Document:

Exhibit
10.1

SETTLEMENT AGREEMENT

THIS SETTLEMENT
AGREEMENT (“Agreement”) is entered into and effective as of this 6th day of
March, 2007, by and between the CITY OF WEST HOLLYWOOD, a municipal corporation
(“City”), and WILLDAN, a California corporation and WILLDAN GROUP, INC., a
Delaware corporation, successor to THE WILLDAN GROUP OF COMPANIES, a California
corporation (collectively “Willdan”) (sometimes referred to herein jointly as
the “Parties” and individually as a “Party”).

RECITALS

A.            On or about November 21, 2003, the
City filed a complaint for breach of contract, express contractual indemnity,
implied contractual indemnity, implied equitable indemnity and negligence (the “Complaint”)
against Willdan in the action entitled City of West Hollywood v.
Willdan Associates aka Willdan aka The Willdan Group of Companies, et al.,
filed in the Los Angeles Superior Court, bearing Case No. BC306587 (the “Action”).

                                B.            On or about December 18, 2003,
Willdan filed a cross-complaint for breach of contract against the City in the
Action (the “Cross-Complaint”).

                                C.            The claims alleged in the Complaint
and the Cross-Complaint concern a dispute over Willdan’s performance of design,
engineering and project management contracts in connection with the City’s
Santa Monica Boulevard Rehabilitation Project (the “Project”)  These claims shall be referred to herein
collectively as the “Lawsuit Claims.”

                                D.            Judgment was rendered in the Action
on October 31, 2005 following a jury trial in Department 48 of the Los Angeles
County Superior Court.  On February 2,
2006, Willdan filed a notice of appeal of the judgment and the Superior Court’s
order determining that the settlement between the City and cross-defendant
Sialic Contractors corporation, dba Shawnan (“Shawnan”) was in good faith.  Willdan’s appeal is now pending as Case No.
B189153 (the “Appeal”).

E.             It
is now the mutual desire of the Parties by this Agreement fully and forever to
resolve their differences over the Project and the Lawsuit Claims without the
necessity of further investigation or litigation, and without an admission of
liability by either Party.

NOW, THEREFORE,
for good and valuable consideration, the receipt, sufficiency, and fairness of
which are hereby acknowledged, the Parties agree as follows:

I.

TERMS OF SETTLEMENT

1.1           Payment
to City.   Within ten (10) business
days of execution of this Agreement by the Parties, Willdan shall pay to City
by way of one or more certified or cashier’s checks made payable to the “City
of West Hollywood” or by wire transfer the sum of Six Million Two Hundred
Thousand Dollars ($6,200,000).  Payment
by check shall be directed to the Finance Director, City of West Hollywood,
8300 Santa Monica Boulevard, West Hollywood, California 90069.  Payment by wire transfer shall be made to
Bank of America — Gov’t Services, 275 Valencia Avenue, Brea, CA 92823, pursuant
to wire instructions to be provided separately by the City.  Each Party shall bear its own attorneys’
fees, costs of litigation and other expenses incurred in connection with the
Action, the Appeal and with the negotiation and execution of this Agreement.

1.2           Credit
Towards Future Services.       By this
Agreement, Willdan commits to and shall provide to the City a credit for future
services of the City’s choosing, in the City’s sole discretion, from among the
services provided by Willdan to its municipal clients, at Willdan’s then
prevailing rates, in the amount of Eighty-Five Thousand Dollars ($85,000).  The credit may be exercised by the City at
any time and in any number or combination of transactions, subject to the City
providing commercially reasonable notice to Willdan and to the reasonable
availability of Willdan to provide the services.  The City shall exhaust the credit by not
later than December 31, 2012.

1.3           Dismissals.  Within five (5) business days of the payment
to the City identified in paragraph 1.1 above, counsel for Willdan shall file
with the court of appeal a Stipulation and Request for Dismissal of Appeal in
the Action as against the City only (the “Stipulation”).  The Stipulation shall provide that the City
and Willdan are to bear their own costs in connection with the Appeal.  The Appeal will not be dismissed as to
Shawnan.  In the event the Court of
Appeal refused to accept the Stipulation and the dismissal of the Appeal as to
the City only, this Agreement shall be invalid and the City shall return the
payment made under Paragraph 1.1 above to Willdan within five (5) business days
of any such ruling by the Court of Appeal.

II.

RELEASES

2.1           Mutual
Release.  Upon dismissal of the
Appeal as against the City,  the Parties,
for themselves and each of their respective predecessors, successors and
assigns, hereby fully release and forever discharge the other and each of the
other Party’s respective, as relevant, shareholders, affiliates, boards,
directors, commissions, agencies, officers, employees, agents, representatives,
insurers and attorneys from any and all claims, demands, actions, causes of
action, liens, judgments, losses, liabilities, costs,

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expenses, and attorneys’ fees, of whatever nature, past or present or
future, whether in law or in equity, whether under state or federal law, and
whether known or unknown, suspected or unsuspected and whether asserted or not
asserted, in connection with or relating to the Action, the Appeal and the
Lawsuit Claims; provided, however, that nothing in this Agreement shall release
either Party from liability for failure to perform the terms, conditions,
covenants and promises set forth in this Agreement.

2.2           Waiver
of Civil Code §1542.  It is the
express intention of the  Parties in
executing this Agreement that this Agreement shall be effective as a full and
final accord and satisfaction and release of each other from any and all of the
Lawsuit Claims and the judgment entered in the Action.  In furtherance of this intention, the Parties
acknowledge that they are familiar with Section 1542 of the California Civil
Code, which provides as follows:

“A general release does not
extend to claims which the creditor does not know or suspect to exist in his or
her favor at the time of executing the release, which if known by him or her
must have materially affected his or her settlement with the debtor.”

The Parties hereby waive and relinquish all rights and
benefits that they have or may have under Section 1542 of the California Civil
Code or under any other law of the State of California or any federal law to
the same or similar effect with respect to the Lawsuit Claims released
herein.  Notwithstanding the foregoing
release of Civil Code Section 1542, the Parties acknowledge and agree that the
mutual releases set forth in paragraph 2.1 are specific to the matters set
forth in such paragraph and are not intended to create general releases as to
all claims, or potential claims, between the Parties related to other matters.

It is not the intention of the parties that Willdan
release Shawnan from any claims that Willdan may have against Shawnan nor that
Willdan dismiss its appeal as to Shawnan.

III.

ADDITIONAL PROVISIONS

3.1           Effectiveness
of this Agreement.  The Parties
acknowledge and agree that no term or provision of this Agreement shall take
effect or be binding on the Parties unless and until this Agreement has been
fully signed and delivered by the Parties.

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3.2           Advice
of Counsel.  In executing this
Agreement, each Party acknowledges that it has consulted with and had the
advice and counsel of an attorney duly admitted to practice in the State of
California, and each Party further acknowledges that it has executed this
Agreement after independent investigation and careful review, with a complete
understanding of its contents, of its own free choice and will, and without
fraud, duress or undue influence.

3.3           No
Admission of Fault.  This Agreement
pertains to the Lawsuit Claims and is the result of compromise.  Neither Party admits any fault or liability
in respect of the Lawsuit Claims, and this Agreement does not constitute, and
shall not in any circumstance be deemed to constitute, an admission of fault or
liability by either Party.

3.4           Sole
Agreement.  This Agreement
constitutes the entire agreement and understanding between the Parties
concerning the subject matter of this Agreement, and supersedes and replaces
any and all prior or contemporaneous negotiations, offers, proposals, terms, representations,
warranties, and agreements, whether written or oral, concerning the subject
matter of this Agreement, including without limitation, the Lawsuit Claims and
the resolution of the Lawsuit Claims. 
The Parties acknowledge that no other party, nor any agent or attorney
of any Party, has made any promise, representation, warranty, or other
inducement of any kind or nature whatsoever, written or oral, express or
implied, concerning the subject matter of this Agreement, to induce the Party
to execute this Agreement or for any other purpose, and each Party acknowledges
that it has not executed this Agreement in reliance on any promise,
representation, warranty or other inducement that is not expressly set forth in
this Agreement.

3.5           Governing
Law.  This Agreement is made and
entered into in the State of California and the Parties agree that this
Agreement shall in all respects be interpreted, enforced and governed by and
under the internal laws of the State of California, without resort to choice of
law principles.

3.6           Interpretation
of Agreement.  This Agreement shall
not be subject to challenge on the grounds that any or all of the legal
theories or factual assumptions used for negotiating purposes are for any
reason inappropriate or inaccurate.  The
Parties acknowledge that the terms and conditions of this Agreement have
resulted from the negotiations of the Parties and that no Party shall be deemed
to be the drafter or author of this Agreement, nor shall either Party be
subject to any legal rules of contract interpretation which may apply based on
the extent to which either Party participated in the drafting of all or any
portion of this Agreement.

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3.7           Execution
of Agreement.  This Agreement may be
executed in counterparts with the same force and effect as if executed in one
complete, original document.  Signatures
delivered by facsimile or electronic transmission shall be accepted as though
originals.

3.8           Representations
and Warranties.  Willdan represents
and warrants that the person who has signed this Agreement on behalf of Willdan
is authorized to execute and enter into this Agreement for and on behalf of
Willdan, and to bind Willdan to the terms set forth herein, and Willdan further
represents and warrants that no other or further consent, approval, or
signature is required to authorize the undersigned to sign for and bind
Willdan.  The City warrants and
represents that the person who has signed this Agreement on behalf of the City
is authorized to execute and enter into this Agreement for and on behalf of the
City and to bind the City to the terms set forth herein.  The City further represents and warrants that
no other or further consent, approval, or signature is required to authorize
the undersigned to sign for and bind the City. 
The Parties each represent and warrant that neither has heretofore
assigned or transferred, or purported to assign or transfer, any of the Lawsuit
Claims released herein.  All
representations and warranties contained in this Agreement shall survive the
execution, delivery and effectiveness hereof.

3.9           Binding
Effect.  This Agreement shall be
binding upon and shall inure to the benefit of Willdan and the City, and their
respective successors and assigns.

3.10         Amendment
to Agreement.  Any amendment to this
Agreement must be in writing and signed by duly authorized representatives of
the Parties hereto and state the intent of the Parties to amend this Agreement.

3.11         Covenant
Not to Sue.  The Parties covenant and
agree not to institute any action or other dispute-resolution proceeding based
on any of the Lawsuit Claims that the Parties have released under this
Agreement.  It is understood and agreed
that this Agreement is a bar to any such action or proceeding.

3.12         Further
Assurances.  The Parties agree that
each of them will execute and deliver to the other Party all such further
documents and instruments as may be reasonably necessary and appropriate to
effectuate the terms and conditions of this Agreement.

3.13         Disputes.  In the event that an action is commenced to
enforce any of the terms and conditions of this Agreement, the non-prevailing
Party shall pay the 

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prevailing Party its reasonable attorneys’ fees and costs of litigation
incurred in connection with such claims, including the fees and costs incurred
in the enforcement or collection of any judgment or award rendered therein.

IN WITNESS WHEREOF, the Parties hereto have executed
this Settlement Agreement on the dates indicated below.  When executed by both Parties, this Agreement
shall be deemed effective as of the date first written above.

	
  

  	
  CITY OF WEST HOLLYWOOD

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Heilman

  
	
   

  	
   

  	
  Mayor

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  /s/ Thomas R.
  West

  	
   

  	
   

  
	
  City Clerk

  	
   

  
	
   

  	
   

  
	
  Approved as to
  Form:

  	
   

  
	
   

  	
   

  
	
  /s/ Michael
  Jenkins

  	
   

  	
   

  
	
  Michael Jenkins

  	
   

  
	
  Jenkins &
  Hogin

  	
   

  
	
  City Attorney

  	
   

  
	
   

  	
  WILLDAN

  
	
   

  	
  A California
  corporation

  
	
   

  	
  By: 

  	
  /s/ David L.
  Hunt

  
	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  WILLDAN GROUP,
  INC.

  
	
   

  	
  A Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tracy
  Lenocker

  
	
   

  	
   

  	
  President

  
	
  Approved as to
  Form:

  	
   

  
	
   

  	
   

  
	
  /s/ Robert L.
  Lavoie

  	
   

  	
   

  
	
  Robert L. Lavoie

  	
   

  
	
  Lavoie, McCain
  & Jarman

  	
   

  
	
  General Counsel

  	
   

  
					

 

 6Exhibit 10.1

BASE SALARIES
OF EXECUTIVE OFFICERS

	
  Name and Principal Position

  	
   

  	
  Current Base Salary

  (on an annualized

  basis)

  	
   

  	
  Base Salary effective

  beginning April 1,

  2007 (on annualized

  basis)

  	
   

  	
  Percentage Increase

  from Current Salary

  	
   

  
	
  John W. Elias

  Chairman of the Board, President and

  Chief Executive Officer

  	
   

  	
  $

  	
  350,000

  	
   

  	
  $

  	
  400,000

  	
   

  	
  14.3

  	
  %

  
	
  John O. Tugwell

  Executive Vice President and

  Chief Operating Officer

  	
   

  	
  $

  	
  235,000

  	
   

  	
  $

  	
  246,000

  	
   

  	
  4.7

  	
  %

  
	
  Michael G. Long

  Executive Vice President and

  Chief Financial Officer

  	
   

  	
  $

  	
  227,000

  	
   

  	
  $

  	
  238,000

  	
   

  	
  4.8

  	
  %

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