Willdan Group, Inc.
Willdan Group, Inc. (Form: DEF 14A, Received: 04/18/2017 16:11:44)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant ☒

 

Filed by a Party other than the Registrant ☐

 

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

WILLDAN GROUP, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)  

Title of each class of securities to which transaction applies:

 

 

 

 

(2)  

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)  

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)  

Total fee paid:

 

 

 

 

 

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)  

Amount Previously Paid:

 

 

 

 

(2)  

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)  

Filing Party:

 

 

 

 

(4)  

Date Filed:

 

 

 

 

 

 


 

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PICTURE 2

 

April 18, 2017

 

Dear Stockholder:

 

You are cordially invited to attend our Annual Meeting of Stockholders to be held on Thursday, June 8, 2017 at 10:00 a.m. Pacific Daylight Time at the Hyatt Regency Orange County, 11999 Harbor Blvd., Garden Grove, California 92840.

 

We utilize the Internet as our primary means of furnishing proxy materials to our stockholders.  Stockholders will receive a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials and voting via the Internet.  The Notice of Internet Availability of Proxy Materials also provides information on how stockholders can obtain paper copies of the proxy materials if they so choose.  Internet transmission and voting are designed to be efficient, cost-effective and preserve resources.

 

At the Annual Meeting, you will be asked to (i) elect nine directors; (ii) ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm; (iii) vote on a non-binding advisory resolution approving the Company’s executive compensation; (iv) approve the amendment to 2008 Performance Incentive Plan (the “2008 Plan”); (v) approve the amendment to our Employee Stock Purchase Plan (the “ESPP”) and (vi) transact such other business as may properly come before the meeting.  You will note that the Board of Directors of the Company recommends a vote “FOR” the election of each of the nine director nominees, “FOR” the ratification of the appointment of KPMG LLP, “FOR” the approval of the non-binding advisory resolution on the Company’s executive compensation, “FOR” the amendment to 2008 Performance Incentive Plan, and “FOR” the amendment to our ESPP. The matters to be considered during the Annual Meeting are described in the Notice of Internet Availability of Proxy Materials, the Notice of Annual Meeting of Stockholders and the Proxy Statement.

 

YOUR VOTE IS VERY IMPORTANT.  We appreciate you taking the time to vote promptly.  After reading the Proxy Statement, please vote by Internet, telephone, or mail at your earliest convenience to assure that your shares will be represented and voted at the Annual Meeting, even if you cannot attend.  Instructions regarding all methods of voting are provided in the Notice of Internet Availability of Proxy Materials and on the proxy card.  If you decide to attend the Annual Meeting and would prefer to vote by ballot, your proxy will be revoked automatically and only your vote at the Annual Meeting will be counted.  If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares.  YOUR SHARES CANNOT BE VOTED UNLESS YOU VOTE BY INTERNET, TELEPHONE OR MAIL, OR ATTEND THE ANNUAL MEETING AND VOTE IN PERSON.

 

Thank you for your continued support of Willdan.  We look forward to seeing you at the Annual Meeting.

 

 

 

 

/s/ Thomas D. Brisbin

 

Thomas D. Brisbin

 

Chairman of the Board and Chief Executive Officer

 

 

 


 

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WILLDAN GROUP, INC.

2401 EAST KATELLA AVENUE, SUITE 300

ANAHEIM, CALIFORNIA 92806


 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 8, 2017


 

NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of Willdan Group, Inc., a Delaware corporation (the “Company”), will be held on Thursday, June 8, 2017 at 10:00 a.m. Pacific Daylight Time at the Hyatt Regency Orange County, 11999 Harbor Blvd., Garden Grove, California 92840, for the following purposes described in this Notice:

 

(1)

To elect nine members of the Board of Directors, each to serve for a one-year term and until his or her successor is duly elected and qualified;

 

(2)

To consider and vote upon the ratification of the appointment of KPMG LLP as the independent registered public accounting firm for the Company for the year ending December 29, 2017;

 

(3)

To vote on a non-binding advisory resolution approving the Company’s executive compensation;

 

(4)

To approve an amendment to the Company’s 2008 Plan, including an increase in the number of shares available for grant under the 2008 Plan;

 

(5)

To approve an amendment to the Company’s ESPP, including an increase in the number of shares available for issuance under the ESPP; and

 

(6)

To consider and act upon any other matter that may properly be brought before the Annual Meeting and at any adjournment or postponement thereof.

 

Any action may be taken on the foregoing matters at the Annual Meeting on the date specified above, or on any date or dates to which the Annual Meeting may be adjourned or postponed.

 

The Board of Directors has fixed the close of business on Thursday, April 13, 2017 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof. Only stockholders of record of the Company’s common stock, $0.01 par value per share, at the close of business on that date will be entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 8, 2017:  Our proxy statement is attached.  Our financial and other information is contained in our 2016 Annual Report to Stockholders.  Pursuant to rules promulgated by the Securities and Exchange Commission, we have elected to provide access to our proxy materials by notifying you of the availability of our proxy materials on the Internet.  You will not receive a printed copy of the proxy materials unless specifically requested.  This proxy statement and our 2016 Annual Report to Stockholders, including our Form 10-K for the year ended December 30, 2016, are available on our website at http://ir.willdangroup.com/annual-proxy.cfm, which does not have “cookies” that identify visitors to the site.  If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.  In addition, the Notice of Internet Availability of Proxy Materials provides instructions on how stockholders may request to receive proxy materials for future Annual Meeting materials in printed or email form.

 


 

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YOUR VOTE IS VERY IMPORTANT .  Whether or not you plan to attend the Annual Meeting of Stockholders, we urge you to vote and submit your proxy by the Internet, telephone or mail in order to ensure the presence of a quorum.  Registered holders may vote:

 

1.

By Internet:  go to www.investorvote.com/WLDN;

 

2.

By toll-free telephone:  call 1-800-652-VOTE (8683); or

 

3.

By mail:  mark, sign, date and promptly mail the proxy card when received.

 

Any Proxy may be revoked by delivery of a later dated Proxy or a written notice of revocation or by attending the Annual Meeting and voting in person.

 

 

By Order of the Board of Directors

 

/s/ Kate Nguyen

 

Kate M. Nguyen

 

Secretary

 

Anaheim, California

April 18, 2017

 

 

 


 

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Table of Contents

 

 

Page

 

 

ABOUT THE ANNUAL MEETING  

1

PROPOSAL 1 :

ELECTION OF DIRECTORS

5

 

Information Regarding Nominees

5

 

Vote Required for Election of Each Nominee

9

PROPOSAL 2 :

RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

10

 

Audit and Other Fees

10

 

Audit Committee Pre-Approval Policy

11

 

Vote Required for Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm

11

PROPOSAL 3 :

VOTE ON NON-BINDING ADVISORY RESOLUTION APPROVING EXECUTIVE COMPENSATION

12

 

Vote Required for Approval of the Non-Binding Advisory Resolution Approving Executive Compensation

12

PROPOSAL 4 :

AMENDMENT TO 2008 PERFORMANCE INCENTIVE PLAN

13

PROPOSAL 5 :

AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN

24

CORPORATE GOVERNANCE  

28

 

The Board of Directors

28

PRINCIPAL STOCKHOLDERS  

33

MANAGEMENT  

35

EXECUTIVE COMPENSATION  

37

 

Compensation, Discussion & Analysis (“CD&A”)

37

 

Summary Compensation Table—Fiscal 2016, Fiscal 2015, and Fiscal 2014

42

 

Grants of Plan-Based Awards in Fiscal 2016

44

 

Outstanding Equity Awards at Fiscal 2016 Year-End

45

 

Option Exercises and Stock Vested in Fiscal 2016

46

 

Potential Payments Upon Termination or Change in Control

46

DIRECTOR COMPENSATION  

48

 

Director Compensation for Fiscal 2016

48

EQUITY COMPENSATION PLAN INFORMATION  

50

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS  

51

 

Related Person Transactions

51

 

Related Person Transaction Policy

51

REPORT OF THE AUDIT COMMITTEE  

52

OTHER INFORMATION  

53

 

Solicitation of Proxies

53

 

Householding of Stockholder Materials

53

 

Annual Report on Form 10-K

53

 

Stockholder Proposals

53

 

Section 16(a) Beneficial Ownership Reporting Compliance

54

 

Other Matters

54

APPENDIX A—AMENDED AND RESTATED 2008 PERFORMANCE INCENTIVE PLAN  

A-1

APPENDIX B—AMENDED AND RESTATED 2006 EMPLOYEE STOCK PURCHASE PLAN  

B-1

 

 

 

 

 

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WILLDAN GROUP, INC.

2401 EAST KATELLA AVENUE, SUITE 300

ANAHEIM, CALIFORNIA 92806


PROXY STATEMENT

FOR 2017 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 8, 2017


This Proxy Statement is furnished to you in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Willdan Group, Inc., a Delaware corporation (the “Company”), for use at its 2017 Annual Meeting of Stockholders to be held on Thursday, June 8, 2017 at 10:00 a.m. Pacific Daylight Time at the Hyatt Regency Orange County, 11999 Harbor Blvd., Garden Grove, California 92840, and at any adjournment or postponement thereof (the “Annual Meeting”).  We first made this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders and proxy card available to stockholders on or about April 18, 2017.  The Company’s 2016 Annual Report, including financial statements for the fiscal year ended December 30, 2016, is being made available to stockholders concurrently with this Proxy Statement.  The Annual Report, however, is not part of the proxy solicitation material.

 

The terms “we,” “our,” “us” or the “Company” refer to Willdan Group, Inc. and its subsidiaries.

 

ABOUT THE ANNUAL MEETING

 

Why did I receive only a Notice of Internet Availability?

 

As permitted by the United States Securities and Exchange Commission (the “SEC”), we are furnishing to our stockholders our Notice of Annual Meeting, Proxy Statement and Annual Report for the year ended December 30, 2016 primarily over the Internet.  On or prior to April 21, 2017, we will mail to each of our stockholders (other than those who previously requested electronic delivery or to whom we are mailing a paper copy of the proxy materials) a Notice of Internet Availability containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet.  The Notice of Internet Availability also contains instructions on how to receive, free of charge, paper copies of the proxy materials.  If you received the Notice of Internet Availability, you will not receive a paper copy of the proxy materials unless you request one.

 

We believe that delivery options that we have chosen will allow us to provide our stockholders with the proxy materials they need, while lowering the cost of the delivery of the materials and reducing the environmental impact of printing and mailing printed copies.

 

What is the purpose of the Annual Meeting?

 

At the Annual Meeting, our stockholders will consider and vote on the following matters:

 

(1)

the election of nine directors;

 

(2)

the ratification of the appointment of the Company’s independent registered public accounting firm;

 

(3)

the non-binding advisory resolution approving the Company’s executive compensation;

 

(4)

an amendment to the Company’s 2008 Performance Incentive Plan (the “2008 Plan”), including an increase in the number of shares available for grant under the 2008 Plan; and

 

(5)

an amendment to the Company’s Employee Stock Purchase Plan (the “ESPP”), including an increase in the number of shares available for issuance under the ESPP.

 

In addition, our stockholders will transact any other business that properly comes before the meeting.  Management of the Company will also respond to any questions from our stockholders.

 

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Who can attend the Annual Meeting?

 

All stockholders of the Company as of the Record Date (as defined below), or their duly appointed proxy holders, may attend the Annual Meeting.

 

Who is entitled to vote?

 

Only holders of record of the Company’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on the record date, April 13, 2017 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting.  Holders of Common Stock are entitled to cast one vote for each share held by them on each matter to be voted upon.  The Common Stock is the only class of securities of the Company authorized to vote.  Under the Company’s Certificate of Incorporation and applicable law, a stockholder is not entitled to cumulative voting rights in the election of directors.

 

What constitutes a quorum?

 

The presence, in person or by proxy, of holders of at least a majority of shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting.  As of the Record Date, 8,559,261 shares of Common Stock were outstanding and entitled to vote.  Abstentions and “broker non-votes” will count toward the presence of a quorum.  A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner returns an executed proxy, but strikes out a particular proposal because the nominee does not have discretionary voting power with respect to that matter and has not received voting instructions from the beneficial owner.

 

What happens if a quorum is not present at the meeting?

 

If a quorum is not present at the scheduled time of the meeting, the meeting may be adjourned to another place, date or time until a quorum is present.  The date, time, and place of the adjourned meeting will be announced at the meeting when the adjournment is taken, and no other notice will be given unless the adjournment is for more than 30 days or unless after the adjournment a new record date is fixed for the adjourned meeting.

 

How do I vote?

 

If you are a registered stockholder as of the close of business on the Record Date, you may vote in person at the Annual Meeting or by proxy without attending the meeting.  Stockholders whose shares are registered in their own names may vote (1) by returning a proxy card, (2) via the Internet, or (3) by telephone.  Specific instructions to be followed by any registered stockholder interested in voting via the Internet or by telephone are set forth in the Notice of Internet Availability of Proxy Materials and/or on the proxy card.  The Internet and telephone voting procedures are designed to authenticate the stockholder’s identity and to allow the stockholder to vote his or her shares and confirm that his or her voting instructions have been properly recorded.  If you do not wish to vote via the Internet or telephone, please complete, date, sign, and return the proxy card.  If you sign and return the proxy card but do not give any instructions, your shares will be voted by the persons named in the proxy card in accordance with the recommendations of the Board given below.

 

If your stock is held in the name of a broker, bank or other nominee, please mark, date, sign, and return the voting instruction form you receive from your broker or nominee with the proxy card.

 

If you are a registered stockholder and wish to vote in person at the meeting, be sure to bring a form of personal picture identification with you.  If your stock is held by a broker, bank or other nominee (in “street name”) and you wish to vote in person at the meeting, in addition to picture identification you should bring an account statement or a letter from the record holder indicating that you owned the shares as of the record date, and obtain from the record holder and bring with you a proxy from the record holder issued in your name.

 

What is the deadline for voting my shares?

 

If you are a stockholder of record, your proxy must be received by telephone or the Internet by 1:00 a.m. Pacific time on June 8, 2017 in order for your shares to be voted at the Annual Meeting.  However, if you are a stockholder of record and you received a copy of the proxy materials by mail, you may instead mark, sign, date and return the proxy

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card you received and return it in the accompanying prepaid and addressed envelope so that it is received by us before the Annual Meeting in order for your shares to be voted at the Annual Meeting.  If you hold your shares in street name, please provide your voting instructions by the deadline specified by the bank, broker or other nominee who holds your shares.

 

Can I change my vote after I return my proxy card?

 

Yes.  Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by delivering a duly executed proxy bearing a later date or a written revocation to the Secretary of the Company at the address of the Company set forth above, or by attending the Annual Meeting and voting in person.  Any stockholder of record as of the Record Date attending the Annual Meeting may vote in person, whether or not a proxy has been previously given, but the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy.

 

If I return my proxy card without specifying voting instructions on it, will my shares be voted?

 

Unless you give other instructions on your proxy, the persons named as proxy holders on the proxy will vote in accordance with the recommendations of the Company’s Board.  The Board’s recommendations are set forth together with the description of each matter in this Proxy Statement.  In summary, the Board unanimously recommends a vote:  FOR election of each of the nine nominees for director, FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 29, 2017, FOR the approval of the non-binding advisory resolution approving the Company’s executive compensation, FOR an amendment to the Company’s 2008 Plan, including an increase in the number of shares available for grant under the Plan, and FOR an amendment to the ESPP, including an increase in the number of shares available for issuance under the ESPP.

 

With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is given, at the discretion of the proxy holders. 

 

What vote is required to approve each proposal?

 

Election of Directors (Proposal No. 1) .  Once a quorum has been established, the affirmative vote of a plurality of the shares present in person or represented by proxy on the matter at the Annual Meeting will be required for the election of each director nominee, meaning that the persons receiving the highest number of FOR votes, up to the total number of directors to be elected at the meeting, will be elected.  Stockholders are not permitted to cumulate their shares for the purpose of electing directors.

 

Other Items (Proposal Nos. 2, 3, 4 and 5) .  Once a quorum has been established, pursuant to our Bylaws, approval of each of the other items to be submitted for a vote of stockholders at the Annual Meeting requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal.  Notwithstanding this vote standard required by our Bylaws, Proposal No. 2 (ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ended December 29, 2017) and Proposal No. 3 (an advisory approval of executive officer compensation) are advisory only and are not binding on us.  Our Board will consider the outcome of the vote on each of these items in considering what action, if any, should be taken in response to the vote by stockholders.

 

With respect to the election of directors, ratification of the appointment of KPMG LLP, the non-binding advisory resolution approving the Company’s executive compensation, the approval of the amendment to the 2008 Plan and the approval of the amendment to the ESPP, abstentions will have the effect of a vote AGAINST a proposal.

 

Who tabulates the votes?

 

Stockholder votes will be tabulated by Computershare Trust Company, N.A., as inspector of election for the Annual Meeting.

 

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Could other matters be decided at the meeting?

 

It is not anticipated that any matter, other than those set forth in this Proxy Statement, will be presented at the Annual Meeting.  If other matters are presented, proxies will be voted by the proxy holders in accordance with the recommendation of the Board or, if no recommendation is given, in the discretion of the proxy holders.

 

What happens if the Annual Meeting is postponed or adjourned?

 

Your proxy may be voted at the postponed or adjourned Annual Meeting.  You will still be able to change your proxy until it is voted.

 

How can I receive a copy of the Annual Report?

 

We will mail you, without charge, a copy of our annual report on Form 10-K for the fiscal year ended December 30, 2016, including the consolidated financial statements, schedules and list of exhibits, upon written request.  Requests should be sent to:  Willdan Group, Inc., 2401 East Katella Avenue, Suite 300, Anaheim, California 92806, ATTN:  Investor Relations.  The annual report on Form 10-K is also available at www.willdan.com .

 

Who pays for the proxy solicitation, and how will the Company solicit votes?

 

Willdan will pay all costs associated with the solicitation of proxies. We also will reimburse any costs incurred by brokers, banks and other nominees to forward proxy solicitation materials to beneficial owners. Proxies may be solicited by us on behalf of our board of directors in person or by mail, telephone, facsimile or e-mail. We have not retained any firm to assist with the solicitation of proxies.

 

Where can I find the voting results of the Annual Meeting?

 

Our intention is to announce the preliminary voting results at the Annual Meeting and to publish the final results within four business days after the Annual Meeting on a Form 8-K to be filed with the SEC and which we will make available on our website at www.willdan.com   under “Investors—SEC Filings.” The information on our website is not a part of this Proxy Statement.

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Proposal 1:

 

ELECTION OF DIRECTORS

 

The Bylaws provide that the Board of Directors (the “Board”) consist of nine directors until changed by the Board.  On March 23, 2012, the Board passed a resolution decreasing the size of the board to six directors, effective immediately prior to the 2012 Annual Meeting of Stockholders, which was held on June 1, 2012.  On April 14, 2015, the Board passed a resolution increasing the size of the board to eight directors, effective on the same date.  On March 7, 2017, the Board passed a resolution increasing the size of the board to nine directors, effective March 16, 2017.  The directors are regularly elected at each annual meeting of the stockholders, and each director holds office until his or her successor has been elected and qualified or until his or her earlier resignation or removal.

 

The nine nominees, if elected at the Annual Meeting, will hold office until the next annual meeting of stockholders, or until an earlier stockholder meeting at which directors are elected, and until their respective successors are duly elected and qualified.  The Board has nominated Thomas D. Brisbin, Keith W. Renken, Steven A. Cohen, Raymond W. Holdsworth, Douglas J. McEachern, Dennis V. McGinn, Curtis S. Probst, Mohammad Shahidehpour and Win Westfall to serve as directors of the Company (each a “Nominee” and collectively, the “Nominees”).  All of the Nominees are currently serving as directors.

 

Each Nominee has consented to be nominated and to serve if elected.  However, if any Nominee is unavailable for election or unable to serve, the proxy holders may vote for another person nominated by the Board or the Board may amend the Bylaws to reduce the number of directors to be elected at the Annual Meeting.

 

Information Regarding Nominees

 

The following table and biographical descriptions set forth certain information with respect to the Nominees.  Unless otherwise specified, each Nominee has continuously served as a director of the Company since he or she was previously elected or appointed, based on information furnished to the Company by each Nominee.  The following information is as of April 18, 2017, unless otherwise specified.

 

Name

    

Age

    

Director
Since

    

Positions Held with the Company
(other than Director)

Thomas D. Brisbin

 

64

 

2007

 

Chairman and Chief Executive Officer

Keith W. Renken

 

82

 

2006

 

 

Steven A. Cohen

 

63

 

2015

 

 

Raymond W. Holdsworth

 

74

 

2009

 

 

Douglas J. McEachern

 

65

 

2009

 

 

Dennis V. McGinn

 

71

 

2017

 

 

Curtis S. Probst

 

49

 

2017

 

 

Mohammad Shahidehpour

 

61

 

2015

 

 

Win Westfall

 

83

 

2001

 

 

 

The Company believes that the members of its Board should have a range of skills, experience, diversity, and expertise that enables the Board to provide sound guidance with respect to the Company’s operations and interests.  When considering a candidate, the Board looks at the current composition of the Board and the evolving needs of the Company, in addition to such candidate’s background and accomplishments.  The Nominating and Governance Committee identifies new candidates for election to the Board, reviews their qualifications, skills, experience and other characteristics, and can recommend nominees for director to the Board for approval.

 

The Board seeks directors with strong reputations and experience in areas relevant to the strategy and operations of the Company’s businesses, particularly in engineering, consulting and finance.  All of the Nominees hold or have held senior executive positions in large, complex organizations and have operating experience that meets these objectives, as described below.  In these positions, they have gained experience in core management skills, strategic and financial planning, public company financial reporting, corporate governance, risk management, and leadership development.  Additionally, a number of our directors have experience serving on the boards of directors of other public companies, which increases their knowledge of effective corporate governance.

 

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The Board also believes that each of the Nominees and current directors has other key attributes that are important to an effective board, including integrity and demonstrated high ethical standards, sound judgment, analytical skills, the ability to engage management and each other in a constructive and collaborative fashion, diversity of background, experience, and thought, and the commitment to devote significant time and energy to service on the Board and its Committees.  The following biographies provide further qualifications, attributes and other information with respect to the Nominees.

 

Thomas D. Brisbin has served as our Chairman of the Board since November 2016, a member of the Board since 2007 and as our Chief Executive Officer since 2007.  Dr. Brisbin also served as our President from April 2007 to November 2016.  Dr. Brisbin previously was vice president of and consultant for AECOM Technology Corporation, or AECOM, from spring 2004 until he joined us.  At AECOM, a company focused on infrastructure, environment and facilities engineering contracts, Dr. Brisbin was responsible for developing the company’s environmental business.  Prior to joining AECOM, Dr. Brisbin was chief operating officer and executive vice president of Tetra Tech, Inc., or Tetra Tech, a leading provider of consulting, engineering and technical services, for five years.  Prior to that, he was employed by Planning Research Corporation, or PRC, a systems analysis and management consulting company and wholly-owned subsidiary of The Black & Decker Corporation, from 1978 to 1995 and was co-founder and President of PRC Environmental Management, Inc.  During his tenure at PRC, he was involved in all aspects of operations, marketing and finance.  Before joining PRC, he was a research associate at Argonne National Laboratory.  He has also served as an adjunct professor at the Illinois Institute of Technology.  Dr. Brisbin holds a B.S. degree from Northern Illinois University and a Ph.D. in Environmental Engineering from Illinois Institute of Technology.  He also completed Harvard Business School’s Advanced Management Program in 1988.  Dr. Brisbin, as our current Chairman of the Board and Chief Executive Officer and our prior President, brings his in-depth knowledge of the day-to-day operations of the Company and its industry to the Board, providing valuable insight to the Board as it reviews our operations, growth and financial prospects.  In addition, we believe that his experience as an executive officer at Tetra Tech, a publicly traded engineering and consulting company, benefits our Board by increasing his knowledge of our industry and effective public company corporate governance.

 

Keith W. Renken joined our Board in 2006 and serves as our lead independent director and is a member of our Audit Committee.  Mr. Renken retired in 1992 as Senior Partner and Chairman, Executive Committee of Southern California, for the public accounting firm Deloitte & Touche.  From 1992 through 2006, he was an adjunct professor (executive in residence) in the Marshall School of Business at the University of Southern California.  He is currently the Managing Partner of Renken Enterprises, a family business providing consulting services to growing companies and real estate operations.  Mr. Renken is on the Board of Directors and Audit Committees of two other publicly held companies, East West Bancorp, Inc., since 2000, and Limoneira Company, an integrated agribusiness, since 2009, and one investment management company, Whittier Trust Company, since September 2008.  He is also on East West Bancorp, Inc.’s nominating and corporate governance committee.  Mr. Renken was also a member of the Board of Directors of 21 st Century Insurance Group from 2002 until 2007, and he serves on the boards of directors and/or audit committees of several other private companies and non-profit organizations.  Mr. Renken is a Certified Public Accountant in the states of Arizona (inactive) and California (inactive).  He received a B.S. in Business Administration in 1957 from the University of Arizona and an M.S. in Business Administration from the University of Arizona in 1959.  We believe that Mr. Renken’s considerable knowledge of financial and operational issues facing large companies and his accounting and finance experience at Deloitte makes him a valuable member of our Board and its committees, including the Audit Committee.  In addition, we believe that Mr. Renken’s extensive experience on the boards and audit committees of diverse public and private companies, including financial services companies, provides him with increased knowledge of effective corporate governance that benefits the Board.

 

Steven A. Cohen joined our Board in 2015 and serves as the chairperson of our Strategy, Mergers and Acquisitions Committee and is a member of our Nominating and Governance Committee.  He is Executive Director of Columbia University’s Earth Institute, where he is responsible for managing the education, research, outreach and operational programs that address sustainable development throughout the world.  The Earth Institute is the largest institute at Columbia with over 799 full-time employees and an annual budget of over $135 million.  Dr. Cohen is also a Public Affairs Professor at Columbia’s School of International and Public Affairs and Director of its Master of Public Administration Program in Environmental Science and Policy.  From 1985 to 1998, he served as Director of Columbia’s Graduate Program in Public Policy and Administration.  Dr. Cohen began his career at Columbia in 1981 after working as a policy analyst for the U.S. Environmental Protection Agency for two years.  Over the past three decades, he has served at different times as a consultant to the U.S. Environmental Protection Agency, the most recent being from 2005 to 2010.  From 2001 to 2004, he also served on the United States Environmental Protection Agency’s Advisory Council

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on Environmental Policy and Technology.  Throughout his career, Dr. Cohen has written numerous articles on public management innovation, sustainability and environmental management.  Dr. Cohen has also been a senior advisor to Willdan Energy Solutions since November 2008.  He received a B.A. in Political Science from Franklin College of Indiana in 1974 and an M.A. in Political Science from State University of New York at Buffalo in 1977 and a Ph.D in Political Science with a concentration in environmental policy and management from State University of New York at Buffalo in 1979.  We believe Dr. Cohen’s extensive background in government policy, environmental sciences as well as his substantial knowledge of our company though his role as a senior advisor to Willdan Energy Solutions will provide our board strategic insight to shape our growth strategy.

 

Raymond W. Holdsworth joined our Board in 2009 and serves as the chairperson of our Compensation Committee and is a member of our Strategy, Mergers and Acquisitions Committee.  Mr. Holdsworth previously served as Vice Chairman of Corporate Development for AECOM from October 2005 through March 2009.  Mr. Holdsworth joined AECOM in 1992 and held a number of positions, including President, before being named Vice Chairman in 2005.  During his tenure at AECOM, he led a variety of outreach, growth and diversification activities.  Mr. Holdsworth began his career at Peat Marwick Mitchell and worked in California’s Office of Transportation Planning and Research.  He has also held senior management positions, including president, with DMJM, an engineering/architectural firm in the transportation and infrastructure industry which is now a major operating subsidiary of AECOM.  He worked for International Technology Corp. and Parsons Brinckerhoff Quade & Douglas Inc., a company that provides strategic consulting, planning, engineering, and program and construction management services relating to infrastructure.  Mr. Holdsworth received a B.A. in English in 1964 from Lake Forest College and an M.B.A. in 1969 from the University of Pennsylvania, Wharton School of Business.  He is a director of the California Chamber of Commerce and the Los Angeles Economic Development Corporation and a former Vice Chairman of the Civil Engineering Research Foundation/International Institute.  As a past trustee of the California State University system, he chaired the Audit committee for three consecutive years.  We believe that Mr. Holdsworth’s background in engineering and experience as the Vice Chairman of Corporate Development for AECOM during the time when it became a public company provides useful insight to the Board with regard to our growth strategy and strategic initiatives.

 

Douglas J. McEachern joined our Board in 2009 and serves as the chairperson of our Audit Committee and is a member of our Compensation Committee.  He was an Audit Partner at Deloitte & Touche, LLP, or Deloitte, from August 1985 until May 2009.  Mr. McEachern was a staff member and manager at Deloitte’s predecessor, Touche Ross & Co., from 1976 to 1983.  From 1983 to 1985, he was the Professional Accounting Fellow with the Federal Home Loan Bank Board in Washington D.C. Mr. McEachern was Chairman of the Board of Directors of Community Bank in Pasadena, California and a member of its Nominating and Governance and Audit Committees until his resignation in October 2015.  In addition, Mr. McEachern joined the Board of Directors of Reading International in May 2012 and is chairman of its Audit and Conflicts Committee and serves on its Compensation Committee.  He is also a member of the Finance Committee and Board of Directors of the Methodist Hospital of Arcadia Foundation.  Mr. McEachern was an auditing and accountancy instructor at Claremont McKenna College until his retirement in December 2015, and he has taught accounting at California State Polytechnic University at Pomona.  Additionally, Mr. McEachern is a member of the American Institute of Certified Public Accountants, or AICPA.  Mr. McEachern received a B.S in Business Administration in 1974 from the University of California, Berkeley, and an M.B.A. in 1976 from the University of Southern California.  We believe that Mr. McEachern’s significant audit experience at Deloitte makes him an important contributor to our Board and its committees, including the Audit Committee.

 

Vice Admiral Dennis V. McGinn, Ret. , joined our Board in March 2017 and serves as a member of our Strategy, Mergers and Acquisitions Committee.  He served as Assistant Secretary of the Navy for Energy, Installations and Environment from September 2013 until January 2017.  In this role, Vice Admiral McGinn, Ret., led the transformation of naval installations toward greater resiliency though energy efficiency, microgrids, and other technologies.  Previously, Vice Admiral McGinn, Ret., served in the United States Navy for 35 years attaining the rank of Vice Admiral.  Vice Admiral McGinn, Ret., served as Deputy Chief of Naval Operations for Warfare Requirements and Programs, overseeing the development of future Navy capabilities, and previously commanded the United States Third Fleet.  While in the Navy, he served as a naval aviator, test pilot, aircraft carrier commanding officer, and national security strategist.  Vice Admiral McGinn, Ret., is a former President of the American Council on Renewable Energy (ACORE) where he led efforts to communicate the economic, security and environmental benefits of renewable energy.  Vice Admiral McGinn, Ret., is also a past member of the Steering Committee of the Energy Future Coalition, the United States Energy Security Council, the Bipartisan Center Energy Board, the past Co-Chairman of the CNA Military Advisory Board, and has been an International Senior Fellow at the Rocky Mountain Institute.  Vice Admiral McGinn, Ret., holds a BS in Naval Engineering from the U.S. Naval Academy.  Vice Admiral McGinn, Ret., was also a

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participant in the National Security Program at Harvard University’s Kennedy School of Government.  We believe that Vice Admiral McGinn, Ret.’s background in the energy and engineering fields, as well as his extensive government and military experience, make him an important contributor to our Board.

 

Curtis S. Probst joined our Board in March 2017 and serves as a member of our Audit Committee and our Strategy, Mergers and Acquisitions Committee. Mr. Probst has served as a Managing Director and Head of Sustainable Finance for the Rocky Mountain Institute since June 2014.  As one of the Institute’s senior leaders, Mr. Probst develops strategies to increase the availability and lower the cost of capital for key energy initiatives.  Mr. Probst also serves on the Board of Directors of NYCEEC and as an Adjunct Lecturer at Columbia University.  Previously, Mr. Probst was a Managing Director, and before that, a Vice President, at Goldman Sachs where he managed teams that executed capital-raising assignments for corporate and governmental clients.  Prior to that, Mr. Probst worked with Salomon Brothers as a Vice President in the Structured and Project Finance Group, which executed a variety of financing assignments.  Mr. Probst holds an MPA from Columbia University’s School of International and Public Affairs as well as a Bachelor of Commerce from the University of Calgary.  He is also a Chartered Financial Analyst. We believe that Mr. Probst’s significant financial knowledge and experience   make him an important contributor to our Board and its committees, including the Audit Committee.

 

Mohammad Shahidehpour joined our Board in 2015 and serves as the chairperson of our Nominating and Governance Committee and is a member of our Compensation Committee and our Strategy, Mergers and Acquisitions Committee.  He is the Bodine Chair Professor in the Electrical and Computer Engineering Department at the Illinois Institute of Technology (IIT) in Chicago, where he also serves as Director of the Robert W. Galvin Center for Electricity Innovation.  He has been a faculty member at IIT since 1983 and is a recipient of IIT’s Excellence in Teaching Award.  Dr. Shahidehpour is the author of six books and 400 technical papers on electric power systems and has been awarded over $50 million in federal research and development grants on electricity grid modernization issues.  Dr. Shahidehpour is the founding chair of the Institute of Electrical and Electronics Engineers (IEEE) Great Lakes Symposium on Smart Grid and the New Energy Economy.  He has served as Editor-in-Chief of the IEEE Transactions on Smart Grid journal since 2009.  Dr. Shahidehpour is an IEEE Distinguished Lecturer and has delivered over 100 invited lectures in several countries on electricity restructuring and smart grid issues.  He has been a keynote speaker in 20 International Conferences since 2007 and counseled governments on electricity grid modernization bills throughout the world.  Dr. Shahidehpour received a B.S. in Electrical Engineering 1977 from Iran’s Sharif University of Technology, and an M.S. in Electrical Engineering in 1978 and a Ph.D in 1981 from University of Missouri.  We believe that Dr. Shahidehpour’s more than 35 years of work with government agencies and electric power companies provides the board valuable insight to guide our growth strategy and strategic vision.

 

Win Westfall served as our Chairman of the Board from May 2006 until November 2016, has been a member of our Board since 2001 and is a member of our Nominating and Governance Committee.  Mr. Westfall was also our President and Chief Executive Officer from May 2006 to February 2007, our Senior Vice President of Corporate Relations from January 2004 to May 2006, and a regional manager in Northern California from 1998 through January 2004.  Mr. Westfall has over 35 years of experience as a line manager for consulting engineering firms, and has served as city engineer for seven California cities.  Mr. Westfall received his B.S. in Civil Engineering from the University of Southern California in 1962 and an M.B.A. from Pepperdine University in 1980.  Mr. Westfall is a fellow of The Society of American Military Engineers and has been active in numerous other professional associations.  During 1997, he served as the National President for The American Public Works Association, or APWA, the first private consultant to hold this position.  Mr. Westfall has served on and chaired national committees for the American Council of Engineering Companies, and in 2004 was made an Honorary CLOD (past president) of the County Engineers Association of California, the first private consultant to be accorded this honor.  He is currently a registered engineer in California and has been a registered civil engineer in Hawaii, Idaho, Nevada and Washington.  Mr. Westfall also has served as the trustee of the APWA Education Endowment Fund since 1999 and was on the California Transportation Foundation Board of Directors from 2005 to 2012.  Mr. Westfall, as a former executive officer and regional manager of the Company with significant engineering experience, brings his in-depth knowledge of our Company and its industry, operations and business to the Board, providing valuable insight to the Board as it reviews our operations, growth and financial prospects.  In addition, we believe that his experience as an engineer for California cities benefits our Board by providing increased understanding of the needs of our clients.

 

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Vote Required for Election of Each Nominee

 

Election of each Nominee requires the affirmative vote of a plurality of all of the votes cast on the election of directors at the Annual Meeting.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES.  PROXIES RECEIVED WILL BE VOTED “FOR” EACH OF THE NOMINEES UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.

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Proposal 2:

 

RATIFICATION OF THE APPOINTMENT OF KPMG LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

KPMG LLP served as the Company’s independent registered public accountants during the fiscal year ended December 30, 2016 and, in that capacity, audited the Company’s consolidated financial statements for the fiscal year ended December 30, 2016.  Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request approval of the appointment of KPMG LLP as the Company’s independent registered public accountants for the fiscal year ending December 29, 2017 by the stockholders.  If the stockholders do not ratify this appointment, the Audit Committee will reconsider whether or not to retain KPMG LLP, and may decide to retain them notwithstanding the vote.  Even if the appointment is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.  In addition, if KPMG LLP should decline to act or otherwise become incapable of acting, or if the employment should be discontinued, the Audit Committee will appoint a substitute independent public registered public accounting firm.  A representative of KPMG LLP will be present at the Annual Meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions from stockholders.

 

Change in Independent Registered Public Accounting Firm

 

On April 14, 2015, after being recommended by the Audit Committee and approved by our Board, we dismissed Ernst & Young LLP, an independent registered public accounting firm, as our principal accountant.  Following the recommendation of the Audit Committee, our Board approved the engagement of KPMG LLP, an independent registered public accounting firm, on April 14, 2015 as our principal accountant with respect to the audit of our financial statements for the fiscal year ended January 1, 2016, which was subsequently ratified by the stockholders. 

 

The reports of Ernst & Young LLP on our consolidated financial statements for the fiscal year ended January 2, 2015 and December 27, 2013 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.

 

During our fiscal years ended January 2, 2015 and December 27, 2013, and the interim period from January 3, 2015, through and including April 14, 2015, the date of Ernst & Young LLP’s dismissal, (i) there were no disagreements (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between us and Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the subject matter of the disagreement in connection with its reports on our consolidated financial statements for such years or any subsequent interim period through the date of dismissal, and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).

 

We provided Ernst & Young LLP and KPMG LLP with a copy of the disclosures required by Item 304(a) of Regulation S-K prior to the time this proxy statement was filed with the SEC.

 

Audit and Other Fees

 

The following is a summary of the fees billed to us by KPMG LLP for professional services for the fiscal years ended December 30, 2016 and January 1, 2016.

 

 

 

 

 

 

 

 

 

Fee Category

    

Fiscal 2016 Fees

      

Fiscal 2015 Fees

 

Audit Fees

 

$

821,780

 

$

1,067,000

 

Audit-Related Fees

 

 

 —

 

 

 

Tax Fees

 

 

 —

 

 

 

All Other Fees

 

 

 —

 

 

 

Total Fees

 

$

821,780

 

$

1,067,000

 

 

Audit Fees.  Fees for audit services provided by KPMG LLP for fiscal 2016 and 2015 consisted of professional services for the annual audit of our consolidated financial statements and for review of our interim condensed consolidated financial statements including quarterly reports.

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Audit-Related Fees.  No fees for audit-related services were billed by KPMG LLP in fiscal 2016 or 2015.

 

Tax Fees .  No fees for tax services, including tax return preparation, tax compliance, tax advice and tax planning, were billed by KPMG LLP in fiscal 2016 or 2015.

 

All Other Fees.  There were no fees paid for any other services not described above in fiscal 2016 or 2015.

 

The Company has been advised by KPMG LLP that KPMG LLP, nor any member of KPMG LLP, has any financial interest, direct or indirect, in any capacity in the Company or its subsidiaries.

 

Audit Committee Pre-Approval Policy

 

Consistent with SEC policies regarding independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm.  In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm, including audit services, audit-related services, tax services, and other services.  In some cases, the full Audit Committee provides pre-approval for up to a year, related to a particular defined task or scope of work and subject to a specific budget.  During the year, circumstances may arise when it becomes necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories.  In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.  The Audit Committee may delegate pre-approval authority to one or more of its members.  The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.

 

Vote Required for Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm

 

Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 29, 2017, requires the affirmative vote of a majority of all the votes cast on the matter at the Annual Meeting.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 29, 2017.  PROXIES RECEIVED WILL BE VOTED “FOR” RATIFICATION UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.

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PROPOSAL 3:

 

VOTE ON NON-BINDING ADVISORY RESOLUTION APPROVING EXECUTIVE COMPENSATION

 

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which was amended pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), we are asking stockholders to approve a non-binding advisory resolution approving our executive compensation as reported in this Proxy Statement.

 

Our executive compensation decisions are made in the context of our executive compensation plan statement. 

 

Under our executive compensation plan statement, our executive compensation philosophy is to:

 

Ø

Align the interests of our executives with those of the stockholders;

 

Ø

Attract, motivate, reward and retain the top contributors upon whom, in large part, our success depends;

 

Ø

Be competitive with compensation programs for companies of similar size and complexity with whom we compete for talent, including direct competitors;

 

Ø

Provide compensation based upon the short-term and long-term performance of both the individual executive and the Company; and

 

Ø

Strengthen the relationship between pay and performance by emphasizing variable, at-risk compensation that is dependent upon the successful achievement of specified corporate and individual goals.

 

We urge stockholders to read the “Executive Compensation” section beginning on page 33 of this Proxy Statement, including the Compensation Discussion and Analysis, which describes in more detail our executive compensation plan statement and the key elements of our executive compensation program.  The Compensation Committee and the Board believe that our executive compensation program is appropriately designed to achieve the objectives of our executive compensation philosophy.

 

We are asking stockholders to approve the following advisory resolution at the Annual Meeting:

 

RESOLVED , that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers set forth under “Executive Compensation,” including the Compensation Discussion and Analysis, Summary Compensation Table and the related compensation tables and narratives in the Proxy Statement for the 2017 Annual Meeting of Stockholders.

 

This vote is an advisory vote only and will not be binding on us, our Board or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Board or the Compensation Committee.  However, the Compensation Committee, which is responsible for designing and administering our executive compensation program, values the opinions expressed by stockholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions for Named Executive Officers.

 

The Company’s current policy is to provide stockholders with an opportunity to approve the compensation of the Named Executive Officers each year at the annual meeting of stockholders.  It is expected that the next such vote will occur at the 2018 Annual Meeting of Stockholders.

 

Vote Required for Approval of the Non-Binding Advisory Resolution Approving Executive Compensation

 

Approval of the non-binding advisory resolution approving our executive compensation requires the affirmative vote of a majority of all the votes cast on the matter at the Annual Meeting.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE NON-BINDING ADVISORY RESOLUTION APPROVING THE COMPANY’S EXECUTIVE COMPENSATION.  PROXIES RECEIVED WILL BE VOTED “FOR” APPROVAL UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.

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proposal 4:

 

AMENDMENT TO 2008 PERFORMANCE INCENTIVE PLAN

 

General

 

The Company’s long-term incentive compensation program is implemented under the Willdan Group, Inc. 2008 Performance Incentive Plan (the “2008 Plan”).  The 2008 Plan emphasizes achievement of long-term performance and stockholder value creation.

 

On April 17, 2017, the Company’s Board of Directors approved amending and restating the 2008 Plan, subject to approval by our stockholders.  At the Annual Meeting, our stockholders will be asked to approve the following amendments set forth in the amended and restated 2008 Plan:

 

·

Increase in Aggregate Share Limits .  The 2008 Plan currently limits the aggregate number of shares of Common Stock that may be delivered pursuant to all awards granted under the 2008 Plan to 1,836,167 shares (plus shares subject to options granted under the Willdan Group, Inc. 2006 Stock Incentive Plan (the “2006 Plan”) which expire or are cancelled or terminated).  The proposed amendments would increase this limit by an additional 875,000 shares so that the new aggregate share limit for the 2008 Plan would be 2,711,167 shares (plus shares subject to options granted under the 2006 Plan which expire or are cancelled or terminated).  The proposed amendments would also increase (1) the limit on the number of shares that may be delivered pursuant to “incentive stock options” granted under the 2008 Plan by 875,000 shares for a new limit of 2,975,000 incentive stock options and (2) the limit on the number of shares that may be granted subject to stock options and stock appreciation rights to any one employee in any one calendar year from 200,000 shares to 300,000 shares.  For purposes of clarity, any shares that are delivered pursuant to incentive stock options also count against (and are not in addition to) the aggregate 2008 Plan share limit described above.

 

·

Extension of Performance-Based Award Feature.  One element of the 2008 Plan is the flexibility to grant certain performance-based awards designed to satisfy the requirements for deductibility of compensation under Section 162(m) of the U.S. Internal Revenue Code (the “Code”).  If stockholders approve the proposed amendments to the 2008 Plan, the administrator’s authority to grant performance-based awards (other than options or stock appreciation rights) will be extended through the first annual meeting of shareholders that occurs in 2022 (this expiration time is earlier than the general expiration date of the 2008 Plan and is required under applicable tax rules).  If stockholders approve the proposed amendments to the 2008 Plan, the maximum number of shares subject to performance-based awards (other than stock options and stock appreciation rights, which are subject to the separate limit above) granted to any one employee in any one calendar year will be increased from 200,000 shares to 300,000 shares.

 

·

Extension of Plan Term .  The 2008 Plan is currently scheduled to expire on March 8, 2026.  The proposed amendments provide for the term of the 2008 Plan to be extended until April 17, 2027 ten years from the date the plan was approved by the Board.

 

·

Minimum Vesting Requirements.  The 2008 Plan does not currently include any minimum vesting requirements.  If stockholders approve the proposed amendments to the 2008 Plan, the 2008 Plan will include the minimum vesting requirements described below.

 

As of March 31, 2017, a total of 1,312,467 shares of the Company’s Common Stock were then subject to outstanding awards granted under the 2008 Plan, and there were then 142,767 available shares for new award grants under the 2008 Plan.  The proposed amendments would increase the reserved shares under the plan by 875,000 shares.  Based solely on the closing price of the Company’s common stock as reported by the NASDAQ Stock Market on March 31, 2017, the maximum aggregate market value of the additional 875,000 new shares that could be issued under the 2008 Plan is $28,227,500 million.

 

The Company believes that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the 2008 Plan are an important attraction, retention and motivation tool for participants in the plan.  The Board believes that the number of shares currently available under the 2008 Plan does not give the Company sufficient authority and flexibility

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to adequately provide for future incentives.  The Board believes that the additional shares give the Company greater flexibility to structure future incentives and better attract, retain, and award key employees.

 

If stockholders do not approve this 2008 Plan proposal, the current share limits under the 2008 Plan will continue in effect, the minimum vesting requirements described above will not be included, the performance-based award feature described above will not be extended, and the 2008 Plan term will not be extended.

 

Summary Description of the 2008 Performance Incentive Plan

 

The principal terms of the 2008 Plan are summarized below.  The following summary is qualified in its entirety by the full text of the 2008 Plan, which appears as Exhibit A to this Proxy Statement.

 

Purpose .  The purpose of the 2008 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means for us to attract, motivate, retain and reward selected employees and other eligible persons through the grant of awards.  Equity-based awards are also intended to further align the interests of award recipients and our stockholders.

 

Administration .  Our Board or one or more committees appointed by our Board will administer the 2008 Plan.  Our Board of Directors has delegated general administrative authority for the 2008 Plan to the Compensation Committee.  A committee may delegate some or all of its authority with respect to the 2008 Plan to another committee of directors, and certain limited authority to grant awards to employees may be delegated to one or more officers of the Company.  (The appropriate acting body, be it the Board of Directors, a committee within its delegated authority, or an officer within his or her delegated authority, is referred to in this proposal as the “Administrator”).

 

The Administrator has broad authority under the 2008 Plan, including, without limitation, the authority:

 

·

to select eligible participants and determine the type(s) of award(s) that they are to receive;

 

·

to grant awards and determine the terms and conditions of awards, including the price (if any) to be paid for the shares or the award and, in the case of share-based awards, the number of shares to be offered or awarded;

 

·

to determine any applicable vesting and exercise conditions for awards (including any applicable performance-based targets) and the extent to which such conditions have been satisfied, or determine that no delayed vesting or exercise is required (subject to the minimum vesting requirement described below), and to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards;

 

·

to cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents;

 

·

subject to the other provisions of the 2008 Plan, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award;

 

·

to determine the method of payment of any purchase price for an award or shares of the Company’s common stock delivered under the 2008 Plan, as well as any tax-related items with respect to an award, which may be in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company’s common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the Administrator may authorize, or any other form permitted by law;

 

·

to modify the terms and conditions of any award, establish sub-plans and agreements and determine different terms and conditions that the Administrator deems necessary or advisable to comply with laws in the countries where the Company or one of its subsidiaries operates or where one or more eligible participants reside or provide services;

 

·

to approve the form of any award agreements used under the 2008 Plan; and

 

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·

to construe and interpret the 2008 Plan, make rules for the administration of the 2008 Plan, and make all other determinations necessary or advisable for the administration of the 2008 Plan.

 

No Repricing.  In no case (except due to an adjustment to reflect a stock split or other event referred to under “Adjustments” below, or any repricing that may be approved by stockholders) will the Administrator (1) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.

 

Eligibility.  Persons eligible to receive awards under the 2008 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries.  Currently, approximately 839   officers and employees of the Company and its subsidiaries (including all of the Company’s Named Executive Officers), and each of the Company’s eight non-employee directors, are considered eligible under the 2008 Plan.

 

Minimum Vesting Requirement If stockholders approve the proposed amendments to the 2008 Plan, all awards granted under the 2008 Plan will be subject to a minimum vesting requirement of one year, and no portion of any award may vest earlier than the first anniversary of the grant date of the award.  This minimum vesting requirement will not apply to 5% of the total number of shares available under the 2008 Plan.

 

Authorized Shares; Limits on Awards .  The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2008 Plan equals the sum of: (1) 1,836,167 shares, plus (2) the number of any shares subject to stock options granted under the 2006 Plan and outstanding as of June 9, 2008 which expire, or for any reason are cancelled or terminated, after June 9, 2008 without being exercised.  If stockholders approve this 2008 Plan proposal, the maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2008 Plan will equal the sum of: (1) 2,711,167 shares, plus (2) the number of any shares subject to stock options granted under the 2006 Plan and outstanding as of June 9, 2008 which expire, or for any reason are cancelled or terminated, after June 9, 2008 without being exercised. 

 

The following other limits are also contained in the 2008 Plan:

 

·

The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the plan is 2,100,000   shares, however if stockholders approve this 2008 Plan proposal, the maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the plan will be 2,975,000 shares.

 

·

The maximum number of shares subject to those options and stock appreciation rights that are granted under the plan during any one calendar year to any one individual is 200,000   shares, however if stockholders approve this 2008 Plan proposal, the maximum number of shares subject to those options and stock appreciation rights that are granted during any one calendar year to any one individual will be 300,000   shares.

 

·

The maximum number of shares that may be delivered pursuant to awards granted under the plan, other than in the circumstances described in the next sentence, is 1,250,000   shares.  This limit on so-called “full-value awards” does not apply, however, to (1) shares delivered in respect of compensation earned but deferred or (2) shares delivered in respect of options or stock appreciation rights.  If stockholders approve this 2008 Plan proposal, the limit on full-value awards will be removed from the plan.  

 

·

The maximum grant date fair value for awards granted to a non-employee director under the 2008 Plan during any one calendar year is $200,000 except that this limit will be $400,000 as to (1) a non-employee director who is serving as the Independent Chair of the Board or the Lead Independent Director at the time the applicable grant is made or (2) any new non-employee director for the calendar year in which the non-employee director is first elected or appointed to the Board.  For purposes of this limit, the "grant date fair value" of an award means the value of the award on the date of grant of the award determined using the equity award valuation principles applied in the Company’s financial reporting.  This limit does not apply

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to, and will be determined without taking into account, any award granted to an individual who, on the grant date of the award, is an officer or employee of the Company or one of its subsidiaries.  This limit applies on an individual basis and not on an aggregate basis to all non-employee directors as a group.

 

·

The maximum number of shares subject to “Performance-Based Awards” (other than “Qualifying Options and Qualifying SARs”) under Section 5.2 of the 2008 Plan (referred to as “Qualified Performance-Based Awards” in this proposal, as described in more detail below) granted during any one calendar year to any one participant is 200,000 shares. If stockholders approve this 2008 Plan proposal, the maximum number of shares subject to “Qualified Performance-Based Awards” where the value of the award is expressed as a number or range of shares (including Qualified Performance-Based Awards in the form of restricted stock, performance stock or stock unit awards) or where the award is payable in cash upon or following vesting of the award in an amount determined with reference to the fair market value of a share at such time is 300,000 shares.

 

·

The maximum amount that may be paid to any one participant in respect of all “Qualified Performance-Based Awards” granted to that participant in any one calendar year where the potential payment is a stated cash amount or range of stated cash amounts is $1,000,000 (regardless of whether the payment is ultimately made in cash or in a number of shares determined based on the fair market value of a share upon or following the vesting of the award).

 

Shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2008 Plan will not be counted against the share limit and will again be available for subsequent awards under the 2008 Plan.  To the extent that shares are delivered pursuant to the exercise of an option or stock appreciation right granted under the 2008 Plan, the number of underlying shares as to which the exercise related will be counted against the share limit.  (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the share limit with respect to such exercise.)  Shares that are exchanged by a participant or withheld by the Company as full or partial payment in connection with any award granted under the 2008 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award, will be counted against the share limit and will not be available for subsequent awards under the 2008 Plan.  To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the share limit and will again be available for subsequent awards under the 2008 Plan.  In the event that shares are delivered in respect of a dividend equivalent right, the actual number of shares delivered with respect to the award shall be counted against the share limit.  (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the share limit.)  In addition, the 2008 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2008 Plan.  The Company may not increase the applicable share limits of the 2008 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).

 

Types of Awards .  The 2008 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in the Company’s Common Stock or units of the Company’s Common Stock, as well as cash bonus awards.  The 2008 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances.  Any award may be structured to be paid or settled in cash.

 

A stock option is the right to purchase shares of the Company’s Common Stock at a future date at a specified price per share (the “exercise price”).  The per share exercise price of an option generally may not be less than the fair market value of a share of the Company’s Common Stock on the date of grant.  The maximum term of an option is ten years from the date of grant.  An option may either be an incentive stock option or a nonqualified stock option.  Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal Income Tax Consequences of Awards Under the 2008 Plan” below.  Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2008 Plan.  Incentive stock options may only be granted to employees of the Company or a subsidiary.

 

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A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of a share of the Company’s Common Stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right.  The base price will be established by the Administrator at the time of grant of the stock appreciation right and generally may not be less than the fair market value of a share of the Company’s Common Stock on the date of grant.  Stock appreciation rights may be granted in connection with other awards or independently.  The maximum term of a stock appreciation right is ten years from the date of grant.

 

The other types of awards that may be granted under the 2008 Plan include, without limitation, stock bonuses, restricted stock, performance stock, stock units or phantom stock (which are contractual rights to receive shares of stock, or cash based on the fair market value of a share of stock), dividend equivalents which represent the right to receive a payment based on the dividends paid on a share of stock over a stated period of time, or similar rights to purchase or acquire shares, and cash awards. 

 

Subject to the minimum vesting requirement described above, any awards under the 2008 Plan (including awards of stock options and stock appreciation rights) may be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.

 

Qualified Performance-Based Awards .  Under Section 162(m) of the U.S. Internal Revenue Code (“Section 162(m)”) a public corporation generally cannot take a tax deduction in any tax year for compensation it pays to its Chief Executive Officer and certain other executive officers in excess of $1 million.  Compensation that qualifies as “performance-based” under Section 162(m), however, is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals under a plan approved by the corporation’s shareholders.

 

The Administrator may grant awards under the 2008 Plan that are intended to be performance-based awards within the meaning of Section 162(m).  Stock options and stock appreciation rights may qualify as performance-based awards within the meaning of Section 162(m).  In addition, other types of awards authorized under the 2008 Plan (such as restricted stock, performance stock, stock units, and cash bonus opportunities) may be granted with performance-based vesting requirements and intended to qualify as performance-based awards within the meaning of Section 162(m) (“ Qualified Performance-Based Awards ”).  While the Administrator may grant awards under the 2008 Plan that qualify (or are intended to qualify) as performance-based awards within the meaning of Section 162(m), nothing requires that any award qualify as “performance-based” within the meaning of Section 162(m) or otherwise be deductible for tax purposes.

 

The vesting or payment of Qualified Performance-Based Awards will depend on the absolute or relative performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis.  The Administrator will establish the criterion or criteria and target(s) on which performance will be measured.  To qualify an award as performance-based under Section 162(m), the Administrator must consist solely of two or more outside directors (as this requirement is applied under Section 162(m)), the Administrator must establish criteria and targets in advance of applicable deadlines under Section 162(m) and while the attainment of the performance targets remains substantially uncertain, and the Administrator must certify that any applicable performance goals and other material terms of the grant were satisfied.  The performance criteria that the Administrator may use for this purpose will include one or more of the following: earnings per share, cash flow (which means cash and cash equivalents derived from either net cash flow from operations or net cash flow from operations, financing and investing activities), total stockholder return, gross revenue, revenue growth, operating income (before or after taxes), net earnings (before or after interest, taxes, depreciation and/or amortization), return on equity or on assets or on net investment, cost containment or reduction, or any combination thereof.  The performance measurement period with respect to an award may range from three months to ten years.  The terms of the Qualified Performance-Based Awards may specify the manner, if any, in which performance targets shall be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses; to exclude restructuring and/or other nonrecurring charges; to exclude the effects of financing activities; to exclude exchange rate effects; to exclude the effects of changes to accounting principles; to exclude the effects of any statutory adjustments to corporate tax rates; to exclude the effects of  any items of an unusual nature or of infrequency of occurrence; to exclude the effects of acquisitions or joint ventures; to exclude the effects of discontinued operations; to assume that any business divested achieved performance objectives at targeted levels during the balance of a performance period following such divestiture or to exclude the effects of any divestiture; to exclude the effect of any event or transaction referenced below under the heading “Adjustments” below; to exclude the effects of stock-based compensation; to exclude the award of bonuses; to exclude amortization of acquired intangible assets; to exclude the goodwill and

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intangible asset impairment charges; to exclude the effect of any other unusual, non-recurring gain or loss, non-operating item or other extraordinary item; to exclude the costs associated with any of the foregoing or any potential transaction that if consummated would constitute any of the foregoing; or to exclude other items specified by the Administrator at the time of establishing the targets.

 

Qualified Performance-Based Awards may be paid in stock or in cash (in either case, subject to the limits described under the heading “Authorized Shares; Limits on Awards” above).  The Administrator has discretion to determine the performance target or targets and any other restrictions or other limitations of Qualified Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.

 

Dividend Equivalents; Deferrals .   The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals.  Subject to the following provisions, the Administrator may provide that awards under the 2008 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of Common Stock .

 

Dividends on Unvested Equity Awards If stockholders approve the proposed amendments to the 2008 Plan and if the Company pays an ordinary cash dividend, the cash dividend will not be paid on a current basis with respect to any awards granted under the 2008 Plan that are not vested as of the record date for the ordinary cash dividend.  This restriction on paying ordinary cash dividends with respect to unvested equity awards does not limit or restrict the administrator’s ability (1) for restricted stock or performance stock awards, to pay the ordinary cash dividend upon (and subject to) the vesting of such shares subject to these awards, (2) for stock unit awards, to credit dividend equivalents in the form of additional units that are subject to the same vesting terms as the underlying units to which the dividend equivalents relate, and (3) to make equitable adjustments to preserve the intrinsic value of awards in the event of a transaction as described below.

 

Assumption and Termination of Awards .  If an event occurs in which the Company does not survive (or does not survive as a public company in respect of its common stock), including, without limitation, a dissolution, merger, combination, consolidation, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, stock or assets of the Company, awards then-outstanding under the 2008 Plan will not automatically become fully vested pursuant to the provisions of the 2008 Plan so long as such awards are assumed, substituted for or otherwise continued.  However, if awards then-outstanding under the 2008 Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards would generally become fully vested (with any performance goals applicable to the award in each case being deemed met at the “target” performance level, unless otherwise provided in the award agreement), subject to any exceptions that the Administrator may provide for in an applicable award agreement.  The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2008 Plan.  For example, the Administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event or in connection with a termination of the award holder’s employment.  For the treatment of outstanding equity awards held by the Named Executive Officers in connection with a termination of employment and/or a change in control of the Company, please see the “Potential Payments Upon Change in Control and Termination” below in this Proxy Statement.

 

Transfer Restrictions .  Subject to certain exceptions contained in Section 5.7 of the 2008 Plan, awards under the 2008 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient.  Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative.  The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).

 

Adjustments .  As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2008 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.

 

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No Limit on Other Authority .  The 2008 Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.

 

Discretion to Accelerate .  The minimum vesting requirement under the 2008 Plan, as described above, does not limit or restrict the Administrator’s discretion to accelerate the vesting of any award in any circumstances it determines to be appropriate.

 

Limitation on Golden Parachute Payments .  To the extent any award or payment under the 2008 Plan would trigger the golden parachute payment excise taxes provided for under Sections 280G and 4999 of the Code, the 2008 Plan provides that such award or payment will automatically be “cut back” to avoid triggering these excise taxes.

 

Clawback Policy .  Awards granted under the 2008 Plan are generally subject to the terms of any Company clawback policy in effect from time to time.

 

Termination of or Changes to the 2008 Plan .  The Board may amend or terminate the 2008 Plan at any time and in any manner.  Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the Board.  Unless terminated earlier by the Board and subject to any extension that may be approved by stockholders, the authority to grant new awards under the 2008 Plan will terminate on March 8, 2026.  If stockholders approve this 2008 Plan proposal, the term of the 2008 Plan will be extended to April 17, 2027.  Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan.  Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.

 

U.S. Federal Income Tax Consequences of Awards under the 2008 Plan

 

The U.S. federal income tax consequences of the 2008 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2008 Plan.  This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the U.S. Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.

 

With respect to nonqualified stock options, the Company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise.  With respect to incentive stock options, the company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.

 

The current federal income tax consequences of other awards authorized under the 2008 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid.  In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.

 

If an award is accelerated under the 2008 Plan in connection with a “change in control” (as this term is used under the U.S. Internal Revenue Code), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the U.S. Internal Revenue Code (and certain related excise taxes may be triggered).  Furthermore, the aggregate compensation in excess of $1,000,000 attributable to awards that are not “performance-based” within the meaning of Section 162(m) may not be permitted to be deducted by the company in certain circumstances.

 

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Specific Benefits under the 2008 Performance Incentive Plan

 

The Company has not approved any awards that are conditioned upon stockholder approval of the 2008 Plan.  The Company is not currently considering any other specific award grants under the 2008 Plan.  If the proposed amendments to the 2008 Plan had been in existence in fiscal 2016, the Company expects that its award grants for fiscal 2016 would not have been substantially different from those actually made in that year under the 2008 Plan.  For information regarding stock-based awards granted to the Company’s Named Executive Officers during fiscal 2016, see the material under the heading “Executive Compensation” below.  

 

Potential Dilution

 

The following paragraphs include additional information to help stockholders assess the potential dilutive impact of the Company’s equity awards and the 2008 Plan.  As of the date hereof, the Company has outstanding awards under the 2008 Plan, the 2006 Plan, and the Company’s Employee Stock Purchase Plan (the “ESPP”).  The ESPP is intended as a qualified employee share purchase plan under Section 423 of the Code.  The ESPP generally provides for broad-based participation by employees of the Company (and certain of its subsidiaries) and affords employees who elect to participate an opportunity to purchase shares of the Company’s common stock at a discount.  Certain information regarding the number of shares of Company common stock available for issuance under the ESPP is included under the heading “Equity Compensation Plan Information” below.  The discussion that follows in this “Potential Dilution” section does not include any shares that have been purchased under, may be purchased in the current purchase period under, or that remain available for issuance or delivery under the ESPP. 

 

“Overhang” refers to the number of shares of the Company’s common stock that are subject to outstanding awards or remain available for new award grants.  The following table shows the total number of shares of the Company’s common stock that were subject to outstanding restricted stock granted under the 2008 Plan, that were subject to outstanding stock options granted under the 2006 Plan and the 2008 Plan, and that were then available for new award grants under the 2008 Plan as of December 30, 2016 and as of March 31, 2017.

 

 

 

 

 

 

 

 

    

As of December 30, 2016

    

As of March 31, 2017

 

Shares subject to outstanding restricted stock awards

 

98,965

 

107,631

 

 

 

 

 

 

 

Shares subject to outstanding stock options

 

1,311,048

 

1,204,836

 

 

 

 

 

 

 

Shares available for new award grants

 

218,270

 

142,767

 

 

The weighted-average number of shares of the Company’s common stock issued and outstanding in each of the last three fiscal years was 7,488,000 shares issued and outstanding in 2014; 7,834,000 shares issued and outstanding in 2015; and 8,219,000 shares issued and outstanding in 2016. The number of shares of the Company’s common stock issued and outstanding as of December 30, 2016 and March 31, 2017 was 8,348,000 and 8,519,000 shares, respectively.

 

“Burn rate” refers to the number of shares that are subject to awards that we grant over a particular period of time. The total number of shares of the Company’s common stock subject to awards that the Company granted under the 2008 Plan in each of the last three fiscal years, and to date (as of March 31, 2017) for 2017, are as follows:

 

·

260,000 shares in fiscal 2014 (which was 3.5% of the weighted-average number of shares of the Company’s common stock issued and outstanding in fiscal 2014), of which 25,000 shares were subject to restricted stock awards and 235,000 shares were subject to stock options;

 

·

190,200 shares in fiscal 2015 (which was 2.4% of the weighted-average number of shares of the Company’s common stock issued and outstanding in fiscal 2015), of which 25,200 shares were subject to restricted stock awards and 165,000 shares were subject to stock options;

 

·

504,100 shares in fiscal 2016 (which was 6.1% of the weighted-average number of shares of the Company’s common stock issued and outstanding in fiscal 2016), of which 82,100 shares were subject to restricted stock and 422,000 shares were subject to stock options; and

 

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·

87,500 shares in fiscal 2017 through March 31, 2017 (which was 1.0% of the number of shares of the Company’s common stock issued and outstanding on March 31, 2017), of which 8,700 shares were subject to restricted stock and 78,800 shares were subject to stock options.

 

Thus, the total number of shares of the Company’s common stock subject to awards granted under the 2008 Plan per year over the last three fiscal years (2014, 2015 and 2016) has been, on average, 4.1% of the weighted-average number of shares of the Company’s common stock issued and outstanding for the corresponding year.

 

The total number of shares of our common stock that were subject to awards granted under the 2008 Plan or the 2006 Plan that terminated or expired, and thus became available for new award grants under the 2008 Plan, in each of the last three fiscal years, and to date (as of March 31, 2017) in 2017, are as follows: 3,000 in 2014, 24,000 in 2015, 17,900 in 2016, and 12,000 in 2017.

 

The Compensation Committee anticipates that the 875,000 additional shares requested for the 2008 Plan (together with the shares available for new award grants under the 2008 Plan on the Annual Meeting date and assuming usual levels of shares becoming available for new awards as a result of forfeitures of outstanding awards) will provide the Company with flexibility to continue to grant equity awards under the 2008 Plan through approximately the end of 2019.  However, this is only an estimate, in the Company’s judgment, based on current circumstances.  The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards the Company grants, and how the Company chooses to balance total compensation between cash and equity-based awards.

 

The closing market price for a share of the Company’s common stock as of March 31, 2017 was $32.26 per share.

 

Aggregate Past Grants Under the 2008 Plan

 

As of March 31, 2017, awards covering 2,424,734 shares of the Company’s common stock have been granted under the 2008 Plan.  (This number of shares includes shares subject to awards that expired or terminated without having been exercised and paid and became available for new award grants under the 2006 Plan and the 2008 Plan.)  The following table shows information regarding the distribution of all awards among the persons and groups identified below, option exercises and restricted stock vesting prior to that date, and option and unvested restricted stock holdings

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as of that date.  The number of shares subject to past option grants includes all options that were awarded, including those that may have expired prior to exercise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options and Stock Appreciation Rights

 

Restricted Stock / Units

 

 

 

 

 

 

 

Number of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying

 

 

 

 

 

 

 

 

 

 

 

 

 

Options/SARs as of

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

 

Number of

 

 

 

Number of

 

Number

 

 

 

 

 

of

 

 

 

Shares/Units

 

 

 

Shares

 

of

 

 

 

 

 

Shares/

 

Number of

 

Outstanding

 

 

 

Subject to

 

Shares

 

 

 

 

 

Units

 

Shares/Units

 

and

 

 

 

Past

 

Acquired

 

 

 

 

 

Subject

 

Vested as of

 

Unvested as

 

 

 

Option/SAR

 

On

 

 

 

 

 

to Past

 

March 31,

 

of March 31,

 

 

 

Grants

 

Exercise

 

Exercisable

 

Unexercisable

 

Awards

 

2017

 

2017

 

Named Executive Officers:

    

    

    

    

    

    

    

    

    

    

    

    

    

    

 

Thomas D. Brisbin,
Chairman of the Board and Chief Executive Officer

 

440,000

 

100,000

 

189,999

 

150,001

 

40,000

 

 —

 

40,000

 

Michael A. Bieber,
President

 

216,667

 

 —

 

83,333

 

133,334

 

3,333

 

 —

 

3,333

 

Stacy B. McLaughlin,
Vice President & Chief Financial Officer

 

66,667

 

18,333

 

10,000

 

38,334

 

1,333

 

 —

 

1,333

 

Daniel Chow,
Chief Operating Officer

 

95,333

 

25,000

 

23,666

 

46,667

 

12,667

 

 —

 

12,667

 

Frank G Tripepi,
Senior Vice President, Business Development

 

31,500

 

31,500

 

 —

 

 —

 

 —

 

 —

 

 —

 

Total for All Current Executive Officers as a Group (6 persons):

 

949,167

 

242,166

 

338,665

 

368,336

 

57,333

 

 —

 

57,333

 

Steven A. Cohen

 

 —

 

 —

 

 —

 

 —

 

8,183

 

1,188

 

6,983

 

Raymond W. Holdsworth

 

20,000

 

 —

 

20,000

 

 —

 

18,183

 

11,188

 

6,983

 

Douglas J. McEachern

 

20,000

 

20,000

 

 —

 

 —

 

18,183

 

11,188

 

6,983

 

Dennis V. McGinn

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

Curtis S. Probst

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

Keith W. Renken

 

26,000

 

17,000

 

9,000

 

 —

 

18,183

 

11,188

 

6,983

 

Mohammad Shahidehpour

 

 —

 

 —

 

 —

 

 —

 

8,183

 

1,188

 

6,983

 

Win Westfall

 

32,000

 

 —

 

22,000

 

 —

 

18,183

 

11,188

 

6,983

 

Total for all Current Non-Executive Directors as a Group (8 persons):

 

98,000

 

37,000

 

51,000

 

 —

 

89,098

 

47,128

 

41,898

 

Each other person who has received 5% or more of the options, warrants or rights under the Plan

 

 

 

 

 

 

 

 

All employees, including all current officers who are not executive officers or directors, as a group

 

1,187,620

 

298,782

 

142,492

 

280,343

 

1,333

 

 —

 

1,333

 

Total

 

2,234,787

 

577,948

 

532,157

 

648,679

 

147,764

 

47,128

 

100,564

 

 

The non-executive directors and Dr. Brisbin are each nominees for re-election as a director at the Annual Meeting.

 

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Vote Required for Approval of the 2008 Performance Incentive Plan

 

The Board believes that the adoption of the amendments to the 2008 Plan will promote the interests of the Company and its stockholders and will help the Company and its subsidiaries continue to be able to attract, retain and reward persons important to our success.

 

All members of the Board and all of the Company’s executive officers are eligible for awards under the 2008 Plan and thus have a personal interest in the approval of the 2008 Plan.

 

Approval of the amendments to the 2008 Plan requires the affirmative vote of a majority of the common stock present, or represented, and entitled to vote at the Annual Meeting.

 

THE BOARD UNANIMOUSLY RECOMMENDS THAT A VOTE “FOR” APPROVAL OF AMENDMENT TO THE 2008 PERFORMANCE INCENTIVE PLAN AS DESCRIBED ABOVE AND SET FORTH IN EXHIBIT A HERETO.

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PROPOSAL 5:

 

AMENDMENT TO 2006 EMPLOYEE STOCK PURCHASE PLAN

 

General

 

The Company maintains the Willdan Group, Inc. Amended and Restated 2006 Employee Stock Purchase Plan (the “ESPP”) to provide eligible employees with the opportunity to purchase shares of Common Stock at a discount.  The Company utilizes the ESPP to attract employees and to incentivize employees to increase shareholder value. 

 

On April 17, 2017, the Company’s Board approved amending and restating the ESPP, subject to approval by our stockholders.  At the Annual Meeting, our stockholders will be asked to approve the amendment to the ESPP to increase the maximum number of shares authorized for issuance under the ESPP by 825,000 shares (so that the new share limit under the ESPP would be 1,125,000 shares).

 

The Board has determined that it is advisable to increase the maximum number of shares available for issuance under the ESPP in order to help retain and motivate eligible employees and further align their interests with those of our shareholders.  As of March 31, 2017, there were only 4,912 shares remaining available for issuance under the ESPP, and the Company had a total of 8,519,000 shares of Common Stock issued and outstanding.  The 825,000 additional shares that may be issued under the proposed increase in the ESPP share limit, plus the 4,912 shares that remained available for issuance under the ESPP as of March 31, 2017, equal approximately 9.74% of the Company’s total issued and outstanding shares of Common Stock as of that date.

 

In the event the shareholders fail to approve the amendment to the ESPP, the ESPP will continue in operation pursuant to its terms with no change to the number of shares authorized for issuance under the plan.  In the event the shareholders fail to approve the amendment to the ESPP, the Company believes we will have to discontinue and cease all new offering periods under the ESPP as early as the next offering period beginning on July 1, 2017. 

 

The Company believes the proposed amendment would facilitate our ability to continue to utilize the ESPP.  The Company believes the ESPP is an important component of its employee compensation package and assists it in attracting and retaining skilled personnel.  All of the Company’s employees were eligible to participate in, and 19% of the Company’s employees elected to participate in, the ESPP during the offering period ending December 31, 2016.  The essential features of the ESPP are summarized below.  The ESPP is intended to be an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code.

 

Summary Description of the 2006 Employee Stock Purchase Plan

 

The principal terms of the ESPP and its operation are summarized below.  The following summary is qualified in its entirety by the full text of the ESPP, which appears as Exhibit B to this Proxy Statement.  

 

Background and Purpose.     The ESPP provides eligible employees with the opportunity to purchase shares of the Company’s Common Stock at a discount through payroll deductions.  The purposes of the ESPP are to encourage ownership of the Company’s Common Stock by the Company’s employees and to provide additional incentives to the Company’s employees to promote the success of the Company’s business. 

 

Administration.     The ESPP is administered by the Board or by a committee appointed by the Board.  The Compensation Committee (the “Administrator”) has authority in its discretion to interpret the ESPP, to prescribe, amend and rescind rules and regulations relating to the ESPP, and to make all other determinations necessary or advisable for the administration of the ESPP. 

 

Shares Available for Issuance.  The aggregate number of shares of the Company’s Common Stock that currently may be issued pursuant to the ESPP is 300,000, of which only 4,912 remained available for issuance as of March 31, 2017.  If shareholders approve the proposed amendment, this limit would be increased from 300,000 shares to 1,125,000 shares.

 

Eligibility and Participation.  Employees who are employed by the Company (or one of its subsidiaries designated as a “participating employer” in the ESPP) on the first day of any offering period and remain an eligible

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employee through the end of the offering period and who customarily work more than twenty hours per week (or such lesser number of hours as the Administrator may provide) and more than five months (or such lesser number of months as the Administrator may provide) per calendar year may participate in the ESPP.  Participation in the ESPP is voluntary.  No participant may purchase shares if immediately after such purchase, the participant would own stock and/or outstanding options to purchase stock comprising 5% or more of the total combined voting power of the Company’s stock or of any of the Company’s affiliates.  In addition, a participant’s right to purchase stock under the ESPP may not accrue at a rate that exceeds $25,000 (determined with respect to the fair market value of the stock at the time such option to purchase shares is granted) in any calendar year in which such right is outstanding at any time.

 

Currently, approximately 831   employees of the Company and its subsidiaries (including all of our Named Executive Officers) were eligible to participate in the ESPP.

 

Offering Periods.  Shares of stock are offered for purchase on the first business day of each offering period designated by the Administrator.  Currently, offering periods under the ESPP are approximately six months long and commence at the beginning of each January and July.  The Administrator has the authority to change the timing and duration of the offering periods (provided that each offering period is not less than three months and is not more than 27 months in duration), and provided further that the change is announced prior to the start of the relevant offering period.

 

Purchase Price.  Currently, the purchase price per share of Common Stock covered by an option granted under the ESPP is the lesser of (i) 85% of the fair market value per share of the Company’s Common Stock on the first day of the applicable offering period, and (ii) 85% of the fair market value per share of the Company’s Common Stock on the last day of the applicable offering period.  For purposes of the ESPP, the fair market value of the Company’s Common Stock is generally the closing price of the Company’s Common Stock on The NASDAQ on the determination date.  The Administrator may change the formula for determining the purchase price for a particular offering period prior to the start of that offering period, except that in no event may the purchase price for an offering period be lower than the lesser of (i) 85% of the fair market value per share of the Company’s Common Stock on the first day of the applicable offering period, and (ii) 85% of the fair market value per share of the Company’s Common Stock on the last day of the applicable offering period.

 

Payroll Deductions.  Employees participating in the ESPP for an offering period may authorize payroll deductions to the ESPP in that offering period in 1% multiples of eligible earnings for each payroll period, up to a maximum of 10% of their eligible earnings (or such different maximum as the Administrator may establish for the particular offering period).  An employee generally may not change the percentage of eligible earnings withheld during an offering period, however an employee may elect to discontinue payroll deductions during an offering period effective as of the next payroll date.  An employee may also withdraw from the ESPP during the offering period as described below.

 

Purchase of Stock.  By enrolling in the ESPP for an offering period, an employee is entitled to purchase shares of the Company’s Common Stock on the last day of the offering period.  The maximum number of shares that may be purchased by a participating employee during an offering period is determined by dividing the amount collected from the participant through payroll deductions during the offering period by the per share purchase price in effect for that offering termination date, subject to a maximum of 10,000 shares purchasable by any one participant for any one offering period (or such different individual limit as the Administrator may establish in advance of the relevant offering period).  Unless the employee’s participation is discontinued prior to such purchase date (for example, because of a termination of the employee’s employment with the Company or an election by the employee to withdraw from the ESPP), his or her purchase of the shares will occur automatically on the last day of the offering period at the applicable price.

 

Withdrawal.  Generally, a participant may withdraw from an offering period at any time prior to the last business day before the offering termination date by giving a withdrawal notice to the Company prior to the last payroll date in the offering period.  Any such withdrawal will not affect his or her eligibility to participate in future offering periods.  However, once a participant withdraws from a particular offering period, that participant may not participate again in the same offering period.  Upon a participant’s withdrawal from an offering period, all of the participant’s accumulated payroll deductions held by the Company will be paid to the participant in cash without interest.

 

Termination of Employment.  Termination of a participant’s employment for any reason, including death, retirement, or any other voluntary or involuntary termination, cancels his or her option to purchase shares and

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participation in the ESPP immediately as to the offering period in which the termination of employment occurs.  In such event, the payroll deductions credited to the participant’s account will be returned to him or her or, in the case of an employee’s death, to the person or persons entitled thereto as provided in the ESPP, in cash without interest.

 

Restrictions on Transfer.  Options under the ESPP may not be assigned, transferred, pledged, or otherwise disposed of, except by will, or under the laws of descent and distribution.  An option under the ESPP may not be exercised by anyone other than the participant during the life of the participant.

 

Changes in Capitalization.  As is customary in incentive plans of this nature, the number of shares reserved under the ESPP, any maximum number of shares a participant may purchase in the offering period in which such event occurs, and the number of shares and the price per share in effect under each outstanding option under the ESPP shall be appropriately adjusted for the payment of a stock dividend or any increase or decrease in the number of outstanding shares of the Company’s Common Stock resulting from a split-up or contraction of shares without receipt of any consideration by the Company, in order to prevent the dilution or enlargement of benefits under the ESPP.

 

Change of Control.  In the event of a dissolution or liquidation of the Company or any other corporate transaction in which the Company does not survive or does not survive as a public company, the Administrator shall, in its sole discretion, either (a) provide for the in-progress offering period to end prior to the transaction and for shares of Common Stock to be purchased on the last day of the shortened offering period, or (b) arrange with the surviving, continuing, successor or purchasing corporation, as the case may be, that such corporation shall assume the Company’s rights and obligations under the ESPP.

 

Amendment and Termination of the ESPP.  The Board may suspend, terminate or amend the ESPP at any time and from time to time (subject to shareholder consent as may be required by applicable law).  No suspension or termination of or amendment to the ESPP may materially adversely affect the rights of a participant with respect to an outstanding option held by the participant for a completed offering period as of the date of such termination or amendment without the participant’s consent.

 

No Limit on Other Plans The ESPP does not limit the ability of the Board or any committee of the Board to grant awards or authorize any other compensation, with or without reference to the Company’s Common Stock, under any other plan or authority.

 

Federal Income Tax Consequences of the ESPP

 

The following is a brief summary of the federal income tax consequences to U.S. taxpayers and the Company with respect to the shares purchased under the ESPP.  The summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the U.S. Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.

 

The ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Internal Revenue Code.  Under these provisions, no income will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of.  Upon sale or other disposition of the shares, the participant will generally be subject to tax in an amount that depends upon the holding period applicable to such shares.  If the shares are sold or otherwise disposed of (including by gift) more than two years after the first day of the particular offering period in which such shares were acquired and more than one year after the actual purchase date of the shares, the participant will recognize ordinary income measured as the lesser of (a) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price, or (b) the excess of the fair market value of the shares as of the first day of the applicable offering period over the purchase price.  Any additional gain or loss will be treated as long-term capital gain or loss.  If the shares are sold or otherwise disposed of (including by gift) before the expiration of either of the aforementioned holding periods, the participant will recognize ordinary income generally measured as the excess of (a) the fair market value of the shares on the date the shares are purchased over (b) the purchase price.  Any additional gain or loss on such sale or disposition will be capital gain or loss, which will be long-term if the shares are held for more than one year.  The Company generally is not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant with respect to shares purchased under the ESPP except to the extent of ordinary income recognized by participants upon a sale or disposition of shares prior to the expiration of the holding periods described above.

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Participation in the ESPP

 

Participation in the ESPP is voluntary and therefore the number of shares an individual employee will purchase cannot be determined in advance.  If the proposed amendment to the ESPP had been in effect in 2016, the number of shares delivered under the ESPP for offering periods in 2016 would not have differed.  For the six-month offering periods ending in June 2016 and December 2016, the number of shares of the Company’s Common Stock purchased under the ESPP were 9,625 and 37,804, respectively. However, because benefits under the ESPP may change based on any number of variables, including, without limitation, the fair market value of the Company’s Common Stock at various future dates, the number of our employees who elect to participate in the ESPP and the amount of payroll deductions elected by the employees who participate, it is not possible to determine the benefits that will be received by employees if the proposed ESPP amendment is approved by the shareholders.

 

The closing market price for a share of the Company’s Common Stock as of March 31, 2017 was $32.26 per share.

 

Aggregate Past Purchases Under the 2006 Employee Stock Purchase Plan 

 

As of March 31, 2017, a total of 295,088 shares of the Company’s Common Stock had been purchased by employees under the ESPP.  The number of shares of Common Stock purchased under the ESPP by each of our Named Executive Officers and our executive officers as a group is as follows:

 

 

 

 

 

 

Number of

 

 

Shares

 

 

Purchased

 

 

Under

Named Executive Officers:

 

ESPP

Thomas D. Brisbin,

 

1,320

Chairman of the Board and Chief Executive Officer

 

 

Michael A. Bieber,

 

1,321

President

 

 

Stacy B. McLaughlin,

 

3,236

Vice President & Chief Financial Officer

 

 

Daniel Chow,

 

 -

Chief Operating Officer

 

 

Frank G. Tripepi,

 

 -

Senior Vice President, Business Development

 

 

Total for All Current Executive Officers as a Group (6 persons):

 

5,877

 

The Company’s non-employee directors are not eligible to participate in the ESPP. No person has received 5% or more of the options or rights granted under the ESPP.

Vote Required for Amendment to ESPP

 

The Board believes that the amendment to the ESPP will promote the interests of the Company and its stockholders and will assist the Company in attracting and retaining skilled personnel. 

 

All of the Company’s executive officers are eligible for awards under the ESPP and thus have a personal interest in the approval of the ESPP.

 

Approval of the amendment to the ESPP to increase the number of shares authorized for issuance under the plan requires the affirmative vote of the majority of the common stock present, or represented, and entitled to vote at the Annual Meeting.

 

THE BOARD UNANIMOUSLY RECOMMENDS THAT A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN AS DESCRIBED ABOVE AND SET FORTH IN EXHIBIT B HERETO.  

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CORPORATE GOVERNANCE

 

The Board of Directors

 

Corporate Governance

 

The Company is managed under the direction of the Board currently composed of nine directors, eight of whom the Board has determined are independent under the rules of the listing standards for the Nasdaq Global Market (the “Nasdaq Rules”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  If all of the nominees named in this proxy statement are elected, eight of the nine directors will be independent under Nasdaq Rules.

 

Board members are expected to attend each Board meeting and each meeting of any committee on which such Board member serves and they are encouraged to attend the Annual Meeting of Stockholders.  The Board met four times in 2016.  Each incumbent director attended at least 75% of the total number of meetings of the Board that were held during the time that he or she served on the Board and of each committee on which he or she served during 2016.  Each incumbent director who was a director at the time of the 2016 annual meeting attended the 2016 annual meeting, except for Mr. Renken. Stockholders or other interested parties may communicate with members of the Board individually or with the Board as a whole by sending a letter to the appropriate director or the Board in care of the Secretary of the Company at the address shown below under “—Communications with the Board of Directors.”

 

Board Leadership Structure

 

The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board.  In November 2016, the Board elected Thomas D. Brisbin, Willdan’s Chief Executive Officer, as Chairman of the Board.  In March, 2017, the Board appointed Keith W. Renken as Lead Independent Director of the Board.  Although, we have in the past separated the roles of Chief Executive Officer and Chairman of the Board, the Board believes that having Dr. Brisbin serve in both these roles, coupled with strong independent director leadership, further enhanced by the appointment of Mr. Renken as Lead Independent Director, is the most appropriate and effective board leadership structure for us at this time.

 

Executive Sessions

 

Non-management directors meet regularly in executive sessions without management.  Non-management directors are those directors who are not Company officers or employees and include directors, if any, who are not independent by virtue of the existence of a material relationship with the Company, former status or family relationship or for any other reason other than being an employee of the Company.  Executive sessions are led by a “Lead Director” and Mr. Renken has been designated as the Lead Director.  An executive session is held in conjunction with each regularly scheduled quarterly Board meeting and other sessions may be called by the Lead Director in his own discretion or at the request of the Board.

 

Director Independence

 

The Company has established standards of independence for the Board that comply with the Nasdaq Rules and Exchange Act.  Under these standards of independence, for a director to be considered independent, the director must, among other things, not be an officer or employee of the Company or its subsidiaries and the director must not have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

The Company’s policy is to have at least a majority of directors qualify as independent under the listing standards set forth in the Nasdaq Rules and Exchange Act.  The Board has determined that each of Messrs. Cohen, Holdsworth, McEachern, McGinn, Probst, Renken, Shahidehpour and Westfall, is independent under the standards set forth in the Nasdaq Rules and the Exchange Act.  We have one director who is not independent, Dr. Brisbin, our Chief Executive Officer.

 

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Committees of the Board of Directors

 

We have four standing committees of the Board:  the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Strategy, Mergers and Acquisitions Committee.  The charters for each of these committees are available on our website at www.willdan.com under “Investors—Corporate Governance—Governance Documents” or are available in print to any stockholder who requests a copy from the Company’s Secretary at 2401 East Katella Avenue, Suite 300, Anaheim, California 92806.  Each of these committees regularly reports to the Board as a whole.  Dr. Brisbin, our chairman of the board, serves as an ex officio member of each committee.  The following summaries identify the members of each committee as of the date of this proxy statement.  The composition of each committee may change following the Annual Meeting.

 

Audit Committee .  The Board’s Audit Committee consists of Messrs. McEachern, Probst, Renken and Westfall, each of whom the Board has determined is an independent director and meets the independence requirements for Audit Committee members under the Nasdaq Rules and the Exchange Act.  Mr. McEachern is the chairman of the Audit Committee and has been designated by the Board as the Audit Committee financial expert.  Each of the other members of the Audit Committee is financially literate, in accordance with the Nasdaq Rules.  The Audit Committee met five times during fiscal 2016. 

 

Under the terms of the Audit Committee charter, the purpose of this committee is to assist the Board in overseeing the integrity of the Company’s financial statements and financial reporting, the Company’s compliance with legal and regulatory requirements, the qualifications and independence of the Company’s independent registered public accounting firm, the performance of the Company’s internal reporting and audit functions, and the Company’s disclosure controls and procedures and system of internal controls regarding finance, accounting, legal compliance and ethics.  The Audit Committee confers formally with the Company’s independent registered public accounting firm, as well as with members of management to inquire as to the manner in which the respective responsibilities of these groups and individuals are being discharged.  The Audit Committee engages our independent registered public accounting firm and reviews and approves the scope of the audit conducted by the independent registered public accounting firm.

 

Compensation Committee .  The Board’s Compensation Committee consists of Messrs. Holdsworth, McEachern, and Shahidehpour, each of whom the Board has determined is an independent director under the Nasdaq Rules and the Exchange Act, with Mr. Holdsworth serving as the Committee’s chairman.  Mr. Toups served on the Compensation Committee for all of fiscal 2016 and until his retirement on March 16, 2017. The Compensation Committee is responsible for establishing and governing the compensation and benefit practices of the Company.  The Compensation Committee charter requires that the Compensation Committee consist of three or more members of the Board, each of whom qualifies as an “independent director” under Nasdaq Rules, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.  At all times during fiscal 2016, the Compensation Committee consisted of at least three members of the Board, each of whom the Board has affirmatively determined satisfies these independence requirements.  The Compensation Committee met five times during fiscal 2016. 

 

The Compensation Committee assists the Board in determining the compensation of the Company’s executive officers and senior management and approves the annual and long-term compensation for the Company’s Chief Executive Officer and other executive officers.  In addition to its annual review of the compensation of the Company’s officers, the Compensation Committee administers the Company’s 2008 Performance Incentive Plan (the “2008 Plan”), 2006 Stock Incentive Plan (the “2006 Plan”) and the Amended and Restated Willdan Group, Inc. 2006 Employee Stock Purchase Plan (the “ESPP”).  The Committee has the authority to designate officers, directors or key employees eligible to participate in the plans, to prescribe the terms of any stock options or other equity-based awards, to interpret the plans, and to make all other determinations for administering the plans.  Our Chief Executive Officer recommends to the Compensation Committee salary, annual bonus and long-term compensation levels for less senior officers, including the other Named Executive Officers (as defined below).

 

The Compensation Committee is authorized to retain and terminate any compensation consultant engaged to assist in the evaluation of the compensation of our senior executive officers (including all of the Named Executive Officers).  In light of the straightforward nature of our executive compensation arrangements, the Compensation Committee believes it has not been necessary to date to retain independent compensation consultants.

 

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Nominating and Governance Committee .  The Board’s Nominating and Governance Committee consists of Messrs. Shahidehpour, Cohen, and Westfall, each of whom the Board has determined is an independent director under the Nasdaq Rules, with Dr. Shahidehpour serving as the Committee’s chairman.  The Nominating and Governance Committee met four times in fiscal 2016.

 

The Nominating and Governance Committee works with the Board to determine the appropriate characteristics, skills, and experience for the Board as a whole and its individual members.  In evaluating the suitability of individual Board members, the Nominating and Governance Committee and the Board take into account many factors, as discussed above under “Proposal 1. Election of Directors—Information Regarding Nominees.”  Although the Company does not have a formal policy with regard to the consideration of diversity in identifying candidates for election to the Board, the Nominating and Governance Committee recognizes the benefits associated with a diverse group of directors and takes diversity considerations into account when identifying director candidates.  The Nominating and Governance Committee and the Board seek a broad range of perspectives and consider both the personal characteristics and experience of prospective nominees to ensure that the Board as a whole will possess the appropriate skills and expertise to oversee the Company.  These factors, and others considered useful by the Nominating and Governance Committee, will be reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.

 

After assessing the perceived needs of the Board, the Nominating and Governance Committee may identify specific individuals to serve as directors and the committee looks to well respected companies as a potential source of director candidates with relevant experience.  The priorities and emphasis of the Nominating and Governance Committee and of the Board may change from time to time to take into account changes in business and other trends and the portfolio of skills and experience of current and prospective Board members.  The Nominating and Governance Committee establishes procedures for the nomination process and may recommend candidates for election to the Board.

 

Strategy, Mergers and Acquisitions Committee .  The Board’s Strategy, Mergers and Acquisitions, or SMA, Committee consists of Messrs. Cohen, McGinn, Probst, Holdsworth and Shahidehpour, each of whom the Board has determined is an independent director under the Nasdaq Rules, with Dr. Cohen serving as the Committee’s chairman.  The SMA Committee assists the Board by reviewing and making recommendations to the Board or taking actions on behalf of the Board relating to the Company’s financial and strategic plans.  The SMA Committee charter requires that the SMA Committee consist of three members of the Board, each of whom the Board has determined satisfies the independence requirements under the Nasdaq Rules and the Exchange Act.  The SMA Committee met four times during fiscal 2016.

 

The responsibilities of the SMA Committee include reviewing with management, on a timely basis, significant financial matters of the Company and its subsidiaries, including matters relating to the Company’s capitalization, dividend policy and practices, credit ratings, cash flows, borrowing activities, investment strategies, and potential acquisitions, and risk oversight.  The SMA Committee also reviews and may recommend to the Board actions relating to offerings of the Company’s debt or equity securities; purchases or disposals of treasury shares, except the purchase of shares pursuant to approved employee benefit plans; stock splits or reclassification of shares; the declaration and payment of any dividends on the Company’s common stock; guarantees of unconsolidated third party indebtedness; and certain other financial transactions and strategies.

 

Oversight of Risk

 

Companies face a variety of risks, including credit risk, liquidity risk, and operational risk.  The Board believes an effective risk management system will (1) timely identify the material risks that the Company faces, (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board Committee, (3) implement appropriate and responsive risk management strategies consistent with the Company’s risk profile, and (4) integrate risk management into the Company decision making.

 

Board’s Role in Risk Oversight. One of the principal functions of our Board is to provide oversight concerning the assessment and management of risk related to our business. The Board is involved in risk oversight through direct decision-making authority with respect to fundamental financial and business strategies and major corporate activities, including material acquisitions and financings, as well as through its oversight of management and the committees of the Board. Management is responsible for identifying the material risks facing the Company, implementing appropriate risk management strategies and ensuring that information with respect to material risks is shared with the Board or the appropriate Board committee. In connection with this responsibility, members of management provide regular reports to

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the Board regarding business operations and strategic planning, financial planning and budgeting and regulatory matters, including any material risk to the Company relating to such matters.

 

The Board has delegated oversight for specific areas of risk exposure to committees of the Board as follows:

 

1.

The Audit Committee is responsible for discussing policies with respect to risk assessment and risk management periodically with management and the independent auditor, as well as the Company’s plans or processes to monitor, control and minimize any financial risk exposure.  The Audit Committee is also responsible for primary risk oversight related to our financial reporting, accounting and internal controls.

 

2.

The Compensation Committee reviews the Company’s incentive compensation arrangements to help ensure that they do not encourage unnecessary risk-taking.

 

3.

The SMA Committee reviews periodically the Company’s risk management strategies with the Audit Committee.

 

At each regular meeting of our Board, the chairperson of each committee reports to the full Board regarding the matters reported and discussed at any committee meetings, including any matters relating to risk assessment or risk management. Upon the request of the committees, our Chief Executive Officer and Chief Financial Officer attend meetings of these committees when they are not in executive session, and often report on matters that may not be otherwise addressed at these meetings. In addition, our directors are encouraged to communicate directly with members of management regarding matters of interest, including matters related to risk, at times when meetings are not being held. Our Board believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of leadership structure as described under “Board Leadership Structure” above.

 

Compensation Risk Assessment .   We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to encourage unnecessary or excessive risk taking that could have a material adverse effect on the Company. In addition, the Compensation Committee believes that the mix and design of the elements of our executive compensation program do not encourage management to assume unnecessary or excessive risks that could have a material adverse effect on the Company.

 

Compensation Committee Interlocks and Insider Participation

 

The Board’s Compensation Committee consists of Messrs. Holdsworth, McEachern and Shahidehpour. None of the members of our Compensation Committee has at any time been one of our officers or employees, nor has any member of our Compensation Committee had any relationship requiring disclosure under Item 404 of Regulation S-K. None of our executive officers serves, or in the past year has served, as a member of the board of directors or the compensation committee of any entity that has one or more executive officers who serve on our Board or Compensation Committee.

 

Policy on Hedging and Pledging

 

The Company recognizes that hedging against losses in Company stock is not appropriate or acceptable trading activity for individuals employed by or serving the Company.  The Company has incorporated prohibitions on various hedging activities within its insider trading policy, which policy applies to directors, officers and employees of the Company and their family members.  The policy prohibits trading in any interest or position relating to the future price of Company securities, such as put, call or short sale. 

 

Code of Ethics

 

The Company expects that all of its directors, officers and employees will maintain a high level of integrity in their dealings with and on behalf of the Company and will act in the best interests of the Company.  The Company has adopted a Code of Ethical Conduct which provides principles of conduct and ethics for the Company’s directors, officers and employees.  This Code complies with the requirements of the Sarbanes-Oxley Act of 2002 and the Nasdaq Rules.  This Code of Ethical Conduct is available on the Company’s website at www.willdan.com under “Investors—Corporate

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Governance—Governance Documents” and is also available in print, without charge, to any stockholder who requests a copy by writing to our Secretary at 2401 East Katella Avenue, Suite 300, Anaheim, California 92806.

 

Material Litigation

 

There are currently no ongoing material proceedings in which any director or executive officer is a party adverse to the Company or any of its subsidiaries, or in which any director or executive officer has a material interest adverse to the Company or any of its subsidiaries.

 

Director Nominations by Stockholders

 

The Nominating and Governance Committee will consider director candidates recommended by stockholders.  Properly communicated stockholder recommendations will be considered in the same manner as recommendations received from other sources.  To be properly communicated, stockholders desiring to recommend candidates for nomination or election to the Board should submit their recommendations in writing to the attention of the Secretary, Willdan Group, Inc., 2401 East Katella Avenue, Suite 300, Anaheim, CA 92806, together with the following information:  (i) all information about the stockholder and the candidate that would be required pursuant to Section 3.04(a)(ii) of our Bylaws if the stockholder was nominating the candidate for election to the Board, (ii) a statement of the proposed director candidate’s qualifications, taking into account the principles used by the Nominating and Governance Committee in evaluating possible candidates as described above, (iii) a statement detailing any relationship between the proposed director candidate and any of our competitors, and (iv) detailed information about any relationship or understanding between the recommending stockholder and the director candidate.  The Nominating and Governance Committee may request additional information concerning the director candidate as it deems reasonably necessary to determine the eligibility and qualification of the director candidate to serve as a member of our Board.

 

The Nominating and Governance Committee will evaluate any stockholder recommended candidate to determine whether he or she is highly qualified.  Particular consideration will be given to those individuals who have substantial achievement in their personal and professional pursuits and whose talents, experience and integrity would be expected to contribute to the best interests of the Company and to long-term stockholder value.  Without limitation, the Committee recommends individuals who have a general management focus, have specialization in the Company’s principal business activities or finance, have significant experience in issues encountered by public companies and who could contribute to the diversity of the board.  The Nominating and Governance Committee evaluates stockholder recommended candidates in the same way it evaluates candidates proposed from other sources.

 

Please note that stockholders who wish to nominate a person for election as a director in connection with an annual meeting of stockholders (as opposed to making a recommendation to the Nominating and Governance Committee as described above) must deliver written notice to our Secretary in the manner described in Section 3.04(a)(ii) of our Bylaws.

 

Communications with the Board of Directors

 

Individuals may contact the Company’s entire Board or an individual director by sending a written communication to the Board or such director in care of:

 

Secretary

Willdan Group, Inc.

2401 E. Katella Avenue, Suite 300

Anaheim, CA 92806

 

Each communication must set forth the name and address of the stockholder on whose behalf the communication is sent.  Each communication will be reviewed by the Company’s Secretary to determine whether it is appropriate for presentation to the Board or such director.  Advertisements, solicitations or hostile communications will not be presented.  Communications determined by the Secretary to be appropriate for presentation to the Board or such director will be submitted to the Board or such director on a periodic basis.

 

A stockholder wishing to communicate directly with the non-management members of the board may address the communication to “Non-Management Directors, c/o Board of Directors” at the same address set forth above.  These communications will be handled by the Lead Director, who presides at the meetings of non-management directors.  Finally, communications can be sent directly to individual directors by addressing letters to the director’s individual name, c/o the Board of Directors, at the address above.

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PRINCIPAL STOCKHOLDERS

 

Except as otherwise noted, the following table sets forth information as of April 13, 2017 with respect to:  (i) each person known by us to own beneficially more than 5% of the outstanding shares of our common stock, based upon Schedule 13G and Schedule 13D reports filed with the SEC, (ii) each of our directors and director nominees, (iii) each of our Named Executive Officers (as defined below under “Executive Compensation”) and (iv) our directors and executive officers as a group.

 

Unless otherwise noted below, the address of the persons listed in the table is c/o Willdan Group, Inc., 2401 East Katella Avenue, Suite 300, Anaheim, California 92806.  The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities.  Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security.  A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days.  Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest.  Except as otherwise noted, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock reflected as beneficially owned, subject to applicable community property laws.  We had 8,559,261 shares of common stock outstanding on April 13, 2017.

 

 

 

 

 

 

 

 

    

Amount of

    

Percent of

 

 

 

Beneficial

 

Common

 

Name and Address of Stockholder

 

Ownership

 

Stock

 

5% Stockholders

 

 

 

 

 

Renaissance Technologies LLC(1)

 

506,989

 

5.9

%

Edward W. Wedbush(2)

 

468,459

 

5.5

%

Executive Officers, Directors and Director Nominees

 

 

 

 

 

Thomas D. Brisbin(3)

 

408,798

 

4.8

%

Michael A. Bieber(4)

 

98,998

 

1.2

%

Daniel Chow(5)

 

63,000

 

*

%

Steven A. Cohen(6)

 

8,183

 

*

%

Raymond W. Holdsworth(7)

 

83,183

 

1.0

%

Douglas J. McEachern(8)

 

87,320

 

1.0

%

Dennis V. McGinn

 

 —

 

*

%

Stacy B. McLaughlin(9)

 

11,333

 

*

%

Curtis S. Probst

 

 —

 

*

%

Keith W. Renken(10)

 

124,583

 

1.5

%

Mohammad Shahidehpour(11)

 

8,183

 

*

%

Frank G. Tripepi

 

139,500

 

1.6

%

Win Westfall(12)

 

42,183

 

*

%

All directors and executive officers as a group (14 persons)

 

1,134,978

 

13.3

%


* The percentage of shares beneficially owned by this executive officer or director does not exceed one percent of the Company’s outstanding common stock.

 

(1)

Beneficial ownership information is given as of November 14, 2016 and was obtained from a Schedule 13G filed with the SEC on February 14, 2017 by Renaissance Technologies LLC (“RTC”) and Renaissance Technologies Holdings Corporation (“RTHC”).  RTHC is the majority owner of RTC. The principal office or business address of RTC and RTHC is 800 Third Avenue, New York, NY 10022.

 

(2)

Beneficial ownership information is given as of December 31, 2015 and was obtained from a Schedule 13G/A filed with the SEC on March 1, 2016 by Wedbush, Inc.  Edward W. Wedbush owns approximately 50% of the issued and outstanding shares of Wedbush, Inc., which is the sole shareholder of Wedbush Securities Inc. Mr. Wedbush is also the Chairman of the Board of Wedbush, Inc. and the President of Wedbush Securities Inc.  Edward Wedbush has sole voting and dispositive power over 389,372 shares, shared voting power over 406,872 shares and shared dispositive power over 468,459 shares, of which Wedbush Securities, Inc. has dispositive power over 61,587 shares and Mr. Wedbush disclaims beneficial ownership over such shares.  In addition, Wedbush Securities Inc. has shared voting power over 17,500 shares and shared dispositive power over 468,459 shares, and Wedbush Inc. has sole

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voting and dispositive power over 17,500 shares and shared voting and dispositive power over 17,500 shares.  The address for Wedbush Inc. is 1000 Wilshire Blvd., Los Angeles, CA 90017-2457, and the address for Wedbush Securities Inc. and Mr. Wedbush is P.O. Box 30014, Los Angeles, CA 90030-0014.

 

(3)

Consists of 185,465 shares of common stock held directly by Dr. Brisbin and 223,333 shares of common stock subject to options exercisable on or before June 13, 2017. The 185,465 shares of common stock held directly by Dr. Brisbin include 40,000 shares of restricted stock which vest in substantially equal parts on each of May 5, 2017, May 5, 2018 and May 5, 2019.

 

(4)

Consists of 7,333 shares of common stock held directly by Mr. Bieber and 91,665 shares of common stock subject to options exercisable on or before June 13, 2017. The 7,333 shares of common stock held directly by Mr. Bieber include 3,333 shares of restricted stock, which vest in substantially equal parts on each of March 8, 2018, March 8, 2019 and March 8, 2020.

 

(5)

Consists of 37,667 shares of common stock held directly by Mr. Chow and 25,333 shares of common stock subject to options exercisable on or before June 13, 2017.  The 37,667 shares of common stock held directly by Mr. Chow include 12,667 shares of restricted stock, of which 10,000 shares vest in substantially equal parts on each of May 5, 2017, May 5, 2018 and May 5, 2019 and 2,667 shares vest in substantially equal parts on each of March 8, 2018, March 8, 2019 and March 8, 2020.

 

(6)

The 8,183 shares of common stock held by Dr. Cohen include 6,983 shares of restricted stock, of which 2,400 shares of restricted stock vest in substantially equal parts on each of June 5 2017 and June 5, 2018 and 4,583 shares of restricted stock vest in substantially equal parts on each of June 9, 2017, June 9, 2018 and June 9, 2019.

 

(7)

Consists of 63,183 shares of common stock held directly by Mr. Holdsworth and 20,000 shares of common stock subject to options exercisable on or before June 13, 2017.  The 63,183 shares of common stock held directly by Mr. Holdsworth include 6,983 shares of restricted stock, of which 2,400 shares of restricted stock vest in substantially equal parts on each of June 5, 2017 and June 5, 2018 and 4,583 shares of restricted stock vest in substantially equal parts on each of June 9, 2017, June 9, 2018 and June 9, 2019.

 

(8)

Consists of 10,683 shares of common stock held directly by Mr. McEachern and 76,637 shares of common stock held in The McEachern Family Trust. Mr. McEachern and his wife are co-trustees and beneficiaries of the trust and have shared voting and investment control over our shares of common stock held therein.  The 10,683 shares of common stock held directly by Mr. McEachern include 6,983 shares of restricted stock, of which 2,400 shares of restricted stock vest in substantially equal parts on each of June 5, 2017 and June 5, 2018 and 4,583 shares of restricted stock vest in substantially equal parts on each of June 9, 2017, June 9, 2018 and June 9, 2019.

 

(9)

Consists of 1,333 shares of common stock held directly by Mrs. McLaughlin and 10,000 shares of common stock subject to options exercisable on or before June 13, 2017. The 1,333 shares of common stock held directly by Ms. McLaughlin are restricted shares of stock, which vest in substantially equal parts on each of March 8, 2018, March 8, 2019 and March 8, 2020.

 

(10)

Consists of 37,183 shares of common stock held directly by Mr. Renken, 80,400 shares of common stock held by the LVRJC Partnership and 7,000 shares of common stock subject to options exercisable on or before June 13, 2017. Mr. Renken is the managing partner of the partnership and has sole voting and investment control over our shares of common stock held therein.  The 37,183 shares of common stock held directly by Mr. Renken include 6,983 shares of restricted stock, of which 2,400 shares of restricted stock vest in substantially equal parts on each of June 5, 2017 and June 5, 2018 and 4,583 shares of restricted stock vest in substantially equal parts on each of June 9, 2017, June 9, 2018 and June 9, 2019.

 

(11)

The 8,183 shares of common stock held by Dr. Shahidehpour include 6,983 shares of restricted stock, of which 2,400 shares of restricted stock vest in substantially equal parts on each of June 5, 2017 and June 5, 2018 and 4,583 shares of restricted stock vest in substantially equal parts on each of June 9, 2017, June 9, 2018 and June 9, 2019.

 

(12)

Consists of 20,183 shares of common stock held directly by Mr. Westfall and 22,000 shares of common stock subject to options exercisable on or before June 13, 2017. The 20,183 shares of common stock held directly by Mr. Westfall include 6,983 shares of restricted stock, of which 2,400 shares of restricted stock vest in substantially equal parts on each of June 5, 2017 and June 5, 2018 and 4,583 shares of restricted stock vest in substantially equal parts on each of June 9, 2017, June 9, 2018 and June 9, 2019.

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MANAGEMENT

 

The following table sets forth the names, ages and positions of our current executive officers.

 

Name

    

Age

    

Position

Thomas D. Brisbin

 

64

 

Chairman of the Board and Chief Executive Officer

Michael A. Bieber

 

48

 

President

Stacy B. McLaughlin

 

35

 

Vice President and Chief Financial Officer

Daniel Chow

 

66

 

Chief Operating Officer

Marc Tipermas

 

69

 

President of National Programs

Frank G. Tripepi

 

69

 

Senior Vice President, Business Development

 

Biographical information concerning Dr. Brisbin is set forth under the caption “Proposal 1. Election of Directors—Information Regarding Nominees and Directors.”

 

Michael A. Bieber was appointed President of the Company in November 2016.  Previously, Mr. Bieber was Senior Vice President, Corporate Development of the Company from December 2014 to November 2016.  Previously, he served as Senior Vice President at Tetra Tech, where he served in a number of leadership roles for over 18 years.  From March 2007 to December 2014, Mr. Bieber managed Tetra Tech’s mergers and acquisitions and investor relations functions, overseeing over fifty acquisitions.  From 2005 to 2007, Mr. Bieber managed Tetra Tech’s corporate business development group, where he was responsible for overseeing internal business development, marketing and communications.  From January 2000 to December 2014, Mr. Bieber also worked in Tetra Tech’s investor relations group.  From 1996 to 2000, he was a proposal manager in Tetra Tech’s corporate marketing group.  From 1994 to 1996, he served at CRC, Inc., and its successor, as a strategic business development consultant to large defense, infrastructure, and environmental firms.  Prior to 1994, Mr. Bieber worked for IT Corporation (now CB&I) where he served as project manager and engineer on government nuclear and commercial environmental projects.  Mr. Bieber holds a B.S. degree in Civil Engineering from the Tennessee Technological University.

 

Stacy B. McLaughlin was appointed Vice President and Chief Financial Officer of the Company in November 2013.  Mrs. McLaughlin served as the Company’s Compliance Manager from 2010 to 2013.  As Compliance Manager, Mrs. McLaughlin was responsible for overseeing all aspects of the financial reporting process, including analyzing the balance sheets and income statements of each business segment.  Prior to joining the Company, Mrs. McLaughlin was, from 2009 to 2010, Senior Associate at Windes & McClaughry Accountancy Corporation and, from 2004 to 2009, Senior Audit Associate at the public accounting firm KPMG LLP.  In her position at KPMG LLP, she planned, coordinated and completed financial statement audits for companies in the engineering services sector, among others.  Mrs. McLaughlin has a Masters in Accounting from the University of Southern California and BS from the University of Arizona.  Mrs. McLaughlin is a Certified Public Accountant (CPA).

 

Daniel Chow was appointed Chief Operating Officer of the Company in November 2016.  Mr. Chow also continues to serve as President and Chief Executive Officer of Willdan Energy Solutions since August 2016 and as President and Chief Executive Officer of Willdan Engineering since December 2008.  Prior to joining the Company, Mr. Chow was the Vice President of AMEC Earth & Environmental, Inc., a subsidiary of AMEC plc, a global provider of high value consultancy, engineering and project management services to the energy, power and process industries, from April 2004 to December 2008.  Prior to AMEC, Mr. Chow worked at Tetra Tech EM Inc. (formerly PRC Environmental Management, Inc.) for over 20 years and held various senior management positions, including Vice President of US operations.  During Mr. Chow’s tenure with these firms he was responsible for establishing new offices and developing and implementing management systems firmwide to enhance operations.  He also led the pursuit and management of multi-million dollar contracts for government clients that included the U.S. Navy and the U.S. Army Corps of Engineers.  Mr. Chow received his B.Sc. in Mechanical Engineering from Tennessee Technological University and his Master’s Degree in Environmental Engineering from Illinois Institute of Technology.  He is a registered professional engineer in the state of Illinois and Guam.

 

Marc Tipermas was appointed President of National Programs in May 2007.  Dr. Tipermas has spent most of his 35-year career in the professional services industry in a variety of senior executive level business development and operations positions.  From 1981 to 1998, Dr. Tipermas worked at ICF Kaiser International, a global consulting, engineering, and program management firm with over 6,000 employees, and was named President and Chief Operating Officer in 1997.  From January 2002 to May 2006, he was Senior Vice President for Business Development of Dynamac Corporation, an environmental consulting firm.  From October 1998 to December 2001 and from May 2006 to May

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2007, he worked as an independent business development consultant to several nationwide engineering and consulting firms.  From 1977 to 1981 Dr. Tipermas worked at the U.S. Environmental Protection Agency (EPA) and from 1980 to 1981 served as the first Director of EPA’s Superfund Policy and Program Management Office.  From 1975 to 1977 he was Assistant Professor of Political Science at SUNY/Buffalo.  Dr. Tipermas received an S.B. from the Massachusetts Institute of Technology and holds Ph.D. and Master’s degrees from Harvard University in political science.

 

Frank G. Tripepi was appointed Senior Vice President, Business Development in May 2011.  Previously, he served as the President and Chief Executive Officer of our subsidiary, Willdan Financial Services, formerly known as MuniFinancial, from June 2002 to May 2011.  From October 2008 to December 2009, Mr. Tripepi also served as the interim city manager for the City of La Puente.  Prior to joining Willdan Financial Services, Mr. Tripepi served as the city manager of Rosemead, California for approximately 28 years.  In April 2004, Mr. Tripepi received an appointment to the Board of Governors of the Rose Institute of State and Local Government.  The Rose Institute conducts and publishes research on California government and politics.  Mr. Tripepi received his B.A. in Political Science in 1969 from California State University, Fullerton.

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This section describes each of the material elements of compensation awarded to, earned by or paid to our executive officers identified in the “Summary Compensation Table,” whom we refer to in this section as our “Named Executive Officers.” This section also describes the role and involvement of various parties in our executive compensation analysis and decisions, and provides a discussion of the process and rationale for the decisions of our Compensation Committee to compensate our Named Executive Officers with specific types and amounts of compensation.

 

2016 Named Executive Officers

 

Our Named Executive Officers for 2016 were:

 

Thomas D. Brisbin

    

Chairman of the Board and Chief Executive Officer

Michael A. Bieber

    

President

Stacy B. McLaughlin

 

Vice President and Chief Financial Officer

Daniel Chow

 

Chief Operating Officer

Frank G. Tripepi

 

Senior Vice President, Business Development

 

Financial Highlights

 

We believe that 2016 was a successful year for the Company.  We were able to successfully execute on our business plan, and believe that we were able to deliver strong energy savings on all of our major long-term programs for utilities, while effectively ramping up the new programs we won in 2016.  During 2016, we achieved significant year-over-year growth in several important metrics, as highlighted below:

 

Ø

Total contract revenue of $208.9 million, an increase of 55% over prior year;

 

Ø

Net income of $8.3 million, an increase of 95% over prior year;

 

Ø

Diluted earnings per share of $0.97, up 87% over prior year;

 

Ø

Cash flow from operations of $21.6 million; and

 

Ø

Stock price appreciation from $8.38 at December 31, 2015 to $22.59 at December 30, 2016, an increase of approximately 170%.

 

Executive Compensation Program Objectives and Philosophy

 

In 2015, we adopted a comprehensive executive compensation plan statement.  Decisions regarding total compensation program design, as well as individual pay decisions and adjustments, are made in the context of our executive compensation plan statement. 

 

Under our executive compensation plan statement, our executive compensation philosophy is to:

 

Ø

Align the interests of our executives with those of the stockholders;

 

Ø

Attract, motivate, reward and retain the top contributors upon whom, in large part, our success depends;

 

Ø

Be competitive with compensation programs for companies of similar size and complexity with whom we compete for talent, including direct competitors;

 

Ø

Provide compensation based upon the short-term and long-term performance of both the individual executive and the Company; and

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Ø

Strengthen the relationship between pay and performance by emphasizing variable, at-risk compensation that is dependent upon the successful achievement of specified corporate and individual goals.

 

Our current executive compensation program consists of three key elements, each of which is designed to be consistent with our executive compensation philosophy: (1) base salary; (2) cash bonuses that are earned based on performance; and (3) long-term incentive compensation in the form of equity awards that are subject to time-based vesting requirements. We also provide 401(k) retirement benefits and, in some cases, severance benefits to our executive officers, including the Named Executive Officers.

 

In structuring our executive compensation arrangements, our Compensation Committee considers how each compensation element fits within our overall philosophy. Base salaries are primarily intended to attract and retain top contributors.  We believe that in order to attract and retain top executives, we need to provide our executive officers with compensation levels that reward their continued service and are competitive. Cash bonuses and long-term equity incentives are the elements of our executive compensation program that are “at risk” and designed to reward performance and thus the creation of long-term shareholder value. Performance cash bonuses are primarily intended to motivate the Named Executive Officers to achieve our short-term financial objectives. Our long-term equity incentives are primarily intended to align our Named Executive Officers’ long-term interests with shareholders’ long-term interests.

 

Role of the Compensation Committee

 

Pursuant to its charter, the Compensation Committee of our Board has the authority to determine the amount of compensation given to each of the Named Executive Officers. The Compensation Committee implements our executive compensation philosophy, and is responsible for administering our equity compensation plans, including approving grants of awards under the plans.  In performing its duties, the Compensation Committee is authorized to consider the recommendations of our Chief Executive Officer when determining the compensation of the other Named Executive Officers.   All of the members of the Compensation Committee are independent directors.

 

The elements of our executive compensation program were each approved by the Compensation Committee.  None of the Named Executive Officers is a member of the Compensation Committee or, except for recommendations made by our Chief Executive Officer with respect to the compensation of the other Named Executive Officers, had any role in determining the compensation of the Named Executive Officers.

 

The Compensation Committee is authorized to retain and terminate any compensation consultant engaged to assist in the evaluation of the compensation of our senior executive officers (including all of the Named Executive Officers).   Consistent with past practice, in 2016 neither our Compensation Committee nor management retained a compensation consultant to review or recommend the amount or form of compensation paid to our executive officers, including our Named Executive Officers, or our directors.  In light of the straightforward nature of our executive compensation arrangements, the Compensation Committee believes it has not been necessary to date to retain independent compensation consultants. If and when we decide to retain a compensation consultant to assist us with our executive compensation programs in the future, we will conduct an independence assessment of any such compensation consultant (including an assessment of any conflicts of interest) as and to the extent required under applicable SEC and NASDAQ rules.

 

Similarly, our Compensation Committee does not “benchmark” executive compensation at any particular level in comparison with other companies. Rather, our Compensation Committee familiarizes itself with compensation trends and competitive conditions through the review of non-customized third-party market surveys and other publicly available data about relevant market compensation practices. In setting compensation levels for 2016, our Compensation Committee considered publicly available compensation data to determine the relative strengths and weaknesses of our compensation packages on an aggregate basis solely as a validation after determining the types and amount of compensation based on its own evaluation. In addition to a review of the general market compensation levels and practices, in setting compensation levels for 2016, our Compensation Committee also considered each executive’s level of responsibility and performance for the overall operations of the Company, historical Company practices, long-term market trends, internal pay equity, expectations regarding the individual’s future contributions, our own performance, and budget considerations.

 

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Role of Shareholder Say-on-Pay Votes

 

The Company annually offers shareholders the opportunity to cast an advisory vote on our executive compensation program. This annual vote is known as the “say-on-pay” proposal. At our annual general meeting in 2016, approximately 84 percent of votes cast were in favor of our executive compensation program for 2015. The Compensation Committee believes these results demonstrate that shareholders support our executive compensation program. When making future compensation decisions for Named Executive Officers, the Compensation Committee will continue to consider the opinions that shareholders express through say-on-pay votes.

 

Executive Compensation Program Elements

 

Base Salaries

 

We pay each Named Executive Officer a base salary to provide each executive with a minimum, fixed level of cash compensation.  Decisions regarding increases to base salaries are made at the discretion of our Compensation Committee. In reviewing base salary levels for our Named Executive Officers, our Compensation Committee primarily considers and assesses the following factors: each Named Executive Officer’s current base salary, their job responsibilities, leadership and experience, value to our Company and the recommendations of our President and Chief Executive Officer (other than with respect to his own compensation). 

 

Even though 2016 was a successful year for us and we achieved significant year-over-year growth in several important metrics, the Compensation Committee determined not to make any increase to Dr. Brisbin’s base salary in 2016.  During 2016, the Compensation Committee did approve base salary increases for Mr. Chow and Mrs. McLaughlin to recognize their leadership and experience, but did not award base salary increases to any of the other Named Executive Officers.

 

No Named Executive Officer has received a base salary increase for 2017.

 

Annual Bonuses

 

We determined to award performance bonuses to all of our Named Executive Officers except Dr. Brisbin in 2016.  The Compensation Committee determined the amount of each executive’s bonus in its discretion, and did not use any formulaic bonus metric.  In determining the amount of each executive’s 2016 bonus, the Compensation Committee primarily considered our overall financial performance during our 2015 fiscal year and the first part of our 2016 fiscal year, budget considerations, each executive’s level of responsibility and performance, internal pay equity, and the recommendations of our Chief Executive Officer (other than with respect to his own compensation).

 

Even though 2016 was a successful year for the Company, Dr. Brisbin was not awarded a bonus in 2016. Instead, Dr. Brisbin was awarded a long-term equity award in connection with his appointment as Chairman of the Board. As described below, the Compensation Committee determined to grant Dr. Brisbin a long-term equity award instead of a bonus because it wanted to award him with a meaningful long-term equity incentive tied to the value of our stock that would vest in installments over a three-year period and provide more retention value than a cash bonus for 2016.

 

Long-Term Equity Awards

 

Our 2008 Performance Incentive Plan permits us to award all types of incentive awards, including incentive or nonqualified options, stock appreciation rights, stock bonuses, restricted stock, stock units, performance stock, phantom stock, dividend equivalents and other forms of awards.

 

The Compensation Committee has currently determined to grant long-term equity incentive awards to the Named Executive Officers and other executives in the form of options and restricted stock awards. The Compensation Committee believes option awards with a multi-year vesting schedule create an incentive for the executives to create and preserve long-term shareholder value, as the options will only have value if our share price increases following the grant date. The Compensation Committee believes restricted stock awards with a multi-year vesting schedule can be an effective supplement to option awards in the mix of long-term equity compensation because, compared to options, they have value even if our share price does not appreciate. This helps to mitigate risk by ensuring that our Named Executive

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Officers have downside risk that is aligned with our shareholders’ interests and also helps enhance the retentive value of the awards.

 

In 2016, each of our Named Executive Officers (except Mr. Tripepi) received an option award under our 2008 Plan.  Each option award was granted with an exercise price equal to the fair market value of a share of our Common Stock on the grant date, and will only have value if the executives are able to successfully drive appreciation in the value of our Common Stock.

 

As described above, in connection with Dr. Brisbin’s appointment as Chairman of the Board in November 2016, Dr. Brisbin was granted a restricted stock award that vests in substantially equal annual installments over three years, subject to his continued employment on each vesting date.  The Compensation Committee determined to grant Dr. Brisbin a long-term equity award in connection with his appointment because it wanted to award with him a meaningful long-term equity incentive tied to the value of our stock that would vest in installments over a multi-year period.  The Compensation Committee believed this award would provide significant retentive value over the vesting period and would further align Dr. Brisbin’s interests with those of our shareholders.  As a result of this equity award, Dr. Brisbin was not awarded a cash bonus for 2016.

 

Mr. Chow was also granted a restricted stock award in November 2016 that vests in substantially equal annual installments over three years, subject to his continued employment on each vesting date. This award was granted to reward Mr. Chow for his contributions to our successful performance in 2016 and to help further align his interests with those of our shareholders.

 

In determining the level of awards granted to each of the Named Executive Officers who received a long-term equity incentive grant in 2016, the Compensation Committee primarily took into account the executive’s level of responsibility and performance for the overall operations of the Company, internal pay equity, historical Company practices, each executive’s performance, budget considerations, and for Dr. Brisbin and Mr. Chow, the specific factors described above.

 

Severance

 

Dr. Brisbin and Mr. Chow are employed pursuant to employment agreements or offer letters that provide specified levels of severance benefits if the executive’s employment is terminated by us without “cause” or, in the case of Dr. Brisbin, by the executive for a “good reason.”  The level of each executive’s severance benefits was negotiated and established in connection with the executive’s entry into his employment agreement or offer letter, and has been determined to be appropriate by the Compensation Committee based on the executive’s level of responsibility and performance for the overall operations of the Company, long-term market trends, and budget considerations.  Severance benefits for Dr. Brisbin are based on a multiple of “2x” his base salary and severance benefits for Mr. Chow are based on a multiple of “0.25x” base salary (or three months of base salary in total).  Severance benefits for Dr. Brisbin also includes payment of the executive’s target bonus for the year of termination of employment and a continued medical benefits component (which for Dr. Brisbin, is payable for any type of termination other than a termination by us for “cause”).

 

Mrs. McLaughlin, Mr. Bieber and Mr. Tripepi are not party to employment agreements or offer letters with us that provide for the payment of severance benefits for any type of termination of employment.

 

We do not believe that our Named Executive Officers should be entitled to any cash severance payments or benefits merely because of a change in control of the Company. Accordingly, none of the Named Executive Officers is entitled to any such payments or benefits upon the occurrence of a change in control of the Company unless there is an actual or constructive termination of employment for “good reason” following the change in control (a “double-trigger” arrangement).

 

Similarly, none of our Named Executive Officers is entitled to receive any automatic “single trigger” equity acceleration, as our equity awards will only vest in connection with a change in control of the Company if they are not substituted or assumed in connection with the transaction. 

 

No Named Executive Officer is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control pursuant to Sections 280G and 4999 of the Code.  Instead,

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our 2008 Performance Incentive Plan generally provides that awards or payments under the 2008 Plan are automatically “cut back” in such circumstances in order to avoid triggering these excise taxes.

 

Other Benefits

 

While employed, we provide our Named Executive Officers with retirement benefits under our 401(k) Plan, participation in our medical, dental and insurance programs and vacation and other holiday pay, all in accordance with the terms of such plans and programs in effect from time to time and substantially on the same terms as those generally offered to our other employees.

 

Policy with Respect to Section 162(m)

 

Under Section 162(m) of the Code, we are generally precluded from deducting compensation in excess of $1.0 million per year for our Chief Executive Officer and certain of our other Named Executive Officers, unless the payments are made under qualifying performance-based plans. Our 2008 Performance Incentive Plan permits us to grant awards that are intended to be qualified performance-based compensation that is deductible for purposes of Section 162(m) of the Code. In making its compensation decisions, the Compensation Committee considers the impact of Section 162(m) of the Code.  The Compensation Committee has generally structured stock options granted to our Named Executive Officers to be deductible qualified performance-based compensation, and stock options have historically been the largest component of long-term incentive awards for the Named Executive Officers.

 

Compensation Committee Report

 

The Compensation Committee of the Board has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement.  Based upon this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis section be included in this Proxy Statement.

 

 

Compensation Committee of the Board

 

 

 

Raymond W. Holdsworth (Chair)

 

Douglas J. McEachern

 

Mohammad Shahidehpour

 

The foregoing report of the Compensation Committee does not constitute soliciting material   and shall not be deemed filed, incorporated by reference into or a part of any other filing by the Company (including any future filings) under the Securities Act of 1933, as amended, or the   Exchange Act, except to the extent the Company specifically incorporates such report   by reference therein.

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COMPENSATION OF EXECUTIVE OFFICERS

 

The following table presents information regarding compensation during fiscal 2016, fiscal 2015, and fiscal 2014 of our named executive officers (the “Named Executive Officers”).  The Named Executive Officers include our principal executive officer, principal financial officer, and our three other most highly compensated executive officers.

 

Summary Compensation Table—Fiscal 2016, Fiscal 201 5, and Fiscal 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

Stock

    

Option

    

All Other

    

 

 

 

 

 

 

Salary

 

Bonus

 

Awards

 

Awards

 

Compensation

 

Total

 

Name and Principal Position

 

Year

 

($)

 

($)(1)

 

($)(2)

 

($)(3)

 

($)(4)

 

($)

 

Thomas D. Brisbin(5)

 

2016

 

300,019

 

 —

 

432,400

 

655,590

 

14,550

 

1,402,560

 

Chairman of the Board and Chief Executive Officer

 

2015

 

300,019

 

100,000

 

 —

 

272,530

 

13,800

 

686,349

 

 

 

2014

 

260,594

 

 

 —

 

144,950

 

14,008

 

419,552

 

Michael A. Bieber

 

2016

 

270,046

 

25,000

 

 —

 

418,190

 

3,750

 

716,986

 

President

 

2015

 

270,046

 

 —

 

 —

 

136,165

 

3,000

 

409,211

 

Stacy B. McLaughlin

 

2016

 

171,592

 

35,000

 

 —

 

152,576

 

16,268

 

375,435

 

Vice President and Chief Financial Officer

 

2015

 

148,408

 

40,000

 

 —

 

83,198

 

3,000

 

274,606

 

Daniel Chow

 

2016

 

229,842

 

25,000

 

108,100

 

196,677

 

9,240

 

568,859

 

Chief Operating Officer

 

2015

 

217,298

 

50,000

 

 —

 

 —

 

9,240

 

276,538

 

 

 

2014

 

211,784

 

 

 —

 

42,018

 

9,078

 

262,880

 

Frank G. Tripepi

 

2016

 

183,768

 

5,500

 

 —

 

 —

 

18,468

 

207,736

 

Senior Vice President, Business Development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1)

The amounts reported under “Bonus” include performance bonuses paid in 2016 for services performed in 2015 and 2016, as described in “Compensation Discussion and Analysis” section above.

 

(2)

The amounts reported under “Stock Awards” represent the aggregate grant date fair value of restricted stock awards granted to our Named Executive Officers during fiscal 2016 (disregarding any estimate of forfeitures related to service-based vesting conditions).  For a discussion of the assumptions and methodologies used to calculate the amounts reported in this column, please see the discussion of restricted stock awards granted during fiscal 2016 contained in Note 9 (Equity Plans) to our consolidated financial statements, included as part of our 2016 Annual Report filed on Form 10-K.

 

(3)

The amounts reported under “Option Awards” represent the aggregate grant date fair value of option awards granted to our Named Executive Officers during fiscal 2016 (disregarding any estimate of forfeitures related to service-based vesting conditions).  For a discussion of the assumptions and methodologies used to calculate the amounts reported in this column, please see the discussion of stock option awards granted during fiscal 2016, 2015, and 2014 contained in Note 9 (Equity Plans) to our consolidated financial statements, included as part of our 2016 Annual Report filed on Form 10-K.

 

(4)

The amounts reported under ‘‘All Other Compensation” for 2016 include $3,000 in matching contributions made by us for each of our Named Executive Officers under our 401(k) plan.  The balance of the amounts under ‘‘All Other Compensation” for each Named Executive Officer, other than Mr. Bieber and Mrs. McLaughlin, for 2016 represents automobile allowances paid to them or use of a company vehicle and cashing out of accumulated paid-time-off. The balance of the amounts under “All Other Compensation” for Mrs. McLaughlin for 2016 represents cashing out of accumulated paid-time-off.

 

(5)

Dr. Brisbin served on the Board during fiscal 2016, 2015, and 2014.  As an employee-director, Dr. Brisbin did not receive additional compensation for his services as a director.

 

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Compensation of Named Executive Officers

 

The Summary Compensation Table above quantifies the value of the different forms of compensation earned by or awarded to our Named Executive Officers in each applicable fiscal year.  As described in the “Compensation Discussion and Analysis” section above, the primary elements of each Named Executive Officer’s total compensation reported in the table are base salary, performance bonus and a long-term equity incentive award consisting of stock options and restricted stock awards (in the case of Dr. Brisbin and Mr. Chow).  Named Executive Officers also received the other benefits listed in the ”All Other Compensation” column of the Summary Compensation Table, as further described in footnote (4) to the table.

The Summary Compensation Table should be read in conjunction with the “Compensation Discussion and Analysis” section above and the tables and narrative descriptions that follow.  A description of the material terms of each Named Executive Officer’s employment agreement, if any, is provided immediately following this paragraph.  The “Grants of Plan-Based Awards in Fiscal 2016” table, and the description of the material terms of the stock options and restricted stock awards granted in fiscal 2016 that follows it, provides information regarding the long‑term equity incentives awarded to certain Named Executive Officers in fiscal 2016.  The “Outstanding Equity Awards at Fiscal 2016 Year-End” and “Option Exercises and Stock Vested in Fiscal 2016” sections provide further information on the Named Executive Officers’ potential realizable value and actual value realized with respect to their equity awards.  The discussion of the potential payments due upon a termination of employment or change in control that follows is intended to further explain the potential future payments that may become payable to our Named Executive Officers under certain circumstances.

 

Description of Employment Agreements, Salary and Bonus Amounts

 

On May 3, 2011, we entered into an amended and restated employment agreement with Dr. Brisbin.  This employment agreement provides for “at-will” employment and does not include a specified term.  This agreement provides for Dr. Brisbin to receive a base salary and an annual incentive bonus as determined by the Compensation Committee.  The annual target bonus for Dr. Brisbin under this agreement is 100% of his annual base salary.  Dr. Brisbin is also entitled to participate in benefit plans made available to our employees generally.

 

On October 29, 2008, we entered into an offer letter with Mr. Chow.  The letter provides that Mr. Chow’s employment is on an “at-will” basis and for his initial base salary to be $205,000 per year (which was increased to $230,000 per year beginning April 2016).

 

On December 17, 2014, we entered into an offer letter with Mr. Bieber.  The letter provides that Mr. Bieber’s employment is on an “at-will” basis and for his initial base salary to be $270,000 per year.

 

The Company has not entered into an employment agreement or offer letter with Mrs. McLaughlin or Mr. Tripepi. 

 

The provisions of these agreements relating to severance benefits following a termination of the Named Executive Officer’s employment are described below under “Potential Payments Upon Termination or Change in Control.”

 

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Grants of Plan-Based Awards in Fiscal 201 6

 

The following table presents information regarding the equity incentive awards granted to Named Executive Officers during fiscal 2016 under the 2008 Plan.  The material terms of each grant are described below under “―Description of Plan-Based Awards.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Other

 

All Other

 

 

 

 

 

 

 

 

Stock Awards:

 

Option Awards:

 

 

 

 

 

 

 

 

Number of

 

Number of

 

 

 

 

 

 

 

 

Shares of

 

Securities

 

Exercise or

 

Grant Date

 

 

 

 

Stock or

 

Underlying

 

Base Price of

 

Fair Value of

 

 

 

 

Units

 

Options

 

Option Awards

 

Option Awards

Name

 

Grant Date

 

(#)

 

(#)

 

($/Sh)

 

($)

Thomas Brisbin

    

5/5/2016

    

40,000

(1)  

 —

 

 —

    

432,400

 

 

11/3/2016

 

 —

 

100,000

(1)  

16.27

 

655,590

Michael Bieber

 

3/10/2016

 

 —

 

25,000

(1)  

9.13

 

90,395

 

 

11/3/2016

 

 —

 

50,000

(1)  

16.27

 

327,795

Stacy McLaughlin

 

3/10/2016

 

 —

 

15,000

(1)  

9.13

 

54,237

 

 

11/3/2016

 

 —

 

15,000

(1)  

16.27

 

98,339

Daniel Chow

 

5/5/2016

 

10,000

(1)  

 —

 

 —

 

108,100

 

 

11/3/2016

 

 —

 

30,000

(1)  

16.27

 

196,677

Frank G. Tripepi

 

 

 

 

 

 

 

 

 

 


(1)

These options and stock awards vest in substantially equal annual installments over three years from their grant date.

 

Description of Plan-Based Awards

 

During fiscal 2016, certain Named Executive Officers were each awarded stock option grants under the 2008 Plan.  The options were granted on March 10, 2016 and November 3, 2016 and will vest in substantially equal annual installments over three years from the grant date.  The options were granted with a per-share exercise price equal to the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date and have a term of ten years.  Outstanding options under the 2008 Plan, however, may terminate earlier than their stated expiration date in connection with a change in control transaction or a termination of the recipient’s employment.  The recipient will generally have three months to exercise the stock option following a termination of employment.  This period is extended to 12 months if the recipient dies or terminates his or her employment because of a disability incurred while employed by the Company.  However, if a recipient’s employment is terminated by the Company for cause, outstanding stock options (whether vested or unvested) will immediately terminate.  The stock options granted under our 2008 Plan do not include any dividend or dividend equivalent rights.

 

On May 5, 2016, Dr. Brisbin and Mr. Chow were each awarded restricted stock grants under the 2008 Plan.  These stock awards will vest in substantially equal annual installments over three years from the grant date.  If the recipient’s employment is terminated unvested restricted stock will be forfeited.  The restricted stock awards include the same dividend rights as applicable to other shares of the Company’s stock.

 

As indicated above, the stock options and restricted stock awards granted in fiscal 2016 were granted under, and are subject to the terms of, the 2008 Plan, which is administered by the Compensation Committee.  The Compensation Committee has authority to interpret the plan provisions and make all required determinations under the plan.  This authority includes making required proportionate adjustments to outstanding awards upon the occurrence of certain corporate events such as reorganizations, mergers and stock splits, and making provisions to ensure that any tax withholding obligations incurred in respect of awards are satisfied.  Awards granted under the plan are generally only transferable to a beneficiary of an award recipient upon his or her death.  However, the Compensation Committee may establish procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable securities laws and, with limited exceptions set forth in the plan documents, are not made for value.

 

Under the terms of the 2008 Plan, if there is a change in control of the Company, each recipient’s outstanding equity-based awards granted under the plan will generally become fully vested and exercisable to the extent such outstanding awards are not substituted or assumed in connection with the transaction.  Any options that become vested in connection with a change in control generally must be exercised prior to the change in control, or they will be canceled in exchange for the right to receive a cash payment in connection with the change in control transaction.

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Outstanding Equity Awards at Fiscal 2016 Year-End

 

The following table presents information regarding the outstanding option and restricted awards held by each Named Executive Officer as of December 30, 2016. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

 

    

 

 

 

 

Options Awards

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numbers of

 

Number of

 

 

 

 

 

 

 

 

 

 

 

Securities

 

Securities