Equity Plans

Common Stock

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

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

A participant in the Plan generally may not receive Plan awards covering an aggregate of more than 600,000 shares of common stock in any calendar year. Additionally, awards granted under the Plan may be conditioned upon the attainment of specified Company performance goals. The types of awards included in the Plan are restricted stock awards, restricted stock units, performance shares, or other share-based awards. In addition, shares are issued to employees under the Employee Stock Purchase Plan (“ESPP”). The last offering period under the ESPP ended on July 31, 2014. A 2014 Employee Stock Purchase Plan (“2014 ESPP”) was approved by Company stockholders in April 2014. The initial offering period under the 2014 ESPP commenced on August 1, 2014 with a January 30, 2015 purchase date. SJW Group also had a Dividend Reinvestment and Stock Purchase Plan (“DRSPP”) which allowed eligible participants to buy shares and reinvest cash dividends in SJW Group common stock. The DRSPP was terminated effective as of April 14, 2014.

As of December 31, 2016, 2015 and 2014, 576,074, 516,956 and 429,352 shares have been issued pursuant to the Plan, and 229,972, 245,976 and 296,831 shares are issuable upon the exercise of outstanding options, restricted stock units, and deferred restricted stock units for the years ended 2016, 2015 and 2014, respectively. The remaining shares available for issuance under the Plan are 993,954 as of December 31, 2016. The compensation costs charged to income is recognized on a straight-line basis over the requisite service period.

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



	2016		2015	2014
Compensation costs charged to income:
ESPP	$	168	158	148
Restricted stock and deferred restricted stock	1,523		1,445	883
Total compensation costs charged to income	$	1,691	1,603	1,031
Proceeds from the exercise of stock options and similar instruments:
Stock options	$	—	—	1,044
ESPP	954		895	839
DRSPP	—		—	34
Total proceeds from the exercise of stock options and similar instruments	$	954	895	1,917
Excess tax benefits realized from share options exercised and stock issuance:
Stock options	$	—	—	213
Restricted stock and deferred restricted stock	203		634	249
Total excess tax benefits realized from share options exercised and stock issuance	$	203	634	462

Stock Options

SJW Group applies FASB ASC Topic 718—“Compensation—Stock Compensation,” for all existing and new share-based compensation plans. To estimate the fair value of options at grant date as the basis for the share-based compensation awards, SJW Group utilizes the Black-Scholes option-pricing model, which requires the use of subjective assumptions. Further, as required under ASC Topic 718, SJW Group estimates forfeitures for the share-based awards that are not expected to vest. Changes in these inputs and assumptions can affect the measure of estimated fair value of our share-based compensation and the amount and timing of expense recognition.

Awards in the form of stock options under the Plan allowed executives to purchase common shares at a specified price. Options were granted at an exercise price that is not less than the per share market price on the date of the grant. Options vested at a 25% rate on each annual date over four years and had a contractual term of 10 years.

As of December 31, 2016 and 2015, there were no outstanding options and no option award activity during the years ended December 31, 2016 and 2015.

The total intrinsic value of options exercised during the year ended December 31, 2014 was $581.

As of December 31, 2016 and 2015, there are no unrecognized compensation costs related to stock options.

Restricted Stock and Deferred Restricted Stock

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

On January 26, 2016, certain officers of SJW Group were granted performance-based restricted stock units covering an aggregate target number of SJW Group’s shares of common stock equal to 12,473 that will vest based on the actual attainment of specified performance goals measured for the 2016 calendar year and continued service through December 31, 2016. The number of shares issuable under the awards, ranging between 0% to 150% of the target number of shares, is based on the level of actual attainment of specified performance goals. The units do not include dividend equivalent rights. The awards have no market conditions and the share-based compensation expense of $29.46 per unit, which is based on the award grant date fair value, is being recognized. As of December 31, 2016, the specified performance goals and service requirement were met and 150% of the target number of shares is expected to vest February 28, 2017 upon approval of the Executive Compensation Committee of the Board on February 27, 2017.

On April 27, 2016, restricted stock units covering an aggregate of 7,656 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 of $35.79 per unit, which is based on the award grant date fair value, is being recognized over the service period beginning in 2016.

A summary of SJW Group’s restricted and deferred restricted stock awards as of December 31, 2016, and changes during the year ended December 31, 2016, are presented below:



	Units		Weighted- Average Grant- Date Fair Value
Outstanding as of January 1, 2016	209,237		$	21.49
Issued	40,398		$	29.83
Vested	(55,919	)	$	26.92
Forfeited or expired	(996	)	$	27.86
Outstanding as of December 31, 2016	192,720		$	21.69
Shares vested as of December 31, 2016	106,817		$	16.62

A summary of the status of SJW Group’s nonvested restricted and deferred restricted stock awards as of December 31, 2016, and changes during the year ended December 31, 2016, are presented below:



	Units		Weighted- Average Grant- Date Fair Value
Nonvested as of January 1, 2016	93,544		$	27.63
Granted	40,398		$	29.65
Vested	(47,043	)	$	28.71
Forfeited	(996	)	$	27.86
Nonvested as of December 31, 2016	85,903		$	28.00

As of December 31, 2016, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $902. This cost is expected to be recognized over a weighted-average period of 0.60 years.

Dividend Equivalent Rights

Under the 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.

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

As of December 31, 2016, 2015 and 2014, a cumulative of 74,403, 70,691 and 66,458 dividend equivalent rights were converted, since inception, to deferred restricted stock awards, respectively. For the years ended December 31, 2016, 2015 and 2014, $114, $114 and $122, respectively, related to dividend equivalent rights were recorded against retained earnings and were accrued as a liability.

Employee Stock Purchase Plan

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

As of December 31, 2016, the 2014 ESPP had four purchase intervals since its inception. As of December 31, 2016 and 2015, a total of 30,214 and 33,318 shares were issued under the 2014 ESPP, respectively. Prior to the inception of the 2014 ESPP plan, the ESPP had seventeen purchase intervals. As of December 31, 2014, a total of 35,682 shares were issued under the prior ESPP. Both plans have no look-back provisions. For the years ended December 31, 2016, 2015 and 2014, cash received from employees towards the 2014 ESPP and ESPP amounted to $1,060, $916 and $854, respectively.

After considering estimated employee terminations or withdrawals from the plan before the purchase date, for the years ended December 31, 2016, 2015 and 2014, SJW Group’s recorded expenses were $185, $162 and $151 related to the 2014 ESPP and the prior ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ended January 31, 2017 for the 2014 ESPP is approximately $94. This cost is expected to be recognized during the first quarter of 2017.

Dividend Reinvestment and Stock Purchase Plan

SJW Group adopted the DRSPP effective April 19, 2011. The DRSPP offered stockholders the ability to reinvest cash dividends in SJW Group common stock and also purchase additional shares of SJW Group common stock. A total of 3,000,000 shares of common stock were reserved for issuance under the DRSPP. SJW Group terminated the DRSPP effective as of April 14, 2014. For the year ended December 31, 2014, 829 shares were issued under the DRSPP.