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STOCK OPTIONS AND AWARDS

12 Months Ended

Jan. 02, 2021

7. STOCK OPTIONS AND AWARDS

Stock Options

As of January 2, 2021, the Company has one stock option plan, The Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”), for officers, other key employees, and non-employee Directors. The Eastern Company 2010 Executive Stock Incentive Plan expired in February 2020. Incentive stock options granted under the 2020 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 2020 Plan with restrictions determined by the Compensation Committee of the Company’s Board of Directors. Under the 2020 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 2020 and 2019, the Company did not grant stock options or restricted stock.

The 2020 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. The Company issued 44,000 SARs during 2020 and 96,000 SARs during 2019.

7. STOCK OPTIONS AND AWARDS (continued)

Stock-based compensation expense in connection with Stock Awards and SARs granted to employees during fiscal year 2020 was $376,000 and for 2019 was $397,000. For the period of 2020, the Company used several assumptions which included an expected term of 4 years, volatility deviation of 38.62% and a risk-free rate of 0.26%. For the period of 2019, the Company used several assumptions which included an expected term of 3.5 to 4 years, volatility deviation of 28.88% and 32.33% and a risk-free rate of 1.42% to 2.48%.

As of January 2, 2021, there were 818,864 shares of common stock reserved and available for future grant under the above noted 2020 Plan.

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

	Year Ended January 2, 2021					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		44,000			20.20		96,000			23.65
Exercised		--			--		(1,667	)		19.10
Forfeited		(75,999	)		22.00		(7,500	)		21.20
Outstanding at end of period		244,001			21.87		276,000			22.30

SARs Outstanding and Exercisable

Range of Exercise Prices

Outstanding as of

January 2, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Exercisable as of

January 2, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

19.10-26.30

244,001

2.3

21.87

71,172

1.3

20.38

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

	Year Ended January 2, 2021				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		—

7. STOCK OPTIONS AND AWARDS (continued)

Stock Grants Outstanding and Exercisable

Range of Exercise Prices

Outstanding as of

January 2, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Exercisable as of

January 2, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

—

25,000

1.3

—

As of January 2, 2021, outstanding SARs and options had an intrinsic value of $1,253,140.