Stock Options and Awards

9 Months Ended

Oct. 01, 2022

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 2022, the Company granted 43,300 stock awards that were subject to the meeting of performance measurements. The Company granted 27,300 stock awards in the first nine months of fiscal 2021 that were subject to the meeting of performance measurements. For the first nine months of fiscal 2022, the Company used assumptions which included an expected term of 4.0 years, volatility deviation between 47.15% to 47.70% and a risk-free rate between 2.04% to 2.66% for the purposes of measuring compensation under the Black Scholes Method. 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 2022 and 2021 the Company did not issue any SARs.

Stock-based compensation expense in connection with SARs previously granted to employees was approximately $131,000 and $102,000 in the third quarter of 2022 and the third quarter of 2021, respectively and was approximately $381,000 and $316,000 in the first nine months of fiscal years 2022 and 2021, respectively.

As of October 1, 2022, there were 812,954 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:

	Nine Months Ended					Year Ended
	October 1, 2022					January 1, 2022
	Units			Weighted Average Exercise Price		Units			Weighted Average Exercise Price
Outstanding at beginning of period		180,833		$	22.88		244,001		$	21.87
Issued		-			-		-			-
Exercised		(16,667	)		21.20		(55,668	)		19.31
Forfeited		(16,000	)		21.34		(7,500	)		21.20
Outstanding at end of period		148,166			23.24		180,833			22.88

SARs Outstanding and Exercisable
Range of Exercise Prices	Outstanding as of October 1, 2022		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Exercisable as of October 1, 2022		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$20.20 - $26.30		148,166		1.3	$	23.24		120,166		0.8	$	23.52

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

	Nine Months Ended			Year Ended
	October 1, 2022			January 1, 2022
	Units			Units
Outstanding at beginning of period		27,300			25,000
Issued		43,300			27,300
Exercised		-			-
Forfeited		(6,100	)		(25,000	)
Outstanding at end of period		64,500			27,300

As of October 1, 2022, outstanding SARs and stock awards had an intrinsic value of $1,119,000.