6. Stock Options and Awards

Stock Options

The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation ("ASC 718-10"), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and Directors, including employee stock options and restricted stock awards. The Company estimates the fair value of granted stock options using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, without limitation, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company's consolidated statements of operations. The Company used several assumptions which included an expected term of 3.5 years, volatility deviation of 22.6% and a risk free rate of 1.47%.

As of December 30, 2017, the Company had one stock option plan, The Eastern Company 2010 Executive Stock Incentive Plan (the "2010 Plan"), for officers, other key employees, and non-employee Directors. Incentive stock options granted under the 2010 Plan must have exercise prices that are not less than 100% of the fair market value of the Company's common stock on the dates the stock options are granted. Restricted stock awards may also be granted to participants under the 2010 Plan with restrictions determined by the Compensation Committee of the Company's Board of Directors. Under the 2010 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Company's Board of Directors. During 2017, 25,000 shares were granted but not issued and during the year of 2016, no stock options or restricted stock were granted that were subject to the meeting of performance measurements.

The 2010 Plan also permits the issuance of Stock Appreciation Rights ("SARs"). The SARs are in the form of an option with a cashless exercise price equal to the difference between the fair value of the Company's common stock at the date of grant and the fair value as of the exercise date resulting in the issuance of the Company's common stock. During 2017, the Company issued 149,500 SARs and during 2016 no SARs were issued.

Stock-based compensation expense in connection with SARs granted to employees during fiscal year 2017 was approximately $172,806.

As of December 30, 2017, there were 333,500 shares of common stock reserved and available for future grant under the above noted 2010 Plan.

The following tables set forth the outstanding SARs for the period specified:

	Year Ended December 30, 2017					Year Ended December 31, 2016
	Units			Weighted - Average Exercise Price		Units		Weighted - Average Exercise Price
Outstanding at beginning of period		—		$	—		—	$	—
Issued		149,500			20.39		—		—
Forfeited		(8,000	)		21.10		—		—
Outstanding at end of period		141,500			20.36		—		—

SARs Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of December 30, 2017		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Exercisable as of December 30, 2017		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
$	19.10-21.10		141,500		4.2	$	20.36		—		—		—

The following tables set forth the outstanding stock grants for the period specified:

	Year Ended December 30, 2017				Year Ended December 31, 2016
	Shares		Weighted - Average Exercise Price		Shares		Weighted - Average Exercise Price
Outstanding at beginning of period		—	$	—		—	$	—
Issued		25,000		—		—		—
Forfeited		—		—		—		—
Outstanding at end of period		25,000		—		—		—

Stock Grants Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of December 30, 2017		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Exercisable as of December 30, 2017		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
$	0.00		25,000		5.0		—		—		—		—

As of December 30, 2017, outstanding SARs and options had an intrinsic value of $1,484,375.