UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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 ☐
Check the appropriate
box:
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☐ Preliminary Proxy Statement
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☐ Confidential, for Use of the Commission
Only
(as permitted by Rule
14a-6(e)(2))
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☒ Definitive Proxy Statement
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☐ Definitive Additional Materials
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☐ Soliciting Material under
§240.14a-12
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SUNLINK HEALTH SYSTEMS, INC.
(Name of the Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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☐
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Fee computed on table below per Exchange Act Rules
14a-6(i)(4)
and
0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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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 is determined):
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(4)
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Proposed maximum aggregate value of transaction:
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☐
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Fee paid previously with preliminary materials.
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☐
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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SUNLINK HEALTH SYSTEMS, INC.
900 Circle 75 Parkway, Suite 1120
Atlanta, Georgia 30339
September 29, 2017
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders which will be held at 10:00 a.m., local time, on Monday,
November 13, 2017, at the Hyatt House Hotel, 3595 Cumberland Blvd. SE, Atlanta, Georgia 30339.
The accompanying Notice of the Annual
Meeting and Proxy Statement contain detailed information concerning the matters to be considered and acted upon at the meeting. The Companys 2017 Annual Report to Shareholders is also enclosed.
We hope you will be able to attend the meeting.
Shareholders of record at the close of business on September 28, 2017 are entitled to vote at the annual meeting. Whether or not you plan
to attend the meeting, we encourage you to read the Proxy Statement and vote as soon as possible. You may vote:
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by following the Internet voting procedures described in these Proxy Materials;
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by following the telephone voting procedures described in these Proxy Materials; or
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by executing and returning the enclosed proxy card at your earliest convenience to ensure representation at the meeting.
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Whether or not you plan to attend the meeting, please execute and return the enclosed proxy card at your earliest convenience to ensure
representation at the meeting or vote via telephone or the Internet. If you later find you can attend the meeting, you may, if you wish, withdraw your proxy and vote in person.
We appreciate your support of SunLink.
Sincerely,
ROBERT M. THORNTON, JR.
President and Chief Executive Officer
SUNLINK HEALTH SYSTEMS, INC.
900 Circle 75 Parkway, Suite 1120
Atlanta, Georgia 30339
NOTICE OF 2017 ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON NOVEMBER 13, 2017
To the Shareholders of
SUNLINK HEALTH SYSTEMS, INC.:
The Annual Meeting of Shareholders of SUNLINK HEALTH SYSTEMS, INC. will be held at 10:00 a.m., local time, on Monday, November 13, 2017,
at the Hyatt House Hotel, 3595 Cumberland Blvd. SE, Atlanta, Georgia 30339, for the purpose of considering and voting upon:
1.
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The election of three (3) members of the board of directors named in the Proxy Statement for a term of two (2) years, and until their respective successors are elected and qualified;
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2.
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To take a
non-binding
advisory vote on the compensation program for the Companys named executive officers, as disclosed in the Executive Compensation section of the Proxy
Statement (a
say-on-pay
vote). The Board recommends that shareholders approve the compensation program, as set forth in the proposal;
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3.
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To take a
non-binding
advisory vote on how frequently shareholders will be provided a
say-on-pay
vote (a
say-on-frequency
vote). You have the
opportunity to request a
say-on-pay
vote every year, every two years, or every three years, or abstain from voting on the matter completely. The board of
directors recommends that shareholders vote in favor of a
say-on-pay
vote every three years;
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4.
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The ratification of the appointment of Cherry Bekaert LLP as our independent registered public accounting firm for fiscal year 2018; and
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To transact such other business that may properly come before the meeting. Except with respect to the procedural matters incident to the
conduct of the Annual Meeting, we are not aware of any other business to be brought before the Annual Meeting.
Holders of record of the
common shares of SunLink at the close of business on September 28, 2017 will be entitled to notice of and to vote at the meeting. You may vote by mail, telephone or the Internet to the extent described in the Companys Proxy Statement.
Internet and telephone voting for holders of record will conclude on the Sunday prior to the meeting.
Audited financial statements for
the year ended June 30, 2017 and the related Managements Discussion and Analysis of Financial Condition and Results of Operations are included in our Form
10-K,
such portions of which are also
contained in the Annual Report included with this communication.
To attend the annual meeting you must have valid proof of identification
and other proof of beneficial ownership of SunLink Health Systems, Inc. common shares (such as a brokerage statement reflecting your stock ownership) as of September 28, 2017.
Whether or not you expect to be present, please mark, sign, date, and return the enclosed proxy
promptly in the envelope provided, or vote via telephone or the Internet. Giving the proxy will not affect your right to vote in person if you attend the meeting.
By order of the Board of Directors of
SunLink Health Systems, Inc.
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/s/
Theresa Mota
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Theresa Mota
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Secretary
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September 29, 2017
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TABLE OF CONTENTS
SUNLINK HEALTH SYSTEMS, INC.
900 Circle 75 Parkway, Suite 1120
Atlanta, Georgia 30339
PROXY
STATEMENT
FOR 2017 ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
We are providing these Proxy Materials to you in connection with the solicitation of proxies by the board of directors of SunLink Health
Systems, Inc. for the 2017 Annual Meeting of Shareholders and for any adjournment or postponement of the annual meeting. In this Proxy Statement, we refer to SunLink Health Systems, Inc. as SunLink, the Company,
we or us.
We are holding the annual meeting at 10:00 a.m. local time, on Monday, November 13, 2017, at the
Hyatt House Hotel, 3595 Cumberland Blvd. SE, Atlanta, Georgia 30339.
These Proxy Materials include:
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Our Proxy Statement for the annual meeting; and
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Our 2017 Annual Report to Shareholders, which includes our audited consolidated financial statements.
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All shareholders will have the ability to access the Proxy Materials on a website referred to in these Proxy Materials.
We intend to mail this Proxy Statement and a proxy card to shareholders starting on or about October 3, 2017.
SMALLER REPORTING COMPANY
The SEC has adopted rules allowing smaller reporting companies to tailor their disclosure to reduce costs. Because the Company qualifies as a
smaller reporting company under the SEC rules, the Company has elected to prepare this proxy statement and other annual and periodic reports as a Smaller Reporting Company consistent with rules of the SEC. Under the scaled
disclosure obligations, the Company is not required to provide, among other things, Compensation Discussion and Analysis and certain other tabular and narrative disclosures relating to executive compensation.
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ABOUT THE MEETING
At our annual meeting, our shareholders will act upon the matters outlined in the accompanying notice of meeting. The scheduled matters to be
acted upon at the 2017 annual meeting are the election of three (3) members of the board of directors named in the Proxy Statement, a
non-binding
advisory vote on the compensation program for the
Companys named executive officers (a
say-on-pay
vote), a
non-binding
advisory vote on how frequently
shareholders will be provided a
say-on-pay
vote (a
say-on-frequency
vote), and the ratification of the appointment of Cherry Bekaert LLP as our independent registered public accounting firm for fiscal year
2018. In addition, our management will report on our performance during fiscal year 2017.
VOTING INFORMATION
All shares represented by properly executed proxies received by the board of directors pursuant to this solicitation will be voted in
accordance with the shareholders directions specified in the applicable voting instructions or proxy card. If no directions have been specified during Internet or telephone voting or by marking the appropriate places on the physical proxy
card, the shares will be voted in accordance with the boards recommendations which are:
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FOR the election of each of the director nominees as directors of the Company for a term of two (2) years, and until their successors are elected and qualified
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FOR the compensation of our named executive officers as disclosed in this Proxy Statement.
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FOR the 3 Years
say-on-frequency
alternative set out in the proxy card.
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FOR the ratification of the appointment of Cherry Bekaert LLP as the Companys independent registered public accounting firm for fiscal year 2018.
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A shareholder signing and returning a proxy has power to revoke it at any time prior to its exercise by delivering to the Company a
later-dated proxy or by giving notice to the Company in writing or at the meeting, but without affecting any vote previously taken.
Record Date
You may vote all shares that you owned as of September 28, 2017, which is the record date for the annual meeting.
On September 28, 2017, we had 9,162,565 common shares outstanding. Each common share is entitled to one (1) vote on each matter properly brought before the meeting.
Ownership of Shares
If your shares are registered directly in your name, you are the holder of record of these shares and we are sending these Proxy Materials
directly to you. As the holder of record, you have the right to give your proxy directly to us, give your voting instructions by telephone or by the Internet directly to us, or vote in person at the annual meeting. If you hold your shares in a
brokerage account or through a bank or other holder of record, you hold the shares in street name, and your broker, bank or other holder of record is sending these Proxy Materials to you. As a holder in street name, you have the right to
direct your broker, bank or other holder of record how to vote by filling out a voting instruction form as provided to you by your broker or other person who is the holder of record, or if such Internet or telephone access is provided to you by such
holder of record, by following the directions to provide your instructions to the record holder via the Internet or by telephone. Regardless of how you hold your shares, we invite you to attend the annual meeting.
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Electronic Availability
In compliance with the proxy rules promulgated by Untied States Securities and Exchange Commission (SEC), our Proxy Statement and
Annual Report to Shareholders are available over the Internet at
www.proxyvote.com
, a website established specifically for access to such materials. Such materials are also available on the Companys website at
www.sunlinkhealth.com
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How to Vote
Your Vote Is Important
. We encourage you to vote promptly. Internet and telephone voting is available through 11:59 p.m. local time on
Sunday,
November 12, 2017 for all shares held of record. Depending on whether you are a record holder of your shares, or whether you hold your shares in street name, you may vote by any of the means described below.
Voting Procedures for Holders of Record
If you are a holder of record, you may vote your shares by any of the following methods:
By Telephone
: If you are a holder of record located in the U.S., you can vote your shares by calling the toll-free telephone number
provided on your proxy card. Holders of record may vote by telephone 24 hours a day. Our telephone voting system has
easy-to-follow
instructions and allows record
holders to confirm that the system has properly recorded their votes. If you vote by telephone, you do not need to return your proxy card.
By Internet
: If you are a holder of record you can also vote your shares by using the Internet. Your proxy card indicates the website
you need to access for Internet voting. Holders of record may vote on the Internet 24 hours a day. As with telephone voting, you will be able to confirm that the system has properly recorded your votes. If you vote by Internet, you do not need to
return your proxy card.
By Mail
: If you are a holder of record, you can vote by marking, dating and signing your proxy card and
returning it by mail in the enclosed postage-paid envelope.
At the Annual Meeting
: You may vote in person at the Annual Meeting.
If you vote your shares now, it will not limit your right to change your vote at the Annual Meeting if you attend in person.
Voting
Procedures for Beneficial Holders
If you hold your shares in street name, you may vote your shares by any of the
following methods:
By Telephone/Internet
: The availability of telephone and Internet voting for beneficial owners will depend on
the voting processes of your broker, bank or other holder of record. Therefore, we recommend that you follow the voting instructions in the materials you receive from your broker, bank or other holder of record.
By Mail
: If you hold your shares in street name, please complete and mail the voting instruction card you receive from your broker,
bank or other holder of record.
At the Annual Meeting
: You may vote in person at the Annual Meeting. If you hold your shares in
street name, you must obtain a proxy, executed in your favor, from the holder of record if you wish to vote your shares in person at the Annual Meeting.
Broker Vote on Election of Directors, Routine and
Non-Routine
Proposals
A
broker
non-vote
occurs when a broker holding your shares in street name does not vote on a particular matter because you did not provide the broker voting instructions and the broker lacks
discretionary voting authority to vote the shares because the matter is
non-routine
or fails to exercise such authority. New York Stock Exchange (NYSE) Rule 452 and Section 402.8 of the NYSE Listed
Company Manual which regulate broker voting in connection with certain listed companies, including companies listed on the NYSE American, LLC exchange (NYSE American exchange), prohibit broker discretionary voting on a variety of
matters, including, but not limited to, the election
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of directors for shares held in client accounts when the broker has not timely received voting instructions from the client. Effective September 9, 2010, Rule 452 and Section 402.8 were
amended to prohibit broker discretionary voting upon matters related to executive compensation, including, but not limited to, advisory votes on approval of compensation and the frequency of such advisory votes.
If you hold your shares in a bank or brokerage account, you should be aware that if you fail to instruct your bank or broker how to vote
within ten (10) days of the meeting, the bank or broker is not permitted to vote your shares in its discretion on your behalf for the election of directors, but is permitted to vote your shares in its discretion on your behalf on routine items.
NYSE American exchange rules also determine whether proposals presented at the shareholder meetings are routine or not routine. If your
holdings of our common shares are held in street name, under the rules of the NYSE your broker or other nominee may vote your shares on certain routine matters, other than the election of directors and compensation matters, if you do not provide
such record holder with voting instructions. The ratification of the selection of our independent registered public accountants is considered a routine matter upon which brokerage firms and other nominees may vote on behalf of the beneficial owners
if no voting instructions are provided.
While banks and brokers have historically cast their votes on routine items in support of
managements recommendations in the absence of instructions from their clients, some firms are now casting uninstructed votes in the same proportion as their clients instructed votes, giving, in effect, investors who provide voting
instructions to brokers an opportunity to disproportionately influence the outcome of proxy voting.
If you want to ensure that your
shares are voted in accordance with your wishes on Proposals
1,
2, 3 and 4 you should complete and return your voting instruction form before November
10, 2017
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Revocation of Proxies
: All shares that have been properly voted and not revoked will be voted at the meeting. If you sign and return
your proxy card without any voting instructions, your shares will be voted as the board of directors recommends.
Holders of Record
You can revoke your proxy at any time before your shares are voted if you: (1) submit a written revocation to our Secretary;
(2) submit a later-dated proxy; (3) provide subsequent telephone or Internet voting instructions within the time permitted for such voting methods; or (4) vote in person at the meeting.
Beneficial Holders
If you are a beneficial holder you can revoke your proxy or voting instructions at any time before your shares are voted if you (1) cause
the record holder to submit a written revocation to our Secretary; (2) cause the record holder to submit a later dated proxy if you timely provide updated voting instructions to such holder by mail or if provided by the record holder by
Internet or telephone voting; or (3) vote your shares in person at the annual meeting through a later-dated proxy, executed in your favor, from the holder of record.
Quorum and Required Vote
Quorum
: We will have a quorum and will be able to conduct the business of the annual meeting if the holders of a majority of the shares
that are entitled to vote are present at the meeting, either in person or by proxy.
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Votes Required
: To elect directors a plurality of the votes cast is required. The
say-on-pay
proposal will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal. Shareholders are
not voting to require that the
say-on-pay
vote be held every three years, only to express a
non-binding
preference for how often
the
say-on-pay
vote should be held. The Company will take into consideration the shareholder vote on each of the alternatives set forth in the proxy card with respect to
that Proposal. To ratify the appointment of Cherry Bekaert LLP as the Companys independent registered public accounting firm for fiscal 2018 a majority of votes cast is required.
How We Count Votes: Abstentions will be counted for purposes of determining the presence or absence of a quorum. In the case of Proposal 1
(Election of Directors), Proposal 2 (the say on pay vote), Proposal 3 (the
say-on-frequency
vote), and Proposal 4 (Ratification of the Selection
of Independent Registered Public Accountants), abstentions will not change the number of votes cast for or against these proposals.
Other Business; Adjournment and Postponements
We are not aware of any other business to be acted upon at the annual meeting. If,
however, other matters are properly brought before the annual meeting, your proxies will have discretion to vote or act on those matters according to their best judgment.
Any adjournment of the annual meeting may be made from time to time by approval of the holders of a majority of the voting shares held by
shareholders present in person or by proxy at the annual meeting, whether or not a quorum exists, without notice other than by an announcement made at the annual meeting. The record date for the annual meeting will continue to be the record date for
all adjournments of such meeting unless the Board sets a new record date in which event notice of the record date and of the date to which the meeting has been adjourned will be given in accordance with Ohio law and applicable rules of the NYSE
American exchange. In all events, the record date for a change in shares will be the time when the certificate of amendment or of amended articles effecting the change is filed in the office of the Secretary of State of Ohio.
If a quorum is not present at the annual meeting, shareholders may be asked to vote on a proposal to adjourn or postpone the annual meeting in order to allow
the solicitation of additional proxies. If a quorum is present at the annual meeting, a shareholder vote may be taken on any of the proposals in this Proxy Statement prior to any such adjournment if there are sufficient votes for approval of such
proposal. If a quorum is present at the annual meeting but there are not sufficient votes at the time of the annual meeting to approve one or more proposal(s), shareholders may also be asked to vote on a proposal to adjourn or postpone the annual
meeting in order to allow the solicitation of additional proxies with respect to any proposals on which action is not taken prior to adjournment of the meeting.
CORPORATE GOVERNANCE
Our business is managed by the Companys employees under the direction and oversight of the board of directors. Except for
Mr. Thornton, none of our board members is an employee of the Company. The board limits membership on the audit committee, the executive compensation committee (referred to in this Proxy Statement as the compensation committee) and
the strategic planning committee to independent
non-management
directors. We keep board members informed of our business through discussions with management, materials we provide to them, visits to our offices
and facilities, and their participation in board and board committee meetings.
The board of directors has adopted charters for the
standing board committees (other than the executive committee), resolutions governing the process for identification and nomination of candidates for the board, and the Companys code of ethics, known as the SunLink Health Systems, Inc. Code of
Conduct. These documents, together with the Companys Articles of Incorporation and Code of Regulations, provide the framework for the governance of the Company. Our Code of Conduct is applicable to our directors and our employees, including
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our principal executive officer and principal financial officer. Members of our board are required to certify compliance with our Code of Conduct. Any amendment to or waiver of our Code of
Conduct for any board member, our chief executive officer, our chief financial officer or any other executive officer as well as our comptroller and any other similar accounting officer will be disclosed on our website,
www.sunlinkhealth.com
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A complete copy of the charters of the board committees, the resolutions governing the process for identification and nomination of
candidates for the board and the Code of Conduct for employees, as in effect from
time-to-time,
may be found on the Companys website at
www.sunlinkhealth.com
. Copies of these materials are also available to shareholders without charge upon written request to the Secretary of the Company.
Summary of the Corporate Governance Principles
Board Leadership Structure
Our Company
is led by Mr. Robert M. Thornton, Jr. who has served as chief executive officer and chairman of the board of directors since 1998. We combine this traditional leadership structure with a board structure in which our
non-management
directors meet regularly outside of the presence of Mr. Thornton. We believe that this structure currently works best for the Company by providing us with the benefits of a single person setting
the tone and having primary responsibility for managing our operations and provides clear leadership. At the same time, by having a board which is composed mainly of independent directors, including former CEOs, individuals with healthcare industry
operating experience, and diverse other talents, we believe that we have created a board that is collegial, well versed in board processes and the duties of the committees on which they sit, and well engaged in their responsibilities. The board
believes its members have no reticence about forcefully expressing their views while at the same time fully and fairly considering the views of their fellow directors, and that the members of the board have the experience and ability to critically
evaluate the performance of our Chairman and CEO in implementing the strategic, as well as day to day, goals of the Company. Although the board periodically evaluates alternative board governance models and refinements to the existing structure, it
believes, after assessing the current service of the Companys Chairman and CEO and the current composition of the board, that the current board leadership structure is appropriate for the Company.
Independence
The board of directors is
required to consist of a majority of independent,
non-management
directors who meet the criteria for independence required by the NYSE American exchange. Under such rules, a director is independent if he or
she does not have a material relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our board annually evaluates each board members independence.
The board of directors has determined that, as of September 25, 2017, six (6) of the Companys seven (7) incumbent
directors are independent under these guidelines: Ms. Brenner and Messrs. Baileys, Burleson, Ford, Turner and Mills. Mr. Thornton, as a management director, also participates in the boards activities and provides valuable insights
and advice. Each member of our audit and compensation committees is an independent director both under the general definition for board independence as well as any separate independence criteria for service on the applicable committee whether
required by the SEC, the NYSE American exchange or SunLink. Independence requirements for committee service are set forth in the respective committee charters.
The
non-management
directors meet periodically in executive session without the management director
present. The executive sessions of
non-management
directors are presided over by the director who is the chairperson of the committee responsible for the issue being discussed. General discussions, such as the
review of the Companys overall performance, are presided over by the chairperson or a director elected by a majority of the
non-management
directors.
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Role of the Board in Risk Oversight
The business of the Company is managed by the Companys employees under the direction and oversight of the board. Among the oversight
activities of the board is the broad oversight of risk. Risk is inherent in virtually every business activity. Accordingly, the boards primary role with respect to risk is to ensure that the Companys management implements appropriate
procedures designed to identify and, where possible, quantify and/or mitigate risks. The board administers its risk oversight function both at a board level and through its various committees. Our board committees consider, among other things, risk
issues within their areas of responsibilities. For example: The audit committee oversees the accounting and financial reporting process, the adequacy of our risk-related internal financial controls, internal audit, the impact of risks on our current
financial position, and related compliance matters. The compensation committee oversees the annual performance evaluations of executive management, succession planning, and the evaluation of risks that may be implicated by the Companys
compensation structure. The responsibilities of the individual committees are discussed in greater detail elsewhere in this Proxy Statement.
Business
Combinations
In the event SunLink receives any formal written offer to purchase more than 20% of the Companys outstanding common
shares, such proposal is required to be evaluated by the board of directors, who have delegated the evaluation of such offer(s) to the strategic planning committee of the board of directors. Such committee is required to be comprised of a majority
of independent directors and currently is comprised solely of outside directors. The strategic planning committee has established three criteria for any takeover proposal it considers: (1) adequate price both in light of the limited trading
market for the Companys common shares and the factors analyzed by the Board in connection with the Companys then current plans to go private, (2) certainty of financing, and (3) minimum execution risk. The strategic planning
committee may retain such legal and financial advisors as it may deem necessary to advise it and the board in respect of any offer or other proposal.
In the event of any proposed business combination involving SunLink, the compensation committee is authorized to retain an independent
financial advisor to evaluate and make recommendations to the compensation committee concerning any severance or retention package proposed for any of SunLinks officers or directors in connection with any proposed business combination. The
compensation committee will evaluate any such proposals in light of existing severance benefits and the financial effect of any existing or additional benefits.
Director Share Ownership
SunLink
believes that each director should have a personal investment in the Company. Each outside director (or future outside director, as the case may be) is required to own at least one thousand (1,000) common shares of SunLink. Each outside director (or
future outside director, as the case may be) must maintain ownership of such number of common shares until such outside director ceases to serve as a member of the board. Each of our incumbent directors has complied with such ownership requirement
since at least July 1, 2008.
Annual Meeting Attendance
Although we do not have a formal policy regarding attendance by members of the board at our annual meeting of shareholders, the board of
directors encourages all of its members to attend the annual meeting of shareholders. In November 2016, all director nominees and all then directors were personally present at the annual meeting of shareholders, except Mr. Mills.
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Communications By and With Directors
In connection with the proper discharge of their duties, our independent
non-management
directors have
access to individual members of management or to other employees of the Company on a confidential basis. Likewise, in connection with the discharge of their duties,
non-management
directorsas authorized
by the board or a committee thereofalso have access to Company records and files, and our directors may contact other directors without informing Company management of the purpose or even the fact of such contact.
Shareholders may communicate with the Board, Board committees,
non-employee
directors as a group, and
individual directors by submitting their communications in writing to SunLink Health Systems, Inc., 900 Circle 75 Parkway, Suite 1120, Atlanta, Georgia 30339 Attention: Corporate Secretary. Any communication should contain (i) a representation
that the shareholder is a holder of record of our common shares; (ii) the name and address, as they appear on our books, of the shareholder sending the communication; and (iii) the number of our common shares that are beneficially owned by
such shareholder.
Our corporate secretary will forward communications to the intended recipients unless the communication is unduly
hostile, threatening, illegal or similarly inappropriate, in which case our corporate secretary has the authority to discard the communication or to take appropriate legal action regarding the communication. Similarly, unsolicited advertisements or
invitations to conferences or promotional material, in the discretion of our corporate secretary or her designee, may not be forwarded to the directors.
Related Party Transactions
The Company is subject to a variety of prohibitions on, or approval procedures with respect to, related party transactions.
First, the Company is subject to certain of the NYSE American exchange requirements which require shareholder approval of certain related
party transactions. Second, the Companys Code of Conduct prohibits related party transactions which could give rise to a conflict of interest including, but not limited to, employment by third parties that do business with the Company;
conducting business, not on behalf of the Company, with the Companys vendors, suppliers, and contractors; representing the Company in any transaction where such person representing the Company has a substantial personal interest; disclosure or
use of confidential or inside information about the Company for personal gain; competition with the Company in any purchase, sale or ownership of property, property rights or interests; performing services for vendors or competitors of the Company;
service on any board of directors or trustees that might conflict with the Companys interests and; the acceptance of any faculty or speaker positions and any honoraria in connection therewith. A related party transaction must be approved by
the Companys compliance committee, or, in the case of a member of the board of directors and/or an executive officer, such related party transaction must be approved by the boards audit committee, with such action reported to the
Companys independent directors. To assist in identifying related party transactions, each director and executive officer is required, annually, to submit a Conflict of Interest Disclosure Statement. We have not adopted formal standards for the
approval of related party transactions, but instead the compliance committee or the board of directors reviews these transactions on a
case-by-case
basis and may approve
such transactions that are in, or not inconsistent with, the best interests of the Company and its shareholders.
BENEFICIAL OWNERSHIP OF OUR COMMON SHARES
Common Shares Owned By Management and Certain Beneficial Owners
The following table sets forth, as of September 28, 2017 (unless otherwise indicated in the footnotes), certain information with respect
to our common shares owned beneficially by each director, by each nominee for election as a director, by each named executive officer, by all directors, nominees and named executive
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officers as a group and by each person known by us to be a beneficial owner of more than 5% of our outstanding common shares. Except as noted in the footnotes, each of the persons listed has sole
investment and voting power with respect to the common shares included in the table.
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|
|
|
|
|
Common Shares Beneficially
Owned As of September 28, 2017
|
|
Name
(1)
|
|
Number
(2)
|
|
|
% of Class
(3)
|
|
Robert M. Thornton, Jr.
Director, Chairman, President and Chief Executive Officer
|
|
|
782,045
|
(4)
|
|
|
8.3
|
|
Mark J. Stockslager
Chief Financial Officer and Principal Accounting Officer
|
|
|
193,264
|
(5)
|
|
|
2.1
|
|
Byron D. Finn
President, SunLink ScriptsRx, LLC
|
|
|
0
|
*
|
|
|
|
|
Dr. Steven J. Baileys
Director
|
|
|
1,176,358
|
(6)
|
|
|
12.8
|
|
Karen B. Brenner
Director
|
|
|
93,521
|
(7)
|
|
|
1.0
|
|
Gene E. Burleson
Director
|
|
|
117,243
|
(8)
|
|
|
1.3
|
|
C. Michael Ford
Director
|
|
|
107,500
|
(8)
|
|
|
1.2
|
|
Howard E. Turner
Director
|
|
|
452,358
|
(8)
|
|
|
4.9
|
|
Christopher H. B. Mills
Director
|
|
|
1,768,442
|
(8)(9)
|
|
|
19.2
|
|
|
|
|
Berggruen Holdings North America Ltd.
|
|
|
704,039
|
(10)
|
|
|
7.7
|
|
|
|
|
Wittenberg Investment Management, Inc.
|
|
|
716,549
|
(11)
|
|
|
7.8
|
|
|
|
|
Directors, Nominees and Executive Officers as a group (9 persons)
|
|
|
4,690,731
|
(12)
|
|
|
47.9
|
|
(1)
|
The address of the named director or officer is c/o SunLink Health Systems, Inc., 900 Circle 75 Parkway, Suite 1120, Atlanta, Georgia 30339.
|
(2)
|
Information with respect to beneficial ownership is based upon information furnished by each owner unless otherwise indicated. None of the shares beneficially owned by the named officers and directors are the subject of
any pledge agreement or arrangement or margin account.
|
(3)
|
The percent of outstanding common shares owned is determined by assuming that in each case the person only, or group only, exercises his, her or its rights to purchase all of the common shares underlying options held by
such person or group that are exercisable as of September 28, 2017, or that will become exercisable within 60 days after that date.
|
(4)
|
Includes 240,000 shares that may be acquired under options exercisable within 60 days of September 28, 2017. Also includes 203,584 shares owned by CareVest Capital, LLC (CareVest). Mr. Thornton
owns 100% of the outstanding voting interests of CareVest.
|
(5)
|
Includes 90,000 shares that may be acquired under options exercisable within 60 days of September 28, 2017.
|
(6)
|
Includes 50,000 shares that may be acquired under options exercisable within 60 days of September 28, 2017. Also includes 574,602 shares held by Beilihis Investments, LLC (Beilihis), which is a private
investment firm. Dr. Baileys is the managing member of Beilihis.
|
9
(7)
|
Includes 50,000 shares that may be acquired under options exercisable within 60 days of September 28, 2017. Ms. Brenners ownership information also includes 43,521 shares which are owned by
Ms. Brenner and her immediate family and related entities.
|
(8)
|
Includes 50,000 shares that may be acquired under options exercisable within 60 days of September 28, 2017.
|
(9)
|
Includes aggregate holdings under a joint filing on a Schedule 13D/A dated December 18, 2006 and filed with the SEC on December 18, 2006 by North Atlantic Value, LLP, Christopher H. B. Mills, American
Opportunity Trust, John W. Gildea, Gildea Management Company and Axia Value Partners (collectively,
the Group
). The following information is based solely on such filing and subsequent information provided by
Mr. Mills. The Group as joint filers disclaims the existence of a group under Rule
13d-3.
North Atlantic Value, LLP, is a limited liability partnership organized under the laws of England with
its principal office and business at 6 Stratton Street, London W1J 8LD England. North Atlantic Value is the investment manager and/or investment adviser to each of American Opportunity Trust, Trident North Atlantic Fund, Trident Holdings, Trident
High Tor and its private clients and as such it has the authority to vote or dispose of the Companys common shares owned by such entities. Trident North Atlantic Fund is an open-ended investment company incorporated in the Cayman Islands with
its principal office and business at P.O. Box 309, Ugland House, George Town, Grand Cayman, Cayman Islands. Trident North Atlantic Fund is a publicly held regulated mutual fund. Mr. Mills serves as a director of Trident North Atlantic Fund and
North Atlantic Value serves as an investment adviser to Trident North Atlantic Fund. Mr. Mills is a British citizen whose business address is Ryder Court, 14 Ryder Street, London SW1Y 6QB England. Trident Holdings (Trident Holdings)
is an open-ended investment company incorporated in the Cayman Islands with its principal office and business at P.O. Box 1350GT, 75 Fort Street, George Town, Grand Cayman, Cayman Islands. High Tor Limited (Trident High Tor) is a
corporation organized under the laws of the Cayman Islands with its principal office and business at P.O. Box
N-4857,
Unit No. 2, Cable Beach Court, West Bay Street, Nassau, The Bahamas. American
Opportunity Trust is a corporation organized under the laws of England with its principal office and business at Ryder Court, 14 Ryder Street, London SW1Y 6QB England. North Atlantic Smaller Companies Investment Trust (NASCIT) is an
investment limited liability company organized under the laws of England with its principal office and business at Ryder Court, 14 Ryder Street, London SW1Y 6QB England. Gildea Management Company is a corporation organized under the laws of the
State of Delaware with its principal office and business address at P.O. Box 938, 65 Vitti Street, New Canaan, Connecticut. John W. Gildea is a U.S. citizen whose principal business address is P.O. Box 938, 65 Vitti Street, New Canaan, Connecticut.
Axia Value Partners LLC (Axia Value Partners) is a limited liability company organized under the laws of the State of Delaware with its principal office and business address at P.O. Box 938, 65 Vitti Street, New Canaan, Connecticut.
Mr. Mills is the Chief Executive Officer of American Opportunity Trust. Mr. Mills is also a partner of North Atlantic Value. Mr. Mills is a citizen of the United Kingdom. Gildea Management Company is the investment manager to Axia
Value Partners and as such it has the authority to vote or dispose of the Companys common shares owned by Axia Value Partners. John W. Gildea is a managing director of Gildea Management Company and is also a director of American Opportunity
Trust. The aggregate number and percentage of the outstanding
|
10
|
common shares of the Company reported by the Group to be beneficially owned by each member and to the knowledge of the Group, by each other person who may be deemed to be a member of the Group is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Member
|
|
Aggregate
Number of
Shares
|
|
|
Number of
Shares:
Sole
Power to
Vote
|
|
|
Number of
Shares:
Shared
Power to
Vote
|
|
|
Number of
Shares:
Sole
Power to
Dispose
|
|
|
Number of
Shares:
Shared
Power to
Dispose
|
|
|
Approximate
Percentage
|
|
Harwood Capital LLP
|
|
|
318,442
|
|
|
|
0
|
|
|
|
318,442
|
|
|
|
0
|
|
|
|
318,442
|
|
|
|
3.5
|
|
North Atlantic Smaller Companies
Investment Trust Plc
|
|
|
1,400,000
|
|
|
|
0
|
|
|
|
1,400,000
|
|
|
|
0
|
|
|
|
1,400,000
|
|
|
|
15.3
|
|
Christopher H. B. Mills
|
|
|
1,718,442
|
|
|
|
0
|
|
|
|
1,718,442
|
|
|
|
0
|
|
|
|
1,718,442
|
|
|
|
18.8
|
|
(10)
|
Includes aggregate holdings under a joint filing on Schedule 13D/A dated March 24, 2008 and filed with the SEC on March 25, 2008 by Berggruen Holdings North America Ltd. (BHNA), Medici I
Investments Corp., Berggruen Holdings Ltd., Tarragona Trust, Nicholas Berggruen, Resurgence Health Group, LLC, Philip H. Eastman and Anne S. Thompson. The following information is based solely on such filing. BHNA is a British Virgin Islands
(BVI) international business company, with its principal office at 1114 Avenue of the Americas, 41st Floor, New York, New York, and is a direct, wholly owned subsidiary of Medici I Investments Corp., a BVI company, with its principal
office at 1114 Avenue of the Americas, 41st Floor, New York, New York, which is a direct, wholly owned subsidiary of Berggruen Holdings Ltd., a BVI international business company (Berggruen Holdings) with its principal office at 1114
Avenue of the Americas, 41st Floor, New York, New York. All of the shares of Berggruen Holdings are owned by Tarragona Trust, a BVI trust (Tarragona) with its principal office at 9 Columbus Centre, Pelican Drive, Road Town, Tortola,
British Virgin Islands. The trustee of Tarragona is Maitland Trustees Limited, a BVI corporation acting as an institutional trustee in the ordinary course of business. Mr. Berggruen is a U.S. citizen whose principal business address is 1114
Avenue of the Americas, 41st Floor, New York, New York. Mr. Berggruen is a director of Berggruen Holdings. Resurgence Health Group, LLC, a Georgia limited liability company (Resurgence) with its principal office at 1400 Buford
Highway, Building
R-3,
Sugar Hill, Georgia. Mr. Eastman is a U.S. citizen whose principal business address is 1400 Buford Highway, Building
R-3,
Sugar Hill,
Georgia. Mr. Eastman is the chief executive officer of Resurgence. Ms. Thompson is a U.S. citizen whose principal business address is 1400 Buford Highway, Building
R-3,
Sugar Hill, Georgia.
Ms. Thompson is the chief operating officer of Resurgence. BHNA, Berggruen Holdings, Tarragona, and Mr. Berggruen report shared voting and dispositive power with respect to all of the reported shares listed above. Mr. Eastman reports
sole voting and investment power with respect to an additional 100 shares.
|
(11)
|
Includes holdings reported on Schedule 13G dated March 15, 2016 by Wittenberg Investment Management, Inc. (WIM) and Joel B. Wittenberg (Wittenberg) and filed with the SEC on
February 10, 2017. The following information is based solely on such filing. WIM is a California corporation, with its principal office located at 650 Concord Street, Suite 203, Carlisle, Massachusetts 01741. Wittenberg is a U.S. citizen whose
principal business address is 650 Concord Street, Suite 203, Carlisle, Massachusetts 01741. Wittenberg is deemed the beneficial owner of the 716,549 shares beneficially owned by WIM. WIM and Wittenberg report shared voting and dispositive power with
respect to all of the reported shares.
|
(12)
|
Includes 630,000 shares that may be acquired under options exercisable within 60 days of September 28, 2017.
|
11
PROPOSAL 1 TO BE VOTED ON BY SHAREHOLDERS
Proposal 1Election of Directors
The Companys board of directors is presently comprised of seven (7) members. One class of directors is normally elected at each
annual meeting of shareholders for a term of two (2) years. At the 2017 annual meeting, shareholders will elect three (3) members to the board of directors who will hold office until the annual meeting of shareholders in 2018. The board of
directors has nominated Robert M. Thornton, Jr., Dr. Steven J. Baileys, and Gene E. Burleson for
re-election
as directors for terms of office of two (2) years, and until their successors are
elected and qualified.
It is the intention of the proxy agents named in the proxy, unless otherwise directed, to vote such proxies for
the election of Robert M. Thornton, Jr., Dr. Steven J. Baileys, and Gene E. Burleson. Should any of such nominees be unable to accept the office of director, an eventuality which is not anticipated, proxies may be voted with discretionary
authority for a substitute nominee or nominees designated by the board of directors.
The board of directors unanimously recommends
a vote FOR the election of Robert M. Thornton, Jr., Dr. Steven
J. Baileys, and Gene E. Burleson.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Identification of Directors
The following table sets forth certain information about the nominees for election and the directors whose terms of office will continue after
the meeting.
|
|
|
|
|
|
|
Current Nominees:
|
|
Name and Offices
Presently Held with Company
|
|
Director
Since
|
|
Robert M. Thornton, Jr.
|
|
Director, Chairman, President and
Chief Executive Officer
|
|
|
1996
|
|
Dr. Steven J. Baileys
|
|
Director
|
|
|
2000
|
|
Gene E. Burleson
|
|
Director
|
|
|
2003
|
|
|
|
|
Directors Whose Term of Office Expires in 2018:
|
|
Name and Offices
Presently Held with Company
|
|
Director
Since
|
|
Karen B. Brenner
|
|
Director
|
|
|
1996
|
|
C. Michael Ford
|
|
Director
|
|
|
1999
|
|
Howard E. Turner
|
|
Director
|
|
|
1999
|
|
Christopher H. B. Mills
|
|
Director
|
|
|
2007
|
|
Certain information concerning each person listed in the above table, including his or her principal
occupation for at least the last five (5) years, is set forth below.
Robert M. Thornton
,
Jr
., 68, has been Chairman
and Chief Executive Officer of the Company since September 10, 1998, President since July 16, 1996 and was its Chief Financial Officer from July 18, 1997 through August 31, 2002. From October 1994 to the present,
Mr. Thornton also has been a private investor and, since March 1995 has been Chairman and Chief Executive Officer of CareVest Capital, LLC, a private investment and management services firm. Mr. Thornton was a director of and held various
executive offices with Hallmark Healthcare Corporation from October 1989 until Hallmarks merger with Community Health Systems, Inc. in October 1994. Mr. Thornton was deemed qualified to serve on the board for the reasons set forth below
under Director Qualifications, including his business experience set forth herein.
12
Dr.
Steven
J. Baileys
, 63, is a private investor and
was Chairman of the Board of Directors of SafeGuard Health Enterprises, Inc., a public dental care benefits company, from July 1995 to June 2004. Dr. Baileys was Chief Executive Officer of SafeGuard from April 1995 to February 2000, its
President from December 1981 until May 1997, and its Chief Operating Officer from December 1981 until April 1995. Dr. Baileys is licensed to practice dentistry in the State of California. Dr. Baileys was deemed qualified to serve on the
board for the reasons set forth below under Director Qualifications, including his business experience set forth herein.
Gene E.
Burleson
, 76, is a private investor and was Chairman of PET DRx Corporation from June 2005 to July 1, 2010 and its Chief Executive Officer from October 2008 until its acquisition by VCA Antech in July 2010. Mr. Burleson was a director
of HealthMont Inc. from September 2000 until its acquisition by SunLink in October 2003. Mr. Burleson served as Chairman of Mariner Post-Acute Network, Inc. from January 2000 to June 2002. Mr. Burleson was Chairman of the Board of GranCare
Inc. from October 1990 to November 1997 and President and Chief Executive Officer of GranCare Inc. from December 1989 to February 1997. From June 1986 to March 1989 Mr. Burleson served as President, Chief Operating Officer and Director of
American Medical International Inc. (AMI). Mr. Burleson served as Managing Director of AMIs international operations from May 1981 to June 1986. Mr. Burleson was deemed qualified to serve on the board for the reasons set
forth below under Director Qualifications, including his business experience set forth herein.
Karen B. Brenner
, 64, has been
President of Fortuna Asset Management, LLC, an investment advisory firm located in Newport Beach, California, since 2000. Fortuna Asset Management, LLC succeeded to the business of Fortuna Advisors, Inc., which Ms. Brenner formed and operated
from 1993 to 2000. From 1996 to 1998 Ms. Brenner served on the Board of Directors of Data Design Labs. From 1984 to 1993, Ms. Brenner was a partner in Allen Brenner, a financial consulting firm. Prior to 1984, Ms. Brenner was a
consultant in the health and medical division of Booz Allen Hamilton. Ms. Brenner was deemed qualified to serve on the board for the reasons set forth below under Director Qualifications, including her business experience set forth herein.
C. Michael Ford
, 78, has been President of Ocmulgee Land Trust, Inc. since July 2011. Mr. Ford was the Chief Executive Officer of
Newtown Macon, Inc. until March 31, 2014 and its Chief Financial Officer from October 2002 to November 2003. He was Chairman of the Board of In Home Health, Inc. from February 2000 to December 2000. Mr. Ford also served as Vice President
of Development of Columbia/HCA Healthcare Corporation from September 1994 to September 1997, and was Vice President of Marketing of Meditrust Corp. from October 1993 to September 1994. Mr. Ford was deemed qualified to serve on the board for the
reasons set forth below under Director Qualifications, including his business experience set forth herein.
Howard E. Turner
, 75,
has been a partner in the law firm of Smith, Gambrell & Russell, LLP, since 1971. Mr. Turner has served in the past as a director of Avlease, Ltd., a lessor of large commercial aircraft and as an officer and director of Historic
Motorsports Holdings, Ltd. Mr. Turner provides legal services to the Company through the law firm, Smith, Gambrell & Russell, LLP, as requested by the Company. Mr. Turner was deemed qualified to serve on the board for the reasons
set forth below under Director Qualifications, including his business experience set forth herein.
Christopher H. B. Mills
, 64, is
a Director and the Chief Investment Officer of Harwood Capital Management and has served in such capacity since October 30, 2011. From January 1993 until October 2011, Mr. Mills was a Director and the Chief Investment Officer of J. O.
Hambro. Mr. Mills also serves as the Managing Director/Investment Manager of North Atlantic Smaller Companies Investment Trust plc and Trident North Atlantic, positions he has held since 1998. From 1984 to 1993 Mr. Mills was a Director of
MIM Management Limited. Mr. Mills was deemed qualified to serve on the board for the reasons set forth above under Director Qualifications, including his business experience set forth herein.
13
Nominees for Election as Directors for a
Two-Year
Term Expiring In 2019
Nomination of Directors
We currently do not have a standing nominating committee. Our entire board of directors performs the functions of the nominating committee. Our
board does not believe that it needs a separate nominating committee because the full board is comprised predominately of independent directors and has the time and resources to perform the function of selecting board nominees. When our board
performs its nominating function, it acts in accordance with our Articles of Incorporation and Code of Regulations but does not have a separate charter related to the nomination process.
Director Qualifications
The board of
directors concluded that each continuing director and each director nominated for
re-election
was qualified to serve as a director of SunLink and recommended the nominees for election or
re-election
at the current years annual meeting. No single factor was more important than any other factor in the evaluation of any director or selection of any director nominee and the board made its
determination on the basis of its own experience and subjective evaluation of each individual, with reference to various objective criteria required by law or other regulatory requirements, including but not limited to independence requirements and
stock exchange regulations, as well as the subjective criteria that each director has deemed desirable in evaluating nominations.
Each
director nominated for
re-election
and each continuing director was deemed by the board to have: met applicable legal and regulatory definitions of independence excluding from such independence determination
only Mr. Thornton, the Companys sole management director; met the criteria set forth in the Companys corporate governance guidelines; a reputation for and to have displayed, personal integrity and judgment; achieved professional
prominence in their business careers; manifested concern for the interests of the Companys shareholders; sufficient time available for service on the SunLink board taking into account such persons other professional and personal
commitments; demonstrated a commitment to the Company based on their current and historical service to the Company as a director and/or as an executive officer of the Company; a general understanding of marketing, finance, and other disciplines
relevant to the success of a publicly traded company in todays business environment; and knowledge with respect to the current state of the Company based on their current and historical service to the Company as a director and/or as an
executive officer of the Company.
Board members with long board service to the Company (Baileys, Brenner, Burleson, Ford, Mills, Thornton
and Turner), prior experience in the healthcare services industry (Burleson, Ford and Thornton), current and prior experience providing legal services to clients in the healthcare industry (Turner), prior experience in businesses ancillary to the
healthcare services industry (Burleson, Ford and Thornton), or a combination thereof, as set forth in greater detail in their individual biographies, were deemed to have applicable industry or related industry experience relevant to the Company.
Board members identified in greater detail in their individual biographies as having served as officers of other healthcare services providers (Burleson, Ford and Thornton) or a current officer of the Company (Thornton) were deemed to have had
operational experience relevant to the Company. Directors identified elsewhere in this Proxy Statement in greater detail as serving on specific committees of the board were deemed to have experience in matters relevant to their current committee
assignments including executive compensation (Baileys, Brenner, and Burleson), and financial expertise (Brenner, Ford and Mills). Each director identified in greater detail in their biographies as an incumbent director of SunLink or as having served
as an officer, director or both of one or more other public companies (Baileys, Burleson, Thornton and Mills) was deemed to have experience relevant to SunLink as a public company and to the discharge of the duties of such persons as directors of a
public company. Each director with prior CEO experience (Baileys, Burleson and Ford) and corporate legal experience (Turner) was deemed to have experience relevant to their oversight of the Companys management in general and its CEO in
particular. Each director identified in their biography as having applicable healthcare services industry experience (Baileys, Burleson, Ford and Thornton), or healthcare legal experience (Turner) was deemed to have applicable industry regulatory
experience. Each director identified
14
as having experience in industries which are or have been highly competitive (all) or highly regulated, especially the financial services industries (Brenner and Mills), were deemed to have
experience relevant to the Company in its own business which is both highly competitive as well as highly regulated. Each director was deemed of sufficient age and maturity to have accumulated the life experiences, viewpoints, and expertise
necessary to perform the duties of a public company director, as well as being able to vigorously perform his or her duties as a director of the Company.
The board conceptualizes diversity expansively to include differences of viewpoint, professional experience and skill sets, especially in
matters of healthcare service operations and regulations, financing, marketing, and human resources, as well as a subjective determination of individual qualities, attributes and differences. The board has taken into account the benefits of, but has
not ascribed any specific weight to, or adopted any formal policy with respect to, matters of geographic and cultural background, race, and gender. The board evaluates each individual in the context of the board as a whole, with the objective of
recommending a group that can best facilitate the success of SunLinks business and represent shareholder interests through the exercise of sound judgment using its diversity of experience. The board evaluates each incumbent director to
determine whether he or she should be nominated to stand for
re-election
based on the types of criteria outlined above as well as the directors contributions to the board during their current term.
Because the assessment of the diversity of the board as well as the effectiveness of the current factors in achieving diversity from a variety of perspectives is based on the individual subjective evaluation of each of the board members, the Company
does not engage in any formal benchmarking procedure.
Board Meetings
The board of directors held eight (8)
meetings during fiscal 2017. Such meetings were in addition to one action in writing taken by
the board. The board has four (4) standing committees: an executive committee, an audit committee, a compensation committee and a strategic planning committee. Each standing committee had the right to retain, in the fiscal year ended
June 30, 2017, its own legal and other advisors. During the fiscal year ended June 30, 2017, all directors, except Mr. Mills, attended 75% or more of the meetings of the full board of directors. During the fiscal year ended
June
30, 2017, all directors attended 75% or more of the meetings of the individual committees of the board of directors upon which they served.
Committees of the Board of Directors Overview
Membership On Board Committees
This table lists the four (4) board committees in existence during our last fiscal year and the directors who currently serve on them and
the number of committee meetings held in the fiscal year ended June 30, 2017.
|
|
|
|
|
|
|
|
|
Name
|
|
Audit
|
|
Compensation
|
|
Executive
|
|
Strategic
|
Dr. Baileys
|
|
|
|
●
|
|
|
|
C
|
Ms. Brenner
|
|
●
|
|
●
|
|
●
|
|
|
Mr. Burleson
|
|
●
|
|
C
|
|
|
|
●
|
Mr. Ford
|
|
C
|
|
|
|
|
|
●
|
Mr. Mills
|
|
|
|
|
|
|
|
|
Mr. Thornton
|
|
|
|
|
|
C
|
|
|
Mr. Turner
|
|
|
|
|
|
●
|
|
|
2017 Meetings
|
|
4
|
|
2
|
|
0
(1)
|
|
1
|
(1)
|
The Executive Committee took three actions in writing.
|
15
Audit Committee
The audit committees primary function is to assist the board of directors in fulfilling its oversight responsibilities by:
|
|
|
selecting the Companys independent registered public accounting firm and evaluating the independence, performance, and continued retention of such accounting firm;
|
|
|
|
reviewing the Companys auditing, accounting and financial reporting processes generally;
|
|
|
|
reviewing the Companys systems of internal controls regarding finance, accounting, legal, and compliance that management and the board have established;
|
|
|
|
reviewing the integrity of the financial statements and other financial information provided by the Company to the Companys shareholders, the general public and the SEC, including:
|
|
|
|
reviewing and discussing with management and the independent registered public accounting firm the financial statements to be included in the Companys annual report on Form
10-K
for filing with the SEC;
|
|
|
|
discussing with the independent registered public accounting firm the conduct of the audit, the adequacy and effectiveness of the Companys accounting and financial controls, and the written disclosures required by
Independence Standards Board Standard No. 1 regarding such firms independence;
|
|
|
|
meeting separately with the independent registered public accounting firm and with the Companys internal auditors, as well as the Companys management, to discuss the results of their audits; and
|
|
|
|
reviewing and discussing with management and the independent registered public accounting firm the Companys interim financial statements as included in the Companys quarterly reports;
|
|
|
|
reviewing the potential engagement of the Companys independent registered public accounting firm for
non-audit
services prior to any such engagement and approving any such
engagement;
|
|
|
|
reassessing annually the adequacy of the audit committee charter and recommending any proposed changes to the board for approval;
|
|
|
|
reporting to the Companys board of directors the conclusions with respect to the matters that the audit committee has considered; and
|
|
|
|
examining such other areas or activities consistent with the audit committee charter, the Companys Code of Regulations and governing law as the audit committee or board deem appropriate.
|
The audit committee has adopted a procedure to receive allegations on any fraudulent accounting issues through a toll-free telephone number
and email as set out in the Companys Code of Conduct.
Each member of the audit committee is independent as defined in
Section 803(A) of the NYSE American exchange Company Guide and Rule
10A-3
of the Securities Exchange Act of 1934 (the 1934 Act). The board has also determined that Mr. Ford meets the
requirements for being an audit committee financial expert pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Our audit committee charter is available on our website at
www.sunlinkhealth.com
.
16
Compensation Committee
Composition; Independence; Insider Participation
Our compensation committee is composed entirely of independent members of the board of directors. All three (3) members of the
compensation committee are independent, as defined in Section 803(A) of the NYSE American exchange Company Guide and each of them qualifies as an outside director (as such term is defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Code) and the regulations thereunder). Our compensation committee charter is available on our website at
www.sunlinkhealth.com
. No member of the committee is a current or former employee or
officer of the Company or any of its affiliates.
Compensation Review Process; Management Participation in Compensation Determinations
The compensation of our executive officers is determined by the compensation committee on an annual basis subject to minimum compensation
threshholds pursuant to employment agreements and letters previously approved by the committee. Our compensation committee considers all elements of compensation in making its determinations. With respect to those executive officers who do not serve
on our board of directors, the committee also considers the recommendations of our chairman of the board and chief executive officer. The compensation committee meets at various times during the year, and it also considers and takes action by
written consent. The compensation committee chairperson reports on committee actions and recommendations at board meetings.
Responsibilities
The compensation committee has the power and authority of the board to perform and performs the following duties and responsibilities:
|
|
|
Develops guidelines and, on an annual basis, reviews the compensation and performance of the Companys senior executive officers; reviews and approves corporate goals relevant to the compensation of the chief
executive officer; evaluates the chief executive officers performance in light of these goals and objectives; sets the chief executive officers compensation based on such evaluation; evaluates the performance of the Companys senior
executive officers and approves their annual compensation; and produces an annual report on executive compensation for inclusion in the Companys annual proxy statement, in accordance with all applicable rules and regulations;
|
|
|
|
Makes recommendations to the board with respect to incentive compensation plans and equity-based plans, and administers such plans by establishing criteria for granting of awards to the Companys officers and other
employees and reviews and approves the granting of awards in accordance with such criteria;
|
|
|
|
Reviews and approves plans for managerial succession of the Company;
|
|
|
|
Reviews director compensation levels and practices, and recommends to the board, from time to time, changes in such compensation levels and practices (including retainers, meetings fees, committee fees, stock options
and other similar items as appropriate);
|
|
|
|
Annually reviews and assesses the adequacy of the Compensation Committee Charter and recommends any proposed changes to the board for approval; and
|
|
|
|
Performs such other activities consistent with the Compensation Committee Charter, the Companys Code of Regulations and governing law as the compensation committee or the board deems appropriate.
|
Executive Committee
The executive committee is empowered to exercise all of the authority of the board of directors except as to matters not delegable to a
committee under the General Corporation Law of Ohio.
17
Strategic Planning Committee
The strategic planning committee is empowered to, among other things, conduct periodic evaluations of the Companys strategic
alternatives. The strategic planning committee has the power and authority of the board to perform and performs the following duties and responsibilities:
|
|
|
Recommends for board approval actions that address the Companys strategic alternatives, including, but not limited to solicited and unsolicited takeover offers, possible acquisition targets, asset sales or major
purchases;
|
|
|
|
Discusses with the Companys regular outside counsel or special counsel any legal matters that could reasonably be expected to have a material impact on the Companys long-term strategies;
|
|
|
|
Annually evaluates performance of the strategic planning committee; and
|
|
|
|
Annually reviews and assesses the Strategic Planning Committee Charter and submits recommended changes to the board.
|
The Strategic Planning Committee Charter is available on our website at
www.sunlinkhealth.com
.
Nomination Procedures and Shareholder Nominations
The board does not have a nominating committee but has adopted a nominating resolution which provides that the board believes it to be in the
best interest of the Company and the best interest of the Companys shareholders to authorize the entire board to identify and nominate, by majority vote of the entire board of directors then in office, directors to serve on the Companys
board so long as, pursuant to rules of the NYSE American exchange director nominees so selected are approved by a majority of the independent directors and, when vacancies occur on the board which are to be filled, that the board will actively seek
individuals qualified to become board members based on business experience, professional expertise, industry experience, and diversity. Shareholders who wish to submit nominees for election at an annual or special meeting of shareholders should
follow the procedure generally described in
Requirements, Including Deadlines, For Submission Of Proxy Proposals, Nomination Of Directors And Other Business Of Shareholders
on page 32 of this Proxy Statement and more particularly, in the
Companys Code of Regulations. The board of directors applies the same standards in considering candidates submitted by shareholders as it does in evaluating candidates submitted by members of the board of directors. The board does not have a
separate policy with regard to the consideration of candidates recommended by shareholders other than the process provided in the nominating resolution.
18
COMPENSATION OF DIRECTORS FOR FISCAL YEAR 2017
Management Directors
We do not pay directors who are also our employees any additional compensation for serving as a director, other than customary reimbursement of
expenses.
Non-Management
Directors
The Company believes that the compensation of
non-management
directors should be at a level which is
sufficient to attract talented and diverse individuals to serve on the Companys board of directors while, at the same time, avoiding compensation levels where the level of compensation might present the appearance of a potential lack of
director independence. However, in recent years, the board of directors has limited director compensation in light of the Companys recent financial performance to levels below those which the board would otherwise deem appropriate.
The following chart discloses the compensation of each
non-management
director for the fiscal year
ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid in
Cash
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
|
Totals
($)
(3)
|
|
Dr. Steven J. Baileys
|
|
|
42,000
|
|
|
|
14,520
|
|
|
|
56,520
|
|
Karen B. Brenner
|
|
|
44,000
|
|
|
|
14,520
|
|
|
|
58,520
|
|
Gene E. Burleson
|
|
|
44,000
|
|
|
|
14,520
|
|
|
|
58,520
|
|
C. Michael Ford
|
|
|
42,000
|
|
|
|
14,520
|
|
|
|
56,520
|
|
Christopher H. B. Mills
|
|
|
36,000
|
|
|
|
14,520
|
|
|
|
50,520
|
|
Howard E. Turner(4)
|
|
|
40,000
|
|
|
|
14,520
|
|
|
|
54,520
|
|
(1)
|
Cash Compensation.
Non-management
directors receive a base fee for director compensation of $36,000 per year, payable
on a monthly basis in equal installments. In addition, each
non-management
member of the Audit Committee, Compensation Committee and Strategic Planning Committee was paid an annual fee of $2,000, with the
committee chair receiving $4,000.
Non-management
Executive Committee members received a fee of $2,000 per meeting.
|
(2)
|
Equity Compensation.
This column shows the grant date fair value option awards computed in accordance with equity-based compensation accounting rules (FASB ASC Topic 718). For a description of certain assumptions
made in the valuation of option awards, see Note 11 to the Companys audited consolidated financial statements, included in the Companys Annual Report on Form
10-K
for the fiscal year ended
June 30, 2017.
The Company made equity-based compensation awards to directors during fiscal year 2017 in the form of options, all of which were vested as of the grant date of September 12, 2016. The compensation committee approved
the award of options for 12,000 shares to each of the six
non-management
board members (72,000 total options) to be vested immediately and exercisable over a 10 year period at the market price of the
Companys common shares on the date of grant.
|
(3)
|
None of the directors received any stock awards,
non-equity
incentive plan compensation, any pension benefits, any
non-qualified
deferred
compensation or any other compensation.
|
(4)
|
Other Arrangements.
Mr. Turner is a partner of the law firm of Smith, Gambrell & Russell, LLP. Such law firm provided legal services to the Company in the fiscal year ended June 30, 2017 at
customary rates and continues to provide such services to the Company in the fiscal year ending June 30, 2018.
|
19
The following chart discloses certain information with respect to option awards held by each
non-management
director as of the fiscal year ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
(1)
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Exercisable
|
|
|
|
Dr. Steven J. Baileys
|
|
|
4,857
|
|
|
|
8.00
|
|
|
|
09/23/2017
|
|
|
|
10,000
|
|
|
1.67
|
|
|
11/10/2021
|
|
|
|
20,000
|
|
|
1.22
|
|
|
09/05/2022
|
|
|
|
3,000
|
|
|
0.71
|
|
|
09/16/2023
|
|
|
|
5,000
|
|
|
1.79
|
|
|
09/10/2025
|
|
|
|
12,000
|
|
|
1.21
|
|
|
09/12/2026
|
|
|
|
|
|
Karen B. Brenner
|
|
|
4,857
|
|
|
|
8.00
|
|
|
|
09/23/2017
|
|
|
|
10,000
|
|
|
1.67
|
|
|
11/10/2021
|
|
|
|
20,000
|
|
|
1.22
|
|
|
09/05/2022
|
|
|
|
3,000
|
|
|
0.71
|
|
|
09/16/2023
|
|
|
|
5,000
|
|
|
1.79
|
|
|
09/10/2025
|
|
|
|
12,000
|
|
|
1.21
|
|
|
09/12/2026
|
|
|
|
|
|
Gene E. Burleson
|
|
|
4,857
|
|
|
|
8.00
|
|
|
|
09/23/2017
|
|
|
|
10,000
|
|
|
1.67
|
|
|
11/10/2021
|
|
|
|
20,000
|
|
|
1.22
|
|
|
09/05/2022
|
|
|
|
3,000
|
|
|
0.71
|
|
|
09/16/2023
|
|
|
|
5,000
|
|
|
1.79
|
|
|
09/10/2025
|
|
|
|
12,000
|
|
|
1.21
|
|
|
09/12/2026
|
|
|
|
|
|
C. Michael Ford
|
|
|
4,857
|
|
|
|
8.00
|
|
|
|
09/23/2017
|
|
|
|
10,000
|
|
|
1.67
|
|
|
11/10/2021
|
|
|
|
20,000
|
|
|
1.22
|
|
|
09/05/2022
|
|
|
|
3,000
|
|
|
0.71
|
|
|
09/16/2023
|
|
|
|
5,000
|
|
|
1.79
|
|
|
09/10/2025
|
|
|
|
12,000
|
|
|
1.21
|
|
|
09/12/2026
|
|
|
|
|
|
Christopher H. B. Mills
|
|
|
4,857
|
|
|
|
8.00
|
|
|
|
09/23/2017
|
|
|
|
10,000
|
|
|
1.67
|
|
|
11/10/2021
|
|
|
|
20,000
|
|
|
1.22
|
|
|
09/05/2022
|
|
|
|
3,000
|
|
|
0.71
|
|
|
09/16/2023
|
|
|
|
5,000
|
|
|
1.79
|
|
|
09/10/2025
|
|
|
|
12,000
|
|
|
1.21
|
|
|
09/12/2026
|
|
|
|
|
|
Howard E. Turner
|
|
|
4,857
|
|
|
|
8.00
|
|
|
|
09/23/2017
|
|
|
|
10,000
|
|
|
1.67
|
|
|
11/10/2021
|
|
|
|
20,000
|
|
|
1.22
|
|
|
09/05/2022
|
|
|
|
3,000
|
|
|
0.71
|
|
|
09/16/2023
|
|
|
|
5,000
|
|
|
1.79
|
|
|
09/10/2025
|
|
|
|
12,000
|
|
|
1.21
|
|
|
09/12/2026
|
|
(1)
|
There are no outstanding unexercised options, stock awards or incentive plan awards for directors. If we grant stock awards or equity plan incentive awards in the future, we will report the named director holding
unvested securities, the market value of unvested shares or awards, the vesting date for such securities and the number of securities vesting on the applicable date.
|
20
EXECUTIVE OFFICERS
Our executive officers, as of September 28, 2017, their positions with the Company or our subsidiaries, and the ages of such executive
officers are as follows:
|
|
|
|
|
|
|
Name
|
|
Office
|
|
Age
|
|
Robert M. Thornton, Jr.
|
|
Director, Chairman of the Board of Directors, President and Chief Executive Officer
|
|
|
68
|
|
Mark J. Stockslager
|
|
Chief Financial Officer and Principal Accounting Officer
|
|
|
58
|
|
Byron D. Finn
|
|
President, SunLink ScriptsRx, LLC
|
|
|
67
|
|
Current Executive Officers
All of our executive officers hold office for an indefinite term, subject to the discretion of the board of directors.
Biographical information for our
non-director
executive officers is set forth below:
Mark J. Stockslager
, 58, has been SunLinks Chief Financial Officer since July 1, 2007. He was interim Chief Financial
Officer from November 6, 2006 until June 30, 2007. He has been the Principal Accounting Officer since March 11, 1998 and was Corporate Controller from November 6, 1996 to June 4, 2007. He has been associated continuously
with our accounting and finance operations since June 1988 and has held various positions, including Manager of U.S. Accounting, from June 1993 until November 1996. From June 1982 through May 1988, Mr. Stockslager was employed by Price
Waterhouse & Co.
Byron D. Finn
, 67, was named President of SunLink ScriptsRx, LLC on October 1, 2010. Prior to
becoming President of SunLink Scripts, RX, LLC, Mr. Finn was President of Byron D. Finn, CPA, PC, which provided accounting, financial consulting and litigation support services for clients, including numerous healthcare clients. His experience
also includes various positions with The Coca-Cola Company, where he served in a number of financial-related positions and in connection with special projects, and he was previously employed by Ernst & Young. Mr. Finn is a licensed CPA
and received his BA in Business Administration and Master in Accountancy degrees from the University of Georgia.
21
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth compensation information relating to the Companys principal executive officer
(Mr. Thornton, who is our Chief Executive Officer), the Companys principal financial officer (Mr. Stockslager, who is our Chief Financial Officer), and our sole other named executive officer (Mr. Finn, who is the President of
SunLink ScriptsRx).
Summary Compensation Table
The following table shows the compensation awarded or paid by SunLink for services rendered for the fiscal years ended June 30, 2017 and
2016 to the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
|
All Other
Compensation
($)
(3)
|
|
|
Total
($)
(4)
|
|
Robert M. Thornton, Jr.
|
|
|
2017
|
|
|
|
366,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
8,222
|
|
|
|
424,222
|
|
Chairman, President and Chief Executive Officer
|
|
|
2016
|
|
|
|
366,000
|
|
|
|
0
|
|
|
|
15,000
|
|
|
|
272
|
(5)
|
|
|
381,272
|
|
|
|
|
|
|
|
|
Mark J. Stockslager
|
|
|
2017
|
|
|
|
190,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
6,011
|
|
|
|
211,011
|
|
Chief Financial Officer and Principal Accounting Officer
|
|
|
2016
|
|
|
|
190,000
|
|
|
|
0
|
|
|
|
7,500
|
|
|
|
272
|
(5)
|
|
|
197,772
|
|
|
|
|
|
|
|
|
Byron D. Finn
|
|
|
2017
|
|
|
|
200,000
|
|
|
|
0
|
|
|
|
|
|
|
|
170
|
(5)
|
|
|
200,170
|
|
President, SunLink ScriptsRx, LLC
|
|
|
2016
|
|
|
|
200,000
|
|
|
|
0
|
|
|
|
|
|
|
|
170
|
(5)
|
|
|
200,170
|
|
(1)
|
Represents discretionary bonus awarded by the Companys compensation committee in light of its judgment regarding managements performance with respect to
management of the Companys finances, results of operations, dispositions of nonperforming assets and application of proceeds thereof, and other factors deemed relevant in the subjective discretion of the compensation committee. With respect to
fiscal 2017, the compensation committee retained full authority to determine, among other things, the identity of participants to whom any bonuses would be payable (if at all), whether facts and circumstances merited the award of any bonuses, and
the amount of bonuses awarded, if any.
|
(2)
|
This column shows the grant date fair value option awards computed in accordance with equity-based compensation accounting rules (FASB ASC Topic 718). For a
description of certain assumptions made in the valuation of option awards, see Note 11 to the Companys audited consolidated financial statements, included in the Companys Annual Report on Form
10-K
for the fiscal year ended June 30, 2017. The fair value of the share options is estimated using the Black-Scholes option pricing model and the compensation expense is recognized for financial reporting purposes in the periods in which the share
options vest. However, for purposes herein, the total fair value of the share options is presented.
|
(3)
|
All other compensation consists solely of life, medical and dental insurance premiums paid above those premiums which are generally paid for all employees and 401k contributions made by the Company.
|
(4)
|
None of the named executive officers received any stock awards,
non-equity
incentive compensation, a change in pension value
or
non-qualified
deferred compensation.
|
(5)
|
Consists solely of life insurance premiums.
|
22
Outstanding Equity Awards at Fiscal
Year-End
The following table provides information with respect to common shares that may be
issued upon the exercise of options and other awards outstanding under the Companys existing equity compensation plans as of June 30, 2017 to the Companys named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
(1)
|
|
Name
(3)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
(2)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
Robert M. Thornton, Jr.
|
|
|
33,333
|
|
|
|
|
|
|
|
2.09
|
|
|
|
09/12/2021
|
|
|
|
|
33,333
|
|
|
|
|
|
|
|
2.09
|
|
|
|
09/12/2021
|
|
|
|
|
33,334
|
|
|
|
|
|
|
|
2.09
|
|
|
|
09/12/2021
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
1.22
|
|
|
|
09/05/2022
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
1.22
|
|
|
|
09/05/2022
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
1.22
|
|
|
|
09/05/2022
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
1.49
|
|
|
|
09/12/2024
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
1.49
|
|
|
|
09/12/2024
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
1.49
|
|
|
|
09/12/2024
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1.79
|
|
|
|
09/10/2025
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
1.79
|
|
|
|
09/10/2025
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
1.79
|
|
|
|
09/10/2025
|
|
|
|
|
|
|
Mark J. Stockslager
|
|
|
6,666
|
|
|
|
|
|
|
|
2.09
|
|
|
|
09/12/2021
|
|
|
|
|
6,667
|
|
|
|
|
|
|
|
2.09
|
|
|
|
09/12/2021
|
|
|
|
|
6,667
|
|
|
|
|
|
|
|
2.09
|
|
|
|
09/12/2021
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1.22
|
|
|
|
09/05/2022
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1.22
|
|
|
|
09/05/2022
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1.22
|
|
|
|
09/05/2022
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1.49
|
|
|
|
09/12/2024
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1.49
|
|
|
|
09/12/2024
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
1.49
|
|
|
|
09/12/2024
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
1.79
|
|
|
|
09/10/2025
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
1.79
|
|
|
|
09/10/2025
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
1.79
|
|
|
|
09/10/2025
|
|
(1)
|
There are no outstanding stock awards or incentive plan awards for executive officers. If we grant stock awards or equity plan incentive awards in the future, we will report the named executive officer holding unvested
securities, the market value of unvested shares or awards, the vesting date for such securities and the number of securities vesting on the applicable date.
|
(2)
|
Includes each grant of both exercisable and unexercisable options under the Companys 2001 Long-Term Stock Option Plan and the 2005 Equity Incentive Plan.
|
(3)
|
The identity of the named executive officers holding unvested securities as of the date of this table, the vesting date for such securities and the number of securities vesting on the applicable date is as follows:
|
23
|
|
|
|
|
|
|
|
|
Officer
|
|
Vesting
Date
|
|
|
Shares
Vesting
|
|
Robert M. Thornton, Jr.
|
|
|
09/12/2017
|
|
|
|
20,000
|
|
|
|
|
09/11/2017
|
|
|
|
10,000
|
|
|
|
|
09/11/2018
|
|
|
|
10,000
|
|
|
|
|
Mark J. Stockslager
|
|
|
09/12/2017
|
|
|
|
10,000
|
|
|
|
|
09/11/2017
|
|
|
|
5,000
|
|
|
|
|
09/11/2018
|
|
|
|
5,000
|
|
|
|
|
Byron D. Finn
|
|
|
N/A
|
|
|
|
None
|
|
Pension Plan Benefits
Effective February 28, 1997, SunLink amended its domestic retirement plan to freeze participant benefits and close the plan to new
participants. Accordingly, compensation earned after February 28, 1997 is not used in determining a participants accrued benefit. Mr. Thornton and Mr. Stockslager are the only named executive officers of the Company who are
participants in the plan. The estimated monthly benefits to be received by them at age 65 are
$
195.38 and $601.24, respectively based on Mr. Thorntons two years of credited service and $31,148 present value of accumulated benefits
and Mr. Stockslagers eight years of credited service and $67,856 present value of accumulated benefits. Neither Mr. Thornton nor Mr. Stockslager received payments under the plan in fiscal 2017.
Employment Contracts, Termination of Employment and
Change-in-Control
Arrangements
Employment Agreements
Robert M. Thornton, Jr
. Mr. Thornton, Chairman, President and Chief Executive Officer, is currently employed by the Company under
the terms of an employment agreement effective July 1, 2005, as amended to date, for a term ending December 31, 2018. Absent notice, the contract provides for automatic renewal at the end of its then current term for a period of eighteen
months. Mr. Thorntons current employment agreement provides for a base salary at a rate of not less than $335,000 per annum plus any increases that may be granted at least annually by the Company. Mr. Thorntons base salary for
fiscal 2017 was $366,000. Mr. Thornton is eligible to participate in the Companys employee equity compensation plans if equity is available thereunder and if the compensation committee decides to grant him additional equity compensation.
Under his employment agreement, Mr. Thornton is also eligible to receive an annual bonus of up to seventy percent of his annual base salary if certain criteria established by the compensation committee (in consultation with him) are met.
Mr. Thornton is eligible to participate in the Companys medical, dental, life, and disability programs.
Mr. Thorntons employment agreement also provides for severance payments in the event Mr. Thornton ceases to be employed by the
Company. If Mr. Thornton is terminated due to death, disability or cause, he is entitled to the accrued compensation under his employment agreement, including a pro rata share of any annual bonus. If Mr. Thornton is terminated other than
for death, disability or cause, he is entitled to receive severance payments equal to thirty months of his then current salary, a pro rata portion of any annual bonus for which goals have been proportionately met, and continuation of certain
benefits for and during the thirty months following termination.
Mark J. Stockslager
. Mr. Stockslager, Chief Financial
Officer and Principal Accounting Officer, is currently employed by the Company under the terms of an employment letter effective January 1, 2001. Mr. Stockslager s current employment letter provides for a salary of at least $7,333
per month or $88,000 on an annualized basis, which will be reevaluated at least annually to determine if any adjustments should be made. Currently, Mr. Stockslagers salary is $15,833 per month or $190,000
on an annualized basis.
Additionally, Mr. Stockslager is also eligible to receive an annual bonus of up to sixty percent of his annual base salary if certain criteria established by the compensation committee are met. Mr. Stockslager is eligible to participate in
the Companys employee equity compensation plans, as well as the Companys medical, dental, life and disability programs. Except as described below with respect to payments in connection with a change in control, if Mr. Stockslager is
24
terminated, other than for cause, as determined by the board of directors in its sole discretion, he is entitled to severance pay by continuation of his base salary for nine months.
Byron D. Finn.
Mr. Finn, President, SunLink ScriptsRx, LLC is currently employed by the Company under the terms of an employment
letter effective September 30, 2010. Mr. Finns current employment letter provides for a salary of $16,667 per month or $200,000 on an annualized basis, which will be reevaluated at least annually to determine if any adjustments
should be made. Additionally, Mr. Finn is eligible to receive an annual bonus of up to sixty percent of his annual base salary if certain criteria established by the compensation committee are met. Mr. Finn is eligible to participate in
the Companys employee equity compensation plans, as well as the Companys medical, dental, life and disability programs. If Mr. Finn is terminated, other than for cause, Mr. Finn will be entitled to receive severance pay by
continuation of his base salary for six (6) months.
Change in Control Arrangements
With regard to the employment agreements with Mr. Thornton, Mr. Stockslager and Mr. Finn, a change in control will
be deemed to have occurred in the event that any of the following events shall have occurred (with defined terms, not otherwise defined herein, having the meanings associated with them in the employment agreements):
|
|
|
Any Person, or Persons acting together that would constitute a group, together with any Affiliates or Related Persons thereof (other than any employee stock ownership plan), beneficially owns 40% or more of
the total voting power of all classes of Voting Stock of the Company, except an acquisition by (i) an employee benefit plan maintained by the Company or another corporation controlled directly or indirectly by the Company; (ii) the Company
or any Subsidiary; (iii) Executive or any Person controlled by an Executive, under common control with Executive or acting in concert with Executive; or (iv) any Person in connection with a
non-control
transaction;
|
|
|
|
The individuals who, as of the date of the agreement, are members of the board (the incumbent board) cease for any reason to constitute at least
two-thirds
of the
board;
provided
,
however
, that if the election, or nomination for election by the Companys shareholders, of any new director was approved by a vote of at least
two-thirds
of the incumbent
board, such new director shall, for purposes of change in control, be considered as a member of the incumbent board;
provided
,
further
,
however
, that no individual shall be considered a member of the incumbent board if such
individual initially assumed office as a result of either an actual or threatened Election Contest (as described in Rule
14a-11
promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the board (a proxy contest) including by reason of any agreement intended to avoid or settle any Election Contest or proxy contest;
|
|
|
|
Approval by shareholders of SunLink of a merger, consolidation or reorganization involving the Company, unless
|
|
|
|
the shareholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least
two-thirds
of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the surviving corporation) in substantially
the same proportion as their ownership of the voting securities immediately before such merger, consolidation or reorganization, and
|
|
|
|
the individuals who were members of the incumbent board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least
two-thirds
of the members of the board of directors of the surviving corporation; or
|
|
|
|
If the executives employment is terminated prior to a change in control and the executive reasonably
demonstrates that such termination (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a
change-in-control
and who effectuates a change in control (a third party) or (B) otherwise occurred in connection with, or in anticipation of, a
change-in-control
which actually occurs, then for all purposes, the date of a change in control with
|
25
|
respect to the executive shall mean the date immediately prior to the date of such termination of the executives employment.
|
Upon a change in control, if Mr. Thorntons employment is thereafter terminated for any reason other than cause or if he terminates
his employment within one (1) year of the change in control, he is entitled to (a) thirty months of base pay, to be paid in accordance with the Companys payroll practices; (b) accrued compensation, including a pro rata portion
of any annual bonus for which goals have been proportionately met; (c) health and certain ancillary benefits for twenty four months following termination; and (d) full vesting of any then unvested stock options.
Upon a change in control, if Mr. Stockslagers employment is thereafter terminated for any reason other than cause or if he
terminates his employment within one (1) year of the
change-in-control,
he is entitled to twelve months of base pay, to be paid in accordance with the
Companys payroll practices.
Upon a change in control, if Mr. Finns employment is terminated within 90 days thereafter
for any reason other than death, disability or cause, he is entitled to six months of base pay, to be paid in accordance with the Companys payroll practices.
The following table sets forth certain potential benefits which would have been realized in connection with a
change in control and
termination of employment without cause or at the election of the executive
for the Companys principal executive officer, principal financial officer and the Companys sole other named executive officer for fiscal year 2017 assuming
the change in control and termination occurred as of the last day of the most recently completed fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Continued
Base
Salary
(1)
$
|
|
|
Lump Sum
Salary Bonus
and Incentive
Compensation
Payment
(2)
$
|
|
|
Value of
Health
and
Insurance
Benefits
(3)
$
|
|
|
Value of
Accelerated
Equity
Awards
(4)
$
|
|
|
Total
Termination
Benefits
$
|
|
Robert M. Thornton, Jr.
|
|
|
915,000
|
|
|
|
50,000
|
|
|
|
29,929
|
|
|
|
3,400
|
|
|
|
998,329
|
|
Chairman, President and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark J. Stockslager
|
|
|
190,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
190,000
|
|
Chief Financial Officer and Principal
Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Byron D. Finn
|
|
|
100,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
100,000
|
|
President, SunLink ScriptsRx, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The continued base salary benefit is to be paid in accordance with the Companys regularly scheduled pay periods over the applicable benefits period.
|
(2)
|
Calculated as a pro rata portion of any annual bonus for which goals have been proportionately met prior to termination and without regard to any requirement to be employed on payment date. Such payment shall be made
after an audit of annual results in accordance with the applicable plan.
|
(3)
|
Calculated based on the lesser of aggregate premiums amounts payable and assuming the exercise of all rights of the covered individual under COBRA plus supplemental life insurance, without adjustment for inflation,
multiplied by the assumed actuarial lives of the persons provided benefits or the maximum benefit period if shorter.
|
(4)
|
Calculated based on the sum of the number of accelerated option awards, multiplied by the positive difference, if any, between the exercise price of such option and the market price of the Companys common shares
at June 30, 2017. All acceleratable options had an exercise price equal to or in excess of the closing market price of the Companys common shares at June 30, 2017 of $1.66, except for options for 20,000 shares for Mr. Thornton
exercisable at $1.49 per share.
|
26
PROPOSAL 2 TO BE VOTED ON BY SHAREHOLDERS
Proposal 2Advisory Vote on Executive Compensation
We are requesting your advisory approval of the compensation of our named executive officers as disclosed in the Executive Compensation section
of this Proxy Statement, including the compensation tables, and the narrative discussion set forth on page 22 of this Proxy Statement. This
non-binding
advisory vote is commonly referred to as a say on
pay vote.
Our Compensation Committee, which is responsible for designing and administering our executive compensation program, has
designed our executive compensation program to provide a competitive compensation and benefits package that reflects executive performance, job complexity and strategic value of the position, which it believes also includes retention incentives,
performance incentives, and alignment with the interests of the Companys shareholders. We encourage you to carefully review the Executive Compensation section of this Proxy Statement for additional details on the Companys
executive compensation, including the Companys compensation objectives, as well as the processes our Compensation Committee used to determine the structure and amounts of the compensation of our named executive officers for the fiscal year
ended June 30, 2017.
We are asking you to indicate your support for the compensation of our named executive officers as described in
this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the objectives, policies and practices described in this Proxy Statement.
Accordingly, we are asking you to vote, on an advisory basis, For the following resolution at the Annual Meeting:
RESOLVED
, that the compensation paid to SunLink Health Systems, Inc.s named executive officers, as disclosed pursuant to the
Securities and Exchange Commissions compensation disclosure rules, including the Executive Compensation section of the Proxy Statement, and the compensation tables and narrative discussion set forth therein, is hereby
approved.
While the results of this advisory vote are not binding, the Compensation Committee will consider the outcome of the vote
in deciding whether to take any action as a result of the vote and when making future compensation decisions for our named executive officers.
Vote
Required and Board Recommendation
The say-on-pay proposal will be approved if the number of votes cast in favor of the
proposal exceeds the number of votes cast against the proposal.
The board of directors unanimously recommends that the
Companys shareholders vote FOR the compensation of our named executive officers as disclosed in this Proxy Statement.
27
PROPOSAL 3 TO BE VOTED ON BY SHAREHOLDERS
Proposal 3Advisory Vote on the Frequency of the Vote on Executive Compensation
The Company is presenting this proposal, which gives you as a shareholder the opportunity to inform the Company as to how often you wish the
Company to include a
say-on-pay
proposal in our Proxy Statement (a
say-on-frequency
vote). While this
say-on-frequency
vote is advisory in
nature and therefore will not bind us to adopt any particular frequency, the Board intends to carefully consider the shareholder vote resulting from the proposal in determining how frequently we will hold
say-on-pay
votes.
Please note that, as a shareholder, you have the choice to vote
for one of the following choices, as indicated on the proxy card: to hold the advisory vote on executive compensation (1) every year, (2) every two years, (3) every three years, or (4) to abstain from voting.
The Board values constructive dialogue on executive compensation and other important governance topics with our shareholders. Because the
executive compensation program for our named executive officers has remained consistent for several years, the Board believes an advisory vote every three years should be sufficiently frequent to obtain information on shareholder sentiment about our
executive compensation program and to respond to shareholders feedback and the vote results.
Required Vote of Shareholders
Shareholders are not voting to approve or disapprove the recommendation of the Board that the
say-on-pay
vote be held every two years, but, rather, to express their own preference. The Company will take into consideration the shareholder vote on each of the alternatives set forth in the proxy card
with respect to this Proposal.
The board of directors unanimously recommends that the Companys shareholders vote for the
3 Years alternative set out in the proxy card.
28
PROPOSAL 4 TO BE VOTED ON BY SHAREHOLDERS
Proposal 4Ratification of Independent Registered Public Accounting Firm
Cherry Bekaert LLP was engaged to perform the Companys annual audit for the fiscal year ended June 30, 2017. We anticipate that
representatives of Cherry Bekaert LLP will be present at the 2017 annual meeting of shareholders to respond to appropriate questions and to make a statement if such representatives so desire.
The audit committee of the board of directors of the Company has appointed Cherry Bekaert LLP to serve as our independent registered public
accounting firm for the fiscal year beginning July 1, 2017. We are asking our shareholders to ratify the selection of Cherry Bekaert LLP as our independent registered public accounting firm. Although ratification is not required by our Code of
Regulations or otherwise, the board is submitting the selection of Cherry Bekaert LLP to our shareholders for ratification as a matter of good corporate practice. If the selection is not ratified, the audit committee will consider whether it is
appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the audit committee, in its discretion, may select a different independent registered public accounting firm at any time during the year
and may periodically request proposals from other independent registered public accounting firms and as a result of such process may select Cherry Bekaert LLP or another independent registered public accounting firm if the audit committee determines
that such a change or action would be in the best interests of the Company and our shareholders.
The board of directors unanimously
recommends a vote FOR the ratification of the appointment of Cherry Bekaert LLP as our independent registered public accounting firm.
CERTAIN ACCOUNTING AND AUDITING MATTERS
Report of the Audit Committee
The authority, duties and responsibilities of the audit committee of the board of directors of the Company are set forth in detail in the
written audit committee charter, which was adopted by the board of directors of the Company and which complies with the applicable rules of the NYSE American exchange. The audit committee has three members, each of whom is independent under the
applicable rules of the NYSE American exchange. In accordance with section 407 of the Sarbanes-Oxley Act of 2002, Mr. Ford has been identified as an Audit Committee Financial Expert.
The audit committee reviews and assesses the adequacy of its charter on an annual basis. A copy of the Audit Committee Charter is available on
the Companys website at
www.sunlinkhealth.com
.
The audit committee is responsible for overseeing the Companys
financial reporting process on behalf of the board of directors. Management of the Company has the primary responsibility for the Companys financial reporting process, principles and internal controls as well as preparation of its financial
statements in accordance with generally accepted accounting principles. The Companys independent auditors are responsible for performing an audit of the Companys financial statements and expressing an opinion as to the conformity of such
financial statements with generally accepted accounting principles in the United States.
The audit committee met four (4) times
during fiscal year 2017. In addition, the members of the audit committee reviewed, and the chairperson of the audit committee discussed with management and the Companys independent auditors, the interim financial information contained in each
quarterly earnings release prior to the release of such information to the public.
The audit committee has reviewed and discussed the
Companys audited financial statements as of and for the year ended June 30, 2017 with management and the independent auditors. The audit committee has discussed with the independent auditors the matters required to be discussed under
Standards of the Public Company Accounting Oversight Board (PCAOB), including those matters set forth in Auditing Standards No. 1301,
Communication with Audit Committees
. In addition, the audit committee received from the
independent
29
registered public accounting firm the written disclosures and the letter required by the PCAOBs applicable requirements and has discussed with them their independence from the Company and
its management. The audit committee has considered whether the independent registered public accounting firms provision of
non-audit
services to the Company is compatible with maintaining the independent
registered public accounting firms independence. The audit committee has concluded that the independent auditors are independent from the Company and its management.
The audit committee discussed with the Companys independent auditors the overall scope and plans for their respective audits. In
addition, the audit committee met with the Chief Executive Officer and Chief Financial Officer of the Company to discuss the processes that they have undertaken to evaluate the accuracy and fair presentation of the Companys financial
statements and the effectiveness of the Companys system of disclosure controls and procedures.
In fulfilling its oversight
responsibilities and as part of its review of the Companys 2017 Annual Report, the audit committee met with the Companys independent auditors, with and without management present, to discuss their evaluations of the Companys
internal controls as well as the overall quality of its financial reporting.
The fees paid to the Companys auditors, Cherry Bekaert
LLP, as well as the policy on
pre-approval
of audit and
non-audit
services are set forth elsewhere in this Proxy Statement.
As a result of the reviews and discussions with management and Cherry Bekaert LLP referred to above, the audit committee recommended to the
board and the board has approved that the audited financial statements of the Company be included in the Annual Report on Form
10-K
for the fiscal year ended June 30, 2017 for filing with the Securities
and Exchange Commission.
This report has been submitted by the audit committee:
|
|
|
|
|
C. Michael Ford (Chairperson)
|
|
Karen B. Brenner
|
|
Gene E. Burleson
|
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of 1933.
Policy on
Pre-Approval
of Services Provided By Independent Registered Public Accounting Firm
Pursuant to the
requirements of the Sarbanes-Oxley Act of 2002, the terms of the engagement of Cherry Bekaert LLP with respect to all auditing services and
non-audit
services to be performed for the Company by its independent
registered public accountants are subject to the specific
pre-approval
of the audit committee (except where such services are determined to be de minimis under the 1934 Act). All audit and permitted
non-audit
services to be performed by Cherry Bekaert LLP require
pre-approval
by the audit committee in accordance with
pre-approved
procedures established by the audit committee. The audit committee may delegate to one or more designated members of the audit committee who are independent directors of the board of directors, the authority to grant such
pre-approvals.
The decisions of any member to whom such authority is delegated are presented to the full audit committee at the next scheduled meeting of the audit committee. The procedures require all proposed
engagements of Cherry Bekaert LLP for services of any kind to be directed to the Companys Principal Accounting Officer and then submitted for approval to the audit committee prior to the beginning of any services.
In fiscal year 2017, 100% of the audit fees, audit-related fees and tax fees billed by Cherry Bekaert LLP were approved either by the audit
committee or its designee. The fees billed by Cherry Bekaert LLP that are shown in the following table for fiscal year 2017 and 2016 were also
pre-approved
by the audit committee or its designee. The audit
committee has considered whether the provision of
non-audit
services by the Companys independent registered public accounting firm is compatible with maintaining auditor independence and believes that
the provision of such services is compatible.
30
Independent Registered Public Accounting Firm Fees
The following tables show the type of services and the aggregate fees billed to the Company for such services during the fiscal years ended
June 30, 2017 and 2016 by SunLinks independent registered public accounting firm, Cherry Bekaert LLP
1
. Descriptions of the service types follow the table.
|
|
|
|
|
|
|
|
|
Services Rendered by Cherry Bekaert LLP
|
|
Fiscal 2017
|
|
|
Fiscal 2016
|
|
Audit Fees
|
|
$
|
120,000
|
|
|
$
|
143,000
|
|
Audit-Related Fees
|
|
|
0
|
|
|
|
4,021
|
|
Tax Fees
|
|
|
0
|
1
|
|
|
3,500
|
|
All Other Fees
|
|
|
0
|
|
|
|
1,935
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
120,000
|
|
|
$
|
152,456
|
|
|
|
|
|
|
|
|
|
|
1
|
In fiscal 2017, the professional services for tax compliance were performed by another public accounting firm. Such fees were $76,827 and were approved by the audit committee or its designee.
|
Audit Fees
The aggregate fees billed by
Cherry Bekaert LLP for each of the last two fiscal years include fees for professional services rendered for the audit of the Companys annual financial statements, review of financial statements included in the Companys Quarterly Reports
on Form
10-Q,
and consents and assistance with and review of other documents filed with the SEC, and accounting and financial reporting consultations and other attest services and the issuance of consents.
Audit-Related Fees
The
aggregate fees billed by Cherry Bekaert LLP in each of the last two fiscal years include fees for assurance and related services that are reasonably related to the performance of the audit or review of the Companys financial statements. The
nature of the services performed for these fees may include, among other things, employee benefit plan audits, internal control reviews, attest services not required by statute or regulation and consultations concerning financial accounting and
reporting matters not classified as an audit.
Tax Fees
The aggregate fees billed by Cherry Bekaert LLP in each of the last two fiscal years include fees for professional services rendered for tax
compliance, including assisting the Company with tax audits.
All Other Fees
These fees generally relate to assistance in connection with regulatory filings and accounting and disclosure consultation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires directors and certain officers of the Company and owners of
more than 10% of the Companys common shares to file an initial ownership report with the Securities and Exchange Commission and any subsequent current reports reflecting any changes in their ownership of any of the Companys equity
securities. The Company believes, based solely on a review of the copies of those reports furnished to the Company during the past year and written representations to it that no other reports were required and that during the period from
July 1, 2016 through June 30, 2017 all filing requirements have been met except (i) on October 13, 2016, Ms. Brenner filed a late report on Form 4 to correct prior inadvertent under-reporting of shares owned by
Ms. Brenners spouse as well as two dispositions of indirectly owned shares; (ii) on December 9, 2016, each of the Companys outside directors filed reports on
31
Form 4 to report the award of director stock options which represented a small acquisition grant previously eligible for deferred reporting under Rule
16a-6
for which a timely Form 5 was not filed; (iii) Mr. Thornton filed a late report on March 2, 2017 on Form 4 to report the disposition of shares earlier in the week of the report and on
March 3, 2017 to correct the prior inadvertent under-reporting of shares disposed of on such earlier report; and (iv) on March 8, 2017, Ms. Brenner filed a late report with respect to shares sold for clients in client-managed
accounts at the direction of and for the benefit of such clients and to correct the nature of the indirect ownership of certain shares inadvertently incorrectly reflected on an original Form 4.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In addition to the use of the mails, proxy solicitations may be made by
directors, officers and employees of the Company, personally or by telephone or other means of communication, without receiving additional compensation. It is also anticipated that banks, brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward soliciting material to their principals and to obtain authorization for the execution of proxies. The Company will reimburse banks, brokerage houses and other custodians, nominees and fiduciaries for their
out-of-pocket
expenses.
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS,
NOMINATION OF DIRECTORS AND OTHER BUSINESS OF SHAREHOLDERS
We plan to hold our 2018 annual meeting of shareholders during the month of November. Any proposal of a shareholder intended to be presented at
the 2018 annual meeting of shareholders must be received by us for inclusion in the Proxy Statement and form of proxy for that meeting no later than June 21, 2018, 100 days before the anniversary of the date of this Proxy Statement. If any
proposal is submitted after that date, we are not required to include it in our Proxy Materials. Any proposal of a shareholder intended to be presented at the 2018 annual meeting of shareholders that is not required to be included in the Proxy
Statement and form of proxy must be received by us for that meeting no later than August 15, 2018, 45 days before the anniversary of the date of this Proxy Statement. Proposals should be submitted to the following address:
Corporate Secretary
SunLink
Health Systems, Inc.
900 Circle 75 Parkway, Suite 1120
Atlanta, Georgia 30339
A notice
of a proposed item of business should include a description of, and the reasons for, bringing the proposed business to the meeting, any material interest of the shareholder in the business, and certain other information about the shareholder.
Under our Code of Regulations, and as SEC rules permit, shareholders must follow certain procedures to nominate a person for election as a
director at an annual or special meeting. Under these procedures, shareholders must submit the proposed nominee by delivering a notice to the Secretary of the Company at our principal executive offices. Normally, we must receive notice of a
shareholders intention to introduce a nomination at an annual meeting not less than 50 days nor more than 75 days before the next meeting. Assuming that our 2018 Annual Meeting of Shareholders is held on November 12, 2018, we must receive
notice pertaining to the 2018 Annual Meeting no earlier than September 7, 2018 and no later than September 22, 2018. However, if we give less than 60 days notice or public announcement of the annual meeting date, we must receive the
notice no later than the close of business ten (10) days after the earlier of the date we first provide notice of the meeting to shareholders or announce it publicly.
If we hold a special meeting to elect directors with less than 60 days notice, the effect of our Code of Regulations will be that we
must receive a shareholders notice of intention to introduce a nomination no later than the close of business ten (10) days after the earlier of the date we first provide notice of the meeting to shareholders or announce it publicly.
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A notice of a proposed nomination must include certain information about the shareholder and the
nominee, as well as a written consent of the proposed nominee to serve if elected.
WHERE YOU CAN FIND
ADDITIONAL INFORMATION
WE HAVE MAILED, AND POSTED ON THE INTERNET, OUR 2017 ANNUAL REPORT TO SHAREHOLDERS IN CONNECTION WITH THIS
PROXY SOLICITATION. IF YOU WOULD LIKE AN ADDITIONAL PHYSICAL COPY OF OUR 2017 FORM
10-K,
EXCLUDING CERTAIN EXHIBITS, PLEASE CONTACT SUNLINK HEALTH SYSTEMS, INC., 900 CIRCLE 75 PARKWAY, SUITE 1120, ATLANTA,
GEORGIA 30339.
OTHER MATTERS
Admission to Meeting
All shareholders as of the record date, or their duly appointed proxies, may attend the meeting. Seating, however, may be limited. Admission to
the meeting will be on a first-come, first-served basis. Please note that if you hold your shares in street name (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock
ownership as of the record date. Only shareholders as of the record date may attend the meeting. Each shareholder may be asked to present valid picture identification, such as a drivers license or passport. Cameras, recording devices, cellular
telephones, beepers and other electronic devices will not be permitted at the meeting.
Action on Other Matters at the
Annual Meeting
At this time, we do not know of any other matters to be presented for action at the Annual Meeting other than those
mentioned in the Notice of Annual Meeting of Shareholders and referred to in this Proxy Statement. If any other matter properly comes before the meeting, it is intended that the proxies will be voted in respect thereof in accordance with the
judgment of the persons voting the proxies.
Shareholders are urged to date, sign and return promptly the enclosed proxy in the
accompanying envelope, which requires no postage if mailed in the United States, or to vote their shares via telephone or the Internet. Your cooperation is appreciated. Your proxy will be voted, with respect to the matters identified thereon, in
accordance with any specifications on the proxy.
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SUNLINK HEALTH SYSTEMS, INC.
900 Circle 75 Parkway, Suite 1120
Atlanta, Georgia 30339
(770)
933-7000
NYSE American exchange: SSY
www.sunlinkhealth.com
sunlink@sunlinkhealth.com
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SUNLINK HEALTH SYSTEMS, INC.
900 CIRCLE 75 PARKWAY
SUITE 1120
ATLANTA, GEORGIA 30339
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PROXY VOTING INSTRUCTIONS
VOTE BY INTERNET
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
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VOTE BY PHONE 1-800-690-6903
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Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the
instructions.
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VOTE BY MAIL
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Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Voting Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
If you vote your proxy by internet
or by telephone you do NOT need to mail back your proxy card.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M50570-P30448 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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SUNLINK HEALTH SYSTEMS, INC.
Vote on Directors
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For All
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Withhold All
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For All Except
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To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s)
of the nominee(s) on the line below.
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1.
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To elect three (3) directors to the Board of Directors to serve for a
two-year term and until their successors are elected and qualified.
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☐
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☐
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☐
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Nominees:
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01) Robert M. Thornton, Jr.
02) Dr. Steven J. Baileys
03) Gene E. Burleson
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Vote on Proposals
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For
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Against
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Abstain
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2.
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Advisory Vote on Executive Compensation (Say-on-Pay Vote).
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☐
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1yr
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2yrs
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3yrs
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Abstain
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3.
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Advisory Vote on How Frequently Shareholders will be provided a Say-on-Pay Vote.
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☐
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For
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Against
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Abstain
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4.
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To Ratify the Appointment of Cherry Bekaert LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2018.
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NOTE
: TO TRANSACT SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
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THE BOARD OF DIRECTORS FAVORS A VOTE FOR ALL IN THE ELECTION OF DIRECTORS, AND A VOTE FOR EACH OF THE ABOVE PROPOSALS (AND FOR 3-YEARS IN THE CASE OF PROPOSAL 3) AND
UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY WILL BE SO VOTED.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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Yes
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No
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Please indicate if you plan to attend this meeting.
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☐
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☐
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NOTE:
Please sign exactly as your name or names appear(s) on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full
title as such. If signer is a partnership, please sign in partnership name by authorized person.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
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M50571-P30448
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P
R
O
X
Y
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ANNUAL
MEETING OF SHAREHOLDERS OF
SUNLINK HEALTH SYSTEMS,
INC.
November 13, 2017
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 2017
ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Robert M.
Thornton, Jr. and C. Michael Ford, and either of them, with power of substitution to each, the proxies of the undersigned to vote the common shares of the undersigned
at the annual meeting of shareholders of SUNLINK HEALTH SYSTEMS, INC. to be
held on November 13, 2017, at 10:00 a.m. at the Hyatt House Hotel, 3595 Cumberland Blvd. SE, Atlanta, GA 30339, and any adjournments or postponements thereof, as indicated on the reverse side of this proxy card with respect to the proposal set forth
in the proxy statement, and in their discretion upon any matter that may properly come before the annual meeting or any adjournments or postponements thereof. The undersigned hereby revokes any previously submitted proxies.
(To be signed, dated and voted on reverse side.)
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