Disposal

Zest Group PLC
28 January 2008

Embargoed until 7.30am


28 January 2008





                                 Zest Group Plc
                           ('Zest' or 'the Company')

               Proposed Disposal of Greensleeves Records Limited

                                      And

                           Notice of General Meeting



Zest Group plc announces today that on 25 January 2008 it entered into an
agreement, conditional, amongst other things, on approval of the Resolution, for
the disposal by the Company of the Greensleeves Group to VP Records (UK)
Limited.



The following is extracted from the Circular of the Company which will be posted
to Shareholders today.  The purpose of the Circular is to provide details of the
Proposal, explain why the Zest Board considers the Proposal to be in the best
interests of the Company and its Shareholders, to seek the approval of
Shareholders for the Proposal at the General Meeting and to recommend that
Shareholders vote in favour of the Resolution which is necessary to approve and
to implement the Proposal.



Defined terms used in this announcement are as  set out below.



Introduction

The consideration for the Disposal is £3,100,000 in cash. The Share Sale
Agreement provides for the payment of the consideration to the Company upon
Completion less £100,000, the payment of which is to be deferred, as described
below.



Under the AIM Rules, the Disposal is classified as a disposal resulting in a
fundamental change of business of the Company. The Disposal is, therefore,
conditional on the consent of Shareholders being given in a general meeting of
the Company.



A General Meeting is being convened for 10.00 a.m. on 13 February 2008 to be
held at the offices of Marriott Harrison, Staple Court, 11 Staple Inn Buildings,
London WC1V 7HQ at which the Resolution will be proposed.



The Disposal

Greensleeves is an independent record company and music publisher specialising
in reggae music. Greensleeves is based in Isleworth, Middlesex and also has a
promotions office in New York (which will be closing at the end of the month).
Greensleeves operates its business activities in the United States of America
through Greensleeves USA and manages its publishing activities through
Greensleeves Publishing. Greensleeves has an established presence in a number of
reggae markets in various countries throughout the world and, in particular, the
UK, the USA, Japan, France, Germany, Canada and Scandinavia. Greensleeves has
been one of the companies at the forefront of the constantly evolving reggae
genre of music and in the 1990s was instrumental in developing the new 'ragga'
style (commonly known in the USA as 'dancehall') which remains the dominant
style of reggae music. Greensleeves has an extensive reggae back catalogue
dating from the 1980s onwards to the present day.



The Greensleeves Group was acquired on 31 March 2006 by the Company for a
consideration of £3,250,000, comprising of a cash consideration of £3,000,000
and the issue of 8,333,334 Ordinary Shares which were issued at 3 pence per
share. On 19 June 2007, the Company announced that it had reached a settlement
with the vendors of the Greensleeves Group in relation to the breach of certain
specified warranties given at the time of the acquisition. The total settlement
for these breaches was £455,687.



Greensleeves occupies approximately 6,000 square feet of offices and warehousing
at Unit 14, Metro Centre, St John's Road, Isleworth, Middlesex TW7 6NJ on a
freehold basis. The freehold was acquired at the time of the original
acquisition of Greensleeves for £663,000 by Zest and will, together with a
related loan of approximately £419,000, be included as part of the net assets of
Greensleeves at Disposal.



Reasons for the Disposal and use of proceeds

Since the acquisition of Greensleeves in March 2006, the Zest management team
has introduced a number of initiatives to seek to leverage the opportunities
within the Greensleeves business, including exploiting the existing catalogue
and expanding the distribution network in both non-digital and digital formats.
Unfortunately these initiatives have not produced the returns to Shareholders
that Zest was expecting.



The music industry is currently experiencing very difficult market conditions
against a background of considerable structural change. These difficult market
conditions have been particularly pronounced in the US retail market, the major
market for Greensleeves, which has seen the closure of a number of significant
retail outlets and, in those which remain, a trend towards seeking to restrict
space for genre music in favour of mainstream label releases and other product
lines such as video games and DVDs. Although digital sales have exceeded Zest's
expectations, they have not been sufficient to offset the shortfall in physical
retail sales. In addition, margins have been affected by exposure to exchange
rate volatility, which has seen the pound appreciate approximately 20 per cent.
against the dollar since Zest's acquisition of Greensleeves.



Following Completion, the proceeds from the Disposal will be used by Zest to
repay borrowings of approximately £1.8 million, settle outstanding creditors and
to provide additional working capital.





Principal Terms of the Share Sale Agreement

Under the terms of the Share Sale Agreement, the Company has conditionally
agreed to sell the entire issued share capital of Greensleeves to the Buyer. The
total aggregate consideration for the sale and purchase of the Greensleeves
shares will be £3,100,000 in cash which will be paid at Completion to Zest, less
the Deferred Consideration. In addition intra-group debt of approximately
£331,000, due to Zest, will be written off by Zest.



The Company has also given certain warranties and indemnities to the Buyer in
relation to the business and affairs of the Greensleeves Group, which will be
subject to a cap of £1,000,000. The liability of the Company for any breach of
the warranties and indemnities (except in respect of those relating to taxation)
will expire if notice of a claim is not given to the Company within 12 months of
Completion. The Company will also enter into certain restrictive covenants with
the Buyer. Those Directors on the board of the Greensleeves Group will also
resign their positions at Completion.



The Deferred Consideration will, upon Completion, be placed for a period of 12
months from Completion in a joint retention account to be operated by the
Company's solicitors and the Buyer's solicitors. The Deferred Consideration is
to be set aside to meet any claims that arise under the warranty and indemnity
provisions of the Share Sale Agreement. Subject to there having been no
deductions from the Deferred Consideration in accordance with the

agreement between the parties, the Deferred Consideration (or such amount as may
then remain in the joint retention account) will be paid to the Company on the
date 12 months after Completion.



A copy of the Share Sale Agreement will be available for inspection from the
date of this announcement up until the commencement of the General Meeting at
10.00 a.m. on 13 February 2008 at the offices of Marriott Harrison, Staple
Court, 11 Staple Inn Buildings, London WC1V 7QH. The Disposal is conditional on
the passing of the Resolution.



Director Bonus

Following Completion, Mr Steve Weltman, Chief Executive of Zest, will be
entitled to receive a bonus of £90,000 in consideration of his project
management of the transaction, but has agreed that from Completion his annual
salary will be reduced to £75,000.



Financial effects of the Disposal

In the year ended 30 September 2006, Greensleeves Group contributed all of the
Zest Group's turnover and gross profit of £1.4 million and £0.6 million
respectively. It also contributed £0.2 million of the Zest Group's £0.7 million
operating loss. At 30 September 2006 the Zest Group had net assets of £3.0
million including £3.6 million goodwill arising from the acquisition of
Greensleeves. Each of these figures is derived from the audited financial
statements of Zest Group for the period ended 30 September 2006.



In the six months to 31 March 2007, Greensleeves Group again contributed all of
the Zest Group's turnover and gross profit of £1.1 million and £0.5 million
respectively. It also contributed £0.2 million of the Zest Group's £0.4 million
operating loss. At 31 March 2007, the Zest Group had net assets of £2.5 million,
of which £3.5 million related to goodwill on Greensleeves. Each of these figures
is derived from the unaudited interim report of Zest Group for the six month
period ended 31 March 2007.



An unaudited pro-forma balance sheet as at 31 March 2007, showing for
illustrative purposes only, the impact on the Zest Group following the disposal
of Greensleeves, as if it had occurred on 31 March 2007, will be set out in Part
II of the Circular.



Since the acquisition of Greensleeves, the Zest Group has been loss making. In
addition, the Zest Group has also been faced with servicing the borrowings taken
out to finance the acquisition of Greensleeves. In the opinion of the Directors,
this is unsustainable. The proceeds from the Disposal will be sufficient to
repay borrowings, settle outstanding creditors and meet the expenses of the
transaction, estimated to be approximately £325,000, and

provide working capital for the future. If the Disposal does not proceed the
Zest Group will be obliged to raise further funding if it is to continue in its
current form.



The Zest Business following Completion

Following Completion the Board of Zest will comprise Richard Griffiths as
Executive Chairman, Steve Weltman as Chief Executive and John Crawley remaining
as a Non-executive Director. Marcus Lee and Grant Gadzig will step down as
Finance Director and Non-executive Director respectively on Completion.



Zest will retain and continue to seek to exploit the publishing and recording
rights arising from the following artists with whom it has contracted:



Tara Chinn

Recording on Tara's debut album 'Night Racing', produced and co-written by Tony
Fennell and mixed by Grammy award winning Hugh Padgham, was completed during
summer of 2007.



On 12 December 2007 Zest signed a physical and digital licence agreement with
leading Australian based independent music distributor Amphead to launch Tara's
album in Spring 2008 in Australia and New Zealand. The launch is being
co-ordinated with a promotional trip, live dates and a series of TV commercials
to act as springboard to launch her career and develop other markets in Asia and
to create momentum before launching the album in the European and US markets.



Nasio Fontaine

Nasio's latest album 'Universal Cry' was released in June 2006 through
Greensleeves and was supported with a three week tour of the east and west
coasts of the United States. In June 2007, Zest Group released a compilation
album under the Greensleeves label 'Rise Up' which incorporated tracks from
Nasio's first three albums and 'Universal Cry'. As at 30 September 2007, total
sales for both 'Universal Cry' and 'Rise Up' are in excess of 30,000 since their
launch.



Nasio has informed Zest that he is currently working on his next album which is
expected to be recorded and released sometime in 2008 and there are further
plans to re-release some of Nasio's earlier recordings during 2008.



Tony Fennell

A songwriter and record producer signed to Zest, Tony co-wrote 11 of the 13
songs on Tara Chinn's debut album 'Night Racing' which he is also producing.
Tony has informed Zest that he is currently writing the first album for former X
Factor contestant, Brenda Edwards, who is currently featuring in the West End
musical, Chicago. Tony is also hoping to produce Brenda's album.



Richard Griffiths

Chairman of Zest, Richard is also a songwriter signed to Zest and has recently
been writing with Tony Fennell for the Brenda Edwards album. In addition, both
Tony and Richard have informed Zest that they are writing for another female
artist (who cannot be named at this time for confidentiality reasons) and expect
to see their work featured on an album in the second half of 2008.



In addition to seeking to optimise the value of existing artists it is expected
the Zest Group will, where the opportunity arises, seek to add further rights by
signing new artists and songwriters.



General Meeting

The Proposal is subject to the passing of the Resolution by a majority vote of
the Shareholders. A General Meeting is being convened for 10.00 a.m. on 13
February 2008 to be held at the offices of Marriott Harrison, Staple Court, 11
Staple Inn Buildings, London WC1V 7QH, at which the Resolution will be proposed.
If the Resolution is not passed at the General Meeting, or at any adjournment of
it, then Completion of the Disposal will not occur.



Recommendation

The Directors, having consulted with WH Ireland Limited, the Company's nominated
adviser, which has taken into account the Directors' commercial assessment of
the position of the Company, consider that the terms of the Proposal are fair
and reasonable and in the best interests of the Company and of Shareholders.
Accordingly, the Directors will unanimously recommend Shareholders to vote in
favour of the Resolution as they intend to do or procure to be done in respect
of their own beneficial holdings of 11,666,668 Ordinary Shares, representing
approximately 6.72 per cent. of the issued share capital of the Company.







Enquiries:


Steve Weltman, Chief Executive                             [phone]

John Bick                                                  [phone]

Tim Cofman/Nicola Rayner WH Ireland                        [phone]



Definitions


'Act'                                means the Companies Act 1985 including any statutory modification or
                                     re-enactment thereof for the time being in force and, where relevant, any
                                     provisions of the Companies Act 2006
'AIM'                                the market of that name operated by London Stock Exchange plc
'AIM Rules'                          the AIM Rules for Companies governing the admission to and the operation of
                                     AIM published by London Stock Exchange plc as amended from time to time
'the Board' or 'the Directors'       the directors of the Company
'Buyer' or 'VP'                      VP Records (UK) Limited
'Circular'                           the circular to Shareholders in relation to the Proposal to be despatched
                                     today
'Company' or 'Zest'                  Zest Group plc
'Completion'                         completion of the Share Sale Agreement and the purchase of the Sale Shares
                                     by the Buyer
'Completion Date'                    the date of Completion of the Disposal, expected to occur on
                                     14 February 2008
'Consideration'                      £3,100,000 in aggregate in cash
'Deferred Consideration'             £100,000 in cash
'Disposal'                           the disposal of the Greensleeves Group on the terms of the Share Sale
                                     Agreement
'General Meeting'                    the general meeting of the Company, being convened for 10.00 a.m. on 13
                                     February 2008, and any adjournment thereof, notice of which  will be set
                                     out at the end of the Circular
'Greensleeves'                       Greensleeves Records Limited, company no. 871107, a company incorporated in
                                     England and Wales
'Greensleeves Group'                 Greensleeves and the Subsidiaries
'Greensleeves Publishing'            Greensleeves Publishing Limited, company no. 887475, a company incorporated
                                     in England and Wales
'Greensleeves Shares'                ordinary shares of £1.00 each in the share capital of Greensleeves
'Greensleeves USA'                   Greensleeves Records (USA) Limited, a company incorporated under the laws
                                     of the state of New York, United States of America
'the Group' or 'Zest Group'          Zest Group plc and its subsidiaries
'Ordinary Shares'                    ordinary shares of 0.25p each in the capital of the Company
'Property'                           the freehold property located at Unit 14, Metro Centre, St John's Road,
                                     Isleworth, Middlesex TW7 6NJ
'Proposal'                           the Disposal
'Resolution'                         the resolution to approve the Disposal to be proposed at the General
                                     Meeting, details of which will be set out in the notice of General Meeting
                                     at the end of the Circular
'Sale Shares'                        17,250 Greensleeves Shares, being the entire issued share capital of
                                     Greensleeves
'Share Sale Agreement'               the conditional share sale agreement entered into between the
                                     Company and the Buyer on 25 January 2008
'Shareholder' or 'Shareholders'      the holder or holders of Ordinary Shares
'Subsidiaries'                       Greensleeves USA and Greensleeves Publishing
'WH Ireland'                         WH Ireland Limited, broker and nominated adviser to the
                                     Company




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