Stock Options and Awards

9 Months Ended

Oct. 02, 2021

Stock Options and Awards

Note H - Stock Options and Awards

Note H - 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 (the “Board”) 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 Board. Under the 2020 Plan, non-qualified stock options granted to participants will have exercise prices determined by the Compensation Committee of the Board. During the first nine months of fiscal 2021, the Company granted 27,300 stock options that were subject to the meeting of performance measurements. The Company did not issue any stock options or restricted stock in the first nine months of fiscal 2020. For the first nine months of fiscal 2021, the Company used several assumptions which included an expected term of 4.0 years, volatility deviation between 47.25% to 48.55% and a risk-free rate between 0.18% to 0.35% for the purposes of measuring compensation under the Black Scholes Method.

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. During the first nine months of fiscal 2021 the Company did not issue any SARs. During the first nine months of fiscal 2020 the company issued 44,000 SARs. For the first nine months of fiscal 2020, the Company used several assumptions which included an expected term of 4.0 years, volatility deviation of 38.62% and a risk-free rate of 0.26% for the purposes of measuring compensation under the Black Scholes Method.

Stock-based compensation expense in connection with SARs previously granted to employees was approximately $102,000 and $85,000 in the third quarter of 2021 and the third quarter of 2020, respectively and was approximately $316,000 and $279,000 in the first nine months of fiscal years 2021 and 2020, respectively.

As of October 2, 2021, there were 804,646shares 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:

	Nine Months Ended					Year Ended
	October 2, 2021					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		(55,667	)		19.31		-			-
Forfeited		(7,500	)		21.20		(75,999	)		22.00
Outstanding at end of period		180,834			22.88		244,001			21.87

SARs Outstanding and Exercisable
	Range of Exercise Prices	Outstanding as of October 2, 2021		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Exercisable as of October 2, 2021		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$	19.10 - $26.30		180,334		1.8	$	22.88		87,335		0.8	$	22.46

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

	Nine Months Ended				Year Ended
	October 2, 2021				January 2, 2021
	Units		Weighted Average Exercise Price		Units		Weighted Average Exercise Price
Outstanding at beginning of period		25,000	$	-		25,000	$	-
Issued		27,300		-		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Outstanding at end of period		52,300		-		25,000		-

As of October 2, 2021, outstanding SARs and grants had an intrinsic value of $1,764,000.