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 June 18, 2010 SYMBOL COMPANY INVESTOR ADPT Adaptec Inc. Steel Partners BIOC BioClinica, Inc. Nicusa Capital CRL Charles River Laboratories Intl Jana Partners CRL Charles River Laboratories Intl Neuberger Berman FORD Forward Industries Inc. LaGrange Capital Partners MAGS Magal Security Systems Ltd Prescott Group; Clough Capital; Diker Capital NRO Neuberger Berman Real Estate Securities Income Fund Bulldog Investors RGDX Response Genetics Inc. SRB Management SFD Smithfield Foods Inc. Continental Grain Co TIS Orchids Paper Products Company Hillson Partners LP (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 10

3 Adaptec Inc. (ADPT) Activist Investor: Steel Partners Shares 29,184,718 % Outstanding 24.2% Cost Basis 3.23 Share Price M 366M Enterprise Value -8M 375M -20M 52 wk. range EV/ N/A Steel Partners continues to increase their ownership in ADPT since gaining control of the board in October They currently own 24.2%. On June 8 ADPT announced the completion of the sale of a business unit for approximately $34M in cash. As part of the sale (which includes Adaptec s brand name) Adaptec will change its name to ADPT Corp. ADPT currently has $375 million in net cash, equivalent to $3.12/share We ve covered ADPT in numerous Catalyst Research Reports (most recently on December ) highlighting Steel s steady increase in ownership in ADPT since Steel obtained three board seats in 2007 through a settlement agreement with the Company following a proxy contest. In 2008 ADPT added one additional member to the Board (recommended by Steel). On October Steel delivered written consents by stockholders owning more than 50% of the Company s outstanding shares consenting to the removal of two Board members and the reduction in the size of the Board from nine to seven members. Steel Partners now effectively controls the Board of Directors with four of the six current board members having been nominated or recommended by them. BioClinica Inc. (BIOC) Activist Investor: Nicusa Capital Partners Shares 789,119 % Outstanding 5.21% Cost Basis Not Avail Share Price M 66M Enterprise Value 52M 13M 8M 52 wk. range EV/ 6.12 On June 14 Nicusa sent a letter to the Chairman of BIOC stating that the dialogue between the two parties has not been terribly informative. In the letter Nicusa suggested BIOC enact the following changes: Change senior management s compensation to account for capital deployed in the business, including all capital spending and acquisitions, in determining annual incentive compensation. Provide greater transparency on the financial impact of the EDC strategy, particularly as it relates to the acquisitions made to enter this business. Provide detailed financial disclosure on all future acquisitions. Nicusa s entire letter is available on The Shareholder Activism Resource Portal. Go to Next Page Page 3 of 10

4 Charles River Laboratories International, Inc. (CRL) Activist Investor: Jana Partners Shares 4,657,695 % Outstanding 7.0% Cost Basis Share Price B 2.4B Enterprise Value 2.4B -240M 272M 52 wk. range EV/ 8.9 On June 16 Jana sent another letter to CRL. In this letter Jana highlights than an analyst from Jeffries says approximately 35% of the current shareholder are opposed to CRL s acquisition of WuXi Pharma. Furthermore, Jana suggested that if the company redesigned the acquisition to avoid a shareholder approval vote they would attempt to replace the board at next year s annual meeting. Jana s entire letter is available on The Shareholder Activism Resource Portal. We previously covered CRL in our June 11 Catalyst Research Report, highlighting Jana s opposition to the Company s April 26 announcement to purchase WuXi PharmaTech, a Chinese pharmaceutical outsourcing company, for $1.6B. On June 3 Jana met with the Chairman, President & CEO of CRL and the Chairman & CEO of WuXi to discuss the transaction. On June 7, Jana sent a letter to CRL expressing their concern about the combined businesses and, as a result, announced their plans to vote against the transaction. In their first letter to CRL Jana stated, Charles River's share price performance in recent years underscores the danger for shareholders of inefficient capital allocation. Despite numerous acquisitions and significant expenditures on new facilities (which in some cases have been temporarily closed shortly after completion) over the years, the Company has significantly and consistently underperformed peers. Furthermore, Jana noted that CRL could employ the same multiple of leverage to trailing it would assume in a WuXi acquisition to repurchase approximately 19% of its currently undervalued outstanding shares at a 10% premium to the current Charles River share price, without any integration risk. We believe that a share repurchase of this magnitude would result in accretion to 2011 earnings per share of approximately 14%, and growing thereafter. Charles River Laboratories International, Inc. (CRL) Activist Investor: Neuberger Berman Shares 4,146,182 % Outstanding 6.26% Cost Basis Share Price B 2.4B Enterprise Value 2.4B -240M 272M 52 wk. range EV/ 8.9 On June 16 Neuberger Berman changed their filing statues from passive investor to active investor and sent a letter to CRL s board of directors stating that the proposed transaction with WuXi is not in the best interest of shareholders based on the elevated financial and operational risks it will bring to the company. Similar to Jana Partners (see comments above) Neuberger Berman cautioned the board not to endorse any revision to the proposed WuXi transaction that bypasses the need for a stockholder vote. Neuberger Berman s entire letter is available on The Shareholder Activism Resource Portal. Page 4 of 10

5 Forward Industries, Inc. (FORD) Activist Investor: LaGrange Capital Partners Shares 2,102,751 % Outstanding 26.4% Cost Basis 3.72 Share Price M 28M Enterprise Value 13M 20M -0.5M 52 wk. range EV/ Negative On June 18 LaGrange sent a letter to the board of FORD expressing their disappointment with the company s announcement that they have adopted a poison pill along with a change in their bylaws which adjusts the threshold to call a special meeting from 30% to 40% of the shares outstanding. On the same day, LaGrange filed a preliminary proxy for the purpose of soliciting written consents to call a special meeting to remove the board. We previously covered FORD in our March 26 Catalyst Research Report, highlighting LaGrange s letter to FORD on March 9, 2010 expressing concern about the course of action presently being taken by the management team. At that time, LaGrange stated their desire for board representation as soon as possible. LaGrange Capital s March 9 and June 18 letters to the board of FORD are available on The Shareholder Activism Resource Portal. Magal Security Systems Ltd. (MAGS) Activist Investor: Prescott Group; Clough Partners; Diker Management Shares 1,852,964 % Outstanding 17.81% Cost Basis 8.68 Share Price M 30M Enterprise Value 26M 3M -2M 52 wk. range EV/ Negative On June 13 Prescott (5.24% shareholder at an avg. cost of $9.16), Clough (6.77% shareholder at an avg. cost of $8.88) and Diker (5.8% shareholder at an avg. cost of $8.02) sent a joint letter to the Chairman of MAGS requesting a special meeting of shareholders to remove and replace five of six board members in order to lead a recovery plan that would increase shareholder value. The demand letter from Prescott, Clough and Diker to MAGS requesting an extraordinary meeting is available on The Shareholder Activism Resource Portal. Neuberger Berman Real Estate Securities Income Fund (NRO) Activist Investor: Bulldog Investors Shares 500 % Outstanding 16.62% Cost Basis Not Avail Share Price M 233M Enterprise Value 265M Not Avail N/A 52 wk. range EV/ N/A On June 16 Bulldog announced their intention to contact management to discuss refinancing the company s auction rate preferred stock. NRO is a closed end fund. As of June 18, 2010 NRO was trading at a -7.29% discount to its net asset value. Page 5 of 10

6 Response Genetics Inc. (RGDX) Activist Investor: SRB Management Shares 2,066,601 % Outstanding 11.29% Cost Basis Not Avail Share Price M 44M Enterprise Value 35M 9M -8M 52 wk. range EV/ Negative On June 16 SRB announced they are increasingly dissatisfied with the performance of RGDX s management and board. SRB also stated their concern that the company is going to engage in a long and unnecessary proxy fight (see comments below). We previously covered RGDX in our April 2, March 19 and February 19 Catalyst Research Reports, highlighting Austin Marxe & David Greenhouse s (AWM) announcement (AWM owns 18.3% of RGDX) that they believed RGDX shares are undervalued and that they may seek to change the company s strategic direction and board composition. On March 29 AWM filed a preliminary proxy statement, formally nominating nine directors for election to the board at RGDX s next annual meeting. Smithfield Foods Inc. (SFD) Activist Investor: Continental Grain Co Shares 13,074,034 % Outstanding 7.88% Cost Basis Not Avail Share Price B 2.6B Enterprise Value 5.2B -2.6B 217M 52 wk. range EV/ 21.1 On June 16 Continental Grain Co announced their intention to engage in discussions with SFD on a range of matters regarding the Company s hedging policies, sale of non-core assets and certain corporate governance matters. On September an individual from Continental Grain Co resigned from the board of SFD because he did not believe that the Company s announced $25M equity offering was necessary. In addition, another individual from Continental Grain submitted his resignation as an Advisory Director. Orchids Paper Products Company (TIS) Activist Investor: Hillson Financial Management Shares 376,511 % Outstanding 5.0% Cost Basis 7.54 Share Price M 97M Enterprise Value 105M -8M 22M 52 wk. range EV/ 4.7 On June 16 Hillson sent a letter to TIS expressing their frustration with the company s performance both from an operating standpoint and with respect to the stock price. Hillson promised to carefully monitor management s progress against three major goals over the next several months. The entire letter from Hillson outlining their expectation for the company is available on The Shareholder Activism Resource Portal. Page 6 of 10

7 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 7 of 10

8 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 8 of 10

9 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 9 of 10

10 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. Tom Cronin, Partner tcronin@laurelhillag.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 10 of 10