CATALYST EQUITY RESEARCH REPORT Weekly Research Highlighting Activist Investments

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2 HIGHLIGHTING ACTIVIST INVESTMENTS Week Ending February 25, 2011 SYMBOL COMPANY INVESTOR BPK BlackRock Municipal 2018 Term Trust Brooklyn Capital Management CCUR Concurrent Computer Corporation Skellig Capital Management CPEX CPEX Pharmaceuticals, Inc. Kingstown Capital CRWS Crown Crafts, Inc. Mill Road Capital JCG J. Crew Group Inc. Mason Capital MENT Mentor Graphics Corporation Carl Icahn NOOF New Frontier Media Longkloof Ltd. PULS Pulse Electronics Corp. Bel Fuse Inc. RDNT RadNet Inc. Red Mountain Capital TIER Tier Technologies Discovery Capital XPRT LECG Corporation T2 Partners 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 12

3 BlackRock Municipal 2018 Term Trust (BPK) Activist Investor: Brooklyn Capital Management Shares 100 Catalyst: % Outstanding 1.87% On February 11 Brooklyn Capital (an entity controlled by activist investor Bulldog Investors) disclosed that Cost Basis Not Avail they own 100 shares of auction rate preferred stock and announced they have nominated one director for election to the board at the next annual meeting. Share Price M 247M Enterprise Value 251M Net Cash N/A N/A 52 wk. range EV/ N/A Concurrent Computer Corp. (CCUR) Activist Investor: Skellig Capital Management Shares % Outstanding Cost Basis 514, % Not Avail Catalyst: On February 22 Skellig sent a letter to CCUR stating that the best option to produce a significant long-term return on investment for Concurrent's shareholders is for the Company to repurchase shares of its own stock via a tender offer [at a price between $6.60 and 6.90 per share]. Share Price M 55M Enterprise Value 23M Net Cash 32M 2M 52 wk. range EV/ 10.3 We previously covered CCUR in our October 1, 2010 Catalyst Research Report, highlgihgting Skellig Capital s September 28 letter announcing a 5.06% active ownership position and disclosing a letter sent to the Company on July 28, 2010 requesting a significant share buyback. In the letter, Skellig suggests the Company use $5M to $7.5M to repurchase shares at a specified price rather than execute a large acquisition which, Skellig states, would introduce new business risk when the successful execution of Concurrent s new product cycle should be of paramount importance. Skellig also disclosed they met with management of CCUR on September 9 to continue this discussion. Continue To Next Page Page 3 of 12

4 CPEX Pharmaceuticals, Inc. (CPEX) Activist Investor: Kingstown Capital Shares 159,156 Catalyst: % Outstanding 6.1% On February 23 Kingstown Capital announced they will vote against the Company s $27.25 per share buyout Cost Basis offer from Footstar Corporation. Share Price M 71M Enterprise Value 52M Net Cash 19M 3M 52 wk. range EV/ 16.5 We previously covered CPEX in our February 4, 2011; February 19, January 29 and January Catalyst Research Reports, highlighting Arcadia Capital s (9.97%) January letter to CPEX expressing concern that the company has not been managed for the benefit of its stockholders. Arcadia s offer to acquire CPEX for $14.00 (which was later increased to $16.00). On February 17 Arcadia nominated one candidate for election to the board but was unsuccessful in gaining representation. On May CPEX announced that it intended to explore strategic alternatives. On January Footstar Corporation offered to purchase CPEX for $27.25/share in cash. On January 28 Mangrove Partners (5.31% shareholder at an avg. $24.41/share) sent a letter to CPEX detailing why they intend to vote against the company s recent buyout proposal. The Mangrove letter is available here: Legal counsel to Footstar, Inc. Crown Crafts, Inc. (CRWS) Activist Investor: Mill Road Capital Shares 838,363 Catalyst: % Outstanding 8.7% Mill Road has increased their ownership in CRWS from 6.3% to 8.7% since announcing their active Cost Basis 3.72 ownership stake on January 31. Share Price M 48M Enterprise Value 56M Net Cash -8M 11M 52 wk. range EV/ 4.9 We previously covered CRWS in our February 4, January 14, 2011; July 2, 2010; May ; July 4, 2008; December 7, October 12 and August Catalyst Research Reports, highlighting Mill Road s active ownership and Wynnefield Capital s (17%) 2007 threat to replace two directors if certain governance and compensation issues were not addressed. On August the Company announced one Wynnefield nominee was elected to the 7-person board following a contested election. On October Wynnefield delivered a letter to the board requesting they take prompt action to (i) form an independent Strategic Alternatives Committee and employ a competent outside arm s length firm to undertake an analysis of all the strategic options available, including a sale or merger, (ii) de-stagger the Board, (iii) implement a succession plan for the chief executive officer and other senior executives, and (iv) orient Board compensation away from cash and toward equity participation. On July 1, 2008 CRWS entered into a settlement agreement with Wynnefield, adding one of Wynnefield s nominees to the board, increasing their board representation to 2 of 7. On April Wynnefield sent a letter to Crown Crafts formally requesting that one current director resign from the board. On June 25 Wynnefield delivered a letter to CRWS notifying them of their intention to appear at the August 10 annual meeting to nominate and seek to elect two individuals to the board. Wynnefield was successful and currently holds two of seven board seats. On January Wynnefield issued a press release stating that CRWS s recent cut in fiscal 2011 sales and earnings guidance demonstrates the urgent need for strategic action. Furthermore, Wynnefield demanded CRWS form a special committee to conduct a proactive and exhaustive process to release stockholder value. Page 4 of 12

5 J. Crew Group, Inc. (JCG) Activist Investor: Mason Capital Shares % Outstanding Cost Basis 4,805, % Catalyst: On February 11 Mason Capital sent a letter to the Board of JCG advising them that they will oppose the company s $43.50 per share going-private transaction. On February 25 Mason asserted their appraisal rights under Section 262 of the Delaware General Corporation Law. Share Price B 2.8B Enterprise Value 2.5B Net Cash 312M 316M 52 wk. range EV/ 7.8 Proxy Solicitor to J. Crew Mentor Graphics Corp. (MENT) Activist Investor: Carl Icahn Shares 16,120,289 Catalyst: % Outstanding 14.70% On February 22 Icahn offered to purchase MENT for $17 per share in cash. In the letter Icahn stated he will not Cost Basis Not Avail insist on a break-up fee so as not to provide a roadblock to others who may want to consider bidding higher. Share Price M 1.7B Enterprise Value 1.9B Net Cash -156M 88M 52 wk. range EV/ We previously covered MENT in our February 11, February 4, June 25, June 11 and May Catalyst Research Reports, highlighting Icahn s May 27 announcement that he owns 6.86%. At that time Icahn announced he intends to hold conversations with MENT s management to discuss maximization of shareholder value. On February 3 we highlighted that Casablanca Capital disclosed a 5.5% active ownership. (See additional comments below) On February 4 MENT announced that it would hold its 2011 annual meeting on May 12 (March 11 record date), which is six weeks earlier than last year, leaving shareholders only 10 days to nominate directors. On February 11 Icahn nominated three people to MENT s board. On February 9 Icahn said MENT should put itself up for sale. Icahn believes that a strategic acquirer should find extremely attractive the fact that the Company spent $407 million on SG&A ($313 million on marketing and selling expenses and $94 million on G&A) over the last twelve months. Casablanca Capital On February 7 Casablanca sent the board of MENT a letter in response to the Company s announcement that they have moved forward the annual meeting by six weeks (and therefore leaving shareholders only 10 days to nominate directors). In the letter Casablanca strongly urged the board to change the date of the annual meeting so that nominations are due by April 2. On February 11, Casablanca nominated three people to MENT s board. See our Feb 11 blog post titled, Icahn and Drapkin Threaten Proxy Fight Against Mentor Graphics (MENT) See our blog post on Casablanca s founder Donald Drapkin discussing activist investing. Legal counsel to Casablanca Capital Page 5 of 12

6 New Frontier Media Inc. (NOOF) Activist Investor: Longkloof Limited Shares 1,921,000 Catalyst: % Outstanding 12.1% Longkloof has increased their ownership in NOOF from 11.5% in September 2010 to 12.1% at an average cost Cost Basis 2.09 basis of $2.09/share. Share Price M 39M Enterprise Value 26M Net Cash 15M 7M 52 wk. range EV/ 3.9 We previously covered NOOF in our February ; December 24, September 24, 2010; and November 14, 2008 Catalyst Research Reports, highlighting Baker Street s 7.9% active ownership position in February 2011 and Longkloof Limited s September % active ownership stake. We also reported on an agreement between NOOF and activist investor Steel Partners in 2008 in which NOOF repurchased Steel s 2.6M shares (11.5%) for $1.55/sh. Legal counsel to Baker Street Capital Pulse Electronics Corporation (PULS) Activist Investor: Bel Fuse Inc. (Ticker: BELFB) Shares % Outstanding Cost Basis Share Price 341,725 1% Not Avail 5.41 Catalyst: On February 28 Bel Fuse proposed to acquire Pulse Electronics for $6.00 per share in cash or Bel Fuse Class B shares. In the letter to PULS, Bel stated, Despite our best efforts Pulse Electronics' Board has expressed an unwillingness to engage in meaningful negotiations and has continued to defer discussions to some future time. We believe good corporate governance and their fiduciary responsibilities require the Pulse Electronics Board to seriously consider our value enhancing proposal, which provides immediate and full value to Pulse Electronics' shareholders. 437M 222M Enterprise Value 268M Net Cash -42M 36M 52 wk. range EV/ 7.4 We previously covered PULS in our January 21, 2011 and December Catalyst Research Reports, highlighting PULS s December 28 announcement that they had received a letter from Bel nominating three candidates for election to the Company s Board of Directors at the 2011 Annual meeting. In a press release issued on December 28 by Pulse Electronics (formerly Technitrol), the Company stated they had attempted to acquire Bel in 2007, and the current nominations followed a recent communication from Bel expressing its interest in "restarting discussions about a potential business combination" and identifying a "friendly transaction" as the "preferred path forward." On January PULS confirmed they have received a letter from Bel nominating a fourth candidate for election to the Company s board. This announcement follows PULS s recent announcement that they have added the Company s newly appointed CEO to an expanded board of 6 Directors. Strategy & Communications for Bel Fuse Inc. Legal counsel to Bel Fuse Inc. Page 6 of 12

7 RadNet, Inc. (RDNT) Activist Investor: Red Mountain Capital Shares 2,151,749 Catalyst: % Outstanding 5.8% On February 22 Red Mountain disclosed an active 5.8% ownership stake in RDNT and announced, [they] Cost Basis 3.12 have met with the management of RadNet and expect to maintain a dialogue with management regarding, among other things, RadNet s operations, strategic direction, capital structure and corporate governance and Red Mountain s expectation that management will pursue appropriate measures to enhance shareholder value. Share Price M 120M Enterprise Value 620M Net Cash -493M 92M 52 wk. range EV/ 6.8 Tier Technologies Inc. (TIER) Activist Investor: Discovery Group Shares 2,459,404 Catalyst: % Outstanding 14.8% On February 19 Tier entered into an agreement with Discovery to end a proxy contest. Under the terms of the Cost Basis Not Avail agreement Tier will reduce the size of a reconstituted board of directors from eight to seven members. Share Price M 96M Enterprise Value 37M Net Cash 62M 0 52 wk. range EV/ Negative We previously covered TIER in numerous Catalyst Research Reports going back to 2007, highlighting Parthenon Capital s (9.9%) and Discovery Capital s request for board representation at the 2009 annual meeting. Through a proxy contest that year, Discovery obtained two board seats and Parthenon obtained one board seat on the Company s 9-member board. On January 6, 2010 Discovery announced their intention to nominate three candidates to the board at the 2010 annual meeting. On January 8, 2010 Parthenon entered into a Settlement Agreement with TIER. Under the terms of the Agreement TIER agreed to re-elect one of Parthenon s representative to the board. In exchange, Parthenon agreed to vote their share in accordance with the board s nominees for the 2010 annual meeting. On February TIER entered into an agreement with Discovery in order to prevent a proxy contest for board representation. Under the terms of the agreement TIER (i) reduced the size of the board from 9 to seven members, (ii) separated the roles of Chairman and CEO, and (iii) reimbursed Discovery $175,000 in connection with the 2009 proxy contest. On September 7 Discovery sent a letter to the Board stating that they intend to nominate up to two individuals for election to the board at the Company s 2011 annual meeting. On November 2, Discovery submitted a shareholder proposal to be included in the Company s proxy materials. The proposal recommends the Board return a portion of their cash to stockholders by undertaking a Dutch Auction to repurchase $40 million of common stock. On December 17 TIER announced a $10M Dutch offer to repurchase shares at a price range from $5.80 to $6.20 per share. On January 21 TIER announced 1.9M shares were validly tendered at a price of $6.10, therefore 85.9% of shares tendered from each tendering stockholder will be purchased for $6.10 per share for a total of $10M. On January Discovery nominated four individuals to the TIER board for election at the 2011 annual meeting. Page 7 of 12

8 LECG Corporation (XPRT) Activist Investor: T2 Partners Shares 2,001,148 Catalyst: % Outstanding 5.24% On February 23 T2 disclosed 5.3% active ownership position in XPRT. Cost Basis 1.29 Share Price 0.71 On February 28 XPRT announced plans to transfer several of their practice groups to other companies. The Company will use a majority of the proceeds to repay $28M in debt and does not believe there will be any value remaining for the common stockholders. 297M 27M Enterprise Value 54M Net Cash -26M -8M 52 wk. range EV/ Negative Page 8 of 12

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 12

10 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 10 of 12

11 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 11 of 12

12 GOLD SPONSORS 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. John O Grady, Vice President jogrady@lhsecurities.com Tel: SSG Capital Advisors, LLC ( SSG ) is a nationally recognized independent investment bank that assists public companies, as well as their stakeholders in providing strategic alternatives analysis including sales and acquisitions, optimizing capital structures, evaluating dividends and share buyback programs, business unit divestitures, monetization of intellectual property, preservation of NOL s, PIPEs, and strategic investments such as joint ventures. As a specialist in maximizing shareholder value we offer the expertise our clients need in today's complex and ever changing financial markets. Since 2001, SSG has successfully completed over 160 investment banking assignments on behalf of clients throughout North America and Europe. Mark Chesen, Managing Director mchesen@ssgca.com Tel: Page 12 of 12