Placing/Notice of EGM

Zoo Digital Group PLC
08 May 2003


Zoo Digital Group plc ('Zoo Digital' or 'the Company')

Placing of New Ordinary Shares and Notice of Extraordinary General Meeting 
('EGM')


Placing of up to 60,000,000 new ordinary shares of 0.2p each of the Company at a
price of  2.5p per share with new institutional investors and Amendments to the
                           Share Option Schemes

Attached to this announcement are extracts from the circular which sets out the
background to the proposals and further details on them.

Copies of the circular, including the Notice of EGM, will be posted to
shareholders today, and are available from the Company's Nominated Adviser and
Broker, Noble & Company Limited, 76 George Street, Edinburgh, EH2 3BU, free of
charge, for a period of one month.


For further information please contact:

Ian Stewart, Chief Executive, Zoo Digital Group plc          0114 241 3700

Robert Deri, Finance Director, Zoo Digital Group plc         0114 241 3700

John Llewellyn-Lloyd, Noble & Company Limited                0207 367 5600


The following text is an extract from the circular that has today been
despatched to shareholders:


Introduction

Your Board today announced proposals for a capital raising to provide the
Company with additional funds to continue the development of its business. The
Company is seeking to raise approximately £1.5 million gross as set out herein.
This is to be effected by means of a placing with new institutional investors of
60,000,000 new ordinary shares of 0.2p each in the capital of the Company ('New
Ordinary Shares'') at an issue price of 2.5p per New Ordinary Share ('the
Placing'').  As at today's date, placing commitments have been received from
investors amounting to £1.15 million, representing 46,000,000 new ordinary
shares.

The Placing is conditional upon the passing of a resolution by the Company's
shareholders at an extraordinary general meeting ('EGM'') approving the Placing,
authorising the allotment of shares and approving the disapplication of
pre-emption rights ('the Placing Resolution''), and admission ('Admission'') of
the New Ordinary Shares to the Alternative Investment Market of the London Stock
Exchange ('AIM''). The purpose of this document is to provide you with
information about the Placing and explain why your Board considers the Placing
to be in the best interests of the Company. Application will be made to the
London Stock Exchange for the New Ordinary Shares to be admitted to trading on
AIM. It is expected that, conditional upon the passing of the Placing Resolution
at the EGM, dealings in the New Ordinary Shares will commence on 9 June 2003.
The New Ordinary Shares will rank pari passu with the existing ordinary shares
in the Company. Notice of the EGM to be held at 10 a.m. on 2 June 2003 at the
Company's offices at Parkhead House, 26 Carver Street, Sheffield, S1 4FS, at
which the resolutions to enable the Placing to take place will be proposed, is
set out on page 6 of this document.

The directors of the Company ('the Directors'') whose names appear above, accept
responsibility for the information contained in this document. To the best of
the knowledge and belief of the Directors (who have taken all reasonable care to
ensure that such is the case), the information contained in this document is in
accordance with the facts and does not omit anything likely to affect the import
of such information.


Background to and reasons for the Placing

The Company specialises in the development and publishing of interactive
entertainment for various digital platforms including DVD, PS2, Game Boy
Advance, PCs, public consoles and fixed Internet.  In addition, the Company has
also developed a technology called DVD Extra which enables complex interactive
content to be developed for standard DVD players.

The Company was admitted to trading on AIM in 2000, as Kazoo3D plc and
subsequently merged with The ZOO Media Corporation Limited in May 2001, before
changing its name to Zoo Digital Group PLC. It has recently augmented its place
in the videogames industry with the acquisition of publisher Digital Worldwide
Limited (now ZOO Digital Publishing Limited).

The Directors believe that there is an opportunity to raise funds from a small
number of institutional investors at the present time, and wish to avail the
Company of this funding. Your Board has decided to effect the fundraising by way
of a placing following a limited marketing exercise, rather than offering all
shareholders the opportunity to acquire shares in an offer as the costs, and,
more particularly, the time taken to produce a prospectus may adversely affect
the Company's ability to raise the required funds. In addition, given the
current shareholder structure, in which the Directors hold over 44 per cent. of
the share capital, the take-up in any pre-emptive offer would, in all
likelihood, be relatively low.


Use of funds


The funds raised under the Placing will be used:

  • to develop and exploit the Company's DVD Extra technology;
  • to fully exploit titles and intellectual property already acquired and
    developed;
  • to produce intellectual property on other platforms; and
  • to acquire title and licensing rights.

It is envisaged that the funds raised will be allocated 45 per cent as to the
exploitation of the DVD Extra Technology, a third as to the production of
intellectual property on other platforms and the remainder to the acquisition of
rights.


Licensing Agreement with Vivendi Universal Corporation

On 7 May 2003, the Company announced that it had concluded negotiations for an
exclusive licensing agreement with Universal Pictures UK, a wholly owned
subsidiary of the Vivendi- Universal Corporation, to create products based on
the TV show 'Who Wants To Be A Millionaire?' using its DVD-Extra authoring
system.  The agreement is an exclusive seven year contract covering three
European territories: France, United Kingdom and Italy. The titles produced will
be in an interactive DVD format featuring actual footage of the respective
nation's TV host and audience.  The French and UK titles will be released in the
fourth quarter of 2003 and the Italian version in 2004.


Working capital

The Company is of the opinion having made due and careful enquiry that, on the
basis that the Placing will raise approximately £1.5 million gross, and taking
into account existing facilities available to the Company, the Company will have
sufficient working capital for its present requirements, that is for at least 12
months from Admission of the New Ordinary Shares.


Extraordinary General Meeting

The shareholder circular includes a notice convening the EGM of the Company to
be held at the Company's offices at Parkhead House, 26 Carver Street, Sheffield,
S1 4FS at 10 a.m. on 2 June 2003, at which the Resolutions set out in such
notice ('the Resolutions') will be proposed.


Recommendation

The Directors consider the approval of all the Resolutions, including the
Placing Resolution upon which the Placing is conditional, to be in the best
interests of the Company's shareholders as a whole.

Your Directors unanimously recommend you vote in favour of the Resolutions, as
they have irrevocably undertaken to do in respect of their own beneficial
holdings amounting to in aggregate 70,881,006 Ordinary Shares, representing
approximately 44.93 per cent. of the current issued share capital of the
Company.

END


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