UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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☒ | Definitive Proxy Statement |
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☐ | Fee paid previously with preliminary materials. | |
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
April 21, 2023
Dear Willdan Stockholder:
You are cordially invited to attend our 2023 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 8, 2023 at 10:00 a.m. Pacific Time. We will be hosting this year’s Annual Meeting via live audiocast on the Internet. To participate, vote or submit questions during the Annual Meeting via live audiocast, please visit: https://edge.media-server.com/mmc/p/tydzawp6. You will need the 15-digit control number included on your Notice of Internet Availability or your proxy card or voting instruction form (if you received a printed copy of the proxy materials) or included in the email to you (if you received the proxy materials by email) in order to be able to vote your shares or submit questions during the Annual Meeting. You will not be able to attend the Annual Meeting in person.
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| “Today, Willdan’s technical services are in high demand. We believe we are ideally positioned to provide the energy efficiency and engineering solutions that are needed in a changing energy world.” Thomas Brisbin Chairman & CEO |
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We utilize the Internet as our primary means of furnishing proxy materials to our stockholders. We will mail a Notice of Internet Availability of Proxy Materials to our stockholders of record that did not request to receive a printed copy of our proxy materials on or about April 26, 2023 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 or email copies of the proxy materials if they so choose. Internet transmission and voting are designed to be efficient, cost-effective and preserve resources.
Thank you for your continued support of Willdan. We look forward to your participation in the Annual Meeting.
/s/ Thomas D. Brisbin | |
Thomas D. Brisbin | |
Chairman of the Board and Chief Executive Officer |
Notice of 2023 Annual
Meeting of Stockholders
Annual Meeting of Stockholders | |
Date | Thursday, June 8, 2023 |
Time | 10:00 a.m. Pacific Time |
Place | Virtual audiocast only at https://edge.media-server.com/mmc/p/tydzawp6. |
Record Date | Close of business on April 18, 2023. A list of all stockholders entitled to vote at the Annual Meeting will be available for examination at our principal executive offices at 2401 East Katella Avenue, Suite 300, Anaheim, California 92806, for 10 days before the Annual Meeting, and during the Annual Meeting, such list will be available to registered stockholders as a link on the virtual meeting platform at https://edge.media-server.com/mmc/p/tydzawp6. |
Items of Business | ||
Proposal | Board | |
Item 1 | To elect the seven directors nominated by our Board of Directors to serve a one-year term or until their successors are duly elected and qualified or until their earlier resignation or removal | FOR |
Item 2 | To ratify the appointment of Crowe LLP as our independent registered public accounting firm for fiscal year 2023 | FOR |
Item 3 | To approve, on a non-binding advisory basis, our named executive officer compensation | FOR |
Item 4 | To approve 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 | FOR |
Item 5 | To approve an amendment to the Company’s 2006 Employee Stock Purchase Plan (the “ESPP”), including an increase in the number of shares available for issuance under the ESPP | FOR |
Item 6 | Consider and act on any other matter that may properly be brought before the Annual Meeting or any postponements or adjournment thereof | N/A |
HOW TO VOTE: YOUR VOTE IS VERY IMPORTANT
Dear Willdan Stockholders:
Your vote is very important. We recommend you vote by proxy ahead of the Annual Meeting even if you plan to participate in, and vote at, the virtual Annual Meeting.
If your shares are held in your name, you can vote by proxy in one of three convenient ways:
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Telephone | Internet | |
1-800-652-VOTE (8683) | www.investorvote.com/WLDN | Mark, sign, date and promptly mail the proxy card when received. |
Follow the instructions provided in the separate proxy card or voting instruction form you received. | Follow the instructions provided in the Notice, separate proxy card or voting instruction form you received. | Send your completed and signed proxy card or voting instruction form to the address on your proxy card or voting instruction form. |
Refer to "Other Information—How do I vote?" in the Meeting and Voting Information section on page 75 of the accompanying proxy statement for a description of each voting method. Any proxy may be revoked by delivery of a later dated proxy or a written notice of revocation or by attending the Annual Meeting via live audiocast and voting your shares at that time. If you hold shares through someone else, such as an account with a brokerage firm, bank or other nominee, you will receive materials from your brokerage firm, bank or other nominee instructing you how to vote.
By Order of the Board of Directors | |
/s/ Kate M. Nguyen | |
Kate M. Nguyen | |
Secretary |
Important Notice about the Availability of Proxy Materials. The Notice of the 2023 Annual Meeting, proxy statement, and our 2022 Annual Report on Form 10-K are available at www.proxyvote.com. You are encouraged to access and review all the important information contained in our proxy materials before voting.
Virtual Annual Meeting
The Annual Meeting will be a completely virtual meeting of stockholders conducted through a live audio webcast at https://edge.media-server.com/mmc/p/tydzawp6, which will provide stockholders with the ability to participate in the Annual Meeting, vote their shares and ask questions.
Benefits of a Virtual Annual Meeting
■ | We believe a virtual-only meeting format facilitates stockholder attendance and participation by enabling all stockholders to participate fully, equally and without cost, using an Internet-connected device from any location around the world. In addition, the virtual-only meeting format increases our ability to engage with all stockholders, regardless of size, resources or physical location. |
■ | Stockholders of record and beneficial owners as of April 18, 2023 (“Record Date”) will have the ability to submit questions directly to our management and Board and vote electronically at the Annual Meeting via the virtual-only meeting platform, with procedures designed to ensure the authenticity and correctness of your voting instructions. |
■ | We believe that the virtual-only meeting format will give stockholders the opportunity to exercise the same rights as if they had attended an in-person meeting and believe that these measures will enhance stockholder access and encourage participation and communication with our Board of Directors and management. |
Attendance at the Virtual Annual Meeting
■ | All stockholders of our common stock as of the Record Date may attend the Annual Meeting at https://edge.media-server.com/mmc/p/tydzawp6 and vote their shares or ask questions during the Annual Meeting. Members of the public will also be permitted to attend the meeting, but will not be permitted to ask questions during the meeting. |
■ | To attend and participate in the Annual Meeting by voting or asking questions, you will need the 15-digit control number included on your Notice of Internet Availability or your proxy card or voting instruction form (if you received a printed copy of the proxy materials) or included in the email to you (if you received the proxy materials by email). |
■ | If you were a stockholder as of the Record Date, you may vote shares held in your name as the stockholder of record or shares for which you are the beneficial owner but not the stockholder of record electronically during the Annual Meeting through the online virtual annual meeting platform by following the instructions provided when you log in to the online virtual Annual Meeting platform. |
■ | On the day of the Annual Meeting, stockholders may begin to log in to the virtual-only Annual Meeting beginning at 9:30 a.m., Pacific Time. The Annual Meeting will begin promptly at 10:00 a.m., Pacific Time. Please allow ample time for online login. |
■ | We will have technicians ready to assist with any technical difficulties you may have accessing the Annual Meeting. If you encounter any difficulties accessing the virtual-only Annual Meeting platform, including any difficulties with your 15-digit control number or submitting questions, you may call the technical support number that will be posted on the Annual Meeting log-in page. |
■ | Please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies. |
Questions at the Virtual Annual Meeting
■ | Stockholders will have the opportunity to submit questions on the date of the Annual Meeting by following the instructions on the virtual-only Annual Meeting platform. |
■ | Following the presentation of all proposals at the Annual Meeting, we will spend up to 30 minutes answering as many stockholder-submitted questions that comply with the meeting rules of conduct, which will be posted on the online virtual Annual Meeting platform. We will publish appropriate questions submitted in accordance with the Annual Meeting rules of conduct with answers, including those questions which were not addressed directly during the Annual Meeting due to time constraints, on our investor relations website at https://ir.willdangroup.com soon after the Annual Meeting. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition. |
YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON
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Cautionary Statement Regarding Forward-Looking Information
This Proxy Statement contains statements that constitute forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995, as amended. These statements concern our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition, which are subject to risks and uncertainties. All statements other than statements of historical fact included in this Proxy Statement are forward-looking statements. These statements may include words such as “aim,” “anticipate,” “assume,” “believe,” “can have,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “objective,” “plan,” “potential,” “positioned,” “predict,” “should,” “target,” “will,” “would” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events or trends. For example, all statements we make relating to our plans and objectives for future operations, growth or initiatives and strategies are forward-looking statements.
These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions. We derive many of our forward-looking statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that predicting the impact of known factors is very difficult, and we cannot anticipate all factors that could affect our actual results.
All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from our expectations. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:
| ■ | our ability to adequately complete projects in a timely manner; |
| ■ | our ability to compete successfully in the highly competitive energy services market; |
| ■ | our reliance on work from our top ten clients; |
| ■ | changes in state, local and regional economies and government budgets; |
| ■ | our ability to win new contracts, to renew existing contracts and to compete effectively for contracts awarded through bidding processes; |
| ■ | our ability to make principal and interest payments on our outstanding debt as they come due and to comply with the financial covenants contained in our debt agreements; |
| ■ | our ability to manage supply chain constraints, labor shortages, rising interest rates, and rising inflation; |
| ■ | our ability to obtain financing and to refinance our outstanding debt as it matures; |
| ■ | our ability to successfully integrate our acquisitions and execute on our growth strategy; |
| ■ | our ability to attract and retain managerial, technical, and administrative talent; and |
| ■ | the extent to which the coronavirus (“Covid-19”) pandemic and measures taken to contain its spread ultimately impact our business, results of operation and financial condition. |
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The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and we cannot predict all of them. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements disclosed under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and public communications. You should evaluate all forward-looking statements made in this Proxy Statement and otherwise in the context of these risks and uncertainties.
Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on any forward-looking statements we make. These forward-looking statements speak only as of the date of this Proxy Statement and are not guarantees of future performance or developments and involve known and unknown risks, uncertainties and other factors that are in many cases beyond our control. Except as required by law, we undertake no obligation to update or revise any forward-looking statements publicly, whether as a result of new information, future developments or otherwise.
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Table of Contents
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Proposal 2: Ratification of the Appointment of Crowe LLP as the Company’s Independent Registered Public Accounting Firm | 31 |
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Proposal 3: Approval, on a Non-Binding Advisory Basis, of Named Executive Officer Compensation | 33 |
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C-1 |
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Proxy Summary
This section contains summary information explained in greater detail in other parts of this proxy statement and does not contain all the information you should consider before voting. Stockholders are urged to read the entire proxy statement before voting. We will mail a Notice of Internet Availability of Proxy Materials to our stockholders of record that did not request to receive printed copy of our proxy materials on or about April 26, 2023 with instructions for accessing the proxy materials and voting via the Internet.
About Willdan
Willdan Group, Inc. (“we,” “our,” “us,” “Willdan” or the “Company”) is a provider of professional, technical and consulting services to utilities, private industry, and public agencies at all levels of government. As resource and infrastructure needs undergo continuous change, we help organizations and their communities evolve and thrive by providing a wide range of technical services for energy solutions, greenhouse gas reduction, and government infrastructure. Through engineering, program management, policy advisory, and software and data management, we plan, design and deliver trusted, comprehensive, innovative, and proven solutions to improve efficiency, resiliency, and sustainability in energy and infrastructure to our clients.
We believe our ability to provide innovation is enhanced by partnerships with our forward-thinking clients. We aim to create an environment that is diverse and inclusive, embracing the breadth of experience across our talent force with a culture of innovation and entrepreneurship. We are disciplined in our business delivering value to our clients. In supporting our clients, we seek to add value and provide long-term sustainable energy solutions, program management, engineering, and consultation.
Items Being Voted on and Board Recommendations
Proposal | Description | Board Vote | Page Number With |
Item 1 | To elect the seven directors nominated by our Board of Directors (“Board”) to serve a one-year term or until their successors are duly elected and qualified or until their earlier resignation or removal | FOR | 24 |
Item 2 | To ratify the appointment of Crowe LLP (“Crowe”) as our independent registered public accounting firm for fiscal year 2023 | FOR | 31 |
Item 3 | To approve, on a non-binding advisory basis, our named executive officer compensation | FOR | 33 |
Item 4 | To approve 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 | FOR | 34 |
Item 5 | To approve an amendment to the Company’s 2006 Employee Stock Purchase Plan (the “ESPP”), including an increase in the number of shares available for issuance under the ESPP | FOR | 44 |
Item 6 | Consider and act on any other matter that may properly be brought before the meeting or any postponements or adjournment thereof | N/A | N/A |
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Proactive Stockholder Engagement
Stockholder feedback is integral to the Board’s decision making process and informs the Company’s policies, practices and disclosures. Throughout 2022, our Chief Executive Officer (“CEO”), President, Chief Financial Officer (“CFO”), and VP of Investor Relations, proactively contacted our institutional investors to discuss and solicit their feedback on various matters including on our corporate governance and executive compensation programs.
Outcomes of Stockholder Engagement
During 2022 meetings, stockholders expressed concerns related to certain areas of executive compensation, Board Governance, and Environmental, Social, and Governance (“ESG”) reporting. These concerns and our Board’s response to the feedback of our stockholders and proxy advisors are as follows:
| ● | Optimized the size of our Board of Directors in 2022; |
| ● | Partnered with Circa, a national leader in diversity recruitment, to draw from a wider pool of candidates for open positions to find and hire the most qualified employees to serve our clients; |
| ● | Reached 500 graduates and achieved over 40% participant job placement for Willdan’s Clean Energy Academy, which offers free training in energy efficiency skills to disadvantaged workers in New York City and the Los Angeles City area; |
| ● | Conducted our second annual company-wide employee engagement survey. We expect to implement feedback received during 2023; |
| ● | Re-instated the three-year performance period for the performance-based restricted stock units (“PBRSUs”) in our compensation program and eliminated the “one-year” performance period used in 2021 due to the Covid-19 pandemic; |
| ● | Implemented a new metric in our performance-based restricted stock unit awards, a three-year Relative Total Shareholder Return; |
| ● | Introduced time-based equity awards as part of the overall long-term equity compensation based on the recommendation of Pearl Meyer, the third party compensation consulting group hired by the Compensation Committee; |
| ● | Updated our 2022 compensation peer group based on the recommendation of Pearl Meyer; and |
| ● | Published our Sustainability Report in 2023. |
2022 Performance Highlights
Revenue | $429.1 Million |
Net Income (Loss) | $(8.4) Million |
Adjusted EBITDA(1) | $23.3 Million |
Cash from Operations | $9.4 Million |
| (1) | See Appendix C for the Company’s reconciliation of Net Income to Adjusted EBITDA. |
During 2022, we continued to take actions to strengthen our position as a leading energy consulting and municipal services provider. We delivered organic year over year revenue growth of 21%, reflecting increased demand for our services and benefitting from increased collaboration across our complementary technical disciplines.
We serve one of the most dynamic market segments in the world at one of the most exciting times. Demand for a cleaner, low carbon energy cycle is transforming the electric grid, building design and management, industrial production, and transportation networks. We help our clients evaluate new technical advances and implement sustainable cost effective solutions to advance and transform the delivery and consumption of energy and other government infrastructure.
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2023 Director Nominees
All of the director nominees are currently serving as directors of the Company and were previously elected to serve on the Board by our stockholders.
Our Board has recommended that all incumbent directors be re-elected at the Annual Meeting. The following table reflects information on the seven director nominees, including our board committee composition.
Name |
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| Director |
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| Positions Held with Willdan or Principal |
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| Independent |
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| AC |
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| CC |
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| NCG |
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| SMAC |
Thomas D. Brisbin | 70 | 2007 | Chairman and Chief Executive Officer | |||||||||||||||||||||
Steven A. Cohen | 69 | 2015 | Lead Independent Director, Senior Vice Dean & COO - School of Professional Studies at Columbia University | X | M | M | C | |||||||||||||||||
Cynthia A. Downes | 62 | 2021 | President and CEO at Fide Professional Services | X | C | M | ||||||||||||||||||
Vice Admiral Dennis V. McGinn | 77 | 2017 | Retired, Assistant Secretary of the Navy for Energy, | X | C | M | M | |||||||||||||||||
Wanda K. Reder | 58 | 2021 | President and CEO at Grid-X Partners, LLC | X | M | M | ||||||||||||||||||
Keith W. Renken | 88 | 2006 | Managing Partner | X | M | |||||||||||||||||||
Mohammad Shahidehpour | 67 | 2015 | Bodine Chair Professor in the Electrical & | X | M | C | M | |||||||||||||||||
Each of the incumbent directors attended or participated in at least 83% of the total number of meetings of the Board and of the committees of the Board on which such director served, during the period for which such director served. During 2022, there were five board meetings held and all of our incumbent directors attended our 2022 annual meeting of stockholders. | Meetings Held in Fiscal 2022 | 5 | 7 | 5 | 4 | |||||||||||||||||||
AC = Audit Committee | NCGC = Nominating and Corporate Governance Committee | C = Chairperson |
CC = Compensation Committee | SMAC = Strategy, Mergers and Acquisitions Committee | M = Member |
The Board composition, including last year’s refreshment and leadership changes of the AC, CC, and NCGC, evidences our Board’s commitment to representing the long-term interest of shareholders through continuous effort to obtain representation of individuals from diverse backgrounds and with a range of skills, qualifications, experiences, and perspectives.
| (1) | One of our directors nominees self-identifies as Asian. |
| (2) | Dr. Brisbin is our only non-independent director as he serves as our CEO. |
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Executive Officer Compensation
Our Board's CC designs our executive compensation program to motivate our executives to execute our business strategies and deliver long-term stockholder value. We pay for performance with compensation dependent on our achieving financial and business performance objectives while aligning executives with the interests of our stockholders. A schematic of our compensation approach is shown below.
Executive Officer Group Compensation Components(1)
| (1) | See the Compensation Discussion and Analysis section below for a description of the manner in which these amounts are determined. |
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Compensation Highlights
Underlying our compensation program is an emphasis on sound governance practices. These practices are summarized below and described in further detail in the Compensation Discussion and Analysis (“CD&A”) section below.
We Do | |||
| Structure a significant portion of compensation to be at risk and tied to Company performance |
| Include clawback provisions for cash bonuses, PBRSUs, and time-based restricted stock awards. |
| Perform annual say-on-pay advisory role for stockholders |
| Minimum vesting requirements |
| Review officer compensation against our peer group |
| Deliver pay that is aligned with performance (below target for weak years and above target for strong years) |
| Maintain stock ownership goals for management and all officers and non-employee directors | ||
| Utilize an independent external compensation consultant every two years whose independence is reviewed by CC | ||
We Do Not | |||
| Provide excise tax gross-up payments in connection with change in control severance benefits |
| Re-price or exchange outstanding options and PBRSUs |
| Provide gross-ups to cover tax liabilities associated with executive perquisites |
| Grant stock options with an exercise price less than fair market value on the date of grant |
| Allow directors, officers or employees to hedge or pledge company stock |
| Promise multiyear guarantees for bonus payouts or salary increases |
| Pay out dividends or dividend equivalents on unvested equity awards | ||
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Sustainability, Human Capital, Community Responsibility and Corporate Governance
We are dedicated to environmental sustainability and the integration of the environmental, social and governance ("ESG") framework into our business practices and decision-making. We are committed to operating responsibly and ethically and to the protection of our planet as we grow our business in the communities where we live and work. Willdan’s goal is to reduce our ecological footprint and our environmental impact, as we help our clients reduce carbon intensity to become cleaner, more sustainable organizations, and to achieve their own sustainability goals. Our ESG framework spans the following six categories:
Our technical consulting services have a low carbon intensity, as we do not manufacture or distribute products, making our environmental impact relatively small. As a professional services firm, we believe our main contributors to environmental impact are leased office space, business travel, technology, and waste, primarily paper use.
Human Capital Management
Willdan brings together a purpose-driven team of engineers, scientists, consultants, program managers, technical specialists, and policy analysts from a wide variety of backgrounds to solve our clients’ challenges. At the end of FY 2022, we employed a total of 1,491 employees, excluding contractors. Our employees include, among others, licensed electrical, mechanical, structural, geotechnical and civil engineers; land surveyors; certified building officials; certified inspectors and plans examiners; licensed architects and landscape architects; certified planners; energy sales and audit specialists; installation technicians; program managers; policy advisors and information technology specialists.
Our goal is to maintain a culture of acceptance and individuality, where all employees feel respected, included, and encouraged to bring their unique perspectives, ideas, and skills to work each day. Our culture is focused on hiring, empowering, and retaining highly talented employees and professionals with the diverse background and expertise required to solve complex challenges, as energy and infrastructure transforms.
We regularly look for ways to grow our business and better support and invest in our people. We are committed to continued implementation of the feedback received from the company-wide employee engagement surveys. In 2022, led by our action committees, we implemented the top three employee initiatives from our inaugural survey. We
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launched our 2022 employee survey in late fiscal year 2022 and are in the process of analyzing the results with the goal to implement applicable feedback in 2023. We are committed to conducting future employee engagement surveys to listen to our people and take action to improve their lives and our business.
In 2022, we formed a partnership with Circa, a national leader in diversity recruitment, to foster an even broader diversity of our candidates to find for open positions and to hire the most qualified employees to best serve our clients.
Community Responsibility
To encourage more diversity and to encourage talented people to join our team, we partner with professional organizations that represent and support a diverse pool of applicants. We actively seek out and hire minority-owned subcontractors on our projects and, in conjunction with our clients, we regularly propose and achieve specific percentage content goals for the use of minority-owned and disadvantaged businesses in our projects. These partnerships offer economic opportunity to local, minority-owned, and disadvantaged business enterprises. At Willdan, we believe that we can better serve all communities by utilizing qualified employees, suppliers, and subcontractors that mirror the culture and demographics of the communities where we live and work.
To support workplace development and the communities we serve, training is offered to our employees and for those who wish to join the growing clean energy sector. In 2022, the Willdan Clean Energy Academy celebrated 500 graduates and 200 job placements in the green workforce , with 70% of those students coming from disadvantaged communities and/or priority populations.
Corporate Governance
Under the direction of the Board, we have designed our corporate governance program to promote compliance with applicable laws and regulations, the rules of the Securities and Exchange Commission (“SEC”) and the listing standards of the Nasdaq Stock Market (the “Nasdaq Rules”) and to reflect best practices of other public companies.
We are committed to operating with honesty and integrity and maintaining the highest level of ethical conduct. We encourage stockholders to visit the Corporate Governance section on our website at ir.willdangroup.com/corporate-governance, which includes the following corporate governance documents:
| ■ | Code of Ethical Conduct |
| ■ | Charters for our Board’s Audit Committee (“AC”), Compensation Committee (“CC”), Nominating and Corporate Governance Committee (“NCGC”), and Strategy, Mergers and Acquisitions Committee (“SMAC”) |
| ■ | Insider Trading Policy |
| ■ | Management Stock Ownership Guidelines for Executives and Non-Employee Directors |
Information on our website is not and should not be considered part of, nor is it incorporated by reference in this proxy statement. You can receive copies of these documents, without charge, by written request mailed to our Corporate Secretary at Willdan Group, Inc., 2401 E. Katella Avenue, Suite 300 Anaheim, California 92806.
Our 24-hour hotline (“Whistleblower Policy”) is managed by an outside party that is available to all employees for the anonymous submission of complaints by telephone and internet. All complaints received from our 24-hour hotline go directly to our AC chair and to our Lead Independent Director. During fiscal 2022, we did not receive any complaints relating to accounting, internal controls, or auditing matters.
Willdan conducts its business on the basis of the quality of its services and the integrity of its association with its clients and others. Our Code of Ethical Conduct demonstrates our commitment to ascribing to the highest standards of ethical conduct in the pursuit of our business and applies to all of our directors, officers, and employees. Our employees are trained on and affirm their commitment to complying with the policies when they first join our Company and regularly thereafter. Our Company has a written “related person transaction” policy. Under the policy, the AC reviews and approves transactions between Willdan and “related persons” (as defined in the policy). See the section “Certain Relationships and Related Person Transactions - Related Persons Transaction Policy” for more information.
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Willdan Board of Directors
Overview
Our Board of Directors is responsible for overseeing, counseling, and directing management in serving the long-term interests of our Company and stockholders, with the goal of building long-term stockholder value and ensuring the strength of our Company for our clients, associates, employees, and other stakeholders. In this capacity, the Board’s primary responsibilities include establishing an effective corporate governance program with a board and committee structure that ensures independent oversight; overseeing our business practices, strategies, and risks; maintaining the integrity of our financial statements; evaluating the performance of our senior executives and determining their compensation; undertaking succession planning for our CEO, other senior executives and directors; and reviewing our 2008 Amended and Restated Performance Incentive Plan (“2008 Plan”) and significant strategic and operational objectives and actions.
Director Independence
The Board has determined that each of Messrs. Cohen, McGinn, Renken and Shahidehpour and Mss. Downes and Reder, and each of our former directors who did not seek re-election at the 2022 annual meeting of stockholders, Messrs. Holdsworth and McEachern and Ms. Coy, are independent pursuant to the applicable independence requirements set forth in the rules of the listing standards for the Nasdaq Stock Market (the “Nasdaq Rules”) and by the SEC because they either have no relationship with the Company (other than as a director and stockholder) or because any relationship they have with the Company is immaterial. Under these standards of independence, for a director to be considered independent, the director must, among other things, not be an executive 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. Dr. Brisbin, due to his employment as our CEO, does not qualify as independent.
Board Leadership Structure
Our Board does not have a policy with respect to whether the roles of CEO and Chairman should be separated or combined. We currently have a combined Chairman/CEO role as well as a Lead Independent Director. We believe that the combined Chairman/CEO role is appropriate at this time because it fosters clear accountability, effective decision-making, and alignment on corporate strategy. We believe combined leadership at the top also provides the necessary flexibility for us to rapidly address the changing needs of our business.
In November 2016, the Board elected Thomas D. Brisbin, Willdan’s CEO, as Chairman of the Board. From March 2017 to March 2021, Keith W. Renken served as Lead Independent Director of the Board. In March 2021, the Board appointed Steven A. Cohen as Lead Independent Director. Although we have in the past separated the roles of CEO and Chairman of the Board, the Board believes that having Dr. Brisbin serve in both these roles, coupled with strong independent oversight by the Board and Lead Independent Director, is the most appropriate and effective board leadership structure for us at this time.
Board Committees
The Board has four standing committees: the AC, the CC, the NCGC and the SMAC. Each of our Board committees has a separate written charter that describes its purposes, membership, meeting structure, authority, and responsibilities. These charters, which may be found in the Corporate Governance section of our website at ir.willdangroup.com/corporate-governance, are reviewed annually by the respective committee, with any recommended changes adopted upon approval by our Board.
Each of these committees regularly reports to the Board as a whole. The following summaries identify the members of each committee as of the date of this Proxy Statement. The composition of each committee may change from time to time. In 2022, the composition of all four standing committees were updated and approved by the Board.
14 |
Board Skills, Experience, and Diversity Matrix
Our amended and restated bylaws provide that the authorized number of directors of the Board shall be set by a resolution of the Board. The Board has fixed the number of directors at seven. We believe a limited number of directors helps maintain personal and group accountability. All of our current directors have been nominated for election by the Board upon recommendation by the NCGC. Although the Company does not have a formal policy regarding attendance by members of the Board at the Company's annual meeting of stockholders, the Company encourages directors to attend. The following matrix provides information regarding the members of our Board as of April 21, 2023:
Thomas D. Brisbin | Steven A. Cohen | Cynthia A. Downes | Dennis V. McGinn | Wanda K. Reder | Keith W. Renken | Mohammad Shahidehpour | |
SKILLS AND EXPERIENCE | |||||||
Senior Leadership | ● | ● | ● | ● | ● |
| ● |
Industry & Technical Expertise | ● | ● | ● | ● | ● |
| ● |
Client Regulatory |
| ● |
| ● | ● |
|
|
Business Development and M&A | ● | ● | ● | ● | ● |
| ● |
Financial Sophistication | ● | ● | ● |
| ● | ● |
|
Talent Management & Compensation | ● |
|
| ● | ● | ● | ● |
Governance & Risk Oversight | ● | ● | ● | ● |
| ● | ● |
Public Board |
|
|
|
|
| ● |
|
Innovation & Technology |
|
|
| ● | ● |
| ● |
TENURE AND INDEPENDENCE | |||||||
Tenure (years) | 15 | 8 | 1 | 6 | 1 | 17 | 8 |
Independence | ● | ● | ● | ● | ● | ● | |
DEMOGRAPHICS | |||||||
Age | 70 | 69 | 62 | 77 | 58 | 88 | 67 |
Gender Identity | M | M | F | M | F | M | M |
African American or Black | |||||||
Alaskan Native or Native American | |||||||
Asian | ● | ||||||
Hispanic or Latinx | |||||||
Native Hawaiin or Pacific Islander | |||||||
White/Caucasian | ● | ● | ● | ● | ● | ● |
|
LGBTQ+ | |||||||
Military Veteran | ● |
*The matrix is intended to be a high-level summary and not an exhaustive list of each director’s skills or contributions to the Board.
15 |
Corporate Governance Policies
Our corporate governance policies are reviewed at least annually and amended from time to time to reflect the beliefs of our Board, changes in regulatory requirements, evolving best practices, and recommendations from our stockholders.
Matter |
| Description of Policy |
Board | § Fixed Number. Our Board is currently fixed at seven directors until changed by the Board. | |
Director | § Majority Independent. Eighty-six percent of our directors satisfy applicable Nasdaq and SEC independence standards. | |
§ Regular Executive Sessions. Our independent directors meet in executive session following each meeting of the Board, each meeting of the AC, and as needed following other committee meetings. | ||
Board | § Lead Independent Director. Since our CEO is also Chairman of the Board, our directors have collectively appointed one of our independent directors to serve as Lead Independent Director with established roles and responsibilities. See the Board Leadership Structure section above for further details. | |
§ Annual Review. The Board annually reviews its leadership structure and appoints the Chairman of the Board and determines whether the positions of Chairman of the Board and CEO will be held by one individual or separated. | ||
Board | § Independence. Board Committees are comprised only of independent directors. | |
§ Governance. Board Committees act under charters evaluated annually that set forth their purposes and responsibilities. The charters allow for engagement, at our expense, of independent legal, financial, or other advisors the committee members deem necessary or appropriate. | ||
§ Attendance. Directors are expected to attend all meetings of the Board and the committees on which they serve, and are strongly encouraged to attend our annual stockholder meetings. | ||
Director | § Diverse and Relevant Experience. The NCGC works with the Board to determine the appropriate characteristics, skills, and experiences for the directors. We are committed to selecting qualified candidates regardless of gender, ethnicity, and national origin. | |
Board Duties | § Succession Planning. The NCGC works on a periodic basis with the CEO to review, maintain, and revise, as necessary, the Company's succession plan. The CEO reports annually to the Board on succession planning for CEO and senior management positions, including a discussion of assessments, leadership development plans and other relevant factors. | |
§ Financial Reporting, Legal Compliance, and Ethical Conduct. Our Board maintains governance and oversight functions, but our executive management maintains primary responsibility. | ||
Continuous | § New Director Orientation. All new directors participate in an orientation program to familiarize them with our Company. | |
§ Continuing Education. Directors continue their education through meetings with executive management and other managers to enhance the flow of meaningful financial and business information. They also receive presentations to assist with their continuing education. Directors also attend outside director education programs to stay informed about relevant issues. | ||
§ Annual Evaluations. The NCGC oversees an annual board performance evaluation policy that includes individual director self-assessments and an assessment of each of the Board’s four standing committees. |
16 |
Audit Committee | ||||
Meetings in FY 2022: | 5 | Average Attendance in FY 2022: | 100% | |
Chair: | ||
Cynthia A. Downes | § Oversee the integrity of the Company’s financial statements and financial reporting | |
Members: | § Oversee compliance with legal and regulatory requirements | |
Steven A. Cohen | ||
§ Discuss policies with respect to risk assessment, monitoring and mitigation with management and independent auditor | ||
All members satisfy the audit committee experience and independence standards required by the Nasdaq Rules and the Exchange Act and have been determined to be financially literate in accordance with the Nasdaq Rules. | § Review qualifications and independence of the Company’s independent registered public accounting firm | |
§ Review performance of the Company’s internal reporting and audit functions | ||
Under applicable SEC regulations, Ms. Downes has been determined to be an "audit committee financial expert". | § Oversee the Company’s disclosures controls and procedures and system of internal controls regarding finance, accounting, legal compliance and ethics | |
§ Retain and oversee the independent auditor and review and approve the scope of the audit conducted by the independent auditor |
Compensation Committee | ||||
Meetings in FY 2022: | 7 | Average Attendance in FY 2022: | 86% | |
Chair: | ||
Vice Admiral Dennis V. McGinn | § Produce an annual report on executive compensation for inclusion in the Company’s proxy statement, if and as required by applicable rules and regulations § Review, evaluate and make recommendations to the full Board with respect to management’s proposals regarding the Company’s overall compensation policies, and recommend performance-based incentives that support and reinforce the Company’s long-term strategic goals, organization objectives and stockholder interests. § Annually review and approve objectives relevant to the Chief Executive Officer’s compensation, evaluate the Chief Executive Officer’s performance in light of those objectives and set the Chief Executive Officer’s compensation level based on this evaluation. | |
Members: | § Consider and approve the selection, retention and remuneration arrangements for senior executive officers and establish, review and approve compensation plans in which any executive officer is eligible to participate. | |
All members satisfy the independence standards required by the Nasdaq Rules and Exchange Act. | § Make recommendations to the Board with respect to the Company’s incentive-compensation plans and equity-based compensation plans and approve for submission to stockholders all new stock option and equity compensation plans, including amendments or supplements thereto | |
§ Administer the Company’s 2008 Plan, 2006 Stock Incentive Plan (the “2006 Plan”) and the ESPP | ||
All members qualify as "nonemployee directors" under Rule 16b-3 of the Securities Exchange Act of 1934, as amended. | ||
§ Authorized to retain and terminate any compensation consultant engaged to assist in the evaluation of the compensation of our senior executive officers including all NEOs (as defined below) | ||
17 |
Nominating & Corporate Governance Committee | ||||
Meetings in FY 2022: | 5 | Average Attendance in FY 2022: | 95% | |
Chair: | ||
Mohammad Shahidehpour | § Evaluate the size and composition of the Board, review and develop criteria for Board membership, and evaluate the independence of existing and prospective directors | |
Members: Vice Admiral Dennis V. McGinn Wanda K. Reder | § Actively seek and evaluate qualified individuals to become new directors as needed , establish procedures to solicit, review and recommend to the Board potential director nominees proposed by stockholders and recommend to the Board the director nominees for the annual meeting of stockholders and any special meeting at which directors are elected § Review the suitability of each Board member for continued service when his or her term expires and when he or she has a significant change in status § Take diversity considerations into account when identifing director candidates | |
All members satisfy the independence standards required by the Nasdaq Rules and Exchange Act | § Evaluate the nature, structure and operations (including authority to delegate to subcommittees) of other Board committees | |
§ Periodically review and, in the NCGC’s discretion, recommend to the Board changes to, the Company’s certificate of incorporation, bylaws, corporate governance policies and practices, and other present or future policies of the Company as they relate to corporate governance matters | ||
Strategy, Mergers and Acquisitions Committee | ||||
Meetings in FY 2022: | 4 | Average Attendance in FY 2022: | 100% | |
Chair: | ||
Steven A. Cohen | § Review 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, and investments including mergers and acquisitions | |
§ Review and recommend to the Board or take actions on behalf of the Board relating to the Company’s financial and strategic plans | ||
Members: | ||
§ In consultation with the AC, as appropriate, review periodically the Company’s risk management strategies | ||
§ Be available to management as needed regarding various matters such as reviewing the relationships with the Company’s principal lending institutions and investment and strategic advisors |
Executive Sessions
Our Board believes it is important to have executive sessions without our CEO or other management being present. Executive sessions are led by our Lead Independent Director. Our independent directors have robust and candid discussions at these executive sessions during which they can critically evaluate the performance of our company, CEO, and management. An executive session is held in conjunction with each regularly scheduled quarterly Board meeting and other sessions may be called by the Lead Independent Director in his own discretion or at the request of the Board.
18 |
Oversight of Risk Management
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 the Board, with reporting in the areas of enterprise risks, cybersecurity and information security, sustainability, human capital management, other ESG matters, and succession planning.
Cybersecurity is a critical part of risk management at Willdan. The Board as a whole regularly reviews risks related to cybersecurity and the Company’s information system controls. The Company uses third-party vendors to independently tests information security risks. In 2020, the Company completed an ISO/IEC 27001:2013 certification process for some of its information security systems and, in 2022, the Company completed a Systems and Organization Controls 2 (“SOC 2”) certification process for some of its information security systems. These certifications are audited and verified by third-parties on an annual basis. We take cyber threats very seriously and regularly audit our cyber security capabilities. These audits are a useful tool for ensuring that we maintain a robust cyber security program to protect our investors, customers, employees, and intellectual property. The Company has information security training and compliance programs which regularly tests employees and executives on items such as phishing attacks. We also maintain a cyber security insurance program which is reviewed on an annual basis. The oversight responsibility of the Board and its committees is supported by Company management and the risk management processes that are currently in place.
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 (such as prepaid variable forward sale contracts, collars, equity swaps, or exchange funds) that are designed to hedge or offset any decrease in the market value of Company securities without the full risks and rewards of ownership 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. This policy also applies regardless of whether such Company securities (i) were granted to the director, officer or employee as part of their compensation or (ii) are held directly or indirectly by the director, officer or employee.
19 |
Executive Development and Succession Planning
Our Board is involved in the identification and cultivation of our future leaders. The NCGC works on an annual basis with the CEO to review, maintain and revise, as necessary, the Company’s succession plan upon the CEO's retirement and in the event of an unexpected occurrence. The CEO reports annually to the Board on succession planning for the CEO and senior management positions, including a discussion of assessments, leadership development plans and other relevant factors. The CEO also makes available to the NCGC on a continuing basis, the CEO's recommendations regarding his successor should he become unexpectedly disabled.
Stockholder Submission of Director Nominees
The NCGC will consider director candidates recommended by stockholders. Properly communicated stockholder recommendations will be considered in the same manner and using the same criteria as used for any other director candidate. To be properly communicated, stockholders desiring to recommend candidates for consideration by the NCGC and the Board should submit their recommendations in writing to the NCGC Chair, c/o Corporate Secretary, Willdan Group, Inc. 2401 East Katella Avenue, Suite 300, Anaheim, CA 92806, together with 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. The NCGC may request additional information concerning such director candidate as it deems reasonably required to determine the eligibility and qualification of the director candidate to serve as a member of the Board. For a discussion of the factors and other criteria the NCGC and Board will consider when evaluating a director candidate, see “Proposal 1: Election of Directors.”
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 NCGC as described above) must deliver written notice to our Secretary in the manner described in Section 3.04(a)(ii) of our Bylaws and otherwise in accordance with SEC regulations, and as further described in the Meeting and Voting Information section of this proxy statement under "Requirements for Proposals to be Considered for Inclusion in Proxy Materials and for Nomination of Director Candidates.”
20 |
Director Qualifications
Qualifications that are particularly desirable for our directors to possess in order to provide oversight and stewardship of our company include the following:
Qualifications | Descriptions | Value to Our Board and Stockholders | ||||
Senior Leadership | Service in a senior executive position | Provide us with valuable external perspectives with which to assess our operations, execute our strategies, mitigate related risks, and improve our policies and procedures. | ||||
Industry and | Experience in consulting and engineering services that focus on energy efficiency, the environment, sustainable infrastructure, renewable energy and energy transition | Allow us to better understand the needs of our clients in developing our business strategies, as well as evaluate acquisition and divestiture opportunities. | ||||
Client | Service in a position that requires interaction with utilities, municipalities, and commercial clients | Provides us with experience and insight into working constructively with utility commissions, state and local agencies and administrators and addressing significant public policy and regulatory compliance issues in areas related to our business and operations. | ||||
Business | Background in business development and in the | Provides us with insight into developing and implementing strategies for growing our business through combinations with other organizations, including analysis of the "fit" of a proposed acquisition with our company's strategy, the valuation of the transaction, and the management plan for integration with existing operations. | ||||
Financial | Understanding of accounting, auditing, tax, banking, insurance, or investments | Help us to oversee our accounting, financial reporting, and internal control processes; manage our capital structure; optimize capital allocation; and undertake significant transactions. | ||||
Talent Management / | Practical experience developing, managing, motivating, and compensating employees | Provide us with insight into cultivating an inclusive culture consistent with our values and purpose, providing an engaging work environment, attracting top talent, investing in our employees, supporting their career development, and remaining competitive in the marketplace. | ||||
Governance and Risk Oversight | Practical experience in risk governance, enterprise risk management framework, and knowledge, understanding of risk monitoring and mitigation | Help us understand enterprise risk management program structures as well as practices and policies designed to identify and manage risks and properly align risk-taking with overall governance and operations. | ||||
Public Board | Prior or concurrent service on other SEC reporting company boards | Demonstrates understanding of the extensive and complex oversight responsibilities of directors and helps reinforce management accountability for maximizing long-term stockholder value. Also provides insights into a variety of strategic planning, compensation, finance, and governance practices. | ||||
Innovation / | Practical experience with technology transformation and disruption | Allow us to better understand and anticipate technical trends, generate disruptive innovation, and extend and create new business models. |
21 |
The grid below summarizes the qualifications of our director nominees:
Number of Nominees |
|
|
|
| Qualifications of Director Nominees | |||||||||||||
6 |
|
|
|
|
|
| Senior Leadership Experience |
| ||||||||||
6 |
|
|
|
|
|
| Industry and Technical Expertise |
| ||||||||||
3 |
|
|
| Client Regulatory Experience |
| |||||||||||||
6 |
|
|
|
|
|
| Business Development and M&A Experience | |||||||||||
5 |
|
|
|
|
|
| Financial Sophistication |
| ||||||||||
5 |
|
|
|
|
| Talent Management/Compensation Experience | ||||||||||||
6 |
|
|
|
|
|
| Governance and Risk Oversight Experience | |||||||||||
1 |
|
|
| Public Board Experience |
| |||||||||||||
3 |
|
|
|
| Innovation/Technology Experience | |||||||||||||
Board Refreshment
Our governance policies reflect our belief that directors should not be subject to term limits. While term limits could facilitate fresh ideas and viewpoints being consistently brought to the Board, we believe they are counterbalanced by the disadvantage of causing the loss of a director who over a period of time has developed insight into our strategies, operations, and risks and continues to provide valuable contributions to Board deliberations. This practice balances the institutional knowledge of our longer-tenured directors with the fresh perspectives brought by our newer directors.
Our Board has shown an ongoing commitment to board refreshment and to having highly qualified and independent perspectives. Of our seven director nominees, two were added in 2021.
Director Diversity
Our Company recognizes the value of diversity and we endeavor to a have a diverse Board with experiences in business, technology, finance, business development, government, energy, risk management, and public board experience. Our NCGC continues to seek diverse candidates as board positions become available. Board gender and ethnic diversity has become a significant selection factor in our Board selection process. In addition to gender and ethnic diversity, the NCGC focuses on skills, expertise, and background of director nominees to complement the existing Board in light of the diverse and national nature of our businesses and operations. We enhanced our gender diversity on the Board in 2021, appointing two women independent directors. As of April 21, 2023, three of our seven directors self-identify as “diverse” as such term is defined in Rule 5605(f) of The Nasdaq Stock Market LLC (“Nasdaq”).
22 |
Active Stockholder Engagement and Communications
Stockholder Engagement
We believe that engaging with investors is fundamental to our commitment to good governance. Our CEO, President, CFO, and VP of Investor Relations regularly seek opportunities to engage with our investors to gain and share valuable insights into current and emerging business and governance trends that our shareholders tell us matter most to them. In addition, we seek opportunities to connect with our investors to increase their understanding of our business, our long-term growth strategy, our executive compensation philosophy and program, risk management and our commitment to corporate governance, environmental and social issues. In addition to senior management, members of our Compensation Committee are available for consultation with our major shareholders when requested.
The Company continues to receive constructive feedback from ESG investors, many of whom are European-based. These European-based funds have a particular focus on measuring our performance and related disclosure of ESG metrics. The Company issued its 2022 sustainability report in early April 2023.
In 2022, we met with over 85 investors, representing over 58% of our shares of common stock outstanding as of year-end
Topics discussed include our energy efficiency contracts with independent owned utilities, performance period length and metrics for our equity compensation program, balance sheet capitalization, growth strategy, risk management practices, and our focus on sustainability and governance practices. These meetings were conducted in person, via teleconference, via videoconference, or one-on-one at industry conferences. Our engagement activities take place throughout the year and we also conduct quarterly earnings calls where we try to answer many of the new questions that we receive during our investor outreach.
Communications With the Board
Stockholders and other interested parties who wish to communicate with the Board or non-management directors of the Company can send an email to nonmanagementdirectors@willdan.com or send their correspondence to Board of Directors (or a particular subgroup or individual director), c/o Corporate Secretary, Willdan Group, Inc., 2401 E. Katella, Suite 300 Anaheim, California 92806.
23 |
Proposal 1:
Election of Directors
Our Board is currently fixed at seven directors, each to be elected on an annual basis, until changed by the Board. All of the director nominees are currently serving as directors. Each of the director nominees, if elected at the Annual Meeting, will hold office until the 2024 annual meeting of stockholders and until his or her successor has been elected and qualified, or until his or her earlier resignation or removal.
Each director nominee has consented to be nominated and to serve if elected. We have no reason to believe that any of the director nominees will be unavailable for election or unable to serve if elected. However, if any director 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 adopt resolutions to reduce the number of directors to be elected at the Annual Meeting.
Recommendation of Board of Directors
Our Board of Directors recommends that you vote “FOR” each of the director nominees.
2023 Director Nominees
The following pages provide information on each nominee for election at the Annual Meeting, including his or her age, Board leadership roles held, and business experience during at least the past five years. We also indicate the name of any other public company for which each nominee currently serves as a director or served as a director during the past five years.
The information relating to each director nominee led our Board to the conclusion that he or she should be elected as a director in light of the Company's business and structure. We believe that each of these director nominees has integrity and adheres to our high ethical standards. In addition, each nominee has demonstrated the ability to exercise sound judgment as well as a commitment to servicing the long-term interests of our stockholders.
The Company believes that the members of the 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 director 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 NCGC identifies new candidates for election to the Board, reviews their qualifications, skills, experience and other characteristics and recommends 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 energy efficiency, engineering, consulting and finance. All of the director 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 the Company believes increases their knowledge of effective corporate governance.
The Board also believes that each of the director 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 serve on the Board and its Committees. The following biographies provide further qualifications, attributes and other information with respect to the director nominees.
24 |
Dr. Thomas D. Brisbin | Chairman and Chief Executive Officer | Director Since 2007 | ||
Experiences § CEO and Director since 2007. Chairman since November 2016. President from April 2007 to November 2016 § Vice President and Consultant of AECOM Technology Corporation from 2004-2007 § Chief Operating Officer and Executive VP at Tetra Tech, Inc. from 1999-2004 § Co-founder and President of PRC Environmental Management, Inc. from 1978-1995 § Research Associate at Argonne National Laboratory and Adjunct Professor - Illinois Institute of Technology (IIT) prior to PRC | |||
| |||
Age: 70 Board Committees: None. | Skills and Qualifications Senior leadership; industry & technical experience; business development and M&A; financial sophistication; talent management & compensation; governance & risk oversight § B.S. Northern Illinois University. Ph.D. Environmental Engineering Illinois State Technology § Completed Harvard Business School's Advanced Management Program | ||
Steven A. Cohen | Independent | Director Since 2015 | ||
Experiences § Senior Vice Dean and Chief Operating Officer of the School of Professional Studies at Columbia University (CU). Directs CU's Master of Sustainability Management Program. Professor in the Practice of Public Affairs at CU's School of International and Public Affairs. Director of CU's Master of Public Administration Program in Environmental Science and Policy § Consultant to U.S. Environmental Protection Agency for past three decades, most recently from 2005-2010 § Served on the U.S. Environmental Protection Agency’s Advisory Council on environmental Policy and Technology from 2001-2004 § Director of Columbia's Graduate Program in Public Policy and Administration from 1985 to 1998 § Former policy analyst for U.S. Environmental Protection Agency before joining CU in 1981 | |||
| |||
Age: 69 | Skills and Qualifications | ||
Senior leadership; industry & technical expertise; client regulatory; business development and M&A; financial sophistication; governance & risk oversight § BA Political Science from Franklin College; M.A. Political Science from University of New York at Buffalo (SUNY-Buffalo) § Ph.D. Political Science from SUNY-Buffalo | |||
Board Committees: | |||
25 |
Cynthia A. Downes | Independent | Director Since 2021 | ||
Experiences § President and CEO of Fide Professional Services, which she founded in 2017 § Chief Financial Officer of Constant and Associates, Inc. from 2020 to 2022 § Accounting & Finance leadership consulting services for Guidehouse, a $1B+ consulting firm, from 2018 to 2019 § Executive Vice President, Chief Financial Officer and Treasurer at Versar, Inc. (NYSE:VSR) from 2011 to 2017 § Vice President and Chief Financial Officer of Environmental Design International Inc. from 2009 to 2011 and Vice President of Finance of GDI Advanced Protection Solutions from 2008 to 2009 § Previously spent 15 years at Tetra Tech, Inc. (Nasdaq:TTEK), ultimately serving as Vice President and Chief Financial Officer of its subsidiary, Tetra Tech, EM Inc. § Current member of the Board of Trustees and Chair of the Audit Committee of Riverside Research | |||
| |||
Age: 62 | Skills and Qualifications | ||
Senior leadership; industry & technical expertise; business development and M&A; financial sophistication; governance & risk oversight § Active CPA and member of the American Institute of Certified Public Accountants § B.S. Accounting and Business Management Purdue University § M.B.A. Northwestern University | |||
Board Committees: Chairperson, Audit Committee; Member, Compensation Committee | |||
Vice Admiral Dennis V. McGinn | Independent | Director Since 2017 | ||
Experiences § Retired as Vice Admiral of United States Navy after 35 years. Deputy Chief of Naval Operations for Warfare Requirements and Programs. Previously commanded United States Third Fleet § Assistant Secretary of the Navy for Energy, Installations, and Environment from September 2013 – January 2017 § Former President of the American Council on Renewable Energy § Past member of the Steering Committee of the Energy Future Coalition, past member of the U.S. Energy Security Council; and past member of the Bipartisan Center Energy Board § Past Co-Chairman of the CAN Military Advisory Board § Prior International Senior Fellow at the Rocky Mountain Institute § Member of the Board of Directors at Electric Power Research Institute § Member of the Board of Directors at Customer First Renewables | |||
| |||
Age: 77 | Skills and Qualifications | ||
Senior leadership; industry & technical expertise; client regulatory; business development and M&A; talent management & compensation; governance & risk oversight; innovation & technology § B.S. Naval Engineering from the U.S. Naval Academy § Participant, National Security Program at Harvard University's Kennedy School | |||
Board Committees: Chairperson, Compensation Committee; Member, Nominating & Corporate Governance Committee; Member, Strategy, Mergers and Acquisitions Committee | |||
26 |
Wanda K. Reder | Independent | Director Since 2021 | ||
Experiences § President and Chief Executive Officer of Grid-X Partners, LLC since 2018 § Chair of the Electricity Advisory Committee of the U.S. Department of Energy, member of the Finance Committee of the National Academy of Engineering and member of the board of directors and the Strategy Committee of TechPro Power Group Inc. § Previously spent 14 years, from 2004 to 2018, at S&C Electric Company, ultimately serving as Chief Strategy Officer § Vice President of Asset Management from 2003 to 2004 and Vice President of Engineering & System Planning from 2001 to 2003 of Exelon Energy Delivery § Prior Vice President, Energy Sector of Davies Consulting, Inc. | |||
| |||
Age: 58 | Skills and Qualifications | ||
Senior leadership; industry & technical expertise; client regulatory; business development and M&A; financial sophistication; talent management & compensation; innovation & technology § Member of the National Academy of Engineering and Fellow of the Institute of Electrical and Electronics Engineers (IEEE) § B.S. Engineering South Dakota State University § M.B.A. University of St. Thomas | |||
Board Committees: Member, Compensation Committee; Member, Nominating & Corporate Governance Committee | |||
Keith W. Renken | Independent | Director Since 2006 | ||
Experiences § Managing Partner, Renken Enterprises § Retired Senior Partner and Chairman, Executive Committee of Southern California for Deloitte and Touche in 1992 § Adjunct Professor (executive in residence) Marshall School of Business at the University of Southern California from 1992 to 2006 § Served on Board of Directors, Audit Committee and Compensation Committee of East West Bancorp, Inc. from 2000-2018 § Served on Board of Directors and Audit Committee of Limoneira Company from 2009-2015 § Served on Board of Directors and Audit Committee of Whittier Trust Company from 2006-2020 | |||
| |||
Age: 88 | Skills and Qualifications | ||
Financial sophistication; talent management & compensation; governance & risk oversight; public board § B.S. Business Administration from the University of Arizona; M.S. Business Administration from the University of Arizona | |||
Board Committees: Member, Audit Committee | |||
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Mohammad Shahidehpour | Independent | Director Since 2015 | ||
Experiences § Bodine Chair Professor in the Electrical and Computer Engineering Department at IIT. Director of Robert W. Galvin Center for Electricity Innovation. University professor for over 40 years, including faculty member at IIT since 1983 and recipient of IIT's Excellence in Teaching Award § Former IIT Research Vice-President overseeing $80M in annual budget and over 200 technical projects § Principal investigator of over $60 million in grants and contracts related to electricity and modernization technological advances, mostly funded by government agencies such as the U.S. Department of Energy and U.S. Department of Defense § Founding chair of the IEEE Great Lakes Symposium on Smart Grid and the New Energy Economy § Editor-in-Chief of IEEE Transactions on Smart Grid Journal since 2009 § Elected Member of National Academy of Engineering in the U.S. § Keynote speaker in 20 International Conferences since 2007 and counseled governments on electricity and grid modernization bills globally | |||
| |||
Age: 67 | Skills and Qualifications | ||
Senior leadership; industry & technical expertise; business development and M&A; talent management & compensation; governance & risk oversight, innovation & technology § IEEE Distinguished Lecturer; Delivered over 100 invited lectures on electricity restructuring and smart grid issues § Author of six books and 400 technical papers on electric power systems § B.S. Electrical Engineering from Iran's Sharif University of Technology; M.S. in Electrical in Engineering; Ph.D. from the University of Missouri | |||
Board Committees: | |||
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES.
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Director Compensation
The following table provides information concerning the compensation for services of our nonemployee directors during FY 2022. Dr. Brisbin is a Named Executive Officer and his compensation is presented below under “Executive Compensation” in the Summary Compensation Table and related explanatory tables. Dr. Brisbin is not entitled to additional compensation for his services as a director.
The majority of the compensation provided to nonemployee directors is delivered in equity to align director interests with those of our stockholders.
Fees Earned or | Stock | Option | All Other | |||||||
Name |
| Paid in Cash ($) |
| Awards (1), (2) ($) |
| Awards ($) |
| Compensation ($) |
| Totals ($) |
Steven A. Cohen |
| 75,875 |
| 70,007 |
| — |
| — |
| 145,882 |
Cynthia A. Downes |
| 61,000 |
| 70,007 |
| — |
| — |
| 131,007 |
Dennis V. McGinn | 60,250 |
| 70,007 |
| — |
| — | 130,257 | ||
Wanda K. Reder |
| 52,000 |
| 70,007 |
| — |
| — | 122,007 | |
Keith W. Renken |
| 47,750 |
| 70,007 |
| — |
| — | 117,757 | |
Mohammad Shahidehpour |
| 61,750 |
| 70,007 |
| — |
| — | 131,757 |
| (1) | The amounts reported under “Stock Awards” above represent the aggregate grant date fair value of restricted stock awards granted to Non-Employee Directors during fiscal 2022 (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 contained in Note 10 (Stockholders’ Equity) to our consolidated financial statements, included as part of our 2022 Annual Report filed on Form 10-K. |
| (2) | As of December 30, 2022, the following Non-Employee Directors held the following number of outstanding restricted stock awards: Messrs. Cohen, McGinn, Renken and Shahidehpour each held 3,481 shares of restricted stock, of which (i) 892 shares of restricted stock vest on June 9, 2023 and (ii) 2,589 shares of restricted stock vest in two substantially equal installments on each of June 9, 2023 and June 9, 2024. Ms. Downes held 3,324 shares of restricted stock, of which (i) 735 shares of restricted stock vest on August 4, 2023 and (ii) 2,589 shares of restricted stock vest in two substantially equal installments on each of June 9, 2023 and June 9, 2024. Ms. Reder held 3,251 shares of restricted stock, of which (i) 662 shares of restricted stock vest on December 6, 2023, and (ii) 2,589 shares of restricted stock vest in two substantially equal installments on each of June 9, 2023 and June 9, 2024. |
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Annual Retainer and Meeting Fees
The following table sets forth the schedule of annual retainers and meeting fees for each Non-Employee Director in effect during FY 2022.
Type of Fee |
| Through October 31, 2022 |
| Effective November 1, 2022 |
| ||
Annual Board Retainer | $ | 36,000 | $ | 46,000 | |||
Additional Annual Retainer to Lead Independent Director | $ | 15,000 | $ | 15,000 | |||
Additional Annual Retainer to Chair of Audit Committee | $ | 16,500 | $ | 16,500 | |||
Additional Annual Retainer to Chair of Compensation Committee | $ | 11,000 | $ | 12,000 | |||
Additional Annual Retainer to Chair of Strategy, Mergers and Acquisitions Committee | $ | 7,500 | $ | 12,000 | |||
Additional Annual Retainer to Chair of Nominating and Governance Committee | $ | 7,500 | $ | 12,000 | |||
Additional Annual Retainer to Member of Audit Committee | $ | 7,500 | $ | 6,000 | |||
Additional Annual Retainer to Member of Compensation Committee | $ | 5,500 | $ | 6,000 | |||
Additional Annual Retainer to Member of Strategy, Mergers and Acquisitions Committee | $ | 4,500 | $ | 6,000 | |||
Additional Annual Retainer to Member of Nominating and Governance Committee | $ | 4,500 | $ | 6,000 | |||
Additional Daily Fee for Attendance at Board Meetings (1) | $ | 1,500 | Discontinued | ||||
Additional Daily Fee for Attendance at Committee Meetings (1) | $ | 1,000 | Discontinued | ||||
| (1) | Directors only received one fee for meetings per day after a minimum of: (i) 4 Board meetings, (ii) 6 AC meetings or (iii) 5 CC, NCGC or SMAC meetings. |
Compensation for Non-Employee Directors during FY 2022 generally consisted of an annual retainer, fees for attending meetings, fees for work related to board committees and a restricted stock grant award. All Non-Employee Directors are also reimbursed for out-of-pocket expenses they incur serving as directors. In addition, in conjuction with the 2022 compensation study conducted by Pearl Meyer, the Company’s independent compensation consultant, the Board increased annual retainers for non-employee directors and eliminated meeting fees, each effective November 1, 2022.
Restricted Stock Awards
In June 2022, Messrs. Cohen, McGinn, Renken, and Shahidehpour and Mss. Downes and Reder were granted a restricted stock award of 2,589 shares under the 2008 Plan. Each restricted stock award granted to our Non-Employee Directors in fiscal 2022 is subject to a two year vesting schedule, with 50% of the award vesting on each of the first and second anniversaries of the grant date, subject in each case to the Non-Employee Director’s continued service through the applicable vesting date.
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Proposal 2:
Ratification of the Appointment of Crowe as the Company’s
Independent Registered Public Accounting Firm
Crowe served as the Company’s independent registered public accountants during the fiscal year ended December 30, 2022 and, in that capacity, audited the Company’s consolidated financial statements for the fiscal year ended December 30, 2022. Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request approval by the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on the proposal at the Annual Meeting of the appointment of Crowe as the Company’s independent registered public accountants for the fiscal year ending December 29, 2023. If stockholders do not ratify this appointment, the AC will reconsider whether or not to retain Crowe, and may decide to retain them notwithstanding the vote. Even if the appointment is ratified, the AC, in its discretion, may appoint a different independent registered public accounting firm 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. A representative of Crowe 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.
Audit and Other Fees
Crowe
The following is a summary of the Crowe fees for professional services for the fiscal years ended December 30, 2022 and December 31, 2021.
Fee Category |
| Crowe 2022 |
| Crowe 2021 | ||
Audit Fees | $ | 915,000 | $ | 855,000 | ||
Audit-Related Fees |
| — |
| — | ||
Tax Fees |
| — |
| — | ||
All Other Fees |
| — |
| — | ||
Total Fees | $ | 915,000 | $ | 855,000 | ||
Audit Fees. Fees for audit services provided by Crowe for fiscal 2022 and 2021 consisted of professional services for the annual audit of our consolidated financial statements and for the review of our interim condensed consolidated financial statements including quarterly reports.
The Company has been advised by Crowe that neither Crowe nor any member of Crowe 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 AC has responsibility for appointing, setting compensation and overseeing the work of the Company’s independent registered public accounting firm. In recognition of this responsibility, the AC 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 AC 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 AC requires specific pre-approval before engaging the Company’s independent registered public accounting firm. The AC 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 AC at its next regularly scheduled meeting.
The AC has considered whether the provision of the services described above is compatible with maintaining the Company’s independent public accounting firm’s independence and has determined that such services have not
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adversely affected Crowe’s independence. Crowe did not provide any services for fiscal 2022 and fiscal 2021 that required pre-approval by the AC.
Vote Required for Ratification of the Appointment of Crowe as the Company’s Independent Registered Public Accounting Firm
Ratification of the appointment of Crowe as the Company’s independent registered public accounting firm for the year ending December 29, 2023, requires the affirmative vote of a majority of shares present in person or represented by proxy at the Annual meeting and entitled to vote on the subject matter.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF CROWE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 29, 2023.
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Proposal 3:
Approval, on a Non-Binding Advisory Basis, of Named
Executive Officer 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:
| ■ | Align the interests of our executives with those of the stockholders; |
| ■ | Attract, motivate, reward, and retain the top contributors upon whom, in large part, our success depends; |
| ■ | Be competitive with compensation programs for companies of similar size and complexity with whom we compete for talent, including direct competitors; |
| ■ | Provide compensation based upon the short-term and long-term performance of both the individual executive and the Company; and |
| ■ | 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 49 of this Proxy Statement, including the “Compensation Discussion and Analysis” section, which describes in more detail our executive compensation plan statement and the key elements of our executive compensation program. The CC 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 a non-binding advisory basis, the compensation of the Company’s Named Executive Officers (“NEOs”) 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 Annual Meeting.
This vote is an advisory vote only and will not be binding on us, our Board or the CC and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Board or the CC. However, the CC, 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 NEOs.
The Company’s current policy is to provide stockholders with an opportunity to approve, on an advisory basis, the compensation of the NEOs each year at the annual meeting of stockholders. It is expected that the next such vote will occur at the 2024 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 shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the subject matter.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION.
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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, 2023, 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 4,144,167 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 750,000 shares so that the new aggregate share limit for the 2008 Plan would be 4,894,167 shares (plus shares subject to options granted under the 2006 Plan which expire or are cancelled or terminated). The proposed amendments would also increase the limit on the number of shares that may be delivered pursuant to “incentive stock options” granted under the 2008 Plan by 750,000 shares for a new limit of 5,125,000 incentive stock options. 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 Plan Term. The 2008 Plan is currently scheduled to expire on April 17, 2032. The proposed amendments provide for the term of the 2008 Plan to be extended until April 16, 2033, the day before the tenth anniversary from the date the plan was approved by the Board. |
As of March 31, 2023, a total of 1,338,190 shares of the Company’s common stock were then subject to outstanding awards granted under the 2008 Plan, and there were then 73,074 available shares for new award grants under the 2008 Plan. The proposed amendments would increase the reserved shares under the plan by 750,000 shares. Based solely on the closing price of the Company’s common stock as reported by the Nasdaq Stock Market on March 31, 2023, the maximum aggregate market value of the additional 750,000 new shares that could be issued under the 2008 Plan is $11,715,000.
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 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 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 Appendix A to this Proxy Statement.
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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 |
| ● | 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
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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. As of March 31, 2023, approximately 1,498 officers and employees of the Company and its subsidiaries (including all of the Company’s NEOs), and each of the Company’s six non-employee directors, were considered eligible under the 2008 Plan.
Minimum Vesting Requirement. 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) 4,144,167 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) 4,894,167 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 4,375,000 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 5,125,000 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 300,000 shares. |
| ● | 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 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. |
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
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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.
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.
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 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
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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 NEOs 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.
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.
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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 April 17, 2032. If stockholders approve this 2008 Plan proposal, the term of the 2008 Plan will be extended to April 16, 2033. 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, subject to any limitations under the U.S. Internal Revenue Code 162(m). 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 in any calendar year may not be permitted to be deducted by the company in certain circumstances pursuant to Section 162(m) of the U.S. Internal Revenue Code.
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 2022, the Company expects that its award grants for fiscal 2022 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 NEOs during fiscal 2022, see the material under the heading “Executive Compensation” below.
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Overhang as of March 31, 2023
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 ESPP. There are no remaining shares available for grant under the 2006 Plan. 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 headings “Equity Compensation Plan Information” and “Proposal 5: Amendment to 2006 Employee Stock Purchase Plan” 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 (i) were subject to outstanding restricted stock or unit awards granted under the 2008 Plan, (ii) were subject to outstanding stock options granted under the 2006 Plan and the 2008 Plan, including the weighted-average exercise price and remaining life of such outstanding stock options, and (iii) were then available for new award grants under the 2008 Plan as of December 30, 2022 and as of March 31, 2023. The number of shares subject to outstanding performance-based restricted stock units and the shares available for new award grants assume that all performance-based awards will pay out at the maximum performance level.
| As of December 30, 2022 |
| As of March 31, 2023 | |
Shares subject to outstanding restricted stock and unit awards |
| 299,155 |
| 532,419 |
Shares subject to outstanding stock options |
| 815,771 |
| 805,771 |
Weighted-average exercise price | $20.38 | $20.39 | ||
Weighted-average remaining life | 3.68 | 3.39 | ||
Shares available for new award grants |
| 391,902 |
| 73,074 |
The weighted-average number of shares of the Company’s common stock issued and outstanding in each of the last three fiscal years was 11,793,000 shares issued and outstanding in 2020; 12,458,000 shares issued and outstanding in 2021; and 13,013,000 shares issued and outstanding in 2022. The number of shares of the Company’s common stock issued and outstanding as of December 30, 2022 and March 31, 2023 was 13,296,000 and 13,489,000 shares, respectively.
As of December 30, 2022, the Company’s 815,771 outstanding stock options had a weighted-average exercise price of $20.38 and weighted-average remaining life of 3.68 years. As of March 31, 2023, the Company’s 805,771 outstanding stock options had a weighted-average exercise price of $20.39 and a weighted-average remaining life of 3.39 years.
“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, 2023) for 2023, are as follows:
| ● | 512,000 shares in fiscal 2020 (which was 4.3% of the weighted-average number of shares of the Company’s common stock issued and outstanding in fiscal 2020), of which 512,000 shares were subject to restricted stock; |
| ● | 345,000 shares in fiscal 2021 (which was 2.8% of the weighted-average number of shares of the Company’s common stock issued and outstanding in fiscal 2021), of which 345,000 shares were subject to restricted stock; |
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| ● | 290,000 shares in fiscal 2022 (which was 2.2% of the weighted-average number of shares of the Company’s common stock issued and outstanding in fiscal 2022), of which 290,000 shares were subject to restricted stock; and |
| ● | 330,000 shares in fiscal 2023 through March 31, 2023 (which was 2.4% of the weighted-average number of shares of the Company’s common stock issued and outstanding on March 31, 2023), of which 330,000 shares were subject to restricted stock. |
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 (2020, 2021 and 2022) has been, on average, 3.1% 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, 2023) in 2023, are as follows: 18,000 in 2020, 32,000 in 2021, 71,000 in 2022, and 16,000 for 2023 (as of March 31, 2023).
The CC anticipates that the 750,000 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 fiscal 2025. 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, 2023 was $15.62 per share.
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Aggregate Past Grants Under the 2008 Plan
As of March 31, 2023, awards covering 4,857,816 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 and unit vesting prior to that date, and option and unvested restricted stock holdings 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. The number of shares subject to outstanding performance-based restricted stock units assumes that all performance-based awards will pay out at the maximum performance level.
Options and Stock Appreciation Rights | Restricted Stock / Units | |||||||||||||
Number | Number of | |||||||||||||
Number of | Number | of | Shares/Units | |||||||||||
Shares | of | Number of Shares | Shares/ | Number of | Outstanding | |||||||||
Subject to | Shares | Underlying | Units | Shares/Units | and | |||||||||
Past | Acquired | Options/SARs as of | Subject | Vested as of | Unvested as | |||||||||
Option/SAR | On | March 31, 2023 | to Past | March 31, | of March 31, | |||||||||
Named Executive Officers: |
| Grants |
| Exercise |
| Exercisable |
| Unexercisable |
| Awards |
| 2023 | 2023 | |
Thomas D. Brisbin, |
| 565,000 |
| 225,000 |
| 325,000 |
| — |
| 559,497 |
| 424,497 |
| 135,000 |
Michael A. Bieber, |
| 241,667 |
| 47,236 |
| 194,431 |
| — |
| 367,669 |
| 282,169 |
| 85,500 |
Creighton K. Early | 63,333 | 22,653 | 40,680 | — | 96,505 | 58,505 | 38,000 | |||||||
Micah H. Chen | 70,000 |
| — |
| 70,000 |
| — |
| 77,361 | 56,861 |
| 20,500 | ||
Paul M. Whitelaw | 71,587 |
| 38,500 |
| 22,337 |
| — |
| 64,082 |
| 64,082 |
| — | |
Total for All Current Executive Officers as a Group (5 persons): |
| 1,011,587 |
| 333,389 |
| 652,448 |
| — |
| 1,165,114 |
| 886,114 |
| |