SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /_/
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Under Rule 14a-12
SUNSET FINANCIAL RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
WESTERN INVESTMENT L L C
- --------------------------------------------------------------------------------
WESTERN INVESTMENT HEDGED PARTNERS LP
WESTERN INVESTMENT INSTITUTIONAL PARTNERS L L C
WESTERN INVESTMENT ACTIVISM PARTNERS L L C
ARTHUR D. LIPSON
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/_/ Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
/_/ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed
2
SUNSET FINANCIAL RESOURCES, INC.
- --------------------------------------------------------------------------------
CONSENT SOLICITATION STATEMENT
TO CALL A SPECIAL MEETING OF STOCKHOLDERS
BY
WESTERN INVESTMENT L L C,
WESTERN INVESTMENT INSTITUTIONAL PARTNERS L L C,
WESTERN INVESTMENT HEDGED PARTNERS LP,
WESTERN INVESTMENT ACTIVISM PARTNERS L L C, AND
ARTHUR D. LIPSON
- --------------------------------------------------------------------------------
WHY YOU WERE SENT THIS CONSENT SOLICITATION STATEMENT
Western Investment L L C ("WILLC"), Western Investment Institutional Partners L
L C ("WIIP"), Western Investment Hedged Partners LP ("WIHP"), Western Investment
Activism Partners L L C ("WIAP") and Arthur D. Lipson (collectively, the
"Western Committee") are hereby asking you to help the Western Committee call a
special meeting of stockholders of Sunset Financial Resources, Inc. (the
"Company"). This consent solicitation statement and the accompanying WHITE
consent card are being furnished to holders of the Company's common stock, $.001
par value (the "Common Stock") in connection with the solicitation of written
consents to call a special meeting by the Western Committee. The Western
Committee seeks to call a special meeting of the Company's stockholders for the
following purposes: (i) to remove each of the members of the Board of Directors
(the "Board of Directors") of the Company, (ii) to amend the bylaws of the
Company to require Article II, Section 2.6 thereof, which provides that board
vacancies created by the removal of directors shall be filled by stockholders,
to only be amended by a vote of a majority of the voting power of the Common
Stock of the Company and to read as follows: "Any vacancy occurring on the Board
of Directors, including any vacancy created by reason of an increase in the
number of directors, may be filled in the manner provided in the Charter.
Notwithstanding the foregoing, any vacancy created as a result of the removal of
a director by a vote of the stockholders shall only be filled by a vote of the
stockholders. This Section 2.6 shall only be amended by a vote of a majority of
the voting power of the Common Stock of the Company," (iii) to amend the
Company's bylaws to fix the number of members of the Board of Directors at five,
and (iv) to elect directors to fill the vacancies created by the removal of
directors as proposed above (items (i) through (iv) above collectively referred
to as the "Proposals").
Under the Company's bylaws, as amended on August 31, 2005, for a special meeting
to be held, written consents to call a special meeting must be executed by the
holders of not less than 50% of all of the shares of Common Stock entitled to
vote at such meeting. Prior to the Company's amendment of its bylaws, special
meetings could be called by the written request by the holders of not less than
25% of all of the shares of Common Stock entitled to vote at such meeting. As of
October __, 2005, the Western Committee is the beneficial owner of, and has the
right to vote, 1,021,300 shares of the Company's Common Stock, representing
approximately 9.7% of the outstanding Common Stock of the Company.
This consent solicitation statement and the accompanying WHITE consent card are
first being mailed to stockholders on or about October ____, 2005. Written
consents to call a special meeting should be delivered as promptly as possible,
by fax or by mail (using the enclosed envelope), to the Western Committee's
Solicitation Agent, The Altman Group, Inc. as set forth below.
This consent solicitation is being made by the Western Committee, and not on
behalf of the Board of Directors. At this time, the Western Committee is not
1
currently seeking your proxy, consent, authorization or written consent for
approval of the proposals. THE WESTERN COMMITTEE IS ONLY SOLICITING YOUR WRITTEN
CONSENT TO CALL THE SPECIAL MEETING. AFTER THE SPECIAL MEETING HAS BEEN CALLED,
THE WESTERN COMMITTEE WILL SEND YOU PROXY MATERIALS URGING YOU TO VOTE IN FAVOR
OF THE PROPOSALS. YOUR WRITTEN CONSENT IS IMPORTANT, NO MATTER HOW MANY OR HOW
FEW SHARES YOU OWN. THE WESTERN COMMITTEE URGES YOU TO SIGN, DATE AND RETURN THE
ENCLOSED WHITE WRITTEN CONSENT TO CALL A SPECIAL MEETING.
IMPORTANT
IF YOUR SHARES OF COMMON STOCK ARE REGISTERED IN YOUR OWN NAME, PLEASE SIGN,
DATE AND MAIL THE ENCLOSED WHITE CONSENT CARD TO THE ALTMAN GROUP, INC. IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK
NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A WHITE CONSENT CARD WITH RESPECT
TO YOUR SHARES AND ONLY UPON RECEIPT OF SPECIFIC INSTRUCTIONS FROM YOU.
ACCORDINGLY, YOU SHOULD CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE
INSTRUCTIONS FOR A WHITE CONSENT CARD TO BE SIGNED REPRESENTING YOUR SHARES OF
COMMON STOCK. THE WESTERN COMMITTEE URGES YOU TO CONFIRM IN WRITING YOUR
INSTRUCTIONS TO THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND TO PROVIDE A COPY OF
SUCH INSTRUCTIONS TO THE WESTERN COMMITTEE IN CARE OF THE ALTMAN GROUP, INC. TO
THE ADDRESS BELOW, SO THAT THE WESTERN COMMITTEE WILL BE AWARE OF ALL
INSTRUCTIONS GIVEN AND CAN ATTEMPT TO ENSURE THAT SUCH INSTRUCTIONS ARE
FOLLOWED.
IF YOU HAVE ANY QUESTIONS ABOUT EXECUTING OR DELIVERING YOUR WHITE CONSENT CARD
OR REQUIRE ASSISTANCE, PLEASE CONTACT:
The Altman Group, Inc.
1200 Wall Street West, 3rd Floor
Lyndhurst, New Jersey 07071
CALL TOLL-FREE: (866) 416-0553
FAX: (201) 460-0050
WE ARE DISSATISFIED WITH THE CURRENT BOARD OF DIRECTORS
We are dissatisfied with the Board of Directors. Since the members of the
Western Committee comprise one of the largest stockholdings in the Company, we
have a very strong incentive to increase stockholder value. The Western
Committee believes that calling a special meeting will provide the Company's
stockholders an opportunity to express their dissatisfaction with the current
affairs of the Company and performance of the current Board of Directors.
Holding a special meeting shall also provide the Company's stockholders an
opportunity to be proactive in the future of the Company by changing the
composition of the Board and removing each of the current directors.
PAST CONTACTS
On August 27, 2005, WILLC sent a letter to the Board of Directors expressing its
concerns about recent developments with the Company, including the resignation
of Ernst & Young LLP as the Company's independent auditors for the period ending
December 31, 2005. WILLC stated that it believes that it would be in the best
interests of the Company and its stockholders if the Board of Directors was
reconstituted and a majority of new directors were elected. WILLC suggested that
the Company hold a special meeting to vote on the Proposals. After discussions
with Mr. Lipson, WILLC's managing member, the Board of Directors decided not to
2
call a special meeting. In fact, the Board of Directors even made it harder for
stockholders to express any dissatisfaction they may have with respect to the
management of the Company by increasing the percentage of the outstanding shares
of Common Stock necessary to call a special meeting from 25% to 50% on August
31, 2005. On September 22, 2005, WILLC sent a letter to the members of the Board
of Directors requesting that the Board of Directors consult with the principal
stockholders of the Company with respect to one remaining vacancy on the Board
of Directors and that the Board of Directors appoint a stockholder
representative to fill the vacancy. On September 28, 2005, the Company announced
the appointment of Charles Wolcott to the Board of Directors of the Company. To
show its commitment and determination to express its concerns with respect to
the recent developments in the Company and in an effort to increase shareholder
value, the Western Committee has decided to solicit written consents to call a
special meeting from the stockholders of the Company.
THE SPECIAL MEETING
The Western Committee is soliciting written consents to call the special
meeting. The Western Committee is furnishing this Consent Solicitation Statement
and the WHITE Consent Card to enable you and the Company's other stockholders to
call the special meeting. For the special meeting to be held in accordance with
the amendment to the bylaws adopted by the Board of Directors on August 31,
2005, written consents in favor of the call of the special meeting must be
executed by the holders of not less than 50% of all votes entitled to be cast at
such meeting. After the special meeting is called, the Western Committee will
solicit proxies from you in support of the Proposals by sending you a notice of
the special meeting, a proxy statement and a proxy card for use therewith.
According to the Company's Form 10-Q for the fiscal quarter ended June 30, 2005,
as of August 10, 2005, there were 10,475,000 shares of the Company's common
stock outstanding. Based on such number, and the fact that the Western Committee
already owns 1,021,300 shares of Common Stock, additional written consents to
hold a special meeting from holders of an aggregate of at least 4,216,200 shares
of Common Stock will be required to call the special meeting. PLEASE COMPLETE,
SIGN AND RETURN THE ENCLOSED WHITE CONSENT CARD BEFORE OCTOBER __, 2005. THE
FAILURE TO SIGN AND RETURN THE WHITE CONSENT CARD WILL HAVE THE SAME EFFECT AS
OPPOSING THE CALL OF A SPECIAL MEETING.
If the Western Committee is successful in its solicitation of written consents,
the Company will be required to call and hold the special meeting. After the
special meeting is called, the Western Committee intends to solicit proxies from
you in support of the Proposals by sending you a notice of the special meeting,
a proxy statement and a proxy card for use therewith. At the special meeting,
the stockholders will be asked to vote "For" the Proposals.
The Western Committee expects to request, in any future proxy solicitation
relating to the special meeting, authority (i) to initiate and vote for
proposals to recess or adjourn the special meeting for any reason and (ii) to
oppose and vote against any proposal to recess or adjourn the special meeting.
The Western Committee does not currently anticipate additional proposals on any
substantive matters. Nevertheless, the Western Committee reserves the right to
either modify the Proposals or cause additional proposals to be identified in
the notice of, and in, the proxy materials for, the special meeting. The Western
Committee is not aware of any other proposals to be brought before the special
meeting. However, should other proposals be brought before the special meeting,
the Western Committee will vote its proxies on such matters in its discretion.
WRITTEN CONSENT PROCEDURES
Pursuant to this Consent Solicitation Statement, the Western Committee is
soliciting written consents from holders of outstanding shares of Common Stock
to call the special meeting. By executing a written consent, a stockholder is
3
requesting the Company to call the special meeting and designate specified
persons as the stockholder's agents and is authorizing the designated agents (i)
to call the special meeting, (ii) to set the place, date and time of the special
meeting, if held to be permissible, and (iii) exercise all rights of the holders
of shares of Common Stock incidental to calling and convening the special
meeting and causing the purposes of the authority expressly granted pursuant to
the written consents to the designated agents to be carried into. PLEASE NOTE
THAT WRITTEN CONSENTS TO CALL THE SPECIAL MEETING DO NOT GRANT THE DESIGNATED
AGENT(S) THE POWER TO VOTE YOUR SHARES OF COMMON STOCK AT THE SPECIAL MEETING
AND DO COMMIT YOU TO CAST ANY VOTE IN FAVOR OR AGAINST ANY PROPOSAL TO BE
BROUGHT BEFORE THE SPECIAL MEETING. To vote on the matters to be brought before
the special meeting you must vote by proxy or in person at the special meeting.
You may revoke your written consent to call a special meeting at any time by
delivering a written revocation to the Western Committee in care of The Altman
Group, Inc. at the address or fax number set forth on the back cover of this
Consent Solicitation Statement. Such a revocation must clearly state that your
written consent to call a special meeting is no longer effective. Any revocation
of a written consent to call a special meeting will not affect any action taken
by the designated agent pursuant to the written consent prior to such
revocation.
If your shares of Common Stock are held in the name of a brokerage firm, bank
nominee or other institution, only it can sign a written consent or revoke any
consent previously given with respect to your shares and only upon receipt of
your specific instructions. Accordingly, please contact the person responsible
for your account and give instructions for a WHITE Consent Card representing
your shares to be signed. The Western Committee urges you to confirm in writing
your instructions to the person responsible for your account and to provide a
copy of such instructions to the Western Committee in care of The Altman Group,
Inc. at the address or fax number set forth on the back cover of this Consent
Solicitation Statement so that the Western Committee will be aware of all
instructions given and can attempt to ensure that such instructions are
followed.
SOLICITATION OF WRITTEN CONSENTS; EXPENSES.
The entire expense of preparing and mailing this Consent Solicitation Statement
and any other soliciting material and the total expenditures relating to the
solicitation of written consents to call the special meeting (including, without
limitation, costs, if any, related to advertising, printing, fees of attorneys,
financial advisors, solicitors, accountants, public relations, transportation
and litigation) will be borne by the Western Committee. In addition to the use
of the mails, written consents to call a special meeting and proxies may be
solicited by the Western Committee by telephone, telegram, and personal
solicitation. Banks, brokerage houses, and other custodians, nominees, and
fiduciaries will be requested to forward solicitation material to the beneficial
owners of the Common Stock that such institutions hold, and the Western
Committee will reimburse such institutions for their reasonable out-of-pocket
expenses.
The Western Committee has retained The Altman Group, Inc., a proxy solicitation
firm, to assist in the solicitation of written consents and the proxy
solicitation in connection with the special meeting and at a fee estimated not
to exceed $[______] plus reimbursement of reasonable out-of-pocket expenses.
That firm will utilize approximately [__] persons in its solicitation efforts.
The Western Committee estimates that their total expenditures relating to the
solicitation of written consents to call a special meeting and the solicitation
of proxies for approval of the Proposals at the special meeting will be
approximately $[_______] (including, without limitation, costs, if any, related
to advertising, printing, fees of attorneys, financial advisors, solicitors,
accountants, public relations, transportation, and litigation). Total cash
expenditures to date relating to these solicitations have been approximately
$[____].
4
The Western Committee intends to seek reimbursement from the Company for the
Western Committee's actual expenses incurred in connection with this
solicitation and the solicitation of proxies approving the Proposals. Following
the special meeting, the Western Committee will request that the Board of
Directors approve a reimbursement of such expenses. If the matter is submitted
to a vote of the Company's stockholders, the Western Committee will vote its
shares in favor of such reimbursement and will accept the results of such
stockholder vote.
CERTAIN INFORMATION REGARDING THE PARTICIPANTS.
Each member of the Western Committee may be deemed to be a "participant" in the
solicitation conducted with this Consent Solicitation Statement. Arthur D.
Lipson is the sole managing member of WILLC, a Delaware limited liability
company, which in turn is (a) the general partner of WIHP, a Delaware limited
partnership, (b) the managing member of WIIP, a Delaware limited liability
company, and (c) the managing member of WIAP, a Delaware limited liability
company. The principal occupation of Mr. Lipson is acting as the managing member
of WILLC. The principal business of WILLC is acting as the general partner of
WIHP and the managing member of each of WIIP and WIAP. The principal business of
WIHP, WIIP and WIAP is the business of acquiring, holding and disposing of
investments in various companies. The principal business address of Mr. Lipson,
WILLC, WIHP, WIIP and WIAP is 2855 East Cottonwood Parkway, Suite 110, Salt Lake
City, Utah 84121. As of the date hereof, WIHP, WIIP and WIAP beneficially owned
305,300, 633,300, and 77,700 shares of Common Stock, respectively. As the
general partner or managing member, as the case may be, of WIHP, WIIP and WIAP,
WILLC may be deemed to beneficially own the 1,016,300 shares of Common Stock
beneficially owned in the aggregate by WIHP, WIIP and WIAP. As the managing
member of WILLC, Mr. Lipson may be deemed to beneficially own the 1,016,300
shares of Common Stock beneficially owned by WILLC, in addition to the 5,000
shares of Common Stock that Mr. Lipson owns directly.
Exhibit A lists certain information regarding ownership of the Common Stock by
the Western Committee and transactions in the Common Stock made by the Western
Committee during the last two years. The Western Committee beneficially owns
1,021,300 shares, approximately 9.7% of the outstanding shares of the Company's
Common Stock. The Western Committee may, however, change or alter its investment
strategy at any time to increase or decrease its holdings in the Company.
Except as set forth herein, none of the members of the Western Committee is now,
nor has been within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of the Company
(including, but not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or guarantees of profit, division of
losses or profits, or the giving or withholding of proxies).
There are no material proceedings to which any member of the Western Committee
or any associate of any member of the Western Committee is a party adverse to
the Company or any of its subsidiaries or has a material interest adverse to the
Company or any of its subsidiaries. Except as described herein, neither the
members of the Western Committee nor any associate of any of the member of the
Western Committee has any interest in the matters to be voted upon at the
special meeting, other than an interest, if any, as a stockholder of the
Company.
Except as described herein or in the schedules hereto, to the best knowledge of
the Western Committee, neither the members of the Western Committee nor any
associate of any member of the Western Committee (1) has engaged in or has a
direct or indirect interest in any transaction or series of transactions since
the beginning of the Company's last fiscal year, or in any currently proposed
transaction, to which the Company or any of its subsidiaries is a party where
the amount involved was in excess of $60,000; (2) has been indebted to the
5
Company or any of its subsidiaries; (3) has borrowed any funds for the purpose
of acquiring or holding any securities of the Company, or is presently, or has
been within the past year, a party to any contract, arrangement or understanding
with any person with respect to either any securities of the Company, any future
employment by the Company or its affiliates, or any future transaction to which
the Company or any of its affiliates will or may be a party; or (4) is the
beneficial or record owner of any securities of the Company or any parent or
subsidiary thereof.
OTHER MATTERS
The principal executive offices of the Company are located at 10245 Centurion
Parkway North, Suite 305, Jacksonville, Florida 32256. Except as otherwise noted
herein, the information concerning the Company has been taken from or is based
upon documents and records on file with the SEC and other publicly available
information. Although the Western Committee does not have any knowledge that
would indicate that any statement contained herein based upon such documents and
records is untrue, it does not take any responsibility for the accuracy or
completeness of the information contained in such documents and records, or for
any failure by the Company to disclose events that may affect the significance
or accuracy of such information.
For information regarding the security ownership of certain beneficial owners
and the management of the Company, see Schedule II.
YOUR SUPPORT IS IMPORTANT
NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN WE ARE SEEKING YOUR SUPPORT. PLEASE
SIGN, DATE, AND MAIL IN THE ENCLOSED POSTAGE-PAID ENVELOPE WITH THE ENCLOSED
WHITE CONSENT CARD AS SOON AS POSSIBLE.
IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK,
BANK NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A WRITTEN CONSENT WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE
FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR A WRITTEN CONSENT TO BE SIGNED
REPRESENTING YOUR SHARES OF COMMON STOCK.
WHOM YOU CAN CALL IF YOU HAVE QUESTIONS
If you have any questions or require any assistance, please contact The Altman
Group, Inc., proxy solicitors for the Western Committee, at the following
address and toll free telephone number:
The Altman Group, Inc.
1200 Wall Street West, 3rd Floor
Lyndhurst, New Jersey 07071
CALL TOLL-FREE: (866) 416-0553
FAX: (201) 460-0050
IT IS IMPORTANT THAT YOU SIGN AND DATE YOUR WHITE CONSENT CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO
POSTAGE IS NECESSARY.
THE WESTERN COMMITTEE
October __, 2005
6
SCHEDULE I
TRANSACTIONS IN SECURITIES OF SUNSET FINANCIAL RESOURCES, INC.
DURING THE PAST TWO YEARS
CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED/(SOLD) SHARE ($)* PURCHASE / (SALE)
- --------------------------------------------------------------------------------
WESTERN INVESTMENT HEDGED PARTNERS LP
- --------------------------------------------------------------------------------
Common Stock 18,000 12.7706 3/17/04
Common Stock 18,000 12.7555 3/17/04
Common Stock 20,000 13.0005 3/17/04
Common Stock 18,000 13.0005 3/17/04
Common Stock (18,000) 12.7439 (3/17/04)
Common Stock 20,000 9.8075 7/13/04
Common Stock 15,000 9.6100 8/12/04
Common Stock (91,000) 10.3798 (11/30/04)
Common Stock 62,500 9.6701 3/04/05
Common Stock 100,000 9.6701 3/07/05
Common Stock 125,000 9.4200 3/24/05
Common Stock 8,400 8.2695 8/16/05
Common Stock 9,400 8.2822 8/17/05
* Per share prices includes all commission costs.
WESTERN INVESTMENT INSTITUTIONAL PARTNERS L L C
- --------------------------------------------------------------------------------
Common Stock 30,000 12.7500 3/17/04
Common Stock 25,000 13.0004 3/17/04
Common Stock 32,000 12.7553 3/17/04
Common Stock 50,000 13.0002 3/17/04
Common Stock (32,000) 12.7442 (3/17/04)
Common Stock 10,000 12.7910 3/22/04
Common Stock 4,300 11.4623 4/08/04
Common Stock 26,100 11.4604 4/12/04
Common Stock 11,700 11.0178 4/30/04
Common Stock 5,000 11.0150 5/03/04
Common Stock 22,000 10.3800 11/30/04
7
CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED/(SOLD) SHARE ($)* PURCHASE / (SALE)
- --------------------------------------------------------------------------------
Common Stock 91,000 10.3800 11/30/04
Common Stock 1,000 9.77785 2/22/05
Common Stock 5,000 9.7085 2/23/05
Common Stock 10,000 9.5255 2/24/05
Common Stock 1,000 9.4785 2/25/05
Common Stock 62,500 9.6701 3/04/05
Common Stock 100,000 9.4200 3/24/05
Common Stock (29,700) 9.4711 (3/24/05)
Common Stock 186,100 9.5200 3/28/05
Common Stock (1,100) 9.4996 (3/28/05)
Common Stock 100 9.2200 5/04/05
Common Stock 8,300 9.1867 5/13/05
Common Stock 10,000 9.1898 5/16/05
Common Stock 5,000 9.1680 5/17/05
* Per share prices includes all commission costs.
WESTERN INVESTMENT ACTIVISM PARTNERS L L C
- --------------------------------------------------------------------------------
Common Stock 10,000 9.6395 3/04/05
Common Stock 20,600 9.6015 3/04/05
Common Stock 15,100 9.4999 3/16/05
Common Stock 25,000 9.4202 3/24/05
Common Stock 2,800 9.2100 5/27/05
Common Stock 800 9.2100 8/02/05
Common Stock 4,500 9.2100 8/03/05
Common Stock (1,100) 9.2996 (8/08/05)
* Per share prices includes all commission costs.
ARTHUR D. LIPSON
- --------------------------------------------------------------------------------
Common Stock 5,000 9.5000 3/28/05
WESTERN INVESTMENT L L C
- --------------------------------------------------------------------------------
NONE
8
SCHEDULE II
THE FOLLOWING TABLE IS REPRINTED FROM THE DEFINITIVE PROXY STATEMENT
FILE BY SUNSET FINANCIAL RESOURCES, INC. WITH THE SECURITIES
AND EXCHANGE COMMISSION ON APRIL 6, 2005.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 30, 2005 by (1) each person known by
us to own beneficially more than 5% of our outstanding common stock, (2) each
current director, (3) each named executive officer, and (4) all current
directors and executive officers as a group. The number of stock beneficially
owned by each entity, person, director or executive officer is determined under
the rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any stock as to which the individual has the sole or shared
voting power or investment power and also any stock that the individual has a
right to acquire as of May 30, 2005 (60 days after March 30, 2005) through the
exercise of any share option or other right. Unless otherwise indicated, each
person has sole voting and investment power (or shares such powers with his
spouse) with respect to the stock set forth in the following table.
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class (1)
- ----------------------------------------------- -------------------- ----------
Hunter Global Associates, L.L.C. 1,500,000 (2) 14.3%
485 Madison Avenue
22nd Floor
New York, New York 10022
North Sound Capital LLC 1,000,000 (3) 9.6%
53 Forest Avenue
Suite 202
Old Greenwich, CT 06870
Delaware Management Holdings 899,100 (4) 8.6%
2005 Market Street
Philadelphia, PA 19103
NWQ Investment Management Company, LLC 897,549 (5) 8.6%
2049 Century Park East, 4th Floor
Los Angeles, CA 90067
Teachers Insurance and Annuity Association of America 788,320 (6) 7.5%
730 Third Avenue
New York, NY 10017
9
Thomas Bruce Akin 659,700 (7) 6.3%
c/o Talkot Crossover Fund, L.P.
2400 Bridgeway
Suite 300
Sausalito, CA 94965
Western Investment LLC 562,800 (8) 5.4%
2855 East Cottonwood Parkway
Suite 110
Salt Lake City, UT 84121
J. Bert Watson 189,000 (9) 1.8%
Byron L. Boston 36,666 (10) *
Jeffrey S. Betros 8,833 (11) *
Michael L. Pannell 14,333 (12) *
Rodney E. Bennett 5,000 (13) *
Hugh H. Jones, Jr. 7,000 (14) *
George A. Murray 8,000 (15) *
Joseph P. Stingone 6,000 (16) *
G. Steven Dawson 5,000 (17) *
George O. Deehan 5,000 (18) *
Thomas Manuel -- (19) *
All directors and executive officers as a group 289,832 (3) 2.7%
(11 persons)
* Beneficial ownership of less than 1% of the class is omitted.
10
(1) The percentages of shares owned provided in the table is based on
10,475,000 shares outstanding as of March 21, 2005. Percentage of
beneficial ownership by a person as of a particular date is calculated by
dividing the number of shares beneficially owned by such person as of
March 30, 2005 by the sum of the number of shares of common stock
outstanding as of such date and the number of unissued shares as to which
such person has the right to acquire voting and/or investment power
within 60 days and restricted stock not yet vested.
(2) Includes shares beneficially owned by Duke Buchan III and various
affiliated entities, including Hunter Global Associates L.L.C., Hunter
Global Investors L.P., Hunter Global Investors Fund I L.P. and Hunter
Global Investors Fund II L.P. Hunter Global Associates L.L.C. reported
shared voting power and shared dispositive power with respect to 475,500
shares. Hunter Global Investors L.P. and Duke Buchan III each reported
shared voting power and shared dispositive power with respect to
1,500,000 shares. Hunter Global Investors Fund I L.P. reported shared
voting power and shared dispositive power with respect to 448,500 shares.
Hunter Global Investors Fund II L.P. reported shared voting power and
shared dispositive power with respect to 27,000 shares. Based solely on
Schedule 13G dated March 17, 2004.
(3) North Sound Capital LLC reported shared voting and dispositive power over
1,000,000 shares of common stock. The ultimate managing member of North
Sound Capital LLC is Thomas McAuley. North Sound Capital LLC may be
deemed the beneficial owner of the shares in its capacity as the managing
member of North Sound Legacy Fund LLC, North Sound Legacy Institutional
Fund LLC and North Sound Legacy International Ltd. (the "Funds"), who are
the holders of such shares. As the managing member of the Funds, North
Sound Capital LLC has voting and investment control with respect to the
shares of common stock held by the Funds. Based solely on Schedule 13G
dated March 17, 2004.
(4) Consists of shares beneficially owned by Delaware Management Holdings
which is wholly-owned by Delaware Management Business Trust. Lincoln
National Corp. is the ultimate parent of Delaware Management Business
Trust and may be deemed to share beneficial ownership with the various
Delaware Investments Family of Funds. Of the shares beneficially owned,
Delaware Management Holdings and Delaware Management Business Trust have
sole voting and dispositive power with respect to 899,100 shares. Based
solely on Schedule 13G dated December 31, 2004.
(5) Shares are beneficially owned by clients of NWQ Investment Management
("NWQ"), an investment advisor, which clients may include investment
companies registered under the Investment Company Act and/or employee
benefit plans, pension funds, endowment funds or other institutional
clients. NWQ has the sole power to dispose of or to direct the disposition
of 897,549 shares, and the sole power to vote or direct the vote of
786,418 shares. Based solely on Schedule 13G dated December 31, 2004.
(6) Teachers Insurance and Annuity Association of America ("TIAA") holds
303,820 shares of our common stock for the benefit of TIAA Real Estate
Account, a separate account of TIAA. In addition, TIAA, as the parent of
two registered investment advisers, may be deemed to have indirect voting
or investment discretion over 484,500 shares of our common stock that are
beneficially owned by three registered investment companies - College
Retirement Equities Fund ("CREF"), TIAA-CREF Institutional Mutual Funds
("Institutional Funds"), and TIAA-CREF Life Funds ("Life Funds"), as well
as the TIAA-CREF Asset Management Commingled Funds Trust I ("TCAM Funds")
11
- whose investment advisers are TIAA-CREF Investment Management, LLC (in
the case of CREF) and Teachers Advisors, Inc. (in the case of
Institutional Funds, Life Funds and TCAM Funds), both of which are wholly
owned subsidiaries of TIAA. Based solely on Schedule 13G dated December
31, 2004.
(7) Thomas Akin is the direct beneficial owner of 446,800 shares of common
stock. Thomas Akin is the managing general partner of the Talkot
Crossover Fund, L.P. Talkot Crossover Fund, L.P. is the direct beneficial
owner of 212,900 shares of common stock. By virtue of the relationship
between Mr. Akin and the fund, Mr. Akin may be deemed to possess indirect
beneficial ownership of the shares of common stock beneficially owned by
the fund. Based solely on Schedule 13D dated March 15, 2005.
(8) Western Investment LLC, ("WILLC"), Arthur D. Lipson, Western Investment
Hedged Partners LP, ("WIHP"), Western Investment Institutional Partners
LLC, a Delaware limited liability company ("WIIP"), and Western
Investment Activism Partners LLC ("WIAP"), jointly reported their stock
ownership. WILLC has sole voting and investment power over WIHP's,
WIIP's, and WIAP's security holdings and Mr. Lipson, in his role as the
managing member of WILLC, controls WILLC's voting and investment
decisions. As of the close of business on March 16, 2005, WIHP, WIIP and
WIAP beneficially owned 162,500, 354,600 and 45,700 shares respectively.
WILLC beneficially owned 562,800 shares. Based solely on Schedule 13D
filed March 7, 2005.
(9) Includes options to purchase 39,000 shares of common stock.
(10) Includes options to purchase 16,666 shares of common stock, and 5,000
restricted shares.
(11) Includes options to purchase 8,333 shares of common stock.
(12) Includes options to purchase 8,333 shares of common stock.
(13) Includes options to purchase 5,000 shares of common stock.
(14) Includes options to purchase 5,000 shares of common stock.
(15) Includes options to purchase 5,000 shares of common stock. Includes 3,000
shares held in a family trust, of which Mr. Murray is the trustee.
(16) Includes options to purchase 5,000 shares of common stock.
(17) Includes options to purchase 5,000 shares of common stock.
(18) Includes options to purchase 5,000 shares of common stock.
(19) Based solely on Form 4 filed January 27, 2005.
12
WRITTEN CONSENT
OF STOCKHOLDERS OF SUNSET FINANCIAL RESOURCES, INC.
SOLICITED BY WESTERN INVESTMENT L L C ("WILLC"), WESTERN INVESTMENT
INSTITUTIONAL PARTNERS L L C ("WIIP"), WESTERN INVESTMENT HEDGED PARTNERS
LP ("WIHP"), WESTERN INVESTMENT ACTIVISM PARTNERS L L C ("WIAP")
AND ARTHUR D. LIPSON (COLLECTIVELY, THE "WESTERN COMMITTEE")
TO CALL A SPECIAL MEETING OF THE STOCKHOLDERS OF
SUNSET FINANCIAL RESOURCES, INC.
The undersigned is a stockholder of common stock of Sunset Financial Resources,
Inc. (the "Company") and hereby submits this request to call a special meeting
of the Company's stockholders for the purposes of considering the proposals
described in the Consent Solicitation Statement previously sent to the
stockholders of the Company, and incorporated by reference herein, and designate
specified persons as the stockholder's agents and authorizing the designated
agents to set the place, date and time of the special meeting, if held to be
permissible, and exercise all rights of the stockholders of the Company
incidental to calling and convening the special meeting. NOTHING CONTAINED IN
THIS INSTRUMENT SHALL BE CONSTRUED TO GRANT THE WESTERN COMMITTEE THE RIGHT,
POWER OR AUTHORITY TO VOTE ANY SHARES OWNED BY THE UNDERSIGNED AT THE SPECIAL
MEETING.
The undersigned hereby authorizes and designates the Western Committee or any
agent thereof to collect and deliver this request to the Company, and to deliver
any other information required in connection therewith.
This request supercedes, and the undersigned hereby revoke, any earlier dated
revocation which the undersigned may have submitted to the Western Committee,
the Company or any designees of either.
Print Name:_______________________________________________________________
Signature:________________________________________________________________
Signature (if held jointly):______________________________________________
Title (only if shares are held by an entity):_____________________________
Number of shares beneficially owned (and as to which you have the right to
vote):_____________________________
Dated:______________________________________________________
Please sign exactly as your shares are registered. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporation name by the President or other duly authorized officer.
If a partnership, please sign in partnership name by authorized person. This
demand will represent all shares held in all capacities.
PLEASE COMPLETE, SIGN, DATE, AND MAIL PROMPTLY
IN THE ENCLOSED ENVELOPE BEFORE ____________, 2005
13
