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 October 25, 2013 SYMBOL COMPANY INVESTOR BID Sotheby s Marcato Capital CBRL Cracker Barrel Biglari Capital DGIC A/B Donegal Group Gregory Shepard HBNK Hampden Bancorp Clover Partners LNN Lindsay Corporation Kerrisdale Capital NFLX Netflix, Inc. Carl Icahn OBAF OBA Financial Services Clover Partners PBSK Poage Bankshares, Inc. Joseph Stilwell PCC PMC Commercial Trust REIT Redux PLXT PLX Technology Potomac Capital QEP QEP Resources Jana Partners RLH Red Lion Hotels Aim Capital WPP Wausau Paper Starboard Value (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. 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 13

3 Sotheby s (BID) Activist Investor: Marcato Capital 4,562, % Marcato published a presentation it gave on BID at an Oct 23 investing conference. A copy of Marcato s presentation is available here: Share Price M 3.6B Enterprise Value 3.2B Net Cash -90M 225M 52 wk. range EV/ 14.0 We initially covered BID on July 30 when Marcato disclosed a 6.68% active stake in the form of stock and options. Marcato currently owns 6.68%, consisting of stock and 1.2M options (approx.. 2% of BID) at a $45 strike price through Oct. 19. On August 26 Third Point disclosed a 5.7% "active" stake in BID. On October 2 Third Point disclosed an increase in its "active" stake from 5.7% to 9.3% and sent a letter to the CEO expressing concern about its leadership, shareholder misalignment, strategic direction and board governance. A copy of Third Point s October 2 letter is available here: On October 4 BID adopted a poison pill with a 10% threshold for "active" investors and a 20% threshold for "passive" investors. The details of BID s Poison Pill are available here: Continue to Next Page Page 3 of 13

4 Cracker Barrel Old Country Store (CBRL) Activist Investor: Biglari Capital 4,737, % On October 22 Biglari issued a letter to shareholders and on October 23 published its presentation to ISS. A copy of Biglari s October 22 letter is available here: Share Price B 2.6B Enterprise Value 2.9B Net Cash -290M 268M 52 wk. range EV/ 10.7 A copy of Biglari s ISS presentation is available here: We ve covered CBRL in several Catalyst Research Reports since mid-2011 when we initially highlighted BH s active ownership stake and its 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 19.9%) 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 August 16, 2012 BH nominated 2 people for election to the board at the next annual meeting. 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. 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 November 15 BH s 2 nominees were defeated at the annual meeting. In December 2012 Biglari increased its holding from 17.5% to 19.9%. On February 13 Biglari declined CBRL s offer to acquire its ownership. On August 16 Biglari nominated 2 for election to CBRL's board for the 3rd year in a row On September 16 Biglari announced it wants CBRL to declare a $20/share special dividend. On September 18 Biglari filed preliminary proxy materials to elect 2 directors. On October 8 Bilglari launched and filed its Definitive proxy materials Proxy Solicitor to Cracker Barrel Proxy Solicitor to Biglari Holdings Legal counsel to Biglari Holdings Page 4 of 13

5 Donegal Group (DGICA; DGICB) Activist Investor: Gregory Shepard 3,602,900(A); 397,100(B) 17.96%(A); 7.12%(B) Not Avail Share Price 16.11(A); 20.23(B) 539M 399M Enterprise Value 421M Net Cash -9M 32M 52 wk. range EV/ 12.9 Shepard issued a press release criticizing the Boards of Donegal Mutual and Donegal Group for failing to consider his acquisition proposal. A copy of Shepard s press release is available here: We initially covered Donegal Group in our November 5, 2012 Catalyst Research Report, highlighting Gregory Shepard s shareholder proposal for inclusion in DGIC s proxy statement. The proposal asked shareholders to demand the board immediately engage an investment bank to evaluate strategic alternatives. On October 7, 2013 Shepard proposed to purchase the Class B shares of Donegal Group not owned by him and a mutual property & casualty insurer would purchase all of the Class A shares not owned by Donegal Mutual or Shepard. Hampden Bancorp (HBNK) Activist Investor: Clover Partners 455, % On October 22 Clover sent a letter to HBNK s shareholders seeking support to elect 2 directors at the 11/ meeting. Clover also announced that ISS supports their candidates. Share Price M 98M Enterprise Value 218M Net Cash -120M 52 wk. range EV/ Clover s October 22 letter is available here: We initially covered HBNK on October 17, 2012 highlighting Clover Partners letter to the HBNK board demanding they sell the business to a strategic buyer. A copy of Clover s letter is available here: On May 1, 2013 Clover nominated 2 people for election to the board. On September 5 Clover sent a letter to HBNK shareholders outlining its reason for nominating 2 board candidates. A copy of Clover s September 5 letter is available here: On September 16 Clover increased its ownership in HBNK from 6.5% to 7.9% since nominating 2 to the board. On October 8 Clover filed its proxy materials. Proxy Solicitor to Clover Partners Page 5 of 13

6 Lindsay Corporation (LNN) Activist Investor: Kerrisdale Capital 360, % Kerrisdale issued a press release saying the stock is undervalued and the company should examine a capital Not Avail allocation plan as well as shareholder representation on the board. Share Price M 1B Enterprise Value 831M Net Cash 152M 120M 52 wk. range EV/ 6.95 A copy of Kerrisdale s press release is available here: Kerrisdale's whitepaper analysis on LNN is available here: Netflix, Inc. (NFLX) Activist Investor: Carl Icahn 2,665, % Icahn reduced his position in NFLX to 4.5% Not Avail Share Price B 18.7B Enterprise Value 18.8B Net Cash 630M 213M 52 wk. range EV/ 88.2 We initially covered NFLX on October 31, 2012 when Icahn disclosed a 9.98% (via stock and options) active ownership stake and stated his belief that the Company may hold significant strategic value for larger companies. On November 5 NFLX adopted a poison pill with a 10% threshold. OBA Financial Services Inc. (OBAF) Activist Investor: Clover Partners 268, % Clover increased its "active" stake from 5.3% to 6.6% We initially covered OBAF on May 26, 2010 when Lawrence Seidman announced his intention to meet with OBAF s board and management to review ways to maximize shareholder value. Share Price M 71M Enterprise Value 78M Net Cash -7M 52 wk. range EV/ On September 12, 2013 Seidman sent a letter to OBAF's board saying that there are several strategic buyers who would provide shareholders an adequate premium and greater liquidity. Clover Partners disclosed a 5.3% "active" stake and said it has engaged in communications with the management and the Board Seidman increased his "active" stake from 6.9% to 8.1% Legal counsel to Seidman Page 6 of 13

7 Poage Bankshares (PBSK) Activist Investor: Joseph Stilwell 318, % Not Avail Stilwell announced plans to seek board representation Share Price We previously covered PBSK in our December 30, 2011 and September 23, 2011 Catalyst Research Reports, highlighting Stilwell s initial 7.1% active ownership stake and his statement that the Company s value is not adequately reflected in the share price. 11M 43M Enterprise Value 45M Net Cash -2M 52 wk. range EV/ On December 30, 2011 we reported that Stilwell had increased his ownership stake from 7.1% to 8.3% since late September On February 25, 2013 Stilwell sent a letter to PBSK stating the Company is overcapitalized and that share repurchases are a simple, low-risk way to build shareholder value. To that end, Stilwell suggested the Company repurchase at least 10% of its shares every year while the stock is trading below book value. PMC Commercial Trust (PCC) Activist Investor: REIT Redux 583, % Not Avail REIT Redux sued PCC for breach of fiduciary duty by entering into a merger agreement with CIM Urban REIT Share Price M We initially covered PCC in our April 19 and April 5 Catalyst Research Reports, highlighting REIT Redux s 5.5% active ownership stake ($7.65 cost basis) and its announcement that they have held unproductive discussions with management about expanding into real estate equity investments. Enterprise Value 93M 191M On April 16 Hoak Public Equities disclosed a 5.15% active ownership stake in PCC at $7.46/share. Net Cash -94M On April 22 REIT Redux disclosed it had proposed the appointment of 1 person as a Trust Manager. 52 wk. range EV/ On May 17 REIT Redux sent a letter outlining a more realistic set of peer group companies for PCC to compare performance to. Also announced plans to withhold votes for director election. Hoak sent a letter to the CEO opposing the merger between PCC and CIM Urban REIT and instead suggested the Company seek a bidder above book value of $13/share. On July 22 REIT Redux sent a letter to PCC expressing several concerns over the transaction with CIM Urban REIT. On August 1 Hoak increased its ownership from 5.45% to 6.39% Hoak increased its "active" stake from 6.39% to 7.26% and reiterated its plan to vote against the merger with CIM Urban REIT. Continue to Next Page Page 7 of 13

8 PLX Technology Inc. (PLXT) Activist Investor: Potomac Capital 4,447, % Not Avail On October 25 Potomac sent a letter to shareholders seeking support for its slate of 5 nominees. A copy of Potomac s Oct. 25 letter is available here: Share Price M 268M Enterprise Value 261M Net Cash 7M 8M 52 wk. range EV/ 31.3 Also on October 25 PLXT filed its preliminary proxy statement outlining their position to vote for its nominees We previously covered PLXT in several Catalyst Research Reports, initially highlighting Balch Hill Capital s 9.7% active ownership stake and their statement that management should seek a buyer for the Company to take advantage of the tremendous market interest in the Company s PCI Express switches, and particularly its Gen3 switches. On March 7, 2012 Balch Hill nominated seven people for election to PLXT s board at the 2012 annual meeting. On March 13 Balch Hill sent a letter to the board suggesting that the board s ill-advised and poorly executed acquisition strategy is directly responsible for destroying shareholder value. In addition, PLX stated, We believe a reconstituted Board focused on reviewing all strategic options for the Company, including a sale of the Company is the best option for creating value for all stockholders of the Company. On April 16 we reported that Seligman Spectrum Focus Fund disclosed a 5.03% active ownership stake. On May 3, 2012 we reported that Balch Hill withdrew its nomination notice to elect 7 people to the board following PLXT s April 30 announcement that the Company is to be acquired by IDT for $7.00 per share in stock and cash. That deal collapsed on December 19, On January 25 Potomac Capital sent a letter to PLXT demanding the Company immediately commence a thorough review of all strategic alternatives to the Company. On March 6 Potomac Capital nominated 5 for election to PLXT s board. Potomac increased its ownership from 5.33% to 6.4% On June 17 Potomac increased its ownership from 6.4% to 8.2% (cost basis of $4.33/share). On June 27 Potomac sent a Demand Letter requesting to inspect the Company's books and records as it relates to the examination of strategic alternatives. On September 13 we reported that Discovery Capital had increased its ownership and disclosed a 5.2% "active" stake with a $5.05/sh cost basis Legal counsel to Potomac Capital Legal counsel to Balch Hill Capital Proxy Solicitor to PLX Technology Continue to Next Page Page 8 of 13

9 QEP Resources (QEP) Activist Investor: Jana Partners 13,500, % Jana disclosed a 7.5% "active" stake in QEP and sent a letter to the board recommending they add new board members to help unlock the value of its midstream QEPFS business and return capital. Share Price B 5.9B Enterprise Value 9.2B Net Cash -3.2B 1.46B 52 wk. range EV/ 6.3 A copy of Jana s October 21 letter is available here: Legal counsel to Jana Partners Red Lion Hotels Corp (RLH) Activist Investor: Aim Capital 19,608, % Not Avail Aim Capital disclosed a 5.01% "active" stake in RLH We initially covered RLH in our February 13, 2009 Catalyst Research Report highlighting a letter from Columbia Pacific (28.8%) to RLH expressing its disappointment in the Board s decision to adopt a poison pill. Share Price M 117M Enterprise Value 174M Net Cash -59M 12M 52 wk. range EV/ 15.2 On December 1, 2010 Columbia stated its belief that RLH should consider a sale of one or more assets. Furthermore, Columbia stated it may be interested in acquiring certain assets. On January 19, 2011 Columbia sent a letter to the board stating that the Company s January 18, 2011 announcement to sell two real estate assets was an important first step in the process to create and return value to shareholders. However, Columbia also stated that RLH explore the sale of the entire company or all of its real estate assets while focusing on growing the high margin franchise and management business. On November 14, 2011 Columbia said that it applauded management for successfully selling fully valued real estate, reducing debt, and reallocating capital to recently acquire the istar lease portfolio. With the hotel portfolio and balance sheet in a stable position, Columbia believed it was time to engage an advisor to run a full process to sell or liquidate the company. On February 28 Columbia sent a letter to the board stating that several financial and strategic parties have recently contacted them expressing an interest in acquiring the Company. On September 7 Columbia sent a letter to the board stating that, after five months, it is time for shareholders to learn the results of [the strategic review] process. Furthermore, Columbia said that if the board does not present a proposal to sell or liquidate the company they intend to call for their resignation. On December 6 RLH announced 4 new directors will join the board immediately. Legal counsel to Columbia Pacific Strategy & Communications to Columbia Pacific Page 9 of 13

10 Wausau Paper Corp. (WPP) Activist Investor: Starboard Value 7,500, % 7.75 On October 21 Starboard sent a letter to the board urging them to (i) immediately initiate a share repurchase of $100 million or more, (ii) institute a recurring dividend of $1.00 per share beginning later this year or early next year, and to increase the dividend to $1.50 or more over time, and (iii) reduce corporate overhead and relocate the headquarters to one of its tissue facilities. Share Price M 672M Enterprise Value 778M Net Cash -104M 46M 52 wk. range EV/ A copy of Starboard s October 21 letter is available here: We previously covered WPP in our January 18, 2013; October 19, September 28, February 17 and January 13, 2012; October 7, 2011 and July 29, 2011 Catalyst Research Reports, highlighting Starboard s initial 6.3% active ownership stake (subsequently increased to 9.7%) and letter to the board. In the July letter, Starboard stated their belief that WPP is deeply undervalued and also questioned the Company s tissue paper business expansion plans. Starboard s sum-of-the-parts analysis in 2011 suggested WPP was worth between $ per share. On October 3, 2011, Starboard sent a letter to the CEO of WPP following their meeting with management and the Board in late August. In the letter, Starboard stated their concern that, as currently conceived, WPP s Tissue expansion project requires them to take on significant additional debt, which in turn would dramatically increase the risk profile for shareholders. Starboard urged WPP to finance the Tissue expansion project by divesting certain non-core assets, including the underperforming Paper business, the Company-owned timberlands and the hydroelectric assets. On January 11, 2012 Starboard sent a letter to WPP suggesting they retain a reputable financial advisor to explore a sale. In addition, Starboard recommended WPP reconstitute its board with individuals capable of critically analyzing important strategic initiatives, such as the potential sale of the Paper segment or the entire Company, and the expansion of the Tissue business into new areas of the away-from-home market. On February 10, 2012 WPP entered into a settlement agreement with Starboard. Under the terms of the agreement WPP nominated 2 of Starboard s nominees for election to the 8-member board. On October 14 we reported Starboard had increased its active ownership stake in WPP from 9.7% to 14.4%. On January 11 and January 14 Starboard sent letters to WPP demanding they examine strategic alternatives. In addition, Starboard nominated 3 directors for election to the board. On March 6 WPP entered into a settlement agreement with Starboard. Under the terms of the agreement WPP agreed to solicit votes for 2 Starboard nominees. Legal counsel to Starboard Value Page 10 of 13

11 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 11 of 13

12 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 375 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: David Rosewater, Partner david.rosewater@srz.com Tel: Page 12 of 13

13 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 13 of 13