DEF 14A of Eastern Co, Mar 14, 2023

DEF 14A of Eastern Co

Filed Mar 14, 2023 · FY20220001654954-23-002850

Open on EDGAR

  1. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS At the Annual Meeting, seven directors will be elected to serve for one-year terms, which expire at the annual meeting of shareholders in 2024 or when a successor is duly elected and qualified. Mr. Fredrick D. DiSanto, Mr. John W. Everets, Mr. Charles W. Henry, Mr. James A. Mitarotonda, Mrs. Peggy B. Scott, Mr. Michael J. Mardy and Mr. Mark A. Hernandez are the Company’s nominees for election at the Annual Meeting. All seven nominees are current directors whose terms expire in 2023. Unless otherwise specified in your proxy, the persons with power of substitution named in the proxy card will vote your Common Shares FOR each of the Company’s nominees. If a nominee is unable or unwilling to accept the nomination, the proxies will be voted for the election of such other person as may be recommended by the Board. However, the Board has no reason to believe that the Company’s nominees will be unavailable for election at the Annual Meeting. Approval of the election of each director nominee requires the affirmative vote of a majority of the votes duly cast by holders of Common Shares represented at the Annual Meeting that are entitled to vote on the matter. The Board recommends a vote FOR the election of each of Mr. Fredrick D. DiSanto, Mr. John W. Everets, Mr. Charles W. Henry, Mr. James A. Mitarotonda, Mrs. Peggy B. Scott, Mr. Michael J. Mardy and Mr. Mark A. Hernandez as directors. Proxies will be voted FOR the election of each of the nominees unless otherwise specified. Each director has furnished the biographical information set forth below with respect to his or her present principal occupation, business and other affiliations. Information regarding each director’s beneficial ownership of equity securities of the Company is provided under “Security Ownership of Certain Beneficial Owners and Management” in this proxy statement. Unless otherwise indicated, each director has been employed in the principal occupation or employment listed for at least the past five years.

  2. Company Nominees for Election at the 2023 Annual Meeting

    Company Nominees for Election at the 2023 Annual Meeting

  3. For a one-year term expiring in 2024

    For a one-year term expiring in 2024 Fredrick D. DiSanto, age 61, is the Chairman and Chief Executive Officer of The Ancora Group, a provider of investment advisory, wealth management and retirement plan services to individuals and institutions, and has served in such capacities since 2014 and 2006, respectively. Mr. DiSanto was the President and Chief Operating Officer of Maxus Investment Group, a provider of financial advisory services, from 1998 until December of 2000. From 2001 to 2006, after Maxus Investment Group was sold to Fifth Third Bank, Mr. DiSanto served as Executive Vice President and Manager of Fifth Third Bank’s Investment Advisor Division. Mr. DiSanto is an experienced public company director and has knowledge and background in finance, strategic planning, governance and international business. He currently serves on the Board of Regional Brands, Inc. and Ampco-Pittsburgh Corporation. Previously, he served on the respective Boards of Directors of the Alithya Group, Axia Net Media Corporation and LNB Bancorp, Inc. Mr. DiSanto has served as a director of the Company since 2016. Mr. DiSanto is Chairman of the Audit Committee and serves on the Executive, and Nominating and Corporate Governance Committees. John W. Everets, age 76, has been a Partner in Arcturus Capital LLC, a venture capital firm in Boston, since 2016. Mr. Everets was the Chairman and Chief Executive Officer of SBM Financial, an investor group in Portland, Maine, from May 2010 until October 2016. Mr. Everets was also Chairman and Chief Executive Officer of The Bank of Maine from May 2010 until October 2016. Mr. Everets’ directorships at public companies in the past five years include Independent Director at Medallion Bank (since 2019), Medallion Financial Corp. (since 2017). Mr. Everets also serves on the Board of Directors of Newman’s Own Foundation. Mr. Everets is a former director of The Bank of Maine, which merged into Camden National Bank Financial Security Assurance, FSA, Dairy Mart and The Martin Currie Business Trust Edinburgh. From 1993 to 2004, Mr. Everets was the Chairman and Chief Executive Officer of HPSC, a provider of financing to medical and dental practices, which was acquired by GE Healthcare Financial Services, a provider of capital, financial solutions and related services for the global healthcare industry in 2004. Mr. Everets became Chief Executive Officer of GEHPSC from 2004 until 2006. Mr. Everets has served as a director of the Company since 1993 and brings to the Board extensive knowledge of the Company’s business. Mr. Everets is Chairman of the Compensation Committee effective January 1, 2022. Mr. Everets also serves on the Audit Committee. Charles W. Henry, age 73, is an attorney and partner with the law firm Henry & Giardina, LLP located in Woodbury, Connecticut. Mr. Henry brings to the Board extensive knowledge of the Company’s business. Mr. Henry’s independent legal expertise is valuable to the Company if, and when, matters of law or regulation arise in the normal course of the Company’s business. His law firm does not provide any services to the Company. Mr. Henry has served as a director of the Company since 1989. Mr. Henry is Chairman of the Nominating and Corporate Governance Committee and serves on the Compensation Committee, the Executive Committee, and Environmental, Health and Safety Committee. James A. Mitarotonda, age 68, is currently the Chairman, President and CEO at Barington Capital Group, L.P., an activist investment firm. He is also the Chairman, President and CEO of Barington Companies Investors, LLC, the general partner of Barington Companies Equity Partners, L.P., an activist investment fund. Since April 2022, Mr. Mitarotonda has served as an advisor to Rambus, Inc., a company that designs, develops, and licenses chip interface technologies and architectures that are used in digital electronics products, and in his capacity as Chairman, President and CEO of the Barington entities, has served as an advisor to each of Matthews International Corporation, a global provider of memorialization products, industrial technologies and brand solutions, since January 2023, and Griffon Corporation, a diversified manufacturing company, since January 2012. From 2019 to 2022, Mr. Mitarotonda served as a Special Advisor to L Brands, Inc., a specialty retailer of women’s apparel and personal care products. Over the past five years, Mr. Mitarotonda has also served as (i) a director and Audit Committee member of Rambus, Inc. from April 2021 until April 2022; (ii) a director of Avon Products, Inc., a global manufacturer and marketer of beauty and related products, from April 2018 to January 2020; (iii) a director of OMNOVA Solutions Inc., a global provider of emulsion polymers and specialty chemicals, from March 2015 to April 2020; and (iv) a director of A. Schulman Inc., an international supplier of plastic compounds and resins, from October 2005 until August 2018. Prior to such time, Mr. Mitarotonda served as a director of The Pep Boys – Manny, Moe & Jack, an automotive aftermarket service and retail chain, from August 2006 to February 2016, and as Chairman from July 2008 to July 2009. Mr. Mitarotonda has also served as a director of Barington/Hilco Acquisition Corp., a special purpose acquisition company, from February 2015 until January 2018, as Chief Executive Officer from February 2015 to May 2015, and as Chairman from February 2015 until May 2017. He has also served as a director of Ebix, Inc., a supplier of software and e-commerce services to the insurance, financial and healthcare industries, from January 2015 to March 2015; The Jones Group Inc., a designer, marketer and wholesaler of branded clothing, shoes and accessories, from June 2013 to April 2014; Griffon Corporation from November 2007 to January 2012; Ameron International Corporation, a multinational manufacturer of products and materials for the chemical, industrial, energy, transportation and infrastructure markets, from March 2011 to October 2011; and Gerber Scientific, Inc., an international supplier of automated manufacturing systems, from June 2010 to August 2011. Mr. Mitarotonda received a B.A. in economics from Queens College, where he is currently a member of the Board of Trustees and a M.B.A from New York University’s Graduate School of Business Administration (now known as the Stern School of Business). Mr. Mitarotonda has served as a director of the Company since 2015 and as Chairman of the Board since January 2016. Mr. Mitarotonda serves on the Compensation Committee and the Nominating and Corporate Governance Committee, and as Chair of the Executive Committee. Peggy B. Scott, age 71, has served as the Chairperson of the Board of Cleco Corporate Holdings LLC (NASDAQ: CNL), a public utility holding company, since April 2016, and was Chief Executive Officer from February 2017 until January 2018. She also serves on the boards of Martin Sustainable Resources, LLC, and the Blue Cross Blue Shield of Louisiana Foundation, including former roles as Chairperson and President. Her recent public company service includes Benefytt Technologies, Inc. (NASDAQ: BFYT) from 2019 until its acquisition in 2020 and Gresham Smith Partners until 2022. Previously, Mrs. Scott served as the Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer of Blue Cross Blue Shield of Louisiana (BCBS), and as Chief Strategy Officer, overseeing growth strategies and operational performance in challenging markets. Prior to BCBS, she held senior executive positions in U.S. and international companies where she led transformations, growth strategies and operations in seven foreign countries. Earlier, Mrs. Scott was an office Managing Partner with Deloitte, a global public accounting firm, advising diverse companies, including manufacturers and industrial companies.

  4. For a one-year term expiring in 2024

    Mrs. Scott has served as a director of the Company since May 2019. She is Chairperson of the Environmental, Health and Safety Committee and serves on the Audit Committee and Compensation Committee. Mrs. Scott is a Certified Public Accountant (CPA) and also Certified in Valuations (ABV and CVA) and Financial Forensics (CFF). She has expertise in strategy, finance, operations, acquisitions and international business. Michael J. Mardy, age 74 is currently Chairman of the board of Vince Holdings (NYSE: VNCE), Lulu’s Fashion Lounge (NASDAQ: LVLU), Newman’s Own, Inc., and Penn Medicine Princeton Health. He was previously a member of the board of directors of Modus Link Global Solutions, Keurig Green Mountain, DAVIDs TEA, and True Leaf Brands. From 2003 to 2018, Mr. Mardy served as Executive Vice President, Chief Financial Officer and Director of Tumi Holdings, an international manufacturer and marketer of travel goods and accessories based in South Plainfield, New Jersey. In addition to serving as an advisor to small growth companies, he has held several positions in finance working for Nabisco Brands and Keystone Foods and started his career at Coopers and Lybrand (now PricewaterhouseCoopers) as an audit supervisor. Mr. Mardy has served as a director of the Company since June 2022 and serves on the Audit Committee and the Environmental, Health, and Safety Committee. Mark A. Hernandez, 56, has served as the Company’s President and Chief Executive Officer since January 2023 and as a director of the Company since June 2022. Mr. Hernandez led Navistar’s global manufacturing, supply chain, and logistics from 2018 to 2022, most recently as Executive Vice President from 2021 to 2022 and previously as Senior Vice President from 2018 to 2021. Navistar’s core business focuses on the truck, school bus, and genuine parts markets in North America, and sells trucks, powertrains and buses under the International and IC Bus brands, respectively. Prior to Navistar, from 2017 to 2018, Mr. Hernandez was an Experienced Practice Expert (Manufacturing and Commercial Vehicles) at McKinsey & Company, a global management consulting firm, focusing on business transformation. From 1994 to 2016, Mr. Hernandez held several roles at Daimler AG and Daimler Trucks North America, an automotive industry manufacturer of commercial vehicles, where he was a member of Leadership 2020 G16, reporting to the Daimler Board of Management. He graduated cum laude from the United States Naval Academy. Mr. Hernandez served on the Nominating and Corporate Governance Committee and the Environmental, Health, and Safety Committee until his appointment as CEO in January 2023.

  5. For a one-year term expiring in 2024

    | Board Diversity Matrix for The Eastern Company | | | | | | As of March 14, 2023 | | | | | | Total Number of Directors | 7 | | | | | Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender | | Directors | 1 | 6 | | | | Part II: Demographic Background | | | | | | African American or Black | | | | | | Alaskan Native or American Indian | | | | | | Asian | | | | | | Hispanic or Latinx | | 1 | | | | Native Hawaiian or Pacific Islander | | | | | | White | 1 | 5 | | | | Two or More Races or Ethnicities | | | | | | LGBTQ+ | | | | | | Did Not Disclose Demographic Background | | | | |

  6. Summary of Annual Director Compensation

    Summary of Annual Director Compensation During fiscal year 2022, the Company paid non-employee directors individually in Common Shares as follows: the annual retainer for the Chairman of the Board is $125,000; for directors it is $70,000; the Chairman of the Audit Committee received an additional $10,000; the Chairman of the Compensation Committee and the Chairperson of the Environmental, Health and Safety Committee each received an additional $7,500; the Chairman of the Nominating and Corporate Governance Committee received an additional $2,000. In addition to the annual retainer fee, all non-employee directors were compensated for all meetings in addition to the Board’s five regularly scheduled meetings as follows: $1,500 for each in-person meeting and $500 for each telephonic meeting. There will be no change to the compensation given to the committee chairs and compensation for meetings over the five regularly scheduled meetings for fiscal year 2023. Each director receives their fees in the form of Common Shares. The Common Shares are issued under the Directors’ Fee Program (the “Directors’ Fee Program”) provided for in The Eastern Company 2020 Stock Incentive Plan (the “2020 Plan”). The Company maintains a minimum share ownership requirement for non-employee directors. The Common Share ownership requirement will be deemed to have been met once the total net realizable share value held by a non-employee director exceeds five (5) times the annual base retainer paid to the non-employee director. Non-employee directors should attain this target within five (5) years of becoming a member of the Board.

  7. DIRECTOR COMPENSATION IN FISCAL 2022

    DIRECTOR COMPENSATION IN FISCAL 2022

  8. DIRECTOR COMPENSATION IN FISCAL 2022

    | Name (1) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (2) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Change in pension value and nonqualified deferred compensation earnings ($) | All Other Compensation ($) (3) | Total ($) | | Fredrick D. DiSanto | | 83,003 | | | | 360 | 83,399 | | John W. Everets | | 80,504 | | | | - | 80,504 | | Charles W. Henry | | 75,009 | | | | - | 75,009 | | James A. Mitarotonda | | 128,000 | | | | 762 | 128,762 | | Michael J. Mardy | | 36,481 | | | | - | 36,481 | | Mark A. Hernandez | | 36,481 | | | | 129 | 36,610 | | Peggy B. Scott | | 80,501 | | | | - | 80,501 |

  9. DIRECTOR COMPENSATION IN FISCAL 2022

    | (1) This table discloses the compensation received by all non-employee directors who served as a director in 2022. Mr. Vlak did not receive any compensation for his service as a director of the Company. Mr. Hernandez is included in this table because he received compensation in fiscal 2022 as a non-employee director, but he is not expected to receive any such compensation in 2023, as he is now an employee of the Company. | | (2) The amounts listed are director fees paid in newly issued stock of the Company and could include adjustments for fractional shares from previous periods. | | (3) The amounts listed represent the dollar value of insurance premiums paid by, or on behalf of, the Company during the covered fiscal year with respect to life insurance for the benefit of the director. All non-employee directors are provided a life insurance benefit. Messrs. DiSanto, Mitarotonda and Hernandez have a $50,000 benefit and Messrs. Everets, Henry, and Mardy and Mrs. Scott have a $25,000 benefit. The life insurance benefit is reduced after age 70. |

  10. DIRECTOR COMPENSATION IN FISCAL 2022

    For information on compensation for Mr. Vlak, who served during 2022 as a director and the President and Chief Executive Officer of the Company, see the executive compensation tables beginning on page 21.

  11. Base salary

    Base salary Base salaries are set after referencing market data for similar positions from the salary.com survey report on compensation in the manufacturing sector and the Company’s independent benchmarking of peer companies. The Company selects peer companies based on comparable size, nature of operations, and complexity and scope of business activities. The compensation of the Company’s former President and Chief Executive Officer, August M. Vlak, was determined pursuant to the terms and conditions of an employment agreement between Mr. Vlak and the Company, entered into effective January 1, 2018. Mr. Vlak’s base salary was $494,104 for the year ended December 31, 2022. Mr. Vlak’s base salary was not increased for 2023. Mr. Vlak resigned from the Company effective as of January 23, 2023. The compensation of named executive officer John L. Sullivan III, the Company’s former Vice President and Chief Financial Officer, was determined annually by the Compensation Committee and approved by the Board. Mr. Sullivan’s base salary was $362,122 for the year ended December 31, 2022. Mr. Sullivan retired from the Company during 2022. The compensation of named executive officer Peter O’Hara, the Company’s former Vice President and Chief Financial Officer, was determined annually by the Compensation Committee and approved by the Board. Mr. O’Hara’s base salary was $425,000 for the year ended December 31, 2022. Effective January 1, 2023, Mr. O’Hara’s base salary increased 3% to $437,750. Mr. O’Hara served as Vice President and Chief Financial Officer of the Company from May 16, 2022 until his resignation from the Company effective as of February 3, 2023. The compensation of named executive officer James P. Woidke, Chief Operating Officer, is determined by the Compensation Committee and approved by the Board. Mr. Woidke’s base salary was $360,500 for the year ended December 31, 2022. Mr. Woidke’s base salary was not increased for 2023. Total compensation of Messrs. Vlak, Sullivan and Woidke is below the average for similar positions at comparable organizations in the United States as reported by the salary.com survey and the Company’s independent benchmarking of peer companies.

  12. Short-Term Incentives — Annual Cash Incentives

    Short-Term Incentives — Annual Cash Incentives For fiscal year 2022, the named executive officers were eligible to receive short-term incentive compensation based on the annual performance of the Company. Short-term incentives were based on specific goals in the Company’s annual operating plan, as approved by the Board on December 15, 2021 for Mr. Vlak, Mr. Sullivan, and Mr. Woidke. Subsequently, the Board approved Mr. O’Hara’s short-term incentive on January 3, 2022. Seventy percent of the short-term incentive for Mr. Vlak, Mr. O’Hara, and Mr. Sullivan was determined by the Company’s 2022 earnings per share and thirty percent was determined by working capital efficiency of the Company. Working capital was defined as the combined current assets less current liabilities less cash of the businesses. Working capital efficiency is calculated as the average quarterly working capital divided by sales. The Company’s 2022 earnings per share goal was $2.78, before adjustments for one-time costs. The Company’s working capital efficiency goal for 2022 was 25.2%. Seventy percent of the short-term incentive for Mr. Woidke was determined by the 2022 earnings from the operating businesses; the remaining thirty percent was determined by the working capital efficiency of the operating businesses. Determination of the Company’s results and achievement of performance targets is subject to final approval by the Compensation Committee. In 2022, if the Company achieved its earnings per share and working capital efficiency goals, Mr. Vlak was eligible to earn a total short-term incentive equal to 100% of his base salary. The threshold for earning each component of the short-term incentive was achieved at 80% of the goal. At 80% achievement of each goal, Mr. Vlak was eligible to earn 50% of the associated short-term incentive. If the Company achieved less than 80% of a goal, Mr. Vlak was not eligible to earn the associated short-term incentive. At 125% achievement of each goal, Mr. Vlak was eligible to earn 135% of the associated short-term incentive. Mr. Vlak was eligible to earn a maximum short-term incentive of 200% of his base salary. In 2022, if the Company achieved its earnings per share and working capital efficiency goals, Mr. Sullivan was eligible to earn a total short-term incentive equal to 40% of his base salary. The threshold for earning each component of the short-term incentive was achieved at 80% of the goal. At 80% achievement, Mr. Sullivan was eligible to earn 50% of the associated short-term incentive. At less than 80% of each goal, Mr. Sullivan was not eligible to earn the associated short-term incentive. At 125% achievement of each goal, Mr. Sullivan was eligible to earn 54% of the associated short-term incentive. Mr. Sullivan was eligible to earn a maximum short-term incentive of 80% of his base salary. Mr. Sullivan retired during 2022 and as such did not receive any short-term incentive. In 2022, if the Company achieved its earnings per share and working capital efficiency goals, Mr. O’Hara was eligible to earn a total short-term incentive equal to 45% of his base salary. The threshold for earning each component of the short-term incentive was achieved at 80% of the goal. At 80% achievement, Mr. O’Hara was eligible to earn 50% of the associated short-term incentive. At less than 80% of each goal, Mr. O’Hara was not eligible to earn the associated short-term incentive. At 125% achievement of each goal, Mr. O’Hara was eligible to earn 135% of the associated short-term incentive. Mr. O’Hara was eligible to earn a maximum short-term incentive of 90% of his base salary. In 2022, if the Company achieved its operating earnings and working capital efficiency goals, Mr. Woidke was eligible to earn a total short-term incentive equal to 70% of his base salary. The threshold for earning each component of the short-term incentive was achieved at 80% of the goal. At 80% achievement, Mr. Woidke was eligible to earn 50% of the associated short-term incentive. At less than 80% of each goal, Mr. Woidke was not eligible to earn the associated short-term incentive. At 125% achievement of each goal, Mr. Woidke was eligible to earn 135% of the associated short-term incentive. Mr. Woidke was eligible to earn a maximum short-term incentive of 140% of his base salary. In 2022, Mr. Vlak earned an annual cash incentive of $105,879, or approximately 21% of his base salary. The annual cash incentive did not include any payment for the Company’s earnings per share goal for 2022, weighted by 70%. The annual cash incentive included $105,879 for the Company’s achievement of 87.5% of its working capital efficiency goal for 2022 weighted at 30%. In 2022, Mr. O’Hara did not earn a short-term cash incentive due to his resignation prior to approval of the payment by the Board of Directors. In 2022, Mr. Sullivan did not earn a short-term cash incentive due to his retirement in 2022. In 2022, Mr. Woidke earned an annual cash incentive of $54,075, or 15% of base compensation. The annual cash incentive did not include any payment for the Company’s earnings from operating businesses goal for 2022, weighted by 70%. The annual cash incentive included $54,075 for the Company’s achievement of 87.5% of its working capital goal for 2022, weighted at 30%. The following table shows the incentive calculation for fiscal year 2022 based on the short-term incentive earned:

  13. Short-Term Incentives — Annual Cash Incentives

    | | Mr. Vlak | Mr. Sullivan | Mr. O’Hara | Mr. Woidke | | Base Salary | $494,104 | $362,122 | $425,000 | $360,500 | | Incentive achievement | 21% | 0% | 0% | 15% | | Incentive earned | $105,879 | $0 | $0 | $54,075 |

  14. Long-term incentives and performance-based stock appreciation rights and options

    Long-term incentives and performance-based stock appreciation rights and options On February 7, 2018, the named executive officers were granted SARs which were scheduled to vest on February 1, 2021, provided certain performance goals were achieved (the “2020 Performance Period”). The exercise price of $24.90 per unit is equal to 100% of the fair market value of a Common Share on the grant date of the SAR. The performance goal was the Company’s Book Value, defined as the total assets minus the value of total liabilities as recorded on the Company’s balance sheet at the close of December of fiscal year 2020. On February 25, 2019, the named executive officers were granted SARs which were scheduled to vest on February 1, 2022, provided certain performance goals are achieved (the “2021 Performance Period”). The exercise price of $26.30 per unit is equal to 100% of the fair market value of a Common Share on the grant date of the SAR. The performance goal was the Company’s Book Value at the close of December of fiscal year 2021. The Company’s Book Value is defined as the total assets minus the value of total liabilities as recorded on the Company’s balance sheet. On April 29, 2020, the named executive officers were granted SARs which were scheduled to vest on February 1, 2023, provided certain performance goals were achieved (the “2022 Performance Period”). The exercise price of $20.20 per unit is equal to 100% of the fair market value of a Common Share on the grant date of the SAR. The performance goals were the Company’s Book Value at the close of December of fiscal year 2022 and the ROIC achieved in fiscal year 2022. The ROIC is defined as the sum of the Company’s average annual fixed assets, intangible assets, and current assets as of the end of fiscal year 2022; reduced by the sum of the Company’s average annual current liabilities and cash as of the end of fiscal year 2022; then divided by tax adjusted EBIT. The Company’s Book Value is defined as the total assets minus the value of total liabilities as recorded on the Company’s balance sheet. The SARs vested 50% on February 1, 2023, based on the Company’s performance during the 2022 Performance Period. On January 15, 2021, the named executive officers were granted performance stock awards which vest on March 1, 2024, provided certain performance goals are achieved (the “2023 Performance Period”). The performance goal is the Company’s ROIC achieved in fiscal year 2023. The ROIC is defined as the sum of the Company’s average annual fixed assets, intangible assets, and current assets as of the end of fiscal year 2023; reduced by the sum of the Company’s average annual current liabilities and cash as of the end of fiscal year 2023; then divided by tax-adjusted EBIT. On March 15, 2022, the named executive officers were granted performance stock awards which vest on March 1, 2025, provided certain performance goals are achieved (the “2024 Performance Period”). One third of the award vests after 3 years, subject to continued employment on the vesting date. One third of the award has a performance goal based upon the Company’s ROIC achieved in fiscal year 2024. The ROIC is defined as the sum of the Company’s average annual fixed assets, intangible assets, and current assets as of the end of fiscal year 2024; reduced by the sum of the Company’s average annual current liabilities and cash as of the end of fiscal year 2024; then divided by tax-adjusted EBIT. The final third of the award has a performance goal based upon the Company’s EBITDA target for 2024. The performance periods are as follows:

  15. Long-term incentives and performance-based stock appreciation rights and options

    | | | Grantee SARs (units) & Performance Stock Awards | | | | | | | | Vlak | Sullivan | O’Hara | Woidke | | | | | 2020 Performance | | | | | Book Value Target | Book Value Achieved | Vested | | Period | 20,000 | 10,000 | -- | 7,000 | $117.8 million | $104.3 M | Yes (1) | | 2021 Performance Period | | | | | Book Value Target | Book Value Achieved | Vested | | | 12,000 | 5,000 | -- | 7,000 | $127.0 million | $114.7 M | Yes (2) | | 2022 Performance Period (3,4) | -- | -- | -- | 7,000 | 50% Book Value Target $133.0 million 50% ROIC Target 9.3% to 11% | Book Value Achieved $135.1 M ROIC Achieved 6.6% | Vested 50% Vested | | 2023 Performance Period (3,4) | -- | -- | -- | 4,200 | ROIC Target 9.3% to 11% | ROIC Achieved ---- | Vested ---- | | 2024 Performance Period (4) | --- | -- | -- | 6,400 | 34% Vests after 3 years 33% EBITDA Target $49.2M to 61.5M 33% ROIC Target 11.3% to 17% | Vesting Period ---- EBITDA Achieved ---- ROIC Achieved ---- | Vested ---- |

  16. Long-term incentives and performance-based stock appreciation rights and options

    | (1) The Compensation Committee waived the performance goal for the 2020 Performance Period due to the impact of the COVID-19 pandemic. | | (2) The Compensation Committee adjusted the performance goal for the 2021 Performance Period due to the effects of the discontinued business operations and the closure and consolidation of facilities. | | (3) Mr. Sullivan’s unvested SARs and performance awards were forfeited upon his retirement. | | (4) Mr. Vlak and Mr. O’Hara’s SARs and performance awards were forfeited upon their respective resignations. |

  17. Retirement and Other Post-Termination Plans

    Retirement and Other Post-Termination Plans 401(k) Plan The Company maintains The Eastern Company Savings and Investment Plan (the “SIP”) for the benefit of certain eligible employees, including executive officers. An eligible employee who participates in the SIP may execute a salary reduction agreement requiring the Company to reduce his or her taxable earnings by a percentage of his or her compensation (as elected by the participant) and to contribute that amount to the SIP. The amount of the contribution could not exceed $20,500 for calendar year 2022, plus an additional $6,500 catch-up contribution for those participants ages 50 and older. If an employee executes such a salary reduction agreement, the Company will make a matching contribution to the SIP on behalf of the employee. For 2022, the matching contribution equaled 50% of that portion of an employee’s salary reduction contribution that did not exceed 6% of his or her compensation. Effective June 1, 2016, the SIP was amended to increase the non-discretionary profit-sharing contribution to 3%, and eligibility for the profit-sharing contribution was extended to all non-union U.S. employees. The SIP was also amended to provide for a non-discretionary contribution (the “transitional credit”) for certain non-union U.S. employees who were eligible to participate in the Salaried Employees Retirement Plan of The Eastern Company (the “Salaried Plan”). The amount of this non-discretionary contribution ranges from 0% to 4% of compensation, based on the age of the individual on June 1, 2016. Earnings in excess of $305,000 for calendar year 2022 cannot be taken into account under the SIP. An employee is fully vested in his or her salary reduction contributions and the earnings on those contributions. An employee will become vested in any matching contributions, transitional credits, and non-discretionary profit-sharing contributions, and the earnings thereon, under a graded vesting schedule, with full vesting after completing five years of service or upon reaching age 65. Employees who are participating in the SIP may direct that their account balances be invested in one or more investment options offered under the plan. Pension Benefits The Company maintains the Salaried Plan for the benefit of certain eligible employees, including executive officers. On April 5, 2016, the Board passed a resolution freezing benefit accruals under the Salaried Plan, effective as of May 31, 2016. As a result, compensation and years of service earned after May 31, 2016 are not taken into account in determining the amount of a member’s retirement benefit under the Salaried Plan. An employee reaches his or her normal retirement date and can begin benefits without reduction upon reaching age 65 (or, if later, the earlier of the attainment of age 70 or the completion of five years of participation in the plan). An employee reaches his or her early retirement date when he or she reaches age 55 after completing 20 years of service. An employee who is eligible for early retirement can elect to begin to receive his or her benefits on an actuarially reduced basis. In addition, if an employee’s age and years of service equal at least 90, the employee can elect to begin to receive his or her benefits with a smaller reduction for early commencement than is otherwise applicable for early retirement. Pension Benefits Table The following table provides certain information regarding the present value of accumulated benefits under the Company’s qualified and nonqualified defined benefit pension plans as of the last day of the 2022 fiscal year:

  18. Summary Compensation Table

    Summary Compensation Table The table below summarizes the total compensation paid or earned by each of the Company’s named executive officers for the fiscal years ended January 1, 2022 and December 31, 2022.

  19. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Option Awards ($) (4) | Non-Equity Incentive Plan Compensation ($) (5) | Non- Qualified Deferred Compensation Earnings ($) (6) | All Other Compen- sation ($) (7) | Total ($) | | August M. Vlak, 56 President and CEO | 2022 2021 | $494,104 475,088 | $ - - | $277,056 235,470 | $ - - | $105,879 429,723 | $ - - | $20,695 19,701 | $897,734 1,159,982 | | John L. Sullivan III, 69 Vice President and CFO | 2022 2021 | 120,707 351,575 | - - | - 105,210 | - - | - 127,202 | - - | 28,807 33,907 | 149,514 617,894 | | Peter O’Hara, 57 Vice President and CFO | 2022 | 318,750 | | 165,359 | - | - | | 3,735 | 487,844 | | James P. Woidke, 60 Chief Operating Officer | 2022 2021 | 360,500 350,000 | - - | 151,552 105,210 | - - | 54,075 162,241 | - - | 20,912 19,051 | 587,039 636,502 |

  20. Summary Compensation Table

    | (1) The 2022 and 2021 fiscal years each consisted of 52 weeks. | | (2) Amounts shown were discretionary bonuses issued in the applicable fiscal year and paid in the subsequent year to the named executive officers. | | (3) Performance stock awards were granted on March 15, 2022 and May 16, 2022. The fair value of performance stock awards granted for 2022 for Mr. Vlak was $277,056; for Mr. O’Hara $165,359; and for Mr. Woidke $151,552. Mr. Sullivan was not granted any performance stock awards for 2022 due to expected retirement. Performance stock awards were granted on January 15, 2021. The fair value of performance stock awards granted for 2021 for Mr. Vlak was $235,470; for Mr. Sullivan $105,210; and for Mr. Woidke $105,210. | | (4) There were no options or SARs granted by the Company to the named executive officers in 2022 or 2021. | | (5) Amounts shown were earned in the applicable year and paid in the subsequent year under the Company’s short-term incentive plan. Mr. Vlak earned a bonus for 2022 in the amount of $105,879, Mr. Sullivan did not earn a bonus for 2022 due to his retirement, Mr. O’Hara did not earn a bonus for 2022 due to resigning prior to the bonus being approved by the Board of Directors and Mr. Woidke earned a bonus for 2022 in the amount of $54,075. | | (6) Amounts shown represent above-market or preferential earnings on compensation that is deferred on a basis that is not tax-qualified, including such earnings on nonqualified defined contribution plans. | | (7) Included in this column are Company contributions to the SIP (including matching contributions, transitional credits and profit-sharing contributions), company-paid term life insurance premiums, the value of group term life insurance in excess of $50,000, and life insurance under the Salaried Plan. The Company’s contributions to the SIP (including matching contributions, transitional credits and profit-sharing contributions) for Mr. Vlak equaled $18,300 for 2022 and $17,400 for 2021, for Mr. Sullivan equaled $28,807 for 2022 and $29,000 for 2021, for Mr. O’Hara equaled $2,206 for 2022 and for Mr. Woidke equaled $18,300 for 2022 and $17,400 for 2021. Company-paid term life insurance premiums for Mr. Vlak equaled $2,395 for 2022 and $2,301 for 2021, for Mr. Sullivan equaled $4,907 for 2021, for Mr. O’Hara $1,529 for 2022 and for Mr. Woidke equaled $2,612 for 2022 and $1,651 for 2021. |

  21. STOCK APPRECIATION RIGHTS EXERCISED AND STOCK VESTED IN FISCAL 2022

    STOCK APPRECIATION RIGHTS EXERCISED AND STOCK VESTED IN FISCAL 2022 The named executive officers did not exercise any stock options or SARs during the fiscal year ended December 31, 2022, and the named executive officers did not own any shares of restricted stock or performance shares which vested during the fiscal year ended December 31, 2022.

  22. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table displays the units of unvested SARs and performance stock awards held by each of the named executive officers at the end of fiscal year 2022.

  23. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    | | | SARs Awards | | | | | Stock Awards | | | | | | | Number of Securities Underlying Unexercised SARs (#) | | | | | | | | | | Name | Grant Date | Exercisable (#) | Unexerciseable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned units (#) | Exercise Price ($) | Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market value of shares of units of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) | | August M. Vlak | 02/07/2018 | 20,000 | - | - | $24.90 | 02/07/2023 | | | | | | President & CEO (1) | 02/25/2019 | 12,000 | - | - | 26.30 | 05/25/2024 | | | | | | | 04/29/2020 | | 12,000 | - | 20.20 | 04/29/2025 | | | | | | | 01/15/2021 | | | | | | | | 9,400 | $181,232 | | | 03/08/2022 | | | | | | 3,900 | $75,192 | 7,800 | $150,384 | | Peter O’Hara | 04/26/2022 | | | | | | 2,367 | $45,636 | 4,733 | $91,252 | | VP & CFO (1) | | | | | | | | | | | | John L. Sullivan, III | 02/07/2018 | 10,000 | - | - | 24.90 | 02/07/2023 | | | | | | VP & CFO (2) | 02/25/2019 | 5,000 | - | - | 26.30 | 05/25/2024 | | | | | | | 04/29/2020 | - | 6,000 | - | 20.20 | 04/29/2025 | | | | | | | 01/15/2021 | | | | | | | | 4,200 | $80,976 | | James P. Woidke | 02/07/2018 | 7,000 | - | - | 24.90 | 02/07/2023 | | | | | | COO | 02/25/2019 | 7,000 | - | - | 26.30 | 05/25/2024 | | | | | | | 04/29/2020 | - | 7,000 | - | 20.20 | 04/29/2025 | | | | | | | 01/15/2021 | | | | | | | | 4,200 | $80,976 | | | 03/08/2022 | | | | | | 2,133 | $41,124 | 4,267 | $82,268 |

  24. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    | (1) Mr. Vlak and Mr. O’Hara’s SARs and performance awards were forfeited upon their respective resignations in 2023. | | (2) Mr. Sullivan’s unvested SARs and performance awards were forfeited upon his retirement in 2022. |

  25. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    On February 7, 2018, the Compensation Committee granted SARs under the 2010 Plan as follows: August M. Vlak – 20,000; John L. Sullivan III – 10,000; and James P. Woidke – 7,000. The SARs have an exercise price of $24.90 (equal to the fair market value of a Common Share on the date of grant) and were scheduled to vest on February 1, 2021 based on performance targets set by Board, and to be exercisable for a period of five years (provided that the named executive officer remains an employee of the Company on the applicable vesting date and the Company meets certain performance thresholds prescribed in the SAR agreement). The performance target for vesting of the SARs was based on the Company’s book value at the close of December of fiscal year 2020. On February 25, 2019, the Compensation Committee granted SARs under the 2010 Plan as follows: August M. Vlak – 12,000; James P. Woidke – 7,000; and John L. Sullivan III – 5,000. The SARs have an exercise price of $26.30 (equal to the fair market value of a Common Share on the date of grant), and were scheduled to vest on February 1, 2022 based on performance targets set by Board, and to be exercisable for a period of five years (provided that the named executive officer remains an employee of the Company on the applicable vesting date and the Company meets certain performance thresholds prescribed in the SAR agreement). The performance target for vesting of the SARs was the Company’s book value at the end of fiscal year 2021. On April 29, 2020, the Compensation Committee granted SARs under the 2020 Plan as follows: August M. Vlak – 12,000; James P. Woidke – 7,000; and John L. Sullivan III – 6,000. The SARs have an exercise price of $20.20 (equal to the fair market value of a Common Share on the date of grant), and were scheduled to vest on February 1, 2023 based on performance targets set by the Board, and to be exercisable for a period of five years (provided that the named executive officer remains an employee of the Company on the applicable vesting date and the Company meets certain performance thresholds prescribed in the SAR agreement). The performance target for vesting of the SARs was based on the Company’s book value at the end of fiscal year 2022 and the return on invested capital for fiscal year 2022. The SARs vested 50% on March 1, 2023. On June 9, 2020, the Compensation Committee affirmed the vesting of the SARs granted in 2018. The Compensation Committee waived the performance goal for the 2020 Performance Period due to the impact of the COVID-19 pandemic. The Compensation Committee approved vesting of SARs for the following named executive officers: August M. Vlak – 20,000; John L. Sullivan III – 10,000; and James P. Woidke 7,000. On January 15, 2021, the Compensation Committee granted performance stock awards under the 2020 Plan as follows: August M. Vlak – 9,400; James P. Woidke – 4,200; and John L. Sullivan III – 4,200. The performance stock awards will vest on March 1, 2024, provided certain performance goals are achieved (the “2023 Performance Period”). The performance stock awards will be exercisable for a period of five years (provided that the named executive officer remains an employee of the Company on the applicable vesting date and the Company meets certain performance thresholds prescribed in the performance stock awards agreement). The performance goal is based on the Company’s ROIC achieved in fiscal year 2023. On March 2, 2022, the Compensation Committee affirmed the vesting of the SARs granted in 2019 based on the Company’s adjusted book value target. The Compensation Committee approved the vesting of SARs for the following named executive officers: August M. Vlak – 12,000; James P. Woidke – 7,000; and John L. Sullivan III – 5,000. On March 8, 2022 and on April 26, 2022, the named executive officers were granted performance stock awards which vest on March 1, 2024, provided certain performance goals are achieved (the “2024 Performance Period”). One third of the award vests after 3 years. One third of the award has a performance goal based upon the Company’s ROIC achieved in fiscal year 2024. The ROIC is defined as the sum of the Company’s average annual fixed assets, intangible assets, and current assets as of the end of fiscal year 2024; reduced by the sum of the Company’s average annual current liabilities and cash as of the end of fiscal year 2024; then divided by tax-adjusted EBIT. The final third of the award has a performance goal based upon the Company’s EBITDA target for 2024. On March 1, 2023, the Compensation Committee affirmed 50% vesting of the SARs granted in 2020 based on the Company’s adjusted book value target; 50% of the SARs did not vest due to not achieving the ROIC goal. The Compensation Committee approved the vesting of SARs for the following named executive officers: James P. Woidke – 3,500.

  26. PAY VERSUS PERFORMANCE

    PAY VERSUS PERFORMANCE As required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation and our financial performance for each of the last two completed calendar years. In determining the “compensation actually paid” to our NEOs, we are required to make various adjustments to amounts that have been previously reported in the Summary Compensation Table in previous years, as the SEC’s valuation methods for this section differ from those required in the Summary Compensation Table.

  27. Pay Versus Performance Table

    Pay Versus Performance Table The table below summarizes compensation values both previously reported in our Summary Compensation Table, as well as the adjusted values required in this section for fiscal years 2021 and 2022. Note that for our NEOs other than our principal executive officer (the “PEO”), compensation is reported as an average.

  28. Pay Versus Performance Table

    | Year | Summary Compensation Table Total for PEO ($) (1)(2) | Compensation Actually Paid to PEO ($) (1)(3) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) (1)(4) | Average Compensation Actually Paid to Non-PEO Named Executive Officers ($) (1)(5) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return ($)(6) | Net Income ($)(7) (in thousands) | | 2022 | $897,630 | $788,324 | $612,198 | $533,547 | $77.34 | $12,301 | | 2021 | 1,159,982 | 1,175,210 | 627,198 | 641,592 | 104.46 | 9,349 |

  29. Pay Versus Performance Table

    | (1) During fiscal years 2022 and 2021, the PEO was August M. Vlak. During fiscal year 2022, the non-PEO named executive officers (NEOs) were John L. Sullivan III, Peter O’Hara and James P. Woidke,. Mr. Sullivan served as the Company’s principal financial officer through May 15, 2022 and as an employee of the Company through June 4, 2022, and Mr. O’Hara served as the Company’s principal financial officer beginning on May 16, 2022. During fiscal year 2021, the non-PEO NEOs were John L. Sullivan III and James P. Woidke. | | (2) The dollar amounts reported are the amounts of total compensation reported for Mr. Vlak for the applicable fiscal year in the “Total” column of the Summary Compensation Table (SCT). | | (3) The following table sets forth the adjustments made to the SCT total for each year represented in the pay versus performance table to arrive at “compensation actually paid” to our PEO, as computed in accordance with Item 402(v) of Regulation S-K: |

  30. Pay Versus Performance Table

    | | 2022 | 2021 | | SCT Total for PEO | $897,630 | $1,159,982 | | Less: Amount reported under the “Stock Awards” column in the SCT | $(277,056) | $(235,470) | | Add: Fair value as of fiscal year-end of awards granted during the fiscal year that are outstanding and unvested as of the end of the fiscal year | $225,576 | $235,658 | | Add: Change in fair value as of fiscal year-end, compared to prior fiscal year-end, of awards granted in any prior fiscal year that are outstanding and unvested as of the end of the fiscal year | $(54,426) | $11,640 | | Add: Change in fair value as of vesting date, compared to prior fiscal year-end, of awards granted in any prior fiscal year for which all vesting conditions were satisfied at fiscal year-end or during the fiscal year | $(3,400 | $3,400 | | Total Adjustments | $(109,306) | $15,228 | | Compensation Actually Paid to PEO | $788,324 | $1,175,210 |

  31. Pay Versus Performance Table

    | (4) The dollar amounts reported represent the average of the amounts reported for the non-PEO NEOs for the applicable fiscal year in the “Total” column of the Summary Compensation Table. | | (5) The following table sets forth the adjustments made, on an average basis, to the average summary compensation table (SCT) total for each year represented in the pay versus performance table to arrive at “average compensation actually paid” to our non-PEO NEOs: |

  32. Pay Versus Performance Table

    | | 2022 | 2021 | | Average SCT Total for Non-PEO NEOs | $612,198 | $627,198 | | Less: Amount reported under the “Stock Awards” column in the SCT | $(158,456) (a) | $(105,210) | | Add: Fair value as of fiscal year-end of awards granted during the fiscal year that are outstanding and unvested as of the end of the fiscal year | $130,140 | $105,294 | | Add: Change in fair value as of fiscal year-end, compared to prior fiscal year-end, of awards granted in any prior fiscal year that are outstanding and unvested as of the end of the fiscal year | $(48,636) | $12,610 | | Add: Change in fair value as of vesting date, compared to prior fiscal year-end, of awards granted in any prior fiscal year for which all vesting conditions were satisfied at fiscal year-end or during the fiscal year | $(1,700) | $1,700 | | Total Adjustments | $(78,652) | $14,394 | | Average Compensation Actually Paid to Non-PEO NEOs | $533,547 | $641,592 |

  33. Pay Versus Performance Table

    | (a) Mr. Sullivan was not granted any stock awards for 2022 due to expected retirement. | | (6) The amounts reported represent the measurement period value of an investment of $100 in our stock on December 31, 2020 (the last trading day before the 2021 fiscal year), and then valued again on each of December 31, 2021 (the last trading day of the 2021 fiscal year) and December 30, 2022 (the last trading day of the 2022 fiscal year), based on the closing price per share of the Company’s common stock as of such dates and assuming the reinvestment of dividends. | | (7) The amounts reported represent net income for the applicable fiscal year calculated in accordance with generally accepted accounting principles in the United States. |

  34. Narrative Disclosure to Pay Versus Performance Table

    Narrative Disclosure to Pay Versus Performance Table The Company enthusiastically embraces the pay-for performance philosophy. Over the last several years, the Company has not achieved the performance goals across our key metrics and as such the pay for the performance has been below expectations but underscores the effectiveness of our compensation program. For 2022, our shareholders’ value decreased by approximately 23% of the value on their shareholder return and accordingly, the executive compensation actually paid for the PEO & non-PEO NEOs was reduced by approximately 33% and 17%, respectively. For 2022, the executive compensation actually paid for the PEO & the non-PEO NEOs as a percentage of net income was 6% and 4%, respectively. For 2021, the executive compensation actually paid for the PEO & the non-PEO NEOs as a percentage of net income was 13% and 7%, respectively. The program we have designed is incentivizing our executive team to drive the results that create value for our stockholders and motivating our executive team to sustain that value creation in the future fiscal years by rewarding the value created in the current fiscal year. We believe our compensation program exemplifies a properly functioning pay-for-performance approach to compensation. We have constructed a compensation program that incentivizes our executive team to outperform our peers thereby generating significant value for our stockholders.