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Abacast Proposes Business Combination With AllDigital Holdings, Inc.

Proposed Combination Believed to Offer the Most Value for Both Abacast and AllDigital Holdings Shareholders

VANCOUVER, WA -- (Marketwired) -- 01/12/14 -- The following is a transcript of a letter sent from the Abacast Board of Directors to the AllDigital Holdings, Inc. Board of Directors:

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Abacast, Inc. ("Abacast") to propose a business combination of Abacast and AllDigital Holdings, Inc. ("AllDigital"). We believe that a combination with Abacast will position the combined company for greater long-term success as a part of a more comprehensive digital media platform, resulting in greater value and services to your customers. We also believe it will provide a much more realistic path to maximize value for your shareholders versus AllDigital continuing to operate on a standalone basis in light of your status and trajectory today.

Abacast Update

As at least some members of the Board are already well aware, Abacast offers a cloud-based software platform and services to monetize digital media. Our platform now provides an end-to-end monetization ecosystem, enabling a marketplace of advertising inventory and advertising dollars between and among advertisers, broadcasters, advertising networks, and agencies (the "Clarity Marketplace"). 2013 marked a number of important milestones for Abacast as we began to realize accelerated growth in the Clarity Marketplace, completed the transition from and disposal of certain legacy assets and operations, and truly began to focus our efforts on our platform and core audio monetization business.

Key metrics and other information directly relevant to our business in 2013 are as follows: 25%+ total revenue growth; 200+ customers; 90%+ recurring revenue; 70%+ gross margin; cash flow breakeven; Clarity Marketplace in year 2013 (i.e., 1Q13-4Q13) filled ad impression and gross ad revenue growth 320%+ and 270%+, respectively (all amounts currently estimated and subject to audit as applicable). In light of the initial success of the Clarity Marketplace in 2013 (i.e., yearend traffic levels) and our growing base of recurring business, we are forecasting organic growth of approximately 50% in 2014. We also recently completed the transition to a Board of Directors comprised of a majority of outside Directors.

The primary reason Abacast is interested in a business combination with AllDigital is because of our plan to expand our existing monetization platform to include video, leveraging the capabilities and services offered by AllDigital Cloud. Accustream Media estimates that the online video advertising market represented $10.4 billion in 2013, with spending expected to grow to $16.8 billion by 2015. Our monetization platform was architected to support the expansion into video, however, such expansion involves development requirements around certain video workflow capabilities that we believe are available in AllDigital Cloud. In addition, we are receiving a growing number of inquiries from our existing customers for video workflow, streaming, and mobile application capabilities, each a part of your core business, and further confirming the value proposition of a business combination with AllDigital.

AllDigital Today

While Abacast is extremely interested in a business combination with AllDigital, we must emphasize that time is of the essence. We are increasingly concerned about recent developments and an overall continued lack of market penetration and business progress at AllDigital. A few examples according to your public filings, LinkedIn, and other publicly available information include:

  • 15% revenue growth from 2011-2012.
  • Over the past 24 months, 80% of your revenue remains concentrated with 3-4 customers.
  • Your gross margin has remained at 40% since 2011.
  • Recent departures of multiple personnel, including your COO & CFO and CTO.
  • There has been no announcement about a replacement for your CTO for almost two months.
  • Who owns and is actively working the day-to-day development of your AllDigital Cloud platform?
  • Recent claims of breach, damages, reserved rights, etc. from the failed Broadcast Internat'l merger.
  • AllDigital's Board remains comprised of only one outside Director and three executive insiders.

We believe that these recent developments and overall continued lack of market penetration and business progress are damaging to the interests of AllDigital's shareholders. We strongly believe that these trends will likely freeze your stockholders out of any possibility of realizing AllDigital's long term potential. AllDigital's future is far from certain as a standalone company, and it is unlikely to be sustainable without an immediate business combination such as we are proposing with Abacast, or significant and immediate investment.

Our Proposal

Under our proposal, AllDigital would acquire all of the outstanding shares of Abacast in a reverse merger such that AllDigital would own 38% and Abacast would own 62% of the common stock of the combined company, excluding options and warrants. Per share consideration, exchange ratios, option pools, etc. will be determined early in the due diligence process.

Given AllDigital's status today based on publicly available information and that your stock is highly illiquid, we believe our proposal represents a significant premium relative to AllDigital's intrinsic value and will receive the support of a majority of AllDigital's independent shareholders. By whatever financial measure you use -- EBITDA, free cash flow, or operating cash flow, this proposal represents a compelling value realization event for all of AllDigital's shareholders. It also represents a significant premium to where AllDigital would likely trade on a standalone basis if there was liquidity in your stock.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain confirmatory due diligence, including diligence calls to AllDigital's few customers that represent 80% of your revenue. It is also subject to Abacast receiving management control of the combined company, the negotiation of severance payouts to certain executive officers, the execution of releases from liability in light of multiple SEC filings alleging breaches, damages, reserved rights, etc. associated with the failed Broadcast International merger. In addition, because AllDigital would be acquiring the outstanding stock of Abacast, we would provide AllDigital the opportunity to conduct appropriate limited due diligence with respect to Abacast.

The closing of the proposed transaction is conditioned on the availability of equity financing for go forward operating capital for the combined company.

Moving Forward

We are prepared to deliver a draft merger agreement to you, meet with you, and begin discussions immediately, given time is of the essence. Due to AllDigital's status today and the value represented by our proposal, we expect you to engage in a full and immediate review of our proposal, and believe it is appropriate to receive a response on or before January 17th, 2014. Depending on the nature and timing of your response, Abacast reserves the right to call a special meeting of the AllDigital shareholders, and pursue any other steps necessary to ensure that your shareholders are provided with the opportunity to realize the value inherent in our proposal. In the interim, we would strongly caution you against adopting any precautionary measures to try to control the outcome of what's best for AllDigital's shareholders.

In light of the significance of this proposal to you, AllDigital's shareholders, and Abacast's shareholders, as well as the potential for selective disclosure, our intention is to publicly release the text of this letter immediately.

We believe this proposal represents a unique opportunity to create significant value for your shareholders, enhance your value proposition and service offering to customers, and benefit your employees. We hope that you share our enthusiasm and look forward to hearing from you on or before January 17th, 2014.

Sincerely,

Rob Green
Chief Executive Officer

Forward-Looking Statements
This letter contains forward-looking statements, which include any predictions, projections or other statements about future events based on past events, current expectations, and assumptions that are subject to risks and uncertainties. The potential risks and uncertainties include, among others, that the expected financial and other benefits from the transaction may not be realized, including because of: our inability to close the transaction, including expressly Abacast potentially revoking or modifying its proposal based on the required due diligence referenced herein; the response to the proposed acquisition by the customers, employees, and partners of AllDigital's or Abacast's business; the extent to which we achieve anticipated operating efficiencies and cost savings, and anticipated video monetization targets; our ability to penetrate the advertising video monetization business; audited results differing materially from estimates referenced herein; the inability to achieve the referenced and other material agreement terms referenced herein; unanticipated restructuring expenses; any restrictions or limitations imposed by regulatory authorities; the impact on Abacast and AllDigital management and organizational changes resulting from the proposed business combination; the ability to retain key AllDigital personnel; our effectiveness in integrating AllDigital with Abacast's business; risks related to AllDigital's business described in their filings with the Securities and Exchange Commission ("SEC"), including their Forms 10-K and 10-Q; and our ability to realize our broader strategic and operating objectives. Actual results may differ materially from the forward-looking statements because of these and other risk and uncertainties of our business.

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