<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]CONFIDENTIAL,FOR USE OF THE
[_]Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
EXPONENT, INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--N/A--
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
EXPONENT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Exponent, Inc., a Delaware corporation (the "Company"), will be
held on Wednesday, May 13, 1998, at 9:00 a.m., local time, in the Company's
auditorium, located at 155 Jefferson Drive, Menlo Park, California 94025, for
the following purposes:
1. To elect directors to serve for the ensuing year or until their
successors are duly elected and qualified.
2. To ratify the appointment of KPMG Peat Marwick L.L.P. as independent
auditors for the Company for the year ending January 1, 1999.
3. To transact other such business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Only stockholders of record at the close of business on April 6, 1998, (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting and
any adjournments or postponements thereof.
All stockholders of record as of the Record Date are cordially invited to
attend the Annual Meeting in person.
If you would like to attend the Annual Meeting, you must bring a form of
personal identification. If your shares are held by a broker, bank, or other
nominee, you must bring to the meeting a recent brokerage statement or a
letter from the nominee confirming your beneficial ownership of the shares. In
order to vote shares that are held by a broker, bank, or other nominee at the
Annual Meeting, you must obtain from the nominee a proxy issued in your name.
To ensure your representation at the Annual Meeting, you are urged to sign,
date, and return the enclosed proxy as promptly as possible in the prepaid
postage envelope enclosed for that purpose. Any stockholder attending the
Annual Meeting may vote in person, even if he or she has returned a proxy. If
you are a stockholder of record, you may use the toll-free telephone number on
the proxy card to vote your shares.
ELIMINATE DUPLICATE MAILINGS
Securities and Exchange Commission ("SEC") rules require the Company to
provide an Annual Report to stockholders who receive this proxy statement. If
you are a stockholder of record and have more than one account in your name or
the same address as another stockholder of record, you may authorize the
Company to discontinue mailing of multiple annual reports. To do so, mark the
appropriate box on each proxy card for which you do not wish to receive an
Annual Report, or if you are a stockholder of record voting by telephone, you
may stay on the line until you receive the appropriate prompt.
FOR THE BOARD OF DIRECTORS
/s/ RICHARD L. SCHLENKER
Richard L. Schlenker, Corporate
Secretary
Menlo Park, California
April 13, 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED, OR CALL THE TOLL-FREE NUMBER ON THE PROXY CARD TO VOTE
YOUR SHARES. (NOT ALL BROKER'S PROVIDE TELEPHONE VOTING).
<PAGE>
EXPONENT, INC.
----------------
PROXY STATEMENT
FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Exponent, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held in the Company's
auditorium, located at 155 Jefferson Drive, Menlo Park, California 94025, on
Wednesday, May 13, 1998, at 9:00 a.m., local time. The Company's principal
executive office is located at 149 Commonwealth Drive, Menlo Park, California
94025, and its telephone number at that location is (650) 326-9400.
The proxy solicitation materials were mailed on or about April 13, 1998,
together with the Company's Annual Report for the period ended January 2,
1998, to all stockholders entitled to vote at the meeting.
RECORD DATE
Only stockholders of record at the close of business on April 6, 1998 (the
"Record Date"), are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, a total of 7,475,481 shares of the Company's common
stock, $.001 par value (the "Common Stock"), were issued and outstanding. For
information regarding security ownership by management and by the beneficial
owners of more than 5% of the Company's Common Stock, see "Other Information--
Share Ownership by Principal Stockholders and Management." The closing price
of the Company's Common Stock on the NASDAQ National Market on the Record Date
was $11.13 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the
right to cumulate their votes in the election of directors.
If you are a stockholder of record, you may vote by calling the telephone
number on the proxy card or by mailing your signed proxy card in the envelope
provided. Specific instructions to be followed by any owner of record
interested in granting a proxy by telephone are set forth in the enclosed
proxy card. Not all brokers provide telephone voting.
The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of ChaseMellon Shareholder Services to assist in
obtaining proxies from brokers and nominees of stockholders for the Annual
Meeting. The estimated cost of such services is $3,500 plus out-of-pocket
expenses. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies may be
solicited by certain of the Company's directors, officers, and regular
employees without additional compensation, by personal conversation,
telephone, telegram, letter, electronically or by facsimile.
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QUORUM: REQUIRED VOTE
The presence, in person or by properly executed proxy, of the holders of a
majority of the shares of Common Stock outstanding as of the Record Date is
necessary to constitute a quorum at the Annual Meeting. Shares that voted
"For," "Against," or "Withheld" on the proposals are treated as being present
at the meeting for purposes of establishing a quorum and are deemed to be
"votes cast" at the Annual Meeting with respect to the proposals. Signed,
unmarked proxy cards are voted as the Board recommends. A plurality of the
votes duly cast is required for the election of directors. The affirmative
vote of a majority of the votes duly cast is required to ratify the
appointment of auditors.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum of shares is present at the Annual Meeting.
However, abstentions and broker non-votes will not be included in the
tabulation of the voting results on the election of directors or on issues
requiring approval of a majority of the votes cast.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting must be received by
the Company no later than January 1, 1999, in order to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
FISCAL YEAR
Reference to 1998 represents the fiscal period from January 3, 1998 through
January 1, 1999; reference to 1997 represents the fiscal year period from
January 4, 1997 through January 2, 1998; reference to 1996 represents the
fiscal year period from December 30, 1995 through January 3, 1997; and
reference to 1995 represents the fiscal year period from December 31, 1994
through December 29, 1995.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
A board of eight directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's eight nominees named below. In the event that any nominee of
the Company is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a
director. The term of office of each person elected as a director will
continue until the next Annual Meeting, or until a successor has been elected
and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITIONS HELD OR PRINCIPAL OCCUPATION SINCE
---- --- -------------------------------------- --------
<S> <C> <C> <C>
Michael R. Gaulke................ 52 President and Chief Executive Officer 1994
Roger L. McCarthy, Ph.D.......... 49 Chief Technical Officer 1989
Edward J. Keith(1)............... 63 Chairman of the Board of the Company and 1989
Private Investor
Samuel H. Armacost(1)............ 59 Managing Director of Weiss, Peck, & Greer, 1989
L.L.C.
Barbara M. Barrett(1)............ 47 President and Chief Executive Officer of 1997
Triple Creek Guest Ranch
Jon R. Katzenbach(1)............. 65 Director of McKinsey & Company 1997
Subbaiah V. Malladi, Ph.D........ 51 Corporate Vice President 1996
George T. Van Gilder(1).......... 54 Independent Businessman 1996
</TABLE>
- --------
(1) Member of the Human Resources Committee, Audit Committee, and Nominating
Committee of the Board of Directors of the Company.
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There is no
family relationship among any of the directors and executive officers of the
Company.
Mr. Gaulke joined the Company in September 1992, as Executive Vice President
and Chief Financial Officer. He was named President in March 1993, and he was
appointed as a member of the Board of Directors of the Company in January
1994. He assumed his current role of President and Chief Executive Officer in
June 1996. From November 1988 to September 1992, Mr. Gaulke served as
Executive Vice President and Chief Financial Officer at Raynet Corporation, a
subsidiary of Raychem Corporation ("Raynet"). Prior to joining Raynet, Mr.
Gaulke was Executive Vice President and Chief Financial Officer of Spectra
Physics, Inc., where he was employed from 1979 to 1988. From 1972 to 1979, Mr.
Gaulke served as a consultant with McKinsey & Company. Mr. Gaulke is a member
of the Board of Directors of RockShox, Inc. and serves on the Board of
Trustees of the Palo Alto Medical Foundation. Mr. Gaulke received a M.B.A.
(1972) in Marketing and Operations from Stanford University Graduate School of
Business and a B.S. (1968) in Electrical Engineering from Oregon State
University.
Dr. McCarthy was named Chief Technical Officer of the Company and Chairman
of the Board of the Company's principal operating subsidiary Failure Analysis
Associates, Inc. ("FaAA") in June of 1996. He has been a director of the
Company since 1989 and a director of FaAA since 1980, Chief Executive Officer
of the Company and FaAA from 1989 to June 1996. He also served as Chairman and
President of the Company from 1989 to March 1993. He joined the Company in
August 1978. Dr. McCarthy received his Ph.D. (1977), Mech.E. (1975), and S.M.
(1973) from the Massachusetts Institute of Technology, and his B.S.E. (1972)
in Mechanical
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Engineering and A.B. (1972) in Philosophy from the University of Michigan. Dr.
McCarthy is a Registered Professional Engineer in the states of California and
Arizona and a member of the following professional organizations: American
Society of Metals; American Society of Mechanical Engineers; Society of
Automotive Engineers; American Society for Testing and Materials; Human
Factors and Ergonomics Society; American Society of Heating, Refrigeration and
Air-Conditioning Engineers; National Fire Protection Association; American
Welding Society; National Safety Council; and the Society for Risk Analysis.
Mr. Keith has been Chairman of the Board of Directors of the Company since
March 1993, and he has been a member of the Board of Directors of the Company
since 1989 and a member of the Board of Directors of FaAA since 1987. He has
been an advisor to FaAA since 1986. Mr. Keith has been a private investor
since 1985. In January 1994, Mr. Keith was elected a director of Vectra
Technologies, a company providing engineering services and fuel storage to
nuclear power plant owners. In June 1995, Mr. Keith was elected as Chairman of
the Board of Directors of Vectra Technologies, a position he held until
January 1998, when the Company was sold and taken private. From January 1990
until August 1994, Mr. Keith was a director of Inlex, Inc., a company that
provides computer hardware, software, and services in connection with
automation of public and private library systems. Mr. Keith received his M.S.
(1964) in Earthquake Engineering and his B.S. (1961) from the University of
California, Berkeley. Additionally, he was a co-founder and a past director of
Impell Corporation, an engineering services company. Mr. Keith is a
professional civil and structural engineer licensed in the state of
California.
Mr. Armacost has been a member of the Board of Directors of the Company
since 1989. Mr. Armacost had been a Principal of Weiss, Peck & Greer, L.L.C.,
an investment firm, from 1990 to 1997 when he was made Managing Director. He
was Managing Director of Merrill Lynch Capital Markets of Merrill, Lynch,
Pierce, Fenner & Smith, Incorporated, from 1987 to August 1990, and he was
Director, President, and Chief Executive Officer of Bank America Corporation
from 1981 to 1986. Mr. Armacost is also a member of the Board of Directors of
Chevron Corporation, Scios, Inc., SRI International, and The James Irvine
Foundation. Mr. Armacost received his M.B.A. (1964) from Stanford University
Graduate School of Business and his B.A. (1961) from Denison University.
Mrs. Barrett has been a member of the Board of Directors of the Company
since 1997. From October 1997 until February 1998, Mrs. Barrett served as
President and CEO of the American Management Association International, Inc.,
in New York City. She has held the position of President and CEO of Triple
Creek Guest Ranch in Darby, Montana, since 1993, and has served as Chairman of
the Board of Directors for the Valley Bank of Arizona since March 1996. She
has also served on the Board of Directors of New Piper Aircraft Corporation
since 1995. Mrs. Barrett was appointed by the President of the United States
as the Deputy Administrator of the Federal Aviation Administration serving
from 1988 through 1989, and she was also appointed as Vice Chairman of Civil
Aeronautics Board serving from 1983 through 1984. Mrs. Barrett practiced
corporate, international, and business law from 1976 through 1982. Mrs.
Barrett received her J.D. (1978), M.P.A. (1975), and B.S. (1972) in Political
Science from Arizona State University. Some of the distinctions Mrs. Barrett
has received include: Inaugural "Hall of Fame" inductee status from Arizona
State University College of Liberal Arts and Sciences, 1995; the Distinguished
Achievement Award from three Arizona State University Colleges, 1985, 1989,
and 1994; and Administrator's Award for Distinguished Service from the Federal
Aviation Administration in 1989. Currently, Mrs. Barrett is on the Board of
Trustees for Thunderbird, The American Graduate School of International
Management; and the Vice-Chairman of the Board of Directors for the Central
Arizona Chapter of the American Red Cross. Mrs. Barrett was a Republican
candidate for Governor of Arizona in 1994.
Mr. Katzenbach has been a member of the Board of Directors of the Company
since 1997. He joined McKinsey & Company in July of 1959. During his 38 years
of service, he managed various offices including the San Francisco and New
York offices for five years each. Additionally, Mr. Katzenbach served as
Chairman of several governance committees and was elected to the Shareholders'
Committee in 1972. He served on the committee for nearly 20 years. Since 1985
he has been a senior leader in the firm's organizational practice and
4
<PAGE>
their pursuit of new approaches to organization performance and the management
of change in large enterprises. He currently holds the position of Director as
a consulting partner for McKinsey & Company. Mr. Katzenbach attended Brigham
Young University and graduated with distinction from Stanford University with
a Bachelor of Arts degree in Economics. He obtained his MBA from Harvard
University, where he was selected as a prestigious Baker Scholar. Mr.
Katzenbach is also the author of several articles and papers encompassing the
organizational field and co-authored two books--The Wisdom of Teams: Creating
the High Performance Organization and Real Change Leaders: How You Can Create
Growth and High Performance at Your Company. His latest book entitled Teams at
the Top: Unleashing the Potential of Both Teams and Individuals Leaders was
published by Harvard Business School Press in September of 1997.
Dr. Malladi joined FaAA in 1982 as a Senior Engineer, becoming a Senior Vice
President in 1988 and a Corporate Vice President of FaAA in 1993. Dr. Malladi
was a member of the Board of Directors of the Company from 1991 through 1993,
and was re-elected to the Board in 1996. He received a Ph.D. (1980) in
Mechanical Engineering from the California Institute of Technology; M.Tech
(1972) in Mechanical Engineering from the Indian Institute of Technology; B.E.
(1970) in Mechanical Engineering from SRI Venkateswara University, India; and
B.S. (1966) in Physics, Chemistry and Mathematics from Osmania University,
India. Dr. Malladi is a Registered Professional Mechanical Engineer in the
State of California and a member of the following professional organizations:
American Institute of Aeronautics and Astronautics; American Association for
the Advancement of Science; Combustion Institute; and National Fire Protection
Association.
Mr. Van Gilder has been a member of the Board of Directors of the Company
since 1996. He began his twenty-four year career at Chubb and Son, Inc., a
subsidiary of Chubb Insurance, where he was responsible for a wide variety of
underwriting functions within the company, including designing and providing
coverage for financial institutions, as well as a variety of commercial and
personal clients. Mr. Van Gilder attained the position of Chief Underwriting
Officer of the company's worldwide property-casualty area before leaving in
1995 to join Risk Management Solutions (RMS) as Chairman, a position he held
until 1997. RMS provides software licensing and consulting to insurance
companies, reinsurance companies, lenders, and governmental agencies. Since
1997, Mr. Van Gilder has owned and managed the Kitty Knight House, a bed and
breakfast located in Maryland. He received his bachelor's degree from the
University of Pennsylvania in 1966, after which he served five years in the
United States Navy. He has published articles on a variety insurance industry
subjects in Best's Review and other publications, and has served on the
American Management Association Insurance Council since 1992. Additionally,
Mr. Van Gilder was a member of the American Insurance Association Disaster
Task Force and is a frequent speaker before such groups as the Risk and
Insurance Management Society (RIMS) and the Society of Chartered Property and
Casualty Underwriters.
REQUIRED VOTE
The eight nominees receiving the highest number of affirmative votes duly
cast shall be elected as directors. Votes withheld from any director are
counted for purposes of determining the presence or absence of a quorum for
the transaction of business but have no other legal effect under Delaware law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors has three standing committees: an Audit Committee, a
Human Resources Committee, and a Nominating Committee. Since the last Annual
Meeting, the three committees were composed of Messrs. Armacost, Katzenbach,
Keith, Van Gilder, and Mrs. Barrett.
The Audit Committee is responsible for (i) reviewing and consulting with the
independent auditors concerning the Company's financial statements,
accounting, financial policies, and internal controls; (ii) reviewing the
scope of the independent auditors' activities and their fees; and (iii)
maintaining good communications among the Audit Committee, the Company's
independent auditors, and the Company's management on accounting matters. The
Audit Committee held three meetings (including two regularly scheduled and one
special meeting) during 1997.
5
<PAGE>
The Human Resources Committee, which is responsible for reviewing and making
recommendations to the Board of Directors regarding the compensation and
employee benefits of the Company's employees, held five meetings (including
four regularly scheduled and one special meeting ) during 1997.
The Nominating Committee, which is responsible for making recommendations to
the Board of Directors regarding nominations for membership on the Board of
Directors, held one meeting during 1997. The Nominating Committee will
consider nominees recommended by the stockholders provided such
recommendations are submitted in writing to the Secretary of the Company.
The Board of Directors held a total of four regularly scheduled meetings in
1997. No incumbent director during 1997 attended fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings held by all committees on which the director served,
except Dr. Malladi, who attended 50% of the meetings.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are employees of the Company do not
receive additional compensation for their services as directors of the
Company. However, non-employee members of the Board of Directors receive an
annual cash retainer of $24,000, and an attendance fee of $2,000 for each
meeting of the Board of Directors. In addition, committee members receive the
following annual committee membership fees: $5,000 for service on the Human
Resources Committee; $5,000 for service on the Audit Committee; and $1,000 for
service on the Nominating Committee. Furthermore, Mr. Keith received an
additional retainer of $10,500 for his duties associated with serving as
Chairman of the Board of Directors. Non-employee Board members are reimbursed
for certain expenses related to travel and incidentals, with the exception of
Mr. Armacost.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick L.L.P., independent
auditors, to audit the financial statements of the Company for the year ending
January 1, 1999. KPMG Peat Marwick L.L.P. has audited the Company's financial
statements since 1987. A representative of KPMG Peat Marwick L.L.P. is
expected to be present at the meeting, will have the opportunity to make a
statement and is expected to be available to respond to appropriate questions.
REQUIRED VOTE
The Board of Directors has conditioned its appointment of the Company's
independent auditors upon the receipt of the affirmative vote of a majority of
the votes cast. In the event that the stockholders do not approve the
selection of KPMG Peat Marwick L.L.P., the appointment of the independent
auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
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<PAGE>
OTHER INFORMATION
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 27, 1998, by the
following individuals or entities: (a) each director and each Executive
Officer; (b) each of the officers named in the Executive Compensation Table
(see page 9); (c) all directors and executive officers as a group; and (d)
each person known to the Company who beneficially owns 5% or more of the
outstanding shares of the Company's Common Stock. A total of 7,469,412 shares
of the Company's Common Stock were issued and outstanding as of February 27,
1998.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES(1) PERCENT OF TOTAL
---- ------------------- ----------------
<S> <C> <C>
Roger L. McCarthy(2)...................... 1,051,806 14.0%
c/o Exponent, Inc.
149 Commonwealth Drive
Menlo Park, CA 94025
Palo Alto Investors(3).................... 557,200 7.5%
431 Florence Street, Suite 200
Palo Alto, CA 94301
Dimensional Fund Advisors, Inc.(3)(15) 459,700 6.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Bernard Ross(4)........................... 374,155 5.0%
c/o Exponent, Inc.
149 Commonwealth Drive
Menlo Park, CA 94025
Charles A. Rau, Jr.(5).................... 344,371 4.6%
Subbaiah V. Malladi(6).................... 319,684 4.2%
Robert W. Morgan(7)....................... 278,860 3.7%
Michael R. Gaulke(8)...................... 203,088 2.7%
Marc W. Lorenzen(12)...................... 143,817 1.9%
Piotr D. Moncarz(9)....................... 90,736 1.2%
Samuel H. Armacost(10).................... 69,906 *
Edward J. Keith(11)....................... 66,940 *
Alexander Kusko(13)....................... 17,826 *
Barbara M. Barrett(12).................... 10,000 *
All Directors & Executive Officers (18
persons) (14)............................ 2,567,633 31.9%
</TABLE>
- --------
* Represents less than one percent of the outstanding Common Stock of the
Company.
(1) The number and percentage of shares beneficially owned is determined
under rules of the Securities and Exchange Commission (the "SEC"), and
the information is not necessarily indicative of beneficial ownership for
any other purpose. Under SEC rules, beneficial ownership includes any
shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right
to acquire within sixty days of February 27, 1998 through the exercise of
any stock option or other right. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power (or shares
such powers with his or her spouse) with respect to the shares shown as
beneficially owned.
(2) Includes 1,013,962 shares of Common Stock held by Roger L. and Gail E.
McCarthy as trustees of a revocable trust established for the benefit of
Roger L. and Gail E. McCarthy and 37,844 shares of Common Stock held in
trusts for the benefit of the McCarthys' children.
(3) As indicated on a Form 13G filed with the SEC on February 13, 1998 for
Palo Alto Investors, Inc. and February 6, 1998 for Dimensional Fund
Advisors Inc.
(4) Includes 11,670 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998. The remaining 362,485 shares are
held by Bernard and Shelley Ross as trustees of a revocable trust
established for the benefit of Bernard and Shelley Ross.
7
<PAGE>
(5) Includes 9,544 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(6) Includes 175,908 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(7) Includes 12,500 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(8) Includes 188,750 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(9) Includes 41,374 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(10) Includes 24,000 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(11) Includes 18,000 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(12) Includes no shares of Common Stock subject to options exercisable within
sixty days of February 27, 1998.
(13) Includes 10,000 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998
(14) Includes 525,062 shares of Common Stock subject to options exercisable
within sixty days of February 27, 1998.
(15) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 459,700 shares of the
Company's Common Stock as of December 31, 1997, all of which shares are
held in portfolios of DFA Investment Dimensions Group, a registered open-
end investment company, or in series of the DFA Investment Trust Company,
a Delaware business trust, or the DFA Group Trust and DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all
such shares.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's executive officers and directors, and persons
who own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the SEC and the National Association of Securities
Dealers, Inc. Such executive officers, directors and ten-percent stockholders
are also required by SEC rules to furnish the Company with copies of all such
forms that they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no
Form 5 was required to be filed by such persons, the Company believes that,
during 1997, its executive officers, directors, and ten-percent stockholders
complied with all applicable Section 16(a) filing requirements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. Armacost, Keith, and Van Gilder served as members of
the Human Resources Committee. Mrs. Barrett and Mr. Katzenbach join the
committee in July of 1997, after they were elected to the Board of Directors.
No member of the Human Resources Committee is or was formerly an officer or an
employee of the Company or any of its subsidiaries.
No interlocking relationship exists between the Company's Board of Directors
or Human Resources Committee and the Board of Directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
8
<PAGE>
EXECUTIVE OFFICER COMPENSATION
EXECUTIVE COMPENSATION TABLE
The following table shows for the Chief Executive Officer and each of the
other four most highly compensated executive officers (the "Named Officers"),
information concerning compensation paid for services to the Company in all
capacities for the fiscal years indicated:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) (1)($) (#) (2)($)
--------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Roger L. McCarthy 1997 $499,990 $200,000 0 $20,346
Chief Technical Officer and Director 1996 $493,746 $ 90,000 0 $18,779
of the Company 1995 $475,010 $ 90,000 0 $19,182
Subbaiah V. Malladi 1997 $485,969 $160,000 0 $23,242
Corporate Vice President of FaAA 1996 $468,759 $ 60,000 0 $20,221
and Director of the Company 1995 $437,507 $ 70,000 0 $20,351
Michael R. Gaulke 1997 $400,005 $140,000 75,000 $19,892
President, Chief Executive Officer 1996 $387,504 $ 50,000 50,000 $17,775
and Director of the Company 1995 $338,465 $ 60,000 25,000 $18,181
Robert W. Morgan(3) 1997 $398,595 $ 0 0 $33,610
President of 1996 $148,495 $ 0 50,000 $ 0
Exponent Health Group, Inc. 1995 $ 0 $ 0 0 $ 0
Alexander Kusko 1997 $341,025 $ 0 0 $ 0
Corporate Vice President of FaAA 1996 $362,550 $ 20,000 0 $ 0
1995 $368,775 $ 0 0 $ 0
</TABLE>
- --------
(1) Includes bonuses earned or accrued with respect to services rendered in
the year or period indicated, whether or not such bonus was actually paid
during such year.
(2) Represents contributions to the Company's defined contribution pension
plan and insurance premiums, respectively, as follows: R.L. McCarthy,
$12,800 and $7,546; S. V. Malladi, $12,800 and $10,442; M. R. Gaulke
$12,800 and $7,092; Robert W. Morgan $12,800 and $20,810.
(3) Robert W. Morgan's salary in 1996 is only represented since August 1,
1996, the date the Company acquired Environmental Health Strategies, Inc.
It does not include amounts paid for acquisition of Dr. Morgan's stock in
Environmental Health Strategies, Inc.
9
<PAGE>
OPTION GRANTS IN 1997
The following table shows, as to the Named Officers, information concerning
stock options granted during the year ended January 2, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
---------------------------------------------- ---------------------
PERCENT OF TOTAL
OPTIONS OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (#)(1) YEAR(2) ($/SH) DATE 5%($) 10%($)
---- ------- ------------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger L. McCarthy....... 0 -- -- -- -- --
Subbaiah V. Malladi..... 0 -- -- -- -- --
Michael R. Gaulke....... 75,000 22% $6.38 02/05/08 $ 300,750 $ 762,750
Robert W. Morgan........ 0 -- -- -- -- --
Alexander Kusko......... 0 -- -- -- -- --
</TABLE>
- --------
(1) All options in this table were granted under the 1990 Stock Option and
Rights Plan and have exercise prices equal to the fair market value on the
date of grant. The options generally become exercisable over a period of
four years at a rate of 25% per year and expire 10 years from the date of
grant.
(2) In 1997, the Company granted options to employees to purchase 345,575
shares of common stock.
(3) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (10 years) at the annual
rate specified (5% and 10%). Annual compounding results in total
appreciation of 63% (at 5% per year) and 159% (at 10% per year). If the
price of the Company's Common Stock on the date Mr. Gaulke was granted
options were to increase at such rates from the price at the time of grant
($6.38) over the next 10 years, the resulting stock price at 5% and 10%
appreciation would be $10.39 and $16.55, respectively. The assumed annual
rates of appreciation are specified in SEC rules and do not represent the
Company's estimate or projection of future stock price growth. The Company
does not necessarily agree that this method can properly determine the
value of an option.
OPTION EXERCISES AND HOLDINGS
The following table shows, as to the Named Officers, information concerning
the number of shares subject to both exercisable and unexercisable stock
options as of January 2, 1998. Also reported are values for "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding stock options and the fair market value of the Company's
Common Stock as of January 2, 1998. The Named Officers did not exercise any
options during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT JANUARY 2, 1998 JANUARY 2, 1998(1)
------------------------------ -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Roger L. McCarthy... 0 0 $ 0 $ 0
Subbaiah V. Malladi. 205,668 4,000 $911,538 $ 24,000
Michael R. Gaulke... 151,250 133,750 $643,438 $647,812
Robert W. Morgan.... 12,500 37,500 $ 57,813 $173,438
Alexander Kusko..... 10,000 0 $ 27,500 $ 0
</TABLE>
- --------
(1) Market value of underlying securities based on the closing price of
Company's Common Stock on January 2, 1998 (the last trading day of the
period) on the NASDAQ National Market of $10.75 minus the exercise price
of the options.
10
<PAGE>
CERTAIN TRANSACTIONS
Samuel H. Armacost is a Managing Director of Weiss, Peck & Greer, L.L.C. an
investment firm. During the 1997, Weiss, Peck & Greer was engaged by the
Company to provide short-term investment services, for which the Company paid
Weiss, Peck & Greer an aggregate of $12,899.
REPORT OF THE HUMAN RESOURCES COMMITTEE
OF THE BOARD OF DIRECTORS
The Human Resources Committee of the Board of Directors establishes the
general compensation policies for all employees and oversees the specific
compensation plans for officers of the Company, including the President and
CEO. The Committee is composed of the five non-employee directors; no
executive officers of the Company are included on the Human Resources
Committee.
COMPENSATION POLICY
The compensation of the Company's officers, including the President and CEO,
is based on the profitability of the Company, the individual achievements of
the officers, and the competitive environment for such employees. Individual
performance assessments are based on both objective and subjective appraisals
of contributions to: financial performance, quality, and leadership required
to meet the level of excellence demanded by the Company's clients.
Performance appraisals were completed by the Performance Evaluation and
Resource Allocation Committee ("PERAC"), which is appointed by the Human
Resources Committee and is comprised of the President and CEO, and the Chief
Technical Officer ("CTO") of the Company, plus three Vice Presidents of FaAA.
The Chairman of the Board of Directors is invited as a guest, along with the
Director of Human Resources to attend all PERAC meetings. PERAC submitted
their assessments and compensation recommendations to the Human Resources
Committee for final review and approval. Independent assessments of all
insider directors including the President and CEO and the Chief Technical
Officer continued to be conducted by the Human Resources Committee.
Timing of Compensation Changes. The performance reviews of officers and
employees are typically completed within three months after the close of each
year. Hence, compensation changes for 1998 were based on 1997 results. These
compensation changes went into effect April 4, 1998.
COMPENSATION VEHICLES
Salaries. The Company strives to provide base salaries commensurate with
comparable executives and private consultants. However, the unique nature of
the Company's business makes direct comparisons difficult as many competitors
are sole practitioners or in private partnerships. In consideration of their
responsibilities for both managing the Company and/or providing direct
consulting services which generate significant Company revenue, the Human
Resources Committee believes the officers' salaries are comparable to those
earned by executives and consultants of similar background, capability and
technical expertise.
Bonuses. For the year ended January 2, 1998, the bonus plan was continued
for all exempt employees, including highly paid executive officers. Bonuses
were tied to the achievement of corporate profitability goals. Funding was
provided for all levels at approximately 62% of target. Allocation of
individual bonuses at the executive level was based on a review by PERAC of
each FaAA executive's performance in the areas of financial contribution,
quality, and leadership. The Human Resources Committee determines the bonuses
for all inside directors including the President and CEO, and the CTO. The
Human Resources committee also reviewed and approved the bonuses recommend by
PERAC.
11
<PAGE>
Stock Options. The Human Resources Committee believes that stock ownership
provides significant opportunity to assure that officers are motivated to
maximize stockholder value. The fiscal 1997 options were granted at the market
price on the date of grant and vest over a four-year period to encourage
retention of key employees.
Executive Compensation. The Human Resources Committee reviewed the
performance of inside directors including the President and CEO, Michael R.
Gaulke, and the CTO, Roger L. McCarthy, during 1997. In recognition of
individual performance and contributions to overall corporate performance in
1997, the Committee approved an increase in base salary for the President and
CEO. The Human Resources Committee reviewed the 1997 performance of all other
officers, and selected base salary increases were approve based on an
assessment of the Company, group, and individual performance. All salary
adjustments for 1997 performance were implemented effective April 4, 1998.
Human Resources Committee
Samuel H. Armacost
Barbara M. Barrett
Jon R. Katzenbach
Edward J. Keith
George T. Van Gilder
12
<PAGE>
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return calculated on a dividend-reinvested basis from 1993 through 1998 with
those of the S&P 500 Index and a peer group constructed by the Company (the
"Peer Group"). The graph assumes that $100 was invested on first day of 1993.
The Peer Group is composed of Analysis & Technology, Inc., Canisco Resources
Inc., Dames & Moore Group, EMCON, Harding Lawson Associates, Inc. and Salient 3
Communications Inc. Returns for the Peer Group are weighted based on market
capitalization at the beginning of each period presented. Note that historic
stock price performance is not necessarily indicative of future stock price
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG EXPONENT INC., S&P 500 INDEX AND PEER GROUP
<TABLE>
<CAPTION>
Measurement Period EXPONENT S&P PEER
(Fiscal Year Covered) INC. 500 INDEX GROUP
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
FYE 12/92 $100.00 $100.00 $100.00
FYE 12/93 $ 72.41 $110.08 $ 94.97
FYE 12/94 $ 58.62 $111.53 $ 76.27
FYE 12/95 $ 91.38 $153.45 $ 67.60
FYE 12/96 $ 84.48 $188.68 $ 79.45
FYE 12/97 $144.83 $251.63 $ 84.63
</TABLE>
13
<PAGE>
OTHER MATTERS
The Company knows of no other matters, which will be brought before the
meeting. However, if any such matters are properly presented before the
meeting, it is the intention of the persons named in the enclosed proxy card
to vote the shares they represent as the Company may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares, which you hold. You are, therefore, urged to execute
and return at your earliest convenience the accompanying proxy card in the
envelope, which has been enclosed.
FOR THE BOARD OF DIRECTORS
/s/ RICHARD L. SCHLENKER
Richard L. Schlenker, Corporate
Secretary
Menlo Park, California
April 13, 1998
14
<PAGE>
- --------------------------------------------------------------------------------
EXPONENT, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 13, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Exponent, Inc. a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 13, 1998, and hereby appoints
Michael R. Gaulke, Roger L. McCarthy and Richard L. Schlenker and any of them,
each with power of substitution and revocation, proxies and attorneys-in-fact of
the undersigned to represent the undersigned and vote all shares of Common Stock
of the Company which the undersigned would be entitled to vote if personally
present at the Company's Annual Meeting of Stockholders to be held at the
Company's auditorium, located at 155 Jefferson Drive, Menlo Park, California
94025, at 9:00 a.m., local time, on Wednesday, May 13, 1998 and at any
adjournment thereof, upon the following matters.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT:
You can vote in one of two ways:
1. Call toll free 1-800-840-1208 on a touch tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this
call.
or
2. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
PLEASE VOTE
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED PLEASE MARK [X]
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTIONS ARE YOUR VOTES
INDICATED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2, AND AS AS INDICATED
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
FOR WITHHELD
1. Election of all nominees listed below to the [_] [_]
Board of Directors to serve until the next
Annual Meeting or until their successors have
been duly elected and qualified, except as
noted (write the names, of any nominees for
whom you withhold authority to vote).
Nominees: Michael R. Gaulke, Samuel H. Armacost,
Barbara M. Barrett, Jon R. Katzenbach, Edward J.
Keith, Sabbalah V. Malladi, Roger L. McCarthy
and George T. Van Gilder.
- ---------------------------------------
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE.
2. To ratify the appointment of KPMG Peat Marwick FOR AGAINST ABSTAIN
L.L.P. as independent public accountants for the [_] [_] [_]
Company for the fiscal year ending January 1, 1999.
3. To transact such other business as may properly
come before the Annual Meeting or any adjournment
thereof.
- --------------------------------------------------------------------------------
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
Date _________, 1998
________________________
Signature
________________________
Signature, If Jointly Held
IF ACTING AS ATTORNEY,
EXECUTOR, TRUSTEE OR IN
OTHER REPRESENTATIVE
CAPACITY, PLEASE SIGN NAME
AND TITLE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY TELEPHONE
QUICK***EASY***IMMEDIATE
Your telephone vote authorizes the named proxies to vote shares in the same
manner as if you marked, signed and returned your proxy card.
* You will be asked to enter a Control Number which is located in the box in the
in the lower right hand corner of this form.
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS. PRESS
1.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
OPTION #2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0. YOU WILL
HEAR THESE INSTRUCTIONS:
Proposal 1: To vote FOR ALL nominees, PRESS 1; to WITHHOLD FOR ALL
Nominees, press 9.
Proposal 2: To vote FOR, press 1; AGAINST, press 9, ABSTAIN, press 0.
The instructions are the same for all remaining proposals.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED FOR YOU TO MAIL YOUR PROXY.
THANK YOU FOR VOTING.
CALL ** TOLL FREE ** ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME ---------------------------
There is NO CHARGE to you for this call. ---------------------------
CONTROL NUMBER
- --------------------------------------------------------------------------------
