Acquisition of Greensleeves

Zest Group PLC
07 March 2006

7 March 2006

                                 Zest Group Plc

              Proposed Acquisition of Greensleeves Records Limited

             Placing of  83,333,334 Ordinary Shares at 3p per share

                      Application for re-Admission to AIM



The Board of Zest announces today that the Company has conditionally agreed to
acquire the entire share capital of an established, independent record label and
music publisher which specialises in reggae music, Greensleeves Records Limited
('Greensleeves') for a consideration of £3.25 million comprising a cash payment
of £3,000,000 and the issue of 8,333,334 Ordinary Shares (valued at 3p per
share) conditional, inter alia, upon Admission. In addition, Greensleeves has
agreed to acquire the property currently occupied by Greensleeves in the UK for
a consideration of £662,500.  Acquisition of the Property is conditional upon
the acquisition of Greensleeves.

Greensleeves is based in Isleworth, Middlesex, and has a promotions office in
New York. The company has an established presence in a number of the specialist
reggae markets throughout the world and, in particular, the UK, the USA, Japan,
France, Germany, Benelux, Canada and Scandinavia.

The Acquisition will make Zest one of the largest independent reggae publishers
and record labels in Europe and the Directors believe that the Acquisition
should provide critical mass and enable the Company to achieve immediate
profitability.

The Zest management team intends to maximise Greensleeves' growth potential
through the development of a number of business areas as follows:

•         Greensleeves owns a significant number of album masters, of which
approximately 10 per cent. have not been released in CD format. The Company
intends to release the majority of these album masters in CD format as well as
making them available for electronic distribution.

•         Greensleeves has a significant number of album and single masters
which have not been released as compilation albums and the Directors intend to
expand that area of the business.

•         The Directors believe that there is a market for further mid-priced
albums, based on Greensleeves' existing catalogue, which it intends to address.

•         Currently Greensleeves produces a number of compilations on vinyl, a
lucrative area of the reggae and dance markets, and the Directors intend to
increase production of vinyl compilations.

•         The Directors believe that Greensleeves' CDs can be manufactured at
lower cost than currently being achieved.

•         During 2005, Greensleeves concluded a ring tones deal in Japan and the
Directors intend to pursue similar deals in other territories.

•         Greensleeves has concluded agreements with iTunes and Napster to
distribute catalogues electronically.


The Acquisition and the additional working capital requirement are being funded
by a placing of 83,333,334 Ordinary Shares at 3p and bank financing.


Commenting, Steve Weltman, Chief  Executive of Zest Group plc, said:

'Greensleeves is a very well respected player in the reggae market, with a
strong back catalogue of albums and singles.  It is currently releasing over 15
albums a year and we believe that  it will provide a profitable addition to our
existing operation and an excellent operational base on which we can build with
further acquisitions.'


Enquiries:


Richard Griffiths, Chairman         Zest Group plc   tel: [phone] 
                                                          (on 7 March 2006)

Steve Weltman, Chief Executive      Zest Group plc        0870 389 6999 
                                                          (after 7 March)

John Bick                                            tel: [phone]




Acquisition and Placing Statistics

Number of existing Ordinary Shares prior to the 
Placing and Acquisition                                               81,952,382

Number of Placing Shares being issued under the Placing               83,333,334

Placing Price                                                                 3p

Number of Consideration Shares being issued under the Acquisition      8,333,334

Percentage of Enlarged Share Capital represented 
by the Consideration Shares                                                 4.8%

Number of Ordinary Shares in issue immediately following Admission   173,619,050

Percentage of the Enlarged Share Capital of the Company
represented by the Placing Shares upon Admission                             48%

Gross proceeds of the Placing                                         £2,500,000

Estimated net proceeds of the Placing                                 £1,850,000



Expected Timetable

Admission Document publication date                                      7 March

Last time and date for receipt of Forms of Proxy              9.00am on 28 March

Extraordinary General Meeting                                 9.00am on 30 March

Completion date of the Acquisition                                      31 March

Admission effective and dealing in Ordinary Shares
(including New Ordinary Shares) expected to commence on AIM             31 March

Expected date for CREST accounts to be credited 
(in respect of the Placing Shares)                                      31 March

Expected date for posting of the share certificates
for the Placing Shares (where applicable)                                7 April



Information on Greensleeves Records Limited

Greensleeves is an independent record company and music publisher specialising
in reggae music. The company is based in Isleworth, Middlesex, and has a
promotions office in New York. The company has an established presence in a
number of the specialist reggae markets throughout the world and, in particular,
the UK, the USA, Japan, France, Germany, Benelux, Canada and Scandinavia.


Greensleeves was founded in 1975 and the Greensleeves record label was launched
in 1977. For over 27 years Greensleeves has been one of the companies at the
forefront of the constantly evolving reggae genre of music. Initially 'roots'
reggae was its main focus, with artists such as Dr Alimantado and Augustus Pablo
being closely associated with the label. In the early 1980s the label helped to
pioneer the release of 'dancehall' reggae and has many of the albums from this
era in its catalogue. Later in the 1980s, Greensleeves launched the first record
of 'digital' reggae emanating from Jamaica, Wayne Smith's 'Under Me Sleng Teng',
and released many digital recordings over the following years including Gregory
Isaacs' 'Rumours'. During the 1990s Greensleeves was one of the companies at the
forefront of the new 'ragga' style (called 'dancehall' in the USA) which is
currently the dominant style of reggae.  Other labels have been launched by
Greensleeves including the UK Bubblers label in the mid-1980s to cater for DJs
in the UK. In the 1980s and 1990s the company had commercial relationships with
several US reggae labels, particularly Ras, Shanachie and Heartbeat, and
licensed and/or imported releases from these labels.  However, the company now
concentrates on its own label.


Greensleeves has a comprehensive reggae back catalogue from the 1980s onwards.
With a back catalogue of approximately 400 albums and 900 singles on its label,
Greensleeves is currently releasing between 15 and 20 new albums per year and
intends to continue its re-issue programme. Greensleeves has established a
promotions office in New York to handle the growing reggae market in the USA.
The Directors believe the company is now positioned to exploit potential future
growth.


Greensleeves Business Activities


Recording

Record Label

The primary focus for the label is to remain in close contact with the latest
trends and sounds of the Jamaican dancehalls, which are reflected closely in the
base reggae markets in Kingston, London and New York. As a result, Greensleeves
has well established links with many of the key producers on the reggae scene in
Jamaica.  Most of the music is initiated by independent producers who then
license the music to Greensleeves. From time to time Greensleeves signs artists
and producers exclusively. It currently has six artists and one producer under
contract, being:

  • Vybz Kartel
  • Macka Diamond
  • Fanton Mojah
  • Ward 21
  • Kid Kurrupt
  • Predator
  • Donovan 'Vendetta' Bennett (producer)

The CDs are manufactured in the UK by various companies, including Sonopress. In
the year to 30 September 2005, 69 per cent. of Greensleeves' turnover was
attributable to the record label.


Artists

Greensleeves has been able to identify artists and producers early in their
careers.  Shaggy, Beenie Man and Mr Vegas all had their first hits on the
Greensleeves label, and artists as varied as Barrington Levy, Yellowman, Black
Uhuru, Eek-A-Mouse, Scientist, Shabba Ranks, Sizzla and Bounty Killer each had
early albums on the label.


Greensleeves has succeeded in achieving commercial success on a number of
occasions including a number one in the UK Top Forty Chart with Shaggy's 'Oh
Carolina' in 1993. The company has had two further top twenty hits in the UK Top
Forty Charts in the last six years with Beenie Man's 'Who Am I? (Zim Zimma)'
which went into the top ten in March 1998 and Mr Vegas' 'Heads High' which went
to number 16 in November 1999.Greensleeves owns the master rights for Wayne
Wonder's 'No Letting Go' which was a hit on the VP/Atlantic Label, which reached
number 11 in the USA Billboard Chart and number three in the UK Top Forty Chart
in 2003. Greensleeves receives royalties earned by Lumidee's 'Never Leave You
(Uh Oh Uh Oh)', the Universal Label recording, which embodied a sample of a
master owned by it. This was an international success in 2003, reaching number
one in Germany, number two in the UK Top Forty Chart and number five in the USA.
  Greensleeves also owns the dance rhythm on which Nina Sky had a top ten UK hit
with 'Move Ya Body' in the USA and UK in 2004.


Album Series

The company has five compilation series:

•         the annual 'Biggest Ragga Dancehall Anthems'

•         the 'Greensleeves Sampler'

•         'Ragga Ragga Ragga'

•         'Greensleeves Rhythm Album' series

•         'Biggest Reggae One Drop Anthems


Distribution

Greensleeves has  distributors in the UK, the USA, Germany, France, Benelux,
Scandinavia, Canada, Japan, Italy, Australia, South Africa and the Caribbean.
In many territories, particularly the UK, the USA, France and Germany,
Greensleeves sells direct to specialist reggae outlets where these are not
covered by its main distributors. Sales are also made to the various UK based
export houses and to various digital downloading companies.


Publishing

Greensleeves currently has 29 writers under contract and owns or administers
over 18,000 reggae titles. Greensleeves owns musical copyrights through
publishing deals with songwriters and administers other publishers' catalogues
via sub-publishing deals. It also owns all or part of the copyrightS in
approximately 4,500 out of the 18,000 songs in its catalogue.


In 2004 one of Greensleeves' former writers, Stephen Marsden, won the coveted
ASCAP (American Society of Composers and Performers) Award for most performed
song of the year with the song 'Get Busy' as well as two further most performed
song awards for 'Never Leave You (Uh Oh Uh Oh)' and 'No Letting Go' which were
all written whilst under contract with Greensleeves.


In 2005 Greensleeves again won ASCAP awards with two more most performed song
awards for 'Hey Mama' written by Anthony Henry and for 'Get Busy'.


With a network of sub-publishers throughout the world, Greensleeves collects
publishing income worldwide.  Due to the increased interest in reggae in the
USA, its sub-publishing income has been growing steadily in recent years.


Popular Music Charts

Greensleeves has had a series of chart successes over the years with records
which entered the base reggae market, then achieved success in the broader
popular music market. Such chart successes achieved by Greensleeves (unless
otherwise stated) are as follows:


Date                  Position   Title and Artist

Record label and

publishing hits
March 1986            22         'Hello Darling' - Tippa Irie
May 1986              62         'Great Train Robbery' - Black Uhuru (Ras label)
July 1986             59         'Heartbeat' - Tippa Irie
February 1993         1          'Oh Carolina' - Shaggy
July 1993             46         'Soon Be Done' - Shaggy
August 1995           71         'Wrong or Right' - Sabre & Prezident Brown
March 1998            10         'Who Am I? (Zim Zimma)' - Beenie Man
November 1999         16         'Heads High' - Mr Vegas

Publishing hits
May 2003              4          'Get Busy' - Sean Paul (VP/Atlantic label)
August 2003           2          'Never Leave You (Uh Oh Uh Oh)' - Lumidee (Universal label)
July 2004             6          'Move Ya Body' - Nina Sky (Universal label)



Greensleeves Management

The Board is pleased to confirm that both Chris Sedgwick and Chris Cracknell
have agreed to remain involved with Greensleeves' business following Admission.


Christopher John Sedgwick

Chris formed Greensleeves in 1975. He and Chris Cracknell have been primarily
responsible for developing Greensleeves as a specialist independent record
company. He has entered into an agreement with Greensleeves whereby he will
continue as an employee of Greensleeves for six months from Admission, and will
then provide consultancy services for a further two year period.


Christopher Hugh Cracknell

Chris carries out negotiations and interaction with producers and artists on a
music level. Finding new artists and producers with potential is a major part of
his responsibility within Greensleeves. He has entered into an employment
contract with Greensleeves for one year following Admission.


Greensleeves Corporate Structure

Greensleeves Records Limited has two wholly owned subsidiaries, Greensleeves
Publishing Limited (dormant), incorporated in England and Wales under company
number 00887475, and Greensleeves Records (USA) Limited, incorporated in the
USA.


Lock In Agreements

Each of the Vendors and Chris Sedgwick has entered into an agreement not to
dispose of any interests in the securities of the Company within the two year
period following Admission without the Company's prior written consent, save in
certain circumstances, including in connection with a general or partial
takeover offer. Collectively, upon Admission, these Shareholders will control or
be interested in 4.8 per cent. of the Enlarged Share Capital.


The Directors and certain other shareholders entered into agreements at the time
of the Company's admission to AIM on 24 March 2005 not to dispose of any
interests in the securities of the Company within a period of 12 months
following 24 March 2005, or of any interests in the securities of the Company
acquired pursuant to the Second Fundraising within a period of 12 months from 5
September 2005, save in both cases subject to certain specific circumstances
permitted by the AIM Rules.


The Directors have also entered into agreements not to dispose of any interests
in the securities of the Company within a period of 12 months from Admission
without W.H. Ireland's prior written consent and save in certain specific
circumstances, including in connection with a general or partial takeover offer.
Collectively, upon Admission, the Directors will control or be interested in
8.04 per cent. of the Enlarged Share Capital.


Principal terms of the Agreement

Under the terms of the Acquisition Agreement, the Company has conditionally
agreed to acquire the entire issued share capital of Greensleeves and
Greensleeves has agreed to acquire the Property for an aggregate consideration
of £3,912,500 comprising £3,662,500 in cash and 8,333,334 Ordinary Shares,
valued at 3p per share.


The Acquisition Agreement is conditional, inter alia, on (i) the passing of the
Resolutions; (ii) the Facility and Property Loans becoming unconditionally
available for drawdown (save for any conditions relating, inter alia, to
completion of the Acquisition Agreement or Placing Agreement); (iii) allotment
of the Placing Shares; and (iv) Admission. The Consideration Shares will, on
Admission, rank in full for all dividends or other distributions hereafter
undeclared, made or paid on the ordinary share capital of the Company after
their date of issue and will rank pari passu in all other respects with all
other Ordinary Shares which will be in issue on Admission.


Funding

Funds will be provided by the Placing and by facilities from Coutts & Company.
The facility of £1.6 million (the 'Facility') and loan of £455,000 to
Greensleeves for the acquisition of the property (the 'Property Loan') are
provided at an interest rate of 3 per cent. per annum above LIBOR. The Facility,
which is conditional, inter alia, on Admission, is repayable over seven years,
is subject to customary events of default, and is to be secured on the assets of
the Enlarged Group. The Property Loan, which is also conditional, inter alia, on
Admission, is repayable over ten years, is also subject to customary events of
default and is to be secured on the Property.


Dividend Policy

The Directors anticipate that any earnings will, for the foreseeable future, be
retained by the Company for the development of the business of the Enlarged
Group and will not be distributed to shareholders as cash or other dividends.
The declaration and payment by the Company of dividends will, once the Enlarged
Group has achieved its development objectives, be dependent upon the Company's
results from operations and other factors deemed to be relevant at that time.


Details of the Placing

At the time of the Company's admission to AIM in March 2005, the Company
completed the placing of 19,333,333 Ordinary Shares at a price of 3p per share
('Original Placing'). It was a term of the Original Placing that each placee was
obliged to subscribe for additional Ordinary Shares in the Company, at 7p per
share, at anytime before 28 February 2006, but following notification by the
Company ('Second Fundraising'). On 5 September 2005 the Second Fundraising
shares were subscribed and fully paid, and raised £580,000 (before expenses) to
provide additional working capital for the Company.


The Company is issuing 83,333,334 New Ordinary Shares pursuant to the Placing at
3p per share (the 'Placing Price') to raise approximately £1,850,000 (net of
expenses). The Placing Shares will represent approximately 48 per cent. of the
Enlarged Share Capital of the Company and will be fully paid upon issue and will
rank pari passu in all respects with the existing Ordinary Shares and the
Consideration Shares. The funds raised in the Placing will be used to finance
the costs of the Proposals and to provide working capital for the Enlarged
Group. The Company and the Directors have entered into the Placing Agreement
with W.H. Ireland. The Placing is not being underwritten. The Placing Shares
have been conditionally placed with institutions and other investors. The
Placing is conditional, inter alia,  upon Admission taking place on 31 March
2006 (or other such later time and date as the Company and W.H. Ireland may
agree).


Extraordinary General Meeting

An Extraordinary General Meeting of the Company will be held at the offices of
Charles Russell LLP, 8-10 New Fetter Lane, London EC4A 1RS at 9.00 a.m. on 30
March 2006 for the purpose of considering and, if thought fit, passing the
following resolutions:


To approve the Acquisition

As the Acquisition constitutes a reverse takeover, Shareholder approval, as set
out in Resolution 1, is required under the AIM Rules.


The Acquisition Agreement is conditional, inter alia, upon the passing of the
Resolutions and therefore if they are not approved by the Shareholders, the
Acquisition will not be completed.


To authorise the Directors to allot shares

It is proposed to give the Directors authority to allot relevant securities up
to an aggregate nominal amount of £446,536. The authority will expire five years
after the date of the passing of this resolution. After the allotment of the
Consideration Shares and the Placing Shares, the Directors will have authority
to allot up to 86,947,620 Ordinary Shares representing approximately 50 per
cent. of the Enlarged Share Capital.


To disapply pre-emption rights

The provisions of section 89(1) of the Act, to the extent that they have not
been disapplied, confer on shareholders rights of pre-emption in respect of the
allotment of equity securities which are, or are to be, paid up in cash. It is
proposed that the provisions of section 89(1) of the Act will be disapplied in
respect of the issue of the Placing Shares and will be generally disapplied in
connection with a rights or other pre-emptive issue and any other issue of
equity securities for cash up to an aggregate nominal amount of £86,947.62
(representing approximately 20 per cent. of the Enlarged Share Capital). The
authority will expire on the date of the Annual General Meeting in 2007 or, if
earlier, the date 15 months after the date of the passing of this resolution.


Copies of the circular, which has been posted to shareholders today, are
available free of charge from the Company's registered office and at the offices
of W.H. Ireland Limited, 24 Bennetts Hill, Birmingham B2 5QP, during normal
business hours on any weekday (Saturdays and public holidays excepted) and shall
remain available for at least one month after Admission.


end.






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