CATALYST EQUITY RESEARCH REPORT Weekly Research Highlighting Activist Investments

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1 Weekly Research Highlighting Activist Investments Subscribe to receive this FREE Report ed weekly.

2 HIGHLIGHTING ACTIVIST INVESTMENTS Week Ending February 15, 2013 SYMBOL COMPANY INVESTOR ACFC Atlantic Coast Financial Corp Jay Sidhu and Bhanu Choudhrie BFIN BankFinancial Corp PL Capital CBRL Cracker Barrel Biglari Holdings CEDC Central European Distribution Mark Kaufman DELL Dell, Inc. T. Rowe Price ELX Emulex Corp Altai Capital Management FSCI Fisher Communications GAMCO Investors HLF Herbalife Ltd Carl Icahn IAE.TO Ithaca Energy Inc JEC Capital IBCA Intervest Bancshares PL Capital IGT International Game Technology Ader Investment Management IQNT Neutral Tandem, Inc. Clinton Group LEA Lear Corp Marcato Capital MLNK ModusLink Global Solutions Handy & Harman (Steel Partners) QBAK Qualstar Corp BKF Capital SBSA Spanish Broadcasting Attiva Capital SCMR Sycamore Networks Burlingame Asset Management STEC STEC Inc. Balch Hill Capital; Potomac Capital TDS Telephone & Data Systems GAMCO Investors VELT Velti Plc Discovery Capital WTSLA Wet Seal, Inc. Clinton Group HEDGE FUND SOLUTIONS (HFS) provides investment research, strategy and stakeholder communications consulting to companies and investors interested in, or involved with, shareholder activist campaigns. Since 2001 HFS has become the trusted advisor to numerous institutional investors, CEOs and board members worldwide. HFS also administers The Official Activist Investing Blog, the definitive source for activist shareholder information. Catalyst Investment Research is a portfolio of activist investing research products that combine company-specific shareholder activism research with deep value investment analysis and access to industry insiders. HEDGE FUND SOLUTIONS PORTFOLIO OF ACTIVIST INVESTING RESEARCH INCLUDES: Daily Alerts Weekly Summary of Activist Investments Quarterly Buying Analysis of Top 50 Activist Investors Company-Specific Shareholder Activism Analysis (combining shareholder activism & deep value company analysis) Special Reports on Activist Investing 400+ Page Shareholder Activism Report & Regularly Updated Shareholder Activism Resource Portal To Learn More: Download a brochure Page 2 of 19

3 Atlantic Coast Financial Corporation (ACFC) Activist Investor: Jay Sidu and Bhanu Choudhrie Shares % Outstanding 177, % 9.71 Catalyst: On February 13 Sidhu and Choudhrie (current directors of ACFC) nominated 3 individuals for election to ACFC s board because of their concerns with the direction of the company under the stewardship of the current board and CEO. Share Price M 9M Enterprise Value 173M -164M N/A 52 wk. range EV/ N/A A copy of the nomination letter along with details for seeking additional board representation is available here: BankFinancial Corp. (BFIN) Activist Investor: PL Capital Shares 1,167,241 Catalyst: % Outstanding 5.5% On February 14 PL Capital disclosed a 5.5% active ownership stake in BFIN Share Price M 160M Enterprise Value -108M 270M N/A 52 wk. range EV/ N/A Continue to Next Page Page 3 of 19

4 Cracker Barrel Old Country Store (CBRL) Activist Investor: Biglari Holdings Shares % Outstanding 4,737, % Catalyst: On February 13 Biglari declined CBRL s offer to acquire its ownership. A copy of Biglari s letter is available here: Share Price B 1.6B Enterprise Value 2.0B -435M 258M 52 wk. range EV/ 7.8 We previously covered CBRL in several Catalyst Research Reports since mid-2011 when we initially highlighted BH s active ownership stake and August 23, 2011 letter expressing concern over the Company s failure to disclose operating segments for both the restaurant and the retail operations. On September 1, 2011 BH nominated two individuals to the 11 member board (later reduce to one nominee). On September 23 CBRL adopted a Poison Pill with a 10% trigger that would expire at the Company s shareholder meeting unless approved by shareholders. The Company stated that the action was in response to BH s clearance under the Hart-Scott-Rodino Act to acquire up to 49.99% of the Company s common stock. (The approval of the Poison Pill was put to a shareholder vote at the annual meeting and defeated). On November 14 BH issued a letter to shareholders outlining a business improvement plan for CBRL. On April 13, 2012 we reported that BH had increased its ownership from 9.9% to 16.9% (currently 17.5%) since losing a proxy contest for board representation on December 20, On April 10, 2012 CBRL adopted another poison pill, this time with a 20% trigger. On April 19 BH issued a letter to CBRL shareholders reaffirming its long-term investment commitment in CBRL and calling upon the board to replace the CEO. In addition, BH stated that they intend to replace four board members at the next annual meeting. On August 16, 2012 BH nominated 2 people for election to the board at the next annual meeting. On September 6 BH issued a press release commenting on CBRL s proposed settlement offer to avoid a proxy contest. BH said they are rejecting the Faux Offer because of two fundamental flaws, (i) the requirement to recommend two individuals with no relevant restaurant experience and (ii) no significant ownership in the company s stock. On October 11 BH sent CBRL a demand to inspect the Company s books and records for the purpose of investigating any wrongdoing in connection with statements made by CBRL regarding the qualifications of the designated Chairman. In a letter to the board on October 8, BH asked why CBRL continues to claim the incoming Chairman served as CEO of a NYSE-listed company when in fact he did not join the company until after it was no longer a publicly-traded company. On October 16 BH sent a letter to the board detailing several false and misleading statements made by the Company about BH and its effort to obtain board representation. On October 18 BH sent a letter to CBRL s General Counsel refining their Demand Letter seeking to inspect the Company s books and records relating to the professed experience of the designated Chairman. On November 15 BH s 2 nominees were defeated at the annual meeting. In December 2012 Biglari increased its holding in CBRL from 17.5% to 19.9%. Proxy Solicitor to Cracker Barrel Proxy Solicitor to Biglari Holdings Legal counsel to Biglari Holdings Page 4 of 19

5 Central European Distribution Corporation (CEDC) Activist Investor: Mark Kaufman Shares % Outstanding 6,960, % 6.35 Catalyst: On February 11 Mark Kaufman nominated 4 individuals for election to CEDC s board. Share Price M 107M We previously covered CEDC in our January 4, 2013; December 14, November 23, November 16, March 16, February 24, February 3, 2012 and December 9, 2011 Catalyst Research Reports, highlighting Roustam Tariko/Roust Trading/Russian Standard s (19.5% shareholder and significant holder of 2013 convertible bonds) initial proposal to sell CEDC its Rouse business in exchange for 19.9% of the Company s shares outstanding. Enterprise Value 1.4B -1.3B 64M 52 wk. range EV/ We also highlighted that on December 9, 2011 Mark Kaufman (9.6%; $6.35/sh cost basis) sent a letter to the board highlighting a few key points for the board to address, including (i) restructuring CEDC s balance sheet, (ii) improve management and governance, (iii) issue any new shares fair and equally, (iv) consider a business combination with Russian Standard. On February 1, 2012 Russian Standard submitted a second strategic partnership proposal to the board of CEDC (this first proposal was submitted on Dec. 6, 2011). In the proposed Partnership, Russian Standard suggested two transactions to take place: (i) Russian Standard will exchange $103 million of 2013 Convertible Notes at $7.00 per share in exchange for 25% of the Company s post-dilution ownership, and (ii) Russian Standard will sell CEDC its Roust business assets in exchange for an additional 7.99% ownership. In addition, Russian Standard will appoint 3 directors and key members of the Company s Russian management. On February 17 Mark Kaufman nominated himself for election to the CEDC board at the next annual meeting. On March 12, 2012 the board of CEDC sent a letter to Kaufman stating that the board currently intends to include Kaufman on the list of directors for nomination at the 2012 annual meeting of stockholders. On November 14 Kaufman sent a letter to CEDC s board commenting on a letter they recently sent to Roustam Tariko. In his letter, Kaufman said he shared Mr. Tariko s profound concern and deep frustration and called upon the board to reconstitute its membership with Kaufman and 3 additional independent directors. On November 19 Kaufman sent a letter to CEDC s board and special committee commenting on the special committee s open letter to shareholders. In his letter, Kaufman continued to express his concern about the current board and the company s performance under its watch. On December 11 Roust Trading (RTL) announced that CEDC had rejected a proposal made by RTL and its principal equity holder, Mr. Tariko, to provide them with access to interim and permanent capital, to bolster the company s leadership, and to support its operational needs. The Proposal was conditioned on CEDC promptly holding its overdue 2012 annual stockholders meeting, nominating a slate for the Board of Directors which would include a majority satisfactory to RTL, and providing responsibility for operational and financial management to Mr. Tariko that would enable him to address the company s well-known challenges. Despite initial agreement on all material terms of the proposal, RTL states that CEDC s entrenched directors ultimately rejected the proposal, insisting that they must retain control over the company s financial restructuring process. RTL urged all stockholders and bondholders who agree that the rejected proposal would provide much-needed leadership, resources and commercial prowess to the Company, to communicate such views to the Board. On December 28 CEDC entered into an agreement with Roust permitting the Company to use cash invested by Roust for debt restructuring and working capital needs. In addition, the Company formed an operational management committee (controlled by Roust) to oversee day-to-day operations in which all executive officers will report to the committee. On January 16 Kaufman sent a letter to the board stating that the Company s recently agreed to deal with Roust Trading is unbalanced. Kaufman would like CEDC to revise the agreement on more reasonable terms. On January 25 Kaufman announced plans to petition the Delaware Court to compel CEDC to hold its annual meeting. Page 5 of 19

6 Dell Inc. (DELL) Activist Investor: T. Rowe Price Shares 76,542,867 Catalyst: % Outstanding 4.4% On February 12 T. Rowe Price announced that they opposed Dell s going-private deal. Two other shareholders, Not Avail Yacktman Asset Management (1%) and Pzena Investment Management (1%), also opposed the deal. Share Price B 24B Enterprise Value 22B 2B 4B 52 wk. range EV/ 4.9 We previously covered DELL in our February 8 Catalyst Research Report highlighting Southeastern Asset Management s (8.8% shareholder at an avg. cost of $15.46/share) plans to vote against Dell s going-private transaction because the $13.65/share deal grossly undervalues the Company. Emulex Corporation (ELX) Activist Investor: Altai Capital Management Shares 4,849,223 Catalyst: % Outstanding 5.35% On February 15 Altai Capital expressed concern about ELX s proposed acquisition of Edance Limited and 7.04 announced plans to engage with management. Share Price M 631M Enterprise Value 426M 211M 83M 52 wk. range EV/ 5.2 We previously covered ELX in our November 23, 2012 Catalyst Research Report when Elliott Management changed its filing status from passive to active and disclosed a 9.96% ownership stake at an average cost of $7.34/share. Legal counsel to Altai Capital Management Continue to Next Page Page 6 of 19

7 Fisher Communications Inc. (FSCI) Activist Investor: GAMCO Investors Shares % Outstanding 1,851, % Not Avail Catalyst: On February 13 GAMCO announced a second nominee for election to the board. A copy of GAMCO s letter is available here: Share Price M 334M Enterprise Value 227M 104M 26M 52 wk. range EV/ 8.8 We previously covered FSCI in our December 7, August 10, April 6, 2012; May 6, 2011, January 28, 2011; March 27, January 30, 2009; November 21, June 27, April 25, April ; and April Catalyst Research Reports. In 2007 Gamco, TowerView (10.2%) and FrontFour Capital (2.0%) tried to convince the board to examine the sale of certain assets worth $200M and require shareholders to vote on acquisitions over $25M. Both Gamco and TowerView withheld votes for directors at the 2008 annual meeting. On June FrontFour Capital sent a letter expressing their disappointment with the Board s unwillingness to engage in discussions with a potential buyer. In addition, FrontFour demanded they hire a bank to examine strategic alternatives and suggested that if discussions with potential buyers do not result in a transaction, the Board should return cash to shareholders. On January GAMCO sent a letter to FSCI nominating three individuals (including David Lorber from FrontFour Capital) to the board for election at the annual meeting. On March FSCI entered into a settlement agreement with GAMCO. Under the terms of the agreement FSCI agreed to nominate two individuals recommended by GAMCO to the board. On January 27 FrontFour nominated four individuals for election to the board at the 2011 annual meeting. If elected, FrontFour said their candidates would support and pursue a robust and impartial strategic review process aimed at selling the company to the highest bidder. On January 3 FSCI disclosed they had received an unsolicited $211M buyout offer ($23.99/share in cash and stock) on December 6, 2010 from Huntington Real Estate Investment Trust. The majority of the board determined the offer was not in the best interest of shareholders. David Lorber from FrontFour Capital is a board member at FSCI and a Trustee with Huntingdon. FrontFour is also Huntingdon s largest shareholder. On May 3, 2011 GAMCO announced they will cumulate their votes for three of FrontFour s four director nominees at the Company s May 11, 2011 annual meeting. On April 2, 2012 GAMCO sent a letter to FSCI asking them to consider a leveraged restructuring similar to the one executed by Multimedia in GAMCO suggests FSCI form Newco, which in turn will buy FSCI for $40/share. FSCI will distribute $36 per share in cash and one share of stock in Newco to existing shareholders. GAMCO says FSCI can reduce debt and have a 40% CAGR on the leveraged stub over the next five years. In August 6, 2012 GAMCO sent a letter to FSCI s President and CEO recommending that the Company undertake a leveraged restructuring by financing the debt through a bond issue to existing shareholders (thereby reducing the cost of a capital raise.) On December 5, 2012 GAMCO sent a letter announcing plans to nominate directors. On December 6, 2012 TowerView (10.2% shareholder at an average cost of $35.45/share) announced they are considering nominating directors to FSCI s board at the next annual meeting. Legal counsel to FourFront Capital Page 7 of 19

8 Herbalife Ltd. (HLF) Activist Investor: Carl Icahn Shares 14,015,151 Catalyst: % Outstanding 12.98% On February 14 Icahn disclosed a 12.98% active stake in HLF. Not Avail Share Price B 4.3B Enterprise Value 4.4B -182M 709M 52 wk. range EV/ 6.2 Ithaca Energy Inc. (IAE.TO) Activist Investor: JEC Capital Shares 18,000,000 Catalyst: % Outstanding 7.0% On February 14 JEC Capital formed the Concerned Shareholders of Ithaca Energy, Inc. and requisitioned a Not Avail meeting of shareholders to be held no later than April 8 with the goal of significantly enhancing Ithaca s shareholder value through the placement of 2 new directors. Share Price 2.12 Not Avail 543M Enterprise Value 430M 113M Not Avail 52 wk. range EV/ Not Avail Intervest Bancshares Corp. (IBCA) Activist Investor: PL Capital Shares 1,252,348 Catalyst: % Outstanding 5.8% On February 12 PL Capital disclosed a 5.8% active stake in IBCA Not Avail Share Price M 115M Enterprise Value 116M -2M N/A 52 wk. range EV/ N/A Page 8 of 19

9 International Game Technology (IGT) Activist Investor: Ader Investment Management Shares 8,053,889 Catalyst: % Outstanding 3.0% On February 12 Ader issued a letter to IGT shareholders to set the record straight with regards to its proxy Not Avail campaign to elect 3 new directors. Share Price B 4.4B Enterprise Value 5.9B -1.6B 818M 52 wk. range EV/ 7.2 A copy of the letter is available here: On February 15 Orange Capital (1% shareholder) issued a letter of support for Ader s nominees and demanded the Company implement a Dutch Tender Offer for 25% of the shares outstanding. We previously covered IGT in our February 1, January 25 and January 11 Catalyst Research Reports, highlighting Ader Investment s preliminary proxy statement with the SEC seeking to elect 3 directors to IGT s board. Ader s slate includes the Company s former CEO. On January 23 IGT issued its Definitive Proxy Statement with the SEC announcing the annual meeting scheduled for A copy of IGT s proxy statement is available here: On January 25 Ader Investment filed its proxy statement with the SEC: On January 29 Ader issued a press release urging the Company to examine the sale of its social gaming unit which was purchased a year ago for $500M. Ader also announced the launch of its website On February 5 Ader issued a shareholder presentation and on February 7 Ader issued a press release highlighting several points, including a statement from Steve Wynn supporting one of Ader s nominees Chuck Mathewson (IGT s former Chairman and CEO). A copy of Ader s shareholder presentation is available here: A copy of IGT s Feb 8 shareholder presentation is available here: Legal counsel to Ader Investment Proxy Solicitor to Ader Investment Proxy Solicitor to International Game Technology Page 9 of 19

10 Neutral Tandem Inc. d/b/a Inteliquent (IQNT) Activist Investor: Clinton Group Shares % Outstanding 1,720, % 4.13 Catalyst: On February 13 Clinton formally nominated 6 individuals for election to IQNT s 6-member board. Share Price M We previously covered IQNT on January 30 when Clinton sent a letter to the board outlining the destruction of shareholder value by the current board and management. In the letter Clinton suggested (i) the current board be replaced and (ii) the Company divests its Tinet business. Clinton also announced its belief that IQNT is worth $4.75/share. 114M Enterprise Value 94M 20M 64M 52 wk. range EV/ Negative A copy of Clinton s January 30 letter is available here: Legal counsel to Clinton Group Lear Corp. (LEA) Activist Investor: Marcato Capital Shares % Outstanding 5,262, % Not Avail Catalyst: On February 12 Marcato sent a letter to the board of LEA stating that the Company is undervalued and that there is a serious discrepancy between LEA s improved operating performance and business prospects and its current valuation. Marcato says the discount is directly linked to a questionable capital allocation strategy by the board and called for a $2B share repurchase program. Share Price B 5.3B Enterprise Value 4.5B 800M 951M 52 wk. range EV/ 4.7 On February 14 Marcato formally nominated 3 individuals for election to LEA s 8-member board. Proxy Solicitor to Marcato Capital Page 10 of 19

11 ModusLink Global Solutions Inc. (MLNK) Activist Investor: Handy & Harman (Steel Partners); Clinton Group; Peerless Systems Shares See Details Catalyst: % Outstanding See Details On February 13 Handy & Harman (Steel Partners) entered into a settlement agreement with MLNK under See Details which they will add 2 new directors to a 7-member board and invest 30M in the Company. Share Price M 132M Enterprise Value 77M 58M -31M 52 wk. range EV/ Negative We previously covered MLNK in numerous Catalyst Research Reports since In October 2010 The ModusLink Full Value Committee s (LCV Capital and Raging Capital) announced that they had nominated three directors for election to the board at the 2010 annual meeting. On October 20, 2010 MLNK entered into a Settlement Agreement appointing 1 to an expanded board. On September 29, 2011 Peerless Systems announced a proxy contest to replace the two directors up for election at the 2012 annual meeting. Peerless obtained 1 board seat. On October 14 HNH, a publicly-traded entity controlled by Steel Partners, disclosed a 9.9% active stake. On October 18 MLNK adopted a Tax Preservation Poison Pill with a 4.99% trigger. On October 19 HNH demanded MLNK promptly disclose their analysis related to the implementation Poison Pill. On March 7, 2012 HNH requested (i) an exemption under the poison pill to acquire up to 19.9% and (ii) a limited waiver under section 203 of DGCL. On March 22 MLNK announced a poison pill with a 14.9% trigger. On June 11 MLNK announced its CEO was retiring (following the appointment of a new CEO) and the Company was restating financials from 2009 through 2011 following an SEC investigation. On June 20 HNH sent a letter to MLNK demanding the re-composition of the audit committee, the appointment of 2 individuals to the board of directors, redeem the poison pill, and explore a rights offering. On September 28 HNH nominated 3 individuals for election to the MLNK board. On November 7 Evermore (1.8% shareholder) sent a letter to MLNK criticizing the lack of communication On January 11, 2013 MLNK announced its intent to sell its Tech for Less business, concluded 5 years of financial restatements and concluded its strategic alternative review deciding not to pursue a sale. January 8 Handy & Harman (HNH 14.7%) filed a preliminary proxy statement seeking to elect 2 directors January 9 Clinton (3.1%) filed a preliminary proxy statement seeking to elect 2 directors January 10 Peerless Systems (2.2%) filed a preliminary proxy seeking to elect 2 directors Strategy & Communications to Peerless Systems ( ); The ModusLink Full Value Committee (2010) Proxy Solicitor to ModusLink Proxy Solicitor to Handy & Harman Legal counsel to Handy & Harman (2012 & 2013); The Moduslink Full Value Committee (2010) Page 11 of 19

12 Qualstar Corp. (QBAK) Activist Investor: BKF Capital Shares 2,234,520 Catalyst: % Outstanding 18.7% On February 11 BKF withdrew its offer to acquire 3M shares of QBAK for $1.65/share after the company Not Avail adopted a poison pill with a 10% threshold. Share Price M 20M Enterprise Value 6M 14M -4M 52 wk. range EV/ Negative We previously covered QBAK in our January 18, 2013; September 29, June 8, May 25, May 18, March 2, February and September 16, 2011 Catalyst Research Reports, highlighting BKF Capital Group s (Ticker: BKFG.PK -- which is controlled by activist investor Steven Bronson) initial active ownership stake. BKF currently owns approx. 19% On February 15, 2012 BKF sent a letter to QBAK asking the board to consider (i) divesting Qualstar's unprofitable Tape Libraries business; (ii) distributing Qualstar's excess cash from the sale of marketable securities held by Qualstar to its shareholders; and (3) focusing Qualstar's resources on the generally profitable Power Supply business. On February 28 BKF sent a letter to QBAK shareholders announcing their intention to withhold its votes for directors at the 2012 annual meeting, scheduled for March 21, On March 27 QBAK announced that 3 of the 6 directors up for election at the March 21 annual meeting did not receive a majority of the votes cast. On April 30 BKF Capital sent a letter to QBAK demanding a special meeting be convened on June 20 to remove all of the incumbent directors. On May 17 BKF Capital filed a preliminary proxy to elect 5 new directors at a June 20 special meeting. On May 18 BKF delivered a demand letter to QBAK requesting to inspect the Company s shareholder list. On June 6 BKF filed a definitive proxy statement to replace QBAK s board of directors at the June 20 special meeting of shareholders. (While BKF did not achieve the required support to replace the board, they did receive 52.3% of the votes cast at the meeting). On September 27 we reported that Lloyd Miller disclosed a 5.5% active ownership stake. On December 14, 2012 we reported that Miller increased his active ownership in QBAK from 5.5% to 6.6%. On January 17 BKF Capital sent a letter to QBAK announcing plans to nominate 6 directors to the board. Proxy Solicitor to Qualstar Corp Continue to Next Page Page 12 of 19

13 Spanish Broadcasting Systems Inc. (SBSA) Activist Investor: Attiva Capital Partners Shares 421,982 Catalyst: % Outstanding 10.13% Attiva encouraged SBSA s board to separate the Chairman and CEO positions and to reconstitute the board to Not Avail include Class A and Preferred stock shareholders. Share Price M 26M Enterprise Value 286M -260M 43M 52 wk. range EV/ 6.6 We previously covered SBSA in our June 1, 2012; September 2, 2011; August 7, 2009; June , May , April and March Catalyst Research Reports, highlighting letters from Discovery Capital (who at one time owned 9.7% of SBSA) demanding the board form a special committee of independent directors to hire an investment banking firm to evaluate strategic alternatives. On May Discovery issued a press release announcing their intention to withhold votes for the reelection of the Company s board of directors at the 2008 annual meeting and urged other stockholders to do the same. On August Attiva announced they had been in discussions with semiconductor manufacturers to explore transaction opportunities with SBSA. On August 29, 2011 Attiva stated that they remain positive to the idea that recently hired Lazard will be successful in convincing the Board and its Chairman and CEO about the right course of action as other investors in the past have not been able to do so. On May 29, 2012 Attiva announced they are in discussions with SBSA about the idea that the Company should separate ( spin-off ) the Mega TV and Mega Films franchises by selling its majority stake to a bigger media company that has the financial resources, the content and distribution network required to make Mega TV & Films a successful franchise in the Hispanic market in U.S. and Latin America. SBSA should then use the proceeds to reduce high yield debt, strengthen its balance sheet and eventually return some capital to its shareholders in the not so distant future. SBSA should just keep a strategic minority interest in Mega TV and Mega Films as it builds a multi-media platform. Attiva also encourages the Board to improve Corporate Governance by separating the roles of Chairman and CEO and stay true to its motto the largest publicly traded Hispanic-controlled media and entertainment company in the United states by running SBS as a public company and not as a Raul Alarcon Company as it still does advertise in some radio stations. On October 19, 2012 we reported that Attiva had increased its active ownership from 7.76% to 10.1%. Sycamore Networks, Inc. (SCMR) Activist Investor: Burlingame Asset Management Shares 1,809,810 Catalyst: % Outstanding 6.3% On February 11 Burlingame disclosed a 6.3% active stake in SCMR and announced plans to engage with the 2.24 company regarding its liquidation plan and use of its Net Operating Losses. Share Price M 67M Enterprise Value -77M 146M -14M 52 wk. range EV/ 5.7 Page 13 of 19

14 STEC, Inc. (STEC) Activist Investor: Potomac Capital; Balch Hill Capital Shares % Outstanding 4,190, % 5.64 Catalyst: On February 8 Balch Hill/Potomac nominated 7 individuals for election to STEC s 7-member board. We previously covered STEC in our December 7 and November 16 Catalyst Research Reports, highlighting Balch Hill s 6.4% active stake (previously passive ). Share Price M 251M Enterprise Value 67M 186M -49M 52 wk. range EV/ Negative On December 6 Balch Hill sent a letter to STEC expressing serious concern about its strategic direction and performance. In the letter Balch Hill suggested the Company bring costs in line with revenues and consider all strategic alternatives, including a sale of the Company to a larger industry player. A copy of Balch Hill s December 6 letter is available here: On January 25 Potomac Capital and Balch Hill Capital entered into a group investment agreement and announced plans to nominate 2 people for election to the board before the 2/16 deadline. Legal counsel to Balch Hill Capital/Potomac Capital Proxy Solicitor to STEC Telephone & Data Systems, Inc. (TDS) Activist Investor: GAMCO Investors Shares % Outstanding 3,506, % Not Avail Catalyst: On February 14 GAMCO formally nominated 1 individual for election to the TDS board. We previously covered TDS in several Catalyst Research Reports, most recently on September 14, Share Price B 2.8B Enterprise Value 3.6B -761M 1.1B 52 wk. range EV/ 3.3 On May Southeastern Asset Management (SAM) highlighted recommendations they have made to TDS over the last few months. These included: (i) sell itself to a national wireless carrier, (ii) in the absence of TDS agreeing to sell itself, SAM would like TDS to simplify its capital structure by combining its special and common stock into one single class, and (iii) direct a significant portion of its cash-on-hand to repurchase shares. On April TDS entered into a settlement agreement with GAMCO in order to avoid a proxy contest to replace directors. Under the terms of the agreement TDS appointed two individuals nominated by GAMCO. On May Weitz & Co (5.1% shareholder at an average cost of $24.49/share) sent a letter to TDS indicating their support for (i) a shareholder proposal submitted by SAM to recapitalize the stock and (ii) for a 20 million share Dutch tender buyback program. On September 9, 2011 GAMCO sent a letter to the CEO of TDS stating that it is unlikely GAMCO can support the Company s share exchange proposal at the special meeting scheduled for October 6, The letter also suggested that management focus on negotiating with the minority shareholders of US Cellular for the purchase of all of US Cellular. On September 12 GAMCO sent a letter to TDS outlining a strategy to boost shareholder value, which includes structuring a combination of TDS with United States Cellular Corporation (Ticker: USM). A copy of GAMCO s September 12 letter is available here: Page 14 of 19

15 Velti Plc. (VELT) Activist Investor: Discovery Capital Shares 3,463,292 Catalyst: % Outstanding 5.3% On February 15 Discovery disclosed a 5.3% active ownership stake in VELT Share Price M 270M Enterprise Value 247M 14M 30M 52 wk. range EV/ 8.2 Continue to Next Page Page 15 of 19

16 Wet Seal Inc. (WTSLA) Activist Investor: Clinton Group Shares 6,963,235 Catalyst: % Outstanding 7.77% On February 13 Clinton sent a letter to the Board suggesting the Company implement a Dutch Auction to return $2.97 as much as $35 to $55 million in capital this quarter. Share Price M 276M Enterprise Value 145M 126M -0.6M 52 wk. range EV/ Negative We previously covered WTSLA in our October 26, October 5, September 28, September 21, September 14, September 7, August 31, August 24 and August 3 Catalyst Research Reports, highlighting Clinton s letters to WTSLA s board of directors stating that they intend to solicit written consents from other shareholders to remove board members and replace them with new directors unless the Company can justify why they are not examining a complete strategic review of the business with the aid of an investment banker. On August 22 Clinton issued a press release announcing the five director nominees they plan to elect to the WTSLA board by way of written consent. On August 30 Clinton disclosed that they have increased their ownership stake from 4.71% to 6.49% and announced they have filed a preliminary consent statement with the SEC to elect five new members to the company s 6-member board. On September 5 Clinton sent a letter to the board of WTSLA stating that there is a misalignment between the board s compensation and the creation of shareholder value. On September 13 Clinton Group sent a letter to the board of WTSLA requesting their board nominees be provided equal access to strategic and operational information during the consent solicitation period. Clinton states that this will help to enable a smooth transition to a new board. On September 18 Wet Seal proposed a settlement to end Clinton Group s consent solicitation. Clinton rejected the offer. On September 20 Wet Seal added two additional directors to their board, reduced overall director compensation and removed the poison pill. On September 25 proxy vote advisor ISS recommended a vote for the removal of 2 incumbent directors and for the election of 2 Clinton nominees. On September 28 proxy vote advisor Glass Lewis recommended a vote for the removal of 4 incumbents and for the addition of 4 Clinton nominees. On October 4 Wet Seal entered into a Settlement Agreement with Clinton. Under the terms of the Agreement Clinton replaced 4 of the Company s 7 directors. On October 22 Clinton disclosed they have had discussions with WTSLA s new Chairman and another board member about hiring a new CEO and returning excess cash to shareholders as quickly as possible. In particular, Clinton believes a $50-75M buyback or self-tender would be appropriate. On January 7 WTSLA announced the hiring of a new CEO In-Depth Activist Research & Webcast on WTSLA Hedge Fund Solutions issued several in-depth research reports on this situation (Activist coverage initiated Aug. 15; Activist Updates/Research Notes Aug. 28, Sept. 21, Oct. 2 and Oct. 5). For a copy of this research contact dpark@hedgerelations.com or On August 23 Hedge Fund Solutions and APB Financial Group hosted a 30 minute webcast with Greg Taxin, head of activist investments for Clinton Group, to discuss their investment thesis in WTSLA. For a link to the webcast replay contact Brian Luster at APB Financial Group bluster@abbygroup.com or Legal counsel to Clinton Group Proxy Solicitor to Wet Seal Page 16 of 19

17 CONTACT INFORMATION: Hedge Fund Solutions, LLC Damien J. Park Tel FREE Subscription to the weekly report: or The Catalyst Equity Research Report is a general circulation weekly. Hedge Fund Solutions and/or its affiliates (the Firm ) may have a consulting relationship with the companies featured in this report (the Companies ). The Firm may also actively trade in the securities of the Companies for its own account. At any time, the Firm, funds it manages and/or its employees or their family members may have a long or short position in registered or non-registered securities or in options on any such security of any company mentioned in this report. The information contained in this report is not a complete analysis of every material fact with respect to the company, industry, or security and is not an offer or solicitation to buy or sell any security. Although opinions and estimates expressed in this report reflect the current judgment of the Firm, the information upon which such opinions and estimates are based is not necessarily updated on a regular basis. In addition, opinions are subject to change without notice. The Firm from time to time may perform consulting services for companies mentioned in this report and may occasionally possess material, nonpublic information regarding such companies. This information is not used in the preparation of this report. Facts and other information contained in this report have been obtained from the public sources considered reliable but are not guaranteed in any way. Hedge Fund Solutions Portfolio of Activist Investing Products Catalyst Investment Research Daily: Alerts Weekly: Catalyst Equity Research Report Quarterly Buying Analysis Top 50 Activist Investors Specific Activist Target Catalyst Investment Research Special Reports Shareholder Activism Report & Resource Portal Download a Brochure Page 17 of 19

18 PLATINUM SPONSORS Broker-Dealer APB Financial Group is a Special Situations Brokerage Firm tailored to investors seeking fundamental value and catalyst-driven activist investments. Contact: Steven Abernathy, Principal sabernathy@abbygroup.com Tel: PLATINUM SPONSORS Legal Advisers Olshan Frome Wolosky LLP is a law firm dedicated to providing personal service tailored to the specific requirements and concerns of the firm s clients. Olshan is widely recognized as a preeminent law firm in the activist strategy area, and represents experienced activist investors, funds new to the activist area, as well as other investment and hedge funds. Olshan has extensive experience advising clients in a wide range of activist strategies, from private negotiations with management to public, high profile proxy contests, including expertly and efficiently handling litigation relating to activist matters. We also specialize in mergers and acquisitions and hostile takeovers, with extensive expertise in these matters. Olshan s highly regarded attorneys provide a full range of legal services and are uniquely positioned to provide expert advice regarding the complicated and nuanced legal issues facing activist investors today. Contact: Steve Wolosky, Partner swolosky@olshanlaw.com Tel: Schulte Roth and Zabel LLP, one of the leading law firms in the activist investing area, has been involved in some of the highest-profile campaigns facing the business world in recent years. Serving both activist-only and occasional activists, the firm advises on federal securities law, state corporate law, Hart-Scott-Rodino, proxy rules and related matters, as well as handling investigations and litigations arising out of clients' activist activity. The firm, with over 450 lawyers in offices in New York, Washington, D.C., and London, has a long history of serving private equity and hedge fund clients. Contact: Marc Weingarten, Partner marc.weingarten@srz.com Tel: Page 18 of 19

19 PLATINUM SPONSORS Proxy Advisors Alliance Advisors LLC is a multi-faceted shareholder communications firm specializing in proxy solicitation, corporate governance consulting, and information agent services. Our in-depth view of the investor communities and governance environment allows us to prepare for successful outcomes. Alliance Advisors fight team has built a distinguished reputation by successfully completing countless contested assignments. The team will complete a comprehensive analysis of the shareholder base and build a calculated battle plan accordingly. We will assist in the crafting and delivery of your message to the target audience, ensuring the message is heard and understood. Alliance Advisors consistently delivers successful outcomes to our clients. Contact: Peter Casey, Executive Vice President pcasey@allianceadvisorsllc.com Tel: Innisfree M&A Incorporated is a full service proxy solicitation/investor relations firm providing clients with sound tactical and strategic advice and results-oriented implementation in proxy and consent solicitations (whether friendly or contested), tender and exchange offers, mergers, rights offerings, strategic restructurings and other domestic and cross-border transactions requiring action by public security-holders. We provide expert consulting services on a wide range of matters, including executive compensation proposals, corporate governance issues and investor relations. Innisfree s reputation derives from our success in complex and/or contested situations. Key to that success is our ability to track, identify and understand the shifting dynamics of a company s security-holder base and provide battle-tested advice based on that information. We are convinced, and our unrivaled record demonstrates, that this refined, analytical based approach enables us to deliver the extraordinary results our clients expect. Contact: Arthur Crozier, Co-Chairman acrozier@innisfreema.com Tel: MacKenzie Partners, Inc. is a full-service proxy solicitation, investor relations and corporate governance consulting firm specializing in mergers-and-acquisitions related transactions. The firm has offices in New York City, Los Angeles, Palo Alto and London. MacKenzie's services include corporate governance consulting, security holder solicitations, information agent services for tender and exchange offers, beneficial ownership identification, market surveillance and associated financial, investor and media relations services. We work in close partnership with our client's attorneys, investment bankers and other consultants, providing advice and counsel at each stage of the transaction. Contact: Mark Harnett, President mharnett@mackenziepartners.com Tel: Page 19 of 19