SLN Epals Corporation

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/ TORONTO, Sept. 27, 2012 /CNW/ - ePals Corporation ("ePals" or the "Company") is pleased to announce that it has entered into an agreement to sell on a bought deal private placement basis (the "Placement"), to a syndicate of underwriters led by Canaccord Genuity Corp. and including Cormark Securities Inc. (collectively, the "Underwriters"), $12,000,000 aggregate principal amount of senior secured convertible debentures (the "Debentures").  The Company has also granted the Underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing of the Placement, to purchase up to an additional $3,000,000 aggregate principal amount of Debentures on the same terms. The Debentures will have an initial maturity date of October 31, 2014, extendable at ePals' option to October 31, 2016.  The Debentures will have an interest rate of 6.50% per annum payable semi-annually in arrears on April 30 and October 31 in each year, with the first coupon paid April 30, 2013.  Each $1,000 principal amount of Debentures will be convertible into approximately 1,667 voting common shares ("Common Shares") of ePals at the option of the holder, representing a conversion price of $0.60 per share (the "Conversion Price"). The Debentures will not be redeemable before October 31, 2015.  On or after October 31, 2015, ePals may, at its option, redeem the Debentures at par plus accrued and unpaid interest. Also, 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 weighted average closing price of the Common Shares for the preceding ten trading days is not less than 200% of the Conversion Price. Holders having their Convertible Debentures converted will receive accrued and unpaid interest thereon in cash. Upon closing of the Offering, the Underwriters will receive a cash commission equal to 6.0% of the gross proceeds of the Placement.  Further, as consideration for the Underwriters' services, the Company will issue to the Underwriters that number of broker warrants ("Broker Warrants") equal to the gross proceeds of the Placement divided by $0.45, multiplied by 4.0%.  Each Broker Warrant will entitle the holder thereof to subscribe for one additional Common Share at a price of $0.45 per share at any time prior to the day that is 24 months from the closing date.  The cash commission will be subject to reduction in respect of certain subscribers as agreed to between the Underwriters and ePals. The Company intends to use the net proceeds of the Placement for general corporate purposes and working capital. The Debentures and the Broker Warrants issued in connection with the Placement, as well as the underlying Common Shares, will be subject to resale restrictions for a period of four months from the closing date of the Placement. Completion of the Placement is anticipated to occur on or about October 16, 2012, and is subject to the satisfaction or waiver of various conditions, such as the receipt of customary regulatory approvals, including approval of the TSX Venture Exchange. The securities described herein have not been registered under the U.S. Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States unless registered under the 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, 21(st) 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(TM); SchoolMail(R)365; LearningSpace(R); In2Books(R); Cricket(R) and Cobblestone(R). 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. For the ePals Global Community(TM), visit www.epals.com 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 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. ePals Corporation CONTACT: Aric HolsingerChief Financial OfficerePals CorporationPhone: (703) 885-3400aholsinger@corp.epals.comCory PalaInvestor RelationsE.vestorPhone: (416) 657-2400cpala@corp.epals.com

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