CATALYST EQUITY RESEARCH REPORT Weekly Research Highlighting Activist Investments

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2 HIGHLIGHTING ACTIVIST INVESTMENTS Week Ending November 23, 2012 SYMBOL COMPANY INVESTOR AGU Agrium Inc. Jana Partners AWRE Aware, Inc. John Stafford/Ronin Capital BPHX BluePhoenix Solutions Columbia Pacific Advisors CEDC Central European Distribution Mark Kaufman ELX Emulex Corp Elliott Associates LTRE Learning Tree International Mill Road Capital MEMS MEMSIC, Inc. IDG-Accel China Growth Fund PBCP Polonia Bancorp Joseph Stilwell PYMX PolyMedix, Inc. Target Capital Management ROC Rockwood Holdings Atlantic Investment Management SCOR comscore, Inc. Sageview Capital VTSS Vitesse Semiconductor Raging Capital 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 11

3 Agrium Inc. (AGU) Activist Investor: Jana Partners 9,348, % Jana increased its ownership to 6.3% and announced plans to nominate 5 directors for election to the board. A copy of Jana s November 19 press release announcing the nominations is available here: Share Price B 15.2B 16.1B -1B 2.6B 52 wk. range EV/ 6.2 We previously covered AGU in our October 19 and August 17 Catalyst Research Reports, highlighting AGU s press release announcing it has been in discussions with activist investor Jana Partners regarding Jana s request that the Company be split into separate retail and wholesale businesses. In the press release AGU stated, it will continue to execute its integrated business strategy, which is delivering record results and creating sustainable shareholder value, and that it will not spin off its Retail operations. Later in the day on August 14, Jana Partners issued a press release stating they were disappointed that before [Jana and AGU s] discussions have concluded Agrium would reject any topic out of hand. We also note that Agrium has addressed only its structure and has not truly addressed the cost and operating performance improvement opportunities we have identified, the fixing of which could generate billions in value. While Agrium has pointed to its short-term share price performance in 2012, the long-term value creation picture is much more relevant On August 20 AGU issued a shareholder presentation discussing its communications with Jana since May 31 and highlighting why spinning off the Retail business is not in the best interest of shareholders. On October 16 Jana issued a press release calling on AGU to issue substantive responses to the structural and operating issues raised by Jana regarding AGU s true value potential. A link to Jana s website discussing AGU is available here: Legal counsel to Jana Partners Aware, Inc. (AWRE) Activist Investor: John Stafford 3,159, % Not Avail Stafford increased his active ownership stake in AWRE from 11.6% to 14.1% since February. Share Price M We previously covered AWRE in our November 16, April 13 and February 3 Catalyst Research Reports, highlighting Privet Fund s initial 4.1% active ownership stake (currently 3.7% at an avg. cost of $3.49/sh) and their announcement that the company s shares are materially undervalued by the market, especially relative to a reasonable valuation of the sum of the Corporation s component parts. 143M 28M 115M 4M 52 wk. range EV/ 7.0 On April 11 Privet sent a letter to the board expressing concern over the lack of clarity and the amount of time it has taken the company to examine strategic alternatives for monetizing its patent portfolio. On November 13 Privet sent a letter to AWRE s board demanding they address the possibility of selling the $15M revenue biometrics software business. In addition, Privet demanded the board address the $115M cash balance and improve disclosure associated with the company s ongoing litigation. A copy of Privet s November 13 letter is available here: On November 19 AWRE declared a special cash dividend of $1.80/share to be paid on Dec 17 to shareholders of record as of Dec. 3. Page 3 of 11

4 BluePhoenix Solutions Ltd (BPHX) Activist Investor: Columbia Pacific Advisors 3,699, % Not Avail Columbia Pacific increased its active ownership stake in BPHX from 34% in late October. Share Price M We previously covered BPHX in our August 3, June 22, May 11, April 27, 2012; July 1, 2011, January 7, 2011 and June 4, 2010 Catalyst Research Reports, highlighting Prescott Group s (currently a 36% shareholder) change in their filing status from passive to active investor. On December 30, 2010 one individual from Prescott Group was elected to the board. 31M 29M 1M -11M 52 wk. range EV/ Negative On June 24, 2011 Prescott sent a letter to the board formally requesting a Special Meeting of shareholders in order to allow Prescott to increase its ownership above the 25% ownership restriction. In the letter, Prescott stated, This request should not be interpreted as a change in our long-held belief that the value of the Company s assets would best be maximized through the sale of the Company to a strategic buyer. On April 23, 2012 Lake Union Capital disclosed an 11% active ownership stake in BPHX and announced they have been in contact with members of management, the Board of Directors and other significant shareholders regarding alternatives that the Company could employ to maximize shareholder value. On May 7 Columbia Pacific changed their investment status from passive investor to active investor. On June 22 we reported that Columbia Pacific continued to increase their ownership to 25% since changing their investment status to active investor in early May. In August Lake Union converted a number of options granted to them in association with a loan agreement into shares. Lake Union now owns 28.05% of BPHX. Continue to Next Page Page 4 of 11

5 Central European Distribution Corporation (CEDC) Activist Investor: Mark Kaufman 6,960, % On November 19 Kaufman sent a letter to CEDC s board and special committee commenting on the special 6.35 committee s open letter to shareholders. Share Price M 138M 1.4B -1.3B 64M 52 wk. range EV/ 22.2 A copy of CEDC s November 16 Open Letter to Shareholders is available here: In his letter, Kaufman continued to express his concern about the current board and the company s performance under its watch. A copy of Kaufman s November 19 letter is available here: We previously covered CEDC in our November 16, March 16, February 24, February 3, 2012 and December 9, 2011 Catalyst Research Reports, highlighting Roustam Tariko/Russian Standard s (16.4% 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. We also highlighted that on December 9, 2011 Mark Kaufman 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. A copy Russian Standard s February 1, 2012 Proposed Transaction is available here: 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. A copy of Tariko s letter to CEDC shareholders is available here: In his letter, Kaufman said he shared Mr. Tariko s profound concern and deep frustration with the state of the business and called upon the board to reconstitute its membership with Kaufman and 3 additional independent directors. A copy of Kaufman s November 14 letter is available here: Page 5 of 11

6 Emulex Corporation (ELX) Activist Investor: Elliott Associates 8,952, % On November 23 Elliott changed its filing status from passive to active and disclosed a 9.96% ownership 7.34 stake. Share Price M 632M 445M 186M 87M 52 wk. range EV/ 5.1 Learning Tree International, Inc. (LTRE) Activist Investor: Mill Road Capital 1,315, % Mill Road entered into a voting agreement with Lane Five Fund and Pleiades Fund to support Mill Road s 9.66 acquisition of LTRE. Share Price M 72M 34M 40M 5M 52 wk. range EV/ 6.9 We previously covered LTRE in our November 2, September 21, 2012 and May 29 th 2008 Catalyst Research Reports. In May 2008 we highlighted Lane Five Capital Management s active ownership position (Lane Five currently owns 4.4%). At that time Lane Five sent a letter to LTRE expressing their concerns over the Company s announcement that they were exploring a sale. In the letter, Lane Five questioned if the Board was emphasizing the founders' need for liquidity over the long-term interest of the Company's public shareholders. On September 14, 2012 David Collins, LTRE s Chairman and 32% shareholder, expressed an interest to acquire the Company for $5.25/share in cash. On October 29 Mill Road Capital disclosed a 6% active ownership stake in LTRE and announced that on September 21, 2012 they had proposed to acquire LTRE for $5.80 per share in cash. A copy of Mill Road s buyout proposal is available here: Continue to Next Page Page 6 of 11

7 MEMSIC, Inc. (MEMS) Activist Investor: IDG-Accel China Growth Fund 4,146, % Not Avail On November 10 IDG offered to acquire MEMS for $4/share in cash. Share Price 3.08 We previously covered MEMS in our November 2, 2012; June 24, 2011; August 20 and April 9, 2010 Catalyst Research Reports, highlighting Seligman s nomination of 2 individuals for election to the board at the 2010 annual meeting. 74M 75M 33M 42M 6M 52 wk. range EV/ 5.6 On August Seligman withdrew their nominations to the board. On June 24, 2011 Seligman stated that they intend to continue to engage in discussions with MEMS about ways to enhance shareholder value, including making recommendations about possible strategic combinations. In October 2011 Seligman increased its ownership from 13.5% to 14.7% (avg. 2.51/sh). On October 31 Potomac Capital disclosed a 5.0% active ownership stake at an average cost of $1.67/share. Legal counsel to Potomac Capital Polonia Bancorp (PBCP) Activist Investor: Joseph Stilwell 277, % On November 21 Joseph Stilwell disclosed a 7.9% active ownership stake in PBCP and announced plans to 7.81 seek board representation if PBCP does anything to dilute tangible book value. Share Price M 26M 28M -2M N/A 52 wk. range EV/ N/A On May 6 we reported that PL Capital (9.5% shareholder) sent a letter to the board of Polonia suggesting that they complete a second-step transaction. According to PL Capital, a second step transaction completed at 65% of pro-forma book value would generate an exchange ratio of approximately $8.30 and at 70% of pro-forma book value would generate an exchange ratio of approximately $9.30 compared to the current price at the time of $5.75. PolyMedix Inc. (PYMX) Activist Investor: Target Capital Management 7,562, % Not Avail On November 20 Target Capital disclosed their belief that PYMX should be proactive and focus on strategies which improve shareholder value. In addition, Target Capital requested the company enable a constructive dialogue between the Chairman of PYMX and Target Capital. Share Price M 20M 22M 1M -21M 52 wk. range EV/ Negative We previously covered PYMX in our June 12, 2009 Catalyst Research Report, highlighting Target Capital s 8.82% ownership and an they sent to the company s CEO suggesting that shareholders should work together to present a number of constructive suggestions that will lower the company s cost of capital and improve the image of the company. After sending the , Target received a letter from the company s lawyer threatening legal action. Target stated that they believe they are entitled to share their opinions about the company and have requested an apology and a retracted threat of legal action. Furthermore, Target said that if they do not obtain an apology in writing they will consider plans to change the board and management. Page 7 of 11

8 Rockwood Holdings (ROC) Activist Investor: Atlantic Investment Management 4,699, % AIM has increased its active ownership stake in ROC from 5% to 6% since late October Share Price B 3.4B 5.0B -1.5B 817M 52 wk. range EV/ 6.1 comscore, Inc. (SCOR) Activist Investor: Sageview Capital 2,274, % Sageview has increased its active ownership in SCOR from 5.3% to 6.4% since May Share Price M 477M 437M 42M 23M 52 wk. range EV/ 19.4 Vitesse Semiconductor Corp. (VTSS) Activist Investor: Raging Capital 3,491, % 2.50 On November 20 Raging Capital nominated 2 individuals for election to the VTSS board. We previously covered VTSS in our August 3 and June 29, 2012 Catalyst Research Reports, highlighting Raging Capital s change in its filing status from passive to 12.8% active investor. Share Price M 55M 91M -38M -1M 52 wk. range EV/ Negative On July 25 Raging Capital purchased $4,000,000 Convertible Debentures at an 18% discount to the principal amount. If converted, Raging Capital will own an additional 1,442,666 shares of VTSS stock. Legal counsel to Raging Capital Page 8 of 11

9 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 9 of 11

10 PLATINUM SPONSORS Broker-Dealer APB Financial Group is a Special Situations Brokerage Firm tailored to investors seeking fundamental value and catalyst-driven activist investments. 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. 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. Marc Weingarten, Partner marc.weingarten@srz.com Tel: Page 10 of 11

11 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. 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. 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. Mark Harnett, President mharnett@mackenziepartners.com Tel: Page 11 of 11