Controlling Interest by Officers, Directors and Family Members. As of December 28, 2019, Steven Berman, the Executive Chairman of the Company, and members of his family beneficially own approximately 18% of the outstanding shares of our common stock and can influence matters requiring approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.

Undesignated Stock. We have 50,000,000 shares authorized of undesignated capital stock for future issuance. The designation, rights and preferences of such shares will be determined by our Board of Directors.

Incentive Stock Plan. Prior to May 16, 2018, we issued stock compensation grants under our 2008 Stock Option and Stock Incentive Plan. On May 16, 2018, our shareholders approved our 2018 Stock Option and Stock Incentive Plan (the “2018 Plan” or the “Plan”), which supersedes our 2008 Stock Option and Stock Incentive Plan. All future stock compensation grants will be issued under the 2018 Plan. Under the terms of the Plan, our Board of Directors may grant up to 1,200,000 shares of common stock in the form of shares of restricted stock, restricted stock units, stock appreciation rights and stock options or combinations thereof to officers, directors, employees, consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved. Stock options are exercisable upon the terms set forth in each grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock and restricted stock units vest in accordance with the terms set forth in each applicable award agreement approved by our Board of Directors. At December 28, 2019, 1,034,023 shares were available for grant under the Plan.

We grant restricted stock to certain employees and members of our Board of Directors. We retain the restricted stock, and any dividends paid thereon, until the vesting restrictions have been met. For time-based restricted stock awards, compensation cost related to the stock is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date. For performance-based restricted stock awards tied to growth and adjusted pre-tax income, compensation costs related to the stock is recognized over the performance period and is calculated using the closing price per share of our common stock on the grant date and an estimate of the probable outcome of the performance conditions as of the reporting date. In 2019, we introduced performance-based shares that vest based on our total shareholder return ranking relative to the S&P midcap 400 growth index over a three-year performance period. For performance-based restricted stock awards tied to total shareholder return, compensation cost related to the stock is recognized on a straight-line basis over the performance period and is calculated using the simulated fair value per share of our common stock based on the application of a Monte Carlo simulation model. This valuation technique includes estimating the movement of stock prices and the effects of volatility, interest rates and dividends.

The following table summarizes the weighted average valuation assumptions used to calculate the fair value of total shareholder return performance restricted stock granted:

The share price is the company’s closing share price as of the valuation date. The risk-free rate is based on the U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. The weighted-average

grant-date fair value of total shareholder return based performance restricted stock granted during fiscal 2019 was $81.44.

Compensation cost related to restricted stock was $2.1 million, $2.6 million and $2.8 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations. No cost was capitalized during fiscal 2019, fiscal 2018 or fiscal 2017.

The following table summarizes our restricted stock activity for the three years ended December 28, 2019:

	Shares			Weighted Average Price
Balance at December 31, 2016		145,363		$	49.22
Granted		70,611		$	78.27
Vested		(56,953	)	$	56.03
Cancelled		(5,294	)	$	51.56
Balance at December 30, 2017		153,727		$	59.94
Granted		89,798		$	73.51
Vested		(45,707	)	$	62.56
Cancelled		(27,081	)	$	75.39
Balance at December 29, 2018		170,737		$	63.94
Granted		92,396		$	81.92
Vested		(41,586	)	$	55.72
Cancelled		(44,056	)	$	58.03
Balance at December 28, 2019		177,491		$	76.70

As of December 28, 2019, there was approximately $6.3 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.6 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows. The excess tax benefit generated from restricted shares which vested was $0.2 million in fiscal 2019, $0.1 million in fiscal 2018 and $0.4 million in fiscal 2017 and was credited to income tax expense.

We grant stock options to certain employees. We expense the grant-date fair value of stock options. Compensation cost is recognized over the vesting or performance period. Compensation cost charged against income was $0.7 million in fiscal 2019, $0.5 million in fiscal 2018 and $0.3 million in fiscal 2017, respectively. The compensation costs were classified as selling, general and administrative expense in the Consolidated Statements of Operations. No cost was capitalized during fiscal 2019, fiscal 2018 or fiscal 2017.

We used the Black-Scholes option valuation model to estimate the fair value of stock options granted in fiscal 2019, fiscal 2018 and fiscal 2017. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate is based on the U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. The weighted-average grant-date fair value of options granted during fiscal 2019 was $24.32, fiscal 2018 was $15.88 and fiscal 2017 was $15.81 per option.

The following table summarizes the weighted average valuation assumptions used to calculate the fair value of options granted:

The following table summarizes our stock option activity for the three years ended December 28, 2019:

	Shares			Option Price per Share		Weighted Average Price		Weighted Average Remaining Terms (years)		Aggregate Intrinsic Value
Balance at December 31, 2016		101,084		$5.67 – $53.32		$	29.52
Granted		58,024		$69.02 – $82.59		$	78.58
Exercised		(32,751	)	$6.90 – $41.59		$	7.69
Cancelled		(3,810	)	$41.59 – $78.64		$	56.72
Balance at December 30, 2017		122,547		$5.67 – $82.59		$	57.74
Granted		81,995		$68.93 – $82.94		$	73.84
Exercised		(15,113	)	$5.67 – $78.64		$	39.38
Cancelled		(960	)	$	72.55	$	72.55
Balance at December 29, 2018		188,469		$7.74 – $82.94		$	66.14
Granted		44,025		$73.72 – $84.93		$	81.84
Exercised		(38,009	)	$7.74 – $78.76		$	58.96
Cancelled		(12,773	)	$41.59 – $82.94		$	75.52
Balance at December 28, 2019		181,712		$41.59 – $84.93		$	70.78		3.8	$	1,308,808
Options exercisable at December 28, 2019		63,432		$41.59 – $82.94		$	62.39		2.3	$	897,145

As of December 28, 2019, there was approximately $1.6 million of unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.7 years.

The following table summarizes information concerning currently outstanding and exercisable options at December 28, 2019:

		Options Outstanding						Options Exercisable
Range of Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
	$41.59 - $61.13		38,848		1.3	$	45.94		29,136	$	45.94
	$61.14 - $73.13		52,413		3.9	$	71.89		13,762	$	71.68
	$73.14 - $78.70		24,654		3.4	$	77.60		9,650	$	78.64
	$78.71 - $82.31		35,803		5.2	$	80.65		6,871	$	78.76
	$82.32 - $84.93		29,994		5.6	$	83.66		4,013	$	82.83
Balance at December 28, 2019			181,712		3.8	$	70.78		63,432	$	62.39

Cash received from option exercises was $0.1 million in fiscal 2019, $0.2 million in fiscal 2018, and less than $0.1 million in fiscal 2017. There was no excess tax benefit generated from option exercises in fiscal 2019 or fiscal 2018. The excess tax benefit generated from option exercises was $0.6 million in fiscal 2017 and was credited to income tax expense.

Performance-Based Long Term Award Program. The Compensation Committee of our Board of Directors previously approved a performance-based long term award program (the “Program”) that connects compensation for certain of our executives to the three-year compound annual growth in our pre-tax income as defined in the Program. For the three-year periods ending in 2017, the Compensation Committee had the discretion to settle the long-term bonus in either cash or equity. These are liability-classified awards. The Compensation Committee elected to settle the award in equity for the three-year periods ending in fiscal 2017. In fiscal 2016, the Compensation Committee modified the Program to settle the awards earned in the three-year periods ending in fiscal 2018 and beyond in equity alone. These awards are equity-classified. In fiscal 2019, the Compensation Committee elected to connect the compensation of this program to the total shareholder return of the Company’s share price over a three-year period relative to a peer group. The fair value of these awards is determined using a Monte Carlo simulation to determine the most likely outcome of our share price relative to that of the peer group at the end of the three-year period. These awards are equity-classified. Any equity issued related to the Program will be from the 2018 Plan.

Employee Stock Purchase Plan. In May 2017, our shareholders’ approved the Dorman Products, Inc. Employee Stock Purchase Plan (the “ESPP”), which makes available 1,000,000 shares of our common stock for sale to eligible employees. The purpose of this plan, which is qualified under Section 423 of the Internal Revenue Service Code of 1986, as amended, is to encourage stock ownership through payroll deductions and limited cash contributions by our employees. These contributions are used to purchase shares of the Company’s common stock at a 15% discount from the lower of the market price at the beginning or end of the purchase window. Share purchases under the plan are made twice annually, beginning in March 2018. There were 21,200 and 21,173 shares purchased under this plan during fiscal 2019 and 2018, respectively. There were no shares purchased under this plan during fiscal 2017. Compensation cost under the ESPP plan was $0.3 million in fiscal 2019 and $0.4 million in fiscal 2018.

401(k) Retirement Plan. The Dorman Products, Inc. 401(k) Retirement Plan and Trust (the “401(k) Plan”) is a defined contribution profit sharing and 401(k) plan covering substantially all of our employees as of December 28, 2019. Annual contributions under the 401(k) Plan are determined by the Compensation Committee of our Board of Directors. Total expense related to the 401(k) Plan was $3.1 million in fiscal 2019, $4.3 million in fiscal 2018 and $2.7 million in fiscal 2017. At December 28, 2019, the 401(k) Plan held 218,728 shares of our common stock.

Common Stock Repurchases. We periodically repurchase, at the then current market price, and cancel common stock issued to the 401(k) Plan. 401(k) Plan participants can no longer purchase shares of Dorman common stock as an investment option under the 401(k) Plan. Shares are generally purchased from the 401(k) Plan when participants sell units as permitted by the 401(k) Plan or elect to leave the 401(k) Plan upon retirement, termination or other reasons. During fiscal 2019 our Board of Directors approved the repurchase and cancellation of 22,380 shares of our common stock for $1.9 million at an average price of $87.26 per share. During fiscal 2018, our Board

of Directors approved the repurchase and cancellation of 26,280 shares of our common stock for $2.0 million at an average price of $74.79 per share. During fiscal 2017, our Board of Directors approved the repurchase and cancellation of 19,110 shares of our common stock for $1.4 million at an average price of $73.34 per share.

Share Repurchase Program. On December 12, 2013 we announced that our Board of Directors authorized a share repurchase program, authorizing the repurchase of up to $10 million of our outstanding common stock by the end of 2014. Through several expansions and extensions, our Board of Directors has expanded the program up to $400 million and extended the program through December 31, 2020. Under this program, share repurchases may be made from time to time depending on market conditions, share price, share availability and other factors at our discretion. The share repurchase program does not obligate us to acquire any specific number of shares. We repurchased 499,564 common shares for $39.4 million at an average price of $78.84 under this program during fiscal 2019. We repurchased 622,223 common shares for $43.4 million at an average price of $69.73 under this program during fiscal 2018. We repurchased 1,006,365 common shares for $74.7 million at an average price of $74.26 under this program during fiscal 2017. At December 28, 2019, $143.9 million was available for repurchase under this program.