UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.)

 

Filed by the Registrant ☒

 

Filed by a Party other than the Registrant ☐

 

Check the appropriate box:

 

WILLDAN GROUP, INC.

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

April 19, 2016

 

Dear Stockholder:

 

You are cordially invited to attend our Annual Meeting of Stockholders to be held on Friday, June 10, 2016 at 10:00 a.m. Pacific Daylight Time at the Hyatt Regency Orange County, 11999 Harbor Blvd., Garden Grove, California 92840.

 

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

 

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

 

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

 

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

 

 

 

 

 

WILLDAN GROUP, INC.

2401 EAST KATELLA AVENUE, SUITE 300

ANAHEIM, CALIFORNIA 92806

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 10, 2016

NOTICE IS HEREBY GIVEN that the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) of Willdan Group, Inc., a Delaware corporation (the “Company”), will be held on Friday,  June 10, 2016 at 10:00 a.m. Pacific Daylight Time at the Hyatt Regency Orange County, 11999 Harbor Blvd., Garden Grove, California 92840, for the following purposes described in this Notice:

 

 

 

 

 

 

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

 

The Board of Directors has fixed the close of business on Thursday, April 14, 2016 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof. Only stockholders of record of the Company’s common stock, $0.01 par value per share, at the close of business on that date will be entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 10, 2016:  Our proxy statement is attached.  Our financial and other information is contained in our 2015 Annual Report to Stockholders.  Pursuant to rules promulgated by the Securities and Exchange Commission, we have elected to provide access to our proxy materials by notifying you of the availability of our proxy materials on the Internet.  You will not receive a printed copy of the proxy materials unless specifically requested.  This proxy statement and our 2015 Annual Report to Stockholders, including our Form 10-K for the year ended January 1, 2016, are available on our website at http://ir.willdangroup.com/annual-proxy.cfm, which does not have “cookies” that identify visitors to the site.  If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.  In addition, the Notice of Internet Availability of Proxy Materials provides instructions on how stockholders may request to receive proxy materials for future Annual Meeting materials in printed or email form.

 

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

 

 

 

 

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

 

 

Anaheim, California

April 19, 2016

 

 

Table of Contents

 

 

 

 

 

 

WILLDAN GROUP, INC.

2401 EAST KATELLA AVENUE, SUITE 300

ANAHEIM, CALIFORNIA 92806

PROXY STATEMENT

FOR 2016 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 10, 2016

This Proxy Statement is furnished to you in connection with the solicitation of proxies by the Board of Directors of Willdan Group, Inc., a Delaware corporation (the “Company”), for use at its 2016 Annual Meeting of Stockholders to be held on Friday, June 10, 2016 at 10:00 a.m. Pacific Daylight Time at the Hyatt Regency Orange County, 11999 Harbor Blvd., Garden Grove, California 92840, and at any adjournment or postponement thereof (the “Annual Meeting”).  We first made this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders and proxy card available to stockholders on or about April 19, 2016.  The Company’s 2015 Annual Report, including financial statements for the fiscal year ended January 1, 2016, is being made available to stockholders concurrently with this Proxy Statement.  The Annual Report, however, is not part of the proxy solicitation material.

 

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

 

ABOUT THE ANNUAL MEETING

 

Why did I receive only a Notice of Internet Availability?

 

As permitted by the United States Securities and Exchange Commission (the “SEC”), we are furnishing to our stockholders our Notice of Annual Meeting, Proxy Statement and Annual Report for the year ended January 1, 2016 primarily over the Internet.  On or prior to April 19, 2016, we will mail to each of our stockholders (other than those who previously requested electronic delivery or to whom we are mailing a paper copy of the proxy materials) a Notice of Internet Availability containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet.  The Notice of Internet Availability also contains instructions on how to receive, free of charge, paper copies of the proxy materials.  If you received the Notice of Internet Availability, you will not receive a paper copy of the proxy materials unless you request one.

 

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

 

What is the purpose of the Annual Meeting?

 

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

 

 

 

 

 

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

 

Who can attend the Annual Meeting?

 

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

 

Who is entitled to vote?

 

Only holders of record of the Company’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on the record date, April 14, 2016 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting.  Holders of Common Stock are entitled to cast one vote for each share held by them on each matter to be voted upon.  The Common Stock is the only class of securities of the Company authorized to vote.  Under the Company’s Certificate of Incorporation and applicable law, a stockholder is not entitled to cumulative voting rights in the election of directors.

 

What constitutes a quorum?

 

The presence, in person or by proxy, of holders entitled to cast at least a majority of all the votes entitled to be cast is necessary to constitute a quorum for the transaction of business at the Annual Meeting.  As of the Record Date, 8,199,494 shares of Common Stock were outstanding and entitled to vote.  Abstentions and “broker non-votes” will count toward the presence of a quorum.  A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner returns an executed proxy, but strikes out a particular proposal because the nominee does not have discretionary voting power with respect to that matter and has not received voting instructions from the beneficial owner.

 

How do I vote?

 

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

 

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

 

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

 

What is the deadline for voting my shares?

 

If you are a stockholder of record, your proxy must be received by telephone or the Internet by 1:00 a.m. Pacific time on June 10, 2016 in order for your shares to be voted at the Annual Meeting.  However, if you are a stockholder of record and you received a copy of the proxy materials by mail, you may instead mark, sign, date and return the proxy card you received and return it in the accompanying prepaid and addressed envelope so that it is received by us before the Annual Meeting in order for your shares to be voted at the Annual Meeting.  If you hold your shares in street name, please provide your voting instructions by the deadline specified by the bank, broker or other nominee who holds your shares.

 

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

 

Yes.  Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by delivering a duly executed proxy bearing a later date or a written revocation to the Secretary of the Company at the address of the Company set forth above, or by attending the Annual Meeting and voting in person.  Any stockholder of record as of the Record Date attending the Annual Meeting may vote in person, whether or not a proxy

has been previously given, but the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy.

 

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

 

Unless you give other instructions on your proxy, the persons named as proxy holders on the proxy will vote in accordance with the recommendations of the Company’s Board of Directors.  The Board’s recommendations are set forth together with the description of each matter in this Proxy Statement.  In summary, the Board unanimously recommends a vote:  FOR election of each of the eight nominees for director, FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 30, 2016, FOR the approval of the non-binding advisory resolution approving the Company’s executive compensation, and FOR an amendment to the Company’s 2008 Performance Incentive Plan, including an increase in the number of shares available for grant under the Plan.

 

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

 

What vote is required to approve each proposal?

 

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

 

Other Items (Proposal Nos. 2, 3 and 4).  Once a quorum has been established, pursuant to our Bylaws, approval of each of the other items to be submitted for a vote of stockholders that the Annual Meeting requires the affirmative vote of a majority of all of the votes cast on the item at the meeting.  Notwithstanding this vote standard required by our Bylaws, Proposal No. 2 (ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ended December 30, 2016) and Proposal No. 3 (an advisory approval of executive officer compensation) are advisory only and are not binding on us.  Our Board of Directors will consider the outcome of the vote on each of these items in considering what action, if any, should be taken in response to the vote by stockholders.

 

Abstentions are not counted as votes cast and will have no effect on the vote for the election of the directors, the ratification of the appointment of KPMG LLP, the non-binding advisory resolution approving the Company’s executive compensation or the approval of amendment to 2008 Performance Incentive Plan.

 

Who tabulates the votes?

 

Stockholder votes will be tabulated by the persons appointed to act as inspectors of election for the Annual Meeting.

 

Could other matters be decided at the meeting?

 

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

 

What happens if the Annual Meeting is postponed or adjourned?

 

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

 

How can I receive a copy of the Annual Report?

 

We will mail you, without charge, a copy of our annual report on Form 10-K for the fiscal year ended January 1, 2016, including the consolidated financial statements, schedules and list of exhibits, upon written request. 

Requests should be sent to:  Willdan Group, Inc., 2401 East Katella Avenue, Suite 300, Anaheim, California 92806, ATTN:  Investor Relations.  The annual report on Form 10-K is also available at www.willdan.com.

 

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

 

Our intention is to announce the preliminary voting results at the Annual Meeting and to publish the final results within four business days after the Annual Meeting on a Form 8-K to be filed with the SEC and which we will make available on our website at www.willdan.com under “Investors—SEC Filings.”

Proposal 1:

 

ELECTION OF DIRECTORS

 

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

 

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

 

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

 

Information Regarding Nominees

 

The following table and biographical descriptions set forth certain information with respect to the Nominees.  Unless otherwise specified, each Nominee has continuously served as a director of the Company since he or she was previously elected, based on information furnished to the Company by each Nominee.  The following information is as of April 19, 2016, unless otherwise specified.

 

 

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

 

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

 

The Board also believes that each of the Nominees and current directors has other key attributes that are important to an effective board, including integrity and demonstrated high ethical standards, sound judgment, analytical skills, the ability to engage management and each other in a constructive and collaborative fashion, diversity of

background, experience, and thought, and the commitment to devote significant time and energy to service on the Board and its Committees.  The following biographies provide further qualifications, attributes and other information with respect to the Nominees.

 

 

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

 

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

 

Steven A. Cohen joined our Board of Directors in 2015.  He is Executive Director of Columbia University’s Earth Institute, where he is responsible for managing the education, research, outreach and operational programs that address sustainable development throughout the world.  The Earth Institute is the largest institute at Columbia with over 799 full-time employees and an annual budget of over $135 million.  Dr. Cohen is also a Public Affairs Professor at Columbia’s School of International and Public Affairs and Director of its Master of Public Administration Program in Environmental Science and Policy.  From 1985 to 1998, he served as Director of Columbia’s Graduate Program in Public Policy and Administration.  Dr. Cohen began his career at Columbia in 1981 after working as a policy analyst for the U.S. Environmental Protection Agency for two years.  Over the past three decades, he has served at different times as a consultant to the U.S. Environmental Protection Agency, the most recent being from 2005 to 2010.  From 2001 to 2004, he also served on the United States Environmental Protection Agency’s Advisory Council on Environmental Policy and Technology.  Throughout his career, Dr. Cohen has written numerous articles on public management innovation, sustainability and environmental management.  Dr. Cohen has also been a senior advisor to Willdan Energy Solutions since November 2008.  He received a B.A. in Political Science from Franklin College of Indiana in 1974 and an M.A. in Political Science from State University of New York at Buffalo in 1977 and a Ph.D in Political Science with a concentration in environmental policy and management from State University of New York at Buffalo in 1979.  We

believe Dr. Cohen’s extensive background in government policy, environmental sciences as well as his substantial knowledge of our company though his role as a senior advisor to Willdan Energy Solutions will provide our board strategic insight to shape our growth strategy.

 

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

 

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

 

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

companies, including financial services companies, provides him with increased knowledge of effective corporate governance that benefits the Board and its committees.

 

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

 

John M. Toups joined our Board of Directors in April 2007.  Mr. Toups serves as chairperson of our Strategy, Mergers and Acquisitions Committee and he is a member of our Audit and Compensation Committees.  Mr. Toups served as President and Chief Executive Officer of PRC from 1977 until 1987.  Prior to that, Mr. Toups served in various executive positions with PRC.  For a short period of time in 1990, he served as interim Chairman of the Board of Directors and Chief Executive Officer of the National Bank of Washington and Washington Bancorp.  Mr. Toups serves as a director of one other public company, NVR, Inc., a homebuilding and mortgage banking company.  In addition, Mr. Toups serves as a director of one privately held company, Dewberry & Davis, an engineering services firm, and serves on Dewberry’s audit and compensation committees.  Mr. Toups also served as a director of Halifax Corporation, a publicly held electronic services company, from 1993 until 2010, when Halifax Corporation was acquired and ceased to be a publicly traded company.  In addition, he served on the board of directors for GTSI Corp., a reseller of software and hardware, from October 1997 until it was sold in October 2012.  He also is currently the Chair Emeritus for the Inova Health System Board of Trustees.  Mr. Toups received his B.S. in Civil Engineering from the University of California, Berkeley in 1949.  He is a registered civil engineer in California and Maryland and a fellow of the American Society of Civil Engineers.  We believe that Mr. Toups’ extensive experience as an officer and as a director of a broad range of both public and private companies, including engineering and financial services companies, allows him to provide strong leadership and oversight on our strategic and financial plans.  In particular, we believe Mr. Toups’ experience as President and Chief Executive Officer of PRC and his extensive experience serving on the boards and committees of publicly traded companies provides valuable insight on our industry and effective corporate governance to our Board and its committees.

 

Vote Required for Election of Each Nominee

 

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

 

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

Proposal 2:

 

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

 

KPMG LLP served as the Company’s independent registered public accountants during the fiscal year ended January 1, 2016 and, in that capacity, audited the Company’s consolidated financial statements for the fiscal year ended January 1, 2016.  Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request approval of the appointment of KPMG LLP as the Company’s independent registered public accountants for the fiscal year ending December 30, 2016 by the stockholders.  If the stockholders do not ratify this appointment, the Audit Committee will reconsider whether or not to retain KPMG LLP, and may decide to retain them notwithstanding the vote.  Even if the appointment is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.  In addition, if KPMG LLP should decline to act or otherwise become incapable of acting, or if the employment should be discontinued, the Audit Committee will appoint a substitute independent public registered public accounting firm.  A representative of KPMG LLP will be present at the Annual Meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions from stockholders.

 

Change in Independent Registered Public Accounting Firm

 

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

 

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

 

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

 

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

 

We do not expect representatives of Ernst & Young LLP to attend the annual meeting.

 

Audit and Other Fees

 

KPMG LLP

 

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

 

 

 

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

 

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

 

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

 

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

 

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

 

Ernst & Young LLP

 

The following is a summary of the fees billed to us by Ernst & Young LLP for professional services for the fiscals year ended January 1, 2016.

 

 

Ernst & Young LLP was dismissed as the Company’s independent registered public accounting firm on April 14, 2015, upon the recommendation of the Audit Committee and approval by our Board of Directors.

 

 

Audit Fees.  Fees for audit services provided by Ernst & Young LLP for fiscal 2015 consisted of payments for consents of Ernst & Young LLP to issue its audit opinion on previous fiscal periods.  Fees for audit services provided by Ernst & Young LLP for fiscal 2014 consisted of professional services for the annual audit of our consolidated financial statements and for review of our interim condensed consolidated financial statements including quarterly reports.

 

Audit-Related Fees.  No fees for audit-related services were billed by Ernst & Young LLP in fiscal 2015 or 2014.

 

Tax Fees.  No fees for tax services, including tax return preparation, tax compliance, tax advice and tax planning, were billed by Ernst & Young LLP in fiscal 2015 or 2014.

 

All Other Fees.  There were no fees paid for any other services not described above in fiscal 2015 or 2014.

 

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

 

Audit Committee Pre-Approval Policy

 

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

 

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

 

Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 30, 2016, requires the affirmative vote of a majority of all the votes cast on the matter at the Annual Meeting.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 30, 2016.  PROXIES RECEIVED WILL BE VOTED “FOR” RATIFICATION UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THE PROXY.

PROPOSAL 3:

 

VOTE ON NON-BINDING ADVISORY RESOLUTION APPROVING EXECUTIVE COMPENSATION

 

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

 

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

 

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

 

 

 

 

 

 

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

 

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

 

RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers set forth under “Executive Compensation,” including the Compensation Discussion and Analysis, Summary Compensation Table and the related compensation tables and narratives in the Proxy Statement for the 2016 Annual Meeting of Stockholders.

 

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

 

The Company’s current policy is to provide stockholders with an opportunity to approve the compensation of the Named Executive Officers each year at the annual meeting of stockholders.  It is expected that the next such vote will occur at the 2017 Annual Meeting of Stockholders.

 

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

 

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

 

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

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 March 9, 2016, 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:

 

 

 

 

 

As of April 1, 2016 a total of 1,035,017 shares of the Company’s Common Stock were then subject to outstanding awards granted under the 2008 Plan, and only 178,900 shares of the Company’s Common Stock were then available for new award grants under the 2008 Plan.  The proposed amendments would increase the reserved shares under the plan by 500,000 shares.  Based solely on the closing price of the Company’s common stock as reported by the

NASDAQ Stock Market on April 1, 2016, the maximum aggregate market value of the additional 500,000 new shares that could be issued under the 2008 Plan is $5,240,000 million.

 

The Company believes that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the 2008 Plan are an important attraction, retention and motivation tool for participants in the plan.  The Board believes that the number of shares currently available under the 2008 Plan does not give the Company sufficient authority and flexibility 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, there will be no limit on the value of equity awards that may be granted to non-employee directors in any calendar year, the performance-based award feature described above will not be extended, and the 2008 Plan term will not be extended.

 

Summary Description of the 2008 Performance Incentive Plan

 

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

 

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

 

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

 

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

 

 

 

 

 

 

 

 

 

 

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

 

Eligibility.  Persons eligible to receive awards under the 2008 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries.  Currently, approximately 551 officers and employees of the Company and its subsidiaries (including all of the Company’s Named Executive Officers), and each of the Company’s seven non-employee directors, are considered eligible under the 2008 Plan.

 

Authorized Shares; Limits on Awards.  The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2008 Plan equals the sum of: (1) 1,336,167 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) 1,836,167 shares, plus (2) the number of any shares subject to stock options granted under the 2006 Plan and outstanding as of June 9, 2008 which expire, or for any reason are cancelled or terminated, after June 9, 2008 without being exercised. 

 

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

 

 

 

 

 

 

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

 

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

 

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

 

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. 

 

Any awards under the 2008 Plan (including awards of stock options and stock appreciation rights) may be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.

 

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

 

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

 

The vesting or payment of Qualified Performance-Based Awards will depend on the absolute or relative performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis.  The Administrator will establish the criterion or criteria and target(s) on which performance will be measured.  To qualify an award as performance-based under Section 162(m), the Administrator must consist solely of two or more outside directors (as this requirement is applied under Section 162(m)), the Administrator must establish criteria and targets in advance of applicable deadlines under Section 162(m) and while the attainment of the performance targets remains substantially uncertain, and the Administrator must certify that any applicable performance goals and other material terms of the grant were satisfied.  The performance criteria that the Administrator may use for this purpose will include one or more of the following: earnings per share, cash flow (which means cash and cash equivalents derived from either net cash flow from operations or net cash flow from operations, financing and investing activities), total stockholder return, gross revenue, revenue growth, operating income (before or after taxes), net earnings (before or after interest, taxes, depreciation and/or amortization), return on equity or on assets or on net investment, cost containment or reduction, or any combination thereof.  The performance measurement period with respect to an award may range from three months to ten years.  The terms of the Qualified Performance-Based Awards may specify the manner, if any, in which performance targets shall be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other items specified by the Administrator at the time of establishing the goals.

 

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

 

Dividend Equivalents; Deferrals.  The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals.  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.

 

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, subject to any exceptions

that the Administrator may provide for in an applicable award agreement.  The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2008 Plan.  For example, the Administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event or in connection with a termination of the award holder’s employment.  For the treatment of outstanding equity awards held by the Named Executive Officers in connection with a termination of employment and/or a change in control of the Company, please see the “Potential Payments Upon Change in Control and Termination” below in this Proxy Statement.

 

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

 

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

 

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.

 

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

 

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

 

Termination of or Changes to the 2008 Plan.  The Board may amend or terminate the 2008 Plan at any time and in any manner.  Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the Board.  Unless terminated earlier by the Board and subject to any extension that may be approved by stockholders, the authority to grant new awards under the 2008 Plan will terminate on March 9, 2018.  If stockholders approve this 2008 Plan proposal, the term of the 2008 Plan will be extended to March 8, 2026.  Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan.  Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.

 

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

 

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

 

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

 

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

 

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

 

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 2015, the Company expects that its award grants for fiscal 2015 would not have been substantially different from those actually made in that year under the 2008 Plan.  For information regarding stock-based awards granted to the Company’s Named Executive Officers during fiscal 2015, see the material under the heading “Executive Compensation” below. 

 

Potential Dilution

 

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

 

“Overhang” refers to the number of shares of the Company’s common stock that are subject to outstanding awards or remain available for new award grants.  The following table shows the total number of shares of the Company’s common stock that were subject to outstanding restricted stock granted under the 2008 Plan, that were subject to outstanding stock options granted under the 2006 Plan and the 2008 Plan, and that were then available for new award grants under the 2008 Plan as of January 1, 2016 and as of April 1, 2016.

 

 

The weighted-average number of shares of the Company’s common stock issued and outstanding in each of the last three fiscal years was 7,355,000 shares issued and outstanding in 2013; 7,488,000 shares issued and outstanding in 2014; and 7,834,000 shares issued and outstanding in 2015. The number of shares of the Company’s common stock issued and outstanding as of January 1, 2016 and April 1, 2016 was 8,173,000 and 8,192,000 shares, respectively.

 

“Burn rate” refers to the number of shares that are subject to awards that we grant over a particular period of time. The total number of shares of the Company’s common stock subject to awards that the Company granted under the 2008 Plan in each of the last three fiscal years, and to date (as of April 1, 2016) for 2016, are as follows:

 

 

 

 

 

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 (2013, 2014 and 2015) has been, on average, 2.4% 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 April 1, 2016) in 2016, are as follows: 43,000 in 2013, 3,000 in 2014, 24,000 in 2015, and 10,000 in 2016.

 

The Compensation Committee anticipates that the 500,000 additional shares requested for the 2008 Plan (together with the shares available for new award grants under the 2008 Plan on the Annual Meeting date and assuming usual levels of shares becoming available for new awards as a result of forfeitures of outstanding awards) will provide the Company with flexibility to continue to grant equity awards under the 2008 Plan through approximately the end of 2019.  However, this is only an estimate, in the Company’s judgment, based on current circumstances.  The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards the Company grants, and how the Company chooses to balance total compensation between cash and equity-based awards.

 

The closing market price for a share of the Company’s common stock as of April 1, 2016 was $10.48 per share.

 

Aggregate Past Grants Under the 2008 Plan

 

As of April 1, 2016, awards covering 1,873,150 shares of the Company’s common stock have been granted under the 2008 Plan.  (This number of shares includes shares subject to awards that expired or terminated without having been exercised and paid and became available for new award grants under the 2006 Plan and the 2008 Plan.)  The following table shows information regarding the distribution of all awards among the persons and groups identified below, option exercises and restricted stock vesting prior to that date, and option and unvested restricted stock holdings

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

 

Vote Required for Approval of the 2008 Performance Incentive Plan

 

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

 

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

 

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

 

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

CORPORATE GOVERNANCE

 

The Board of Directors

 

Corporate Governance

 

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

 

Board members are expected to attend each Board meeting and each meeting of any committee on which such Board member serves and they are encouraged to attend the Annual Meeting of Stockholders.  The Board of Directors met 4 times in 2015.  Each incumbent director attended at least 75% of the total number of meetings of the Board of Directors that were held during the time that he or she served on the Board of Directors and of each committee on which he or she served during 2015.  Each incumbent director who was a director at the time of the 2015 annual meeting attended the 2015 annual meeting. Stockholders or other interested parties may communicate with members of the Board of Directors individually or with the Board of Directors as a whole by sending a letter to the appropriate director or the Board of Directors in care of the Secretary of the Company at the address shown below under “—Communications with the Board of Directors.”

 

Board Leadership Structure

 

The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board.  The Board has determined that having a non-management director serve as Chairman is in the best interests of the Company’s stockholders at this time.  This structure permits the Chief Executive Officer to focus on the management of the Company’s day-to-day operations.  At the same time, because the Chairman of the Board, Mr. Westfall, is the Company’s former President and Chief Executive Officer, and worked for the Company from 1998 until 2007, this structure also makes use of Mr. Westfall’s extensive knowledge of the Company and its industry.  The Company also believes that having a non-management director serve as Chairman of the Board ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing Board priorities and procedures.

 

Executive Sessions

 

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

 

Director Independence

 

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

 

The Company’s policy is to have at least a majority of directors qualify as independent under the listing standards set forth in the Nasdaq Rules and Exchange Act.  The Board of Directors has determined that each of the directors, other than Mr. Brisbin, is independent under the standards set forth in the Nasdaq Rules and the Exchange Act.

 

Committees of the Board of Directors

 

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

 

Audit Committee.  The Board’s Audit Committee consists of Messrs. Renken, McEachern and Toups, each of whom the Board has determined is an independent director and meets the independence requirements for Audit Committee members under the Nasdaq Rules and the Exchange Act.  Mr. Renken is the chairman of the Audit Committee and has been designated by the Board as the Audit Committee financial expert.  Each of the other members of the Audit Committee is financially literate, in accordance with the Nasdaq Rules.  The Audit Committee met 5 times during fiscal 2015. 

 

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

 

Compensation Committee.  The Board’s Compensation Committee consists of Messrs. McEachern, Holdsworth and Toups, each of whom the Board has determined is an independent director under the Nasdaq Rules and the Exchange Act, with Mr. McEachern serving as the Committee’s chairman.  The Compensation Committee is responsible for establishing and governing the compensation and benefit practices of the Company.  The Compensation Committee charter requires that the Compensation Committee consist of three or more members of the Board, each of whom qualifies as an “independent director” under Nasdaq Rules, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.  At all times during fiscal 2015, the Compensation Committee consisted of at least three members of the Board, each of whom the Board has affirmatively determined satisfies these independence requirements.  The Compensation Committee met 4 times during fiscal 2015. 

 

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

 

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

 

Nominating and Corporate Governance Committee.  The Board’s Nominating and Corporate Governance Committee consists of Messrs. Holdsworth, McEachern and Renken, each of whom the Board has determined is an independent director under the Nasdaq Rules, with Mr. Holdsworth serving as the Committee’s chairman.  The Nominating and Corporate Governance Committee met 4 times in fiscal 2015.

 

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

 

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

 

Strategy, Mergers and Acquisitions Committee.  The Board’s Strategy, Mergers and Acquisitions, or SMA, Committee consists of Messrs. Toups, Holdsworth, and Renken, each of whom the Board has determined is an independent director under the Nasdaq Rules, with Mr. Toups serving as the Committee’s chairman.  The SMA Committee assists the Board by reviewing and making recommendations to the Board or taking actions on behalf of the Board relating to the Company’s financial and strategic plans.  The SMA Committee charter requires that the SMA Committee consist of three members of the Board, each of whom the Board has determined satisfies the independence requirements under the Nasdaq Rules and the Exchange Act.  The SMA Committee met 4 times during fiscal 2015.

 

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

 

Oversight of Risk

 

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

 

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

appropriate Board committee. In connection with this responsibility, members of management provide regular reports to the Board regarding business operations and strategic planning, financial planning and budgeting and regulatory matters, including any material risk to the Company relating to such matters.

 

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

 

 

 

 

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

 

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

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of our Compensation Committee has at any time been one of our officers or employees. None of our executive officers serves, or in the past year has served, as a member of the board of directors or the compensation committee of any entity that has one or more executive officers who serve on our Board of Directors or Compensation Committee.

 

Policy on Hedging and Pledging

 

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

 

Code of Ethics

 

The Company expects that all of its directors, officers and employees will maintain a high level of integrity in their dealings with and on behalf of the Company and will act in the best interests of the Company.  The Company has adopted a Code of Ethical Conduct which provides principles of conduct and ethics for the Company’s directors, officers and employees.  This Code complies with the requirements of the Sarbanes-Oxley Act of 2002 and the Nasdaq Rules.  This Code of Ethical Conduct is available on the Company’s website at www.willdan.com under “Investors—Corporate Governance— Governance Documents” and is also available in print, without charge, to any stockholder who requests a copy by writing to our Secretary at 2401 East Katella Avenue, Suite 300, Anaheim, California 92806.

 

Material Litigation

 

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

 

Director Nominations by Stockholders

 

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

 

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

 

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

 

Communications with the Board of Directors

 

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

 

Secretary

Willdan Group, Inc.

2401 E. Katella Avenue, Suite 300

Anaheim, CA 92806

 

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

 

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

PRINCIPAL STOCKHOLDERS

 

Except as otherwise noted, the following table sets forth information as of April 14, 2016 with respect to:  (i) each person known by us to own beneficially more than 5% of the outstanding shares of our common stock, based upon Schedule 13G and Schedule 13D reports filed with the SEC, (ii) each of our directors and director nominees, (iii) each of our Named Executive Officers (as defined below under “Executive Compensation”) and (iv) our directors and executive officers as a group.

 

Unless otherwise noted below, the address of the persons listed in the table is c/o Willdan Group, Inc., 2401 East Katella Avenue, Suite 300, Anaheim, California 92806.  The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities.  Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security.  A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days.  Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest.  Except as otherwise noted, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock reflected as beneficially owned, subject to applicable community property laws.  We had 8,199,494 shares of common stock outstanding on April 14, 2016.

 

 

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

 

 

Red Oak Partners may be deemed to beneficially own 484,986 shares of Common Stock which includes: 122,651 shares of Common Stock that Red Oak Fund may be deemed to beneficially own, 76,184 shares of Common Stock that Red Oak Long Fund may be deemed to beneficially own, 155,429 shares of Common Stock that Red Oak Founders Fund may be deemed to beneficially own,  104,256 shares of Common Stock that Pinnacle Fund may be deemed to beneficially own and 26,466 shares of Common Stock that Wolverine may be deemed to beneficially own.  Red Oak Partners has discretionary trading and voting authority over shares held by Wolverine.  Mr. Sandberg, as the managing member of Red Oak Partners, may be deemed to beneficially own the 484,986 shares of Common Stock beneficially owned by Red Oak Partners through the Funds and Wolverine.

 

Each of David Sandberg, Red Oak Partners, the Funds and Wolverine disclaims beneficial ownership with respect to any shares other than the shares owned directly by such person.  The principal office or business address of the Red Oak Fund, Red Oak Long Fund, Red Oak Founders Fund, Red Oak Partners, Pinnacle Partners, Pinnacle Fund and David Sandberg is 1969 SW 17th Street, Boca Raton, FL 33486.  The principal office or business address of Wolverine is 175 W. Jackson Blvd., Suite 200, Chicago, IL 60604.

 

 

 

 

 

 

 

 

 

 

 

 

 

MANAGEMENT

 

The following table sets forth the names, ages and positions of our current executive officers.  Executive officers of the Company serve at the pleasure of the Board of Directors.  During fiscal 2015, Dr. Brisbin and Dr. Tipermas were employed pursuant to employment agreements, which are summarized below under “Executive Compensation—Description of Employment Agreements, Salary and Bonus Amounts.”

 

 

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

 

Stacy B. McLaughlin was appointed Vice President and Chief Financial Officer of the Company, effective November 15, 2013.  Mrs. McLaughlin served as the Company’s Compliance Manager from 2010 to 2013.  As Compliance Manager, Mrs. McLaughlin was responsible for overseeing all aspects of the financial reporting process, including analyzing the balance sheets and income statements of each business segment.  Prior to joining the Company, Mrs. McLaughlin was, from 2009 to 2010, Senior Associate at Windes & McClaughry Accountancy Corporation and, from 2004 to 2009, Senior Audit Associate at the public accounting firm KPMG LLP.  In her position at KPMG LLP, she planned, coordinated and completed financial statement audits for companies in the engineering services sector, among others.  Mrs. McLaughlin has a Masters in Accounting from the University of Southern California and BS from the University of Arizona.  Mrs. McLaughlin is a Certified Public Accountant (CPA).

 

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

 

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

 

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

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

 

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

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

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

 

2015 Named Executive Officers

 

Our Named Executive Officers for 2015 were:

 

 

Executive Compensation Program Objectives and Philosophy

 

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

 

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

 

 

 

 

 

 

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

 

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

motivate the Named Executive Officers to achieve our short-term financial objectives. Our long-term equity incentives are primarily intended to align our Named Executive Officers’ long-term interests with shareholders’ long-term interests.

 

Role of the Compensation Committee

 

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

 

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

 

The Compensation Committee is authorized to retain and terminate any compensation consultant engaged to assist in the evaluation of the compensation of our senior executive officers (including all of the Named Executive Officers).   Consistent with past practice, in 2015 neither our Compensation Committee nor management retained a compensation consultant to review or recommend the amount or form of compensation paid to our executive officers, including our Named Executive Officers, or our directors.  In light of the straightforward nature of our executive compensation arrangements, the Compensation Committee believes it has not been necessary to date to retain independent compensation consultants. If and when we decide to retain a compensation consultant to assist us with our executive compensation programs in the future, we will conduct an independence assessment of any such compensation consultant (including an assessment of any conflicts of interest) as and to the extent required under applicable SEC and NASDAQ rules.

 

Similarly, our Compensation Committee does not “benchmark” executive compensation at any particular level in comparison with other companies. Rather, our Compensation Committee familiarizes itself with compensation trends and competitive conditions through the review of non-customized third-party market surveys and other publicly available data about relevant market compensation practices. In setting compensation levels for 2015, our Compensation Committee considered publicly available compensation data to determine the relative strengths and weaknesses of our compensation packages on an aggregate basis solely as a validation after determining the types and amount of compensation based on its own evaluation. In addition to a review of the general market compensation levels and practices, in setting compensation levels for 2015, our Compensation Committee also considered each executive’s level of responsibility and performance for the overall operations of the Company, historical Company practices, long-term market trends, internal pay equity, expectations regarding the individual’s future contributions, our own performance, and budget considerations.

 

Role of Shareholder Say-on-Pay Votes

 

The Company annually offers shareholders the opportunity to cast an advisory vote on our executive compensation program. This annual vote is known as the “say-on-pay” proposal. At our annual general meeting in 2015, approximately 77 percent of votes cast were in favor of our executive compensation program for 2014. The Compensation Committee believes these results demonstrate that shareholders support our executive compensation program. When making future compensation decisions for Named Executive Officers, the Compensation Committee will continue to consider the opinions that shareholders express through say-on-pay votes.

 

Executive Compensation Program Elements

 

Base Salaries

 

We pay each Named Executive Officer a base salary to provide each executive with a minimum, fixed level of cash compensation.  Decisions regarding increases to base salaries are made at the discretion of our Compensation Committee. In reviewing base salary levels for our Named Executive Officers, our Compensation Committee primarily considers and assesses the following factors: each Named Executive Officer’s current base salary, their job

responsibilities, leadership and experience, value to our Company and the recommendations of our President and Chief Executive Officer (other than with respect to his own compensation). 

 

No Named Executive Officer received any base salary increase in 2015.

 

Annual Bonuses

 

We determined to award performance bonuses to all of our Named Executive Officers except Mr. Bieber in 2015.  The Compensation Committee determined the amount of each executive’s bonus in its discretion, and did not use any formulaic bonus metric.  In determining the amount of each executive’s 2015 bonus, the Compensation Committee primarily considered our overall financial performance during our 2014 fiscal year and the first part of our 2015 fiscal year, budget considerations, each executive’s level of responsibility and performance, internal pay equity, and the recommendations of our President and Chief Executive Officer (other than with respect to his own compensation).

Mr. Bieber was not awarded a bonus in 2015 because he did not join us until December 2014 and was awarded an initial long-term equity award in connection with his appointment.

 

Long-Term Equity Awards

 

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

 

The Compensation Committee has currently determined to grant long-term equity incentive awards to the Named Executive Officers and other executives in the form of options. The Compensation Committee believes option awards with a multi-year vesting schedule create an incentive for the executives to create and preserve long-term shareholder value, as the options will only have value if our share price increases following the grant date.

 

In 2015, each of our Named Executive Officers (except Messrs. Tipermas and Chow) received an option award under our 2008 Plan.  Each option award was granted with an exercise price equal to the fair market value of a share of our Common Stock on the grant date, and will only have value if the executives’ are able to successfully drive appreciation in the value of our Common Stock.

 

In determining the level of awards granted to each of the Named Executive Officers who received an option grant in 2015, the Compensation Committee primarily took into account the executive’s level of responsibility and performance for the overall operations of the Company, internal pay equity, historical Company practices, each executive’s performance and budget considerations.

 

Severance

 

Drs. Brisbin and Tipermas and Mr. Chow are employed pursuant to employment agreements or offer letters that provide specified levels of severance benefits if the executive’s employment is terminated by us without “cause” or, in the case of Drs. Brisbin and Tipermas only, by the executive for a “good reason.”  The level of each executive’s severance benefits was negotiated and established in connection with the executive’s entry into his employment agreement or offer letter, and has been determined to be appropriate by the Compensation Committee based on the executive’s level of responsibility and performance for the overall operations of the Company, long-term market trends, and budget considerations.  Severance benefits for Dr. Brisbin are based on a multiple of “2x” his base salary, severance benefits for Dr. Tipermas are based on a “1x” multiple of his base salary, and severance benefits for Mr. Chow are based on a multiple of “0.25x” base salary (or 3 months of base salary in total).  Severance benefits for Drs. Brisbin and Tipermas also include payment of the executive’s target bonus for the year of termination of employment and a continued medical benefits component (which for Dr. Brisbin, is payable for any type of termination other than a termination by us for “cause”).

 

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

 

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

 

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

 

No Named Executive Officer is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control pursuant to Sections 280G and 4999 of the Code.  Instead, our 2008 Performance Incentive Plan generally provides that awards or payments under the 2008 Plan are automatically “cut back” in such circumstances in order to avoid triggering these excise taxes.

 

Other Benefits

 

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

 

Policy with Respect to Section 162(m)

 

Under Section 162(m) of the Code, we are generally precluded from deducting compensation in excess of $1.0 million per year for our Chief Executive Officer and certain of our other Named Executive Officers, unless the payments are made under qualifying performance-based plans. Our 2008 Performance Incentive Plan permits us to grant awards that are intended to be qualified performance-based compensation that is deductible for purposes of Section 162(m) of the Code. In making its compensation decisions, the Compensation Committee considers the impact of Section 162(m) of the Code.  Given the level of compensation paid to our Named Executive Officers, we have historically not needed to specifically structure our compensation in order to comply with the $1.0 million limitation under Section 162(m) of the Code.  However, stock options granted to our Named Executive Officers are generally structured to be deductible qualified performance-based compensation.

 

Compensation Committee Report

 

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

 

 

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

COMPENSATION OF EXECUTIVE OFFICERS

 

The following table presents information regarding compensation during fiscal 2015, fiscal 2014, and fiscal 2013 of our named executive officers (the “Named Executive Officers”).  The Named Executive Officers include our principal executive officer, principal financial officer, and our three other most highly compensated executive officers.

 

Summary Compensation Table—Fiscal 2015, Fiscal 2014, and Fiscal 2013

 

 

 

 

 

 

 

 

Compensation of Named Executive Officers

 

The Summary Compensation Table above quantifies the value of the different forms of compensation earned by or awarded to our Named Executive Officers in each applicable fiscal year.  As described in the “Compensation Discussion and Analysis” section above, the primary elements of each Named Executive Officer’s total compensation reported in the table are base salary, performance bonus and a long-term equity incentive award consisting of stock options.  Named Executive Officers also received the other benefits listed in the ”All Other Compensation” column of the Summary Compensation Table, as further described in footnote (3) to the table.

The Summary Compensation Table should be read in conjunction with the “Compensation Discussion and Analysis” section above and the tables and narrative descriptions that follow.  A description of the material terms of each Named

Executive Officer’s employment agreement, if any, is provided immediately following this paragraph.  The “Grants of Plan-Based Awards in Fiscal 2015” table, and the description of the material terms of the stock options granted in fiscal 2015 that follows it, provides information regarding the long‑term equity incentives awarded to certain Named Executive Officers in fiscal 2015.  The “Outstanding Equity Awards at Fiscal 2015 Year-End” and “Option Exercises and Stock Vested in Fiscal 2015” sections provide further information on the Named Executive Officers’ potential realizable value and actual value realized with respect to their equity awards.  The discussion of the potential payments due upon a termination of employment or change in control that follows is intended to further explain the potential future payments that may become payable to our Named Executive Officers under certain circumstances.

 

Description of Employment Agreements, Salary and Bonus Amounts

 

On May 3, 2011, we entered into amended and restated employment agreements with Drs. Brisbin and Tipermas.  These employment agreements provide for “at-will” employment and do not include a specified term.  Each of these agreements provides for the Named Executive Officer to receive a base salary and an annual incentive bonus as determined by the Compensation Committee.  The annual target bonus for each Named Executive Officer under these agreements is 100% of the Named Executive Officer’s annual base salary in the case of Dr. Brisbin and 50% of the annual base salary in the case of Dr. Tipermas.  Each Named Executive Officer is also entitled to participate in benefit plans made available to our employees generally.

On October 29, 2008, we entered into an offer letter with Mr. Chow.  The letter provides that Mr. Chow’s employment is on an “at-will” basis and for his initial base salary to be $205,000 per year (which was increased to $217,000 per year beginning October 2014).

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

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

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

 

Grants of Plan-Based Awards in Fiscal 2015

 

The following table presents information regarding the equity incentive awards granted to Named Executive Officers during fiscal 2015 under the 2008 Plan.  The material terms of each grant are described below under “—Description of Plan-Based Awards.”

 

 

 

 

Description of Plan-Based Awards

 

During fiscal 2015, certain Named Executive Officers were each awarded stock option grants under the 2008 Plan.  The options were granted on March 26, 2015 and June 5, 2015 and will vest in substantially equal annual installments over three years from the grant date.  The options were granted with a per-share exercise price equal to the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date and have a term of ten years.  Outstanding options under the 2008 Plan, however, may terminate earlier than their stated expiration date in

connection with a change in control transaction or a termination of the recipient’s employment.  The recipient will generally have three months to exercise the stock option following a termination of employment.  This period is extended to 12 months if the recipient dies or terminates his or her employment because of a disability incurred while employed by the Company.  However, if a recipient’s employment is terminated by the Company for cause, outstanding stock options (whether vested or unvested) will immediately terminate.  The stock options granted under our 2008 Plan do not include any dividend or dividend equivalent rights.

 

As indicated above, the stock options granted in fiscal 2015 were granted under, and are subject to the terms of, the 2008 Plan, which is administered by the Compensation Committee.  The Compensation Committee has authority to interpret the plan provisions and make all required determinations under the plan.  This authority includes making required proportionate adjustments to outstanding awards upon the occurrence of certain corporate events such as reorganizations, mergers and stock splits, and making provisions to ensure that any tax withholding obligations incurred in respect of awards are satisfied.  Awards granted under the plan are generally only transferable to a beneficiary of an award recipient upon his or her death.  However, the Compensation Committee may establish procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable securities laws and, with limited exceptions set forth in the plan documents, are not made for value.

 

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

 

Outstanding Equity Awards at Fiscal 2015 Year-End

 

The following table presents information regarding the outstanding option awards held by each Named Executive Officer as of January 1, 2016.  No Named Executive Officer held any outstanding stock awards (other than options) as of January 1, 2016.