10.

SHAREHOLDERS’ EQUITY

Employee and Directors Stock Option Plans—On November 7, 2011, the 2011 Director Stock Option Plan was approved by SunLink’s shareholders at the Annual Meeting of Shareholders. This plan permits the grant of options to non-employee directors of SunLink for the purchase of up to 300,000 common shares through September 2012. Options for 140,000 shares were granted during fiscal 2013. No options have been exercised under this plan. Options outstanding under the plan were 210,000 at June 30, 2013. Options available for future issuance under the plan were 90,000 at June 30, 2013.

On November 7, 2005, the 2005 Equity Incentive Plan was approved by SunLink’s shareholders at the Annual Meeting of Shareholders. This Plan permits the grant of options to employees, non-employee directors and service providers of SunLink for the purchase of up to 800,000 common shares plus the number of unused shares under the 2001 Plans, which is 30,675, by November 2015. This Plan restricts the number of Incentive Stock Options to 700,000 shares and Restricted Stock Awards to 200,000 shares. The combination of Incentive Stock Options and Restricted Stock Awards cannot exceed 800,000 shares plus the number of unused shares under the 2001 Plans. Each award of Restricted Shares reduces the number of share options to be granted by four option shares for each Restricted Share awarded. No options have been exercised under this Plan. 120,000 options were granted during fiscal 2013. Options outstanding under this Plan were 369,999, 289,999 and 115,999 at June 30, 2013, 2012 and 2011, respectively. Options available for future issuance under the plan were 360,676 at June 30, 2013.

On August 20, 2001, the 2001 Outside Directors’ Stock Ownership and Stock Option Plan was approved by SunLink’s shareholders at the Annual Meeting of Shareholders. This Plan permitted the grant of options to outside directors of SunLink for the purchase of up to 90,000 common shares through March 2006. Options for 90,000 shares were granted by March 2006. Options for 7,500 shares have been exercised under this plan. Options outstanding under this Plan were 37,500, 37,500 and 45,000 at June 30, 2013, 2012 and 2011 respectively. No additional awards may be granted under this Plan.

On February 28, 2001, the 2001 Long-Term Stock Option Plan was approved by the Board of Directors of SunLink. The 2001 Long-Term Stock Option Plan permitted the grant of options to officers and other key employees for the purchase of up to 810,000 common shares through February 2006. Options totaling 591,909 shares under this plan have been exercised. Options outstanding under this Plan were 0, 3,000, and 13,250 at June 30, 2013, 2012 and 2011, respectively. No additional awards may be granted under this Plan.

The activity of Company’s share options is shown in the following table:


	Number of Shares			Weighted- Average Exercise Price		Range of Exercise Prices
Options outstanding July 1, 2010		393,624		$	5.19	$	1.50—$10.24
Granted		0			0.00		0.00
Exercised		(40,500	)		1.59		1.50—2.65
Forfeited		(178,875	)		5.41		2.50—5.86

Options outstanding June 30, 2011		174,249		$	5.80	$	2.50—$9.63
Granted		250,000			1.97		1.67—2.09
Exercised		0			0.00		0.00
Forfeited		(23,750	)		2.67		2.50—3.00

Options outstanding June 30, 2012		400,499		$	2.62	$	1.67—$9.63
Granted		260,000			1.22		1.22
Exercised		0			0.00		0.00
Forfeited		(43,000	)		2.13		2.09—2.65

Options outstanding June 30, 2013		617,499		$	1.92	$	1.22—$9.63

Options exercisable June 30, 2011		168,909		$	5.91	$	2.50—$9.63

Options exercisable June 30, 2012		220,498		$	4.75	$	1.67—$9.63

Options exercisable June 30, 2013		404,163		$	3.18	$	0.00—$0.00

The weighted-average fair value of each option granted during the years ended June 30, 2013 and 2012 was $1.22 and $2.09, respectively. The fair value of each stock option grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the year ended June 30, 2013: estimated volatility of 80%; risk-free interest rate of 0.89%; dividend yield of 0%; and an expected life of 6 years. The fair value of each stock option grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants during the year ended June 30, 2012: estimated volatility of 76%; risk-free interest rate of 1.34%; dividend yield of 0%; and an expected life of 6 years. The historical volatility is used to calculate the estimated volatility. The expected life of each stock option grant was determined to be the midpoint between the vesting period and the contractual term of the grants. The estimate of the forfeited options in the compensation expense calculation was determined as the weighted-average forfeitures for the last three years. For the years ended June 30, 2013, 2012, and 2011, the Company recognized $86, $92 and $6, respectively, of compensation expense for share options issued. As of June 30, 2013, there was $82 of unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized during the fiscal years ended June 30, 2014, 2015 and 2016.

Information with respect to stock options outstanding and exercisable at June 30, 2013 is as follows:


Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life (in years)	Number Exercisable
$ 1.22	260,000	16.44	140,000
$ 1.67	70,000	7.17	70,000
$ 2.09	140,000	8.21	46,665
$ 2.51	10,000	5.23	9,999
$ 2.90	37,500	0.44	37,500
$ 6.55	33,000	3.88	33,000
$ 8.00	33,999	4.24	33,999
$ 9.63	33,000	2.36	33,000

	617,499	3.35	404,163

No options were exercised during the years ended June 30, 2013 and 2012. The total intrinsic value of options exercised during the year ended June 30, 2011 was $1. As of June 30, 2013 and 2012, the aggregate intrinsic value of options outstanding and options exercisable were $0 and $0, respectively, for both years.

Tender Offer—On February 5, 2013, the Company announced the commencement of a tender offer to purchase at the price of $1.50 per share in cash all of its common shares held by holders of 99 or fewer shares (“odd lots”) who owned such shares as of the close of business on January 31, 2013 (“Odd Lot Tender Offer”). In addition to the $1.50 per share price, the Company offered each eligible tendering holder a bonus of one hundred dollars ($100) upon completion of the Odd Lot Tender Offer for the tender of all shares beneficially owned by such holder which were received and not withdrawn prior to the date of expiration of the Odd Lot Tender Offer, which was March 26, 2013. In accordance with the terms and conditions of the Offer, SunLink accepted for purchase a total of 2,631 common shares of SunLink tendered by 68 holders pursuant to the Offer. As a result of the completion of the Offer, immediately following payment for the tendered shares, the Company has approximately 9,443,334 common shares issued and outstanding and held by approximately 480 stockholders of record. The shares repurchased were retired immediately. The aggregate cash cost of the Odd Lot Tender Offer was $195 and was recorded in equity. Included in the cash cost are purchase price for the odd lot shares of $4, aggregate bonus payments of $7 and fees and expenses of $184.

The primary purpose of the Odd Lot Tender Offer was to reduce the number of holders of record of the Company’s common shares in order to permit the Company to deregister the common shares with the SEC. The Company’s Board and management each believes that deregistering the Company’s common shares will result in significant cost savings. Since the Offer failed to accomplish the objective of reducing the number of record holders to fewer than 300, SunLink anticipates that it will take further actions to reduce the number of holders of record of the Company’s common shares in order to permit the Company to deregister the common shares with the SEC.

Private Placement of Shares—In the first quarter of fiscal 2012, the Company’s Board of Directors authorized the private placement before August 31, 2011 of a total of up to 3,800,000 of the Company’s common shares at a price equal to the average closing price for the shares over the prior ten trading days (on which the Company’s shares traded) with a minimum placement of $2,500.

On July 28, 2011, SunLink announced the sale of approximately 1,329,000 common shares at approximately $1.90 per share. Such shares were sold to certain of the Company’s officers and directors and/or their affiliates. The net proceeds of the private placement of approximately $2,500 were used, together with the Company’s operating funds, to make an $8,000 pre-payment on the then outstanding Credit Facility Term Loan. A special committee of the Company’s Board of Directors comprised of non-participating disinterested directors evaluated the private placement transaction and obtained an opinion of an outside advisor selected by the special committee that the price and terms of the private placement were fair from a financial point of view to the Company. No additional shares were sold pursuant to the private placement.

Shareholder Rights Plan—On February 8, 2004, the Board of Directors of the Company declared a dividend of one Series A Voting Preferred Purchase Price Right (a “Right”) for each outstanding common share of the Company to record owners of common shares at the close of business on February 10, 2004. Shares issued subsequent to such date are issued with a Right. The Board of Directors declared these Rights to protect shareholders from coercive or otherwise unfair takeover tactics. The Rights should not interfere with any merger or other business combinations approved by the Board of Directors. The Rights expire on February 8, 2014 unless the Company redeems them at an earlier date. The Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right, at any time prior to a public announcement that a person has become an Acquiring Person.

Accumulated Other Comprehensive Loss—Information with respect to the balances of each classification within accumulated other comprehensive loss is as follows:


	Minimum Pension Liability Adjustment			Accumluated Other Comprehensive Loss
June 30, 2010	$	(301	)	$	(301	)
Current period change		23			23

June 30, 2011		(278	)		(278	)
Current period change		(219	)		(219	)

June 30, 2012		(497	)		(497	)
Current period change		91			91

June 30, 2013	$	(406	)	$	(406	)