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”) that was approved by SJW Group stockholders.

As of December 31, 2018, 2017 and 2016, 793,811, 628,546 and 576,074 shares have been issued pursuant to the Plan, and 124,275, 228,885 and 229,972 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units for the years ended 2018, 2017 and 2016, respectively. The remaining shares available for issuance under the Plan are 881,914 as of December 31, 2018. 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:



	2018		2017	2016
Compensation costs charged to income:
ESPP	$	242	214	168
Restricted stock and deferred restricted stock	1,875		2,429	1,523
Total compensation costs charged to income	$	2,117	2,643	1,691
Proceeds from the exercise of stock options and similar instruments:
ESPP	1,371		1,215	954
Total proceeds from the exercise of stock options and similar instruments	$	1,371	1,215	954
Excess tax benefits realized from share options exercised and stock issuance:
Restricted stock and deferred restricted stock	—		—	203
Total excess tax benefits realized from share options exercised and stock issuance	$	—	—	203

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 30, 2018, 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 4,081 that will vest based on the actual attainment of specified performance goals measured for the 2018 calendar year and continued service through December 31, 2018. The number of shares issuable under such units, ranging between 0% to 150% of the target number of shares, is based on the level of actual attainment of specified performance goals. The units do not include dividend equivalent rights. The awards have no market conditions and the stock-based compensation expense of $58.02 per unit which was based on the award grant date fair value is being recognized assuming the performance goals will be attained. As of December 31, 2018, the specified performance goals and service requirement were met by the officers and 150% of the target number of shares is expected to vest on February 25, 2019 and issued on February 28, 2019 upon approval of the Executive Compensation Committee of the Board on February 25, 2019.

On January 30, 2018, 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 5,259 that will vest based on the actual attainment of specified performance goals for the 2020 calendar year and continued service through December 31, 2020. 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 stock-based compensation expense of $55.89 per unit which is based on the award grant date fair value is being recognized assuming the performance goals will be attained. As of December 31, 2018, the forecast determines a potential payout of the specified performance goals and service requirement between 50% and 100% of the target number of shares to vest in 2021.

On January 30, 2018, performance-based restricted stock units were granted to a key officer of SJW Group covering a target number of shares of SJW Group’s common stock equal to 6,342 that will vest based on continued service and attainment of specified performance goals over the period from January 1, 2018, to December 31, 2020. The number of shares issuable under the award, ranging between 0% and 200% of the target number of shares, is based on the level of actual attainment of specified performance goals. These units do not include dividend equivalent rights. The fair value of the performance-based restricted stock award was estimated utilizing the Monte Carlo valuation model, using the fair value of SJW Group’s common stock with the effect of market conditions and no dividend yield on the date of grant, and assumes the performance goals will be attained. Stock-based compensation expense is recognized at $63.85 per unit. If such goals are not met and requisite service is not rendered, no compensation cost will be recognized and any recognized compensation cost will be reversed.

On April 25, 2018, restricted stock units covering an aggregate of 7,385 shares of common stock of SJW Group were granted to the non-employee board members of SJW Group. The units vest upon continuous board service through the day immediately preceding the date of the next annual stockholder meeting with no dividend equivalent rights. Stock-based compensation expense of $55.80 per unit, which is based on the award grant date fair value, is being recognized over the service period beginning in 2018.

A summary of SJW Group’s restricted and deferred restricted stock awards as of December 31, 2018, and changes during the year ended December 31, 2018, are presented below:



	Units		Weighted- Average Grant- Date Fair Value
Outstanding as of January 1, 2018	190,496		$	27.81
Issued	58,211		$	50.29
Exercised	(143,614	)	$	28.41
Forfeited or expired	—		$	—
Outstanding as of December 31, 2018	105,093		$	37.73
Shares vested as of December 31, 2018	45,912		$	16.46

A summary of the status of SJW Group’s nonvested restricted and deferred restricted stock awards as of December 31, 2018, and changes during the year ended December 31, 2018, are presented below:



	Units		Weighted- Average Grant- Date Fair Value
Nonvested as of January 1, 2018	87,483		$	40.89
Granted	58,211		$	50.29
Vested	(86,513	)	$	35.99
Forfeited	—		$	—
Nonvested as of December 31, 2018	59,181		$	54.67

As of December 31, 2018, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $1,801. This cost is expected to be recognized over a weighted-average period of 1.20 years.

Dividend Equivalent Rights

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

The Deferred Restricted Stock and Deferral Election Programs for non-employee Board members were amended effective January 1, 2008, to allow the DERs’ with respect to the deferred shares to remain in effect only through December 31, 2017. Accordingly, the last DERs’ conversion into deferred restricted stock units under such programs occured 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, 2018, 2017 and 2016, a cumulative of 79,478, 77,034 and 74,403 dividend equivalent rights were converted, since inception, to deferred restricted stock awards, respectively. For the years ended December 31, 2018, 2017 and 2016, $97, $139 and $114, respectively, related to dividend equivalent rights were recorded against retained earnings and were accrued as a liability.

Employee Stock Purchase Plan

The 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 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 ESPP.

As of December 31, 2018, the ESPP had eight purchase intervals since its inception. For the year ended December 31, 2018, 2017 and 2016, a total of 25,907, 27,743 and 30,214 shares, respectively, were issued under the ESPP. The plan has no look-back provisions. For the years ended December 31, 2018, 2017 and 2016, cash received from employees towards the ESPP amounted to $1,523, $1,282 and $1,060, respectively.

For the years ended December 31, 2018, 2017 and 2016, SJW Group’s recorded expenses were $265, $229 and $185 related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ended January 31, 2019 for the ESPP is approximately $111. This cost is expected to be recognized during the first quarter of 2019.