RANGE OF MARKET CAPITALIZATION $10M - $100M $100M - $500M $500M - $1B $1B+

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1 WEEK ENDING SEPTEMBER 28 th 27 CATALYST EQUITY RESEARCH REPORT Hedge Fund Solutions DAMIEN J. PARK, President REPORT SUMMARY Number Of Activist Situations For The Week: 18 Average Investor Ownership: 11% RANGE OF MARKET CAPITALIZATION Value Range $1M - $1M $1M - $5M $5M - $1B $1B+ # of Companies REASONS FOR ACTIVIST ACTIVITY (Some situations have more than one reason provided) Transaction Related Review Strategic Alternatives Divest Business Unit(s) Share Repurchase Special Dividend Open A Close-Ended Fund Block a Transaction Corporate Governance Related Request Board Membership Remove Poison Pill De-classify Board Structure Separate Chairman & CEO Adjust Special Meeting Threshold Remove Board Member 3 1 Management/Operations Related Request Change in Management Misaligned Cost Structure Excessive Compensation 1 Settlements Standstill Agreement 1

2 COMPANIES AND INVESTORS HIGHLIGHTED IN THIS WEEK S REPORT: SYMBOL COMPANY INVESTOR ABXA ABX Air, Inc. Red Mountain Capital ACXM Acxiom Corp. MMI Investments AGL Angelica Corp. Pirate Capital BGP Borders Group Inc. Spencer Capital Management BIVN Bioenvision Inc. Genzyme Corp. BRKS Brooks Automation Nierenberg investment Management DUCK Duckwall-Alco Stores Strongbow Capital DXYN Dixie Group RGM Capital ENER Energy Conversion Devices Coghill Capital Management ITG Investment Technology Group DE Shaw LEV Levitt Corp. Prescott Group Capital Management MACE Mace International Lawndale Capital PSPT PeopleSupport, Inc. Galleon Management PRLS Peerless Systems Boston Avenue Capital RURL Rural Metro Corp. Stadium Capital Management TWIN Twin Disc Clarus Capital Group WNG Washington Group International Greenlight Capital ZLC Zale Corp Citadel 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 2 of 9

3 ABX Air, Inc. (ABXA) Activist Investor: Red Mountain Capital Shares 3,623,154 % Outstanding 6.3%. Share Price B 415M Enterprise Value 586M -17M 92M 52 wk. range EV/ 6.4 On September 24 th Red Mountain sent a letter to the Chairman of ABXA stating the board is not acting objectively to safeguard shareholder value. In the letter Red Mountain cited their disappointment in the board s outright rejection of ASTAR Air Cargo Holdings indication of interest to acquire ABXA and its failure to pursue negotiations over the past three months. Red Mountain finished the letter by strongly encouraging the board to engage in serious and constructive negotiations to consummate a transaction that maximizes shareholder value. We estimate an additional 8%+ of ABXA shares are held by activist investors. Acxiom Corp (ACXM) Activist Investor: MMI Investments Shares 7,797,288 % Outstanding 9.7% Share Price B 1.6B Enterprise Value 2.27B -678M 37M 52 wk. range EV/ 6.14 Activist investor MMI increased their ownership in ACXM by 592, shares (equiv. to approx. 1% of the shares outstanding) since August 16 th. On September 21 st the Fund announced their intention to vote their shares in favor of the previously announced merger. We previously covered AXCM in numerous Catalyst Research Reports (most recently on August 17 th ), highlighting MMI s campaign to block the $27.1 merger between the company and ValueAct Capital (who obtained board representation through a proxy contest) and Silver Lake Partners. UPDATE: On Monday October 1 st the Company announced the termination of the merger agreement. In exchange, ValueAct and Silver Lake agreed to pay a $65M penalty for terminating the agreement. Angelica Corp. (AGL) Activist Investor: Pirate Capital Shares 935,147 % Outstanding 9.8% 24.1 Share Price M 189M Enterprise Value 286M -97M 29M 52 wk. range EV/ 9.99 On September 25 th activist investor Pirate Capital entered into a settlement agreement with AGL in which they agreed to pay a portion of Pirate s proxy solicitation fees in exchange for ending a proxy contest with the intent to remove and replace two board members at the next annual meeting. We previously covered AGL in numerous Catalyst Research Reports (most recently on August 31 st ), highlighting Pirate s belief that the company could be sold for $31 per share based upon comparable company multiples. On September 19 th AGL announced that they ve formally directed their investment bank to explore a possible sale. In addition, the company announced the separation of the chairman and CEO position and the appointment of a representative from activist investor Steel Partners (2% ownership at an avg. cost of $22.1) as Vice Chairman. 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 3 of 9

4 Borders Group (BGP) Activist Investor: Spencer Capital Management Shares 4,628,12 % Outstanding 7.9% Share Price B 784M Enterprise Value 1.5B -663M 144M 52 wk. range EV/ 1.1 On September 25 th activist investor Spencer Capital requested that the company consider adding a representative from a major shareholder to the board of directors. We previously covered BGP in our July 13 th Catalyst Research Report, highlighting Spencer s 6.8% ownership in BGP. At that time we also highlighted activist investor Pershing Square s 11.8% ownership and activist investor Citadel Capital s 4.5%. (Citadel currently owns approx. 7.6%.) Spencer Capital s ownership includes 2,452,92 shares (equiv. to approx. 4.2% shares outstanding) at an average price of $19.42/share and 2,175,2 options purchased for approx. $6.4 each. We estimate approx. 4% of BGP s stock is held by activist investors. Bioenvision, Inc. (BIVN) Activist Investor: Genzyme Corp. Shares 18,31,682 % Outstanding 27.9% Share Price M 29M Enterprise Value 241M 49M -28M 52 wk. range EV/ On September 27 th Genzyme (Ticker: GENZ) sent a letter to the board of BIVN reiterating their commitment to purchase the company for $5.6 per share and emphasized their belief that it is a fair price to pay for the business. We previously covered BIVN in our September 14 th, September 7 th, and August 1 th Catalyst Research Reports, highlighting activist investor SCO Partners intention to vote against the buyout proposal from GENZ because of their belief that the company could fetch as much as $1/share in a competitive auction process. In addition, we highlighted SCO s intention to nominate a new slate of directors at the next annual meeting. SCO s slate includes two individuals from SCO, two continuing directors, and one independent nominee. Furthermore, we highlighted activist investor Elliot Associates owns 6.7% and also opposes the $5.6 offer. Brooks Automation (BRKS) Activist Investor: Nierenberg Investment Management Shares 5,56,958 % Outstanding 7.2% On September 25 th activist investor NIM sent a letter to BRKS urging them to use the balance sheet s assets shrewdly to maximize shareholder value. In the letter NIM suggested the company commit to repurchase 1 million shares (equivalent to approx. 14% of the shares outstanding) over the next twelve months. Share Price M 1B Enterprise Value 642M 36M 18M 52 wk. range EV/ Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 4 of 9

5 Duckwall-Alco Stores, Inc. (DUCK) Activist Investor: Strongbow Capital Shares 543,517 % Outstanding 14.2%. Share Price M 14M Enterprise Value 174M -33M 17M 52 wk. range EV/ 1.8 On September 26 th Strongbow Capital proposed the board of DUCK take the following actions: 1. Expand the size of the Board by one member and appoint an individual from Shore Capital Management. (The principal executing broker for Strongbow.) 2. Create an executive committee of the board charged with overseeing efforts by management to achieve the following three objectives: (i) Reduce average inventory levels (ii) Reduce SG&A expense and (iii) Reduce losses from shrinkage (i.e., pilferage). We estimate an addition 1%+ of DUCK shares are held by activist investors. Dixie Group, Inc. (DXYN) Activist Investor: RGM Capital Shares 1,285,353 % Outstanding 1.5% Activist investor RGM Capital increased their ownership in DXYN by 76,271 shares (equiv. to approx..6% shares outstanding) since early August. Share Price M 125M Enterprise Value 225M -1M 31M 52 wk. range EV/ 7.27 Energy Conversion Devices (ENER) Activist Investor: Coghill Capital Management Shares 3,64,68 % Outstanding 7.6%. Share Price M 95M Enterprise Value 721M 184M -24M 52 wk. range EV/ Activist investor Coghill Capital decreased their ownership in ENER by 889,4 shares (equiv. to approx. 2.2% shares outstanding) since early September. We previously covered ENER in numerous Catalyst Research Reports (most recently on August 31 st ), highlighting Coghill s persistent requests for the company to change management and its capital structure. 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 5 of 9

6 Investment Technology Group (ITG) Activist Investor: DE Shaw Shares 4,396,392 % Outstanding 9.9%. Share Price M 1.9B Enterprise Value 1.8M 118M N/A 52 wk. range EV/ 5.34 Activist investor DE Shaw has increased their ownership position in ITG by 965,817 shares (equiv. to approx. 2.2% shares outstanding) since September 12 th. We previously covered ITG in our September 14 th and June 12 th Catalyst Research Reports, highlighting DE Shaw s letter to ITG s CEO expressing their belief that the share price (at that time the share price was $44.2) did not reflect the fair value of the company. The June 11 th letter requested the board evaluate a sale of all or part of the business and if a sufficient price cannot be reached the board should implement a share buyback plan. On September 4 th DE Shaw received termination of the HSR Act waiting period which will allow them the freedom to purchase up to approx. 25% of ITG stock without triggering any antitrust restrictions. Levitt Corp. (LEV) Activist Investor: Prescott Group Capital Management Shares 2,872,338 % Outstanding 15.4% 2.9 Share Price M 4M Enterprise Value 632M -593M -636K 52 wk. range EV/ -994 Activist investor Prescott Group has increased their ownership in LEV by 231,62 shares (equiv. to approx. 1.2% shares outstanding) over the past two weeks. In addition, on September 26 th, Prescott sent a letter to the independent members of the board requesting the company disclose material non-public information relating to the valuation of the company s real estate assets. We previously covered LEV in our September 21 st and September 14 th Catalyst Research Reports, highlighting Prescott s demand that the Company immediately abandon the proposed rights offering. Mace International (MACE) Activist Investor: Lawndale Capital Shares 1,375,428 % Outstanding 9.6% 2.42 Share Price M 37M Enterprise Value 3M 7M -6.7M 52 wk. range EV/ On September 18 th activist investor Lawndale Capital formally submitted notice to nominate four board members at the next annual meeting. In addition, Lawndale submitted a proposal (to be voted on at the annual meeting) to amend the bylaws so that at least 66.7% of the directors shall be considered independent. We previously covered MACE in our August 31 st, August 17 th, July 19 th, and June 22 nd Catalyst Research Reports, highlighting activist investor Ancora Capital s (8.6%) increase in ownership along with their intention to support Lawndale s efforts to replace a majority of board members at the next annual meeting. In addition, Ancora announced their belief that MACE is trading at half of what they believe is the company s private market value. 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 6 of 9

7 PeopleSupport, Inc. (PSPT) Activist Investor: Galleon Management Shares 5,78,548 % Outstanding 24.5% On September 25 th Galleon Management announced their opposition to the decision by the board to recently adopt a poison pill. Share Price M 282M Enterprise Value 181M 11M 16M 52 wk. range EV/ Peerless Systems (PRLS) Activist Investor: Boston Avenue Capital Shares 995,982 % Outstanding 5.7% 1.55 Share Price M 35M Enterprise Value 2M 15M 2.18M 52 wk. range EV/ 8.98 Semi-activist investor Boston Avenue Capital has aggressively been increasing their ownership position in PRLS (by 754,465 shares - equivalent to approx. 4.3% outstanding) since late June. We previously covered PRLS in our July 13 th and May 11 th Catalyst Research Reports, highlighting activist investor Pembridge Capital Management s nomination of three directors to the Company s board. On July 9 th one of Pembridge s managing partners was elected to the board. Rural Metro Corp. (RURL) Activist Investor: Stadium Capital Management Shares 2,813,652 % Outstanding 11.4% Share Price M 79M Enterprise Value 356M -277M wk. range EV/ 6.17 On September 19 th Stadium Capital sent a letter to the board of RURL stating that despite being long-term investors they have lost confidence in the board. In addition, they announced that they were delighted the board has invited activist investor Accipiter Capital (15% at avg. cost of 5.83) to meet with them on October 1 th. We previously covered RURL in numerous Catalyst Research Reports (most recently on August 31 st ), highlighting Accipiter Capital s disappointment with the company s loss in value and lack of progress in reforming its corporate governance practices and compensation structure. On August 31 st Accipiter formally nominated two individuals for election to the board at the next annual meeting. 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 7 of 9

8 Twin Disc (TWIN) Activist Investor: Clarus Capital Group Shares 298,16 % Outstanding 5.1%. Share Price M 332M Enterprise Value 356M -24M 47M 52 wk. range EV/ 7.59 On September 24 th Clarus Capital sent a third letter to the Chairman of TWIN reiterating their previous request for the company to undergo a share buyback program and/or seek the advice of an investment bank regarding how to maximize shareholder value. We previously covered TWIN in our September 14 th Catalyst Research Report, highlighting Clarus Capital s second letter to the board requesting they retain an investment bank to explore various alternatives for enhancing shareholder value. Washington Group International (WNG) Activist Investor: Greenlight Capital Shares 2,917,4 % Outstanding 1.% Share Price B 2.6B Enterprise Value 2.4B 196M 98M 52 wk. range EV/ On September 27 th activist investor Greenlight Capital sent a letter to the board of WNG suggesting the acquisition price of.772 of a share of URS stock and $43.8 in cash remains inadequate. Furthermore, Greenlight announced their intention to vote against the merger. In a July 26 th letter to the board of WNG Greenlight suggested the company pay a special dividend of $27.5 per share which will ultimately have a net effect of raising the share value by $7. We estimate an addition 14%+ of WNG shares are held by activist investors. Zale Corp. (ZLC) Activist Investor: Citadel Shares 2,65,739 % Outstanding 5.31% Share Price B 1.13B Enterprise Value 1.32B 19M 165M 52 wk. range EV/ 8. On September 25 th activist investor Citadel announced a 5.31% ownership position in ZLC. We previously covered ZLC in our September 21 st Catalyst Research Report, highlighting activist investor Breeden Capital s aggressive increase in ownership since early July. 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 8 of 9

9 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. 16 Yeakel Avenue Erdenheim PA 1938 Tel research@hedgerelations.com Page 9 of 9