<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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Exponent, 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):
[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:
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(4) Date Filed:
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Notes:
<PAGE>
2000 NOTICE OF
ANNUAL STOCKHOLDERS MEETING
AND PROXY STATEMENT
[LOGO OF EXPONENT(TM)]
<PAGE>
Exponent, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 1, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders (the "Annual Meeting") of Exponent, Inc.,
a Delaware Corporation (the "Company"), will be held on Monday, May 1, 2000,
at 9:00 a.m., PDT, located at 149 Commonwealth Drive, Menlo Park, California
94025, for the following purposes:
1. To elect seven directors for a term of one year.
2. To ratify the appointment of KPMG LLP, as independent auditors for the
Company for the year ending December 29, 2000.
3. To attend to any other matters that properly comes before the meeting.
Stockholders owning the Company's shares at the close of business on March
17, 2000 (the "Record Date"), are entitled to notice of and to vote at the
Annual Meeting.
All stockholders of record, as of the Record Date, are cordially invited to
attend the Annual Meeting in person.
Please note that if you hold your shares in "street name" that is, through a
broker or other nominee, you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the Record Date. Check-in at
the registration desk will be required.
FOR THE BOARD OF DIRECTORS
/s/ Richard L. Schlenker
Richard L. Schlenker, Corporate
Secretary
Menlo Park, California
March 31, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Proxy Statement............................................................. 1
Questions and Answers..................................................... 1
How Do I Vote?............................................................ 1
Proposal No. 1--The Board of Directors.................................... 3
Board and Committee Meetings.............................................. 6
Director Compensation..................................................... 6
Proposal No. 2--Ratification of Appointment of Independent Auditors....... 7
Stock Ownership........................................................... 8
Section 16(a) Beneficial Ownership Reporting Compliance................... 9
Executive Officer Compensation............................................ 10
Options Granted to Named Officers......................................... 11
The Value of Options Held by Named Officers............................... 11
The Company's Philosophy of Executive Compensation........................ 12
Performance Graph......................................................... 14
Other Matters............................................................. 15
</TABLE>
<PAGE>
EXPONENT, INC.
----------------
PROXY STATEMENT
FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS
----------------
ABOUT THE MEETING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Exponent, Inc., a Delaware Corporation for use at the Annual Meeting of
Stockholders, at the Company's principal executive office, 149 Commonwealth
Drive, Menlo Park, California 94025, on Monday, May 1, 2000, at 9:00 a.m.,
PDT. The telephone number for this location is (650) 326-9400.
What is the Purpose of the Annual Meeting?
At the Company's Annual Meeting, stockholders will act upon matters outlined
in the accompanying notice of the meeting and transact such other business
that may properly come before the meeting. In addition, the Company's
management will report on the performance of the Company during fiscal 1999
and respond to questions from stockholders.
Who is Entitled to Vote?
Only stockholders of record at the close of business on the record date,
March 17, 2000, receive notice of the Annual Meeting and are entitled to vote
the shares of common stock that they hold as of that date. Each outstanding
share entitles its holder to cast one vote on each matter to be voted upon.
Please note that if you hold your shares in "street name," that is through a
broker or other nominee, you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the Record Date. If you do not
vote your proxy, your brokerage firm may either vote your shares on routine
matters, such as election of directors or leave your shares without a vote. We
encourage you to provide instructions to your brokerage firm by voting your
proxy. This ensures your shares will be voted at the meeting.
The proxy solicitation materials were mailed on or about April 3, 2000,
together with the Company's Annual Report for the period ended December 31,
1999, to all stockholders entitled to vote at the meeting.
How Do I Vote?
You have three ways to vote. You may return the proxy card by mail, vote by
telephone, or vote in person. The Company is not offering internet voting at
this time. To vote by mail, you must sign your proxy card and send it in the
enclosed prepaid, addressed envelope. If you mark your voting instructions on
the proxy card, your shares will be voted as you instruct. If you return a
signed card but do not provide voting instructions, your shares will be voted
as recommended by the Board of Directors:
.for the seven named nominees; and
.for the reappointment of KPMG LLP, as the Company's auditors.
If you choose to vote by telephone, please review the back of the proxy card
for instructions on how to do so. You do not need to mail in your proxy card
if you vote by telephone. Some brokers may not provide telephone voting.
1
<PAGE>
If you choose to vote in person, you will have an opportunity to do so at
the Annual Meeting. You may either bring your proxy card to the Annual
Meeting, or if you do not bring your proxy card, the Company will pass out
written ballots to anyone who was a stockholder as of the Record Date of March
17, 2000.
What if I Change My Mind After I Return My Proxy Card?
You may revoke your proxy and change your vote at any time before the polls
close at the Annual Meeting. You may do this by:
.signing another proxy with a later date, (the proxy with the latest date
is counted);
.voting by telephone (your latest telephone proxy is counted); or
.voting in person at the Annual Meeting.
What does it Mean if I Receive More than One Proxy Card?
It means you have multiple accounts with the transfer agent and/or with
brokers. If you would like to cancel duplicate mailings, you may authorize the
Company to discontinue mailings of multiple annual reports by marking the
appropriate box on each proxy card, or if you are a stockholder of record
voting by telephone, you may stay on the line until you receive the
appropriate prompt.
What Constitutes a Quorum?
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 recommended by the Board of Directors. 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 for the
ratification of 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 duly cast.
As of the Record Date, a total of 6,698,815 shares of the Company's common
stock, $.001 par value 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 "Stock Ownership." The closing price of the
Company's common stock on the NASDAQ National Market on the Record Date was
$8.69 per share.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
A Board of seven 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 seven 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.
Required Vote
The seven 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW:
<TABLE>
<C> <S>
Michael R. Gaulke
Age: 54
Director Since: 1994
Principal Occupation: President and Chief Executive Officer
Recent Business Experience: 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. Prior to 1992, he held senior executive
positions at Raynet Corporation and Spectra Physics.
Other Directorships: Member of the Board of RockShox, Inc.; Board of Trustees of
the Palo Alto Medical Foundation; Board of Advisors of the
Whitehead Institute.
- -------------------------------------------------------------------------------
Roger L. McCarthy, Ph.D.
Age: 51
Director Since: 1989
Principal Occupation: Chairman of the Board of Exponent Failure Analysis Associates,
Inc. (FaAA)
Recent Business Experience: Dr. McCarthy was named Chief Technical Officer (CTO) of the
Company and Chairman of the Board of the Company's principal
operating subsidiary FaAA, in June of 1996. He resigned his
position as CTO in 1998. He has been a director of the Company
since 1989 and a director of FaAA since 1980. He was 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.
</TABLE>
- -------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
<C> <S>
Edward J. Keith
Age: 65
Director Since: 1989
Principal Occupation: Chairman of the Board of Exponent, Inc., and
Private Investor
Recent Business Experience: 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, as well as a member
of the Board of Directors of FaAA since 1987. He
was advisor to FaAA in 1986. Mr. Keith has been
a private investor since 1985.
Other Directorships: Chairman of Vectra Technologies 1994 through
1998; Inlex 1990 through 1994.
- -------------------------------------------------------------------------------
Samuel H. Armacost
Age: 61
Director Since: 1989
Principal Occupation: Chairman of the Board of SRI International since
July 1998
Recent Business Experience: Mr. Armacost was a Principal of Weiss, Peck &
Greer, L.L.C., an investment firm, from l990 to
1997. In 1997, he was appointed Managing
Director until his departure in June 1998. 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.
Other Directorships: Member of the Boards of Chevron Corporation;
Scios, Inc.; SRI International; and The James
Irvine Foundation.
- -------------------------------------------------------------------------------
Barbara M. Barrett
Age: 49
Director Since: 1997
Principal Occupation: President and Chief Executive Officer of Triple
Creek Guest Ranch since 1993
Recent Business Experience: Ms. Barrett served as President and CEO of the
American Management Association International,
Inc., in New York City from 1997 through 1998;
as Deputy Administrator of the Federal Aviation
Administration, from 1988 through 1989; and as
Vice Chairman of Civil Aeronautics Board from
1983 through 1984. Prior to 1984 she practiced
corporate, international, and business law.
Other Directorships: Chairman of Valley Bank of Arizona; member of
the Boards of Raytheon; Triple Creek Guest Ranch
and New Piper Aircraft Corporation 1996 through
1998.
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
<TABLE>
<C> <S>
Jon R. Katzenbach
Age: 67
Director Since: 1997
Principal Occupation: Founding Partner of Katzenbach Partners, L.L.C.,
since January 1999
Recent Business Experience: Mr. Katzenbach was with McKinsey & Company from
1959 until January 1999. During his 39 years of
service, Mr. Katzenbach managed several of their
offices, including McKinsey & Company's San
Francisco and New York offices for five years
each. Mr. Katzenbach served as Chairman of
several governance committees and was elected to
the Shareholders' Committee in 1972, for which
he served on for nearly 20 years.
Authored: Authored: Teams at the Top
Co-authored: The Wisdom of Teams; Real Change
Leaders
- -------------------------------------------------------------------------------
Subbaiah V. Malladi, Ph.D.
Age: 53
Director Since: 1996
Principal Occupation: Chief Technical Officer
Recent Business Experience: Dr. Malladi joined FaAA, in 1982 as a Senior
Engineer, becoming a Senior Vice President in
1988, a Corporate Vice President of FaAA in
1993, and CTO in 1998. 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.
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
Board Meetings and Committees
The Board held four regular meetings and one special meeting in 1999. Each
director attended at least 75% of all Board and applicable committee meetings
during 1999. Due to a conflicting schedule Mr. Katzenbach was only able to
attend 50% of the Human Resources Committee meetings. The table below describes
the Board's committees.
<TABLE>
<CAPTION>
Committee Name/Number of
Members Function of Committee Meetings in 1999
- -------------------------------------------------------------------------------
<C> <S> <C>
AUDIT COMMITTEE . Confers with 2 regular meetings
George T. Van Gilder-- independent accountants
Chairperson and auditors regarding
Samuel H. Armacost scope of examinations
Barbara M. Barrett .Reviews audited financial
Jon R. Katzenbach reports with
Edward J. Keith management
.Reviews reports and fees
of independent
accountants and auditors
.Reviews financial
policies and internal
controls
- -------------------------------------------------------------------------------
HUMAN RESOUCES COMMITTEE
Samuel H. Armacost-- . Establishes the general 3 regular meetings
Chairperson compensation 1 special meeting
Barbara M. Barrett policies for all
Jon R. Katzenbach employees and oversees
Edward J. Keith the specific
George T. Van Gilder compensation plans for
officers of the
Company, including the
President and CEO
- -------------------------------------------------------------------------------
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE
Barbara M. Barrett-- .Considers Board 2 regular meetings
Chairperson recommendations, by
Samuel H. Armacost stockholder, per votes
Jon R. Katzenbach obtained on the proxy
Edward J. Keith cards
George T. Van Gilder .Oversees corporate
governance
.Processes and makes
recommendations to the
Board regarding
nominations for the Board
</TABLE>
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.
Non-employee members of the Board of Directors receive:
. an annual cash retainer of $24,000;
. $2,000 for attending each meeting of the Board of Directors;
. $5,000 for service on the Human Resources Committee;
. $5,000 for service on the Audit Committee;
. $1,000 for service on the Corporate Governance and 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 were reimbursed for certain expenses related to travel
and incidentals. The reimbursement for Mr. Katzenbach was paid to McKinsey &
Company and Katzenbach Partners, L.L.C..
6
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP, independent auditors, to
audit the financial statements of the Company for the year ending December 29,
2000. KPMG LLP, has audited the Company's financial statements since 1987. A
representative of KPMG LLP, is expected to be present at the meeting 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 LLP, the Board of Directors will reconsider the appointment
of the independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
7
<PAGE>
STOCK OWNERSHIP
Who are the Largest Owners of the Company's Stock?
Michael R. Gaulke, President and CEO, Roger L. McCarthy, Chairman of the
Board of Exponent Failure Analysis Associates, Inc., and Charlie A. Rau Jr.,
Vice President for Exponent Failure Analysis Associates, are the only insiders
who own more than 5% of the Company's stock.
How Much Stock does the Company's Directors and Officers Own?
The following table indicates beneficial ownership of the Company's common
stock as of February 26, 2000. It includes the Company's directors, the
executive officers of the Company named in the Executive Compensation Table
(see page 10), and the directors and executive officers of the Company as a
group. A total of 6,687,765 shares of the Company's common stock were issued
and outstanding as of February 26, 2000.
<TABLE>
<CAPTION>
Number of
Name Shares(1) Percent of Total(1)
- ---- --------- -------------------
<S> <C> <C>
Roger L. McCarthy(2)............................. 889,264 13.3%
c/o Exponent, Inc.
149 Commonwealth Drive
Menlo Park, CA 94025
Dimensional Fund Advisors, Inc.(3)............... 437,500 6.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Palo Alto Investors(3)........................... 435,500 6.5%
431 Florence Street, Suite 200
Palo Alto, CA 94301
Michael R. Gaulke(4)............................. 354,725 5.1%
c/o Exponent, Inc.
149 Commonwealth Drive
Menlo Park, CA 94025
Charlie A. Rau, Jr.(5)........................... 346,871 5.2%
c/o Exponent, Inc.
149 Commonwealth Drive
Menlo Park, CA 94025
Subbaiah V. Malladi(6)........................... 323,684 4.7%
Dennis J. Paustenbach(7)......................... 86,386 1.3%
Samuel H. Armacost(8)............................ 69,960 1.0%
Edward J. Keith(9)............................... 66,940 1.0%
Piotr D. Moncarz(10)............................. 66,777 *
Barbara M. Barrett(11)........................... 15,000 *
Jon R. Katzenbach(11)............................ 6,600 *
George T. Van Gilder(11)......................... 6,000 *
All Directors & Executive Officers(20
persons)(12).................................... 2,782,084 36.7%
</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 that the individual has the right to
acquire within sixty days of February 26, 2000, through the exercise of
any stock option or other right. The denominator of the calculation
consist of the named executive's options exercisable within sixty days of
February 26, 2000, plus the Company's total shares outstanding as of
February 26, 2000. 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.
8
<PAGE>
(2) Includes 632,159 shares of common stock held by Roger L. McCarthy. Roger
L. McCarthy also has voting rights to Gail E. Kendall's 257,105 shares.
(3) As indicated on a Form 13G filed with the SEC on February 4, 2000, for
Palo Alto Investors, Inc., and February 11, 2000, for Dimensional Fund
Advisors, Inc.
(4) Includes 332,904 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(5) Includes 12,044 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(6) Includes 179,908 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(7) Includes 56,250 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(8) Includes 24,000 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(9) Includes 18,000 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(10) Includes 52,374 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(11) Includes 5,000 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
(12) Includes 902,328 shares of common stock subject to options exercisable
within sixty days of February 26, 2000.
Compliance with Section 16(a) of the Securities Exchange Act
The Company believes that during 1999, all filings with the Securities and
Exchanges Commission (SEC), of its officers, directors, and 10% stockholders
complied with requirements for reporting ownership or changes in ownership of
Company common stock pursuant to Section 16(a) of the Securities Exchange Act
of 1934, except that of Piotr Moncarz. Dr. Moncarz inadvertently filed with
the Company late and the SEC due date was missed in December 1999.
Compensation Committee Interlocks and Insider Participation
During 1999, Ms. Barrett and Messrs. Armacost, Keith, Katzenbach, and Van
Gilder served as members of the Human Resources Committee. 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.
9
<PAGE>
EXECUTIVE OFFICER COMPENSATION
Executive Compensation Table
The following table shows compensation paid for services to the Company in
all capacities for the fiscal years indicated for the Chief Executive Officer
and each of the other four most highly compensated executive officers (the
"Named Officers"):
<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 1999 $499,990 $300,000 0 $16,170
Chairman, Exponent Failure
Analysis, 1998 $499,990 $100,000 0 $19,939
Inc. (FaAA), and Director of
the 1997 $499,990 $200,000 0 $20,346
Company
Subbaiah V. Malladi 1999 $497,302 $250,000 0 $21,837
Chief Technical Officer and
Director 1998 $490,006 $160,000 0 $34,777
of the Company 1997 $485,969 $160,000 0 $23,242
Michael R. Gaulke 1999 $468,278 $250,000 75,000 $17,166
President, Chief Executive
Officer and 1998 $436,546 $100,000 85,000 $18,782
Director of the Company 1997 $400,005 $140,000 75,000 $19,892
Dennis J. Paustenbach(3) 1999 $379,784 $ 30,000 0 $76,496
Corporate Vice President 1998 $ 76,924 $ 0 225,000 $ 6,628
Piotr D. Moncarz 1999 $310,003 $ 50,000 0 $19,580
Corporate Vice President 1998 $305,996 $ 25,000 0 $10,729
1997 $286,926 $ 60,000 5,000 $10,402
</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 in 1999, respectively, as follows: R. L.
McCarthy, $11,200 and $4,970; S. V. Malladi, $11,200 and $10,637; M. R.
Gaulke $11,200 and $5,966; D. J. Paustenbach $11,200 and $7,296; P. D.
Moncarz $11,200 and $8,380. Additionally, Mr. Paustenbach was given a
loan, which is being amortized over a five-year period from his hire date.
The amortization amounts for 1999 and 1998 were $57,998 and $4,833,
respectively.
(3) D. J. Paustenbach started with the Company in October of 1998.
10
<PAGE>
What Options were Granted to the Named Officers in 1999?
The following table offers information concerning stock options granted
during the year ended December 31, 1999, to the Named Officers.
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(3)
---------------------------------------------- -----------------
Percent of Total
Options Options Granted to Exercise
Granted Employees in Price Expiration
Name (#) (1) Year(2) ($/Sh) Date 5% ($) 10% ($)
---- ------- ------------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Gaulke....... 75,000 21% $5.88 02/11/09 $277,107 $702,243
Roger L. McCarthy....... 0 -- -- -- -- --
Subbaiah V. Malladi..... 0 -- -- -- -- --
Dennis J. Paustenbach... 0 -- -- -- -- --
Piotr D. Moncarz........ 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 1999, the Company granted options to employees to purchase 352,200
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
($5.88) over the next 10 years, the resulting stock price at 5% and 10%
appreciation would be $9.58 and $15.24, 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.
What is the Value of the Options held by the Named Officers?
The following table shows information concerning the shares exercised and
the number of shares exercisable and unexercisable as of December 31, 1999.
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 December
31, 1999.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1999 December 31, 1999(1)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael R. Gaulke........... 258,951 186,049 $154,688 $ 79,688
Roger L. McCarthy........... 0 0 $ 0 $ 0
Subbaiah V. Malladi......... 179,908 0 $ 30,000 $ 0
Dennis J. Pausenbach........ 56,250 168,750 $ 49,219 $147,656
Piotr D. Moncarz............ 0 0 $ 0 $ 0
</TABLE>
- --------
(1) The value of underlying securities is based on the closing price of
Company's common stock on December 31, 1999, $6.63 (the last trading day
of the period), on the NASDAQ National Market, minus the exercise price of
the option.
11
<PAGE>
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.
What is the Company's Philosophy of Executive Compensation?
The Company's compensation program for executives consists of three
elements:
. base salary,
. bonus based on performance, and
. stock option grants.
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: financial performance, professional accomplishments, and
leadership that meet the level of excellence demanded by the Company.
What is the 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 2000 were based on 1999 results. These compensation changes went into
effect April 3, 2000. Bonuses based on 1999 performance were paid out on March
7, 2000.
What is the basis for determining the Executive's Compensation?
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 December 31, 1999, the bonus plan was continued
for all employees, including officers. The Company bonus pool was tied to
corporate profitability. Mr. Gaulke, President and CEO, recommends individual
officer bonuses based on the officer's financial performance, professional
accomplishments, and leadership. The Human Resources Committee reviews and
approves the bonuses for each officer and the bonus pool. Additionally, they
determine the bonuses for all inside directors, including the President and
CEO, the Chairman of FaAA, and the CTO.
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 1999 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.
12
<PAGE>
Executive Compensation. The Human Resources Committee reviewed the
performance of the President and CEO, Michael R. Gaulke; the Chairman of FaAA,
Roger L. McCarthy; and the CTO, Subbaiah V. Malladi, during 1999. The Committee
decided to leave base salaries unchanged for all three individuals. The Human
Resources Committee reviewed the 1999 performance of all other officers, and
select base salary increases were approved.
Human Resources Committee
Samuel H. Armacost
Barbara M. Barrett
Jon R. Katzenbach
Edward J. Keith
George T. Van Gilder
13
<PAGE>
COMPANY STOCK PRICE PERFORMANCE GRAPH
Historically, the Company has compared its stock price performance to the
S&P 500 Index and a peer group constructed by the Company (the "Peer Group").
The remaining company in the Peer Group is Harding Lawson Associates, Inc.
Since the Peer Group only consists of one other company, the Company believes
this is not a good comparison. The Company considers a better peer group
comparison to be the S&P Small Cap 600. The first graph compares the Company's
cumulative total stockholder return calculated on a dividend-reinvested basis
from 1994 through 1999 with those of the S&P 500 Index and the Peer Group. The
graph assumes that $100 was invested on the last day of 1994. Returns for the
Peer Group is weighted based on market capitalization at the end of each
period presented. Note that historic stock price performance is not
necessarily indicative of future stock price performance. The second graph
compares the Company's cumulative total stockholder return, the S&P 500 Index
and the S&P Small Cap 600 the Company's new peer group.
[STOCK PERFORMANCE GRAPHS]
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name/Index Dec95 Dec96 Dec97 Dec98 Dec99
- ----------------------------------------------------------------
EXPONENT INC 55.88 -7.55 71.43 -42.86 10.42
S&P 500 INDEX 37.58 22.96 33.36 28.58 21.04
PEER GROUP -6.67 16.66 46.43 -40.24 26.53
INDEXED RETURNS
Years Ending
Base
Period
Company Name/Index Dec94 Dec95 Dec96 Dec97 Dec98 Dec99
- ------------------------------------------------------------------------
EXPONENT INC 100 155.88 144.12 247.06 141.18 155.88
S&P 500 INDEX 100 137.58 169.17 225.60 290.08 351.12
PEER GROUP 100 106.67 124.44 182.22 108.89 137.78
Peer Group Companies
- ------------------------------------------------------------------------
HARDING LAWSON ASSOCIATES INC (FORMERLY HARDING ASSOC)
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name/Index Dec95 Dec96 Dec97 Dec98 Dec99
- ----------------------------------------------------------------
EXPONENT INC 55.88 -7.55 71.43 -42.86 10.42
S&P 500 INDEX 37.58 22.96 33.36 28.58 21.04
S&P SMALLCAP 600 INDEX 29.96 21.32 25.58 -1.31 12.40
INDEXED RETURNS
Years Ending
Base
Period
Company Name/Index Dec94 Dec95 Dec96 Dec97 Dec98 Dec99
- ------------------------------------------------------------------------
EXPONENT INC 100 155.88 144.12 247.06 141.18 155.88
S&P 500 INDEX 100 137.58 169.17 225.60 290.08 351.12
S&P SMALLCAP 600 INDEX 100 129.96 157.67 198.01 195.42 219.66
14
<PAGE>
OTHER MATTERS
The Company knows of no other matters that 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 Board of Directors may recommend. It
is important that your shares be represented at the meeting, regardless of the
number of shares that you hold. You are, therefore, urged to execute and
return, or vote by phone, at your earliest convenience your proxy results.
Stockholder Proposals for the 2001 Annual Meeting. Stockholders are entitled
to present proposals for action at a forthcoming meeting if they comply with
the requirements of the proxy rules promulgated by the Securities and Exchange
Commission. Stockholders interested in presenting a proposal for consideration
at the Company's Annual Meeting of stockholders for the year 2001 may do so by
submitting the proposals to the Company's Corporate Secretary, no later than
December 29, 2000.
Proxy Solicitation Costs. 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
$4,000, 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 by certain Company directors, officers, and regular employees may be
solicited, without additional compensation, by personal conversation,
telephone, telegram, letter, electronically, or by facsimile.
FOR THE BOARD OF DIRECTORS
/s/ Richard L. Schlenker
Richard L. Schlenker, Corporate
Secretary
Menlo Park, California
March 31, 2000
15
<PAGE>
EXPONENT, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 1, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2000 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 March 31, 2000, 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 149
Commonwealth Drive, Menlo Park, California 94025, at 9:00 a.m., local time, on
Monday, May 1, 2000 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
BY THE UNDERSIGNED STOCKHOLDER(S), IF NO DIRECTIONS ARE your votes X
INDICATED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2, AND as indicated
AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of all nominees listed below [_] [_] 2. To ratify the appointment of [_] [_] [_]
to the Board of Directors to serve KPMG LLP as independent
until the next Annual Meeting or public accountants for the
until their successors have been duly Company for the fiscal year
elected and qualified, except as noted ending December 29, 2000.
(write the names, of any nominees for
whom you withhold authority to vote). 3. To transact such other business as may properly come before
Nominees: 01-Michael R. Gaulke, 02-Samuel the Annual Meeting or any adjournment thereof.
H. Armacost, 03-Barbara M. Barrett, 04-Jon
R. Katzenbach, 05-Edward J. Keith, DATE ___________________________, 2000
06-Subbaiah V. Malladi and 07-Roger L.
McCarthy
- ------------------------------------------------- -------------------------------------------------
FOR ALL NOMINEE'S EXCEPT AS NOTED ABOVE Signature
--------------------------------------------------
Signature, If Jointly Held
If acting as Attorney, Executor, Trustee or in other
representative capacity, please sign name and title.
</TABLE>
*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 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.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to
the instructions
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
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.
