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Stock Options and Awards

3 Months Ended

Apr. 03, 2021

Note G - 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 the Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”). On April 29, 2020, at the Company’s 2020 Annual Meeting of Shareholders, the shareholders of the Company approved and adopted the 2020 Plan. The 2020 Plan replaced the 2010 Plan. The Company has no other existing plan pursuant to which equity awards may be granted.

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 the first three months of fiscal 2021, the company issued 24,600 stock options that were granted that were subject to the meeting of performance measurements. The Company did not issue any stock options or restricted stock in the first 3 months of fiscal 2020. For the first three months of fiscal 2021, the Company used several assumptions which included an expected term of 4.0 years, volatility deviation between 47.25% to 47.54% and a risk-free rate between 0.18% to 0.20% for the purposes of measuring compensation under the Black Scholes Method.

The 2020 Plan also permit 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 the first three months of fiscal 2021 and the first three months of fiscal 2020, the Company did not issue any SARs.

Stock-based compensation expense in connection with SARs previously granted to employees was approximately $113,000 and $110,000 in the first quarter of 2021 and 2020, respectively.

As of April 3, 2021, there were 788,358 shares of Company common stock reserved and available for future grant under the 2020 Plan.

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

	Three Months Ended April 3, 2021					Year Ended January 2, 2021
	Units			Weighted - Average Exercise Price		Units			Weighted - Average Exercise Price
Outstanding at beginning of period		244,001		$	21.87		276,000		$	22.30
Issued		--			--		44,000			20.20
Exercised		(10,000	)		19.10		--			--
Forfeited		(6,000	)		21.20		(75,999	)		22.00
Outstanding at end of period		228,001			22.17		244,001			21.87

SARs Outstanding and Exercisable

Range of

Exercise Prices

Outstanding as of

April 3, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Exercisable as of

April 3, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

19.10-26.30

228,001

2.1

22.17

115,172

1.3

21.64

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

	Three Months Ended April 3, 2021				Year Ended January 2, 2021
	Shares		Weighted - Average Exercise Price		Shares		Weighted - Average Exercise Price
Outstanding at beginning of period		25,000	$	-		25,000	$	-
Issued		24,600		-		-		-
Forfeited		-		-		-		-
Outstanding at end of period		49,600		-		25,000		-

Stock Grants Outstanding and Exercisable

Range of Exercise Prices

Outstanding as of

April 3, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

Exercisable as of

April 3, 2021

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

0.00

49,600

3.1

As of April 3, 2021, outstanding SARs and grants had an intrinsic value of $1,776,000.