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CATALYST EQUITY RESEARCH REPORT ™Weekly Research Highlighting Activist Investments

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Hedge Fund Solutions, LLC © 2003 – 2014 of 21

HEDGE FUND SOLUTIONS CATALYST EQUITY RESEARCH REPORT ™

HIGHLIGHTING ACTIVIST INVESTMENTS Week Ending February 21, 2014

SYMBOL COMPANY INVESTOR

ALCS ALCO Stores, Inc. Concerned Alco Stockholders

ANF Abercrombie & Fitch Engaged Capital

ARIA Ariad Pharmaceuticals Sarissa Capital

BKS Barnes & Noble G Asset Management

CNO CNO Financial Group Paulson & Co

CPWR Compuware Corporation Elliott Associates

CWH CommonWealth REIT Corvex/Related

DGIC A/B Donegal Group Gregory Shepard

DRI Darden Restaurants Starboard Value

DST DST Systems George Argyros

FRX Forest Laboratories Carl Icahn

IPDN Professional Diversity Network Ronald Chez

JOSB Jos. A. Bank’s Eminence Capital

NTRI NutriSystems, Inc. Clinton Group

PBSK Poage Bankshares Joseph Stilwell

PEP PepsiCo, Inc. Trian Fund

PRXI Premier Exhibitions Sellers Capital

PTRY The Pantry, Inc. JCP Investment/Lone Star Value

SIG Signet Jewelers Corvex Management

SMPL Simplicity Bancorp Clover Partners

TDS Telephone & Data Systems GAMCO Investors

TRBAA Tribune Company Blue Harbour Group

USAK USA Truck Stone House Capital

VITC Vitacost.com Consac, LLC

VOLC Volcano Corporation Engaged Capital

WPP Wausau Paper Starboard Value

XWES World Energy Solutions Ardsley 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.

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ALCO Stores, Inc. (ALCS) Activist Investor: Concerned ALCO Stockholders

Investor Info Catalyst Info Shares Not Avail Catalyst:

An investment group calling themselves the Concerned Alco Stockholders announced it will seek new board members at the Company’s 2014 annual meeting. Comment: On August 5, 2013 MFP Investors (8.1%) announced the $14/share buyout price offered by Argonne Capital is too low. MFP noted, "Alco’s book value per share is over $30 and its current assets minus current liabilities and long term debt/capital leases is $16 per share." On August 15, 2013 Everbright Development made an offer to purchase ALCS for $14.30/share. A copy of the buyout proposal is available here: http://www.sec.gov/Archives/edgar/data/30302/000101968713003180/everbright_13da1.htm

% Outstanding Not Avail Cost Basis Not Avail Company Info Share Price 10.62 Revenue 498M Market Cap 35M Enterprise Value 124M Net Cash -89M EBITDA 7M 52 wk. range 6.66 – 12.25 EV/EBITDA 18.8

Abercrombie & Fitch Co. (ANF) Activist Investor: Engaged Capital

Investor Info Catalyst Info Shares ~750,000 Catalyst:

On February 20 Engaged Capital issued a press release announcing it has nominated 5 individuals to the Company's 12-member board. A copy of Engaged Capital’s February 20 press release is available here: http://finance.yahoo.com/news/engaged-capital-nominates-five-highly-132300387.html Comment: On December 4, 2013 Engaged sent a letter to ANF requesting the CEO's employment agreement expire and requested the board put the Company up for sale. On January 28 ANF announced several governance changes including the separation of the Chairman and CEO roles, the addition of 3 new directors and the elimination of its poison pill. On the same day Engaged Capital issued a press release stating it was a “good first step”.

Legal counsel to Engaged Capital

% Outstanding ~1% Cost Basis Not Avail Company Info Share Price 34.59 Revenue 4.0B Market Cap 2.6B Enterprise Value 2.6B Net Cash 257M EBITDA 544M 52 wk. range 31.14 – 55.23 EV/EBITDA 4.7

Ariad Pharmaceuticals (ARIA) Activist Investor: Sarissa Capital

Investor Info Catalyst Info Shares 12,000,000 Catalyst:

ARIA agreed to appoint 1 rep from Sarissa to the board immediately and 1 additional director in the future approved by Sarissa A copy of the settlement agreement is available here: http://www.sec.gov/Archives/edgar/data/884731/000089914014000284/s13d1b.htm Comment: On October 29, 2013 Sarissa Capital disclosed a 6.22% “active” stake in ARIA and disclosed plans to seek board representation.

% Outstanding 6.46% Cost Basis 3.75 Company Info Share Price 8.87 Revenue 37M Market Cap 1.6B Enterprise Value 1.4B Net Cash 218M EBITDA -257M 52 wk. range 2.15 – 23.00 EV/EBITDA Negative



Barnes & Noble, Inc. (BKS) Activist Investor: G Asset Management

Investor Info Catalyst Info Shares Not Avail Catalyst:

On February 21 G Asset Management (GAM) proposed to acquire 51% of BKS at $22/share or pay $5/share for the Nook business A copy of GAM’s press release is available here: http://www.prnewswire.com/news-releases/g-asset-management-announces-proposal-to-acquire-a-controlling-interest-in-barnes--noble-that-values-the-company-at-22-per-share-246561551.html Comment: We previously covered BKS in our February 17, 2012 Catalyst Research Report, highlighting G Asset Management’s 5.0% “active” ownership stake and its letter to the board reiterating their belief that the Company should spin-off the Nook business in order to create substantial value for shareholders. In its analysis, G Asset Management suggested BKS could be worth $71/share if the company is sold in pieces. A copy of G Asset Management’s letter to the BKS board is available here: http://www.sec.gov/Archives/edgar/data/890491/000114420412009774/v303094_ex99-4.htm At that time, G Asset Management’s ownership consists of 41,575 shares of common stock and 2,978,600 shares subject to options exercisable within 60 days. On February 25, 2013 Riggio notified the Board he planed to propose to purchase all of the assets of BKS’s retail business, including B&N Booksellers and barnesandnoble.com and would exclude the NOOK Media LLC (comprising the digital and College businesses). On August 20, 2013 Riggio announced he has suspended his efforts to make an offer for BKS's retail business.

% Outstanding Not Avail Cost Basis Not Avail Company Info Share Price 17.69 Revenue 6.6B Market Cap 1.1B Enterprise Value 1.1B Net Cash -32M EBITDA 34M 52 wk. range 12.59 – 23.71 EV/EBITDA 31.9

CNO Financial Group, Inc. (CNO) Activist Investor: Paulson & Co


Paulson increase its “active” ownership in CNO to 7.7%

% Outstanding 7.7% Cost Basis Not Avail Company Info Share Price 17.93 Revenue 4.5B Market Cap 3.9B Enterprise Value 6.6B Net Cash -2.8B EBITDA 797M 52 wk. range 10.45 – 18.52 EV/EBITDA 8.6

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Compuware Corporation (CPWR) Activist Investor: Elliott Associates


Elliott increased its “active” stake in CPWR from 8.6% to 9.6% Comment: We previously covered CPWR in several Catalyst Research Reports highlighting Elliott Associates initial 5.7% “active” stake at an avg. cost of 8.63/share, Elliott’s $11/share offer and Sandell Asset Management’s (2.5% shareholder) estimated value in a sale transaction of $16/sh. On December 4, 2012 Sandell issued a press release and presentation demanding that CPWR act with greater urgency to maximize shareholder value. On January 14 we reported that Elliott sent a letter to CPWR’s board regarding their $11/share offer, seeking an NDA and due diligence materials. On the following day Sandell urged CPWR to engage with Elliott. On January 25 CPWR rejected Elliott’s 11.00/share offer and outlined its value creation actions. A copy of CPWR’s press release outlining its value plan and responding to Elliott’s offer is available here: http://finance.yahoo.com/news/compuware-outlines-value-creation-actions-123500839.html Elliott increased its ownership from 6.6% to 8.3% in late January since CPWR rejected its 11.00/share offer. On February 14 Elliott entered into a confidentiality agreement in connection with its offer to acquire CPWR. On May 16 CPWR and Elliott extended the confidentiality agreement until July 15. CPWR and Elliott extended their confidentiality agreement to Sept. 15 2013. On November 14 Starboard sent a letter to CPWR discussing the Company’s dividend yield (among the highest with Tech stocks) and calling for a large stock repurchase, explore the sale of non-core assets and repurchase additional shares, increase cost reduction targets to achieve 35% EBITDA margins, and increase the dividend to at least $0.60 A copy of Starboard’s November 14 letter is available here: http://www.sec.gov/Archives/edgar/data/859014/000152153613000936/dfan14a08297108_11142013.pdf On November 15 CPWR extended the deadline to nominate directors until January 10, 2014

Legal counsel to Starboard Value

Legal counsel to Sandell Asset Management

% Outstanding 9.6% Cost Basis 9.59 Company Info Share Price 10.51 Revenue 946M Market Cap 2.3B Enterprise Value 2.2B Net Cash 109M EBITDA 126M 52 wk. range 9.66 – 12.74 EV/EBITDA 17.41




CommonWealth REIT (CWH) Activist Investor: Corvex/Related

Investor Info Catalyst Info Shares See Info Catalyst:

Corvex/Related issued a new presentation to CWH shareholders titled, "The Choice is Clear" and announced that Sam Zell and David Hefland have joined its slate of nominees. A copy of the presentation is available here: http://www.sec.gov/Archives/edgar/data/803649/000119312514057393/d679361ddfan14a.htm Comment: We previously covered CWH in several Catalyst Research Reports, initially highlighting Corvex and Related’s February 27, 2013 press release that included an open letter to the CWH Board of Trustees reiterating its demand that they immediately cease its proposed equity offering and debt repurchase. Corvex and Related specified that, as a result of additional and credible analysis, they would be prepared to increase their initial offer to acquire all the outstanding shares of the Company to a price of $27 per share, with the opportunity to meaningfully increase this proposed offer after completing due diligence.

On March 1 Corvex/Related filed a lawsuit claiming the share issuance was to dilute the voting power of existing shareholders so that it becomes dramatically more difficult and onerous, if not impossible, for existing shareholders to remove CWH’s Trustees.On March 11 Corvex/Related’s ownership was readjusted downward (from 9.75% to 8.5%) based on the Company’s 34.5M share offering. On March 12 the dissidents filed their preliminary consent solicitation statement with the SEC. On March 13 Perry Corp. disclosed a 5.5% “active” stake and expressed its support for the proposals of Corvex/Related. On March 14 Corvex/Related amended their complaint in MD State Court seeking to nullify various bylaw amendments that restrict shareholders’ ability to act by written consent. On March 28 CWH confirmed that it received an indication of interest from Corvex/Related for 100% of shares outstanding for $24.50/sh. On April 15 CWH rejected Corvex/Related’s $24.40 buyout offer and announced plans to classify its board structure so that all directors cannot be removed through a consent solicitation. On the same day Corvex/Related demanded the company declare a record date to remove 5 Trustees. On April 30 Perry Corp (5.49% shareholder at $22.17/share cost basis) sent a letter to the board describing the reasons why they intend to support Corvex/Related. On May 1 Luxor Capital (4.7% shareholder at $14.81/share cost basis) stated its support for Corvex/Related On June 19, in an effort to avoid any concerns about the possibility of debt acceleration if the entire board is removed, Corvex/Related pledged to buy 51% of CWH’s debt. On June 21 Corvex/Related issued a press release saying 70% of shareholders supported the board’s removal in their consent solicitation. CWH says the consent solicitation did not comply with the requirements set forth in the Company’s bylaws and therefore has no legal effect. An arbitration hearing was scheduled for July 18. On November 18 Corvex issued a press release applauding the arbitration ruling that CWH's Bylaws erect a complex wall of procedural hurdles to any consent solicitation; Corvex formally began a consent solicitation to replace CWH directors. http://finance.yahoo.com/news/corvex-related-deliver-formal-notice-123000362.html On December 16 Corvex/related issued a presentation titled, “A Case for Change at CWH”; On January 16 Corvex/Related announced its slate of nominees and rejected CWH’s offer of 1 board seat to Corvex. On January 29 Corvex/Related released a presentation to replace the CWH board and announced its belief that the REIT’s NAV would be closer to $35/share in the near-term and closer to $40/share by the end of 2015

Legal counsel to Perry Corp

Proxy Solicitor to CWH

% Outstanding See Info Cost Basis See Info Company Info Share Price 27.45 Revenue 1.1B Market Cap 3.0B Enterprise Value 5.9B Net Cash -3.0B EBITDA 546M 52 wk. range 15.78 – 27.57 EV/EBITDA 8.9



Donegal Group (DGICA; DGICB) Activist Investor: Gregory Shepard

Investor Info Catalyst Info Shares 3,672,900(A);

397,100(B) Catalyst: Shepard withdrew his application to increase his ownership in Donegal but said he was "not going away". Comment: We initially covered Donegal Group in our November 5, 2012 Catalyst Research Report, highlighting Gregory Shepard’s shareholder proposal for inclusion in DGIC’s proxy statement. The proposal asked shareholders to demand the board immediately engage an investment bank to evaluate strategic alternatives. On October 7, 2013 Shepard proposed to purchase the Class B shares of Donegal Group not owned by him and a mutual property & casualty insurer would purchase all of the Class A shares not owned by Donegal Mutual or Shepard. On October 24 Shepard issued a press release criticizing the Boards of Donegal Mutual and Donegal Group for failing to consider his acquisition proposal. A copy of Shepard’s press release is available here: http://finance.yahoo.com/news/gregory-shepard-blasts-don-nikolaus-193400377.html On November 18 Shepard submitted a shareholder proposal seeking to collapse the Company's dual class ownership structure.

% Outstanding 17.76%(A); 7.12%(B)

Cost Basis Not Avail Company Info Share Price 14.54(A);

23.01(B) Revenue 540M Market Cap 604M Enterprise Value 608M Net Cash -8M EBITDA 32M 52 wk. range 18.00 – 28.49 EV/EBITDA 18.8




Darden Restaurants, Inc. (DRI) Activist Investor: Starboard Value

Investor Info Catalyst Info Shares 7,250,000 ON JANUARY 30 2014 HFS HOSTED A WEBCAST WITH BARINGTON CAPITAL

TO DISCUSS ITS INVESTMENT IN DARDEN To listen to a replay go to http://barington.com/press-releases.html

Catalyst: Starboard amended its SEC filing to include Brad Blum, the former President of Olive Garden, CEO of Burger King, and activist investor at COSI, as a member of its investment group. On February 24 Starboard filed preliminary proxy materials seeking support to call a special meeting to give shareholders a platform for voicing dissatisfaction with the proposed Red Lobster Separation. A copy of Starboard’s February 24 press release is available here: http://finance.yahoo.com/news/starboard-files-preliminary-solicitation-statement-131800965.html Comment: We initially covered DRI on October 9 when it was reported that Barington (~2%) began pressing the Company to separate into 2 business units. On October 17 Barington issued a press release publicizing its letter summarizing its recommendations, which include: (i) Forming 2 independently managed operating companies (one for the mature brands and one for its high-er growth brands), (ii) exploring all alternatives to monetize the value of the company’s real estate, including the creation of a publicly-traded REIT, and (iii) reduce operating expenses. On November 21 Barington announced it hired an investment bank and proxy solicitor as advisors. On December 17 Barington issued a presentation outlining its perspectives on value creation. All of Barington’s press releases and investor presentations are available here: http://www.barington.com/press-releases.html On December 20 Starboard disclosed a 6% “active” stake and stated, "Starboard believes there is a significant opportunity to dramatically improve the operating performance at the Issuer, as well as opportunities to realize substantial value from the Issuer’s real estate holdings and to explore other strategic options available to the Issuer to maximize shareholder value, including alternative business sale or separation transactions." On January 13 Barington issued a press release stating that the Company’s recently announced plan to enhance shareholder value by selling the Red Lobster business is “incomplete and inadequate”. On January 21 Starboard sent a letter to DRI expressing concern about the Company's announcement to examine a sale of Red Lobster and called for a comprehensive operational plan and to examine the Company's real estate assets. A copy of Starboard’s January 21 letter is available here: http://tinyurl.com/Starboard-Letter-to-Darden On February 11 Starboard sent a letter to DRI reiterating its belief that the plan to spin-off or sell Red Lobster is not in the best interests of shareholders and could destroy value. Starboard also said it would like to discuss immediate changes in the board’s composition. A copy of Starboard’s February 11 letter is available here: http://www.sec.gov/Archives/edgar/data/940944/000092189514000182/sc13da206297125_02102014.pdf

Proxy Solicitor to Barington


% Outstanding 5.5% Cost Basis 50.97 Company Info Share Price 48.41 Revenue 8.8B Market Cap 6.4B Enterprise Value 9.2B Net Cash -2.8B EBITDA 982M 52 wk. range 44.11 – 55.25 EV/EBITDA 9.4



DST Systems (DST) Activist Investor: George Argyros


The Argyros family issued a press release reaffirming the need for reform at DST. A copy of the February 19 press release is available here: http://www.sec.gov/Archives/edgar/data/714603/000114420414010463/v369006_dfan14a.htm Comment: We initially covered DST on January 22, 2013 when DST entered into a settlement agreement with Argyos. Under the terms of the agreement Argyros had the right to appoint 3 directors to a 9-member board and 1 additional director within 18 months. On February 12 Argyros sent a letter to DST citing a need for change and nominated two directors. A copy of Argyros’ February 12 letter is available here: http://www.sec.gov/Archives/edgar/data/714603/000114420414007772/v367627_ex99-1.htm

Proxy Solicitor to DST Systems

% Outstanding 21.8% Cost Basis Not Avail Company Info Share Price 95.47 Revenue 2.7B Market Cap 4.0B Enterprise Value 4.25B Net Cash -305M EBITDA 454M 52 wk. range 64.01 – 95.85 EV/EBITDA 9.4

Forest Laboratories Inc. (FRX) Activist Investor: Carl Icahn


FRX announced a deal to be purchased by Actavis for ~$25 Billion in equity and cash. Icahn announced on Twitter that the deal "proves again that activism works" Comment: We previously covered FRX in our July 13, June 22, June 1, 2012; August 12 and June 17, 2011 Catalyst Research Reports, highlighting Icahn’s 2011 announcement that he had nominated four individuals to FRX’s ten-member board of directors. Icahn highlighted three main reasons for his decision to nominate new directors, including (i) FRX’s poor performance over the past 7 years, (ii) the failure to adequately prepare for the expiration of the Lexapro patent and (iii) the company’s expenditure in excess of $300 million to settle matters on behalf of the CEO that continue to plague the company. Icahn’s nominees were defeated at the 2011 meeting. On May 30, 2012 Icahn announced plans to nominate a slate of directors at the 2012 annual meeting. On June 19 Icahn nominated 4 individuals for election to FRX’s 10-person board at the 2012 annual meeting. On July 12 Icahn sent a letter to the non-management members of the FRX board expressing concerns over the ability to reach an amicable solution to the ongoing proxy contest. A copy of Icahn’s July 12 letter to FRX is available here: http://www.sec.gov/Archives/edgar/data/38074/000092846412000150/frxsch13damd7071212ex1.htm On July 12 FRX responded to Icahn’s letter essentially stating that they are receptive to ending the proxy contest, just not on the terms suggested by Icahn. On June 11, 2013 FRX and Icahn entered into a settlement agreement. Under the terms of the agreement Icahn added 1 person to the 11-member board.

Proxy Solicitor to FRX

% Outstanding 11.32% Cost Basis 34.59 Company Info Share Price 91.04 Revenue 3.4B Market Cap 24.7B Enterprise Value 17.5B Net Cash 2B EBITDA 418M 52 wk. range 35.22 – 93.50 EV/EBITDA 41.9



Professional Diversity Network LLC (IPDN) Activist Investor: Ronald Chez

Investor Info Catalyst Info Shares 466,765 Catalyst:

On February 18 Ronald Chez disclosed a 7.4% "active" stake in IPDN % Outstanding 7.4% Cost Basis Not Avail Company Info Share Price 3.15 Revenue 4M Market Cap 20M Enterprise Value 2M Net Cash 20M EBITDA -1M 52 wk. range 2.77 – 8.20 EV/EBITDA Negative

Jos. A. Bank Clothiers (JOSB) Activist Investor: Men’s Wearhouse


Eminence sent a letter to JOSB saying the Eddie Bauer acquisition is a poor strategic fit designed to protect management's jobs and paychecks. Eminence announced it will hold the board accountable for its actions both through the upcoming proxy vote and through direct actions in court. A copy of Eminence Capital’s February 18 letter is available here: http://www.sec.gov/Archives/edgar/data/920033/000119312514057202/d678983ddfan14a.htm Comment: We initially covered JOSB on August 13 when Beacon Light (<1% shareholder) sent a letter to JOSB calling for a change in the board and stating its belief that the stock should be worth $70/share. On January 6 Men's Wearhouse launched a hostile bid to acquire JOS for $57.50/share. On Jan 3 JOSB lowered its poison pill trigger from 20% to 10%. On January 17 Eminence Capital, a 10% MW shareholder, announced it is supporting MW’s hostile bid for JOSB. On January 21 Eminence nominated 2 former retail executives for election to the board of JOSB http://www.sec.gov/Archives/edgar/data/920033/000119312514016012/d658451ddfan14a.htm On February 14 JOSB announced it is buying Eddie Bauer and buying back $300 million worth of its shares at $65/each. Golden Gate Capital will own 16.6% of the new entity and have the right to name 2 directors. Men’s Wearhouse issued a statement saying it will evaluate its options

Legal counsel to Eminence Capital

Proxy Solicitor to Men’s Wearhouse

Legal counsel to Beacon Light

% Outstanding 4.90% Cost Basis Not Avail Company Info Share Price 54.20 Revenue 1B Market Cap 1.5B Enterprise Value 1.2B Net Cash 340M EBITDA 134M 52 wk. range 38.36 – 57.61 EV/EBITDA 8.9



NutriSystem, Inc. (NTRI) Activist Investor: Clinton Group


Clinton increased its "active" ownership from 5.2% to 6.4% Comment: We initially covered NTRI On April 5, 2012 when the Company entered into an agreement with Clinton Group. Under the terms of the agreement NTRI appointed a new director (subject to Clinton’s approval) on or before the 2012 annual meeting. On the same day, NTRI announced their CEO is leaving the Company when his contract expires on September 30, 2012. Clinton increased its "active" ownership to 5.2% and sent a letter to NTRI's CEO suggesting the Company increase its dividend as cash flows improve ; says stock should be trading above $20/sh (currently around $14) Clinton’s September 30 letter is available here: http://www.sec.gov/Archives/edgar/data/1096376/000090266413003319/p13-1792_exh1.htm

Legal counsel to Clinton Group

% Outstanding 6.4% Cost Basis 16.12 Company Info Share Price 15.42 Revenue 351M Market Cap 432M Enterprise Value 382M Net Cash 41M EBITDA 13M 52 wk. range 7.18 – 20.54 EV/EBITDA 30.13

Poage Bankshares (PBSK) Activist Investor: Sandler O’Neill Asset Management


Stilwell nominated one person to the board of PBSK and announced his belief that the Company should be sold. Comment: We previously initially covered PBSK in our September 23, 2011 Catalyst Research Reports, highlighting Stilwell’s 7.1% “active” ownership stake (currently 9.9%) and his statement that the Company’s value is not adequately reflected in the share price. On December 30, 2011 we reported that Stilwell had increased his ownership stake from 7.1% to 8.3% On February 25, 2013 Stilwell sent a letter to PBSK stating the Company is overcapitalized and that share repurchases are a simple, low-risk way to build shareholder value. To that end, Stilwell suggested the Company repurchase at least 10% of its shares every year while the stock is trading below book value. On October 21 Stilwell announced plans to seek board representation. Sandler O'Neill (8.08% shareholder) sent a letter to PBSK expressing its belief that the Company should not move forward with its announced acquisition of Town Square Financial and that the Company should not contest the request for board representation by Joseph Stilwell.

% Outstanding 9.5% Cost Basis Not Avail Company Info Share Price 14.02 Revenue 11M Market Cap 43M Enterprise Value 49M Net Cash -6M EBITDA N/A 52 wk. range 13.06 – 15.10 EV/EBITDA N/A




PepsiCo, Inc. (PEP) Activist Investor: Trian Fund

Investor Info Catalyst Info Shares ~15,000,000 Catalyst:

Trian sent a 37 page letter to PEP's board outlining why it should spin off the beverage business. Trian’s whitepaper is available here: www.TrianWhitePapers.com Comment: We initially covered PEP on March 22 when we reported that Trian was rumored to be building a large position in PEP and may seek to push for a merger with Mondelez International (MDLZ) On July 17, 2013 Trian announced it wanted PEP to buy Mondelez for $35 to $38 a share in an all-stock deal. A copy of Trian’s July 2013 whitepaper outlining the reasoning behind the deal is available here: http://trianwhitepapers.com/wp-content/uploads/2013/07/TRIAN-White-Paper-PepsiCo.pdf

% Outstanding ~1% Cost Basis N/A Company Info Share Price 77.10 Revenue 66.4B Market Cap 119B Enterprise Value 139B Net Cash -29B EBITDA 12.5B 52 wk. range 74.53 – 87.06 EV/EBITDA 11.11

Premier Exhibitions (PRXI) Activist Investor: Sellers Capital


Mark Sellers, Chairman of PRXI, has asked two sitting directors to resign in order to reduce the size of the board.

% Outstanding 31.5% Cost Basis Not Avail Company Info Share Price 1.00 Revenue 37M Market Cap 49M Enterprise Value 46M Net Cash 0 EBITDA 6M 52 wk. range 0.94 – 2.96 EV/EBITDA 33.60




The Pantry, Inc. (PTRY) Activist Investor: JCP Investment/ Lone Star Value

Investor Info Catalyst Info Shares ~450,000 Catalyst:

On February 19 JCP/LoneStar issued a presentation titled, "Enhancing Stockholder Value at The Pantry" A copy of the presentation is available here: http://www.sec.gov/Archives/edgar/data/915862/000092189514000386/ex1todfan14a08569009_021914.pdf Comment: We initially covered PTRY on January 23, 2014 when JCP and Lone Star formed a group called the "Concerned Pantry Shareholders" and announced plans to replace 3 board members at PTRY’s next annual meeting on March 13, 2014. A copy of the activist’s press release is available here: http://www.sec.gov/Archives/edgar/data/915862/000092189514000082/dfan14a08569009_01232014.htm On February 5 JCP/Lonestar filed its preliminary proxy statement highlighting several ways to improve value over the next 5 to 10 years, including: monetize the real estate (possible REIT), reduce capital spending and debt, reduce 100M G&A expense, consider dividend/buyback. A copy of the activists’ preliminary proxy statement is available here: http://www.sec.gov/Archives/edgar/data/915862/000141588914000380/prec14a08569009_01312014.htm A copy of PTRY’s preliminary proxy statement is available here: http://www.sec.gov/Archives/edgar/data/915862/000119312514041002/d657694dprer14a.htm

Proxy Solicitor to The Pantry

Legal counsel to JCP Investment/Lone Star Value

% Outstanding 1.9% Cost Basis Not Avail Company Info Share Price 13.83 Revenue 6.9B Market Cap 330M Enterprise Value 1.2B Net Cash -909M EBITDA 199M 52 wk. range 10.99 -17.62 EV/EBITDA 6.2

Signet Jewelers Limited (SIG) Activist Investor: Corvex Management


SIG announced it will acquire Zale (ZLC) for $1.4B or $21/share, representing a 41% premium Comment: We initially covered SIG on January 24 when Corvex disclosed a 7.8% "active" investment (through stock and options) and announced it has had discussions with the board about its strategies.

% Outstanding 7.8% Cost Basis Not Avail Company Info Share Price 93.65 Revenue 4.3B Market Cap 7.5B Enterprise Value 7.4B Net Cash 41M EBITDA 675M 52 wk. range 58.85 – 95.30 EV/EBITDA 11.1



Simplicity Bancorp (SMPL) Activist Investor: Clover Partners


On February 21 Clover disclosed a 5.7% "active" stake in SMPL

% Outstanding 5.7% Cost Basis 14.87 Company Info Share Price 16.35 Revenue 35M Market Cap 121M Enterprise Value 148M Net Cash -27M EBITDA N/A 52 wk. range 14.02 – 16.64 EV/EBITDA N/A

Telephone & Data Systems, Inc. (TDS) Activist Investor: GAMCO Investors


On February 20 GAMCO nominated two individuals for election to the board Comment: We previously covered TDS in several Catalyst Research Reports, most recently on September 14, 2012. On May 5 2008 Southeastern Asset Management (SAM) highlighted recommendations they have made to TDS over the last few months. These included: (i) sell itself to a national wireless carrier, (ii) in the absence of TDS agreeing to sell itself, SAM would like TDS to simplify its capital structure by combining its special and common stock into one single class, and (iii) direct a significant portion of its cash-on-hand to repurchase shares. On April 27 2009 TDS entered into a settlement agreement with GAMCO in order to avoid a proxy contest to replace directors. Under the terms of the agreement TDS appointed two individuals nominated by GAMCO. On May 19 2009 Weitz & Co (5.1% shareholder at an average cost of $24.49/share) sent a letter to TDS indicating their support for (i) a shareholder proposal submitted by SAM to recapitalize the stock and (ii) for a 20 million share Dutch tender buyback program. On September 9, 2011 GAMCO sent a letter to the CEO of TDS stating that it is unlikely GAMCO can support the Company’s share exchange proposal at the special meeting scheduled for October 6, 2011. The letter also suggested that management focus on negotiating with the minority shareholders of US Cellular for the purchase of all of US Cellular. On September 12 GAMCO sent a letter to TDS outlining a strategy to boost shareholder value, which includes structuring a combination of TDS with United States Cellular Corporation (Ticker: USM). On February 14 GAMCO formally nominated 1 individual for election to the TDS board. On May 5, 2013 GAMCO sent a letter to shareholders supporting his nominee for election to the board at May 24 AGM On December 5, 2013 GAMCO sent a letter to TDS announcing it may submit nominees for election at the 2014 annual meeting

Legal counsel to GAMCO

% Outstanding 8.16% Cost Basis Not Avail Company Info Share Price 24.66 Revenue 5.1B Market Cap 2.7B Enterprise Value 3.7B Net Cash -1B EBITDA 919B 52 wk. range 20.57 – 31.52 EV/EBITDA 4.0



Tribune Company (TRBAA) Activist Investor: Blue Harbour Group

Investor Info Catalyst Info Shares ~2,250,000 Catalyst:

On February 24 The Wall Street Journal reported that Blue Harbour is urging the Company to sell real estate, cars.com, a minority stake in The Food Network, and the spectrum its broadcast properties own. A link to the WSJ article is available here: http://online.wsj.com/news/articles/SB10001424052702304834704579401451737653142?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304834704579401451737653142.html

% Outstanding ~2.5% Cost Basis Not Avail Company Info Share Price 75.00 Revenue 3.0B Market Cap 6.7B Enterprise Value 7.1B Net Cash -393M EBITDA 577M 52 wk. range 52.20 – 81.86 EV/EBITDA 12.4

USA Truck (USAK) Activist Investor: Stone House Capital


Stone House disclosed it has engaged in communications with USAK about operations, strategy and strategic direction Comment: We initially covered USAK on September 26 when Knight Transportation’s offer to acquire USAK for $9 per share was rejected by the board. On September 30 Knight increased its stake from 7.9% to 11.3% and issued a press release commenting on USAK's rejection of its $9/share buyout offer. A copy of Knight’s press release is available here: http://www.sec.gov/Archives/edgar/data/883945/000089534513000235/pr13da3x99-4.htm On November 7 Baker Street disclosed a 13.3% "active" ownership stake in USAK at an avg. cost of $12.93/sh. On January 28 Stone House Capital changed its filing status from "passive" and disclosed a 14.7% "active" position at $12.63/share. (Note: Bill Ackman from Pershing Square is Stone House's largest investor). USAK and Knight Transportation entered into a settlement agreement to end litigation. Under the terms of the agreement Knight agreed not to acquire any additional shares and will not vote its shares at the annual meeting.

Legal counsel to Baker Street

% Outstanding 14.70% Cost Basis Not Avail Company Info Share Price 14.24 Revenue 555M Market Cap 147M Enterprise Value 284M Net Cash -142M EBITDA 40M 52 wk. range 4.37 – 16.38 EV/EBITDA 7.1




Vitacost.com (VITC) Activist Investor: Consac LLC


On February 20 Consac sent a letter to VITC's board saying they should examine a sale. A copy of Consac’s letter is available here: http://www.sec.gov/Archives/edgar/data/1401688/000090266414001310/p14-0542exh1.htm Comment: On January 13, 2014 Osmium increased its VITC ownership from 6% to 8.2% at an average cost of $6.35/share and changed its filing status from "passive" to "active"

% Outstanding 7.7% Cost Basis 3.75 Company Info Share Price 8.87 Revenue 370M Market Cap 185M Enterprise Value 169M Net Cash 19M EBITDA -7M 52 wk. range 5.11 – 9.40 EV/EBITDA Negative

Volcano Corporation (VOLC) Activist Investor: Engaged Capital


VOLC announced it has changed its incentive compensation structure to better align management's pay with shareholder performance. Engaged says the valuation opportunity with VOLC is at least a 3:1 upside/downside ratio from current prices. Comment: We initially covered VOLC on November 4, 2013 when Engaged Capital disclosed a 5.1% "active" stake in VOLC and stated its belief that the shares ascribe minimal value to (a) the potential for sustained revenue growth from the fractional flow reserve (“FFR”) and peripheral intra-vascular ultrasound (“IVUS”) businesses as the penetration rates of these technologies increase, (b) the likelihood of material margin improvements and cash flow expansion as VOLC begins to generate operating leverage, (c) the opportunity to generate high rates of return through the disciplined allocation of its approximately $500 million cash balance, and (d) the attractiveness as an acquisition target given the advantaged and desirable position as the market leader in both FFR and IVUS. A good synopsis of Engaged’s investment thesis is available here: http://www.sec.gov/Archives/edgar/data/1354217/000152153613000895/sc13d09455003_10302013.htm

Legal counsel to Engaged Capital

% Outstanding 5.1% Cost Basis 21.68 Company Info Share Price 21.80 Revenue 391M Market Cap 1.2B Enterprise Value 1.2B Net Cash 3M EBITDA 32M 52 wk. range 16.37 – 26.23 EV/EBITDA 36.8




Wausau Paper Corp. (WPP) Activist Investor: Altai Capital


On February 18 Starboard sent a letter to WPP saying it is not the only shareholder that has lost patience with the unwillingness of the current board to hold management accountable for failed execution and prolonged underperformance. A copy of Starboard’s February 18 letter is available here: http://www.sec.gov/Archives/edgar/data/105076/000141588914000603/starboardsc13dafeb182014.pdf Comment: We initially covered WPP on July 29, 2011 highlighting Starboard’s initial 6.3% “active” ownership stake and letter to the board. In the July letter, Starboard stated its belief that WPP is deeply undervalued and also questioned the Company’s tissue paper business expansion plans. Starboard’s sum-of-the-parts analysis in 2011 suggested WPP was worth between $10.29 – 14.09 per share. On October 3, 2011, Starboard sent a letter to the CEO of WPP following their meeting with management and the Board in late August. In the letter, Starboard stated their concern that, as currently conceived, WPP’s Tissue expansion project requires them to take on significant additional debt, which in turn would dramatically increase the risk profile for shareholders. Starboard urged WPP to finance the Tissue expansion project by divesting certain non-core assets, including the underperforming Paper business, the Company-owned timberlands and the hydroelectric assets. On January 11, 2012 Starboard sent a letter to WPP suggesting they retain a reputable financial advisor to explore a sale. In addition, Starboard recommended WPP reconstitute its board “with individuals capable of critically analyzing important strategic initiatives, such as the potential sale of the Paper segment or the entire Company, and the expansion of the Tissue business into new areas of the away-from-home market.” On February 10, 2012 WPP entered into a settlement agreement with Starboard. Under the terms of the agreement WPP nominated 2 of Starboard’s nominees for election to the 8-member board. On October 14 we reported Starboard had increased its “active” ownership stake in WPP from 9.7% to 14.4%. On January 11 and January 14 Starboard sent letters to WPP demanding they examine strategic alternatives. In addition, Starboard nominated 3 directors for election to the board. On March 6 WPP entered into a settlement agreement with Starboard. Under the terms of the agreement WPP agreed to solicit votes for 2 Starboard nominees. On October 21 Starboard sent a letter to the board urging them to (i) immediately initiate a share repurchase of $100 million or more, (ii) institute a recurring dividend of $1.00 per share beginning later this year or early next year, and to increase the dividend to $1.50 or more over time, and (iii) reduce corporate overhead and relocate the headquarters to one of its tissue facilities. A copy of Starboard’s October 21, 2013 letter is available here: http://www.sec.gov/Archives/edgar/data/105076/000152153613000855/sc13da1006297097_10222013.pdf On January 17 Starboard sent a letter to WPP saying the Company must either (i) immediately replace management and position the Company for standalone success, or (ii) explore a sale. Starboard also nominated 3 candidates for election to the board. A copy of Starboard’s January 17 letter is available here: http://www.sec.gov/Archives/edgar/data/105076/000152153614000031/sc13da1106297097_01172014.pdf On January 24 Altai Capital disclosed a 5.5% "active" position in WPP at an average cost of $11.15 and stated that Starboard has made a convincing prima facie case supporting the need for continued enhancement of the Board.


% Outstanding 15.20% Cost Basis 7.75 Company Info Share Price 13.17 Revenue 348M Market Cap 651M Enterprise Value 798M Net Cash -147M EBITDA 79M 52 wk. range 9.57 – 14.04 EV/EBITDA 10.1



World Energy Solutions (XWES) Activist Investor: Ardsley Partners


World Energy announced it is in discussions with Ardsley about board membership and also announced it has retained an investment bank to review strategic alternatives. A copy of World Energy’s press release is available here: http://finance.yahoo.com/news/world-energy-solutions-undertakes-review-130000512.html Comment: We initially covered XWES on January 9, 2014 when Ardsley sent a letter to the Chairman of XWES highlighting several initiatives to improve value. In the letter Ardsley stated that the Company would benefit from new directors. A copy of Ardsley’s January 9 letter is available here: http://www.sec.gov/Archives/edgar/data/900529/000092189514000035/sc13d00322wor_01092014.pdf

Strategy & Communications to Ardsley Partners

Legal counsel to Ardsley Partners

% Outstanding 7.5% Cost Basis 3.74 Company Info Share Price 4.25 Revenue 36M Market Cap 51M Enterprise Value 60M Net Cash -7M EBITDA 3M 52 wk. range 2.99 – 5.16 EV/EBITDA 23.8



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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.

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