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 23, Month FREE Trial SYMBOL COMPANY INVESTOR BASI Bioanalytical Systems Inc. Thomas Harenburg IPCS ipcs, Inc. Greywolf Capital Management ITP Intertape Polymer Group, Inc. KSA Capital Management LM Legg Mason Inc. Trian Fund TBTC.OB Table Trac, Inc. Doucet Asset Management TGY Tremisis Energy Acquisition Bulldog Investors TMEN.PK Thermoenergy Corp. Quercus Trust VXGN.OB VaxGen Inc. Steven Bronson XOHO.OB XO Holdings Inc. Carl Icahn Catalyst Investment Research Activist Investing Catalyst + Deep Value Analysis The Catalyst Investment Research report not only finds where the hidden gems are buried but also brings along the excavation equipment to help dig up the value. - Ron Orol, Author Extreme Value Hedging: How Activist Hedge Funds are Taking on the World 1 Month FREE Trial is a Philadelphia-based consulting business and activist investment research firm focused specifically on shareholder activism. We have an unparalleled depth of knowledge on the subject matter and are the trusted advisor to numerous CEOs, board members and institutional investors worldwide. Page 2 of 9

3 Bioanalytical Systems Inc. (BASI) Activist Investor: Thomas Harenburg Shares 155,307 % Outstanding 5.63% Share Price M 8M Enterprise Value 20M -12M -2M 52 wk. range EV/ Negative On October 15 Thomas Harenburg sent a letter to the Board of BASI withdrawing his director candidate for consideration following the Company s announcement that they have appointed another individual (who was previously recommended by Harenburg) to the Board. We previously covered BASI in our July 31, June 12, June 5, May 15, April 10 and April 3 Catalyst Research Reports, highlighting Peter Kissinger (26% shareholder) and Thomas Harenburg s letters requesting board representation. On April 6 Peter Kissinger (BASI s founder and former CEO) sent a letter to the board expressing his concerns about the company s performance since his departure in Later, Kissinger supported Harenburg s request for board representation and also demanded the board replace three additional directors with directors of his choosing On June 11 Harenburg sent a letter to the board backing Kissinger s board candidates. On July 29 Kissinger demanded BASI call a special meeting of shareholders for the purpose of removing and replacing four of the five directors on the board. The Company has not publicly responded to this demand. ipcs, Inc. (IPCS) Activist Investor: Greywolf Capital Management Shares 1,349,724 % Outstanding 8.2% Share Price M 401M Enterprise Value 801M -400M 101M 52 wk. range EV/ 7.9 On October 22 Greywolf announced their belief that the tender offer made by Sprint to acquire IPCS for $24 per share undervalues the Company and, as a result, they intend to vote against the transaction. On October 19 Greywolf acquired an additional 127,600 shares at an average cost of $23.92 Intertape Polymer Group, Inc. (ITP) Activist Investor: KSA Capital Shares 3,676,590 % Outstanding 6.24% Share Price M 108M Enterprise Value 334M -224M 24M 52 wk. range EV/ 13.8 KSA has increased their ownership in ITP by 34,100 shares since the beginning of October. This constitutes a total increase in ownership of approximately 686,809 shares (totaling an increase of 1.2% of ITA shares outstanding) since early January We previously covered ITP in our January Catalyst Research Report, highlighting a December 30 th letter from KSA to ITP expressing their concern with the current strategy and management and setting forth immediate actions that they believe should be taken to maximize shareholder value, including: (i) commence the process of putting the business up for sale or replace the Board of Directors and Executive Director and restructure corporate governance and (ii) restructure management's economic incentives, including compensation agreements established between the Company and entities in which certain ITP directors have significant economic interests, so that they are more aligned with the interests of all the shareholders. Page 3 of 9

4 Legg Mason Inc. (LM) Activist Investor: Trian Fund Shares 6,946,756 % Outstanding 4.3% Share Price B 4.6B Enterprise Value 5.5B -1.1B 611M 52 wk. range EV/ 9.3 On October 26 LM announced Nelson Peltz, the CEO and founding Partner of Trian, will be elected to an expanded board of 14 members. In exchange for the board position Trian has agreed to vote its shares in favor of LM s Director nominees for a period of two years. We previously covered LM in our June 29, 2007 Catalyst Research Report, highlighting Pershing Square Capital s acquisition of 1.5% of LM shares outstanding when the stock was trading around $98. Pershing no longer holds this position. Table Trac Inc. (TBTC.OB) Activist Investor: Doucet Asset Management Shares 368,177 % Outstanding 8.85% 2.00 Share Price M 8M Enterprise Value 7M 1M 2M 52 wk. range EV/ 4.4 On October 22 Doucet announced their belief that TBTC is undervalued by a multiple of its current trading price and, as a result, would like to see management explore ways to maximize stockholder value by examining a sale or by developing business partnerships. In addition, Doucet would like to see TBTC (i) set an annual meeting date to occur no later than year-end, (ii) add two additional outside independent board members to its existing board to be mutually agreed upon by Doucet and the board, (iii) communicate the company s business plan and strategic vision before the annual meeting, and (iv) confirm to the public that they are Sarbanes-Oxley compliant before the annual meeting. Tremisis Energy Acquisition Corp. (TGY) Activist Investor: Bulldog Investors Shares 1,659,299 % Outstanding 13.64% Share Price 7.88 N/A 73M Enterprise Value 73M 78M N/A 52 wk. range EV/ N/A On October 22 Bulldog announced they had entered into an agreement with a third party providing them with the option to purchase their shares in TGY. Under the provisions of the agreement Bulldog will vote against any transaction proposed by TGY and convert their shares into cash unless the third party exercises their option to purchase Bulldog s shares at which time they will vote their shares as directed by the third party. TGY is a Special Purpose Acquisition Corporation (SPAC) seeking to acquire Asiana Airlines Inc.for $57M in cash and 9.7 million shares of TGY. Page 4 of 9

5 Thermoenergy Corp (TMEN.PK) Activist Investor: Quercus Trust Shares 32,953,334 % Outstanding 41.3% Share Price M 19M Enterprise Value 26M -6M -13M 52 wk. range EV/ Negative On Oct 22 Quercus announced that three individuals affiliated with their fund were appointed to TMEN s seven member board. We previously covered TMEN in our May 1 Catalyst Research Report, highlighting Quercus Trust s announcement that they had proposed the Company make changes to the composition of the board and management team. At that time Quercus wanted five of seven board seats. Following this filing TMEN proposed Quercus invest $5M in the Company and, in exchange, will be granted three of seven board seats. Quercus rejected this offer. VaxGen Inc. (VXGN.OB) Activist Investor: Steven Bronson Shares 1,220,439 % Outstanding 3.7% Share Price M Enterprise Value -16M 36M -6M 52 wk. range EV/ N/A On October 15 VaxGen announced a $22M stock merger agreement with Oxigene Inc. On October 22 Bronson announced he had disbanded the VaxGen Full Value Committee ending his attempt to seek board seats. We previously covered VXGN in our September 25, August 28 and August 21 Catalyst Research Reports, highlighting a letter from MaxApp Capital in July in which they detailed an extensive list of grievances they had with the Company. In the letter, MaxApp demanded (among other things) the Company cease any cash payments to the current board and immediately distribute a minimum of $0.50 per share in cash to shareholders via a special dividend. On August 20 Boston Avenue Capital and Spencer Capital (calling themselves the Value Investors for Change ) filed a preliminary proxy statement for the purpose of seeking to replace the entire five member board at the next annual meeting. On August 21 Steven Bronson and Mark Boyer formed a group and created the VaxGen Full Value Committee for the purpose of replacing the current board at the next annual meeting. On September 17 Bronson formally nominated five directors to the board for election at the 2009 annual meeting. XO Holdings, Inc. (XOHO.OB) Activist Investor: Carl Icahn Shares 721,069,301 % Outstanding 89.33% On October 23 Icahn increased his previously announced bid to purchase XO from 0.55 to 0.80 per share. Share Price B 144M Enterprise Value -275M 397M 131M 52 wk. range EV/ Negative Page 5 of 9

6 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. For Sponsorship Information Contact Damien Park at or dpark@hedgerelations.com Page 6 of 9

7 PLATINUM SPONSORS Legal Advisers Olshan Grundman Frome Rosenzweig & 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 7 of 9

8 PLATINUM SPONSORS Proxy Advisors The Altman Group is a full service proxy solicitation firm whose senior professionals have over 250 years of industry experience. We have developed one of the most experienced proxy fight teams in the industry, having been retained in 46 contested solicitations over the past 3 years alone and our 80% win record is unequaled. We were presented with the 2008 TOPS Award recognizing the firm with the highest rated proxy solicitation practice (the third consecutive win for us). We provide strategic consulting, shareholder identification, institutional and proxy advisory firm insight and advanced proxy solicitation services. Paul Schulman, Executive Managing Director pschulman@altmangroup.com Tel: Georgeson Inc. is the world s leading provider of strategic proxy and corporate governance advisory services to corporations and shareholder groups working to influence corporate strategy. For over half a century, Georgeson has specialized in complex solicitations such as hostile and friendly acquisitions, proxy contests and takeover defenses. For eight consecutive years, Georgeson has been ranked the No. 1 proxy solicitor for M&A transactions in the US. Georgeson s experts include former corporate secretaries who have worked toward successful outcomes with activist investors, former directors of US research at RiskMetrics, M&A attorneys, and the most experienced proxy solicitation team in the industry. Rachel Posner, Senior Managing Director and General Counsel rposner@georgeson.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 8 of 9

9 GOLD SPONSORS Lowenstein Sandler is a nationally recognized corporate law firm with offices in Boston, New York, Palo Alto and Roseland, with more than 270 attorneys providing a full range of legal services. The firm s commitment to its clients is demonstrated through its client-centered, service-oriented culture. Lowenstein Sandler attorneys are regularly recognized for excellence by clients and peers in national publications, including Best Lawyers in America, Chambers USA: America s Leading Lawyers for Business and The Legal 500. The attorneys in our Investment Management and Corporate practices represent more than 200 domestic and offshore hedge funds, private equity funds, venture capital funds and other pooled investment vehicles, with assets under management ranging from $50 million to more than $30 billion. Our clients also include fund managers, investment advisers, administrators, broker-dealers and institutional investors. Jeffrey Shapiro, Partner jshapiro@lowenstein.com Tel: Laurel Hill Advisory Group is a full service, cross-border proxy solicitation firm whose partners and associates are highly recognized in the areas of corporate governance, shareholder activism, and mergers & acquisitions. Laurel Hill was founded in late 2007 by a team of experienced professionals who have worked on over a hundred proxy fights and deals in the U.S. and Canada in the past two years. We are the fastest growing proxy firm in North America providing expertise in corporate governance consulting, shareholder identification, corporate actions (tender offers, consent solicitations), strategic proxy solicitation advisory services, and shareholder asset recovery programs. Tom Cronin, Partner tcronin@laurelhillag.com Tel: Page 9 of 9