Call for Removal of Russell A. Whitney from Board and CEO Position
and Request Board Representation to Unlock Significant Intrinsic
Value NEW YORK, July 2 /PRNewswire/ -- Hudson Street Capital and
Kingstown Capital Partners announced today that they sent a letter
dated July 2, 2007 to the independent Board members of Whitney
Information Network, Inc. (Pink Sheets: RUSS). The full text of the
letter follows: July 2, 2007 Independent Members of the Board of
Directors Whitney Information Network, Inc. 1612 Cape Coral Parkway
East Cape Coral, FL 33904 Attention: Frederick A. Cardin, Director
Chester R. Schwartz, Director cc: Russell A. Whitney, Chairman
& CEO Ronald A. Simon, Director & COO Stephen A. Cootey,
Prides Capital VIA FACSIMILE AND OVERNIGHT DELIVERY Gentlemen:
Hudson Street Capital Management LLC and Kingstown Capital Partners
LLC, respectively, manage funds that have an aggregate economic
interest equivalent to approximately 4.5% of the outstanding shares
of Whitney Information Network ("RUSS" or "the Company"). We are
writing to the independent directors to express our concern that
the RUSS Board of Directors, as currently configured, lacks
independence from Russell Whitney, Chairman of the Board, CEO, and
the Company's largest shareholder. We believe that other
shareholders' interests have been surrendered to the self-interests
and personal enrichment of Mr. Whitney, while shareholder value in
general has precipitously eroded. As such, we strongly urge the
independent directors to: First, remove Russell Whitney from the
Board of Directors and CEO position for cause based on a pattern of
blatant self-dealing that has enriched him at the expense of
Company shareholders as well as his refusal to cooperate with the
Special Committee's investigation (a detailed account of these
self- dealings and the obstruction is provided in Exhibit I).
Second, immediately elect two outside directors who are
representatives of significant shareholders of the Company to
create true independence on the Board and adequately protect
shareholder interests. To the extent that the current independent
directors do not act quickly and decisively on these suggestions,
we intend to take action in two parts. First, we will take action
to remove Russell Whitney from his above-stated positions at the
Company's next annual meeting of shareholders. As an aside, we note
that a definitive proxy has not been filed with the Securities and
Exchange Commission (the "SEC") and as such we do not believe that
the currently-scheduled meeting can go forward on this date. We
would view any attempt by the Company to proceed with the annual
meeting as scheduled as an attempt to disenfranchise its
shareholders. Second, we intend to request that Prides Capital
(cc'd on this letter) immediately add either a Prides Capital
representative or a Hudson Street/Kingstown representative to the
Board of Directors as per Prides Capital's contractual right. As
documented herein, the previous Prides Capital board seat was
occupied by Stephen A. Cootey, who resigned along with another
outside director, Anthony Petrelli, in March 2007, thereby making
the Prides Capital designee director position available. It is our
view, based on an informal polling of the Company's largest
institutional investors and certain Directors, that any such action
to increase independent representation on the Board of Directors
would be ardently supported. It is our belief that, once free of
Russell Whitney's self-dealing and unchecked influence, the Special
Committee could more expeditiously resolve the government
investigations that hang over the Company and hamper its operating
performance on many levels. In fact, the Company's Form 8-K dated
May 29, 2007 discloses that "The Department of Justice and/or the
SEC may view [Mr. Whitney's refusal to submit to an interview by
the Special Committee's consultant WilmerHale] as lack of
cooperation towards the Special Committee's efforts to determine
the facts in its internal investigation and prolong the SEC's
investigation and broaden the Department of Justice's
investigation." Mr. Whitney's removal from the Company along with
moving to resolve these legal matters and investigations would pave
the way for the Company to explore a host of value-maximizing
strategic alternatives. We believe any of these alternatives would
result in the creation of shareholder value in excess of $10 per
share. As such, we would encourage the newly constituted Board to
engage a qualified investment bank to review all strategic
alternatives that would include, in our opinion, the following
possibilities at a minimum: -- An immediate sale of non-core assets
that could result in net cash proceeds in excess of $6.00 per share
as detailed in Exhibit II. This process could be undertaken before
the government investigations are resolved and proceeds could be
immediately distributed to shareholders in the form of a dividend.
-- A restructuring of the Company under new leadership that
facilitates market-comparable operating margins. We believe that
the Company should at least be able to return to its previously
achieved 2005 level of 12% cash flow margins (approximately half
those of its competitors) once expenses are reduced. Applying the
midpoint of the historic free cash flow multiple range of
Investools during 2005-2006 when it was solely an investor
education company (7.5x) implies a value of $16.50 per RUSS share,
excluding the value of non-core asset sales. -- A sale or
separation of the real estate and financial markets education
business units that yields net cash proceeds in excess of $10 per
share, excluding the value of non-core asset sales. A more detailed
description of these alternatives and related valuation
calculations is provided in Exhibit III. It has also come to our
attention that Mr. Whitney had previous plans for a take-private
transaction during the second half of 2006, though he did not
immediately inform the Board of Directors of his intent. If Mr.
Whitney wants to continue to run the Company as a personal
enterprise, then we would suggest that he make an offer to take the
Company private at a price which reflects the intrinsic value of
the Company. Mr. Whitney could use the proceeds from the sale of
the Company's non-core assets to fund such a transaction. In light
of the steep decline of the stock price to $3.65, the closing price
of the shares on June 29, 2007, from over $10.00 as recently as
November 2006, we believe that all of RUSS' shareholders-including
Russell Whitney- would ultimately welcome progress towards any of
the above possible outcomes as opposed to the continued
deterioration of market value related to the current circumstances.
We believe the Company has tremendous business prospects and our
aim is to allow the Company's stockholders to benefit from these
prospects while enabling all of the Company's talented employees
and students to prosper. To this end, we look forward to a prompt
reply from the Board of Directors. Sincerely, Guy Shanon Michael
Blitzer Hudson Street Capital Management LLC Kingstown Capital
Management LLC Managing Partner Managing Partner EXHIBIT I -
Current Board Lacks Independence from Russell Whitney and is Unduly
Coerced by Mr. Whitney The current Board is comprised of the
following four individuals: Russell A. Whitney, chairman and CEO;
Ronald A. Simon, Co-President, COO, and director; Frederick A.
Cardin, director; and Chester P. Schwartz, director. Per the 2007
Preliminary Proxy, Messrs. Cardin and Schwartz have no material
relationships with the Company and are therefore deemed to be
independent. It is our view that the current Board is unduly
coerced by the interests and demands of Mr. Whitney. Specific
examples include: 2006 Compensation. The compensation committee is
currently comprised of the Board's two remaining outside directors:
Fred Cardin and Chester Schwartz. The Company's 2007 Preliminary
Proxy filed April 27, 2007 details a base salary of $600K for Mr.
Whitney and an incentive award of $562K for total compensation of
$1.16M, or approximately 2.7% of the Company's stock market
capitalization, in a year in which the Company's stock declined
nearly 50% from a height of $10 to approximately $5 (the stock has
since fallen approximately another 40% to as low as $3.39 in 2007).
The Preliminary Proxy also disclosed that in setting 2006
compensation, the Compensation Committee had reviewed data from and
met with its outside consultant, Mercer Human Resources, and
concurred with its recommendations. But the Proxy goes on to state
that: "In discussions with the Management at a Board meeting in
March 2007, and taking into consideration the extra workload and
stressful environment resulting from parallel investigations in
2007, coupled with individual performance and retention
considerations, the Board and Management compromised on an annual
incentive payout which was substantially higher than previously
contemplated by the Compensation Committee." Such a "compromise"
seems unusual for a board of directors of a public company since
the entire purpose of having compensation reviewed and set by
outside board members is to prevent inside directors from enriching
themselves with corporate assets at the expense of other
shareholders. The Board's decision here seems even more unusual
when one considers that the supposed reason for the compromise -
the stressful environment related to parallel investigations - was
brought on, in our belief, by the activities of Russell Whitney and
the management team in the first place. It is not often in
corporate America that a manager is awarded additional compensation
for stresses incurred through government investigations relating to
corporate activities that took place directly under that manager's
watch. We also find it noteworthy that these decisions by the Board
seem to coincide with the resignation of the Chairman of the
Compensation Committee, Mr. Cootey, and of an additional
independent board member, Mr. Anthony B. Petrelli, both in March
2007. Corporate Aircraft. In its 2006 Form 10-K, the Company
disclosed that it had purchased a corporate aircraft for $6.9M in
early 2007. Our research indicates that this aircraft is a Cessna
Citation jet; it has received approximately $300K of upgrades
subsequent to purchase; and is used almost entirely by Russell
Whitney, often for what we believe are non-business related trips.
The value of this aircraft represents approximately 18% of RUSS's
capitalization around the time that it was purchased and nearly 50%
of the Company's 2006 free cash flow as measured by adjusted
EBITDA. Given the significant size of this capital investment and
that it has little to do with and is unnecessary for the Company's
business, it is hard to understand how a Board that is acting in
the best interests of its shareholders could approve it. In fact,
our conversations with former Company executives indicate that the
aircraft may have been purchased without the prior knowledge of the
Board. If this is in fact the case, it highlights an even more
alarming state of affairs concerning the corporate governance of
the Company. Government Investigations & Special Committee. As
previously disclosed in public filings, the Company is being
investigated by both the SEC and the Department of Justice's United
States Attorney's Office for the Eastern District of Virginia. The
Company has provided its shareholders with little information about
these investigations, but has stated that it has been subpoenaed, a
grand jury has been convened, documents have been supplied by the
Company, investigations are ongoing and that such investigations
generally concern the Company's marketing practices and its
acquisition of other companies. These investigations clearly hamper
the Company's operations through (1) substantial legal expense and
management distraction, (2) uncertainty regarding the future of the
Company that makes it difficult to recruit and retain key
personnel, and (3) a legal taint that makes potential customers
skeptical of the value of the Company's products-this last factor
is well documented by numerous recent articles in local newspapers
highlighting the Company's legal woes. The Company appointed a
Special Committee comprised of independent directors to conduct its
own internal review of both the SEC and DOJ investigations. In a
Form 8-K filed May 29, 2007 the Company disclosed that on May 14,
2007 it had received a copy of a letter from the legal counsel of
Mr. Whitney, addressed to WilmerHale, counsel to the Special
Committee, indicating that Mr. Whitney, upon advice of his counsel,
would not be submitting to an interview at this time with
WilmerHale. As of the date of this letter, the Board has not taken
any action related to Mr. Whitney's obstruction of the Special
Committee's investigation. The May 29th 8-K states that "The
Department of Justice and/or the SEC may view [Mr. Whitney's
refusal to submit to an interview with WilmerHale] as lack of
cooperation towards the Special Committee's efforts to determine
the facts in its internal investigation and prolong the SEC's
investigation and broaden the Department of Justice's
investigation." We believe Mr. Whitney should be removed from his
management and Board positions for his obstruction of the
investigations that will likely lead to increased legal expenses
and increased exposure for the Company. What is abundantly clear is
that Mr. Whitney's interests and the Company's interests are not
only misaligned, but are directly antithetical. Our only conclusion
is that the current Board as structured is unable to take actions
contrary to the wishes of Mr. Whitney. In addition to the ongoing
SEC and Department of Justice investigations and other lawsuits
against the Company and its subsidiaries, the Company was served
with yet another complaint on March 22, 2007, alleging that a group
of defendants, which includes the Company and Mr. Whitney, breached
certain of their fiduciary duties to the plaintiffs and committed
constructive and common law fraud and other violations. We do not
think it a coincidence that Messrs. Cootey and Petrelli resigned on
that day and the following day, respectively. We presume that their
resignations are related to their ever-increasing exposure to
liability as directors of the Company. Self-dealing and Related
Party Transactions. There are other indications that Mr. Whitney
treats the Company more like a personal "piggybank" than an
enterprise that protects and serves the interests of all of its
stakeholders. The Company is rife with related party transactions
and conflicts which illustrate a clear pattern of Mr. Whitney
managing the Company for his own personal gain. There are three
corporate leases whereby the Company pays annual rents of $267,672
to an entity controlled by Mr. Whitney and his wife. We question
whether there was ever a proper bidding process in place at the
time these rents were secured and we have no way of knowing whether
these values represent fair market rents. In any event, this
strikes us as a glaring conflict of interest. Russell Whitney's two
children and wife are also employees of the Company, earning
collectively over $500,000 in salary in fiscal 2006 alone. While it
is entirely possible that Mr. Whitney's children and wife are
high-value employees, we find such nepotism to be unusually
extensive for a publicly-held company. We have also learned through
discussions with former employees that they believe that
significant expenses which appear to be unnecessary for the
Company's business and therefore personal to Russell Whitney are
consistently run through the P&L of the Company without
reimbursement. In fact, one senior-level former employee has
indicated that the operating margin of the business would be 2-3%+
higher without these expenses. Could this explain why operating
margins of a very similar public competitor have been consistently
higher at similar revenue levels on a historical basis? There are
also a number of instances where Mr. Whitney has commingled
corporate and personal investments. Specifically, Mr. Whitney and
Mr. Simon own financial interests, including the Company's Costa
Rica real estate assets detailed in Exhibit II, in which the
Company has invested in excess of $3M. We believe the Company has
no business purpose for owning real estate in Costa Rica and also
incurs significant expenses supporting Mr. Whitney's travel to
Central America. Additionally, we question Mr. Whitney's marketing
of real estate and time-share units in which he has personal
financial interests to paid real estate education students. The
Company has no such financial interests in these real estate assets
and this once again shows Mr. Whitney's preoccupation with his own
enrichment at the expense of the Company and its customers. In sum,
we can only wonder if the energies of management and the Board are
focused on maximizing value for all shareholders or whether the
vast majority of the Company's activities and investments are
focused on enriching Mr. Whitney and his family. EXHIBIT II -
Non-Core Asset Sales - Detail Company assets have been wastefully
diverted into a number of unrelated and non-core assets and
investments, many with ties to personal interests of Mr. Whitney.
We believe the sale of these assets combined with existing cash on
the balance sheet would provide shareholders over $70M of net cash
equaling more than $6 per share, nearly twice the current share
price. A summary of the fair value of these assets, which we
believe have been conservatively estimated after all
selling/transaction costs, include: Table I - Non-Core Assets Asset
$M $ Per Share Excess cash 38.9 3.32 Note receivable 7.0 0.60
Florida land under contract 4.2 0.36 Assets held for sale 4.7 0.40
Corporate HQ 13.0 - 16.0 1.11 - 1.37 Costa Rica real estate 3.6 -
5.0 0.31 - 0.43 Aircraft 5.5 0.47 Debt (6.1) (0.52) Total 70.8 -
75.2 6.05 - 6.43 Sources: Form 8-K filed March 29, 2007, Form 10-K
filed April 4, 2007 (1) Share count: 11.7M shares Asset sales in
total would provide between $6.05 - $6.43 per share as of March 31,
2007 per the Company's Form 8-K, which listed 11.7M shares
outstanding. Since 70% of the total proceeds comprise cash or
receivable equivalents (assets held for sale or under contract),
the proceeds of these sales would be available to be disbursed to
shareholders. Total capital gains on asset sales will likely have
offsetting capital losses but note that the Company's $29M net
operating loss carryforward would offset additional gains should
certain assets sell for more than we have estimated. Asset-By-Asset
Detail. -- $38.9M of excess cash provided by $43.9M of cash and
equivalents (including restricted cash related to credit card
receivables) reported as of March 31, 2007 less $5M for working
capital and/or funding of future losses. The Company's working
capital has historically been a source of cash so it is possible
that more than $38.9M could be used in the special dividend. --
$7.0M note receivable relating to the sale of an office building in
Orlando, Florida in 2005 which was unrelated to core operations. --
$4.7M book value of assets held for sale including European
headquarters and first corporate aircraft based on actual proceeds
as follows: European headquarters was sold in April, 2007 for net
proceeds of $3.5M after selling costs, first corporate aircraft was
sold in May, 2007 for net proceeds of $1.2M after selling costs and
repairs. -- $4.2M Florida land investment currently under contract
with Gulf Gateway Enterprises, representing The Company's 50%
ownership interest in Tranquility Bay of Southwest Florida, a joint
venture established in 2004 which owns 74 acres of land zoned for
residential development in Southwest Florida. -- $13-$16M for
Company owned headquarters based on guidance from the Company's CFO
and independent real estate appraisals, after selling commissions.
The Company owns the land and building of its executive offices in
Cape Coral, Florida which includes 40,000 square feet of office
space and 4.5 acres of land with water access to the Gulf of Mexico
via the west coast of Florida. We assume the Company would lease
back space in the building, or find alternative space to lease at a
cost of less than $800K per year (say $20 PSF), which would be
absorbed by reduced legal fees and other cost-cutting measures
going forward. -- $3.6M - $5M market value of various Costa Rica
real estate investments based on estimated book value of $3.6M and
capital appreciation since 2002. Investments include a 30% interest
in a Panamanian entity with ownership of 394 acres of undeveloped
land on the Pacific coast of Costa Rica and an interest in a
beachfront land concession adjacent to a hotel property; an 8%
interest in a second Panamanian entity with ownership of
approximately 445 acres of Costa Rican undeveloped land and an
interest in a beachfront land concession; a 51% interest in a third
Panamanian entity that owns a beach front land concession and owns
a hotel; and a fourth entity which holds a 100% interest in a 7,200
square foot conference center in Monterey, Costa Rica built in 2002
and the land on which it is situated. We believe this estimate
could prove conservative as independent local appraisals and
management comments in past conference calls indicate these assets
have appreciated in value since purchase. We note though that the
Company has never had any operations in Costa Rica or Central
America and that the CEO is personally invested in at least two of
these properties. -- $5.5M market value of newly-purchased Cessna
Citation corporate aircraft estimated at 80% of book value at March
31, 2007. We note that his aircraft has had $300K of custom upgrade
that is not included in our valuation. Also, we have not included
any potentially reimbursable expenses related to use of the first
corporate aircraft for personal travel prior to March 2007 when,
per the 2007 Preliminary Proxy filed April 27, 2007, Russell
Whitney began reimbursing the Company for such use. -- ($6.1M) of
net debt including $3.0M related to the Orlando note receivable,
$2.1M related to mortgage on the European headquarters which was
paid off in April, 2007, $1M related to financing on the original
corporate plane which was paid off in May, 2007. EXHIBIT III -
Strategic Alternatives and Valuations - Detail Alternative #1:
Restructuring of business under new leadership. We believe the
Company's core education business has significant value which could
be restored in a restructuring led by new management. This value
has been overshadowed by spending on legal representation and
wasteful overhead. Adjusted EBITDA for the Company as a percentage
of sales transaction revenue has averaged just 7.2% over the last 5
years and has declined to 1.6% or $835,000 from 15.0% in the first
quarter of 2006. Despite deterioration in margins and a reduction
in sales transaction volume, the Company continues to maintain a
bloated cost structure. Table II - RUSS Historic Margins ($M) 1Q07
1Q06 FY06 FY05 FY04 FY03 FY02 Sales 51.5 57.3 223.0 196.4 164.1
109.3 62.7 Adjusted EBITDA 0.8 8.6 15.6 23.4 (6.9) 9.6 7.9 Margin %
1.6 15.0 7.0 11.9 (4.2) 8.8 12.6 Sources: Form 8-K filed March 29,
2007, RUSS Form 10-K's. (1) Adjusted EBITDA equals cash sales minus
direct costs, selling, G&A, and other adjustments including
changes in deferred revenues and other non-cash items. We contrast
this with the Company's closest public competitor, Investools, Inc
which has a similar level of sales transactions revenue but has
achieved adjusted EBITDA margins of 20.9% in 2006 and 15.8% in 2005
despite similar levels of sales. We compare 2006 spending levels at
Whitney and Investools and note the difference in efficiency
between the two businesses, which we believe to be largely due to a
lack of focus on expense management at the Company. Table III -
RUSS vs Investools - 2005 & 2006 Margins Investools RUSS
Difference (%) ($M) 2006 % 2005 % 2006 % 2005 % 2006 2005 Cash
sales 252.9 176.1 223.1 163.1 Direct costs 121.3 48.0 92.2 52.4
111.9 50.2 94.8 58.1 Selling costs 52.9 20.9 37.3 21.2 64.1 28.7
49.8 30.5 G&A 32.7 12.9 24.2 13.8 34.8 15.6 27.7 17.0 Adjusted
EBITDA 52.9 20.9 27.8 15.8 15.6 7.0 23.4 11.9 13.90 3.90 Sources:
RUSS and SWIM 2005, 2006 Form 10-K's We believe adjusted EBITDA to
be a relevant proxy of free cash flow at the Company for a number
of reasons, specifically: -- Timing differences between GAAP
expense and revenue recognition whereby expenses are recognized
upfront while revenues are not recognized for several months or
years after cash has been received. Since the Company's deferred
revenue account requires very little, if any cash expenditures to
be fully realized, adjusted EBITDA is a more appropriate proxy of
the Company's cash flows. -- The Company has no interest expense
other than on debt related to its non-core investments. -- The
Company has very little capital investment requirements. The
Company has spent only $700K per year in 2005 and 2006 on capital
investment not including a $6.9M purchase of a corporate aircraft
which we do not believe to be core to operations. -- The Company
has paid virtually no cash taxes due to its significant NOL valued
at $29M as of its Form 10-K filed on April 2, 2007. In total, we
estimate that over 95% of adjusted EBITDA is available for free
cash flow and believe that the Company should at least be able to
return to its previously achieved 2005 level of 12% cash flow
margins (approximately half those of its competitors) once expenses
are reduced. Using trailing twelve months cash sales of $217M, this
would represent $26M of free cash flow or more than $2.20 per
share. Applying the midpoint of the historic free cash flow
multiple range of Investools during 2005-2006 when it was solely an
investor education company (7.5x) implies a value of $16.50 per
RUSS share, excluding the value of non-core assets. Alternative #2:
Sale or Separation of Business Units. The Company operates in two
primary business segments, financial markets education and real
estate education. The profitability of these segments differs
significantly. Real estate education has been operated by the
Company since 1992, when it was founded by Mr. Whitney. This
business reported 2006 revenues of $95M, down approximately 9% from
2005. While operating earnings are not disclosed for this business,
our research indicates that this business has struggled to earn any
cash flow and likely constitutes a use of cash predominately due to
its bloated cost structure. This is supported by financial
disclosures in the Company's Form 10-K which indicate the business
achieved gross margins of just 12% in 2005, less than the operating
margins of many of its peers. Still, we believe this business would
be of value to a larger education business operator that would be
able to manage the business with more appropriate financial
discipline. Informal queries of potential strategic buyers have
shown interest at approximately 50% of reported sales or $50M, or
$4+ per share. We believe the value of the Company's financial
markets education business is significant and has largely been
obscured by the underperforming real estate business. The financial
markets education business, which was managed under separate
leadership until the end of 2006, reported revenues of $112M in
2006, an increase of 138% over 2005. While the Company does not
report cash flow by segment, an S-1 filed on May 22, 2006 related
to a proposed IPO of this business (see below) indicated that it
generated $13.5M of adjusted EBITDA in 2005 and $76.5M of
transaction sales for a margin of 17.6%. Our belief is that margins
and cash flow in 2006 were significantly higher and that the
financial business achieved peak margins in 2006 and constituted a
significant portion of the Company's total cash flow during that
year. We believe management's recognition of the value of the
financial markets education business was the motivation behind its
2006 planned IPO of this segment under the EduTrades, Inc. brand.
Prior to canceling the registration, the Company's financial
advisors, Kaufman Bros., L.P. and Noble International Investments,
Inc. valued EduTrades, Inc. at a post-IPO value of $116M, valuing
the Company's stake at $84M or $7.15 per RUSS share. We have since
learned that later in the year, Craig Hallum, another investment
bank, and Kaufman Bros. raised the estimated valuation of the
Company's stake to $114M or $9.74 per RUSS share as the business
continued to grow its cash flows. The profitability of the
financial markets education business has recently declined
coinciding with some key executive departures and its increased
oversight by Mr. Whitney. However, we do not see any reason why it
would not be able to return to past levels of profitability under
more focused management. The mid-point of valuation projections
related to the business' IPO was approximately $8.50 per RUSS share
using 2006 figures. Combined with a potential sale of the real
estate business ($4 per share) and the sale of non-core assets ($6
per share), we believe the entire Company's assets may be worth in
excess of $18 per share in an auction process. EXHIBIT IV - Prides
Capital Director Designee The Board seat that was vacated by
Stephen Cootey was granted to Prides Capital in connection with the
Company's 2006 equity offering and Prides Capital has the right to
designate a successor to serve on the Board. The Company's
Registration Statement on Form S-1 filed Jan 11, 2006 and the
Stockholders Agreement dated December 12, 2005 by and among the
Company, Prides Capital, EduTrades, Inc. and Mr. Whitney details
this Board arrangement: "If at any time any Purchaser Designee
ceases to serve on the Company Board or the EduTrades Board, as the
case may be (whether by reason of death, resignation, removal or
otherwise), Purchaser shall be entitled to designate a successor
director to fill the vacancy created thereby, the Company and
EduTrades shall use its best efforts without any undue delay to
cause such successor to become a director of the Company and
EduTrades, respectively, and Whitney shall vote all of the Voting
Stock owned or held of record by Whitney so as to elect any such
director." We will be furnishing Prides Capital with a copy of this
letter. In the event that our request for a seat on the Board is
denied by the Company, we intend to follow up with Prides Capital
to offer to fill its vacancy on the Board. DATASOURCE: Hudson
Street Capital; Kingstown Capital Partners CONTACT: Guy Shanon of
Hudson Street Capital, +1-212-763-3763; or Michael Blitzer of
Kingstown Capital Partners, +1-212-319-1309
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