SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
MICHAEL BAKER CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
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:
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(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):
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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MICHAEL BAKER CORPORATION
P.O. BOX 12259
PITTSBURGH, PENNSYLVANIA 15231-0259
April 2, 2002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2002
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 the Wyndham Pittsburgh Airport
Hotel, 777 Aten Road, Coraopolis, Pennsylvania 15108, on Thursday, April 25,
2002 at 10:00 a.m., local time, for the purpose of considering and acting upon
the following:
1. The election of nine directors to serve for a one-year term or
until their respective successors shall have been elected and shall have
qualified.
2. Such other matters as may properly be brought before the Annual
Meeting.
The Company recently completed an exchange of the Company's Series B Common
Stock for ordinary Common Stock, as described in the following paragraph. You
will find enclosed between one and three proxy cards. You will receive one card
to vote any Common Stock you hold through the Michael Baker Corporation Employee
Stock Ownership Plan and Trust (the "ESOP"), which will represent all of your
Common Stock holdings through the ESOP, both shares originally held as ordinary
Common Stock and shares of ordinary Common Stock received as a result of the
recent exchange of your Series B Common Stock. You will receive one card for any
Common Stock of the Company held directly by you. You will also receive one card
for any Common Stock held directly by you that was originally Series B Common
Stock which has been automatically converted to ordinary Common Stock as a
result of the exchange. Each individual proxy card must be voted. The Company's
2001 Annual Report to Shareholders is also enclosed.
The exchange of the Company's Series B Common Stock for ordinary Common
Stock was effected with the ESOP as of February 28, 2002. Pursuant to the
Company's articles of incorporation, at any time when the number of outstanding
Series B shares falls below 5% of the total outstanding Series B and ordinary
Common Stock combined, the Series B shares are automatically converted into
shares of ordinary Common Stock. This automatic conversion was triggered upon
the effective date of the exchange with the ESOP. Series B shareholders are not
required to take any action. Certificates representing Series B shares outside
of the ESOP will be deemed automatically to represent the same number of shares
of ordinary Common Stock. Each share of ordinary Common Stock is entitled to one
vote per share.
You are cordially invited to attend the Annual Meeting of Shareholders.
Whether or not you plan to attend the Annual Meeting, we encourage you to vote.
You may vote by Internet by accessing "www.voteproxy.com"; vote by telephone by
following the instructions on the enclosed proxy card(s); or vote by signing,
dating and promptly returning the enclosed proxy card(s) in the enclosed
postage-paid envelope.
By Order of the Board of
Directors,
H. JAMES MCKNIGHT
Secretary
MICHAEL BAKER CORPORATION
PITTSBURGH, PENNSYLVANIA
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS - APRIL 25, 2002
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 25, 2002 at 10:00 a.m. at
the Wyndham Pittsburgh Airport Hotel, 777 Aten Road, Coraopolis, Pennsylvania
15108. It is expected that this Proxy Statement and proxies will be mailed to
shareholders on or about April 2, 2002.
Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to the shareholders. Holders of Common Stock have cumulative
voting rights in the election of directors. 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 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 nine nominees receiving the highest number of affirmative votes
cast at the Annual Meeting by the holders of Common Stock voting in person or by
proxy, a quorum being present will be elected as directors.
On March 1, 2002, the Company had outstanding 8,301,253 shares of Common
Stock. Holders of Common Stock of record at the close of business on March 1,
2002 are entitled to notice of and to vote on all matters that may properly come
before the Annual Meeting.
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 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. Votes with
respect to the election of directors will be counted as set forth above. With
respect to all other matters 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.
The Board of Directors does not know of any other business that may be
presented for consideration at the 2002 Annual Meeting. If any other business
should properly come before the Annual Meeting, it is the intention of those
named in the proxies solicited hereby to vote the shares represented by such
proxies in accordance with their judgment on such matters.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
A proposal submitted by a shareholder for the regular annual meeting of
shareholders to be held in 2003 must be received by the Secretary, Michael Baker
Corporation on or prior to November 25, 2002 in order to be eligible for
inclusion in the Company's Proxy Statement for that annual meeting. In
connection with the 2003 Annual Meeting of Shareholders, if the Company does not
receive notice of a matter or proposal to be considered, on or before February
8, 2003, or in accordance with Section 2.01.1 of the Company's By-Laws with
respect to nominations of candidates for election as directors, then the persons
appointed by the Board of Directors to act as proxies for such annual meeting
will be allowed to use their discretionary voting authority with respect to any
such matter or proposal raised at such annual meeting.
1
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 as of March 1, 2002 held 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 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
39.1% of the voting power of the Company's outstanding Common Stock. 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.
NUMBER OF
SHARES AND
NATURE OF BENEFICIAL
BENEFICIAL OWNERSHIP
NAME OWNERSHIP(1) PERCENT
---- ------------ ----------
Michael Baker Corporation 3,247,039 39.1
Employee Stock Ownership
Plan and Trust(1)
Michael Baker Corporation
P.O. Box 12259
Pittsburgh, PA 15231-0259
Lord, Abbett & Co.(2) 689,303 8.3
767 Fifth Avenue
New York, NY 10153
Goldman, Sachs Asset Management(3) 561,500 6.8
85 Broad Street
New York, NY 10004
Dimensional Fund Advisors Inc.(4) 479,914 5.8
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Robert N. Bontempo 9,000(6) *
Nicholas P. Constantakis 14,500(6) *
William J. Copeland 12,800(6) *
Donald P. Fusilli, Jr. 69,461(5)(6) *
Roy V. Gavert, Jr. 10,500(6) *
Thomas D. Larson 10,391(6) *
H. James McKnight 23,913(5)(6) *
William P. Mooney 4,927(6) *
John E. Murray, Jr. 9,000(6) *
Pamela S. Pierce 3,000(6) *
Richard L. Shaw 92,132(6) *
John D. Whiteford 15,992(5)(6) *
Michael D. Whitten 4,595(5)(6) *
All Directors and 315,092(5)(6) 3.8
Executive Officers as a group
(16 persons)
---------------
*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
2
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) According to the Schedule 13G dated January 28, 2002, Lord, Abbett & Co. has
the right to vote and dispose of 689,303 shares of Common Stock.
(3) According to the Schedule 13G dated February 14, 2002, Goldman, Sachs Asset
Management has the right to vote and dispose of 561,500 shares of Common
Stock.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "Funds" according to the
Schedule 13G, dated as of January 30, 2002, filed by Dimensional. In its
role as investment advisor or manager, Dimensional possesses voting and/or
investment power over the securities of the Company described in the
Schedule 13G that are owned by the Funds. All securities reported in this
schedule are owned by the Funds. Dimensional disclaims beneficial ownership
of such securities.
(5) 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. Fusilli (25,262
shares); Mr. McKnight (3,507 shares); Mr. Whiteford (8,531 shares); Mr.
Whitten (695 shares); and directors and officers as a group (54,413 shares).
ESOP holdings have been rounded to the nearest full share.
(6) Includes the number of shares of Common Stock issuable pursuant to stock
options which may be exercised within 60 days of March 1, 2002: Mr. Bontempo
(6,000 shares); Mr. Constantakis (3,000 shares); Mr. Copeland (7,000
shares); Mr. Fusilli (44,199 shares); Mr. Gavert (7,000 shares); Mr. Larson
(6,000 shares); Mr. McKnight (20,406 shares); Mr. Mooney (4,927 shares); Mr.
Murray (6,000 shares); Ms. Pierce (2,000 shares); Mr. Shaw (80,927 shares);
Mr. Whiteford (7,461 shares); Mr. Whitten (3,900 shares); and all directors
and officers as a group (217,283 shares).
3
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. 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.
The following table sets forth certain information regarding the nominees
as of March 1, 2002. All of the nominees were elected directors by the Company's
shareholders at the 2001 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.
DIRECTOR PRINCIPAL OCCUPATION; OTHER
NOMINEE SINCE DIRECTORSHIPS; AGE
------- -------- ---------------------------
Robert N. Bontempo 1997 Professor at Columbia University School of
Business since July 1994; formerly: Assistant
Professor of International Business at Columbia
University Graduate School of Business from July
1989 to July 1994; Fellow at the Center for
Advanced Study at Stanford University, Summer
1992. Age 43.
Nicholas P. Constantakis 1999 Retired; formerly Partner, Andersen Worldwide SC
(in-dependent public accountants and consultants)
from prior to 1995 to September 1997. Director or
Trustee of various investment companies affiliated
with Federated Investors. Age 62.
William J. Copeland 1983 Retired; formerly Chairman of the Board of the
Company and formerly Vice Chairman of the Board of
PNC Financial Corp. and Pittsburgh National Bank.
Director Emeritus of various investment companies
affiliated with Federated Investors. Age 83.
Donald P. Fusilli, Jr. 2001 President and Chief Executive Officer since April
2001; formerly: President and Chief Operating
Officer since May 2000; Executive Vice President
-- Energy since 1994; Executive Vice President,
General Counsel and Secretary from October 1991 to
July 1994; Vice President, General Counsel and
Secretary from December 1989 to October 1991. Age
50.
Roy V. Gavert, Jr. 1988 President and Chief Executive Officer of Kiplivit
North America, Inc. (manufacturing) since July
1995; formerly: Chairman of World Class
Processing, Inc. (manufacturing); Chief Executive
Officer of Horton Company (manufacturer of valves
for household appliances); Managing Director of
Gavert Wennerholm & Co. (venture capital);
Managing Director of Eagle Capital, Inc.
(investment bank and venture capital); and
Executive Vice President, Westinghouse Electric
Corporation. Director Fincom, Inc. Age 68.
4
DIRECTOR PRINCIPAL OCCUPATION; OTHER
NOMINEE SINCE DIRECTORSHIPS; AGE
------- -------- ---------------------------
Thomas D. Larson 1993 Self employed (consultant); formerly:
Administrator, United States Federal Highway
Administration until January 1992; Secretary of
the Pennsylvania Department of Transportation; and
Professor of Engineering, The Pennsylvania State
University. Age 73.
John E. Murray, Jr. 1997 Chancellor Duquesne University since 2001;
formerly: President and Professor of Law of
Duquesne University since prior to 1995;
University Distinguished Service Professor at
University of Pittsburgh; Dean of Villanova
University School of Law; Acting Dean and
Professor at Duquesne University School of Law.
Director or Trustee of various investment
companies affiliated with Federated Investors. Age
69.
Pamela S. Pierce 2000 President and Chief Executive Officer of Mirant
Americas Energy Capital LP since September 2000;
formerly: Vice President Business Development
Vastar Resources, Inc. from February 1996 to
September 2000; Offshore Gulf of Mexico Business
Unit Manager, Vastar Resources Inc. from prior to
1995 to February 1996. Age 47.
Richard L. Shaw 1966 Chairman of the Board; formerly: Chairman of the
Board and Chief Executive Officer, from September
1999 to April 2001; Chairman of the Board since
September 1994; Chairman of the Board, President
and Chief Executive Officer of the Company from
September 1993 through September 1994; President
and Chief Executive Officer of the Company from
April 1984 to May 1992. Director of L.B. Foster
Company (manufacturing). Age 74.
BOARD AND COMMITTEE MEETINGS
During 2001, there were eleven meetings of the Company's Board of
Directors.
The Executive Committee of the Board of Directors, of which Messrs. Shaw,
Copeland, Fusilli and Murray are members, held one meeting. 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 Audit Committee of the Board of Directors, of which Messrs. Bontempo,
Constantakis and Ms. Pierce are members, held eleven meetings. All Audit
Committee members are independent as defined by the American Stock Exchange
listing standards. The Audit Committee acts under a written charter which was
amended by the Board of Directors on February 21, 2002, a copy of which is
attached hereto as Appendix A. The functions performed by the Audit Committee
include recommending the independent accountants subject to the Board of
Directors ratification, 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, discussing
the Company's financial statements with the independent accountants and
management, and reviewing the Company's system of internal accounting controls.
The Audit Committee has considered whether the independent public accountant's
provision of non-audit related services is compatible with maintaining the
independence of the independent public accountants.
5
The Compensation Committee, of which Messrs. Bontempo, Gavert, Larson and
Ms. Pierce are members, held six meetings. The Compensation Committee reviews
and recommends to the Board the compensation of senior executive personnel and
directors.
The Governance and Nominating Committee, of which Messrs. Bontempo,
Copeland, and Murray are members held no meetings. The Governance and Nominating
Committee was established to consider and recommend candidates to sit on the
Board of Directors and address issues related to governance of the Company.
The Executive Search Committee, of which Messrs. Bontempo, Larson, and
Murray are members, held no meetings. The Executive Search Committee was formed
to identify and recommend a new Chief Executive Officer and completed its
purpose upon the selection of Mr. Fusilli.
The Health, Safety, Environmental and Compliance Committee, of which
Messrs. Fusilli and Larson and Ms. Pierce are members was established in April
2001 to review and consider health, safety, environmental and compliance issues
and held its first official meeting in February 2002.
All directors attended at least 75% of the total number of meetings of the
Board of Directors and of the total number of meetings of committees of the
Board of which they were members.
AUDIT COMMITTEE REPORT
We have reviewed and discussed the consolidated balance sheet of Michael
Baker Corporation and subsidiaries as of December 31, 2001, and the related
consolidated statements of income, shareholders investment and cash flows, for
the year then ended, with management of the Company. These financial statements,
which are the responsibility of the Company's management, are included in the
Company's Annual Report to Shareholders and in the Company's Annual Report on
Form 10-K as filed with the Securities and Exchange Commission. They have been
audited by PricewaterhouseCoopers LLP, independent public accountants, and their
report thereon, which accompanies the financial statements, is an important part
of the Company's reporting responsibility to its shareholders. Our
responsibility is to review the financial statements and hold discussions with
Company management and the independent public accountants, and based on this
work, make a recommendation to the Board of Directors of the Company regarding
inclusion of the audited financial statements in the Company's Annual Report on
Form 10-K.
We have met with the independent public accountants and discussed the
matters that they are required to communicate to us by Statement on Auditing
Standards No. 61 (Communication with Audit Committees), as amended. These items
include, but are not limited to, significant issues identified during the audit
such as management judgments and accounting estimates, accounting policies,
proposed audit adjustments, financial statement disclosure items and internal
control issues, and if there were any disagreements with management or
difficulties encountered in performing the audit.
The Company's independent public accountants also provided us with written
disclosures required by Independence Standards Board Statement No. 1
(Independence Discussions with Audit Committees). We have met with and discussed
that firm's independence.
We are not employees of the Company, are not professionally engaged in the
practice of accounting or auditing and do not represent ourselves to be experts
in the fields of accounting or auditing or in respect of auditor independence.
In performing our oversight responsibility, we rely, without independent
verification, on the information provided to us and on the representations made
by management and the independent public accountants. Accordingly, our review
and discussions with management and the independent public accountants do not
assure that the Company's financial statements are presented in accordance with
generally accepted accounting principles, that the audit of the financial
statements has been carried out in accordance with generally accepted auditing
standards or that the independent public accountants are in fact "independent".
Based on our review and discussions, and subject to the limitations on our
role and responsibilities referred to above, we have recommended to the
Company's Board of Directors that the aforementioned 2001 audited financial
statements be included in the Company's Annual Report on Form 10-K for filing
with the Securities and Exchange Commission.
This report is submitted by the Audit Committee of the Company's Board of
Directors.
Robert N. Bontempo Nicholas P. Constantakis Pamela S. Pierce
6
DIRECTORS AND OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding compensation
received by the Chief Executive Officers and the five remaining most highly
compensated executive officers of the Company for the last three completed
fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------- ------------
SHARES OF
COMMON STOCK
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) COMPENSATION(2)
--------------------------- ---- ------ ----- ------------ ---------------
Richard L. Shaw(3) 2001 $198,640 $101,099 26,927 $ 2,918
Chairman and 2000 $400,005 $ 50,000 -- $ 11,124
Chief Executive Officer 1999 $127,100 $ -- 51,000 $ 2,995
Donald P. Fusilli, Jr.(4) 2001 $382,696 $259,503 20,528 $ 11,060
President and 2000 $309,553 $ 50,000 -- $ 86,657
Chief Executive Officer 1999 $220,000 $ -- -- $ 11,188
William P. Mooney 2001 $240,011 $108,995 9,854 $ 560
Executive Vice President and 2000 $120,006 $ 25,000 -- $ 258
Chief Financial Officer 1999 $ -- $ -- -- $ --
H. James McKnight 2001 $234,998 $106,719 9,648 $ 11,672
Executive Vice President, 2000 $215,034 $ 25,000 -- $ 11,973
General Counsel and 1999 $182,000 $ 8,123 -- $ 11,051
Secretary
John D. Whiteford 2001 $190,008 $ 86,287 7,801 $ 9,633
Executive Vice President 2000 $175,833 $ 38,002 -- $ 67,309
Engineering -- North Region 1999 $140,484 $ 1,166 3,561 $ 7,485
Michael D. Whitten 2001 $190,008 $ 86,287 7,801 $ 9,462
Executive Vice President -- 2000 $157,749 $ 41,746 -- $140,242
Energy 1999 $ 93,468 $ 7,789 -- $ 21,803
---------
(1) The Company granted stock options to executive officers in 2001. No stock
options were granted to the executive officers in 2000. During 1999, of the
named executive officers, Richard L. Shaw and John D. Whiteford were granted
stock options.
(2) Includes matching contributions made by the Company under its 401(k) plan
paid on behalf of the following individuals in 2001, 2000, and 1999: Mr.
Fusilli, $9,350, $10,500, and $10,000; Mr. McKnight, $9,350, $9,651, and
$9,186; Mr. Whiteford, $9,350, $8,862, and $7,485; and Mr. Whitten, $9,064,
$8,332, and $3,967. Also includes group life insurance premiums paid by the
Company on behalf of the following individuals as employees in 2001, 2000,
and 1999, respectively: Mr. Shaw, $2,918, $11,124, and $2,995; Mr. Fusilli,
$1,710, $841, and $1,188; Mr. Mooney, $560, $0, and $0; Mr. McKnight $2,322,
$2,322, and $1,865; Mr. Whiteford, $283, $540, and $0; Mr. Whitten, $398,
$58, and $0. Includes $113,228 in foreign taxes paid in 2000 on behalf of
Mr. Whitten incurred as an expatriate living abroad, and $75,316 and $57,907
in relocation expenses paid in 2000 on behalf of Messrs. Fusilli and
Whiteford, respectively.
(3) Mr. Shaw became the Chief Executive Officer of the Company on September 7,
1999. Based on an annual salary of $400,005, his "Annual Compensation" for
1999 reflects compensation paid for the period September through December
1999. Mr. Shaw held the position of Chief Executive Officer from September
1999, until April 25, 2001 at which time he retired from the Company as
Chief Executive Officer. Mr. Shaw's "Annual Compensation" for 2001 reflects
compensation paid to him as Chief Executive Officer for the first four
months of 2001 and accrued vacation paid to him upon his retirement.
(4) Mr. Fusilli's "Annual Compensation" reflects increases based on changes in
his position during the period of 1999-2001. In year 1999, Mr. Fusilli was
the Executive Vice President -- Energy; in May 2000, Mr. Fusilli was elected
President and Chief Operating Officer; and, on April 25, 2001, Mr. Fusilli
became the President and Chief Executive Officer of the Company.
7
OPTIONS GRANTED IN 2001
The following table sets forth, as to the individuals named in the Summary
Compensation Table, information with respect to stock options granted during
2001 under the 1995 Stock Incentive Plan.
OPTIONS GRANTED IN 2001
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL RATES OF STOCK
NO. OF SHARES OPTIONS PRICE APPRECIATION FOR
SUBJECT TO GRANTED OPTION TERM(2)
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED IN 2001 PER SHARE DATE 5% 10%
---- ------------- ---------------- -------------- ---------- ---------- ----------
Richard L. Shaw 24,927 18.7% $ 8.5250 26-Apr-04 $ 33,496 $ 70,338
2,000 N/A(1) $10.0250 26-Apr-11 $ 12,609 $ 31,955
Donald P. Fusilli,
Jr. 20,528 15.4% $ 8.5250 22-Feb-11 $110,057 $278,907
William P. Mooney 9,854 7.4% $ 8.5250 22-Feb-11 $ 52,831 $133,883
H. James McKnight 9,648 7.2% $ 8.5250 22-Feb-11 $ 51,726 $131,084
John D. Whiteford 7,801 5.9% $ 8.5250 22-Feb-11 $ 41,824 $105,989
Michael D. Whitten 7,801 5.9% $ 8.5250 22-Feb-11 $ 41,824 $105,989
---------------
(1) Not applicable as these options were granted under the 1996 Nonemployee
Directors' Stock Incentive Plan after Mr. Shaw retired as an employee of the
Company.
(2) The dollar amounts under the potential realizable value columns 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.
The following table sets forth as to the persons named in the Summary
Compensation Table information with respect to (i) the stock options exercised
during 2001, (ii) the net value realized upon such exercises, (iii) the number
of shares covered by unexercised stock options at December 31, 2001 and (iv) the
value of such unexercised options at December 31, 2001.
AGGREGATED OPTION EXERCISES 2001
NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 2001 DECEMBER 31, 2001
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ----------- -------- ------------------------------- ----------------------------
Richard L. Shaw 0 0 74,927/0 $590,450/$0
0 0 6,000/0(2) $41,337/$0
Donald P. Fusilli, Jr. 0 0 39,067/35,899 $332,371/$206,821
William P. Mooney 0 0 2,463/7,391 $16,441/$49,335
H. James McKnight 0 0 17,994/24,246 $129,908/$134,626
John D. Whiteford 0 0 4,620/6,742 $29,570/$44,580
Michael D. Whitten 0 0 1,950/5,851 $13,016/$39,055
---------------
(1) Based on the exercise price and fair market value of the Common Stock as of
December 31, 2001.
(2) Stock options granted under the 1996 Nonemployee Directors' Stock Incentive
Plan prior to Mr. Shaw becoming an employee in September 1999 and after his
retirement in April 2001.
8
COMPENSATION OF DIRECTORS
During 2001, compensation for non-employee directors was increased pursuant
to recommendations of William M. Mercer, a compensation consulting firm and was
set as follows: Annual retainer -- $17,000; Attendance at each regularly
scheduled or special meeting of the Board of Directors -- $1,000; Attendance at
a Board of Directors committee meeting -- $750; 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. The increase in compensation for non-employee
directors became effective May 2001.
In addition, non-employee directors participate in the 1996 Nonemployee
Directors' Stock Incentive Plan, which provides long-term incentive compensation
to eligible directors. During 2001, compensation under this plan was also
increased. Each member of the Board of Directors who was not an employee of the
Company or any of its subsidiaries was granted 1,000 restricted shares and an
option to purchase 2,000 shares of Common Stock on the first business day
following the Annual Meeting of Shareholders in 2001.
See also "Transactions with Management and Directors" on page 13.
EMPLOYMENT CONTINUATION AGREEMENTS
The Company entered into Employment Continuation Agreements in October
2000, with Messrs. Fusilli, Mooney, McKnight, Whiteford and Whitten. Under the
agreements with Messrs. Fusilli, Mooney, and McKnight, the executives agree to
remain in the employ of the Company for thirty-six months following the date of
a change of control (as defined in the agreements), and the Company agrees to
provide salary and benefits at levels commensurate with those prior to the
change of control for that period. The agreements further provide that if the
executive's employment is terminated by reasons other than death, disability,
voluntary termination (except a voluntary termination for good reason as defined
in the agreements), or is terminated by the Company other than for cause (as
defined in the agreements) during this period, the Company will pay the
executives their (i) earned salary, (ii) a severance amount equal to three times
the sum of the executives' annual base salary and the average bonus for the five
fiscal years preceding the change of control, and (iii) obligations accrued
under applicable benefit plans and programs, and continue their benefits for
three years. The payments under the agreements may be subject to reduction to
the extent that they are considered excess parachute payments under the Internal
Revenue Code. Furthermore, the executives will under certain circumstances
receive similar benefits if their employment is terminated in contemplation of a
change of control and a change of control occurs within one year following such
terminations.
The agreements with Messrs. Whiteford and Whitten are essentially the same
except that the executives agree to remain in the employ of the Company for
twenty-four months following a change of control and the severance amount is an
amount equal to two times the sum of the executive's annual base salary and the
average bonus for the five fiscal years preceding the change of control with
continued benefits for two years.
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 Graph on page 12 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 the Compensation Committee of the Board. In 2001, the Compensation
Committee consisted of Dr. Larson as the Chairman and Messrs. Bontempo and
Gavert and Ms. Pierce.
All recommendations 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. Larson, Bontempo and Gavert and
Ms. Pierce in their capacity as the Board's Compensation
9
Committee addressing the Company's compensation policies for 2001 as they
affected executive officers of the Company.
Compensation Philosophy
The Company's philosophy on compensation places a share of employee
compensation "at risk", thereby rewarding employees based on the overall
performance of the Company. The Company's "Line-of-Sight" annual incentive
compensation plan adopted in 2001 utilizes this philosophy. The following are
the Company's compensation 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 and other key employees 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 William M. Mercer, a
compensation consulting firm, to assist the Committee in connection with
performance of its duties. William M. Mercer provides ongoing advice to the
Committee with respect to the reasonableness of compensation paid to executive
officers of the Company. In addition, William M. Mercer reviews director's
compensation and assists in the development of incentive compensation plans and
policies.
Mr. Shaw, as the Chief Executive Officer of the Company until April 25,
2001, was paid during 2001 pursuant to the terms of his Employment Agreement at
an annual salary of $425,006. Effective April 25, 2001, Mr. Fusilli was elected
to succeed Mr. Shaw as Chief Executive Officer, and Mr. Shaw continued as
Chairman of the Board of Directors. Effective April 25, 2001, Mr. Shaw entered
into a consulting agreement to provide for Mr. Shaw's performance of consulting
services to the Company until April 26, 2003 with annual compensation equal to
25% of his salary of $425,006 in effect on April 25, 2001. In addition, pursuant
to the Consulting Agreement, the Company covers the costs of health insurance,
reimburses actual out-of-pocket expenses and maintains a life insurance policy
for Mr. Shaw. The agreement also provides for a supplemental retirement benefit
of $5,000 per month commencing at the expiration of the agreement. During 2001,
in addition to group life insurance premiums paid on Mr. Shaw's behalf as an
employee, certain life insurance premiums in the amount of $37,013 were paid on
Mr. Shaw's behalf.
On April 25, 2001, Mr. Fusilli became the President and Chief Executive
Officer of the Company at an annual base salary of $400,000. The Compensation
Committee believes this salary is in line with the Company's philosophy for
executive officers and is in accord with the increased responsibilities Mr.
Fusilli assumed as Chief Executive Officer. In addition to his base salary, Mr.
Fusilli may be awarded a bonus by the Compensation Committee based on the
committee's evaluation of Mr. Fusilli's performance. In assessing Mr. Fusilli's
performance, the Compensation Committee reviews a variety of areas affecting the
Company's performance for which Mr. Fusilli is held accountable such as
leadership, strategic planning, financial results, succession planning, human
resources, communications, and external and Board relations. Based on the
Committee's assessment of Mr. Fusilli's results in these areas and his overall
performance in his new role as Chief Executive Officer, the Committee awarded a
bonus of $259,503 to Mr. Fusilli for fiscal year 2001. The Compensation
Committee also granted stock options to Mr. Fusilli for fiscal year 2001 on a
basis consistent with other executive officers, utilizing the guidelines
recommended by Mercer as discussed further below.
The Company applies a compensation program consisting of base salary,
annual incentive compensation and long-term incentive compensation. In
determining base salaries for 2001, the Compensation Committee reviewed the
relationship of an executive's compensation to that of other executive officers
of the Company, similar executive officers in comparable companies, and the
Company's current and projected growth and profitability performance. In
determining annual and long-term incentive compensation, the Compensation
Committee reviewed the Company's performance in 2001.
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. A final
10
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.
In keeping with its philosophy of placing a portion of employee
compensation "at-risk", the Committee administers the Company's 2001
Line-of-Sight Incentive Compensation Plan, in which all employees have an
opportunity to participate. Under the Plan, the Committee established a Company
performance goal measured by earnings per share. Upon achievement of the Company
earnings per share performance goal and other Company goals established based
upon an employee's group within the Plan, the employee may receive payment of an
incentive award up to the amount of a pre-established incentive target. The
incentive targets are based upon market comparisons to ensure that incentive
compensation opportunities are competitive with other leading companies in the
Company's industries or lines of business. Providing an incentive compensation
payment opportunity contingent upon the achievement of the Company's performance
goals facilitates the objective of establishing a clear line-of-sight between
the overall performance of the Company and the individual contribution of each
employee.
1995 Stock Incentive Plan
The 1995 Stock Incentive Plan provides long-term incentive compensation to
eligible employees. The Compensation Committee retained the services of William
M. Mercer, a compensation consulting firm, to assist the Committee in evaluating
its practice of granting stock options relative to practices of other publicly-
traded companies engaging in one or more lines of business comparable to those
of the Company. In connection with this evaluation, the Compensation Committee
revised its guidelines relative to the grant of stock options. It will follow
the Mercer recommendations to motivate strategic behavior by offering awards
independent of short-term rises and falls in the Company's performance.
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 long-term success of the Company, the employee's cash compensation, the
expected rate of appreciation in the value of the stock option, 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 Committee determined to make an annual grant of stock
option awards for 2001. In 2002, the Committee will consider the grant of stock
options to executive officers and other key employees in the context of
motivating strategic behavior beneficial to the Company's long-term performance.
This report is submitted by the Compensation Committee of the Company's
Board of Directors.
Robert N. Bontempo Roy V. Gavert, Jr. Thomas D. Larson Pamela S.
Pierce
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
The members of the Compensation Committee in 2001, Robert N. Bontempo, Roy
V. Gavert, Jr., Pamela S. Pierce and Thomas D. Larson, are non-employee
directors. During 2001, 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.
11
STOCK PERFORMANCE GRAPH
The line graph below compares, for the five year period commencing December
31, 1996, 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 Index, the Russell 2000 Index, and a peer group identified by the Company to
best approximate the Company's lines of business.
The peer group was selected to include publicly-traded Companies engaging
in one or more of the Company's lines of business: civil infrastructure
engineering, construction management, and operations and maintenance.
The peer group consists of Tetra Tech, Inc., and URS Corporation. The
following companies, which were formerly included in the peer group, are no
longer publicly traded: Kaiser Group International, STV Group International,
Inc., and Roy F. Weston, Inc.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MICHAEL BAKER CORPORATION, THE S&P 500 INDEX,
THE RUSSELL 2000 INDEX AND A PEER GROUP
MICHAEL BAKER
CORPORATION PEER GROUP RUSSELL 2000 S&P 500
------------- ---------- ------------ -------
12/96 100 100 100 100
12/97 152.94 136.66 122.36 133.36
12/98 152.94 224.15 119.25 171.47
12/99 103.92 174.43 144.6 207.56
12/00 121.57 272.35 140.23 188.66
12/01 238.43 259.71 143.71 166.24
* Assumes $100 invested on December 31, 1996 in stock or index and assumes
reinvestment of dividends. Fiscal year ending December 31.
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 2001. In making the
disclosure under this paragraph 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.
12
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
The Company entered into an Employment Agreement with Richard L. Shaw in
April 1988, which agreement was supplemented in March 1992, October 1994, June
1995, March 1998 and September 1999. During 2001, Mr. Shaw, as Chief Executive
Officer of the Company until April 25, 2001, was compensated pursuant to the
terms of his Employment Agreement at an annual salary of $425,006. In addition,
pursuant to the Employment Agreement, the Company covered the costs of health
insurance, reimbursed actual out-of-pocket expenses and maintained a life
insurance policy for Mr. Shaw. This agreement also provided for a supplemental
retirement benefit of $5,000 per month commencing on expiration of the
agreement. Effective April 25, 2001, Mr. Shaw retired from the position of Chief
Executive Officer of the Company, and the Company and Mr. Shaw entered into a
Consulting Agreement for Mr. Shaw's consulting services for the period April 26,
2001 through April 26, 2003. The Consulting Agreement provides an annual
compensation equal to 25% of Mr. Shaw's previous salary of $425,006. In
addition, pursuant to the Consulting Agreement, the Company covers the costs of
health insurance, reimburses actual out-of-pocket expenses and maintains a life
insurance policy for Mr. Shaw. The Consulting Agreement also provides for a
supplemental retirement benefit of $5,000 per month commencing at the expiration
of the Consulting Term.
AUDITORS
The Board of Directors of the Company has selected the independent
accounting firm of PricewaterhouseCoopers LLP ("PwC") to examine the financial
statements of the Company for 2002.
PwC audited the financial statements of the Company for 2001. The Board of
Directors expects that representatives of PwC 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.
AUDIT FEES
The Company was billed $270,000 in aggregate fees for the professional
services rendered by the independent public accountants for the audit of its
financial statements for the year ended December 31, 2001, and the reviews of
its financial statements included in its Forms 10-Q for the 2001 fiscal year.
FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION FEES
The independent public accountants did not bill the Company for any
financial information system design and implementation fees for services
rendered in 2001.
ALL OTHER FEES
In addition to the audit fees described above, the independent public
accountants billed the Company $160,965 in aggregate fees for other professional
services rendered in 2001. Such fees were primarily for tax services.
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
April 2, 2002
13
APPENDIX A
MICHAEL BAKER CORPORATION
CHARTER -- AUDIT COMMITTEE
(ADOPTED AS OF FEBRUARY 21, 2002)
COMMITTEE ROLE
The Committee's role is to act on behalf of the Board of Directors and
oversee all material aspects of the Company's reporting, control, and audit
functions, except those specifically related to the responsibilities of another
standing committee of the board. The Audit Committee's role includes a
particular focus on the qualitative aspects of financial reporting to
shareholders and on Company processes for the management of business/financial
risk and for compliance with significant applicable legal, ethical, and
regulatory requirements.
The role also includes coordination with other board committees and
maintenance of strong, positive working relationships with management, external
and internal auditors, counsel, and other committee advisors.
COMMITTEE MEMBERSHIP
The Committee shall consist of at least three independent board members.
Committee members shall have (1) knowledge of the primary industries in which
the Company operates; (2) the ability to read and understand fundamental
financial statements; and (3) the ability to understand key business and
financial risks and related controls and control processes. The Committee shall
have access to its own counsel and other advisors at the Committee's sole
discretion.
At least one member should be literate in business and financial reporting
and control, including knowledge of the regulatory requirements and should have
past employment experience in finance or accounting or other comparable
experience or background. Committee appointments and Committee chairman shall be
approved annually by the full Board upon recommendation of the Chairman of the
Board.
COMMITTEE OPERATING PRINCIPLES
The Committee shall fulfill its responsibilities within the context of the
following overriding principles:
- Communications -- The chairperson and others on the Committee shall, to the
extent appropriate, have contact throughout the year with senior management,
other committee chairpersons, and other key Committee advisors, external and
internal auditors, etc., as applicable, to strengthen the Committee's
knowledge of relevant current and prospective business issues.
- Committee Education/Orientation -- The Committee, with management, shall
develop and participate in a process for review of important financial and
operating topics that present potential significant risk to the company.
Additionally, individual Committee members are encouraged to participate in
relevant and appropriate self-study education to assure understanding of the
business and environment in which the Company operates.
- Meeting Agenda -- Committee meeting agendas shall be the responsibility of the
Committee chairperson, with input from Committee members. It is expected that
the chairperson would also ask for management and key Committee advisors, and
perhaps others, to participate in this process.
- Committee Expectations and Information Needs -- The Committee shall
communicate Committee expectations and the nature, timing, and extent of
Committee information needs to management, internal audit, and external
parties, including external auditors. Written materials, including key
performance indicators and measures related to key business and financial
risks, shall be received from management, auditors, and others prior to the
meeting. Meeting conduct will assume board members have reviewed written
materials in sufficient depth to participate in Committee/Board dialogue.
- External Resources -- The Committee shall be authorized to access internal and
external resources, as the Committee requires, to carry out its
responsibilities.
- Committee Meeting Attendees -- The Committee shall request members of
management, counsel, internal audit, and external auditors, as applicable, to
participate in Committee meetings, as necessary, to carry out the Committee's
responsibilities. Periodically and at least annually, the Committee shall meet
in private session with only the Committee members. It shall be understood
that either internal or external auditors, or counsel, may, at any time,
request a meeting with the Audit Committee or Committee chairperson with or
without management attendance. In any case, the Committee shall meet in
executive session separately with internal and external auditors, at least
annually.
- Reporting to the Board of Directors -- The Committee, through the Committee
chairperson, shall report, after each meeting, to the full board. In addition,
summarized minutes from committee meetings shall be available to each board
member.
- Committee Self Assessment -- The Committee shall review, discuss, and assess
its own performance as well as the committee's role and responsibilities,
seeking input from senior management, the full board, and others. Changes in
role and/or responsibilities, if any, shall be recommended to the full board
for approval.
- Independent Board Members -- The Board shall be composed of executive and
nonexecutive members. Independent members are nonexecutive members who have no
relationship to the Corporation that may interfere with the exercise of their
independence from management and the Corporation.
All members of the Committee must be "independent". The following
categories of person have been determined by the Board of Directors to not be
considered "independent":
- a director who is employed by the Corporation for the current year or any of
the past three years;
- a director who has accepted any compensation from the Corporation or any of
its affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for board service, benefits under a tax-qualified retirement
plan, or non-discretionary compensation;
- a director who is a member of the immediate family of an individual who is, or
has been in any of the past three years, employed by the Corporation or any of
its affiliates as an executive officer;
- a director who is a partner in, or a controlling shareholder or an executive
officer of, any for-profit business organization to which the Corporation
made, or from which the Corporation received payments (other than those
arising solely from investments in the Corporation's securities) that exceed
5% of the Corporation's consolidated gross revenues for that year, or
$200,000, whichever is more, in any of the past three years; or
- a director who is employed as an executive of another entity where any of the
Corporation's executives serve on that entity's compensation committee.
Notwithstanding the above, there may be one member of this Committee who
does not meet the above standards of independence; provided that such member is
not a current employee or an immediate family member of such an employee, if the
Board of Directors, under exceptional and limited circumstances, determines that
membership on this Committee by the individual is required by the best interests
of the Corporation and its shareholders, and the Board discloses, in the next
annual proxy statement subsequent to such determination, the nature of the
relationship and the reasons for the determination.
MEETING FREQUENCY
The Committee shall meet at least quarterly. Additional meetings shall be
scheduled as considered necessary by the committee or chairperson.
REPORTING TO SHAREHOLDERS
The Committee shall make available to shareholders a summary report on the
scope of its activities. This report will be included in the Company's annual
proxy statement.
COMMITTEE'S RELATIONSHIP WITH EXTERNAL AND INTERNAL AUDITORS
- The external auditors, in their capacity as independent public accountants,
shall be responsible to the Board of Directors and the Audit Committee as
representatives of the shareholders.
- As the external auditors review financial reports, they will be reporting to
the Audit Committee. They shall report all relevant issues to the committee
responsive to agreed-on Committee expectations. In executing its oversight
role, the board or committee should review the work of external auditors.
- The Committee shall annually review the performance (effectiveness,
objectivity, and independence) of the external and internal auditors. The
committee shall ensure receipt of a formal written statement from the external
auditors consistent with standards set by the Independence Standards Board.
Additionally, the committee shall discuss with the auditor relationships or
services that may affect auditor objectivity or independence. If the committee
is not satisfied with the auditors' assurances of independence, it shall take
or recommend to the full board appropriate action to ensure the independence
of the external auditor.
- The internal audit function shall be responsible to the Board of Directors
through the committee.
- If either the internal or the external auditors identify significant issues
relative to the overall board responsibility that have been communicated to
management but, in their judgment, have not been adequately addressed, they
should communicate these issues to the committee chairperson.
- Changes in those in charge of internal audit or corporate compliance shall be
subject to committee approval.
PRIMARY COMMITTEE RESPONSIBILITIES
MONITOR FINANCIAL REPORTING AND RISK CONTROL RELATED MATTERS
The Committee should review and assess:
- Risk Management -- The Company's business risk management process, including
the adequacy of the Company's overall control environment and controls in
selected areas representing significant financial and business risk.
- Annual Reports and Other Major Regulatory Filings -- All major financial
reports in advance of filings or distribution.
- Internal Controls and Regulatory Compliance -- The Company's system of
internal controls for detecting accounting and reporting financial errors,
fraud and defalcations, legal violations, and noncompliance with the Corporate
Code of Conduct.
- Internal Audit Responsibilities -- The annual audit plan and the process used
to develop the plan. Status of activities, significant findings,
recommendations, and management's response.
- Regulatory Examinations -- SEC inquiries and the results of examinations by
other regulatory authorities in terms of important findings, recommendations,
and management's response.
- External Audit Responsibilities -- Auditor independence and the overall scope
and focus of the annual/ interim audit, including the scope and level of
involvement with unaudited quarterly or other interim-period information.
- Financial Reporting and Controls -- Key financial statement issues and risks,
their impact or potential effect on reported financial information, the
processes used by management to address such matters, related auditor views,
and the basis for audit conclusions. Important conclusions on interim and/or
year-end audit work in advance of the public release of financials.
- Auditor Recommendations -- Important internal and external auditor
recommendations on financial reporting, controls, other matters, and
management's response. The views of management and auditors on the overall
quality of annual and interim financial reporting.
The Committee should review, assess, and approve:
- The code of ethical conduct. (Annually)
- The internal auditor charter. (Annually)
- Changes in important accounting principles and the application thereof in both
interim and annual financial reports.
- Significant conflicts of interest and related-party transactions.
- External auditor performance and changes in external audit firm (subject to
ratification by the full board).
- Internal auditor performance and changes in internal audit leadership and/or
key financial management.
LIMITATION OF DUTIES
While this Committee has the responsibilities and powers set forth in this
Charter, it is recognized that members of the Committee are not employees of the
Company, are not professionally engaged in the practice of accounting or
auditing, and are not, and do not represent themselves to be, experts in the
field of accounting or auditing. As such, it is not the duty of this Committee
to plan or conduct audits or to determine that the Corporation's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of management and the
Corporation's independent public accountants. Nor is it the duty of this
Committee to conduct investigations to resolve disagreements, if any, between
management and the Corporation's independent public accountants or to assure
compliance with laws and regulations. Each member of the Committee may rely,
without independent verification, on (i) representations of management that the
financial statements have been prepared with integrity, objectivity and in
conformity with generally accepted accounting principles, (ii) representations
of the independent auditors included in their report on the Company's financial
statements and (iii) representations of management and the independent auditors
regarding fees for services provided by the independent auditors.
MICHAEL BAKER CORPORATION
P.O. Box 12259
[MICHAEL BAKER CORP. LOGO]
Pittsburgh, Pennsylvania 15231-0259
(412) 269-6300
FAX (412) 269-2534
April 2, 2002
TO OUR SERIES B SHAREHOLDERS:
In December 2001 Michael Baker Corporation announced that the Board of
Directors had approved an exchange of Baker's Series B Common Stock for ordinary
Common Stock. At that time, approximately 1.3 million shares of the Series B
Common Stock were outstanding and approximately 95% of those shares were held by
the Baker Employee Stock Ownership Plan and Trust (the "ESOP"). The Series B
stock, which had a 10 votes to one share super voting structure, was distributed
to shareholders in the form of a stock dividend in 1987. The Series B shares
converted automatically to ordinary Common Stock when sold or transferred.
The exchange of Baker's Series B Common Stock for ordinary Common Stock
with the Baker ESOP was effected February 28, 2002. Pursuant to Baker's articles
of incorporation, at any time when the number of outstanding Series B shares
falls below 5 percent of the total outstanding Series B and ordinary Common
Stock combined, the Series B shares are automatically converted into shares of
ordinary Common Stock. This automatic conversion was triggered upon the
effective date of the exchange with the ESOP.
Series B shareholders are not required to take any action. Certificates
representing Series B outside of the ESOP will be deemed automatically to
represent the same number of shares of ordinary Common Stock. Each share of
ordinary Common Stock is entitled to one vote per share. Each share of ordinary
Common Stock is otherwise identical to the Series B Common Stock.
You will find enclosed between one and three proxy cards. You will receive
one card to vote any Common Stock you hold through the ESOP, which will
represent all of your Common Stock holdings through the ESOP, both shares
originally held as Common Stock and shares of ordinary Common Stock received as
a result of the recent exchange of your Series B Common Stock. You will receive
one card for any Common Stock of the Company held directly by you. You will also
receive one card for any Common Stock held directly by you that was originally
Series B Common Stock which has been automatically converted to ordinary Common
Stock as a result of the exchange. Each individual proxy card must be voted.
If you have any questions, please contact me at (412) 269-2532 or at
jmcknight@mbakercorp.com.
Very truly yours,
H. JAMES MCKNIGHT
Secretary
ANNUAL MEETING OF STOCKHOLDERS OF
MICHAEL BAKER CORPORATION
APRIL 25, 2002
Co.# Acct.#
-------------------------- -------------------------
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CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY INTERNET
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
YOUR CONTROL NUMBER IS [right arrow]
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NOTE: REFER TO REVERSE SIDE FOR VOTING INSTRUCTIONS.
[down arrow] Please Detach and Mail in the Envelope Provided [down arrow]
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A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR WITHHELD
1. ELECTION OF DIRECTORS. [ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
the name of such nominee(s) in the space below):
--------------------------------------------------------------------------------
NOMINEES: Robert N. Bontempo
Nicholas P. Constantakis
William Copeland
Donald P. Fusilli, Jr.
Roy V. Gavert, Jr.
Thomas D. Larson
John E. Murray, Jr.
Pamela S. Pierce
Richard L. Shaw
PLEASE MARK, SIGN BELOW, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature
----------------------------------------
Signature if held jointly DATED:
--------------------- ---------------
NOTE: Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
YOU MAY RECEIVE BETWEEN ONE AND THREE PROXY CARDS FOR COMMON STOCK. PLEASE VOTE
EACH PROXY CARD THAT YOU RECEIVE AS EACH CARD REPRESENTS SEPARATE SHARES OF
COMMON STOCK HELD BY YOU.
PROXY
MICHAEL BAKER CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Richard L. Shaw and Donald
P. Fusilli, Jr. and each or any one of them, with full power of substitution, as
Proxies to represent and to vote, as designated on the reverse, all the shares
of stock of Michael Baker Corp. (the "Company"), held of record by the
undersigned on March 1, 2002, at the Annual Meeting of the Stockholders (the
"Annual Meeting") to be held on April 25, 2002, or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
(TO BE SIGNED ON THE REVERSE SIDE)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
MICHAEL BAKER CORPORATION
Common
April 25, 2002
[down arrow] Please Detach and Mail in the Envelope Provided [down arrow]
--------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR WITHHELD
1. ELECTION OF DIRECTORS. [ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
the name of such nominee(s) in the space below):
--------------------------------------------------------------------------------
NOMINEES: Robert N. Bontempo
Nicholas P. Constantakis
William Copeland
Donald P. Fusilli, Jr.
Roy V. Gavert, Jr.
Thomas D. Larson
John E. Murray, Jr.
Pamela S. Pierce
Richard L. Shaw
PLEASE MARK, SIGN BELOW, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature
----------------------------------------
Signature if held jointly DATED:
--------------------- ------------------
NOTE: Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
PROXY
MICHAEL BAKER CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Richard L. Shaw and Donald
P. Fusilli, Jr. and each or any one of them, with full power of substitution, as
Proxies to represent and to vote, as designated on the reverse, all the shares
of stock of Michael Baker Corp. (the "Company"), held of record by the
undersigned on March 1, 2002, at the Annual Meeting of the Stockholders (the
"Annual Meeting") to be held on April 25, 2002, or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
(TO BE SIGNED ON THE REVERSE SIDE)