Note F - Stock Options and Awards

The Eastern Company 2010 Executive Stock Incentive Plan (the “2010 Plan”), for officers, other key employees, and non-employee Directors expired in February 2020. On February 19, 2020, the board of directors of the Company adopted, subject to shareholder approval at the 2020 Annual Meeting of Shareholders, The Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”), which is intended to replace the 2010 Plan. The Company has no other exiting plan pursuant to which equity awards may be granted.

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 the first quarter of 2020 and 2019, no stock options or restricted stock were granted that were subject to the meeting of performance measurements. For the first quarter of 2019, the Company used several assumptions which included an expected term of 3.5 years, volatility deviation of 28.88% and a risk free rate of 2.48%.

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 2020, the Company did not issue any SARs, and during 2019 36,000 SARs were issued.

Stock-based compensation expense in connection with SARs granted to employees in the first quarter of 2020 was $110,000, and for 2019 was $80,000.

As of March 28, 2020, there were no shares of Company common stock reserved and available for future grant under the 2010 Plan, as it has expired.

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

	Three Months Ended March 28, 2020					Year Ended December 28, 2019
	Units			Weighted - Average Exercise Price		Units			Weighted - Average Exercise Price
Outstanding at beginning of period		276,000		$	22.30		189,167		$	21.46
Issued		--			--		96,000			23.65
Exercised		--			--		(1,667	)		19.10
Forfeited		(6,999	)		19.10		(7,500	)		21.20
Outstanding at end of period		269,001			22.39		276,000			22.30

SARs Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of March 28, 2020		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Exercisable as of March 28, 2020		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
$	19.10-26.30		269,001		3.0	$	22.39		50,001		2.0		19.10

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

	Three Months Ended March 28, 2020				Year Ended December 28, 2019
	Shares		Weighted - Average Exercise Price		Shares		Weighted - Average Exercise Price
Outstanding at beginning of period		25,000	$	—		25,000	$	—
Issued		—		—		—		—
Forfeited		—		—		—		—
Outstanding at end of period		25,000		—		25,000		—

Stock Grants Outstanding and Exercisable
Range of Exercise Prices		Outstanding as of March 28, 2020		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Exercisable as of March 28, 2020		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
$	0.00		25,000		2.0		—		—		—		—

As of March 28, 2020, outstanding SARs and grants had an intrinsic value of $561,000.