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.
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(Name of Registrant as Specified in Its Charter)
WESTERN INVESTMENT HEDGED PARTNERS LP
WESTERN INVESTMENT LLC
WESTERN INVESTMENT INSTITUTIONAL PARTNERS LLC
WESTERN INVESTMENT ACTIVISM PARTNERS LLC
ARTHUR D. LIPSON
MATTHEW S. CROUSE
JAMES S. SCHALLHEIM
D. JAMES DARAS
MARSHALL W. COBURN
GERALD HELLERMAN
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / 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
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(2) Form, Schedule or Registration Statement No:
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(3) Filing Party:
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(4) Date Filed:
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WESTERN INVESTMENT HEDGED PARTNERS LP
__________, 2006
Fellow Stockholders:
The attached proxy statement and the enclosed GREEN proxy card are
being furnished to you, the stockholders of Sunset Financial Resources, Inc.
("Sunset" or the "Company"), in connection with the solicitation of proxies by
Western Investment Hedged Partners LP ("Western Investment") for use at the
special meeting of stockholders of Sunset, and at any adjournments or
postponements thereof and any meeting which may be called in lieu thereof (the
"Special Meeting"), relating to the proposed merger involving Sunset and Alesco
Financial Trust ("Alesco"). Pursuant to the attached proxy statement, we are
soliciting proxies from holders of shares of Sunset common stock to vote AGAINST
Sunset's proposed merger with Alesco, and specifically to vote against the
proposals to approve the issuance of shares of Sunset common stock in the
proposed merger and to adopt a new long-term incentive plan.
The Special Meeting will be held on _________, 2006 at ____ a.m., local
time, at _________________________________________.
We urge you to carefully consider the information contained in the
attached proxy statement and then support our efforts by signing, dating and
returning the enclosed GREEN proxy card today. The attached proxy statement and
the enclosed GREEN proxy card are first being furnished to Sunset stockholders
on or about _________, 2006.
If you have already voted for Sunset management's proposals relating to
the proposed merger, you have every right to change your vote by signing, dating
and returning a later dated proxy card.
If you have any questions or require any assistance with your vote,
please contact Innisfree M&A Incorporated, which is assisting us, at their
address and toll-free number listed on the following page.
Thank you for your support,
Arthur D. Lipson
Western Investment Hedged Partners LP
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IF YOU HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING YOUR GREEN PROXY CARD
OR NEED ADDITIONAL COPIES OF WESTERN INVESTMENT'S PROXY MATERIALS, PLEASE CALL
INNISFREE M&A INCORPORATED AT THE PHONE NUMBERS LISTED BELOW.
INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NY 10022
STOCKHOLDERS CALL TOLL-FREE AT: (888) 750-5834
BANKS AND BROKERS CALL COLLECT AT: (212) 750-5833
ADDITIONAL INFORMATION CAN BE FOUND AT:
WWW.FIXMYFUND.COM
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SPECIAL MEETING OF STOCKHOLDERS
OF
SUNSET FINANCIAL RESOURCES, INC.
-------------------------
PROXY STATEMENT
OF
WESTERN INVESTMENT HEDGED PARTNERS LP
-------------------------
PLEASE SIGN, DATE AND MAIL THE ENCLOSED GREEN PROXY CARD TODAY
Western Investment Hedged Partners LP ("Western Investment" or "we") is
a significant stockholder of Sunset Financial Resources, Inc., a Maryland
corporation ("Sunset" or the "Company"). Western Investment is writing to you in
connection with the proposed merger (the "Merger") involving Sunset and Alesco
Financial Trust ("Alesco"). The Board of Directors of Sunset (the "Sunset
Board") has scheduled a special meeting of stockholders for the purpose of
approving proposals related to the Merger (the "Special Meeting"). The Special
Meeting is scheduled to be held on _________, 2006 at ____ a.m., local time, at
_________________________________________. Western Investment does not believe
the Merger is in the best interests of the stockholders of Sunset and is
therefore soliciting proxies from the stockholders of Sunset AGAINST the
following Merger proposals:
1. The Company's proposal to approve the issuance of shares of Sunset
common stock pursuant to the Agreement and Plan of Merger, dated as of April 27,
2006 (the "Merger Agreement"), by and among Sunset, Alesco and Jaguar
Acquisition Inc. ("Jaguar"), a wholly-owned subsidiary of Sunset, pursuant to
which Alesco will merge with and into Jaguar, Jaguar will remain a wholly-owned
subsidiary of Sunset and all outstanding shares of beneficial interest of Alesco
will be converted into the right to receive 1.26 shares of Sunset common stock.
2. The Company's proposal to adopt a new long-term incentive plan, the
terms of which will be substantially similar to the Alesco plan that is being
terminated effective with the closing of the Merger, and the implementation of
which is contingent upon the closing of the Merger.
Western Investment, Western Investment LLC ("WILLC"), Western
Investment Institutional Partners LLC ("WIIP"), Western Investment Activism
Partners LLC ("WIAP"), Arthur D. Lipson, Matthew S. Crouse, James S. Schallheim,
D. James Daras, Marshall W. Coburn and Gerald Hellerman are members of a group
(the "Western Group") formed in connection with this proxy solicitation and are
deemed participants in this proxy solicitation. See "Other Participant
Information." This Proxy Statement and the GREEN proxy card are first being
furnished to Sunset stockholders on or about _________, 2006.
Sunset has set the record date for determining stockholders entitled to
notice of and to vote at the Special Meeting as _________, 2006 (the "Record
Date"). The principal executive offices of Sunset are located at 10245 Centurion
Parkway North, Suite 305, Jacksonville, Florida 32256. Stockholders of record at
the close of business on the Record Date will be entitled to vote at the Special
Meeting. As of the Record Date, there were ____________________ shares of common
stock, $0.001 par value per share (the "Shares"), reported to be outstanding by
the Company, each Share entitled to one vote at the Special Meeting. As of
____________, 2006, the approximate date on which Western Investment expects to
mail this Proxy Statement to the Sunset stockholders, Western Investment, along
with all of the participants in this solicitation, are the beneficial owners of
an aggregate of 1,022,300 Shares, which represent approximately 9.7% of the
votes entitled to be cast at the Special Meeting. The participants in this
solicitation intend to vote such Shares AGAINST the Company's Merger proposals.
THIS SOLICITATION IS BEING MADE BY WESTERN INVESTMENT AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OR MANAGEMENT OF SUNSET.
WESTERN INVESTMENT IS NOT AWARE OF ANY OTHER MATTERS TO BE BROUGHT BEFORE THE
SPECIAL MEETING. SHOULD OTHER MATTERS, WHICH WESTERN INVESTMENT IS NOT AWARE OF
A REASONABLE TIME BEFORE THIS SOLICITATION, BE BROUGHT BEFORE THE SPECIAL
MEETING, THE PERSONS NAMED AS PROXIES IN THE ENCLOSED GREEN PROXY CARD WILL VOTE
ON SUCH MATTERS IN THEIR DISCRETION.
WESTERN INVESTMENT URGES YOU TO SIGN, DATE AND RETURN THE GREEN PROXY CARD
AGAINST THE COMPANY'S MERGER PROPOSALS.
IF YOU HAVE ALREADY SENT A PROXY CARD FURNISHED BY SUNSET MANAGEMENT TO SUNSET,
YOU MAY REVOKE THAT PROXY AND VOTE AGAINST THE COMPANY'S MERGER PROPOSALS BY
SIGNING, DATING AND RETURNING THE ENCLOSED GREEN PROXY CARD. THE LATEST DATED
PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE SPECIAL MEETING BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A LATER
DATED PROXY FOR THE SPECIAL MEETING TO WESTERN INVESTMENT, C/O INNISFREE M&A
INCORPORATED, WHICH IS ASSISTING IN THIS SOLICITATION, OR TO THE SECRETARY OF
SUNSET (WITH A COPY TO INNISFREE M&A INCORPORATED), OR BY VOTING IN PERSON AT
THE SPECIAL MEETING.
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IMPORTANT
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN.
WESTERN INVESTMENT URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED GREEN PROXY
CARD TODAY TO VOTE AGAINST THE COMPANY'S MERGER PROPOSALS.
Western Investment does not believe that the Merger is in the best
interest of the Company's stockholders. A vote AGAINST the Company's Merger
proposals will enable you - as the owners of Sunset - to send a message to the
Sunset Board that you are committed to maximizing the value of your Shares.
o If your Shares are registered in your own name, please sign and date
the enclosed GREEN proxy card and return it to Western Investment, c/o
Innisfree M&A Incorporated, in the enclosed envelope today.
o If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the Record Date, only it can vote
such Shares and only upon receipt of your specific instructions.
Accordingly, please contact the person responsible for your account and
instruct that person to execute on your behalf the GREEN proxy card.
Western Investment urges you to confirm your instructions in writing to
the person responsible for your account and to provide a copy of such
instructions to Western Investment, c/o Innisfree M&A Incorporated, who
is assisting in this solicitation, at the address and telephone numbers
set forth below, and on the back cover of this Proxy Statement, so that
we may be aware of all instructions and can attempt to ensure that such
instructions are followed.
If you have any questions regarding your proxy,
or need assistance in voting your Shares, please call:
INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NY 10022
STOCKHOLDERS CALL TOLL-FREE AT: (888) 750-5834
BANKS AND BROKERS CALL COLLECT AT: (212) 750-5833
ADDITIONAL INFORMATION CAN BE FOUND AT:
WWW.FIXMYFUND.COM
PROPOSAL NO. 1
APPROVAL OF PROPOSAL TO ISSUE SHARES OF SUNSET
You are being asked by Sunset, in its Proxy Statement / Prospectus
filed with the Securities and Exchange Commission on June 14, 2006 (the
"Management Proxy Statement"), to approve the issuance of Shares to stockholders
of Alesco in connection with the proposed Merger. The Merger cannot be
consummated without Sunset stockholder approval of such issuance. For the
reasons discussed below, we oppose the proposed Merger. To that end, we are
soliciting your proxy to vote AGAINST Proposal No. 1.
REASONS TO VOTE AGAINST THE PROPOSED MERGER
The following are the primary reasons why we believe stockholders
should vote AGAINST the issuance of Shares to Alesco stockholders in connection
with the proposed Merger.
WE URGE YOU TO DEMONSTRATE YOUR OPPOSITION TO THE PROPOSED MERGER AND
SEND A MESSAGE TO THE SUNSET BOARD THAT THE PROPOSED MERGER IS NOT IN THE BEST
INTEREST OF THE SUNSET STOCKHOLDERS BY SIGNING, DATING AND RETURNING THE
ENCLOSED GREEN PROXY CARD AS SOON AS POSSIBLE.
WE BELIEVE THAT THE PROPOSED EXCHANGE RATIO IN THE MERGER IS UNFAIR TO SUNSET'S
STOCKHOLDERS
Under the terms of the proposed Merger, stockholders of Alesco will
receive 1.26 Shares of Sunset for each share of Alesco that they own. We believe
that there are two numbers that clearly demonstrate that the proposed exchange
ratio of 1.26 Sunset Shares for each Alesco share is unfair to Sunset's
stockholders:
SUNSET'S BOOK VALUE PER SHARE AT MARCH 31, 2006: $10.42
ALESCO'S BOOK VALUE PER SHARE AT MARCH 31, 2006: $9.40
So why is Sunset, a public company, paying a premium to stockholders of
Alesco, a private company?
Based on the companies' respective book values at March 31, 2006 and
the proposed 1.26 exchange ratio, Sunset is effectively paying $13.13 per share,
a staggering 40% premium to Alesco's book value, for a private company (1) that
just commenced operations at the end of January 2006, (2) for which
sophisticated investors, in a private offering of Alesco's shares, paid only
$10.00 per share on January 31, 2006, and (3) whose book value has since
decreased to $9.40 per share at March 31, 2006 and an estimated $8.92 per share
at June 30, 2006, as stated in the Management Proxy Statement. Plus, the
exchange ratio would become even less favorable to Sunset's stockholders if the
principal balance of Sunset's Peerless commercial loan, which had approximately
$12.4 million outstanding as of May 31, 2006 and was in default as of June 8,
2006, is not reduced to $8 million by July 31, 2006.
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As stated in the Management Proxy Statement, the book value of the
combined company would be $7.77. Sunset's stockholders would own 42% of the
combined company and only 35% if the self-tender offer described below is fully
subscribed. Sunset and Alesco management can make all the promises they want
about how their new investment strategy will create value and result in
increased returns to Sunset's stockholders, but how long will it take until
Sunset's stockholders are able to recover from the substantial dilution they
would suffer as a result of the Merger?
Of course, if Sunset's stockholders do not like the proposed Merger,
they have the option to tender their Shares to the Company at $8.74 per Share.
We believe there are two problems with this option. First, it is only available
to holders of less than 30% of Sunset's Shares. Second, do you believe that
tendering your Shares at a significant discount to book value is a viable or
attractive option?
You have another option - vote NO to the Company's Merger proposals.
WE BELIEVE THAT THE MERGER IS NOT IN THE BEST INTEREST OF SUNSET'S STOCKHOLDERS
In Sunset's first quarter earnings call held on May 10, 2006 (the "May
10 Conference Call"), Sunset's management claimed that Sunset explored three
alternatives for the Company before deciding to pursue the Merger: (1)
liquidating the Company; (2) continuing its existing business; and (3) pursuing
a strategic transaction such as the Merger. We believe that the Merger
represents a poor choice by Sunset's Board and management that displays an
alarming lack of concern for stockholder interests.
We believe that the reason the Merger was pursued is that Sunset's
Board and management are not properly committed to Sunset's business or its
stockholders. The current Sunset Board members and management combined
beneficially own only 1% of the Company, as reported in the Management Proxy
Statement. The majority of their Shares was not acquired with their personal
funds, but was awarded to them in the form of options and restricted stock
grants. We believe that the lack of significant actual ownership of the Company
by the Sunset Board and management contributed to their willingness to pursue a
course of action that we believe does not maximize the value of Sunset's Shares
and is not in the best interest of stockholders.
Furthermore, as disclosed by Sunset's management in an investor
presentation, Sunset's executive officers who have employment agreements with
the Company could receive approximately a $2.3-$2.7 million severance package in
the aggregate as a result of the Merger. This amount includes severance payments
to George Deehan, Sunset's Chief Executive Officer, and Stacy Riffe, its Chief
Financial Officer, who have served in their respective positions for a matter of
months. As discussed in the May 10 Conference Call, these severance payments
adversely affect the valuation of the Sunset Shares, thereby worsening the
exchange ratio in the Merger and the dilution suffered by Sunset's stockholders.
Accordingly, we believe that Sunset's management may be advancing their own
interests in the Merger at the expense of stockholders.
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Given their lack of significant actual ownership of the Company and the
severance payments described above, is it any wonder why Sunset's Board and
management have abandoned their stockholders and thrown their support behind the
Merger rather than try to fix a company that we believe they have grossly
mismanaged?
WE HAVE GRAVE CONCERNS REGARDING THE COMBINED COMPANY'S BUSINESS AND ALESCO'S
BUSINESS AND MANAGEMENT STRUCTURE
We question the wisdom of the Sunset Board's decision to fundamentally
change Sunset's investment strategy to invest in what we believe to be a highly
leveraged portfolio of credit-sensitive assets at this point in the business
cycle. Our concerns were further heightened after having read the alarming 29
PAGES of risk factors in the Management Proxy Statement relating to the Merger
and the combined company's business. These risks, which are identified and
described in great detail by Sunset in the Management Proxy Statement, include:
o THERE ARE SUBSTANTIAL COSTS ASSOCIATED WITH THE MERGER. The
Management Proxy Statement states that Alesco and Sunset are
expected to incur costs and expenses of approximately $9
million in connection with the Merger. These costs and
expenses include change of control, severance, stay bonuses
and other benefit payments, fees relating to the termination
of contractual obligations (due to the discontinuance of
Sunset's business and operations), investment banking
expenses, legal and accounting fees and other related charges.
We believe that $9 million, on top of what we believe to be
the inferior economics of the transaction, is too steep of a
price to ask Sunset stockholders to pay for this deal.
o THERE ARE NUMEROUS RISKS AND CONFLICTS ASSOCIATED WITH
ALESCO'S MANAGEMENT STRUCTURE. As described in the Management
Proxy Statement, these include:
o Members of Alesco's management team have competing
duties to other entities, which could result in
decisions that are not in the best interests of
stockholders. Alesco's top executives (who would
become Sunset's top executives following completion
of the Merger) also serve as executive officers of
Alesco's external manager, Cohen Brothers (and, in
some cases, affiliates of Cohen Brothers), and are
accordingly not exclusively dedicated to Alesco's
business and investment activities. The amount of
time they spend on other existing and future business
and investment activities could be material.
o Alesco's management agreement with Cohen Brothers was
negotiated between related parties. We question
whether the terms of this management agreement,
including the fees payable to Cohen Brothers (which
include both a management and incentive fee), are as
favorable as they would be if they had been
negotiated with an unaffiliated third party. In
addition, the incentive fee payable to Cohen Brothers
under the management agreement may induce it to make
riskier investments.
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o Cohen Brothers, which is solely responsible for
managing Alesco's portfolio, owes no fiduciary
obligation to stockholders.
o There are conflicts of interest in Alesco's
relationship with Cohen Brothers, which could result
in decisions that are not in the best interests of
stockholders. Cohen Brothers is subject to conflicts
in the allocation of investment opportunities.
Affiliates of Cohen Brothers have overlapping
investment objectives with Alesco, which could cause
Alesco to forego attractive investment opportunities.
Cohen Brothers may allocate such investment
opportunities without considering what is in the best
interest of stockholders.
o ALESCO AND COHEN BROTHERS HAVE LITTLE EXPERIENCE OPERATING A
REIT, AND ALESCO'S ABILITY TO PURSUE ITS CORE INVESTMENT
STRATEGY MAY BE LIMITED. Two of Sunset's stated reasons for
the Merger are the access to the financial expertise and
management experience of Cohen Brothers and the opportunity to
adopt a new investment strategy. Yet Cohen Brothers has
limited experience in managing a REIT. Also, although the
combined company intends to pursue Alesco's investment
strategy focused on trust preferred securities, or TruPS,
issued by banks and insurance companies (Sunset claims that
Cohen Brothers is a market leaders in TruPS in these sectors,
with over $7.0 billion of its $17.0 billion in assets under
management invested in these securities), middle market loans
and residential mortgage backed securities, the constraints
imposed by the complex rules and regulations governing REITs
will limit the combined company's ability to acquire TruPS and
leveraged loans or maintain its investments in these assets,
which form a core part of Alesco's investment strategy.
o ALESCO NEEDS TO OBTAIN ADDITIONAL CAPITAL TO EXECUTE ITS
BUSINESS PLAN AND FUND ITS GROWTH IN THE NEAR TERM. According
to the Management Proxy Statement, Alesco has deployed
substantially all of the net proceeds of its January 2006
offering and a significant portion of the $1.75 billion of
funds available under its three warehouse lines, and currently
has no commitments for any additional financings. If it fails
to obtain needed additional financing, the Management Proxy
Statement states that its ability to execute its investment
and growth strategies would be adversely affected. Sunset
believes that the combined company will have the "potential"
for greater access to credit markets and that securities
analysts and institutional investors will have greater
interest in the combined company, making it "potentially
easier" for the combined entity to raise capital on more
favorable terms. Are you willing to take this chance on the
combined company's "potential"?
WE BELIEVE THAT SUNSET SHOULD PURSUE ITS STANDALONE BUSINESS PLAN
As a stockholder of Sunset, we believe you should have another
alternative. Western Investment believes that Sunset should hold its 2006 annual
meeting of stockholders, which we believe is long overdue, concurrently with the
Special Meeting. Doing so would give Sunset stockholders, in the event the
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Merger proposals are defeated, an opportunity to express their confidence in the
Company's existing directors or to replace them with directors that stockholders
believe would be more responsive to their interests. In addition, it would avoid
the additional solicitation and mailing costs that Sunset would incur if it were
to hold the annual meeting at a separate time. We intend to nominate directors
for election at the annual meeting to give stockholders a choice as to the
future direction for their company. The Western Group, as the largest group of
stockholders of Sunset, shares your interest in the maximization of the value of
your Shares. Our interests are aligned with the interests of all stockholders.
We have had discussions with Michael Tokarz regarding his (or his
affiliate) managing all or a portion of Sunset's portfolio. Mr. Tokarz has over
30 years of lending and investment experience, including, currently, as Chairman
and Portfolio Manager of MVC Capital (NYSE: MVC), a publicly traded business
development company that makes private debt and equity investments; and as
Chairman of The Tokarz Group, a private merchant bank that he founded; and,
formerly, as a General Partner with Kohlberg Kravis Roberts & Co. (KKR), one of
the world's most experienced private equity firms. We believe that Mr. Tokarz is
a superior portfolio manager with an exceptional record.
If our nominees are elected to the Sunset Board at Sunset's annual
meeting, they would engage in negotiations with Mr. Tokarz regarding his
managing of all or a portion of the Sunset portfolio, and any agreement that is
reached with Mr. Tokarz to manage the Company's assets would be submitted to the
newly reconstituted Sunset Board for its approval. Mr. Tokarz would manage
Sunset's portfolio in accordance with applicable tax and securities laws
relating to REITs, and it is our present intention that any significant change
in Sunset's investment strategy that Mr. Tokarz deems advisable would be subject
to prior stockholder approval. This is in stark contrast to the current Sunset
Board and management team, which effected a fundamental change in Sunset's
investment strategy by entering into an interim management agreement with Cohen
Brothers to transition Sunset's assets into assets consistent with Alesco's
investment strategy, without first obtaining stockholder approval. There is no
assurance that we will be able to reach a definitive agreement with Mr. Tokarz,
or with respect to the returns that Mr. Tokarz would be able to achieve if he or
an affiliate of his is retained. If we are unable to finalize an agreement with
Mr. Tokarz, we would work closely with current management in an effort to
improve management's performance and Sunset's investment returns and also may
seek to retain another highly qualified person or persons to manage all or a
portion of Sunset's portfolio.
We believe that our alternative plan of action would avoid many of the
costs associated with a liquidation of Sunset (one of the options discussed in
the May 10 Conference Call) and the substantial dilution that Sunset's
stockholders would suffer in the Merger. We believe that there is value to be
realized for stockholders in Sunset's existing business, but that the Company
needs a dedicated and stable board and management team to help it unlock its
potential. We believe what is needed now is not the radical change in direction
and uncertainty that the Merger would create, but better management.
For the reasons discussed above, we believe the proposed Merger does
not represent the best means for Sunset stockholders to maximize the value of
their Shares. There can be no assurance that our suggested alternative to the
-8-
proposed Merger as described above would improve the Company's business or
otherwise enhance stockholder value.
If you share our concerns, then we urge you to vote NO to Sunset's
Merger proposals.
WESTERN INVESTMENT IS DETERMINED TO STOP THE PROPOSED MERGER. OUR OPPOSITION IS
BASED ON OUR FIRM COMMITMENT TO STOCKHOLDER VALUE AND OUR FIRM BELIEF THAT THE
PROPOSED MERGER IS NOT IN THE BEST INTEREST OF SUNSET STOCKHOLDERS. WE THEREFORE
URGE YOU TO VOTE YOUR GREEN PROXY CARD AGAINST THE ISSUANCE OF SHARES IN
CONNECTION WITH THE PROPOSED MERGER.
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PROPOSAL NO. 2
PROPOSAL TO ADOPT A NEW LONG-TERM INCENTIVE PLAN
You are being asked by Sunset to approve a proposal to adopt a new
long-term incentive plan in connection with the proposed Merger. For the reasons
discussed above, we oppose the proposed Merger. To that end, we are soliciting
your proxy to vote AGAINST Proposal No. 2.
WESTERN INVESTMENT URGES YOU TO VOTE AGAINST SUNSET'S PROPOSAL TO ADOPT
A NEW LONG-TERM INCENTIVE PLAN, THE TERMS OF WHICH WILL BE SUBSTANTIALLY SIMILAR
TO THE ALESCO PLAN THAT IS BEING TERMINATED EFFECTIVE WITH THE CLOSING OF THE
MERGER, AND THE IMPLEMENTATION OF WHICH IS CONTINGENT UPON THE CLOSING OF THE
MERGER.
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CERTAIN INFORMATION REGARDING THE PROPOSED MERGER
In accordance with the Merger Agreement, Alesco would merge with and
into Jaguar and Jaguar would remain a wholly-owned subsidiary of Sunset. If the
Merger is completed, stockholders of Alesco would receive 1.26 Shares of Sunset
for each share of Alesco that they own at the effective time of the Merger. In
connection with the proposed Merger, Sunset will commence a tender offer to
purchase $25 million of its Shares for $8.74 per Share or approximately
2,860,411 Sunset Shares. The exchange ratio of 1.26 Sunset Shares for each
Alesco share, and the $25 million repurchase amount and the $8.74 repurchase
price in the tender offer, are subject to adjustment if the principal balance of
Sunset's Peerless commercial loan exceeds $8 million at July 31, 2006. Based on
disclosure provided in the Management Proxy Statement, upon completion of the
Merger, Sunset stockholders would own approximately 42% of the combined
company's shares (35% if the tender offer is fully subscribed).
At the effective time of the Merger, Sunset is required to ensure that
each option to purchase Sunset Shares and all warrants to purchase Sunset
Shares, whether or not exercisable at the effective time of the Merger and
regardless of the exercise price thereof, will be canceled, effective as of the
effective time of the Merger, in exchange for the right to receive a single lump
sum distribution, equal to the product of the number of Shares subject to such
option or warrant, as applicable, immediately prior to the effective time of the
Merger, whether or not vested or exercisable, and the excess, if any, of $8.74
over the exercise price per share of such option or warrant. If the exercise
price per share of any such option or warrant is equal to or greater than $8.74,
such option or warrant will be canceled without any cash payment.
Sunset stockholders are not entitled to dissenters' rights of appraisal
for their Shares in connection with the Merger.
The foregoing description is not complete and is qualified in its
entirety by reference to the full text of the Merger Agreement, which is
attached to the Management Proxy Statement, as well as other information
concerning the Merger set forth in the Management Proxy Statement.
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VOTING AND PROXY PROCEDURES
Only stockholders of record on the Record Date will be entitled to
notice of and to vote at the Special Meeting. Each Share is entitled to one
vote. Stockholders who sell Shares before the Record Date (or acquire them
without voting rights after the Record Date) may not vote such Shares.
Stockholders of record on the Record Date will retain their voting rights in
connection with the Special Meeting even if they sell such Shares after the
Record Date. Based on publicly available information, Western Investment
believes that the only outstanding class of securities of Sunset entitled to
vote at the Special Meeting is the Shares.
Shares represented by properly executed GREEN proxy cards will be voted
at the Special Meeting as marked and, in the absence of specific instructions,
will be voted AGAINST the proposal to approve the issuance of shares of Sunset
common stock in connection with the Merger and AGAINST the proposal to adopt a
new long-term incentive plan and, in the discretion of the persons named as
proxies, on all other matters as may properly come before the Special Meeting.
QUORUM
In order to conduct any business at the Special Meeting, a quorum must
be present in person or represented by valid proxies. The presence in person or
by proxy of holders of a majority of the outstanding Shares entitled to vote at
the Special Meeting constitutes a quorum. All Shares that are voted "FOR",
"AGAINST" or "ABSTAIN" on any matter will count for purposes of establishing a
quorum (the "Votes Present").
VOTES REQUIRED FOR APPROVAL
The approval of the issuance of shares of Sunset common stock in
connection with the Merger and the approval of the long-term incentive plan
require the affirmative vote of the holders of a majority of Shares cast on each
proposal, in person or by proxy, provided that the holders of a majority of the
Shares entitled to vote are present. Stockholders may cast their votes by
marking the ballot at the Special Meeting or by specific voting instructions
sent with a signed proxy to either Western Investment in care of Innisfree M&A
Incorporated at the address set forth on the back cover of this Proxy Statement
or to Sunset at 10245 Centurion Parkway North, Suite 305, Jacksonville, Florida
32256 or any other address provided by Sunset.
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ABSTENTIONS
Abstentions will count as Votes Present for the purpose of determining
whether a quorum is present. Abstentions will not be treated as votes cast on
any proposal set forth in this Proxy Statement. Accordingly, Western Investment
believes that abstentions will have no effect upon the outcome of voting on the
proposals set forth in this Proxy Statement.
BROKER NON-VOTES
Shares held in street name that are present by proxy will be considered
as Votes Present for the purpose of determining whether a quorum is present. The
term "broker non-vote" refers to Shares held in street name that are not voted
with respect to a particular matter, generally because the beneficial owner did
not give any instructions to the broker as to how to vote such Shares on that
matter, and the broker is not permitted under applicable rules to vote such
Shares in its discretion because of the subject matter of the proposal, but
whose Shares are present on at least one matter. Such Shares shall be counted as
Votes Present for the purpose of determining whether a quorum is present, if
voting instructions are given by the beneficial owner as to at least one of the
matters to be voted on. Broker non-votes will not be counted as votes cast with
respect to matters as to which the record holder has expressly not voted.
Accordingly, Western Investment believes that broker non-votes will have no
effect upon the outcome of voting on the proposals set forth in this Proxy
Statement.
REVOCATION OF PROXIES
Stockholders of Sunset may revoke their proxies at any time prior to
exercise by attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself constitute
revocation of a proxy) or by delivering a written notice of revocation. The
delivery of a subsequently dated proxy which is properly completed will
constitute a revocation of any earlier proxy. The revocation may be delivered
either to Western Investment in care of Innisfree M&A Incorporated at the
address set forth on the back cover of this Proxy Statement or to Sunset at
10245 Centurion Parkway North, Suite 305, Jacksonville, Florida 32256 or any
other address provided by Sunset. Although a revocation is effective if
delivered to Sunset, Western Investment requests that either the original or
photostatic copies of all revocations be mailed to Western Investment in care of
Innisfree M&A Incorporated at the address set forth on the back cover of this
Proxy Statement so that Western Investment will be aware of all revocations and
can more accurately determine if and when proxies have been received from the
holders of record on the Record Date of a majority of the outstanding Shares.
Additionally, Innisfree M&A Incorporated may use this information to contact
stockholders who have revoked their proxies in order to solicit later dated
proxies against the Company's proposals in connection with the Merger.
IF YOU WISH TO VOTE AGAINST THE COMPANY'S PROPOSALS IN CONNECTION WITH THE
MERGER, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED GREEN PROXY CARD IN
THE POSTAGE-PAID ENVELOPE PROVIDED.
-13-
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being
made by Western Investment. Proxies may be solicited by mail, facsimile,
telephone, telegraph, Internet, in person and by advertisements.
Western Investment has entered into an agreement with Innisfree M&A
Incorporated for solicitation and advisory services in connection with this
solicitation, for which Innisfree M&A Incorporated will receive a fee not to
exceed $__________, together with reimbursement for its reasonable out-of-pocket
expenses, and will be indemnified against certain liabilities and expenses,
including certain liabilities under the federal securities laws. Innisfree M&A
Incorporated will solicit proxies from individuals, brokers, banks, bank
nominees and other institutional holders. Western Investment has requested
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all solicitation materials to the beneficial owners of the Shares they
hold of record. Western Investment will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing. It is anticipated that Innisfree
M&A Incorporated will employ approximately 40 persons to solicit Sunset
stockholders for the Special Meeting.
The entire expense of soliciting proxies will be borne by WILLC. Costs
of this solicitation of proxies are currently estimated to be approximately
$__________. Western Investment estimates that through the date hereof, its
expenses in connection with this solicitation are approximately $___________.
OTHER PARTICIPANT INFORMATION
Each member of the Western Group is a participant in this solicitation.
Arthur D. Lipson is the managing member of WILLC, a Delaware limited liability
company. WILLC is the general partner of Western Investment and the managing
member of WIIP, a Delaware limited liability company, and WIAP, a Delaware
limited liability company. The principal business of Western Investment, WIIP
and WIAP is acquiring, holding and disposing of investments in various
companies. The principal business address of Mr. Lipson, Mr. Crouse, WILLC,
Western Investment, WIIP and WIAP is c/o Western Investment LLC, 2855 E.
Cottonwood Parkway, Suite 110, Salt Lake City, UT 84121. The principal business
address of Mr. Schallheim is c/o University of Utah, Department of Finance, 1645
E. Campus Center Drive, Rm. 109, Salt Lake City, UT 84112. The principal
business address of Mr. Daras is c/o Inter-Atlantic Group, 400 Madison Avenue,
16th Floor, New York, NY 10017. The principal business address of Mr. Coburn is
1000 South Pointe Drive #1402, Miami Beach, FL 33139. The principal business
address of Mr. Hellerman is 10965 Eight Bells Lane, Columbia, MD 21044.
As of the Record Date, Western Investment, WIIP and WIAP beneficially
owned 305,300, 633,300 and 77,700 Shares, respectively, constituting
approximately 2.9%, 6.0% and 0.7%, respectively, of the votes entitled to be
cast at the Special Meeting. Mr. Lipson directly owned 6,000 Shares,
constituting less than 1% of the votes entitled to be cast at the Special
Meeting. As the general partner or managing member, as the case may be, of
Western Investment, WIIP and WIAP, WILLC may be deemed to beneficially own the
1,016,300 Shares owned in the aggregate by Western Investment, WIIP and WIAP. As
-14-
the managing member of WILLC, Mr. Lipson may be deemed to beneficially own the
1,016,300 Shares beneficially owned by WILLC, in addition to the 6,000 Shares
owned directly by Mr. Lipson. Each of WILLC and Mr. Lipson is deemed to have
sole voting and dispositive power over the Shares reported as beneficially owned
by Western Investment, WIIP and WIAP by virtue of their respective positions
described above. Currently, none of Messrs. Crouse, Schallheim, Daras, Coburn
and Hellerman beneficially owns any Shares.
The principal business of WILLC is acting as the general partner and
managing member, as the case may be, of Western Investment, WIIP and WIAP. The
principal occupation of Mr. Lipson is acting as managing member of WILLC. The
principal business of Western Investment, WIIP and WIAP is acquiring, holding
and disposing of investments in various companies. The principal occupation of
Matthew S. Crouse is serving as a portfolio manager at WILLC. The principal
occupation of James S. Schallheim is serving as a Professor of Finance at the
University of Utah. The principal occupation of D. James Daras is serving as a
Partner of Inter-Atlantic Group, a money manager specializing in the financial
services sector. The principal occupation of Marshall W. Coburn is serving as a
General Partner and the President of Diversified Income Strategies Management
Company, a mortgage-related hedge fund. The principal occupation of Gerald
Hellerman is providing financial and corporate consulting services through his
privately-owned firm, Hellerman Associates.
Except as set forth in this Proxy Statement, no participant in this
solicitation has a substantial interest, direct or indirect, by security
holdings or otherwise, in any matter to be acted on at the Special Meeting.
On December 1, 2005, the members of the Western Group entered into a
Joint Filing and Solicitation Agreement in which, among other things, (a) the
parties agreed to the joint filing on behalf of each of them of statements on
Schedule 13D with respect to the securities of Sunset to the extent required by
applicable law, (b) the parties agreed to solicit proxies or written consents in
favor of the election of Western Investment's director nominees at the Company's
2006 annual meeting of stockholders (the "Solicitation"), and (c) WILLC agreed
to bear all expenses incurred in connection with the Western Group's activities,
including approved expenses incurred by any of the parties in connection with
the Solicitations, subject to certain limitations. WILLC intends to seek
reimbursement from Sunset of all expenses it incurs in connection with the
Solicitation. WILLC does not intend to submit the question of such reimbursement
to a vote of security holders of the Company.
-15-
OTHER MATTERS AND ADDITIONAL INFORMATION
Western Investment is unaware of any other matters to be considered at
the Special Meeting. However, should other matters, which Western Investment is
not aware of a reasonable time before this solicitation, be brought before the
Special Meeting, the persons named as proxies on the enclosed GREEN proxy card
will vote on such matters in their discretion.
Western Investment has omitted from this Proxy Statement certain
disclosure required by applicable law that is already included in the Management
Proxy Statement. This disclosure includes, among other things, detailed
information relating to the background, reasons for, terms and consequences of
the Merger, including risk factors, financial and pro forma information, tax
consequences, accounting treatment, description of business conducted by Sunset
and Alesco, description and share price information of the common stock of
Sunset, comparison of rights of holders of shares of common stock of Sunset and
common shares of Alesco, and interests of officers and directors of Sunset and
Alesco in the Merger. The Management Proxy Statement also includes disclosure on
deadlines and procedures for submitting proposals at Sunset's next annual
meeting of stockholders under Rule 14a-8 of the Securities Exchange Act of 1934,
as amended, and outside the processes of Rule 14a-8. Stockholders should refer
to the Management Proxy Statement in order to review this disclosure. See
Schedule I for information regarding persons who beneficially own more than 5%
of the Shares and the ownership of the Shares by the management of Sunset.
The information concerning Sunset and Alesco contained in this Proxy
Statement and the Schedule attached hereto has been taken from, or is based
upon, publicly available information.
WESTERN INVESTMENT HEDGED PARTNERS LP
______________, 2006
-16-
SCHEDULE I
----------
THE FOLLOWING TABLE IS REPRINTED FROM THE MANAGEMENT PROXY STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 2006.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF SUNSET
The following table and the notes thereto sets forth certain
information with respect to the beneficial ownership of Sunset common stock as
of [______], 2006 by (1) each person known by Sunset to own beneficially more
than 5% of Sunset's 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 shares 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 [_______],
2006 (60 days after [_________], 2006) 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
Name Beneficial Ownership Percent of Class(1)
- ------------------------------------------------------ ------------------------ -------------------------
NWQ Investment Management Company, LLC
2049 Century Park East
16th Floor
Los Angeles, CA 90067 1,096,339(2) 10.4%
Western Investment LLC
2855 East Cottonwood Parkway
Suite 110
Salt Lake City, UT 84121 1,016,300(3) 9.7%
Thomas Bruce Akin
c/o Talkot Crossover Fund, L.P.
2400 Bridgeway, Suite 300
Sausalito, CA 94965 966,500(4) 9.2%
Mercury Real Advisors LLC
100 Field Point Road
Greenwich, CT 06830 628,100(5) 6.0%
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, NY 10017 622,299(6) 5.9%
Byron L. Boston 60,833(7) *
George O. Deehan 12,000(8) *
-17-
Amount and Nature of
Name Beneficial Ownership Percent of Class(1)
- ------------------------------------------------------ ------------------------ -------------------------
Stacy M. Riffe 10,000(9) *
Rodney E. Bennett 7,000(10) *
Joseph P. Stingone 8,000(10) *
G. Steven Dawson 7,000(10) *
Charles W. Wolcott -- *
Charles D. Van Sickle -- *
All directors and executive officers as a group
(8 persons) 104,833 1.0%
- ----------------
* Beneficial ownership of less than 1% of the class is omitted.
(1) The percentages of shares owned provided in the table is based on
10,516,600 shares outstanding as of [__________], 2006. 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 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.
(2) Shares are beneficially owned by clients of NWQ Investment Management, or
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 1,096,339 shares,
and the sole power to vote or direct the vote of 1,040,039 shares. Based
solely on Schedule 13G/A dated April 12, 2006.
(3) Western Investment LLC, or WILLC, Arthur D. Lipson, Western Investment
Hedged Partners LP, or WIHP, Western Investment Institutional Partners
LLC, a Delaware limited liability company, or WIIP, and Western Investment
Activism Partners LLC, or WIAP, jointly reported their stock ownership.
Based solely on Schedule 13D/A filed May 3, 2006.
(4) Thomas Akin is the direct beneficial owner of 543,100 shares of common
stock, and is the managing general partner of Talkot Crossover Fund, L.P.
(Fund), which is the direct beneficial owner of 423,400 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 filed September 27, 2005.
(5) Mercury Real Estate Advisors LLC, a Delaware limited liability company and
Messrs. Jarvis and MacLean jointly reported their stock ownership. Mercury
Real Estate Advisors LLC, is a registered investment adviser ("Mercury
Advisors"), with respect to Sunset shares held by Mercury Special
Situations Fund LP, Mercury Special Situations Offshore Fund, Ltd.,
Silvercrest Real Estate Fund, Silvercrest Real Estate Fund (International)
and Silvercreek SAV LLC (collectively, the "Funds"), of which Mercury
Advisors is the investment adviser. Mercury Advisors has investment
discretion with respect to the Sunset shares held by the Funds. Messrs.
Jarvis and MacLean are the Managing Members of Mercury Advisors. Based
solely on the Schedule 13G filed on May 4, 2006.
(6) Teachers Insurance and Annuity Association of America, or TIAA holds
303,820 shares of 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 318,479 shares of common stock that are
beneficially owned by three registered investment companies - College
Retirement Equities Fund, or CREF, TIAA-CREF Institutional Mutual Funds,
-18-
or Institutional Funds, and TIAA-CREF Life Funds, or Life Funds - whose
investment advisers are TIAA-CREF Investment Management, LLC (in the case
of CREF) and Teachers Advisors, Inc. (in the case of Institutional Funds
and Life Funds), both of which are wholly owned subsidiaries of TIAA. TIAA
is reporting the combined holdings of these entities for the purpose of
administrative convenience. These shares were acquired in the ordinary
course of business, and not with the purpose of effect of changing or
influencing control of the Company. TIAA should not be construed, for the
purpose of Sections 13 or 16 of the Securities Exchange Act of 1934, as
the beneficial owner of these shares. Based solely on Schedule 13G dated
December 31, 2005.
(7) Includes options to purchase 33,333 shares of common stock, and 7,500
non-vested restricted shares.
(8) Includes options to purchase 5,000 shares of common stock, and 5,000
non-vested restricted shares.
(9) Includes 8,056 non-vested restricted shares. As vested through May 2006.
(10) Includes options to purchase 5,000 shares of common stock.
-19-
IMPORTANT
Tell your Board what you think! Your vote is important. No matter how
many Shares you own, please give Western Investment your proxy AGAINST the
Company's Merger proposals by taking three steps:
o SIGNING the enclosed GREEN proxy card,
o DATING the enclosed GREEN proxy card, and
o MAILING the enclosed GREEN proxy card TODAY in the envelope
provided (no postage is required if mailed in the United
States).
If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution, only it can vote such Shares and only upon
receipt of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the GREEN proxy
card representing your Shares. Western Investment urges you to confirm in
writing your instructions to Western Investment in care of Innisfree M&A
Incorporated at the address provided below so that Western Investment will be
aware of all instructions given and can attempt to ensure that such instructions
are followed.
If you have any questions or require any additional information
concerning this Proxy Statement, please contact Innisfree M&A Incorporated at
the address and phone numbers set forth below.
INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NY 10022
STOCKHOLDERS CALL TOLL-FREE AT: (888) 750-5834
BANKS AND BROKERS CALL COLLECT AT: (212) 750-5833
ADDITIONAL INFORMATION CAN BE FOUND AT:
WWW.FIXMYFUND.COM
GREEN PROXY CARD
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED __________, 2006
SUNSET FINANCIAL RESOURCES, INC.
SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF WESTERN INVESTMENT HEDGED
PARTNERS LP
THE BOARD OF DIRECTORS OF SUNSET FINANCIAL RESOURCES, INC.
IS NOT SOLICITING THIS PROXY
P R O X Y
The undersigned appoints Arthur D. Lipson and Michael Brinn, and each of them,
as the undersigned's attorneys and agents with full power of substitution to
vote all shares of common stock of Sunset Financial Resources, Inc. (the
"Company") which the undersigned would be entitled to vote if personally present
at the special meeting of stockholders of the Company, and including at any
adjournments or postponements thereof and at any meeting called in lieu thereof
(the "Special Meeting").
The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of common stock of the Company held by
the undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this Proxy will be voted as directed on the
reverse and in the discretion of such attorneys and proxies and their
substitutes with respect to any other matters as may properly come before the
Special Meeting that are unknown to Western Investment Hedged Partners LP a
reasonable time before this solicitation.
IF NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED AGAINST PROPOSALS 1, 2 & 3.
This Proxy will be valid until the sooner of one year from the date indicated on
the reverse side and the completion of the Special Meeting.
IMPORTANT: PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
GREEN PROXY CARD
WESTERN INVESTMENT HEDGED PARTNERS LP RECOMMENDS A VOTE AGAINST PROPOSALS 1, 2 &
3.
[X] PLEASE MARK VOTE AS IN THIS EXAMPLE
(1) The Company's proposal to approve the issuance of shares of Company
common stock pursuant to the Agreement and Plan of Merger, dated as of
April 27, 2006, by and among the Company, Alesco Financial Trust and
Jaguar Acquisition Inc., a wholly-owned subsidiary of the Company,
pursuant to which Alesco will merge with and into Jaguar, Jaguar will
remain a wholly-owned subsidiary of the Company and all outstanding
shares of beneficial interest of Alesco will be converted into the
right to receive 1.26 shares of Company common stock:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(2) The Company's proposal to adopt a new long-term incentive plan:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) The Company's proposal to transact any other business as may properly
arise before the Special Meeting or any adjournments or postponements
of the Special Meeting:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATE:
------------------------------
- ------------------------------------
(Signature)
- ------------------------------------
(Signature, if held jointly)
- ------------------------------------
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC. SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
