STOCK PLANS AND STOCK COMPENSATION EXPENSE

The Company recognizes compensation expense relating to share-based payments based on the fair value of the equity instrument issued and records such expense in selling and administrative expenses in the Company's Consolidated Condensed Financial Statements. The number of shares to be issued is determined by dividing the specified dollar value of the award by the market value per share on the grant date. The Company's stock compensation expense was $1,195 in 2014, $847 in 2013 and $937 in 2012.

2006 Stock Awards Plan

On May 3, 2006, the Company's shareholders' approved and adopted the Company's 2006 Stock Awards Plan (the "2006 Plan") which provided for the issuance of up to 800,000 shares of Common Stock and/or Class B Common Stock as stock-based or stock-denominated awards to directors of the Company and to salaried employees of the Company and its participating subsidiaries. The 2006 Plan superseded and replaced The Dixie Group, Inc. Stock Incentive Plan (the "2000 Plan"), which was terminated with respect to the granting of new awards. Awards previously granted under the 2000 Plan will continue to be governed by the terms of that plan and will not be affected by its termination.

On April 27, 2010, the Company's shareholders' approved the amendment and restatement of the 2006 Plan to increase the number of shares that may be issued under the plan from 800,000 to 1,300,000.

On April 30, 2013, the Company's shareholders' approved the amendment of the 2006 Plan to increase the number of shares that may be issued under the plan from 1,300,000 to 1,800,000.

Restricted Stock Awards

Each executive officer has the opportunity to earn a Primary Long-Term Incentive Award of restricted stock and separately receive an award of restricted stock denominated as “Career Shares.” The number of shares issued, if any, is based on the market price of the Company’s Common Stock at the time of grant of the award, subject to a $5.00 per share minimum value. Primary Long-Term Incentive Awards vest over 3 years, and Career Shares vest when the participant becomes qualified to retire from the Company at 60 years of age and has retained the Career Shares for 2 years following the grant date.

During 2014, the Company issued 101,315 shares of restricted stock to officers and other key employees. The grant-date fair value of the awards was $1,588, or $15.675 per share, and will be recognized as stock compensation expense over the vesting periods which range from 2 to 13 years from the date the awards were granted. Each award is subject to a continued service condition. The fair value of each share of restricted stock awarded was equal to the market value of a share of the Company's Common Stock on the grant date.

During 2013, the Company issued 173,249 shares of restricted stock to officers and other key employees. The grant-date fair value of the awards was $899, or $5.190 per share, and will be recognized as stock compensation expense over the vesting periods which range from 2 to 14 years from the date the awards were granted. Each award is subject to a continued service condition. The fair value of each share of restricted stock awarded was equal to the market value of a share of the Company's Common Stock on the grant date.

During 2012, the Company issued 241,233 shares of restricted stock to officers and other key employees. The grant-date fair value of the awards was $998, or $4.135 per share, and will be recognized as stock compensation expense over the vesting periods which range from 2 to 15 years from the date the awards were granted. Additionally, the Company issued 48,000 shares of restricted stock to certain key employees. The grant-date fair value of the awards was $156, or $3.255 per share, and will be recognized as stock compensation over a 4 year vesting period from the date the awards were granted. Each award is subject to a continued service condition. The fair value of each share of restricted stock awarded was equal to the market value of a share of the Company's Common Stock on the grant date.

Restricted stock activity for the three years ended December 27, 2014 is summarized as follows:



	Number of Shares		Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 2011	306,529		$	8.00
Granted	289,233		3.99
Vested	(113,647	)	4.20
Forfeited	(17,229	)	4.14
Outstanding at December 29, 2012	464,886		6.57
Granted	173,249		5.19
Vested	(112,336	)	4.15
Forfeited	—		—
Outstanding at December 28, 2013	525,799		6.64
Granted	101,315		15.68
Vested	(144,875	)	4.50
Forfeited	(125,000	)	12.78
Outstanding at December 27, 2014	357,239		$	7.92

As of December 27, 2014, unrecognized compensation cost related to unvested restricted stock was $1,809. That cost is expected to be recognized over a weighted-average period of 3.6 years. The total fair value of shares vested was approximately $1,512, $669 and $439 during the year 2014, 2013 and 2012, respectively.

Stock Performance Units

Prior to 2014, the Company's non-employee directors received an annual retainer of $12 in cash and $12 in value of Stock Performance Units (subject to a $5.00 minimum per unit) under the Director's Stock Plan. In 2014, the Company's non-employee directors received $18 in cash and $18 in value of Stock Performance Units (subject to a $5.00 minimum per unit). If market value at the date of the grants is above $5.00 per share; there is no reduction in the number of units issued. However, if the market value at the date of the grants is below $5.00, units will be reduced to reflect the $5.00 per share minimum. Upon retirement, the Company issues the number of shares of Common Stock equivalent to the number of Stock Performance Units held by non-employee directors at that time. As of December 27, 2014, 109,359 Stock Performance Units were outstanding under this plan.

Stock Purchase Plan

The Company has a stock purchase plan which authorizes 108,000 shares of Common Stock for purchase by supervisory associates at the market price prevailing at the time of purchase. At December 27, 2014, 27,480 shares remained available for issuance under the plan. Shares sold under this plan are held in escrow until paid for and are subject to repurchase agreements which give the Company a right of first refusal to purchase the shares if they are subsequently sold. No shares were sold under the plan in 2014, 2013 or 2012.

Stock Options

All stock options issued under the Company's 2000 Plan were exercisable generally at a cumulative rate of 25% per year after the second year from the date the options were granted. Options granted under the Company's 2006 Plan are exercisable for periods determined at the time the awards are granted. Effective 2009, the Company established a $5.00 minimum exercise price on all options granted. No options were granted during 2014, 2013 or 2012.

The fair value of each option was estimated on the date of grant using the Black-Scholes model. Expected volatility was based on historical volatility of the Company's stock, calculated using the most recent period equal to the expected life of the options. The risk-free interest rate was based on the U.S. Treasury yield for a term equal to the expected life of the option at the time of grant. The Company uses historical exercise behavior data of similar employee groups to determine the expected life of options.

Option activity for the three years ended December 27, 2014 is summarized as follows:



	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Fair Value of Options Granted During the Year
Outstanding at December 31, 2011	786,728		$	10.91	$	—
Granted	—		—		—
Exercised	—		—		—
Forfeited	(89,321	)	10.20		—
Outstanding at December 29, 2012	697,407		11.00		—
Granted	—		—		—
Exercised	(37,052	)	5.15		—
Forfeited	—		—		—
Outstanding at December 28, 2013	660,355		11.33		—
Granted	—		—		—
Exercised	(53,950	)	10.22		—
Forfeited	(167,170	)	14.36		—
Outstanding at December 27, 2014	439,235		$	10.31	$	—

Options exercisable at:
December 29, 2012	638,407		$	11.56	—
December 28, 2013	630,855		11.63		—
December 27, 2014	439,235		10.31		—

The following table summarizes information about stock options at December 27, 2014:



Options Outstanding
Range of Exercise Prices	Number of Shares	Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price
$4.20 - $5.00	111,000	4.6	years	$	4.98
$6.96 - $6.96	81,935	0.3	years	6.96
$11.85 - $17.58	246,300	0.9	years	13.82
$3.875 - $17.58	439,235	1.8	years	$	10.31

Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price
$4.20 - $5.00	111,000	4.6	years	$	4.98
$6.96 - $6.96	81,935	0.3	years	6.96
$11.85 - $17.58	246,300	0.9	years	13.82
$3.875 - $17.58	439,235	1.8	years	$	10.31

At December 27, 2014, the intrinsic value of outstanding stock options was $607 and the intrinsic value of exercisable stock options was $607. The intrinsic value of stock options exercised during the years ended 2014 and 2013 was $140 and $206, respectively. At December 27, 2014, there was no unrecognized compensation expense related to unvested stock options.