KIT digital Receives Revised Offer from Group Led by Former Chair

Attention: Bill Russell, Chairman Dear KIT digital Board of Directors, On November 23, 2012, we sent you a detailed letter describing our disappointment in the performance of KIT digital Inc.'s

current management team in both administering the business and capitalizing on strategic opportunities that could have generated significant value for the Company's shareholders (the "Initial Letter").  In our Initial Letter, we also outlined our own turnaround plan for KITD and urged you to immediately engage with us regarding a provisional offer to acquire the Company. Since sending the Initial Letter additional information has come to our attention that paints an even more troubling state of affairs within the Company than we originally believed. We believe management is confused at the current crossroads and that the Company is severely limited in its options—a situation that will likely deteriorate with time. Your demonstrated lack of urgency regarding alternatives to create value for shareholders is particularly unacceptable given that: o KITD has a very low cash balance (less than $7 million of unrestricted cash available to fund operating activities) and we believe the Company is operating at a significant cash burn in the near-term — providing an extremely short runway to solve its manifold issues; o The Company requires additional capital but the recent, dramatic downward share price movement and lack of audited financials will make it very difficult to raise additional financing at anything but terribly dilutive terms–in fact we believe the Company failed in a desperate attempt to close a financing even prior to its announcement that it was restating historical financials and delaying third quarter results; o The Company appears to have misrepresented the reason for the delayed release of its 10-Q for the period ending September 30, 2012, and inappropriately utilized the filing extension granted to companies due to Hurricane Sandy in an attempt to obfuscate the underlying liquidity issues and accounting issues afflicting the Company; o KITD is in material, technical default under its senior secured note issued to Western Technology Investment ("WTI") due to the Company's restatement of its historical financials, enabling WTI to pursue all rights available to it under the secured note agreement to remedy this default—including foreclosure on all of KITD's assets and intellectual property globally; o Based on the current price of KITD common stock, the terms of the Share Purchase Agreement entered into between KITD and Hyro Limited ("Hyro") on April 21, 2012 obligate the Company to issue nearly twenty (20) million new shares to Hyro shareholders within the next 30 days; and o KITD's current share price and its lack of audited financials puts the Company at serious risk of running afoul of the NASDAQ continued listing requirements. We have also received numerous unsolicited accounts of announcements and comments made by KITD management last week to employees, vendors and customers that call into question management's grasp of the Company's challenges or their ability to navigate the Company out of its dire straits. We believe these communications included claims that (a) acquisition offers received by the Company in the past have been too low to be considered; (b) the Company will pursue a standalone path and will not entertain future acquisition offers; (c) the Company has not and will not consider filing for bankruptcy protection; and (d) the Company has enough cash to weather this period and will be breakeven by January or February. Although we appreciate management's desire to calm the Company's various constituencies, reckless statements like these undermine credibility, encourage complacency and prevent the Company from successfully addressing its myriad challenges. More importantly, we are aware of numerous strategic and financial parties interested in the Company that have been ignored, rebuffed and stonewalled in recent months and weeks by the Company and its financial advisors, or have been paralyzed for months by standstill provisions included in the form confidentiality agreement propagated by the Company as a requisite for entering into any acquisition dialogue. If any of the foregoing conclusions are based on incorrect information, please openly correct our understanding.   We fear that KITD's current structural, commercial and liquidity challenges will worsen and compound—leaving the Company and its shareholders with limited, if any, options to preserve or generate value for shareholders. As such, we urge you to take immediate action to the benefit of shareholders and: o Execute on the operational turnaround plan articulated in our Initial Letter; o Clearly explain your balance sheet fortification strategy to KITD shareholders, specifically how you intend to avoid a foreclosure by WTI or a similar action taken by a replacement, "last resort" lender; o Conduct an open and transparent auction of the business (without discriminating against any prospective bidders) with a reasonable minimum bid price; and o Release any party that is currently subject to a standstill provision from any restrictions on participating within or pursuing a transaction to acquire the Company. With respect to our provisional buy-out offer from the Initial Letter, neither you nor your advisors have engaged with us directly. However, several days after you received our Initial Letter, we were contacted by an executive of JEC Capital (the New York hedge fund that currently controls the Company and for which current KITD CEO Peter Heiland serves as Managing Director), who stated that you were not taking our offer seriously because you were unsure of our financial backing, and encouraged us to submit an offer to the board of KITD using a "customary offer letter format".  While we believe this is a delaying tactic—since we used a standard, conditional offer structure and you are aware of at least one of our large private equity partners—we have nevertheless complied with this request. Earlier today, December 5, 2012, we separately submitted a revised, non-binding offer letter in a customary format to the Company's board of directors, as well as a draft confidentiality agreement that we would be prepared to sign in order to pursue a potential transaction. As part of this documentation, we said we would expect to be able to reach a definitive and binding acquisition agreement within thirty (30) days of being granted due diligence access. Given the current price of KITD stock, compounded by the Company's strategic drift and worsening liquidity and capital structure issues, we have lowered our indicative offer to acquire the Company to a range of $1.35 -$1.70 per share—representing, at the midpoint of the range, a 112% premium to the $0.72 closing price of the Company's shares on Tuesday, December 4, 2012. Our offer is subject to due diligence, your release of certain parties from standstill agreements, and a mutually acceptable definitive agreement. We believe that time is of the essence and are prepared to immediately engage with the Company and its legal and financial advisors regarding this transaction. In the absence of a response to this letter by 5pm ET on Wednesday, December 12, 2012 that generates demonstrable progress towards a transaction, we will evaluate other options available to us—including, but not limited, to an offer extended directly to shareholders and/or alternative entry points into the Company's capital structure. We look forward to your timely response. Respectfully, Kaleil Isaza Tuzman On behalf of KIT Capital, Ltd. Contact: Jonathan Cutler JCUTLER MEDIA GROUP JC@jcutlermedia.com