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 May 31, 2013 SYMBOL COMPANY INVESTOR AM American Greetings Corp TowerView LLC ASCMA Ascent Capital Group GAMCO Investors BABB Bab, Inc. JCP Investments CYD China Yuchai International Shah Capital EXA EXA Corporation Discovery Capital FES Forbes Energy Services Steel Partners GTS Triple-S Management Accipiter Capital Management HEWA HealthWarehouse.com Karen Singer; Lloyd Miller JFBI Jefferson Bancshares, Inc. Joseph Stilwell KEG Key Energy Services MHR Fund Management KBXMF Kobex Minerals Sprott, Inc. RDNT RadNet, Inc. BlueMountain Capital SVVA FirstHand Technology Fund Bulldog Investors 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 10

3 American Greetings Corp. (AM) Activist Investor: TowerView LLC Shares 1,795,700 Catalyst: % Outstanding 6.2% TowerView believes the company would do better if the $18.20/share MBO transaction was not consummated TowerView requested that the investment bank working with the Board withdraw their fairness opinion and asked the two members of the Special Committee that they change their recommendation of the proposed transaction. Share Price B 589M Enterprise Value 787M Net Cash -200M 151M 52 wk. range EV/ 5.2 Ascent Media Corporation (ASCMA) Activist Investor: GAMCO Investors Shares 1,129,630 Catalyst: % Outstanding 8.43% GAMCO sent a letter to ASCMA looking forward to hearing what the board will do about the poison pill since Not Avail a majority of shareholders voted for its removal at the May 22 annual meeting. Share Price M 1.1B Enterprise Value 1.9B Net Cash -887M 234M 52 wk. range EV/ 8.2 A copy of GAMCO s letter is available here: We previously covered ASCMA on October 1, 2009 when GAMCO submitted a shareholder proposal to be included in ASCMA s 2010 proxy statement requesting shareholders redeem the company s poison pill. The pill was implemented in September BAB, Inc. (BABB) Activist Investor: JCP Investments Shares 665,062 Catalyst: % Outstanding 9.2% JCP increased its active stake in BABB from 8.2% to 9.2% Share Price 0.86 We previously covered BABB on May 9 and April 25 highlighting JCP s initial 5.8% active stake and subsequent increase in ownership to 8.2% 3M 6M Enterprise Value 5M Net Cash 1M 0.4M 52 wk. range Legal counsel to JCP Investments EV/ 13.6 Page 3 of 10

4 China Yuchai International (CYD) Activist Investor: Shah Capital Management Shares 2,322,492 Catalyst: % Outstanding 6.23% Shah Capital suggests CYD (i) increase ownership in Guangxi Yuchai Machinery from 76.4% to 100%, (ii) hire Not Avail investment bank to list on the Hong Kong exchange, (iii) sell HL Global Enterprises and Thakral Corporation and (iv) buy back stock. Share Price B 637M Enterprise Value 491M Net Cash 120M 225M 52 wk. range EV/ 2.2 EXA Corporation (EXA) Activist Investor: Discovery Capital Shares 703,383 Catalyst: % Outstanding 5.3% Discovery disclosed a 5.3% active stake in EXA 8.71 Share Price M 116M Enterprise Value 93M Net Cash 18M 4M 52 wk. range EV/ 23.5 Forbes Energy Services Ltd (FES) Activist Investor: Steel Excel (Steel Partners) Shares 3,064,878 Catalyst: % Outstanding 14.3% Steel increased its active stake in FES from 12.8% to 14.3% Share Price 3.56 We previously covered FES on March 15, 2013 when Steel disclosed a 12.8% active stake at an average cost of $3.48/share. 443M 76M Enterprise Value 343M Net Cash -272M 74M 52 wk. range EV/ 4.6 Legal counsel to Steel Page 4 of 10

5 Triple-S Management (GTS) Activist Investor: Accipiter Capital Management Shares 2,424,254 Catalyst: % Outstanding 9.7% Accipiter disclosed a 9.7% active stake in GTS Share Price B 614M Enterprise Value 646M Net Cash -46M 115M 52 wk. range EV/ 5.6 Legal counsel to Accipiter Capital HealthWarehouse.com (HEWA) Activist Investor: Karen Singer; Lloyd Miller Shares % Outstanding 1,972,889 15% Not Avail Catalyst: Singer and Miller nominate 3 individuals for election to HEWA s board. Share Price M 39M Singer and Miller own 15% (1,972,889 shares) consisting of (i) 716,484 shares of common stock, (ii) 189,796 shares of Series B Preferred Stock, with each share of Series B Preferred Stock convertible into 5 shares of common stock, and (iii) convertible notes in the amount of $581,033.41, which are convertible into shares of Series B Preferred Stock at a price of $9.45 per share, with each share of Series B Preferred Stock convertible into 5 shares of common stock. Enterprise Value 42M Net Cash -4M -5M 52 wk. range EV/ Negative On January 25 Singer and Miller sent a letter to HEWA notifying the Company that, as a result of the Company s event of default under the Convertible Notes, Singer and Miller are exercising their rights under the U.C.C. and intend to notice a public sale of the collateral securing the Convertible Notes. On May 7 New Atlantic Ventures (9.26%) rep on the board resigned and sent a scathing letter to the board commenting on his inability to fulfill his fiduciary duty. A copy of New Atlantic s resignation letter is available here: Continue to Next Page Page 5 of 10

6 Jefferson Bancshares, Inc. (JFBI) Activist Investor: Joseph Stilwell Shares 369,860 Catalyst: % Outstanding 5.6% Stilwell submitted a shareholder proposal requesting the board retain an investment bank to examine the best 3.48 way to maximize value, including a sale. Share Price M 35M Enterprise Value 45M Net Cash -10M 52 wk. range EV/ We previously covered JFBI on April 8, 2013 when Stilwell disclosed a 5.6% active stake. Key Energy Services (KEG) Activist Investor: MHR Fund Management Shares 17,474,343 Catalyst: % Outstanding 11.5% KEG announced it has increased the size of the board by 1 and added a representative from MHR to the open position. Share Price B 988M Enterprise Value 1.8B Net Cash -838M 375M 52 wk. range EV/ 4.9 Kobex Minerals, Inc. (KBXMF) Activist Investor: Sprott, Inc. Shares 12,264,839 Catalyst: % Outstanding 26.5% On May 28 KXM announced 4 of 6 directors will not seek re-election and will be replaced by Sprott nominees. Not Avail Share Price M Enterprise Value -15M Net Cash 36M -2M 52 wk. range EV/ 8.5 We initially covered KXM on September 25, 2012 when Sprott (Resource Capital Investment Corp) wrote a letter to the board stating that they are willing to assist the Company acquire a business substantially aligned with current management s sector, geographic and transactional type expertise. However, they also stated, if we jointly conclude that an applicable transaction is less attractive, technically, commercially, or in light of your existing skill sets, as they relate to the challenges involved with advancing the applicable opportunity, we will want to reorient the Company, the Board and management in line with the understandings that led to the Company s formation. On May 10, 2013 KXM announced it was voluntarily de-listing from NYSE On May 21, 2013 KXM announced it is considering changing 4 of the Company s 6 directors. Page 6 of 10

7 RadNet, Inc. (RDNT) Activist Investor: BlueMountain Capital Shares 3,108,295 Catalyst: % Outstanding 7.8% BlueMountain increased its ownership from 6.5% to 7.8% and changed its filing status from passive to Not Avail active. Share Price M 102M Enterprise Value 688M Net Cash -584M 101M 52 wk. range EV/ 6.8 We previously covered RDNT on September 19, 2011, September 2, 2011 and February 25, 2011, initially highlighting Red Mountain s February 22 active 5.8% ownership stake and announcement that [they] 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. On August 30, 2011 RDNT entered into a Standstill Agreement with Red Mountain Capital. Under the terms of the agreement Red Mountain can purchase up to 9.9% of RDNT s stock but is restricted from running a proxy contest against the company while the agreement is in place. On September 19, 2011 we reported that Red Mountain increased its ownership from 7.5% to 9.7% since entering into a standstill agreement. Firsthand Technology Value Fund (SVVC) Activist Investor: Bulldog Investors Shares % Outstanding 838, % Not Avail Catalyst: Bulldog increased its active ownership from 9.67% to 9.8%. Share Price We previously covered SVVC on October 24, 2012 highlighting Bulldog s announcement that SVVC shares trade at a large discount to NAV and proposed the Company repurchase its shares or conduct a self-tender offer. 148M Enterprise Value -12M Net Cash 160M 52 wk. range EV/ On April 10, 2013 Bulldog sent a letter to SVVC shareholders (i) criticizing the Fund s discount to NAV, (ii) detailing plans to elect new directors, and (iii) replacing the investment advisor. A copy of Bulldog s April 10 letter is available here: Page 7 of 10

8 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 8 of 10

9 PLATINUM SPONSORS Broker-Dealer APB Financial Group is a Special Situations Brokerage Firm tailored to investors seeking fundamental value and catalyst-driven activist investments. 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. 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 9 of 10

10 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. 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. 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 10 of 10