16. Stock-Based Compensation

On October 23, 2013, UNIFI’s shareholders approved the Unifi, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”). The 2013 Plan replaced the 2008 Unifi, Inc. Long-Term Incentive Plan (the “2008 LTIP”). No additional awards can be granted under the 2008 LTIP; however, prior awards outstanding under the 2008 LTIP remain subject to that plan’s provisions. The 2013 Plan authorized the issuance of 1,000 shares of common stock, subject to certain increases in the event outstanding awards under the 2008 LTIP expired, were forfeited, or otherwise terminated unexercised.

The 2013 Plan expired in accordance with its terms on October 24, 2018, and the Unifi, Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Amended 2013 Plan”) became effective on that same day, upon approval by shareholders at UNIFI’s annual meeting of shareholders held on October 31, 2018. The Amended 2013 Plan set the number of shares available for future issuance pursuant to awards granted under the Amended 2013 Plan to 1,250 and removed provisions no longer applicable due to the recent changes to Section 162(m) of the Internal Revenue Code of 1986, as amended. The material terms and provisions of the Amended 2013 Plan are otherwise similar to those of the 2013 Plan.

On October 29, 2020, UNIFI’s shareholders approved the Unifi, Inc. Second Amended and Restated 2013 Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan set the number of shares available for future issuance pursuant to awards granted under the 2020 Plan to 850. On October 31, 2023, UNIFI’s shareholders approved the First Amendment to the 2020 Plan (the "First Amendment"), which increased the remaining share reserve by 1,100. On October 28, 2025, UNIFI’s shareholders approved the Second Amendment to the 2020 Plan (the "Second Amendment"), which increased the remaining share reserve by 1,240. No additional awards can be granted under prior plans; however, awards outstanding under a respective prior plan remain subject to that plan’s provisions.

Stock Options

No stock options, other than those issued under the existing employee stock purchase plan described below, were issued in fiscal 2026, 2025, and 2024. A summary of stock option activity for fiscal 2026 is as follows:

There was no unrecognized compensation cost at June 28, 2026, and stock option activity for fiscal 2026, 2025, and 2024 was insignificant.

Stock Units and Share Units

UNIFI grants stock unit awards to certain key employees and non-employee directors. Stock unit awards may be subject to service- and/or performance-based vesting conditions, and may be settled in cash (“cash units”) or Common Stock (“equity units”) depending on the terms of the grant. Equity units convey no rights of ownership until they have vested and been distributed to the grantee in the form of Common Stock. Cash units are settled in cash based on the fair value of Common Stock on the vesting date.

Vested share units (“VSUs”), which become fully vested on the grant date, and director restricted stock units (“DRSUs”), which vest quarterly over a one-year service period, are granted to non-employee directors. VSUs and DRSUs are converted into an equivalent number of shares of Company Common Stock and distributed to the grantee following their termination of service as a member of the Board.

Restricted stock units (“RSUs”) granted to employees are subject to a service vesting condition, and vest over a three-year period, as long as employment continues through the respective vesting date. Performance share units (“PSUs”) granted to employees are subject to service and performance-based vesting conditions. Consistent with the vesting provisions of each grant, between 50% and 300% of the PSUs may become vested, contingent upon achieving the prescribed performance metric(s). RSUs and PSUs may be granted as equity units or cash units.

During fiscal 2026 UNIFI granted 108 DRSUs to UNIFI’s non-employee directors. The weighted average grant-date fair value of DRSUs granted during fiscal 2026 was $4.53 per share.

During fiscal 2025 and 2024, UNIFI granted 71 and 84 VSUs, respectively, to UNIFI’s non-employee directors. The weighted average grant-date fair value of each VSU granted during fiscal 2025 and 2024 was $6.85, and $6.71 per share, respectively.

During fiscal 2026, 2025, and 2024, UNIFI granted 333, 508, and 349 RSUs, and 255, 189, and 212 PSUs, respectively, as equity units to certain key employees. The weighted average grant-date fair value of RSUs granted during fiscal 2026, 2025, and 2024 was $3.29, $6.85, and $6.43 per share, respectively. The weighted average grant-date fair value of PSUs granted during fiscal 2026, 2025, and 2024 was $3.29, $6.94, and $6.47 per share, respectively.

During fiscal 2026, UNIFI also granted 24 RSUs and 24 PSUs as cash units. Grants of cash units in fiscal 2025 and 2024 are not significant. The weighted average grant date fair value for cash units granted during fiscal 2026 was $3.29.

Equity units are accounted for as equity awards. Equity units are measured based on the fair value of Common Stock on the award’s grant date. A summary of activity of equity units for fiscal 2026 is as follows:

Cash units are accounted for as liability awards. Cash units are initially measured based on the fair value of Common Stock on the award’s grant date, and then remeasured quarterly until the liability is settled. A summary of activity for non-vested cash units for fiscal 2026 is as follows:

UNIFI reassesses the probability of each potential vesting outcome for all performance units at the end of each reporting period in accordance with ASC 718-20-55-37. In fiscal 2026, management updated its vesting expectation to 200% of target for the first tranche of PSUs granted in November 2025.

At June 28, 2026, the number of equity units vested and expected to vest was 1,810, with an aggregate intrinsic value of $8,597. The number of cash units expected to vest was 94, with an aggregate intrinsic value of $447. There were no vested performance units at June 28, 2026. The aggregate intrinsic value of the 474 vested RSUs, VSUs and DRSUs at June 28, 2026 was $2,250.

The unrecognized compensation cost related to the unvested equity units at June 28, 2026 was $2,672, which is expected to be recognized over a weighted average period of 1.3 years. The unrecognized compensation cost related to the unvested cash units at June 28, 2026 was $294, which is expected to be recognized over the weighted average period of 1.4 years.

For fiscal 2026, 2025, and 2024, the total intrinsic value of equity units converted was $1,049, $731, and $978, respectively. The tax benefit realized from the conversion of equity units was $200, $171, and $232 for fiscal 2026, 2025, and 2024, respectively. For fiscal 2026, total cash payments remitted for vesting and conversion of cash units was 70, and the tax benefit realized was $16. Payments and tax benefits realized for cash units in previous years was not significant.

Employee Stock Purchase Plan

On October 27, 2021, Unifi, Inc.’s shareholders approved the Unifi, Inc. Employee Stock Purchase Plan (the “ESPP”), under which an aggregate of 100 shares of Company common stock have been authorized and reserved for issuance pursuant to the ESPP. The ESPP permits employees to purchase common stock through payroll deductions at 85 percent of the fair market value of Company common stock on a quarterly basis. For fiscal 2026, 2025, and 2024, 0, 12, and 12 shares of common stock were purchased under the ESPP, respectively. As of June 28, 2026, 70 shares were available for purchase under the ESPP.

Stock-based compensation expense associated with options granted under the ESPP is measured at the grant date based on the fair value of the award, which is equal to the purchase discount, and is recognized over the service period (generally the vesting period) on a straight-line basis.

Cost Summary

The total income tax benefit recognized for stock-based compensation was $528, $585, and $366 for fiscal 2026, 2025, and 2024, respectively.

Tax benefit recognized in fiscal 2026 was $32. Expense and tax benefit for cash units in prior years was not significant.

In each of fiscal 2026, 2025, and 2024, UNIFI issued 0, 0, and 7 shares of common stock for $0, $0, and $50 of expense, respectively, in connection with Board compensation.