Espial Signs Definitive Agreement to Acquire Kasenna

Creates a market leading TV software company

OTTAWA, Ontario — Espial® 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 3 rd 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.