<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
MICHAEL BAKER CORPORATION
- --------------------------------------------------------------------------------
(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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
* No fee required
<PAGE> 2
MICHAEL BAKER CORPORATION
P.O. BOX 12259
PITTSBURGH, PENNSYLVANIA 15231-0259
March 23, 1998
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1998
TO THE SHAREHOLDERS OF MICHAEL BAKER CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of MICHAEL
BAKER CORPORATION (the "Company") will be held at Robert Morris College, Massey
Hall, Narrows Run Road, Coraopolis, Pennsylvania 15108 on Thursday, April 23,
1998 at 10:00 a.m., local time, for the purpose of considering and acting upon
the following:
1. The election by the holders of the Common Capital Stock of the
Company of nine directors to serve for a one-year term or until their
respective successors shall have been elected and shall have qualified as
follows:
A. The election by the holders of Common Stock and Series B Common
Stock (voting together) of six directors; and
B. The election by the holders of Common Stock of three directors.
2. The approval of amendments to the Company's 1995 Stock Incentive
Plan (i) to increase the total number of shares of the Company's Common
Stock which may be issued thereunder from 500,000 to 1,500,000 shares, and
(ii) to increase the maximum number of shares as to which stock options may
be granted to any one employee during a calendar year from 30,000 to
100,000 shares.
3. Such other matters as may properly be brought before the Annual
Meeting.
The close of business on March 9, 1998 has been fixed by the Board of
Directors as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting, or any adjournments thereof, and
only shareholders of record on such date are entitled to notice of and to vote
at said Annual Meeting.
If you hold both Common Stock and Series B Common Stock of the Company
directly, you will find enclosed two proxy cards, both of which must be fully
completed and returned in order to vote all Common Stock and Series B Common
Stock which you hold. If you hold both Common Stock and Series B Common Stock of
the Company through the Michael Baker Corporation Employee Stock Ownership Plan
and Trust (the "ESOP"), you will find enclosed two proxy cards, both of which
must be fully completed and returned in order to vote all Common Stock and
Series B Common Stock which you hold indirectly through the ESOP. The Company's
1997 Annual Report to Shareholders is also enclosed.
You are cordially invited to attend the Annual Meeting of Shareholders.
Whether or not you plan to attend the Annual Meeting, we urge you to please
sign, date and promptly return the enclosed proxy card(s) in the enclosed
postage-paid envelope.
By Order of the Board of
Directors,
H. JAMES MCKNIGHT
Secretary
<PAGE> 3
MICHAEL BAKER CORPORATION
PITTSBURGH, PENNSYLVANIA
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS-APRIL 23, 1998
GENERAL INFORMATION
The solicitation of the proxy or proxies enclosed with this proxy statement
is made on behalf of the Board of Directors of Michael Baker Corporation (the
"Company"), P.O. Box 12259, Pittsburgh, Pennsylvania 15231-0259, for the Annual
Meeting of Shareholders to be held on Thursday, April 23, 1998 at 10:00 a.m. at
Robert Morris College, Massey Hall, Narrows Run Road, Coraopolis, Pennsylvania
15108. It is expected that this Proxy Statement and proxies will be mailed to
shareholders on or about March 23, 1998.
The Company's Common Capital Stock is divided into two series, denominated
Common Stock and Series B Common Stock. Each share of Common Stock entitles the
holder thereof to one vote on all matters submitted to the shareholders and each
share of Series B Common Stock entitles the holder thereof to ten votes on all
such matters. All matters submitted to a vote of shareholders are voted upon by
holders of Common Stock and Series B Common Stock voting together except that
(i) holders of Common Stock and holders of Series B Common Stock are each
entitled to vote separately as a series on certain extraordinary transactions
involving the Company or on certain amendments to the Company's Articles of
Incorporation, and (ii) holders of Common Stock, voting separately as a class,
are entitled to elect one-fourth of the directors to be elected at a meeting
(other than those electable by holders of Cumulative Preferred Stock if any is
issued in the future), rounded, if necessary, to the next higher whole number.
Holders of Common Stock vote together with the holders of Series B Common Stock
on the election of the remaining directors (other than those electable by
holders of Cumulative Preferred Stock if any is issued in the future).
Holders of Common Stock and Series B Common Stock have cumulative voting
rights in the election of directors, including, in the case of the holders of
Common Stock, directors elected by such holders voting separately as a class.
Cumulative voting entitles each shareholder to that number of votes in the
election of directors as is equal to the number of shares which he holds of
record (multiplied by ten, in the case of Series B Common Stock) multiplied by
the total number of directors to be elected and to cast the whole number of such
votes for one nominee or distribute them among any two or more nominees as he
chooses. Shares represented by proxies, unless otherwise indicated on the proxy
card, will be voted cumulatively in such manner that the number of shares so
voted for each nominee (and for any substitute nominated by the Board of
Directors if any nominee listed becomes unable or is unwilling to serve) will be
as nearly equal as possible. The six nominees receiving the highest number of
affirmative votes cast at the Annual Meeting by the holders of Common Stock and
Series B Common Stock, voting together, and the three nominees receiving the
highest number of affirmative votes cast at the Annual Meeting by the holders of
the Common Stock, voting in person or by proxy, a quorum being present, will be
elected as directors.
On March 9, 1998, the Company had outstanding 7,100,413 shares of Common
Stock (entitling holders to 7,100,413 votes) and 1,332,453 shares of Series B
Common Stock (entitling holders to 13,324,530 votes). Holders of Common Stock
and Series B Common Stock of record at the close of business on March 9, 1998
are entitled to notice of and to vote on all matters that may properly come
before the Annual Meeting except that holders of Series B Common Stock may not
vote for the election of directors electable solely by the holders of Common
Stock.
The proxy solicited hereby may be revoked at any time before its exercise
by giving notice of revocation to the Secretary of the Company or by executing
and delivering a proxy bearing a later date or by attending and voting at the
Annual Meeting of Shareholders or any adjournment thereof. Unrevoked proxies
will be voted at the Annual Meeting in accordance with the specifications made
thereon, but in the absence of such specifications will be voted FOR each
proposal. Unsigned or undated proxies will not be voted. Votes with respect to
the election of directors will be counted as set forth above. With respect to
all other matters, including the proposed amendments to the Company's 1995 Stock
Incentive Plan, brought before the Annual Meeting, the affirmative vote of the
holders of shares representing the majority of the votes cast at the Annual
Meeting (in person or by proxy) will be required to approve such matter.
1
<PAGE> 4
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
If any shareholder wishes to present a proposal at the 1999 Annual Meeting
of Shareholders, the proposal must be received by the Secretary, Michael Baker
Corporation, P.O. Box 12259, Pittsburgh, Pennsylvania 15231-0259, by November
13, 1998 to be considered for inclusion in the Company's Proxy Statement and
form of proxy relating to the 1999 Annual Meeting. The 1999 Annual Meeting is
presently scheduled on or about April 22, 1999.
Section 2.01.1 of the Company's By-Laws sets forth procedures by which
shareholders may nominate candidates for election as directors.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock and Series B Common Stock as of March 9,
1998 by each person known by the Board of Directors of the Company to own
beneficially more than 5% of the outstanding shares of Common Stock or Series B
Common Stock of the Company, by each director and nominee, by each of the
executive officers named in the Summary Compensation Table included elsewhere in
this Proxy Statement (the "Summary Compensation Table"), and by all directors
and executive officers as a group. The Michael Baker Corporation Employee Stock
Ownership Plan and Trust (the "ESOP") holds 72.6% of the voting power of the
Company's outstanding Common Capital Stock. Information contained in this Proxy
Statement as to shares held by the ESOP is as of February 27, 1998, the most
recent practicable date. The information in the table concerning beneficial
ownership is based upon information furnished to the Company by or on behalf of
the persons named in the table.
<TABLE>
<CAPTION>
COMMON STOCK SERIES B COMMON STOCK
----------------------------- ---------------------------
NUMBER OF NUMBER OF
SHARES AND SHARES AND
NATURE OF NATURE OF
BENEFICIAL BENEFICIAL
NAME OWNERSHIP(1) PERCENT OWNERSHIP(1) PERCENT
---- ------------ ------- ------------ -------
<S> <C> <C> <C> <C>
Michael Baker Corporation 2,596,461 36.6 1,223,582 91.8
Employee Stock Ownership
Plan and Trust
Michael Baker Corporation
P.O. Box 12259
Pittsburgh, PA 15231-0259
Goldman, Sachs & Co. 702,800 9.9 None --
85 Broad Street
New York, New York 10004
Dimensional Fund Advisors Inc.(2) 491,214 6.9 None --
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Lord Abbett & Co. 457,000 6.4 None --
767 Fifth Avenue
New York, New York 10153
Robert N. Bontempo 1,500(6) * None --
Glenn S. Burns 23,038(4)(6) * 1,297(5) *
William J. Copeland 3,000(6) * None --
Donald P. Fusilli, Jr. 40,221(4)(6) * 7,262(5) *
Roy V. Gavert, Jr. 3,000(6) * None --
Jack B. Hoey 9,000(3)(6) * None --
Charles I. Homan 94,957(3)(4)(6) 1.3 19,311(3)(5) 1.5
Thomas D. Larson 4,925(3)(6) * None --
John E. Murray, Jr. 1,500(6) * None --
Richard L. Shaw 11,205(6) * None --
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK SERIES B COMMON STOCK
----------------------------- ---------------------------
NUMBER OF NUMBER OF
SHARES AND SHARES AND
NATURE OF NATURE OF
BENEFICIAL BENEFICIAL
NAME OWNERSHIP(1) PERCENT OWNERSHIP(1) PERCENT
---- ------------ ------- ------------ -------
<S> <C> <C> <C> <C>
Konrad M. Weis 10,500(3)(6) * None --
J. Robert White 26,730(4)(6) * 1,201(5) *
Edward L. Wiley 54,489(3)(4)(6) * 13,862(5) 1.0
All Directors and 356,572(3)(4)(6) 5.0 57,811(5) 4.3
Executive Officers as a group
(19 persons)
</TABLE>
- ---------
*Less than 1%
(1) Under regulations of the Securities and Exchange Commission, a person who
has or shares voting or investment power with respect to a security is
considered a beneficial owner of the security. Voting power is the power to
vote or direct the voting of shares, and investment power is the power to
dispose of or direct the disposition of shares. Unless otherwise indicated
in the other footnotes below, each person has sole voting power and sole
investment power as to all shares listed opposite his name. The ESOP
requires the trustee to vote the shares held by the trust in accordance with
the instructions from the ESOP participants for all shares allocated to such
participants' accounts. Allocated shares for which no such instructions are
given and shares not allocated to the account of any employee are voted by
the trustee in the same proportion as the votes for which participant
instructions are given. In the case of a tender offer, allocated shares for
which no instructions are given are not voted or tendered, and shares not
allocated to the account of any employee are voted by the trustee in the
same proportion as the votes for which participant instructions are given.
(2) Dimensional Fund Advisors Inc., a registered investment advisor, is deemed
to have beneficial ownership of 491,214 shares of Common Stock as of
December 31, 1997, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., 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 Participation Group Trust, investment
vehicles for qualified employee benefit plans, for all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional Fund Advisors
Inc. disclaims beneficial ownership of all such shares. This information has
been taken from Schedule 13G dated February 9, 1998 of Dimensional Fund
Advisors Inc.
(3) Some or all of such shares are jointly owned by such person and his spouse.
Voting and investment power as to such shares is shared by the nominee and
his spouse.
(4) Includes the number of shares of Common Stock indicated for each of the
following persons or group which are allocated to their respective accounts
as participants in the ESOP and as to which they are entitled to give
binding voting instructions to the trustee of the ESOP: Mr. Burns (4,925
shares); Mr. Fusilli (19,133 shares); Mr. Homan (41,187 shares); Mr. White
(6,692 shares); Mr. Wiley (31,451 shares); and directors and executive
officers as a group (145,738 shares). ESOP holdings have been rounded to the
nearest full share.
(5) Includes the number of shares of Series B Common Stock indicated for each of
the following persons or group which are allocated to their respective
accounts as participants in the ESOP and as to which they are entitled to
give binding voting instructions to the trustee of the ESOP: Mr. Burns
(1,297 shares); Mr. Fusilli (7,262 shares); Mr. Homan (18,233 shares); Mr.
White (1,201 shares); Mr. Wiley (13,862 shares); and directors and executive
officers as a group (56,733 shares). ESOP holdings have been rounded to the
nearest full share.
(6) Includes indicated number of shares of Common Stock issuable pursuant to
stock options which may be exercised within 60 days of the date of this
Proxy Statement: Mr. Bontempo (1,000 shares); Mr. Burns (18,113 shares); Mr.
Copeland (2,000 shares); Mr. Fusilli (21,088 shares); Mr. Gavert (2,000
shares); Mr. Hoey (2,000 shares); Mr. Homan (48,692 shares); Mr. Larson
(1,000 shares); Mr. Murray (1,000 shares); Mr. Shaw (2,000 shares); Mr. Weis
(2,000 shares); Mr. White (20,038 shares); Mr. Wiley (20,038 shares); and
all directors and executive officers as a group (179,181 shares).
3
<PAGE> 6
PROXY PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nine directors will be elected for a one-year term expiring on the date of
the next Annual Meeting of Shareholders or until their respective successors
shall have been elected and shall have qualified. Six directors are to be
elected by the holders of Common Stock and Series B Common Stock voting
together, and three directors are to be elected solely by the holders of Common
Stock. The persons named in the enclosed proxies intend to vote for the nominees
whose names appear below. Although it is expected that all such nominees will be
available for election, if any of them becomes unable or is unwilling to serve
at the time the election occurs, it is intended that shares represented by
proxies will be voted for the election of the other nominees named and such
substituted nominees, if any, as shall be designated by the Company's Board of
Directors.
Mr. Hoey has declined to seek reelection to the Board of Directors upon
expiration of his term. Effective April 22, 1998, the size of the full Board of
Directors will be reduced from ten members to nine members.
The following table sets forth certain information regarding the nominees
as of March 9, 1998. All of the nominees were elected directors by the Company's
shareholders at the 1997 Annual Meeting. Except as otherwise indicated, each
nominee has held the principal occupation listed or another executive position
with the same entity for at least the past five years.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION; OTHER
NOMINEE SINCE DIRECTORSHIPS; AGE
- ------------------------------- ---------- --------------------------------------------------
<S> <C> <C>
TO BE ELECTED BY HOLDERS OF COMMON STOCK AND SERIES B COMMON STOCK
Robert N. Bontempo 1997 Associate Professor of International Business at
Columbia University since July 1994; formerly
Assistant Professor of International Business at
Columbia University from July 1989 to July 1994;
Fellow at the Center for Advanced Study at
Stanford University, Summer 1992; formerly
Personnel Research Analyst at IBM Corporate
Headquarters; Age 39
Charles I. Homan 1994 President and Chief Executive Officer since
October 1994; formerly Executive Vice President
from January 1990 to September 1994; formerly
Senior Vice President from April 1988 to December
1989; formerly President of Michael Baker, Jr.,
Inc. (a subsidiary) from May 1983 to September
1994; Director of Century Financial Corporation
and Century National Bank; Age 54
Thomas D. Larson 1993 Self employed (consultant); formerly
Administrator, United States Federal Highway
Administration until January 1992; formerly
Secretary of the Pennsylvania Department of
Transportation; formerly Professor of Engi-
neering, The Pennsylvania State University; Age 69
Richard L. Shaw 1966 Chairman of the Board; formerly Chairman of the
Board, President and Chief Executive Officer of
the Company from September 1993 through September
1994; formerly President and Chief Executive
Officer of the Company from April 1984 to May
1992; Director of L.B. Foster Company
(manufacturing); Age 70
Konrad M. Weis 1991 Retired; formerly President and Chief Executive
Officer of Bayer USA Inc. (chemicals, health care
and imaging technologies); Director of PNC Equity
Management Corporation, Titan Pharmaceuticals,
Inc. and Dravo Corporation; Age 69
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION; OTHER
NOMINEE SINCE DIRECTORSHIPS; AGE
- ------------------------------- ---------- --------------------------------------------------
<S> <C> <C>
J. Robert White 1994 Executive Vice President, Chief Financial Officer
and Treasurer since July 1994; formerly Assistant
Director of Investor Relations for Westinghouse
Electric Corporation from prior to 1990 through
June 1994; formerly Adjunct Professor of
Accounting and Finance at the University of
Pittsburgh and Carnegie Mellon University; Age 55
TO BE ELECTED SOLELY BY HOLDERS OF COMMON STOCK
William J. Copeland 1983 Retired; formerly Chairman of the Board of the
Company; formerly Vice Chairman of the Board of
PNC Financial Corp. and Pittsburgh National Bank;
Director or trustee of various investment
companies affiliated with Federated Investors; Age 79
Roy V. Gavert, Jr. 1988 President and Chief Executive Officer of Kiplivit
North America, Inc. (manufacturing) since July
1995; Managing Director of World Class Processing,
Inc. (manufacturing); principal of the Horton
Company (manufacturer of valves for household
appliances); formerly Managing Director of Gavert
Wennerholm & Co. (venture capital); formerly
Managing Director of Eagle Capital, Inc.
(investment bank and venture capital); formerly
Executive Vice President, Westinghouse Electric
Corporation; Age 64
John E. Murray, Jr. 1997 President and Professor of Duquesne University
since July 1988; formerly University Distinguished
Service Professor at University of Pittsburgh;
formerly Dean of Villanova University School of
Law; formerly Acting Dean and Professor at
Duquesne University School of Law; Director of
Federated Investors; Age 65
</TABLE>
BOARD AND COMMITTEE MEETINGS
During 1997 there were five meetings of the Company's Board of Directors.
The Executive Committee of the Board of Directors, of which Messrs. Shaw,
Copeland, Gavert and Homan are members, held seven meetings. The Audit Committee
of the Board of Directors, of which Messrs. Gavert, Bontempo and Larson are
members, held four meetings. The Compensation Committee, of which Messrs. Hoey,
Larson, Murray and Weis are members, held three meetings. The Nominating
Committee, of which Messrs. Copeland, Hoey and Weis are members, held one
meeting. All directors attended at least 75% of the total number of meetings of
the Board of Directors and of all committees of the Board of which they were
members.
The Executive Committee was established with all the powers and the right
to exercise all the authority of the Board of Directors in the management of the
business and affairs of the Company. The functions performed by the Audit
Committee include recommending the independent accountants, reviewing with the
independent accountants the plan for, and the results of, the auditing
engagement, approving professional services provided by the independent
accountants prior to the performance of such services, reviewing the
independence of the independent accountants, and reviewing the Company's system
of internal accounting controls. The Compensation Committee reviews and
recommends to the Board the compensation of senior executive personnel and
directors. The Nominating Committee interviews and recommends candidates to the
Board to serve as executive officers and/or directors.
In February 1998, the Board of Directors established the Corporate
Governance Committee to address corporate governance issues, including
evaluation of the Board of Directors and development of criteria to select
candidates to serve on the Board of Directors. Dr. Bontempo has been selected to
serve as the Chairman of the Corporate Governance Committee.
5
<PAGE> 8
DIRECTORS AND OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding compensation
received by the Chief Executive Officer and the four remaining most highly
compensated executive officers of the Company for the last three completed
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------- ------------
SHARES OF
COMMON STOCK
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION(1)
--------------------------- ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Charles I. Homan 1997 $341,600 $ 62,757 23,529 $12,092
President and 1996 319,400 54,412 12,571 11,455
Chief Executive Officer 1995 302,500 29,431 27,500 10,063
Edward L. Wiley 1997 $192,300 $ 36,314 9,122 $10,075
Executive Vice President 1996 180,000 35,776 5,236 9,351
--Civil 1995 165,000 17,535 11,550 6,232
J. Robert White 1997 $192,300 $ 31,923 9,122 $ 8,030
Executive Vice President, 1996 180,000 30,001 5,236 9,479
Chief Financial Officer 1995 165,000 19,597 11,500 7,642
and Treasurer
Donald P. Fusilli, Jr. 1997 $188,200 $ 25,642 9,122 $ 8,700
Executive Vice President 1996 180,000 24,750 5,236 8,658
--Energy 1995 180,000 4,216 12,600 8,349
Glenn S. Burns 1997 $184,400 $ 25,700 9,122 $ 6,765
Executive Vice President 1996 180,000 22,500 5,236 8,234
--Buildings 1995 160,400 13,487 9,625 6,628
</TABLE>
- ---------
(1) Includes matching contributions made by the Company under its 401(k) plan
paid on behalf of the following individuals in 1997, 1996 and 1995,
respectively: Mr. Homan, $9,500, $9,151 and $7,759; Mr. Burns, $5,286,
$6,842 and $5,236; Mr. Fusilli, $7,254, $7,873 and $7,717; Mr. White,
$5,438, $7,860 and $6,029; and Mr. Wiley, $8,802, $8,211 and $5,178. Also
includes group life insurance premiums paid by the Company on behalf of the
following individuals in 1997, 1996 and 1995, respectively: Mr. Homan,
$2,592, $2,304 and $2,304; Mr. Burns, $1,479, $1,392 and $1,392; Mr.
Fusilli, $1,446, $785 and $632; Mr. White, $2,592, $1,619 and $1,613; and
Mr. Wiley, $1,273, $1,140 and $1,054.
(2) Stock options were granted January 1, 1995, February 27, 1996 and February
27, 1997 under the Company's 1995 Stock Incentive Plan.
OPTIONS GRANTED IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION
NO. OF SHARES GRANTED TO EXERCISE FOR OPTION TERM
SUBJECT TO EMPLOYEES PRICE/ EXPIRATION -------------------------
NAME OPTIONS GRANTED IN 1997 SHARE DATE 5% 10%
---- --------------- ------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles I. Homan 23,529 13.8 $6.9063 2/27/07 $102,194 $258,980
Glenn S. Burns 9,122 5.3 $6.9063 2/27/07 39,620 100,405
Donald P. Fusilli, Jr 9,122 5.3 $6.9063 2/27/07 39,620 100,405
J. Robert White 9,122 5.3 $6.9063 2/27/07 39,620 100,405
Edward L. Wiley 9,122 5.3 $6.9063 2/27/07 39,620 100,405
</TABLE>
All options were granted pursuant to the 1995 Stock Incentive Plan and vest
in four equal annual installments beginning on the date of grant. The dollar
amounts under the potential realizable value columns
6
<PAGE> 9
are the result of calculations at assumed annually compounded rates of stock
price appreciation over the ten-year life of the options in accordance with the
proxy regulations of the Securities and Exchange Commission, and are not
intended to forecast actual future appreciation, if any, of the Company's Common
Stock. The actual value, if any, an executive may realize will depend on the
excess of the market price of the shares over the exercise price on the date the
option is exercised.
COMPENSATION OF DIRECTORS
Compensation for non-employee directors is as follows: Annual
retainer--$15,000; Attendance at each regularly scheduled or special meeting of
the Board of Directors--$1,000; Attendance at a Board of Directors committee
meeting--$500; Telephonic attendance at a Board of Directors or committee
meeting--$100; Additional annual retainer for chairman of the Board of
Directors--$5,000; and Additional annual retainer for committee
chairmen--$2,500.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
and Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement in whole or in part, the following report and the
Stock Performance Graphs on page 10 shall not be incorporated by reference into
any such filings.
REPORT OF THE COMPENSATION COMMITTEE
Introduction
Decisions regarding compensation of the Company's executives generally are
made by a three-member Compensation Committee of the Board. Mr. Hoey, the
current Chairman of the Compensation Committee, has declined to seek reelection
to the Board of Directors. Effective April 22, 1998, Mr. Hoey will no longer
serve on the Company's Board of Directors and, accordingly, as the Chairman of
the Compensation Committee. To assist with the transition of Mr. Hoey stepping
down from the Compensation Committee, Dr. Murray was appointed to the
Compensation Committee on December 11, 1997, temporarily increasing the number
of Compensation Committee members to four. Effective April 22, 1998, the number
of Compensation Committee members will return to three with Dr. Larson
succeeding Mr. Hoey as the Chairman of the Compensation Committee and with Drs.
Murray and Weis serving as the remaining members of the Compensation Committee.
All decisions of the Compensation Committee relating to compensation of the
Company's executive officers are reviewed and approved by the full Board. Set
forth below is a report submitted by Messrs. Hoey, Larson, Murray and Weis in
their capacity as the Board's Compensation Committee addressing the Company's
compensation policies for 1997 as they affected executive officers of the
Company, including Mr. Homan, the President and Chief Executive Officer, and
Messrs. Burns, Fusilli, White and Wiley, the four executive officers other than
Mr. Homan who were, for 1997, the Company's most highly paid executive officers.
Compensation Philosophy
The Company applies a consistent philosophy toward compensation based upon
the following objectives: (i) to attract and retain executive officers and other
key employees of outstanding ability, and to motivate all employees to perform
to the full extent of their abilities; (ii) to ensure that pay is competitive
with other leading companies in the Company's industry; (iii) to reward
executive officers for corporate, group and individual performance; and (iv) to
ensure that total compensation to the executive officers as a group is not
disproportionate when compared to the Company's total employee population.
Compensation
The Compensation Committee retains the services of Hewitt Associates, a
compensation consulting firm, to assist the Committee in connection with
performance of its duties. Hewitt Associates provides ongoing advice to the
Committee with respect to the reasonableness of compensation paid to executive
officers of the Company.
The Company applies a compensation program consisting of base salary and
annual incentive compensation. In determining Mr. Homan's salary as President
and Chief Executive Officer and the remaining
7
<PAGE> 10
executive officers' base salaries for 1997, the Compensation Committee reviewed
the relationship of his compensation to that of other executive officers of the
Company, the Company's current and projected growth and profitability
performance, an executive compensation report prepared on the Company's behalf
by Hewitt Associates (the "Hewitt Report") and available executive compensation
studies published by Arthur Andersen LLP and the Engineering News Record, a
trade publication for the engineering and construction industry.
Incentive compensation for Mr. Homan and the other executive officers is
determined based on the achievement of such predetermined corporate performance
goals as profitability and earnings per share. Each such officer's annual
performance is measured by reviewing contribution to overhead and profit, new
work added, cash flow return on investment, human resources development and
continuous improvement management goals.
The Chief Executive Officer recommends to the Compensation Committee salary
adjustments for executive officers. The committee reviews these recommendations
in light of the above factors and with reference to the Hewitt Report and the
executive salary studies described above. A final comparison is made to verify
that the total percentage increase in compensation paid to the executive
officers as a group is not disproportionate to the percentage increase
applicable to other Company employee groups.
All executive employees participate in an annual incentive program. The
components of the plan are based upon corporate and individual performance.
Measures of corporate performance may include, but are not limited to, one or
more financial measures such as earnings per share and profitability. Individual
performance is based on the performance rating received as part of the annual
Performance Management Process. The Performance Management Process is a program
which emphasizes performance planning (management/employee goal setting),
progress reviews and management feedback to employees. Primary objectives of the
program are to enhance the professional development of the individual employee
and to align individual performance goals with those of the Company. The rating
is based upon factors agreed to by the Chief Executive Officer and the
individual executive employees.
1995 Stock Incentive Plan
On December 15, 1994, the Board of Directors approved the 1995 Stock
Incentive Plan (the "Option Plan"), which was approved by the shareholders at
the 1995 Annual Meeting and provides long-term incentive compensation to
eligible employees. The general terms of the Option Plan are summarized on pages
11-15. The Compensation Committee retains the services of Buck Consultants to
assist the Committee in evaluating the Option Plan relative to practices of
other publicly-traded companies engaging in one or more lines of business
comparable to those of the Company.
Stock options are awarded based on the Compensation Committee's judgment
concerning the position and responsibilities of the employee being considered,
the nature and value of his or her services, his or her current contribution to
the success of the Company, and any other factors which the Compensation
Committee may deem relevant. Stock option awards tie the interests of employees
to the long-term performance of the Company, and provide an effective incentive
for employees to create shareholder value over the long term since the full
benefit of the compensation package cannot be realized unless an appreciation in
the Company's stock price occurs over a number of years.
The Compensation Committee recommended to the Board of Directors that the
Option Plan be amended to increase by 1,000,000 the number of shares available
for grants thereunder and to increase the maximum number of shares as to which
options may be granted to any one employee during any calendar year from 30,000
to 100,000 shares. The Compensation Committee believes these changes are
desirable in order to ensure that there are sufficient options available under
the Option Plan to continue to motivate and reward employees and to ensure that
the grants are significant enough to provide meaningful inducement and reward to
key employees.
1996 Nonemployee Directors' Stock Incentive Plan
On February 27, 1996, the Board of Directors approved the 1996 Nonemployee
Directors' Stock Incentive Plan, which was approved by the shareholders at the
1996 Annual Meeting. This plan provides long-term incentive compensation to
eligible directors. Under this plan, each member of the Board of Directors
8
<PAGE> 11
who is not an employee of the Company or any of its subsidiaries is granted 500
restricted shares and an option to purchase 1,000 shares of Common Stock on the
first business day following each Annual Meeting of Shareholders.
This report is submitted by the Compensation Committee of the Company's Board of
Directors.
Jack B. Hoey Thomas D. Larson John E. Murray, Jr. Konrad M. Weis
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
The members of the Compensation Committee in 1997, Jack B. Hoey, Konrad M.
Weis, John E. Murray, Jr. and Thomas D. Larson, are nonemployee directors.
During 1997, no executive officer of the Company served on a compensation
committee (or other board committee performing equivalent functions) or on the
board of directors of any entity (other than the Company's Board of Directors)
related to any member of the Company's Board of Directors.
STOCK PERFORMANCE GRAPHS
The line graphs below compare, for the five-year and three-year periods
commencing December 31, 1992 and December 31, 1994, respectively, the yearly
percentage change in the cumulative total shareholder return on the Company's
Common Stock with the cumulative total return of the S&P 500 Stock Index and
with a peer group identified by the Company to best approximate the Company's
diverse business groups.
The peer group was selected to include publicly-traded companies engaging
in one or more of the Company's lines of business: engineering, construction and
operations and maintenance. The Company has elected to change some of the
members comprising the peer group used to compare five year returns. The Company
believes that the companies comprising the new peer group better represent the
Company's primary lines of business.
The new peer group consists of the following companies: Morrison Knudsen
Corp., Perini Corp., Stone & Webster Inc., Dames & Moore Inc., Roy F. Weston
Inc., Jacobs Engineering Group, Inc., ICF Kaiser International, Inc., Harding
Lawson Associates Group, Inc., URS Corp., Guy F. Atkinson Company of California,
Granite Construction, Inc., Turner Corp., Air & Water Technologies Corp., Tetra
Tech, Inc. and STV Group, Inc.
The old peer group consisted of the following companies: Fluor Corp.,
Foster Wheeler Corp., Gilbert Associates, Inc. (recently acquired by Salient 3
Communications Inc.), Morrison Knudsen Corp., Perini Corp., Stone & Webster
Inc., Dames & Moore Inc., Roy F. Weston Inc., Jacobs Engineering Group, Inc.,
ICF Kaiser International, Inc., Harding Lawson Associates Group, Inc., URS
Corp., Guy F. Atkinson Company of California, Granite Construction, Inc., Turner
Corp., McDermott International Inc., Oceaneering International Inc., Air & Water
Technologies Corp., and Halliburton Co.
9
<PAGE> 12
The following five year total shareholder return chart compares the
Company's total shareholder return on the Company's Common Stock with that of
both the new peer group and the old peer group used for the year ended December
31, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
AMONG MICHAEL BAKER CORPORATION, S&P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP*
<TABLE>
<CAPTION>
MICHAEL
MEASUREMENT PERIOD BAKER NEW PEER OLD PEER
(FISCAL YEAR COVERED) CORPORATION GROUP GROUP S&P 500
<S> <C> <C> <C> <C>
12/92 100 100 100 100
12/93 75 95 105 110
12/94 25 79 103 112
12/95 34 95 145 153
12/96 43 98 154 189
12/97 66 105 193 252
</TABLE>
* Assumes $100 invested at the close of trading on December 31, 1992 in the
Company's Common Stock, the S&P 500 Index, the new peer group and the old peer
group and assumes the reinvestment of dividends.
The following three year total shareholder return chart is provided as a
supplement to the five year chart shown above. The Company believes that this
chart more accurately reflects the Company's performance since its internal
reorganization in late 1994.
COMPARISON OF THREE-YEAR CUMULATIVE TOTAL RETURNS
AMONG MICHAEL BAKER CORPORATION, S&P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP*
<TABLE>
<CAPTION>
MICHAEL
MEASUREMENT PERIOD BAKER NEW PEER OLD PEER
(FISCAL YEAR COVERED) CORPORATION GROUP GROUP S&P 500
<S> <C> <C> <C> <C>
12/94 100 100 100 100
12/95 133 120 140 138
12/96 170 124 149 169
12/97 260 134 187 226
</TABLE>
* Assumes $100 invested at the close of trading on December 31, 1994 in the
Company's Common Stock, the S&P 500 Index, the new peer group and the old peer
group and assumes the reinvestment of dividends.
10
<PAGE> 13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission (the "Commission") initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Such persons are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms which
they file. The Company believes that all such filing requirements applicable to
its executive officers and directors were complied with in 1997 except as
follows. Jack B. Hoey made a late filing with respect to his sale of 3,000
shares of Common Stock in October 1997. Thomas D. Larson made a late filing with
respect to his exercise in September 1997 of options to acquire 1,000 shares of
Common Stock. In making this disclosure the Company has relied solely on written
representations of its directors and executive officers and copies of the
reports that they have filed with the Commission.
TRANSACTIONS WITH MANAGEMENT
The Company entered into an employment agreement with Richard L. Shaw
(formerly President and Chief Executive Officer of the Company) in April 1988,
which agreement was supplemented in March 1992, October 1994 and February 1998.
At the time of his retirement as of the end of September 1994, Mr. Shaw was
being compensated at an annual salary of approximately $400,000. The agreement
provides for Mr. Shaw's performance of consulting services to the Company until
May 31, 2000, with annual compensation equal to 20% of his salary prior to
retirement. In addition, during this period, the Company will cover costs of
health insurance, reimburse actual out-of-pocket expenses and maintain a life
insurance policy for Mr. Shaw. This agreement also provides for a supplemental
retirement benefit of $2,500 per month commencing after the expiration of such
period.
PROXY PROPOSAL NO. 2
AMENDMENT OF 1995 STOCK INCENTIVE PLAN
The Company's 1995 Stock Incentive Plan (the "Option Plan") was approved by
the Board of Directors on December 15, 1994 and by the Company's shareholders at
the 1995 Annual Meeting of Shareholders held on April 22, 1995.
On February 27, 1998, the Board of Directors approved amendments to the
Option Plan (i) to increase the total number of shares of the Company's Common
Stock which may be issued under the Option Plan by an additional 1,000,000
shares from 500,000 to 1,500,000 shares, and (ii) to increase the maximum number
of shares as to which stock options may be granted to any one employee during
any calendar year from 30,000 to 100,000 shares. The amendment is required to be
approved by an affirmative vote of a majority of the votes present at the Annual
Meeting (in person or by proxy). The Board of Directors recommends that the
shareholders vote for approval of adoption of the amendment to the Option Plan.
The proxies solicited on behalf of the Board of Directors will be voted for the
adoption of the amendment to the Option Plan unless otherwise specified.
The principal features of the Option Plan are summarized below.
GENERAL
The purposes of the Option Plan are to encourage eligible employees of the
Company and its subsidiaries, including officers, to increase their efforts to
make the Company and each subsidiary more successful, to provide an additional
inducement for such employees to remain with the Company or a subsidiary, to
reward such employees by providing an opportunity to acquire Common Stock of the
Company on favorable terms and to provide a means through which the Company may
attract able persons to enter the employ of the Company or one of its
subsidiaries. Those key employees of the Company or any subsidiary who share
responsibility for the management, growth or protection of the business of the
Company or any subsidiary may be eligible to be granted stock options under the
Option Plan.
No options may be granted under the Option Plan subsequent to December 14,
2004.
11
<PAGE> 14
ADMINISTRATION
The Option Plan is administered by the Compensation Committee, the members
of which are not eligible to participate in the Option Plan.
The Compensation Committee has full authority, in its discretion, to grant
options under the Option Plan and to determine the employees to whom options
shall be granted and the number of shares to be covered by each grant. In
determining the eligibility of any employee, as well as in determining the
number of shares to be covered by a grant and the type or types of grants to be
made, the Compensation Committee will consider the position and the
responsibilities of the employee being considered, the nature and value to the
Company or a subsidiary of his or her services, his or her present and/or
potential contribution to the success of the Company or a subsidiary and such
other factors as the Compensation Committee may deem relevant.
STOCK OPTIONS
Stock options granted by the Committee may be either "incentive stock
options" (stock options qualifying under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")), "nonstatutory stock options" (stock
options which do not so qualify) or both types of stock options (but not in
tandem). The option price for each stock option may not be less than 100% of the
fair market value of the Common Stock on the date the stock option is granted.
Fair market value for purposes of the Option Plan will generally be the mean
between the publicly reported high and low sale prices per share of the Common
Stock for the date as of which fair market value is to be determined. On
February 27, 1998 the fair market value of a share of the Company's Common
Stock, as so computed, was $9.53.
No stock option may be exercised by an optionee during employment during
the first six months of its term unless the exercise date has been accelerated
as described under "Additional Rights in Certain Events" below. No stock option
may be exercised after the expiration of ten years from the date of grant. A
stock option to the extent exercisable at any time may be exercised in whole or
in part.
The option price for each stock option will be payable in full in cash at
the time of exercise; however, in lieu of cash any optionee may, if authorized
by the Committee, pay the option price in whole or in part by delivering to the
Company shares of Common Stock having a fair market value on the date of
exercise of the stock option equal to the option price for the shares being
purchased, except that any portion of the option price representing a fraction
of a share must be paid in cash and no shares of Common Stock which have been
held less than six months may be delivered in payment of the option price of a
stock option.
Unless the Compensation Committee, in its discretion, otherwise determines,
the following provisions in this paragraph will apply in the event of the
termination of employment of the optionee. If the employment of the optionee is
voluntarily or involuntarily terminated with the consent of the Company or a
subsidiary, or the optionee retires under any retirement plan of the Company or
a subsidiary, all outstanding stock options held by the optionee will be
exercisable by the optionee (but only to the extent exercisable immediately
prior to the termination of employment) at any time (i) prior to the expiration
date of the stock option or within three months after the date of termination of
employment, whichever is the shorter period, in the case of an incentive stock
option, or (ii) prior to the expiration date of the stock option or within one
year (or three years in the event the optionee has retired) after the date of
termination of employment, whichever is the shorter period, in the case of a
nonstatutory stock option, and to the extent not exercisable will terminate,
unless the exercise period has been extended as described under "Additional
Rights in Certain Events" below. If the employment of the optionee is
voluntarily or involuntarily terminated because the optionee is a "disabled
grantee" within the meaning of Section 422(c)(6) of the Code, all outstanding
stock options held by the optionee will be exercisable by the optionee (whether
or not so exercisable immediately prior to the termination of employment) at any
time prior to the expiration date of the stock option or within one year after
the date of termination of employment, whichever is the shorter period.
Following the death of the optionee during employment, all outstanding stock
options held by the optionee at the time of death will be exercisable in full
(whether or not so exercisable immediately prior to the death of the optionee)
by the person entitled to do so under the Will of the optionee, or, if the
optionee shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the optionee, at any time
prior to the expiration date of the stock option or within one year after the
date of death of the optionee, whichever is the shorter period. Following the
death of the optionee after termination of employment, all outstanding stock
12
<PAGE> 15
options held by the optionee at the time of death will be exercisable in full
(but only to the extent exercisable immediately prior to the death of the
optionee) by the person entitled to do so under the Will of the optionee, or, if
the optionee shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the optionee, at any time
prior to the expiration date of the stock option or within one year after the
date of death of the optionee, whichever is the shorter period.
No stock option under the Option Plan is transferable other than by Will or
by the laws of descent and distribution, and a stock option may be exercised
during an optionee's lifetime only by the optionee.
Subject to the foregoing and the other provisions of the Option Plan, stock
options granted under the Option Plan may be exercised at such times and in such
amounts and be subject to such restrictions and other terms and conditions, if
any, as shall be determined, in its discretion, by the Compensation Committee.
ADDITIONAL RIGHTS IN CERTAIN EVENTS
The Option Plan provides for certain additional rights upon the occurrence
of one or more events described in Section 7 of the Option Plan ("Section 7
Events"). Such an event is deemed to have occurred when (i) the Company acquires
actual knowledge that any person (other than the Company, the Company's Employee
Stock Ownership Plan and Trust, a subsidiary, or any employee benefit plan
sponsored by the Company) has acquired beneficial ownership, directly or
indirectly, of securities of the Company representing 20% or more of the voting
power of the Company, (ii) a tender offer is made to acquire securities of the
Company representing 20% or more of the voting power of the Company, (iii) a
person other than the Company solicits proxies relating to the election or
removal of 50% or more of any class of the Board of Directors or (iv) the
shareholders of the Company approve a merger, consolidation, share exchange,
division or sale or other disposition of assets of the Company as a result of
which the shareholders of the Company immediately prior to the transaction will
not own a majority of the voting power of the surviving or resulting Company or
any company which acquires the stock of the Company or more than 10% of its
consolidated assets.
Subject to the provisions of Section 4 of the Option Plan limiting such
rights in the case of incentive stock options, unless the agreement between the
Company and the optionee otherwise provides, if any Section 7 Event occurs (i)
all outstanding stock options will become immediately and fully exercisable and
(ii) all stock options held by an optionee whose employment with the Company or
a subsidiary terminates within one year of any Section 7 Event for any reason
other than voluntary termination with the consent of the Company or a
subsidiary, retirement under any retirement plan of the Company or subsidiary or
death will be exercisable for a period of one year (or three years if the
optionee has retired) from the date of such termination of employment, but in no
event after the expiration date of the stock option.
POSSIBLE ANTI-TAKEOVER EFFECT
The provisions of the Option Plan providing for the acceleration of the
exercise date of stock options upon the occurrence of a Section 7 Event and for
the extension of the period during which stock options may be exercised upon
termination of employment following a Section 7 Event may be considered as
having an anti-takeover effect.
MISCELLANEOUS
The Board of Directors may amend or terminate the Option Plan at any time
except that the Board may not terminate any outstanding option and except that,
without the approval of the shareholders of the Company, no amendment may (i)
increase the number of shares which may be issued under the Option Plan, (ii)
increase the maximum number of shares as to which stock options may be granted
under the Option Plan to any one employee during any one calendar year, (iii)
materially increase the benefits accruing under the Option Plan to persons
subject to the provisions of Section 16(b) of the 1934 Act, (iv) materially
modify the requirements as to eligibility for participation in the Option Plan
by persons subject to the provisions of Section 16(b) of the 1934 Act, (v) make
any changes in the class of employees eligible to receive incentive stock
options or (vi) extend the duration of the Option Plan.
If an optionee (i) engages in a business which is in competition with the
Company or any of its subsidiaries, (ii) induces or attempts to induce any
customer, supplier, licensee or other individual,
13
<PAGE> 16
corporation or other business organization having a business relationship with
the Company or any of its subsidiaries to cease doing business with the Company
or any of its subsidiaries or in any way interferes with the relationship
between any such customer, supplier, licensee or other person and the Company or
any of its subsidiaries, or (iii) solicits any employee of the Company or any of
its subsidiaries to leave the employment thereof or in any way interferes with
the relationship of such employee with the Company or any of its subsidiaries,
the Compensation Committee may immediately terminate all outstanding stock
options held by the optionee. The first clause of the preceding sentence shall
not apply if the exercise period of the stock option upon termination of
employment has been extended as a result of the occurrence of a Section 7 Event.
If the outstanding shares of Common Stock are changed in value by reason of
a spin-off, split-off, split-up, dividend in partial liquidation or dividend in
property other than cash or extraordinary distribution to shareholders, then the
Compensation Committee shall make any adjustments to any outstanding stock
options under the Option Plan which it determines are equitably required to
prevent dilution or enlargement of the rights of optionees.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of stock options under present law.
Incentive Stock Options. An optionee does not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, upon the exercise of an incentive stock option, whether the option
price is paid in whole or in part in cash or shares of Common Stock. The
exercise of an incentive stock option generally will result in an increase in an
optionee's taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other disposition within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of is treated as a capital gain,
and any loss is treated as a capital loss, which is long-term if the more than
eighteen month holding period is satisfied. In the event of a "disqualifying
disposition," the difference between the fair market value of the shares
received on the date of exercise and the option price (limited, in the case of a
taxable sale or exchange, to the excess of the amount realized upon disposition
over the optionee's tax basis in the shares) is treated as compensation received
by the optionee and is taxable in the year of disposition. Any additional gain
is taxable as a capital gain and any loss as a capital loss, which is long-term
if the shares were held more than eighteen months, short-term if the shares were
held for twelve months or less and mid-term if the shares were held for more
than twelve months but less than eighteen months. Under proposed regulations,
special rules apply in determining the compensation income recognized upon a
"disqualifying disposition" if the option price of the incentive stock option is
paid in shares of Common Stock. If shares of Common Stock received upon the
prior exercise of an incentive stock option are transferred to the Company in
payment of the option price of an incentive stock option within either of the
two-year or one-year periods referred to above, the transfer is considered a
"disqualifying disposition" of the shares transferred, but, under proposed
regulations, only compensation income determined as stated above, and no capital
gain or loss, is recognized.
Neither the Company nor any of its subsidiaries is entitled to a deduction
for compensation paid with respect to shares received by an optionee upon
exercise of an incentive stock option and not disposed of in a "disqualifying
disposition." If an amount is treated as compensation received by an optionee
because of a "disqualifying disposition," the Company or one of its subsidiaries
generally is entitled to a corresponding deduction in the same amount for
compensation paid.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income for Federal income tax purposes upon receipt of a nonstatutory stock
option.
Upon the exercise of a nonstatutory stock option with cash, the amount by
which the fair market value of the shares received, determined as of the date of
exercise, exceeds the option price is generally treated as compensation received
in the year of exercise.
14
<PAGE> 17
If the option price of a nonstatutory stock option is paid in whole or in
part in shares of Common Stock, no income, gain or loss is recognized on the
receipt of shares equal in value on the date of exercise to the shares delivered
in payment of the option price. The fair market value of the remainder of the
shares received upon exercise of the nonstatutory stock option, determined as of
the date of exercise, less the amount of cash, if any, paid upon exercise is
generally treated as compensation income received on the date of exercise.
In each instance that an amount is treated as compensation received, the
Company or one of its subsidiaries generally is entitled to a corresponding
deduction in the same amount for compensation paid.
Other Tax Matters. The acceleration of the exercise date of a stock option
or the exercise of a stock option following the occurrence of a Section 7 Event,
in certain circumstances, may result in (i) a 20% Federal excise tax (in
addition to Federal income tax) to the optionee on certain amounts associated
with the stock option and (ii) the loss of a compensation deduction which would
otherwise be allowable to the Company or one of its subsidiaries.
AUDITORS
The Board of Directors of the Company has selected the independent
accounting firm of Price Waterhouse LLP ("PW") to examine the financial
statements of the Company for 1998.
PW audited the financial statements of the Company for 1997. The Board of
Directors expects that representatives of PW will be present at the Annual
Meeting of Shareholders and, while such representatives do not currently plan to
make a statement at the Annual Meeting, they will be available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors does not know at this time of any other or further
business that may come before the Annual Meeting, but, if any such matters
should hereafter become known or determined and be properly brought before such
Annual Meeting for action, the proxy holders will vote upon the same according
to their discretion and best judgment.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, in a limited number of instances, officers, directors and
regular employees of the Company may, for no additional compensation, solicit
proxies in person or by telephone to vote for all nominees.
By Order of the Board of
Directors,
H. JAMES MCKNIGHT
Secretary
March 23, 1998
15
<PAGE> 18
NO STRIPE
COMMON STOCK
MICHAEL BAKER CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned does hereby appoint Richard L. Shaw and Charles I. Homan, or any
one of them, Proxies for the undersigned with full power of substitution to vote
at the Annual Meeting of the Shareholders of Michael Baker Corporation (the
"Company") to be held April 23, 1998 and at any and all adjournments of said
meeting, all the shares of Common Stock of the Company which the undersigned may
be entitled to vote.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Over)
FOLD AND DETACH HERE
<PAGE> 19
NO STRIPE
PLEASE MARK
YOUR VOTE AS
INDICATED IN [ X ]
THE EXAMPLE
1. ELECTION OF DIRECTORS BY HOLDERS OF COMMON STOCK AND SERIES B COMMON STOCK:
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
Robert N. Bontempo, Charles I. Homan, Thomas D. Larson, Richard L. Shaw,
Konrad M. Weis and J. Robert White
INSTRUCTION: to withhold authority to vote for any individual nominee(s) write
the name of such nominee(s) in the space provided:
_______________________________________________________________________________
2. ELECTION OF DIRECTORS BY HOLDERS OF COMMON STOCK:
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
William J. Copeland, Roy V. Gavert, Jr., and John E. Murray, Jr.
INSTRUCTION: to withhold authority to vote for any individual nominee(s) write
the name of such nominee(s) in the space provided:
_______________________________________________________________________________
3. Amend the Company's 1995 Stock Incentive Plan (i) to increase the total
number of shares of the Company's Common Stock which may be issued thereunder
from 500,000 to 1,500,000 shares, and (ii) to increase the maximum number of
the shares as to which stock options may be granted to any one employee
during any calendar year from 30,000 to 100,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In his discretion, the Proxy is authorized to vote upon such other business
as may be properly brought before the meeting.
If you plan to attend the
Annual Meeting, please [ ]
check this box.
COMMON STOCK
SIGNATURE(S)____________________________________________________________________
SIGNATURE(S)__________________________________________ DATE ______________, 1998
Please date and sign exactly as name appears hereon. When signing as Attorney,
Executor, Administrator, Trustee, Guardian, Corporate Official, etc., full title
as such should be shown. For joint accounts, each joint owner should sign.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE PROXY
CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 20
PINK STRIPE
SERIES B
COMMON STOCK
MICHAEL BAKER CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned does hereby appoint Richard L. Shaw and Charles I. Homan, or any
one of them, Proxies for the undersigned with full power of substitution to vote
at the Annual Meeting of the Shareholders of Michael Baker Corporation (the
"Company") to be held April 23, 1998 and at any and all adjournments of said
meeting, all the shares of Series B Common Stock of the Company which the
undersigned may be entitled to vote.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Over)
FOLD AND DETACH HERE
<PAGE> 21
PINK STRIPE
PLEASE MARK
YOUR VOTE AS
INDICATED IN [ X ]
THE EXAMPLE
1. ELECTION OF DIRECTORS BY HOLDERS OF COMMON STOCK AND SERIES B COMMON STOCK:
Robert N. Bontempo, Charles I. Homan, Thomas D. Larson, Richard L. Shaw,
Konrad M. Weis and J. Robert White
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
INSTRUCTION: to withhold authority to vote for any individual nominee(s) write
the name of such nominee(s) in the space provided:
_______________________________________________________________________________
2. Amend the Company's 1995 Stock Incentive Plan (i) to increase the total
number of shares of the Company's Common Stock which may be issued thereunder
from 500,000 to 1,500,000 shares, and (ii) to increase the maximum number of
shares as to which stock options may be granted to any one employee during
any calendar year from 30,000 to 100,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In his discretion, the Proxy is authorized to vote upon such other business
as may be properly brought before the meeting.
If you plan to attend the
Annual Meeting, please [ ]
check this box.
SERIES B
COMMON STOCK
SIGNATURE(S)____________________________________________________________________
SIGNATURE(S)__________________________________________ DATE ______________, 1998
Please date and sign exactly as name appears hereon. When signing as Attorney,
Executor, Administrator, Trustee, Guardian, Corporate Official, etc., full title
as such should be shown. For joint accounts, each joint owner should sign.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE PROXY
CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 22
BLUE STRIPE
COMMON STOCK
ESOP
MICHAEL BAKER CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned does hereby appoint Richard L. Shaw and Charles I. Homan, or any
one of them, Proxies for the undersigned with full power of substitution to vote
at the Annual Meeting of the Shareholders of Michael Baker Corporation (the
"Company") to be held April 23, 1998 and at any and all adjournments of said
meeting, all the shares of Common Stock of the Company which the undersigned may
be entitled to vote.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Over)
FOLD AND DETACH HERE
<PAGE> 23
BLUE STRIPE
PLEASE MARK
YOUR VOTE AS
INDICATED IN [ X ]
THE EXAMPLE
1. ELECTION OF DIRECTORS BY HOLDERS OF COMMON STOCK AND SERIES B COMMON STOCK:
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
Robert N. Bontempo, Charles I. Homan, Thomas D. Larson, Richard L. Shaw,
Konrad M. Weis and J. Robert White
INSTRUCTION: to withhold authority to vote for any individual nominee(s) write
the name of such nominee(s) in the space provided:
_______________________________________________________________________________
2. ELECTION OF DIRECTORS BY HOLDERS OF COMMON STOCK:
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
William J. Copeland, Roy V. Gavert, Jr., and John E. Murray, Jr.
INSTRUCTION: to withhold authority to vote for any individual nominee(s) write
the name of such nominee(s) in the space provided:
_______________________________________________________________________________
3. Amend the Company's 1995 Stock Incentive Plan (i) to increase the total
number of shares of the Company's Common Stock which may be issued thereunder
from 500,000 to 1,500,000 shares, and (ii) to increase the maximum number of
the shares as to which stock options may be granted to any one employee
during any calendar year from 30,000 to 100,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In his discretion, the Proxy is authorized to vote upon such other business
as may be properly brought before the meeting.
If you plan to attend the
Annual Meeting, please [ ]
check this box.
COMMON STOCK
ESOP
SIGNATURE(S)____________________________________________________________________
SIGNATURE(S)__________________________________________ DATE ______________, 1998
Please date and sign exactly as name appears hereon. When signing as Attorney,
Executor, Administrator, Trustee, Guardian, Corporate Official, etc., full title
as such should be shown. For joint accounts, each joint owner should sign.
FOLD AND DETACH HERE
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Dear ESOP Participant:
Enclosed you will find the Michael Baker Corporation (the "Company") 1997
Annual Report to Shareholders, the 1998 Proxy Statement, a proxy card with a
blue stripe and/or a proxy card with a green stripe and a postage-paid return
envelope.
As a participant of the ESOP, you are entitled to give binding voting
instructions with respect to (i) the election of six directors of the Company
(if you are a holder of Common Stock or Series B Common Stock of the Company);
(ii) the election of three additional directors of the Company (only if you are
a holder of Common Stock of the Company); (iii) the amendment of the Company's
1995 Stock Incentive Plan (a) to increase the total number of shares of the
Company's Common Stock which may be issued thereunder from 500,000 to 1,500,000
shares, and (b) to increase the maximum number of shares as to which stock
options may be granted to any one employee during any calendar year from 30,000
to 100,000 shares; and (iv) the authorization of your proxies to exercise their
discretion as to any other matters which may arise at the 1998 Annual Meeting of
the Company. The enclosed proxy statement provides detailed information
concerning the voting at the Annual Meeting and the matters which will be acted
upon. You are encouraged to read the enclosed materials carefully and to
exercise your right to vote. ESOP participants must complete, sign and return
the enclosed proxy card or cards for all votes for which you may give
instructions to be counted. Each ESOP participant's voting instructions will be
tabulated by Putnam Fiduciary Trust Company, as Trustee of the ESOP and will be
held in complete confidence by the Trustee except as may be necessary to meet
legal requirements. If you fail to provide voting instructions for shares that
have been allocated to your account, Putnam Fiduciary Trust Company, as Trustee,
will vote your shares in proportion to the shares for which it receives
instructions from other participants. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, WE MUST RECEIVE YOUR PROXY (OR PROXIES) BY RETURN MAIL NO LATER
THAN 5:00 P.M. EST, APRIL 16, 1998. YOUR VOTE IS IMPORTANT.
Very truly yours,
PUTNAM FIDUCIARY TRUST COMPANY, TRUSTEE
Michael Baker Corporation
Employee Stock Ownership Plan
<PAGE> 24
GREEN STRIPE
SERIES B
COMMON STOCK
ESOP
MICHAEL BAKER CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned does hereby appoint Richard L. Shaw and Charles I. Homan, or any
one of them, Proxies for the undersigned with full power of substitution to vote
at the Annual Meeting of the Shareholders of Michael Baker Corporation (the
"Company") to be held April 23, 1998 and at any and all adjournments of said
meeting, all the shares of Series B Common Stock of the Company which the
undersigned may be entitled to vote.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Over)
FOLD AND DETACH HERE
<PAGE> 25
GREEN STRIPE
PLEASE MARK
YOUR VOTE AS
INDICATED IN [ X ]
THE EXAMPLE
1. ELECTION OF DIRECTORS BY HOLDERS OF COMMON STOCK AND SERIES B COMMON STOCK:
Robert N. Bontempo, Charles I. Homan, Thomas D. Larson, Richard L. Shaw,
Konrad M. Weis and J. Robert White
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
INSTRUCTION: to withhold authority to vote for any individual nominee(s) write
the name of such nominee(s) in the space provided:
_______________________________________________________________________________
2. Amend the Company's 1995 Stock Incentive Plan (i) to increase the total
number of shares of the Company's Common Stock which may be issued thereunder
from 500,000 to 1,500,000 shares, and (ii) to increase the maximum number of
the shares as to which stock options may be granted to any one employee
during any calendar year from 30,000 to 100,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In his discretion, the Proxy is authorized to vote upon such other business
as may be properly brought before the meeting.
If you plan to attend the
Annual Meeting, please [ ]
check this box.
SERIES B
COMMON STOCK
ESOP
SIGNATURE(S)____________________________________________________________________
SIGNATURE(S)__________________________________________ DATE ______________, 1998
Please date and sign exactly as name appears hereon. When signing as Attorney,
Executor, Administrator, Trustee, Guardian, Corporate Official, etc., full title
as such should be shown. For joint accounts, each joint owner should sign.
FOLD AND DETACH HERE
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Dear ESOP Participant:
Enclosed you will find the Michael Baker Corporation (the "Company") 1997
Annual Report to Shareholders, the 1998 Proxy Statement, a proxy card with a
blue stripe and/or a proxy card with a green stripe and a postage-paid return
envelope.
As a participant of the ESOP, you are entitled to give binding voting
instructions with respect to (i) the election of six directors of the Company
(if you are a holder of Common Stock or Series B Common Stock of the Company);
(ii) the election of three additional directors of the Company (only if you are
a holder of Common Stock of the Company); (iii) the amendment of the Company's
1995 Stock Incentive Plan (a) to increase the total number of shares of the
Company's Common Stock which may be issued thereunder from 500,000 to 1,500,000
shares, and (b) to increase the maximum number of shares as to which stock
options may be granted to any one employee during any calendar year from 30,000
to 100,000 shares; and (iv) the authorization of your proxies to exercise their
discretion as to any other matters which may arise at the 1998 Annual Meeting of
the Company. The enclosed proxy statement provides detailed information
concerning the voting at the Annual Meeting and the matters which will be acted
upon. You are encouraged to read the enclosed materials carefully and to
exercise your right to vote. ESOP participants must complete, sign and return
the enclosed proxy card or cards for all votes for which you may give
instructions to be counted. Each ESOP participant's voting instructions will be
tabulated by Putnam Fiduciary Trust Company, as Trustee of the ESOP and will be
held in complete confidence by the Trustee except as may be necessary to meet
legal requirements. If you fail to provide voting instructions for shares that
have been allocated to your account, Putnam Fiduciary Trust Company, as Trustee,
will vote your shares in proportion to the shares for which it receives
instructions from other participants. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, WE MUST RECEIVE YOUR PROXY (OR PROXIES) BY RETURN MAIL NO LATER
THAN 5:00 P.M. EST, APRIL 16, 1998. YOUR VOTE IS IMPORTANT.
Very truly yours,
PUTNAM FIDUCIARY TRUST COMPANY, TRUSTEE
Michael Baker Corporation
Employee Stock Ownership Plan
