Regional Health Properties, Inc. (“Regional”) (OTCQB: RHEP) (OTCQB: RHEPA) and SunLink Health Systems, Inc. (“SunLink”) (NYSE American: SSY) jointly announced today that they have entered into an amended and restated agreement and plan of merger (the “merger agreement”), pursuant to which SunLink will merge with and into Regional (the “merger”) in exchange for the issuance of an aggregate of approximately 1,595,401 shares of Regional common stock and 1,408,121 shares of Regional’s newly-authorized Series D 8% Cumulative Convertible Redeemable Participating Preferred Shares (the “Regional Series D Preferred Stock”) with an initial liquidation preference of $12.50 per share. The merger agreement has been approved by each company’s board of directors and completion of the transaction remains subject to the receipt of the approvals of the shareholders of both Regional and SunLink, regulatory approvals and satisfaction of customary closing conditions.

Summary of the Revised Transaction

Consideration

Subject to the terms and conditions of the merger agreement, Regional has agreed to provide for each five (5) SunLink common shares (other than dissenting shares and shares to be cancelled in accordance with the terms and conditions of the merger agreement): (i) 1.1330 shares of Regional common stock and (ii) one (1) share of Regional Series D Preferred Stock. As a result of the transaction, it is expected that SunLink shareholders will, at the closing of the merger, own approximately 45.92% of the combined company. The number of shares of Regional Series D Preferred Stock is subject to adjustment pursuant to the terms and conditions of the merger agreement for the existence of any Cash Surplus (as defined in the merger agreement) or Regional Debt Distress (as defined in the merger agreement) and the number of shares of Regional common stock and Regional Series D Preferred Stock each are subject to adjustment to reflect fully and equitably the effect of any reclassification, stock split, reverse split, stock dividend, reorganization, recapitalization or other like change prior to the closing. No fractional shares will be issued in the transaction.

The Regional Series D Preferred Stock will be a new series of Regional preferred stock which will rank junior to the currently outstanding 12.5% Series B Cumulative Redeemable Preferred Shares of Regional, have an initial liquidation preference of $12.50 per share and be entitled to cumulative preferential dividends at an initial dividend rate of 8% per annum commencing with July 1, 2027 when, as and if approved and declared by the Regional board of directors out of funds of Regional legally available for the payment of distributions, subject in each case to the terms and conditions of the articles of amendment establishing the Regional Series D Preferred Stock. Each three (3) shares of Regional Series D Preferred Stock will be convertible into 1.1330 shares of Regional common stock at the holder’s option and mandatorily if certain future conditions are met. If the Regional common stock is not listed on a National Market, as defined, on or before the last day of (i) the sixth whole calendar month after closing (the “First Milestone Date”), (ii) the twelfth whole calendar month after the closing, (iii) the eighteenth whole calendar month after the closing and (iv) the twenty-fourth whole calendar month after the closing (each, a “ Milestone Date”), then on the First Milestone Date the conversion ratio shall be reduced, and on each succeeding Milestone Date further reduced, by one-half (1/2) of a share of Regional Series D Preferred Stock in the number of shares of Regional Series D Preferred Stock required for conversion into a share of Regional common stock.

SunLink Special Dividend

SunLink may pay its shareholders one or two special dividend(s) prior to the closing of the merger in an amount not to exceed in the aggregate the sum of (i) $705,000, plus (ii) if certain conditions are met, an additional amount as calculated in the merger agreement calculated within five (5) days of closing; provided that the total of such dividends shall not exceed in the aggregate $1,000,000 plus any additional amounts added thereto pursuant to the terms and conditions of the merger agreement.

Estimated Synergies

As of December 31, 2024, SunLink had approximately $17.8 million in total assets and no long-term debt. Regional expects pre-tax cost synergies of approximately $1.0 million by the end of its fiscal 2026 and believes that additional operating synergies may be achievable upon completion of the merger and integration of the companies.

Leadership, Corporate Governance and Headquarters

As previously announced, the combined company will be led by a proven management team that reflects the strengths and capabilities of both organizations. Upon closing of the transaction, Brent S. Morrison, CFA, President and Chief Executive Officer of Regional, will serve as President and Chief Executive Officer of the combined company and Robert M. Thornton, Jr., President and Chief Executive Officer of SunLink, will serve as Executive Vice President – Corporate Strategy of the combined company. Mark Stockslager, Chief Financial Officer of SunLink, will serve as Chief Financial Officer of the combined company.

As previously announced, following closing of the transaction, the board of directors of the combined company will be chaired by Mr. Morrison and consist of at least six directors, including two existing Regional directors and two existing SunLink directors. In addition, C. Christian Winkle and Scott Kellman will join the board of the combined company once the merger is completed.

C. Christian Winkle was most recently the Chief Executive Officer of Sunrise Senior Living (“Sunrise”). Prior to Sunrise, Mr. Winkle was Chief Executive Officer of MedQuest and SavaSeniorCare/Mariner Health. Mr. Winkle currently serves as a board member of Beazer Homes, a publicly traded homebuilder, Direct Supply, a private/employee owned supply chain/applied technology company, and RD Merrill, the owner of Merrill Gardens, the operator of 70 senior housing communities.

Scott Kellman formerly served as Chairman and Chief Executive Officer of American Eagle Lifecare Corporation, a not-for-profit provider of senior living services. Previously, he was the Chief Executive Officer of Care Investment Trust and a Managing Director and Head of Real Estate with CIT Healthcare. Mr. Kellman served as Senior Vice President at Healthcare Property Investors, Inc. where he was responsible for directing HCP’s business development activities. He also served as Senior Vice President, Treasurer of Tenet Healthcare Corporation (“Tenet”) where he managed Tenet’s real estate and oversaw its corporate finance and cash management functions. Mr. Kellman was Chief Operating Officer of Omega Healthcare Investors, Inc. where he acquired and provided debt financing for healthcare real estate properties.

The combined company will be headquartered in Atlanta, Georgia.

Approvals and Closing

The merger is expected to close in the summer of 2025, following receipt of the approvals of the shareholders of both Regional and SunLink, regulatory approvals and satisfaction of customary closing conditions. The transaction is not expected to trigger any change of control provision under Regional’s outstanding mortgages.

Advisors

Harpeth Capital, LLC is acting as financial advisor and Troutman Pepper Locke LLP is acting as legal advisor to Regional. Smith, Gambrell & Russell, LLP is acting as legal advisor to SunLink.