Equity Plans

SJW Corp. accounts for share-based compensation based on the grant date fair value of the awards issued to employees in accordance with FASB ASC Topic 718 - “Compensation - Stock Compensation,” which requires the measurement and recognition of compensation expense based on the estimated fair value for all share-based payment awards.

The Incentive Plan allows SJW Corp. to provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company or any parent or subsidiary the opportunity to acquire an equity interest in SJW Corp. The types of awards included in the Incentive Plan are restricted stock awards, restricted stock units, performance shares, or other share-based awards. As of September 30, 2013, the remaining shares available for issuance under the Incentive Plan were 1,160,597, and 315,508 shares were issuable upon the exercise of outstanding options, restricted stock units, and deferred restricted stock units. In addition, shares are issued to employees under the ESPP. SJW Corp. also has a Dividend Reinvestment and Stock Purchase Plan (“DRSPP”) which allows eligible participants to buy shares and reinvest cash dividends in SJW Corp. common stock.

The compensation costs charged to income are recognized on a straight-line basis over the requisite service period. A summary of compensation costs charged to income, proceeds from the exercise of stock options and similar instruments, and the tax benefit realized from stock options and similar instruments exercised, that were recorded to additional paid-in capital and common stock, by award type, are presented below for the three and nine months ended September 30, 2013 and 2012.



	Three months ended September 30,				Nine months ended September 30,
	2013			2012	2013		2012
Compensation costs charged to income:
ESPP	$	70		55	$	128	104
Restricted stock and deferred restricted stock	127			113	658		347
Total compensation costs charged to income	$	197		168	$	786	451
Excess tax benefits realized from share options exercised and stock issuance:
Stock options	$	27		—	$	27	8
Restricted stock and deferred restricted stock	(95		)	—	—		35
Total excess tax benefits realized from share options exercised and stock issuance	$	(68	)	—	$	27	43
Proceeds from the exercise of stock options and similar instruments:
Stock options	$	96		—	$	96	75
DRSPP	21			16	59		68
ESPP	395			310	723		588
Total proceeds from the exercise of stock options and similar instruments	$	512		326	$	878	731

Stock Options

No options were granted during the three and nine months ended September 30, 2013 and 2012.

As of September 30, 2013, there were no unrecognized compensation costs related to stock options.

Stock, Restricted Stock and Deferred Restricted Stock

On January 2, 2013, restricted stock units covering an aggregate of 23,840 shares of common stock of SJW Corp. were granted to certain executives of SJW Corp. and its subsidiaries. The units vest in three equal successive installments upon completion of each year of service with no dividend equivalent rights. Share-based compensation expense based on a grant date fair value of $25.08 per unit is being recognized over the service period beginning in 2013.

On March 25, 2013, 3,918 shares of common stock were awarded as a special stock bonus award to an officer of a subsidiary of SJW Corp. The award was issued upon satisfaction of previously agreed upon conditions and is not subject to vesting.

On April 23, 2013, 3,634 shares of common stock were awarded as a special stock bonus award to a key executive of SJW Corp. The award was issued upon satisfaction of previously agreed upon conditions and is not subject to vesting.

On April 24, 2013, restricted stock units covering an aggregate of 2,667 shares of common stock of SJW Corp. were granted to the non-employee board members of SJW Corp. The units vest upon continuous board service through the day immediately preceding the date of the next annual shareholder meeting with no dividend equivalent rights. Share-based compensation expense based on a grant date fair value of $25.58 per unit is being recognized over the service period beginning in 2013.

On July 30, 2013, restricted stock units covering an aggregate of 628 shares of common stock of SJW Corp. were granted to certain executives of SJW Corp. and its subsidiaries. The units vest in three equal successive installments upon completion of each year of service with no dividend equivalent rights. Share-based compensation expense based on a grant date fair value of $25.67 per unit is being recognized over the service period beginning in 2013.

As of September 30, 2013, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $745. This cost is expected to be recognized over a remaining weighted-average period of 1.48 years.

Dividend Equivalent Rights

Under the Incentive Plan, certain holders of options, restricted stock, and deferred restricted stock awards may have the right to receive dividend equivalent rights (“DERs”) each time a dividend is paid on common stock after the grant date. Stock compensation on DERs is recognized as a liability and recorded against retained earnings on the date dividends are issued. For the three and nine months ended September 30, 2013, $32 and $97, respectively, related to DERs was recorded against retained earnings and was accrued as a liability. For the three and nine months ended September 30, 2012, $32 and $98, respectively, related to DERs was recorded against retained earnings and was accrued as a liability.

Employee Stock Purchase Plan

The ESPP allows eligible employees to purchase shares of SJW Corp.’s common stock at 85% of the fair value of shares on the purchase date. Under the ESPP, employees can designate up to a maximum of 10% of their base compensation for the purchase of shares of common stock, subject to certain restrictions. A total of 270,400 shares of common stock have been reserved for issuance under the ESPP.

After considering estimated employee terminations or withdrawals from the plan before the purchase date, SJW Corp.’s recorded expenses were $34 and $102 for the three and nine months ended September 30, 2013, respectively, and $17 and $62 for the three and nine months ended September 30, 2012, respectively, related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ends January 31, 2014 for the ESPP is approximately $33. This cost is expected to be recognized during the fourth quarter of 2013 and first quarter of 2014.

Dividend Reinvestment and Stock Purchase Plan

SJW Corp. adopted the DRSPP effective April 19, 2011. The DRSPP offers shareholders the ability to reinvest cash dividends in SJW Corp. common stock and also purchase additional shares of SJW Corp. common stock. A total of 3,000,000 shares of common stock have been reserved for issuance under the DRSPP. For the three and nine months ended September 30, 2013, 829 and 2,273 shares, respectively, have been issued under the DRSPP. For the three and nine months ended September 30, 2012, 636 and 2,834 shares, respectively, have been issued under the DRSPP.