Equity Plans

Common Stock

SJW Group has a Long-Term Stock Incentive Plan (the “Plan”), which has 1,800,000 shares of common stock reserved for issuance. The Plan was initially adopted by the Board of Directors on March 6, 2002. On January 30, 2013, the amended and restated Plan was adopted by the Board and became effective on April 24, 2013. The Plan was subsequently amended and the amended and restated Plan was adopted by the Board on July 29, 2015.

The Plan allows SJW Group to provide employees, non-employee Board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the Company or any parent or subsidiary the opportunity to acquire an equity interest in SJW Group.

A participant in the Plan generally may not receive Plan awards covering an aggregate of more than 600,000 shares of common stock in any calendar year. Additionally, awards granted under the Plan may be conditioned upon the attainment of specified Company performance goals. The types of awards included in the Plan are restricted stock awards, restricted stock units, performance shares, or other share-based awards. In addition, shares are issued to employees under the Employee Stock Purchase Plan (“ESPP”). The last offering period under the ESPP ended on July 31, 2014. A 2014 Employee Stock Purchase Plan (“2014 ESPP”) was approved by Company stockholders in April 2014. The initial offering period under the 2014 ESPP commenced on August 1, 2014 with a January 30, 2015 purchase date.

As of December 31, 2017, 2016 and 2015, 628,546, 576,074 and 516,956 shares have been issued pursuant to the Plan, and 228,885, 229,972 and 245,976 shares are issuable upon the exercise of outstanding options, restricted stock units, and deferred restricted stock units for the years ended 2017, 2016 and 2015, respectively. The remaining shares available for issuance under the Plan are 942,569 as of December 31, 2017. The compensation costs charged to income is recognized on a straight-line basis over the requisite service period.

A summary of compensation costs charged to income, proceeds from the exercise of stock options and similar instruments and the tax benefit realized from stock options and similar instruments exercised, that are recorded to additional paid-in capital and common stock, by award type, are presented below for the years ended December 31:



	2017		2016	2015
Compensation costs charged to income:
ESPP	$	214	168	158
Restricted stock and deferred restricted stock	2,429		1,523	1,445
Total compensation costs charged to income	$	2,643	1,691	1,603
Proceeds from the exercise of stock options and similar instruments:
ESPP	1,215		954	895
Total proceeds from the exercise of stock options and similar instruments	$	1,215	954	895
Excess tax benefits realized from share options exercised and stock issuance:
Restricted stock and deferred restricted stock	—		203	634
Total excess tax benefits realized from share options exercised and stock issuance	$	—	203	634

Restricted Stock and Deferred Restricted Stock

Under SJW Group’s Amended and Restated Deferred Restricted Stock Program (the “Deferred Restricted Stock Program”), SJW Group granted deferred restricted stock units to non-employee Board members. This program was amended effective January 1, 2008. As a result of that amendment, no new awards of deferred restricted stock units will be made under the Deferred Restricted Stock Program with respect to Board service after December 31, 2007.

On January 24, 2017, certain officers of SJW Group were granted performance-based restricted stock units covering an aggregate target number of SJW Group’s shares of common stock equal to 10,744 that will vest based on the actual attainment of specified performance goals measured for the 2017 calendar year and continued service through December 31, 2017. Of such performance-based restricted stock units, units covering 6,639 shares of common stock were granted to a key officer which would only vest on the actual attainment of a specified performance goal and the number of shares issuable under this award is either 0% or 100%. The number of shares issuable under the remaining units, ranging between 0% to 150% of the target number of shares, is based on the level of actual attainment of specified performance goals. The units do not include dividend equivalent rights. The awards have no market conditions and the share-based compensation expense of $50.24 per unit which was based on the award grant date fair value is being recognized assuming the performance goals will be attained at 100% of target. As of December 31, 2017, the specified performance goals and service requirement were met of the key officer and certain officers and 100% and 150%, respectively, of the target number of shares is expected to vest on February 26, 2018 and issued on February 28, 2018 upon approval of the Executive Compensation Committee of the Board on February 26, 2018.

On April 26, 2017, restricted stock units covering an aggregate of 9,240 shares of common stock of SJW Group were granted to the non-employee board members of SJW Group. The units vest upon continuous board service through the day immediately preceding the date of the next annual stockholder meeting with no dividend equivalent rights. Share-based compensation expense of $51.13 per unit which is based on the award grant date fair value is being recognized over the service period beginning in 2017.

On November 6, 2017, restricted stock units covering 14,552 shares of common stock of SJW Group were granted to a key executive of SJW Group. The units vest in three equal successive installments upon completion of each year of service with no dividend equivalent rights. Share-based compensation expense of $59.31 per unit which is based on the award grant date fair value is being recognized over the service period beginning in 2017.

On August 4, 2014, a key employee of SJW Group was granted performance-based restricted stock units covering a target number of shares of SJW Group’s common stock equal to 19,917 that would convert, if earned, between August 4, 2014 and December 31, 2017, based on the terms of the award. The number of shares issuable under the award, ranged between 0% and 200% of the target number of shares, based on the level of actual attainment of specified performance goals. These units do not include dividend equivalent rights. The fair value of the performance-based restricted awards was estimated utilizing the Monte Carlo valuation model, using the fair value of SJW Group’s common stock with the effect of market condition and no dividend yield on the date of grant, and assumed the performance goals will be attained. Share-based compensation expense is recognized at $26.81 per unit. If such goals were not met and requisite service not rendered, no compensation cost would be recognized and any recognized compensation cost would have been reversed. As of December 31, 2017, the specified performance goals and service requirement were met and 200% of the target number of shares is expected to vest on February 26, 2018 and issued on February 28, 2018 upon approval of the Executive Compensation Committee of the Board on February 26, 2018.

A summary of SJW Group’s restricted and deferred restricted stock awards as of December 31, 2017, and changes during the year ended December 31, 2017, are presented below:



	Units		Weighted- Average Grant- Date Fair Value
Outstanding as of January 1, 2017	192,720		$	21.69
Issued	48,754		$	52.19
Vested	(50,978	)	$	27.99
Forfeited or expired	—		$	—
Outstanding as of December 31, 2017	190,496		$	27.81
Shares vested as of December 31, 2017	103,013		$	16.71

A summary of the status of SJW Group’s nonvested restricted and deferred restricted stock awards as of December 31, 2017, and changes during the year ended December 31, 2017, are presented below:



	Units		Weighted- Average Grant- Date Fair Value
Nonvested as of January 1, 2017	85,903		$	28.00
Granted	48,754		$	52.19
Vested	(47,174	)	$	29.10
Forfeited	—		$	—
Nonvested as of December 31, 2017	87,483		$	40.89

As of December 31, 2017, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $1,569. This cost is expected to be recognized over a weighted-average period of 1.14 years.

Dividend Equivalent Rights

Under the Plan, certain holders of restricted stock and deferred restricted stock awards may have the right to receive dividend equivalent rights (“DERs”) each time a dividend is paid on common stock after the grant date. Stock compensation on DERs is recognized as a liability and recorded against retained earnings on the date dividends are issued.

The Deferred Restricted Stock and Deferral Election Programs for non-employee Board members were amended effective January 1, 2008, to allow the DERs’ with respect to the deferred shares to remain in effect only through December 31, 2017. Accordingly, the last DERs’ conversion into deferred restricted stock units under such programs will occur on the first business day in January 2018. Previously, no such time limitation was placed in the Deferred Restricted Stock and Deferral Election Program.

As of December 31, 2017, 2016 and 2015, a cumulative of 77,034, 74,403 and 70,691 dividend equivalent rights were converted, since inception, to deferred restricted stock awards, respectively. For the years ended December 31, 2017, 2016 and 2015, $139, $114 and $114, respectively, related to dividend equivalent rights were recorded against retained earnings and were accrued as a liability.

Employee Stock Purchase Plan

The 2014 ESPP allows eligible employees to purchase shares of SJW Group’s common stock at 85% of the fair value of shares on the purchase date. Under the 2014 ESPP, employees can designate up to a maximum of 10% of their base compensation for the purchase of shares of common stock, subject to certain restrictions. A total of 400,000 shares of SJW Group’s common stock have been reserved for issuance under the 2014 ESPP.

As of December 31, 2017, the 2014 ESPP had six purchase intervals since its inception. For the year ended December 31, 2017, 2016 and 2015, a total of 27,743, 30,214 and 33,318 shares, respectively, were issued under the 2014 ESPP and ESPP. Prior to the inception of the 2014 ESPP plan, the ESPP had seventeen purchase intervals. The plan has no look-back provisions. For the years ended December 31, 2017, 2016 and 2015, cash received from employees towards the 2014 ESPP and ESPP amounted to $1,282, $1,060 and $916, respectively.

For the years ended December 31, 2017, 2016 and 2015, SJW Group’s recorded expenses were $229, $185 and $162 related to the 2014 ESPP and the prior ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ended January 31, 2018 for the 2014 ESPP is approximately $99. This cost is expected to be recognized during the first quarter of 2018.