Espial Signs Definitive Agreement to Acquire Kasenna



    Creates a market leading TV software company

    OTTAWA, June 30 /CNW Telbec/ - Espial(R) Group Inc. ("Espial" or the
"Company"), (TSX: ESP), a leader in the delivery of IPTV middleware and
applications, today announced that it has entered into a definitive agreement
pursuant to which Espial will acquire all of the outstanding shares of
Kasenna, Inc. ("Kasenna") in exchange for an aggregate of 4,722,224 Espial
common shares, which before giving effect to the transaction represents 51.2%
of the issued and outstanding shares of Espial and will represent
approximately 33.6% of the issued and outstanding shares of Espial on an
after-issue basis.
    "Video services are critical for service providers' success worldwide.
The combination of Espial and Kasenna strengthens the leadership position of
Espial in the IPTV, hybrid IP-DVB and hospitality segments", noted Jaison
Dolvane, CEO of Espial. "The IPTV market remains early and fragmented, and
service providers are looking for clear leaders that they can bet on.
Acquiring Kasenna provides us with increased scale, expertise, product breadth
and channel access to position ourselves as the leading choice for service
providers worldwide".
    Mr. Dolvane noted, "The Kasenna team has a tremendous amount of depth and
expertise in video. They've done an excellent job creating world class
middleware and VOD products that have received industry recognition. For
example, Kasenna Mediabase was ranked #1 video-on-demand product by MRG in
2007".
    The combined operations will provide strong synergies including,

    
    - Increased number of Tier 1 video service provider customers, a
      footprint in over 100 customers worldwide with no overlap and a
      combined 2.4M+ IPTV licenses in deployment for one or more of our
      products.
    - Broader channel relationships with equipment vendors and system
      integrators.
    - Larger sales force, support and fulfillment capacity across EMEA, Asia
      & Americas.
    - Broader product portfolio includes browsers, video servers, client &
      server middleware, and applications.
    - Differentiated best-of-breed technology with a strong patent portfolio.
    - Strong balance sheet, financial and cost synergies that will be
      accretive to Espial shareholders in 2009.
    

    "This creates a company with 20+ years of video software experience. The
combined depth and strength of our product portfolios, customers, partners and
channel relationships, provides the right attributes to create an industry
leader" said Vivek Pendharkar, CEO of Kasenna. "Kasenna investors believe this
merger creates a winning combination and agreed to a majority share
transaction in order to participate in the growth of Espial. This increased
scale and a continued strong balance sheet positions Espial to capitalize on
this market as it matures".
    The selection of a TV software platform involves a long-term commitment
from customers. Many global service providers have delayed or deferred
decisions due to difficulty in selecting the right partner in this early
market. This combination distinguishes Espial from the crowd, as a leading
choice for service providers in this important decision.
    "Espial will work to support and enhance its relationships with all
Kasenna and Espial customers, partners and channels." Mr. Dolvane stated. "We
will deliver integrated solutions with a predictable roadmap, along with
continuing to sell component products for open and homegrown IPTV & hybrid
IP-DVB video systems. Partnering with ecosystem partners, including 3rd party
middleware and VOD companies will continue to be an important part of our
strategy".
    Espial and Kasenna are arm's length parties and, to the knowledge of
Espial, no insider of Espial has any interest, directly or indirectly, in the
transaction, no shareholder of Kasenna holds any common shares of Espial prior
to the closing of the acquisition and no shareholder of Kasenna, together with
their associates and joint actors, will hold more than 10% of the common
shares of Espial following closing of the acquisition. As such, the
transaction will not materially affect control of Espial.
    200,954 of the common shares to be issued in connection with the merger
will be issued to certain key officers and directors of Kasenna. 753,545 of
the Espial common shares to be issued in connection with the merger,
representing approximately 16.6% of the Espial common shares to be issued in
exchange for Kasenna shares, will be placed into escrow for a period of one
year following closing of the merger as security for any misrepresentations or
breach of covenants by Kasenna and/or its stockholders under the Merger
Agreement.
    Closing is subject to certain customary conditions, including regulatory
approvals. The policies of the TSX require that Espial seek and obtain
shareholder approval due to the fact that the number of securities issued or
issuable in payment of the purchase price exceeds 25% of the number of common
shares of Espial which are outstanding prior to the acquisition, on a
non-diluted basis. The policies of the TSX allow Espial to meet that
requirement by providing the TSX with written evidence that holders of more
than 50% of the voting securities of Espial are familiar with the terms of the
proposed transaction and are in favour of it. The Board of Directors of Espial
has received a fairness opinion in respect of the merger, has unanimously
approved the merger and has recommended that shareholders vote in favour of
the transaction. Espial has received written consent to the transaction from
certain major shareholders, representing 53% of the outstanding common shares
of Espial. Subject to regulatory approvals and satisfaction of other
conditions of closing, the proposed transaction is expected to close on or
about July 9, 2008. Upon completion of the acquisition, Espial will have seven
directors, six of whom will be the current directors of Espial, and one of
whom will be a nominee of the shareholders of Kasenna.
    Genuity Capital Markets & GMP Securities L.P. acted as financial advisors
to Espial on this transaction. ThinkPanmure LLC. acted as financial advisor to
Kasenna.

    About Espial

    Espial provides IPTV middleware and applications that enable superior
quality of experience, fast application performance, carrier-grade
scalability, and open extensibility, all at a lower total cost of ownership.
Espial's Evo(R) IPTV Service Platform includes Evo Client, Evo Server, Evo
Browser, Evo BML Browser, Evo Future-Proof Framework(TM) (FPF), Evo
SkinTones(TM) and applications such as Electronic Program Guide, Video on
Demand, Digital Video Recorder, Content Portal, Games, and Triple Play.

    About Kasenna

    As a market leader in IP video delivery, the company has focused on open
standards and an intelligent management infrastructure which allow service
providers, enterprises, and other organizations to build commercial-grade IP
video networks that support new and emerging video services. Kasenna offers
network operators a turnkey source of IP video infrastructure and applications
for video services. Kasenna's patented software technology has been proven
with thousands of successful telco, cable, and enterprise deployments
worldwide. Kasenna is headquartered in Sunnyvale, California. For more
information please visit the Kasenna website, www.kasenna.com.

    Forward Looking Statements

    This press release contains information that is forward looking
information with respect to Espial within the meaning of Section 138.4(9) of
the Ontario Securities Act (forward looking statements) and other applicable
securities laws. In some cases, forward-looking information can be identified
by the use of terms such as "may", "will", "should", "expect", "plan",
"anticipate", "believe", "intend", "estimate", "predict", "potential",
"continue" or the negative of theses terms or other similar expressions
concerning matters that are not historical facts. In particular, statements
about the proposed acquisition of Kasenna by Espial, including the expected
timetable for completing the transaction, the receipt of shareholder and
regulatory approvals, benefits and synergies of the transaction, future
opportunities for the combined company and products and any other statements
regarding Espial's and Kasenna's future expectations, beliefs, goals or
prospects are or involve forward-looking information.
    Forward-looking information is based on certain factors and assumptions.
While the company considers these assumptions to be reasonable based on
information currently available to it, they may prove to be incorrect.
Forward-looking information, by its nature necessarily involves risks and
uncertainties, including the parties' ability to consummate the transaction,
the conditions to the completion of the transaction, including the receipt of
shareholder approval or the regulatory approvals required for the transaction
may not be obtained on the terms expected or on the anticipated schedule.
Additional risks and uncertainties affecting Espial can be found in Espial's
Annual Report for the fiscal year ended December 31, 2007 and in its most
recent quarterly report filed on SEDAR at www.sedar.com, and as may be set out
in Espial's management proxy circular in respect of the proposed transaction
to be made available, once filed, on SEDAR at www.sedar.com. If any of these
risks or uncertainties were to materialize, or if the factors and assumptions
underlying the forward-looking information were to prove incorrect, actual
results could vary materially from those that are expressed or implied by the
forward-looking information contained herein. Espial assumes no obligation to
update or revise any forward looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements that speak only as of the
date hereof.
    %SEDAR: 00025301E




For further information:

For further information: from financial press or analysts: Carl Smith,
Chief Financial Officer, Espial Group Inc., (613) 230-4770, csmith@espial.com;
Kirk Edwardson, Director, Marketing, Espial Group Inc., (613) 230-4770 x1145,
kedwardson@espial.com

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Espial Group

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