise value of ePals continues to trend upward, driven by the business and revenue growth prospects for ePals as the education space undergoes the same digital disruption other traditional media have experienced. Good momentum in our recent initiatives domestically and internationally makes it even clearer that ePals' secure learning platform and cloud-based distribution network maps onto the needs of partners, educational publishers, and users globally."

"With this investment, ePals becomes a core investment of Difference Capital," said DCF Executive Chairman Michael Wekerle. "We believe that ePals' execution on its ambitious business plan in North America, China and Europe, combined with an increased emphasis on financial partnerships in 2013, represent the potential for substantial growth."

The Debentures will not be redeemable prior to October 31, 2015. On or after October 31, 2015, under certain conditions, ePals may, at its option, redeem the Debentures, at par plus accrued and unpaid interest thereon to the redemption date. Further, on or after October 31, 2014, 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 for the preceding 10 trading days is not less than 200% of the Conversion Price. Holders of converted Debentures will receive, in cash, accrued and unpaid interest thereon to the conversion date.

The $7.5 million commitment to purchase Debentures made by DCF and ZG will be reduced in the event that the Company receives subscriptions for Debentures exceeding $10 million in principal amount and the investment by DCF or ZG may be made in one or more tranches.

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

In connection with the Placement, the Company may pay a finder's fee to certain registered dealers (on customary terms and conditions) who assist the Company in identifying purchasers for the Debentures. The finder's fee shall not exceed 6% of gross proceeds on any specific purchase of Debentures. No finder's fee will be paid in connection with purchases by DCF or ZG.

The Placement is expected to close in tranches, with an initial closing on or about March 20, 2013. The Debentures issued in connection with the Placement, as well as the underlying Common Shares (if any), will be subject to resale restrictions for a period of four months from the closing date of the Placement.

The Placement is subject to receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange (the "TSX-V"), and the satisfaction of all other customary closing conditions.

Regulatory Matters

As disclosed above, Miles Gilburne and Nina Zolt are both directors and/or officers of the Company and, as such, the participation by ZG in the Placement constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") and under the policies of the TSX-V. In respect of the Placement, the Company is relying upon the exemptions from the formal valuation and minority shareholder approval requirements pursuant to sections 5.5(b) and 5.7(1)(a), respectively, of MI 61-101 on the basis that at the time ZG agreed to participate in the Placement, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction insofar as it involves "interested parties" (within the meaning of MI 61-101) in the Placement, exceeds 25% of the Company's market capitalization calculated in accordance with MI 61-101.

The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in the United States absent registration or applicable exemption from those registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there by any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

About Difference Capital Funding Inc.

Difference Capital Funding Inc. is a publicly listed merchant bank focused on creating shareholder value through strategic investments in, and advisory services for, growth companies, particularly in the technology and media sectors, as well as opportunistic investments in undervalued financial assets and real property. For further information on Difference Capital, its management, board and portfolio of investee companies, please visit

About ePals Corporation

ePals Corporation (TSX VENTURE: SLN) is an education media company and the leading Global Learning Network. Focused on the K-12 market, ePals offers elementary and secondary school administrators, teachers, students and parents worldwide a safe and secure platform for building educational communities, providing quality digital content and facilitating collaboration for effective 21st century learning. ePals' award-winning products include: the ePals Global Community®; Learn365™; In2Books®, a common core eMentoring program that builds reading, writing and critical thinking skills; and popular children's educational publishing brands including Cricket® and Cobblestone®. ePals customers and partners include the International Baccalaureate, Microsoft Corporation, Dell Inc., IBM Corp., National Geographic and leading school districts across the United States and globally. ePals serves approximately 1 million classrooms and reaches millions of teachers, students and parents in approximately 200 countries and territories. Visit For Corporate information, visit

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 completion of the Placement and the expected use of proceeds of the Placement. 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.


ePals Corporation
Aric Holsinger
Chief Financial Officer
Phone: (703) 885-3400

Investor Relations
Cory Pala
Phone: (416) 657-2400

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