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SCHEDULE 14A
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
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under sec.240.14a-12
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):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] 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 O-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
O-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:
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MICHAEL BAKER CORPORATION
AIRSIDE BUSINESS PARK
100 AIRSIDE DRIVE
MOON TOWNSHIP, PA 15108
April 22, 2004
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
DEAR SHAREHOLDER:
We invite you to attend the annual meeting of shareholders of Michael Baker
Corporation, on April 22, 2004, at 10:00 a.m. in Pittsburgh, Pennsylvania.
This booklet includes the formal notice of the meeting and the proxy
statement. The proxy statement tells you more about the items we will vote on at
the meeting. It also explains how the voting process works and gives personal
information about our director candidates.
Whether or not you plan to attend, please promptly complete, sign, date and
return your proxy card(s) in the enclosed envelope, or you may vote over the
Internet or by telephone by following the instructions found on the proxy
card(s), so that we may vote your shares in accordance with your wishes and so
that enough shares are represented to allow us to conduct the business of the
annual meeting. Mailing your proxy(s) or voting over the Internet or by
telephone does not affect your right to vote in person if you attend the annual
meeting.
Sincerely yours,
H. JAMES MCKNIGHT
Secretary
April 1, 2004
NOTICE OF 2004 ANNUAL MEETING
DATE, TIME AND PLACE
- April 22, 2004
- 10:00 a.m.
- David L. Lawrence Convention Center, Room 330
1000 Fort Duquesne Boulevard
Pittsburgh, Pennsylvania 15222
(412) 565-6000
PURPOSE
- Elect eight directors to serve for a one year term
- Approve amendment of the 1996 Non-employee Directors Stock Incentive Plan
- Conduct other business if properly raised
PROCEDURES
- Please complete the enclosed proxy card(s) requested by the Board.
- Only shareholders of record on March 18, 2004 receive notice of and may
vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE, AND RETURN YOUR PROXY
CARD(S) PROMPTLY IN THE ENCLOSED ENVELOPE OR VOTE OVER THE INTERNET OR BY
TELEPHONE.
H. JAMES MCKNIGHT
Secretary
April 1, 2004
CONTENTS
GENERAL..................................................... 1
Who May Vote.............................................. 1
How to Vote............................................... 1
How a Proxy Works......................................... 1
Changing Your Vote........................................ 1
Common Stock Outstanding.................................. 1
Quorum and Voting Information............................. 1
COMMON STOCK OWNERSHIP...................................... 2
Director and Executive Officer Stock Ownership............ 2
Owners of More than 5%.................................... 3
Section 16(a) Beneficial Ownership Reporting.............. 4
PROPOSAL 1 -- ELECT DIRECTORS............................... 4
Director Nominees......................................... 4
Directors' Compensation................................... 5
The Board and Committees.................................. 5
The Executive Committee................................... 6
The Audit Committee....................................... 6
The Audit Committee Report................................ 6
The Compensation Committee................................ 7
Compensation Committee Interlocks and Insider
Participants........................................... 7
The Compensation Committee Report......................... 7
The Governance and Nominating Committee................... 9
The Health, Safety, Environmental and Compliance
Committee.............................................. 10
Summary Compensation Table................................ 10
2003 Aggregate Option Exercises and Year-End Option
Values................................................. 11
Equity Compensation Plan Information...................... 11
Employment Continuation Agreements........................ 11
Related Party Transactions................................ 12
Stock Performance Graph................................... 12
PROPOSAL 2 -- AMEND NON-EMPLOYEE DIRECTORS STOCK INCENTIVE
PLAN...................................................... 13
General................................................... 13
Administration............................................ 14
Grant of Stock Options and Award of Restricted Shares..... 14
Stock Options............................................. 14
Restricted Shares......................................... 15
Acceleration of Options and Lapse of Restrictions in
Certain Events......................................... 15
Possible Anti-Takeover Effect............................. 15
Miscellaneous............................................. 16
Federal Income Tax Consequences........................... 16
New Plan Benefits Table................................... 17
OTHER INFORMATION........................................... 18
Other Business............................................ 18
Independent Accountants................................... 18
Audit Fees................................................ 18
Audit Committee Pre-Approval Policies and Procedures...... 18
Code of Ethics for Senior Financial Officers.............. 18
Expenses of Solicitation.................................. 19
Shareholder Proposals for Next Year....................... 19
APPENDIX A, Michael Baker Corporation Audit Committee
Charter................................................... A-1
APPENDIX B, MBC 1996 Nonemployee Directors Stock Incentive
Plan...................................................... B-1
i
GENERAL
We have sent you this booklet and proxy on or about April 1, 2004 because
the Board of Directors of Michael Baker Corporation is soliciting your proxy to
vote at the Company's 2004 annual meeting of shareholders.
WHO MAY VOTE
Shareholders of Michael Baker Corporation as reflected in our stock records
at the close of business on March 18, 2004 may vote. You have one vote for each
share of Michael Baker Corporation common stock you own. You have cumulative
voting rights in the election of directors. Cumulative voting entitles you to
that number of votes in the election of directors equal to the number of shares
you hold of record multiplied by the total number of directors to be elected,
and to cast the whole number of your votes for one nominee or distribute them
among any two or more nominees as you choose. Shares represented by proxies,
unless otherwise indicated on the proxy card, will be voted cumulatively in such
manner that the number of shares 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 eight 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.
HOW TO VOTE
You may vote in person at the meeting or by proxy. Shareholders of record
have a choice of voting by proxy over the Internet, by telephone, or by using a
traditional proxy card. If you hold shares through someone else such as a
stockbroker, you may get material from them asking how you want to vote. Please
check your proxy card or the information forwarded by your bank, stockbroker or
other holder of record to see which options are available to you. We recommend
you vote by proxy even if you plan to attend the meeting. You can always change
your vote at the meeting.
HOW A PROXY WORKS
Giving us a proxy means you authorize us to vote your shares in accordance
with your directions. If you give us a proxy, but do not make any selections,
your shares will be voted in favor of our director candidates and the approval
of the amendment of the 1996 Nonemployee Directors Stock Incentive Plan.
You may receive more than one proxy or voting card depending on how you
hold your shares. Shares registered in your name are generally covered by one
card. If you hold shares through someone else, such as a stockbroker, you may
get material from them asking how you want to vote.
CHANGING YOUR VOTE
You may revoke your proxy before it is voted by submitting a new proxy with
a later date, by voting in person at the meeting or by notifying our Secretary
in writing.
COMMON STOCK OUTSTANDING
As of the close of business on March 18, 2004, there were 8,321,904 shares
of Michael Baker Corporation common stock issued and outstanding.
QUORUM AND VOTING INFORMATION
In order to conduct the business of the meeting, we must have a quorum.
This means at least a majority of the outstanding shares eligible to vote must
be represented at the meeting, either in person or by proxy. You are considered
a part of the quorum if you submit a properly signed proxy card, vote over the
Internet or vote by telephone.
If a quorum is present at the meeting, votes with respect to the election
of directors will be counted as discussed above. Approval of the amendment of
the 1996 Nonemployee Directors Stock Incentive Plan
1
requires the affirmative vote of a majority of the votes cast upon the proposal
by the holders of Michael Baker Corporation common stock. Approval of any other
matter that properly comes before the Board requires the favorable vote of the
holders of shares representing the majority of the votes cast at the annual
meeting (in person or by proxy) unless the matter requires more than a majority
vote under statute or our bylaws. Under Pennsylvania law, an abstention or
broker non-vote is not a vote cast and will not be counted in determining the
number of votes required for approval, but will be counted in determining the
presence of a quorum.
COMMON STOCK OWNERSHIP
DIRECTOR AND EXECUTIVE OFFICER STOCK OWNERSHIP
Under the proxy rules of the Securities and Exchange Commission a person
beneficially owns Michael Baker Corporation common stock if the person has the
power to vote or dispose of the shares, or if such power may be acquired, by
exercising options or otherwise, within 60 days. The table below shows how much
Michael Baker Corporation common stock is beneficially owned as of March 18,
2004 by directors, nominees for director, the chief executive officer, the four
other highest paid executive officers in 2003 and all directors and executive
officers as a group. Each person has sole voting power and sole dispositive
power unless indicated otherwise.
SHARES PERCENT
EXECUTIVE OFFICER OWNED(1)(2) OF CLASS
----------------- ----------- --------
Donald P. Fusilli, Jr. 112,805 1.4%
H. James McKnight 21,490 *
William P. Mooney 24,635 *
James B. Richards, Jr. 32,312 *
John D. Whiteford 32,068 *
SHARES PERCENT
NON-EMPLOYEE DIRECTOR/NOMINEE OWNED(2)(3) OF CLASS
----------------------------- ----------- --------
Robert N. Bontempo 15,000 *
Nicholas P. Constantakis 20,500 *
William J. Copeland 18,800 *
Roy V. Gavert, Jr. 16,500 *
Thomas D. Larson 9,255 *
John E. Murray, Jr. 15,000 *
Richard L. Shaw 98,632(4) 1.2%
Directors and Executive Officers as a Group 463,765(1)(4) 5.6%
(18 persons)
---------------
*Less than 1%
(1) 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 27,550
shares, Mr. McKnight 2,194 shares, Mr. Richards 3,089 shares, Mr. Whiteford
9,005 shares and directors and officers as a group 61,446 shares. ESOP
holdings have been rounded to the nearest full share.
(2) Includes options that are exercisable on or within 60 days of March 18, 2004
as follows: Dr. Bontempo 10,000 shares, Mr. Constantakis 7,000 shares, Mr.
Copeland 11,000 shares, Mr. Fusilli 85,255 shares, Mr. Gavert 11,000 shares,
Dr. Larson 5,000 shares, Mr. McKnight 19,296 shares, Mr. Mooney 24,635
shares, Dr. Murray 10,000 shares, Mr. Richards 29,223 shares, Mr. Shaw
84,927 shares, Mr. Whiteford 23,063, and all directors and officers as a
group 347,559 shares.
(3) Includes restricted stock in which the Directors do not have dispositive
power until restrictions lift as follows: Dr. Bontempo 2,000 shares, Mr.
Constantakis 2,000 shares, Mr. Copeland 2,000 shares, Mr. Gavert 2,000
shares, Dr. Larson 2,000 shares, Dr. Murray 2,000 shares, Mr. Shaw 2,000
shares.
(4) Includes 2,000 shares gifted to Mr. Shaw's spouse for which Mr. Shaw
disclaims beneficial ownership.
2
OWNERS OF MORE THAN 5%
The following table shows shareholders who are known to the Company to be a
beneficial owner of more than 5% of Michael Baker Corporation's common stock as
of December 31, 2003.
SHARES OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK(1) OF CLASS
------------------------------------ --------------- --------
Michael Baker Corporation 2,769,670(2) 33.29%
Employee Stock Ownership Plan
Michael Baker Corporation
Airside Business Park,
100 Airside Drive
Moon Township, PA 12108
Jeffrey Gendell 753,100(3) 9.1%
55 Railroad Avenue, 3rd Floor
Greenwich, Connecticut
Wellington Management Company, LLP 576,000(4) 6.9%
75 State Street
Boston, MA 02109
Christopher Harwood Bernard Mills 472,700(5) 5.7%
Ryder Court
14 Ryder Street
London SW1Y 6QB
England
---------------
(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 such person's name.
(2) 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.
(3) According to the Schedule 13G filed February 6, 2004, Mr. Gendell is a
managing member of Tontine Management, LLC, which beneficially owns, as
general partner of Tontine Partners, LP, 354,615 shares, and Tontine
Overseas Associates, LLC, which beneficially owns 398,485 shares, and in
that capacity directs their operations. Accordingly, he shares both
dispositive and voting power with respect to the 753,100 shares.
(4) According to the Schedule 13G filed February 12, 2004, Wellington Management
Company shares voting and dispositive power with respect to the 576,000
shares in its capacity as an investment advisor.
(5) According to the Schedule 13G filed May 27, 2003, Christopher Harwood
Bernard Mills shares voting and dispositive power with respect to 410,800
shares beneficially owned by Acquisitor Holding (Bermuda) Ltd., of which Mr.
Mills is a director. Acquisitor is a Bermuda business managed by its Board
of Directors. Mr. Mills is also a director of American Opportunity Trust
which beneficially owns 61,900 shares, and therefore, he also shares voting
and dispositive power with respect to such shares. Accordingly, he shares
both dispositive and voting power with respect to the 472,700 shares.
3
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers to file reports of beneficial ownership and changes in
beneficial ownership of Michael Baker Corporation stock. Directors and officers
must furnish us with copies of these reports. Based on these copies and
directors and executive officers' representations, we believe all directors and
executive officers complied with the requirements in 2003. A Securities and
Exchange Commission Form 4, Statement of Changes in Beneficial Ownership of
Securities, was filed during 2003 for 500 shares granted to Mr. Shaw in a prior
year.
PROPOSAL 1 -- ELECT DIRECTORS
Eight 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
have been elected and qualified.
Your proxy will be voted FOR the election of these nominees unless you
withhold authority to vote for any one or more of them. If any nominee is unable
or unwilling to stand for election, your proxy authorizes us to vote for a
replacement nominee if the Board names one.
THE BOARD RECOMMENDS YOU VOTE "FOR" EACH OF THE FOLLOWING CANDIDATES.
DIRECTOR NOMINEES
The following table sets forth certain information regarding the nominees
as of March 18, 2004. All of the nominees were elected directors by the
Company's shareholders at the 2003 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.
Robert N. Bontempo Professor at Columbia University School of Business since
Age 45 July 1994. Formerly: Assistant Professor of International
Director since 1997 Business at Columbia University Graduate School of Business
from July 1989 to July 1994.
Nicholas P. Constantakis Retired. Formerly: Partner, Andersen Worldwide SC
Age 64 (independent public accountants and consultants) from June
Director since 1999 1961 to September 1997. Director or Trustee of the Federated
Fund Complex.
William J. Copeland Retired. Formerly: Chairman of the Board of the Company;
Age 85 Vice Chairman of the Board of PNC Financial Corp. and
Director since 1983 Pittsburgh National Bank. Director Emeritus of the Federated
Fund Complex.
Donald P. Fusilli, Jr. President and Chief Executive Officer of the Company since
Age 52 April 2001. Formerly: President and Chief Operating Officer
Director since 2001 since May 2000; Executive Vice President -- Energy since
1994; other positions with the Company since 1973. Director
ATI International Metals, Inc.
Roy V. Gavert, Jr. Chief Executive Officer of Horton Company (manufacturer of
Age 70 valves for household appliances) since 1997. Formerly:
Director since 1988 President and Chief Executive Officer of Kiplivit North
America, Inc. (manufacturing) since July 1995; Chairman of
World Class Processing, Inc. (manufacturing); Executive Vice
President, Westinghouse Electric Corporation. Director
Fincom, Inc. , Control Power Corporation and Tocca
Packaging, Inc.
Thomas D. Larson Self employed (consultant). Formerly: Administrator, United
Age 75 States Federal Highway Administration until January 1992;
Director since 1993 Secretary of the Pennsylvania Department of Transportation;
and Professor of Engineering, The Pennsylvania State
University.
4
John E. Murray, Jr. Chancellor Duquesne University since 2001; Professor of Law
Age 71 of Duquesne University since prior to 1995. Formerly:
Director since 1997 President of Duquesne University since prior to 1995.
Director or Trustee of the Federated Fund Complex.
Richard L. Shaw Chairman of the Board of the Company since 1993. Formerly:
Age 76 Chief Executive Officer from September 1999 to April 2001;
Director since 1965 President and Chief Executive Officer from September 1993
through September 1994; President and Chief Executive
Officer from April 1984 to May 1992.
DIRECTORS' COMPENSATION
Compensation for non-employee directors has been set as follows since May
2001:
- 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.
Effective July 23, 2003, the additional annual retainer for the Chairman of
the Company's Audit Committee was increased to $4,500.
In addition, non-employee directors participate in the 1996 Nonemployee
Directors Stock Incentive Plan, which provides long-term incentive compensation
to eligible directors. Under this plan, each member of the Board of Directors
who is not an employee of the Company or any of its subsidiaries is granted
1,000 restricted shares and an option to purchase 2,000 shares of the Company's
common stock on the first business day following the annual meeting of
shareholders each year.
See also "Related Party Transactions" on page 13.
THE BOARD AND COMMITTEES
The Board has reviewed the independence of its members under the American
Stock Exchange listing standards and has determined that each non-employee
director, and therefore a majority of the Board of Directors, is independent.
It is the Company's policy that all directors attend the annual meeting of
shareholders if reasonably possible. Seven directors attended the 2003 annual
meeting of shareholders.
The Board met five times during 2003. All directors except Mr. Copeland
participated in at least 75% of all meetings of the Board and the committees on
which they served in 2003. Mr. Copeland participated in 67% of all meetings of
the Board and the committee on which he served in 2003.
The Board provides a process for shareholders to send communications to the
Board or any of the directors of the Company. Shareholder communications to the
Board or any director should be sent c/o the Secretary of Michael Baker
Corporation, Airside Business Park, 100 Airside Drive, Moon Township, PA 15108.
All such communications will be compiled by the Secretary of the Company and
submitted to the Board or the individual director at the next regularly
scheduled meeting of the Board.
The Board committees that help the Board fulfill its responsibilities are
discussed below.
5
THE EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors, consisting of Mr. Shaw
as Chairman, and Mr. Copeland, Mr. Fusilli and Dr. Murray, held four meetings in
2003. The Executive Committee has 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 Michael Baker Corporation.
THE AUDIT COMMITTEE
The Audit Committee, consisting of Dr. Bontempo as Chairman, and Mr.
Constantakis and Dr. Larson, held eleven meetings in 2003. The Board of
Directors in its best business judgment has concluded that all Audit Committee
members are independent as defined by the American Stock Exchange listing
standards. In addition, the Board has determined that Mr. Constantakis qualifies
as an "audit committee financial expert" as such is defined by the regulations
of the Securities and Exchange Commission. The Audit Committee acts under a
written charter which was amended by the Board of Directors on February 19,
2004. A copy of the Audit Committee Charter is attached as Appendix A to this
proxy statement. The Audit Committee assists the Board in overseeing the
accounting and financial reporting process of the Company. It is directly
responsible for appointing, compensating, retaining and overseeing the work of
the registered public accounting firm engaged by the Company. The functions
performed by the Audit Committee include:
- appointing the independent accountants,
- reviewing with the independent accountants the plan for, and the results
of, the auditing engagement,
- approving professional services to be provided by the independent
accountants before the services are performed,
- reviewing the independence of the independent accountants,
- overseeing the work 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 established procedures for the receipt, retention
and treatment of complaints received by Michael Baker Corporation regarding
accounting, internal controls or auditing matters.
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.
THE AUDIT COMMITTEE REPORT
The Audit Committee is responsible for reviewing the Company's financial
reporting process on behalf of the Board of Directors. Management of the Company
has the primary responsibility for the financial statements and the reporting
process, including the system of internal controls. In the performance of our
oversight function, we meet with management periodically to consider the
adequacy of the Company's internal controls and the objectivity of its financial
reporting. We meet privately with the independent public accountants, who have
unrestricted access to the Audit Committee. Specifically, we have reviewed and
discussed the consolidated balance sheet of Michael Baker Corporation and
subsidiaries as of December 31, 2003, and the related consolidated statements of
income, shareholders investment and cash flows, for the year then ended, with
management of the Company and the independent public accountants. 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. Based on our review of the financial statements and the
discussions with Company management and the independent public accountants, we
are responsible for
6
making 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
the independent public accountants' independence.
Based on our review and discussions, we have recommended to the Company's
Board of Directors that the aforementioned 2003 audited financial statements be
included in the Company's annual report on Form 10-K for filing with the
Securities and Exchange Commission.
As part of the ongoing oversight process, the Audit Committee, with the
advice of legal counsel, the Company's independent public accountants and other
advisors, has adopted and implemented in a timely manner the new rules and
regulations of the Securities and Exchange Commission and the American Stock
Exchange, including the amendment of the Audit Committee Charter.
Respectfully submitted,
Robert N. Bontempo Nicholas P. Constantakis Thomas D. Larson
THE COMPENSATION COMMITTEE
The Compensation Committee, consisting of Mr. Gavert as Chairman, and Dr.
Bontempo and Dr. Larson, held six meetings in 2003. The Compensation Committee
reviews and recommends to the Board the compensation of senior executives and
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
The members of the Compensation Committee in 2003, Mr. Gavert as Chairman,
Dr. Bontempo and Dr. Larson, are non-employee directors who are independent as
defined by American Stock Exchange listing standards. During 2003, 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.
EVEN IF MICHAEL BAKER CORPORATION'S PREVIOUS FILINGS UNDER THE SECURITIES
LAWS INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, THE FOLLOWING
REPORT AND THE STOCK PERFORMANCE GRAPH ON PAGES 11 AND 12 ARE NOT INCORPORATED
BY REFERENCE INTO ANY SUCH FILINGS.
THE COMPENSATION COMMITTEE REPORT
Introduction. Decisions regarding compensation of the Company's executives
generally are made by the Compensation Committee of the Board. In 2003, the
Compensation Committee consisted of Mr. Gavert as the Chairman and Drs. Bontempo
and Larson.
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 Mr. Gavert and Drs. Bontempo and Larson
in their capacity as the Board's Compensation Committee addressing the Company's
compensation policies for 2003 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
7
Company's "Line-of-Sight" annual Incentive Compensation Plan adopted in 2001
utilizes this philosophy. The following are the Company compensation objectives:
- 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;
- to ensure that pay is competitive with other leading companies in the
Company's industries;
- to reward executive officers and other key employees for corporate, group
and individual performance; and
- 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 reviews data from multiple
sources (Hay Group Inc., Hewitt Associates LLC, Watson Wyatt Data Services and
William M. Mercer Incorporated) in connection with performance of its duties. In
addition, William M. Mercer Incorporated assists in the development of incentive
compensation plans and policies.
Effective April 25, 2001, when Mr. Fusilli succeeded Mr. Shaw as Chief
Executive Officer, Mr. Shaw entered into a Consulting Agreement to provide for
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 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 2003, the
Company agreed to extend the term of this Agreement for two years until April
26, 2005. During 2003, life insurance premiums were paid on Mr. Shaw's behalf
pursuant to the Agreement in the amount of $45,038.
On April 25, 2001, Mr. Fusilli became the President and Chief Executive
Officer of the Company at an annual base salary of $400,000. On February 18,
2003, Mr. Fusilli's salary was increased to $410,000, effective April 1, 2003.
The Compensation Committee believes this salary is in line with the Company's
philosophy for executive officers and is in accord with the responsibilities of
Mr. Fusilli 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. The Committee did
not award a bonus to Mr. Fusilli for fiscal year 2003. No stock options were
granted to Mr. Fusilli or any other executive officers in 2004 for fiscal year
2003 performance.
The Company applies a compensation program consisting of base salary,
annual incentive compensation and long-term incentive compensation. In
determining base salaries for 2003, 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 2003.
The Chief Executive Officer recommends to the Compensation Committee salary
adjustments for executive officers. The Committee reviews these recommendations
in light of the above referenced factors. 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.
2001 "Line of Sight" Incentive Compensation Plan. 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 on an annual
basis. Under the Plan, the Committee established a Company performance goal
measured by earnings per share and revenue. 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
8
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. Stock options awarded under the
Plan are 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. No stock options were granted by the Committee in
2004 for 2003 performance.
2003 Long-Term Incentive Compensation Plan. In February 2003, the Board
adopted the 2003 Long-Term Incentive Compensation Plan, subject to shareholder
approval. The shareholders approved this Plan at the annual meeting on April 24,
2003. The new long-term incentive compensation plan is designed to award
employees for specific performance factors, which are defined in the Plan, over
a three (3) year time period. The Compensation Committee and the Board believe
that this plan design provides a commitment to long-term performance. The Plan
provides for the payment of performance-based incentive awards to employees and
includes provisions that protect the Company's ability to take a tax deduction
for such awards. Payment of incentive awards will be, in part, in the form of
restricted stock, which will assist in aligning the interests of employees and
shareholders.
Respectfully submitted,
Roy V. Gavert, Jr. Robert N. Bontempo Thomas D. Larson
THE GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee, consisting of Dr. Murray as
Chairman, and Mr. Constantakis, Mr. Copeland and Mr. Shaw, held one meeting
during 2003. The Governance and Nominating Committee considers and recommends
candidates to sit on the Board of Directors and addresses issues related to
governance relative to the Company. In order to comply with the new listing
standards of the American Stock Exchange requiring that all members of the
Governance and Nominating Committee be independent directors as defined by the
listing standards, effective February 19, 2004, Mr. Shaw resigned as a member of
the Committee.
The Board has determined in its best business judgment that, following the
resignation of Mr. Shaw, the members of the Governance and Nominating Committee
are independent as defined by the American Stock Exchange listing standards. The
Governance and Nominating Committee acts under a written charter which was
adopted by the Board of Directors on February 20, 2003. A current copy of the
Governance and Nominating Committee Charter is available on Michael Baker
Corporation's website at www.mbakercorp.com.
The Governance and Nominating Committee will consider nominees for Director
recommended by shareholders. Shareholders wishing to recommend a director
candidate for consideration by the Committee can do so by writing to the
Secretary of Michael Baker Corporation, Airside Business Park, 100 Airside
Drive, Moon Township, PA 15108; giving the candidate's name, biographical data
and qualifications. Any such recommendation should be accompanied by a current
resume of the individual and a written statement from the individual of his or
her consent to be named as a candidate and, if nominated and elected, to serve
as a director. Such nominations must be received at least 60 days prior to the
annual meeting of shareholders. No candidates for Board membership have been put
forward by shareholders for election at the 2004 annual meeting.
In considering candidates for the Board, the Governance and Nominating
Committee considers the entirety of each candidate's credentials and does not
have any specific minimum qualifications that must be met by a Board nominee.
The Governance and Nominating Committee is guided by the objectives set forth in
9
its charter that the Board of Directors consists of individuals of the highest
integrity, able to provide insightful, intelligent and effective guidance to
management, coming from diverse educational and professional experiences and
backgrounds who, collectively, provide meaningful counsel to management. If
candidates are recommended by the Company's shareholders, such candidates will
be evaluated using the same criteria. With respect to nominations of continuing
directors for re-election, the individual's previous contributions to the Board
are also considered.
The Committee has the authority under its charter to hire and pay a fee to
a consultant or search firm to assist in the process of identifying and
evaluating director candidates. The Committee did not use a consultant or search
firm in the last fiscal year.
THE HEALTH, SAFETY, ENVIRONMENTAL AND COMPLIANCE COMMITTEE
The Health, Safety, Environmental and Compliance Committee, consisting of
Dr. Larson as Chairman, and Mr. Fusilli and Mr. Gavert, held two meetings in
2003. The Committee reviews and considers health, safety, environmental and
related compliance issues relative to the Company.
SUMMARY COMPENSATION TABLE
This table shows the compensation for Michael Baker Corporation's Chief
Executive Officer and the four remaining most highly paid executive officers in
2003.
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) COMPENSATION(2)
--------------------------- ---- -------- -------- ------------ ---------------
Donald P. Fusilli (3) 2003 $407,278 $ -- -- $ 13,622
President and Chief 2002 $400,005 $ -- 41,056 $ 11,972
Executive Officer 2001 $382,696 $259,503 20,528 $ 11,060
William P. Mooney 2003 $244,158 $ -- -- $ 858
Executive Vice President and 2002 $240,011 $ -- 19,708 $ 858
Chief Financial Officer 2001 $240,011 $108,995 9,854 $ 560
H. James McKnight 2003 $239,059 $ -- -- $ 13,322
Executive Vice President 2002 $234,998 $ 25,000 19,296 $151,549
General Counsel and 2001 $234,998 $106,719 9,648 $ 11,672
Secretary
James B. Richards, Jr. 2003 $203,074 $ 20,000 -- $ 12,290
Executive Vice President 2002 $196,693 $ -- 15,192 $ 10,527
2001 $186,461 $ 84,020 7,596 $ 9,979
John D. Whiteford 2003 $202,970 $ 20,000 -- $ 11,300
Executive Vice President 2002 $196,589 $ -- 15,602 $ 10,521
2001 $190,008 $ 86,287 7,801 $ 9,633
---------------
(1) The Company granted stock options to executive officers in 2002 and 2001,
for 2001 and 2000 performance, respectively. No stock options were granted
to the executive officers in 2003 for 2002 performance.
(2) Includes matching contributions made by the Company under its 401(k) plan
paid on behalf of the following individuals in 2003, 2002 and 2001
respectively: Mr. Fusilli $11,000, $ 9,350 and $9,350; Mr. McKnight $11,000
$9,350 and $9,350; Mr. Richards $11,000, $9,350 and $9,350; Mr. Whiteford
$11,000, $9,350 and $9,350. Also includes group life insurance premiums paid
by the Company on behalf of the following individuals as employees in 2003,
2002 and 2001 respectively: Mr. Fusilli $2,622, $2,622 and $1,710; Mr.
McKnight $2,322, $2,322 and $2,322; Mr. Mooney $858, $858 and $560; Mr.
Richards $1,290, $1,177 and $629; Mr. Whiteford $300, $283 and $283.
Includes $139,877 for Mr. McKnight with respect to stock option exercises in
2002.
(3) Mr. Fusilli's Annual Compensation reflects increases based on changes in his
position during the period presented. Mr. Fusilli was elected President and
Chief Executive Officer of the Company on April 25, 2001.
10
2003 AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
This table shows the number and value of stock options exercised and
unexercised for the named executive officers.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 2003 DECEMBER 31, 2003
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ----------- -------- ------------------------- ----------------------------
Donald P. Fusilli, Jr. 0 $0 69,859/46,163 $ 161,628/$13,979
William P. Mooney 0 $0 17,244/12,318 $ 13,487/$ 4,497
H. James McKnight 0 $0 12,060/29,070 $ 4,402/$ 8,229
James B. Richards, Jr. 0 $0 23,526/15,566 $ 37,444/$ 4,832
John D. Whiteford 0 $0 17,212/9,752 $ 15,484/$ 3,561
---------------
(1) The value of unexercised options is based on the differences between the
exercise prices of the various option grants and the closing price of
Michael Baker Corporation's common stock on the American Stock Exchange on
December 31, 2003 of $10.35.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2003 about
equity awards under our equity compensation plans and arrangements in the
aggregate.
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR FUTURE
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE ISSUANCE UNDER EQUITY
BE ISSUED UPON EXERCISE EXERCISE PRICE OF COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (a)) (1)
------------- ----------------------- -------------------- -------------------------------
Equity compensation plans
approved by shareholders 574,281 $10.70 1,063,248
Equity compensation plans not
approved by shareholders -- -- --
------- ------ ---------
Total 574,281 $10.70 1,063,248
---------------
(1) Excludes 250,000 shares for which shareholder approval is being sought
pursuant to Proposal 2 -- Amend 1996 Nonemployee Directors Stock Incentive
Plan in this proxy statement.
EMPLOYMENT CONTINUATION AGREEMENTS
The Company entered into Employment Continuation Agreements in October
2000, with Messrs. Fusilli, Mooney, McKnight, Richards and Whiteford. 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 that 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 executive's 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 termination.
11
The Agreements with Mr. Richards and Mr. Whiteford are the same except that
the executive agrees 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 executive's
average bonus for the five fiscal years preceding the change of control with
continued benefits for two years.
RELATED PARTY TRANSACTIONS
The Company entered into an Employment Agreement with Richard L. Shaw in
April 1988, which 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 under the terms of his
Employment Agreement at an annual salary of $425,006. In addition, the Company
covered the costs of health insurance and maintained a life insurance policy for
Mr. Shaw as provided for in the Agreement. 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, under the Consulting Agreement, the Company covers the costs of health
insurance 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. During 2003, the
Company agreed to extend the term of this Agreement for two years until April
26, 2005.
STOCK PERFORMANCE GRAPH
The line graph compares, for the five year period commencing December 31,
1998, the yearly percentage change in the cumulative total shareholder return on
the Company's common stock with the cumulative total return of the Russell 2000
Index, the Philadelphia Oil Service 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.
12
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MICHAEL BAKER CORPORATION, THE RUSSELL 2000 INDEX,
THE PHILADELPHIA OIL SERVICE INDEX, AND A PEER GROUP
GRAPHIC
BAKER MICHAEL PHILADELPHIA OIL
CORP RUSSELL 2000 SERVICE PEER GROUP
------------- ------------ ---------------- ----------
12/98 100.00 100.00 100.00 100.00
12/99 67.95 121.26 145.01 77.82
12/00 79.49 117.59 198.84 121.50
12/01 155.90 120.52 138.18 115.86
12/02 112.31 95.83 126.28 67.51
12/03 106.15 141.11 146.47 130.06
* $100 invested on 12/31/98 in stock or index and assumes reinvestment of
dividends. Fiscal year ending December 31.
PROPOSAL 2 -- AMEND 1996 NONEMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
The 1996 Nonemployee Directors Stock Incentive Plan (the "Directors Plan")
was originally adopted by the Board of Directors on February 27, 1996, and was
amended, subject to your approval, by the Board of Directors on February 19,
2004. The amendment increases the number of shares available for grant under the
Directors Plan by 250,000 and extends the term of the plan to February 18, 2014.
The affirmative vote of a majority of the votes represented in person or by
proxy at the annual meeting is required for approval of the amendment of the
Directors Plan.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT OF THE DIRECTORS PLAN.
The principal features of the Directors Plan are summarized below, but the
summary is qualified in its entirety by the full text of the Directors Plan,
which is set forth as Appendix B to this proxy statement.
GENERAL
The purposes of the Directors Plan are to promote the long-term success of
the Company by creating a long-term mutuality of interests between the
non-employee directors and shareholders of the Company, to provide an additional
inducement for such directors to remain with the Company, to reward such
directors by providing an opportunity to acquire shares of Common Stock on
favorable terms and to provide a means through which the Company may attract
able persons to serve as directors of the Company.
The aggregate number of shares which may be issued and as to which grants
or awards of stock options and/or restricted shares may be made under the
Directors Plan is 400,000 shares of common stock, subject to proportionate
adjustment in the event of stock splits and similar events. If any stock option
granted under the Directors Plan is cancelled by mutual consent or terminates or
expires for any reason without having been exercised in full, the number of
shares subject thereto is again available for purposes of the Directors Plan. If
13
shares of common stock are forfeited to the Company pursuant to the restrictions
applicable to restricted shares awarded under the Directors Plan, the shares so
forfeited are not again available for purposes of the Directors Plan unless
during the period such shares were outstanding the awardee received no dividends
or other "benefits of ownership" from such shares. For purposes of applying that
standard, no benefit is deemed to be derived by an awardee from voting rights or
where dividends accumulate but due to forfeiture are never realized.
ADMINISTRATION
The Directors Plan is administered by the Compensation Committee of the
Board.
The Committee has the power to interpret the Directors Plan and to
prescribe rules, regulations and procedures in connection with the operations of
the Directors Plan. All questions of interpretation and application of the
Directors Plan, or as to stock options granted or restricted shares awarded
under the Directors Plan, are subject to the determination of the Committee,
which is final and binding.
Notwithstanding the discretion to administer the Directors Plan granted to
the Committee, the selection of the directors to whom stock options are to be
granted or restricted shares awarded, the timing of such grants and awards, the
number of shares subject to any stock options or restricted share award, the
terms of any restricted share award, the exercise price of any stock option, the
periods during which any stock option may be exercised and the term of any stock
option are set forth in the Directors Plan, and the Committee has no discretion
as to such matters.
GRANT OF STOCK OPTIONS AND AWARD OF RESTRICTED SHARES
On the first business day following each annual meeting of shareholders of
the Company, each person who is then a member of the Board of Directors of the
Company and who is not then an employee of the Company or any of its
subsidiaries is granted a "nonstatutory stock option" to purchase 2,000 shares
of common stock, and is awarded 1,000 restricted shares. If the number of shares
remaining available for the grant of stock options and the award of restricted
shares under the Plan is not sufficient for each non-employee director to be
granted an option for 2,000 shares and awarded 1,000 restricted shares, then
each non-employee director is granted an option and awarded restricted shares
for a number of whole shares equal to the number of shares then remaining
available divided by the number of non-employee directors, disregarding any
fractions of a share, and allocating one-half of the remaining shares to options
and one-half to restricted shares.
STOCK OPTIONS
The option price for each stock option is the fair market value of the
common stock on the date the stock option is granted. Fair market value, for
this purpose, is generally 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.
No stock option may be exercised by a grantee during the first six months
of its term, unless the exercise date has been accelerated upon the occurrence
of one or more events described under "Acceleration of Options and Lapse of
Restrictions in Certain Events" below. Each stock option will expire, and 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.
If a grantee ceases to be a director for any reason, any unexpired option
which is then exercisable remains exercisable for a period of one year following
the date such grantee ceases to be a director or until the expiration of the
option, whichever is shorter. If the grantee dies after ceasing to be a
director, any unexpired stock option is exercisable by the person entitled to do
so under his will or by his legal representative (but only to the extent such
option was exercisable by the grantee immediately prior to his death) at any
time prior to the expiration of such option or within one year after the date of
death, whichever is shorter.
14
The option price for each stock option is payable in full in cash at the
time of exercise; however, in lieu of cash the person exercising the stock
option may 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 (determined as described above) 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.
No stock option granted under the Directors Plan is transferable other than
by will or by the laws of descent and distribution, and a stock option may be
exercised during a grantee's lifetime only by the grantee.
RESTRICTED SHARES
Awards of restricted shares are confirmed by an agreement which sets forth
the number of shares of common stock awarded. The agreement is executed on
behalf of the Company by the Chief Executive Officer or by the Chief Financial
Officer and by the awardee. None of the restricted shares may be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during a period of
two years commencing on the date of the award of the restricted shares (the
"Restricted Period"), except that shares may be transferred by will or by the
laws of' descent and distribution and the transfer restriction will lapse in the
event the awardee ceases to be a director of the Company as a result of
voluntary retirement with the consent of the Company, disability, or death. The
restricted shares are forfeited during the Restricted Period in the event the
awardee ceases to be a director of the Company for any reason, other than as a
result of voluntary retirement with the consent of the Company, disability, or
death.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, share certificates for the restricted shares are
issued in the name of the awardee and deposited with the Company in escrow
together with related stock powers signed by the awardee. Upon the lapse or
termination of the applicable restrictions (and not before such time), the
awardee is issued or transferred share certificates for such restricted shares.
From the date a restricted share award is effective, the awardee is a
shareholder with respect to all the shares represented by such certificates and
has all the rights of a shareholder with respect to all the shares, including
the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares.
ACCELERATION OF OPTIONS AND LAPSE OF RESTRICTIONS IN CERTAIN EVENTS
The Directors Plan provides for acceleration of the exercisability of stock
options and the lapse of restrictions on restricted share awards upon the
occurrence of one or more events described in Section 8 of the Plan ("Section 8
Events"). Such an event is deemed to have occurred when (1) the Company acquires
actual knowledge that any person (other than the Company, a subsidiary or an
employee benefit plan sponsored by the Company) has acquired beneficial
ownership, directly or indirectly, of securities representing 20 percent or more
of the voting power of the Company, (2) a tender offer is made to acquire
securities representing 20 percent or more of the voting power of the Company,
(3) a person other than the Company solicits proxies relating to the election or
removal of 50 percent or more of any class of the Board of Directors or (4) 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 corporation
or any corporation which acquires the stock of the Company or more than 10
percent of its consolidated assets.
Notwithstanding any other provision contained in the Directors Plan, in
case any Section 8 Event occurs, all outstanding stock options become
immediately and fully exercisable whether or not otherwise exercisable by their
terms and all restrictions applicable to restricted share awards will lapse
regardless of the scheduled lapse of such restrictions.
POSSIBLE ANTI-TAKEOVER EFFECT
The provisions of the Plan providing for the acceleration of the exercise
date of stock options and the lapse of restrictions on restricted share awards
upon the occurrence of a Section 8 Event may be considered as having an
anti-takeover effect.
15
MISCELLANEOUS
The Board of Directors may amend or terminate the Directors Plan at any
time except that the Board may not revoke any outstanding stock options and
except that no amendment of the Directors Plan may (i) be made without
shareholder approval if shareholder approval of the amendment is at the time
required for stock options under the Directors Plan to qualify for the exemption
from short-swing trading liability under Section 16(b) of the Securities
Exchange Act of 1934 provided by Securities and Exchange Commission Rule 16b-3
or by the rules of any stock exchange on which the Common Stock is listed, (ii)
amend more than once every six months the provisions of the Directors Plan
relating to the selection of the directors to whom stock options are to be
granted or restricted shares are to be awarded, the timing of such grants and
awards, the number of shares subject to any stock option or restricted share
award, the exercise price of any stock option, the periods during which any
stock option may be exercised and the term of any stock option, other than to
comport with changes in the Internal Revenue Code or the rules and regulations
thereunder or (iii) otherwise amend the Directors Plan in any manner that would
cause stock options under the Directors Plan not to qualify for the exemption
provided by Rule 16b-3. No amendment or termination of the Directors Plan may,
without the written consent of the holder of a stock option or restricted share
award theretofore awarded under the Directors Plan, adversely affect the rights
of such holder with respect thereto.
Notwithstanding the provisions described in the preceding paragraph, the
Board has the power to amend the Directors Plan in any manner deemed necessary
or advisable for stock options granted under the Directors Plan to qualify for
the exemption provided by Rule 16b-3, and any such amendment will, to the extent
deemed necessary or advisable by the Board, be applicable to any outstanding
stock options theretofore granted under the Directors Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of nonstatutory stock options and the
award of restricted shares under present law.
Nonstatutory Stock Options. A director will 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, 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
by the director on the date of exercise. If the option price of the nonstatutory
stock option is paid in whole or in part in shares, 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 treated as compensation received on the date of exercise
of the nonstatutory stock option. Special rules apply upon the exercise by a
director of a nonstatutory stock option in certain limited circumstances if
there is a Section 16(b) restriction period following the date of exercise.
The Company generally is entitled to a deduction for compensation paid in
the same amount treated as compensation received.
Restricted Shares. An awardee of restricted shares does not recognize any
taxable income for Federal income tax purposes in the year of the award,
provided the shares are subject to restrictions (that is, they are
nontransferable and subject to a substantial risk of forfeiture). If an awardee
is subject to Section 16(b) of the 1933 Act on the date of the award, the shares
generally are deemed to be subject to restrictions (in addition to the
restrictions imposed by the award) for at least six months following the date of
the award. However, an awardee may elect under Section 83(b) of the Code to
recognize compensation income in the year of the award in an amount equal to the
fair market value of the shares on the date of the award, determined without
regard to the restrictions. If the awardee does not make a Section 83(b)
election, the fair market value of the shares on the date the restrictions lapse
is treated as compensation income to the awardee and is taxable in the year the
restrictions lapse. The Company generally is entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
awardee.
16
Other Tax Matters. The acceleration of the exercise date of stock options,
the exercise of a stock option, or the lapse of restrictions on restricted
shares following the occurrence of a Section 8 Event, in certain circumstances,
may result in (i) a 20 percent Federal excise tax (in addition to Federal income
tax) to the director on certain amounts associated with the stock option or, in
the case of restricted shares, on all or a portion of the fair market value of
the shares on the date the restrictions lapse and (ii) the loss of the
compensation deduction which would otherwise be allowable to the Company.
NEW PLAN BENEFITS TABLE
The following table sets forth the options and restricted shares that were
granted to date under the Directors Plan and are to be granted during 2004.
Total grants to be made under the Directors Plan in the future are not
determinable. No stock options will be granted and no restricted shares will be
awarded under the Directors Plan to employees of the Company.
RESTRICTED SHARES
NAME OF DIRECTOR FISCAL YEAR OPTIONS GRANTED GRANTED
---------------- ----------- --------------- -----------------
Robert N. Bontempo 1997-2000 4,000 2,000
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
Nicholas P. Constantakis 2000 1,000 500
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
William J. Copeland 1996-2000 5,000 2,500
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
Roy V. Gavert, Jr. 1996-2000 5,000 2,500
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
Thomas D. Larson 1996-2000 5,000 2,500
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
John E. Murray, Jr. 1997-2000 4,000 2,000
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
Richard L. Shaw 1996-2000 4,000 2,500
2001-2003(1) 6,000 3,000
2004(2) 2,000 1,000
---------------
(1) At a meeting held on January 15 and 16, 2001, the Compensation Committee of
the Board of Directors approved an increase in the annual stock option grant
to non-employee directors from 1,000 shares to 2,000 shares and an increase
in the annual restricted stock award to non-employee directors from 500
shares to 1,000 shares. The action of the Compensation Committee was
approved by the full Board of Directors at a regular meeting on February 21,
2001.
(2) Grants to be made to non-employee directors on the first business day
following the 2004 annual meeting of shareholders.
17
OTHER INFORMATION
OTHER BUSINESS
We do not expect any business to come before the meeting other than the
election of directors and the request for approval of the amendment of the 1996
Nonemployee Directors Stock Incentive Plan. If other business is properly
raised, your proxy authorizes its holder to vote according to their best
judgment.
INDEPENDENT ACCOUNTANTS
The Audit Committee of 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 2004.
PwC audited the financial statements of the Company for 2003. The Board of
Directors expects that representatives of PwC will be present at the annual
meeting and, while the representatives do not currently plan to make a statement
at the meeting, they will be available to respond to appropriate questions.
AUDIT FEES
The following table sets forth the aggregate fees for services provided by
PwC for the fiscal years ended December 31, 2003 and 2002:
2003 2002
-------- --------
Audit Fees $381,600 $338,400
Audit Related Fees (1) 90,000 11,000
Tax Fees -- --
All Other Fees -- --
-------- --------
Total Fees $471,600 $349,400
======== ========
---------------
(1) Services related to review of implementation of financial accounting system
in 2003 and audit of employee benefit plan in 2002.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee is responsible for the appointment, compensation and
oversight of the work of the independent auditor. As part of this
responsibility, the Audit Committee is required to pre-approve the audit and
non-audit services performed by the independent auditor in order to assure that
the provision of such services does not impair the auditor's independence.
The annual audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. With respect to other permitted
services, the Committee pre-approves certain services and categories of services
on a fiscal year basis subject to thresholds. All other permitted services must
be pre-approved by the Audit Committee.
The Chief Financial Officer determines whether services to be provided
require pre-approval or are included within the list of pre-approved services.
All services provided by PwC in fiscal year 2003 were pre-approved by the
Audit Committee.
CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS
The Company has adopted a Code of Ethics for Senior Officers incorporating
the provisions required by the SEC for senior financial officers of the Company.
A copy of the Code is posted on the Company's website at www.mbakercorp.com. In
the event that the Company makes any amendment to, or grants any waiver from a
provision of the Code of Ethics for Senior Officers that requires discussion
under SEC rules, the Company will disclose the amendment or waiver and the
reasons for such on our website.
18
EXPENSES OF SOLICITATION
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
other employees of the Company may, for no additional compensation, solicit
proxies in person or by telephone to vote for all nominees and for amendment of
the 1996 Nonemployee Directors Stock Incentive Plan.
SHAREHOLDER PROPOSALS FOR NEXT YEAR
To be eligible for inclusion in next year's proxy for the 2005 annual
meeting of shareholders, the deadline for shareholder proposals to be received
by our Secretary is December 3, 2004. In connection with the 2005 annual meeting
of shareholders, if we do not receive notice of a matter or proposal to be
considered, on or before February 15, 2005, or in accordance with Section 2.01.1
of our 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 the 2005
annual meeting.
By order of the Board of
Directors,
H. JAMES MCKNIGHT
Secretary
19
APPENDIX A
MICHAEL BAKER CORPORATION
AUDIT COMMITTEE CHARTER
(AMENDED AND RESTATED AS OF FEBRUARY 19, 2004)
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 "financially sophisticated" having past
employment experience in finance or accounting, professional certification in
accounting, or other comparable experience or background. The Committee shall
have at least one member who qualifies as an "audit committee financial expert"
under Item 401(h) of Regulation S-K. 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. The Company will provide appropriate funding
A-1
as determined by the Committee for payments of compensation of the
registered public accountant, advisers and other expenses to carry out
the Committee's duties.
- 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 Company that may interfere with the exercise
of their independence from management and the Company.
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 Company for the current year or any of
the past three years;
- a director who has accepted any compensation from the Company or any of
its affiliates or has an immediate family member who has accepted
compensation from the Company in excess of $60,000 during any of the past
three fiscal years, 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 Company
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
Company made, or from which the Company received payments (other than
those arising solely from investments in the Company's securities) that
exceed 5% of the Company'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, or has an immediate family
member who is employed as an executive, of another entity where any of
the Company's executives serve on that entity's compensation committee.
- A director who is, or has an immediate family member who is, a current
partner of the Company's outside auditor, or was a partner or employee of
the Company's outside auditor who worked on the Company's audit at any
time during any of the past three years.
- A director who is an "affiliated person" of the Company as defined under
Rule 10A-3 of the Exchange Act.
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.
A-2
COMMITTEE'S RELATIONSHIP WITH EXTERNAL AND INTERNAL AUDITORS
- The Audit Committee, in its capacity as a committee of the board of
directors, is directly responsible for the appointment, compensation,
retention and oversight of the work of the external auditors engaged to
audit and issue an audit report on the Company's financial statements.
- The external auditors, in their capacity as independent registered public
accountants, shall be responsible to the Audit Committee, in its capacity
as a committee of the Board of Directors, 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 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 Committee shall pre-approve all services performed by the external
auditors.
- The internal audit function shall be responsible to 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.
A-3
- 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)
- This 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).
- Procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting
controls or auditing matters and the confidential anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters.
- Internal auditor performance and changes in internal audit leadership
and/or key financial management.
ROLE AND RESPONSIBILITY OF AUDIT COMMITTEE
The function of the Audit Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and internal
control over financial reporting, and the auditor's responsibility to plan and
carry out a proper audit. Specially, the Company's management is responsible
for: (1) the preparation, presentation and integrity of the Company's financial
statements; (2) the maintenance of appropriate accounting and financial
reporting principles and policies; and (3) the maintenance of internal control
over financial reporting and other procedures designed to assure compliance with
accounting standards and related laws and regulations. The independent auditors
are responsible for planning and carrying out an audit consistent with
applicable legal and professional standards and the terms of their engagement
letter. Nothing in this Charter shall be construed to reduce the
responsibilities or liabilities of the Company's service providers, including
the auditors.
Although the Audit Committee is expected to take a detached and questioning
approach to the matters that come before it, the review of the Company's
financial statements by the Audit Committee is not an audit, nor does the
Committee's review substitute for the responsibilities of the Company's
management for preparing, or the independent auditors for auditing, the
financial statements. Members of the Audit Committee are not full-time employees
of the Company and, in serving on this Committee, are not, and do not hold
themselves out to be, acting as accountants or auditors. As such, it is not the
duty or responsibility of the Committee or its members to conduct "field work"
or other types of auditing or accounting reviews or procedures.
In discharging their duties the members of the Audit Committee are entitled
to rely, to the extent reasonable, on information, opinions, reports, or
statements, including financial statements and other financial data, if prepared
or presented by: (1) one or more officers of the Company whom the director
reasonably believes to be reliable and competent in the matters presented; (2)
legal counsel, public accountants, or other persons as to matters the director
reasonably believes are within the person's professional or expert competence;
or (3) a Board committee of which the director is not a member.
A-4
APPENDIX B
MICHAEL BAKER CORPORATION
1996 NONEMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
The purposes of the 1996 Nonemployee Directors Stock Incentive Plan (the
"Plan") are to promote the long-term success of Michael Baker Corporation (the
"Corporation") by creating a long-term mutuality of interests between the
nonemployee Directors and shareholders of the Corporation, to provide an
additional inducement for such nonemployee Directors to remain with the
Corporation, to reward such nonemployee Directors by providing an opportunity to
acquire shares of the Common Stock, par value $1.00 per share, of the
Corporation (the "Common Stock") on favorable terms and to provide a means
through which the Corporation may attract able persons to serve on the Board of
Directors of the Corporation (the "Board").
SECTION 1
ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") appointed by the Board and consisting of not less than two members
of the Board.
The Committee shall keep records of action taken at its meetings. A
majority of the Committee shall constitute a quorum at any meeting, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts unanimously approved in writing by the Committee, shall be the
acts of the Committee.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan, or as to stock options granted under the Plan or
restricted shares awarded under the Plan, shall be subject to the determination
of the Committee.
Notwithstanding the above, the selection of the nonemployee Directors to
whom stock options are to be granted or restricted shares are to be awarded, the
timing of such grants and awards, the number of shares subject to any stock
option or restricted share award, the terms of any restricted share award, the
exercise price of any stock option, the periods during which any stock option
may be exercised and the term of any stock option shall be as hereinafter
provided, and the Committee shall have no discretion as to such matters.
SECTION 2
ELIGIBILITY
Only nonemployee Directors of the Corporation, as defined in Section 4,
shall be eligible to be granted stock options and to receive awards of
restricted shares as described herein.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock which may be issued and
as to which grants or awards of stock options and/or restricted shares may be
made under the Plan is 400,000 shares, subject to adjustment and substitution as
set forth in Section 7. If any stock option granted under the Plan is canceled
or terminates or expires for any reason without having been exercised in full,
the number of shares subject thereto shall again be available for purposes of
the Plan. If shares of Common Stock are forfeited to the Corporation pursuant to
the restrictions applicable to restricted shares awarded under the Plan, the
shares so forfeited shall not again be available for purposes of the Plan unless
during the period such shares were outstanding the awardee received no dividends
or other "benefits of ownership" from such shares. For the purpose of applying
this standard, no benefit is deemed to be derived by an awardee from voting
rights or where dividends accumulate but due to forfeiture are never realized.
The shares which may be issued under the Plan may be
B-1
either authorized but unissued shares or treasury shares or partly each, as
shall be determined from time to time by the Board.
SECTION 4
GRANT OF STOCK OPTIONS AND AWARD OF RESTRICTED SHARES
On the first business day following the day of each annual meeting of the
shareholders of the Corporation, each person who is then a member of the Board
of Directors of the Corporation and who is not then an employee of the
Corporation (a "nonemployee Director") shall be granted a "nonstatutory stock
option" (i.e., a stock option which does not qualify under section 422 or
section 423 of the Internal Revenue Code of 1986) to purchase 2,000 shares of
Common Stock, and shall be awarded 1,000 restricted shares. If the number of
shares then remaining available for the grant of stock options and the award of
restricted shares under the Plan is not sufficient for each nonemployee Director
to be granted an option for 2,000 shares and awarded 1,000 restricted shares,
then each nonemployee Director shall be granted an option and awarded restricted
shares equal to the number of shares then remaining available divided by the
number of nonemployee Directors, disregarding any fractions of a share, and
allocating one-half of the remaining shares to options and one-half to
restricted shares.
SECTION 5
TERMS AND CONDITIONS OF STOCK OPTIONS
Stock options granted under the Plan shall be subject to the following
terms and conditions:
(A) The purchase price at which each stock option may be exercised
(the "option price") shall be one hundred percent (100%) of the fair market
value per share of the Common Stock covered by the stock option on the date
of grant, determined as provided in Section 5(G).
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order), which may include cash forwarded through
a broker or other agent-sponsored exercise or financing program; provided,
however, that in lieu of such cash the person exercising the stock option
may pay the option price in whole or in part by delivering to the
Corporation shares of the Common Stock having a fair market value on the
date of exercise of the stock option, determined as provided in Section
5(G), equal to the option price for the shares being purchased; except that
(i) any portion of the option price representing a fraction of a share
shall in any event be paid in cash and (ii) no shares of the Common Stock
which have been held for less than six months may be delivered in payment
of the option price of a stock option. If the person exercising a stock
option participates in a broker or other agent-sponsored exercise or
financing program, the Corporation will cooperate with all reasonable
procedures of the broker or other agent to permit participation by the
person exercising the stock option in the exercise or financing program.
Notwithstanding any procedure of the broker or other agent-sponsored
program, if the option price is paid in cash, the exercise of the stock
option shall not be deemed to occur and no shares of the Common Stock will
be issued until the Corporation has received full payment in cash
(including check, bank draft or money order) for the option price from the
broker or other agent. The date of exercise of a stock option shall be
determined under procedures established by the Committee, and as of the
date of exercise the person exercising the stock option shall be considered
for all purposes to be the owner of the shares with respect to which the
stock option has been exercised. Payment of the option price with shares
shall not increase the number of shares of the Common Stock which may be
issued under the Plan as provided in Section 3.
(C) Except as otherwise provided in Section 8(B), no stock option
shall be exercisable while the grantee is a Director prior to the six month
anniversary of the date of grant. No stock option shall be exercisable
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.
(D) No stock option shall be transferable by the grantee otherwise
than by Will, or if the grantee dies intestate, by the laws of descent and
distribution of the state of domicile of the grantee at the time of death.
All stock options shall be exercisable during the lifetime of the grantee
only by the grantee.
B-2
(E) If a grantee ceases to be a Director of the Corporation for any
reason, any outstanding stock options of the grantee shall be exercisable
and shall terminate according to the following provisions:
(i) If a grantee ceases to be a Director of the Corporation, any
then outstanding stock option of such grantee shall be exercisable by
the grantee (but only to the extent exercisable by the grantee
immediately prior to the grantee ceasing to be a Director) at any time
prior to the expiration date of such stock option or within one year
after the date the grantee ceases to be a Director, whichever is the
shorter period, provided that, in no event shall the option be
exercisable during the first six months of its term;
(ii) Following the death of a grantee after ceasing to be a
Director and during a period when a stock option remains outstanding,
any stock option of the grantee outstanding at the time of death shall
be exercisable by such person entitled to do so under the Will of the
grantee or by such legal representative (but only to the extent the
stock option was exercisable by the grantee immediately prior to the
death of the grantee) at any time prior to the expiration date of such
stock option or within one year after the date of death, whichever is
the shorter period.
A stock option of a grantee who has ceased to be a Director of the
Corporation shall terminate upon the expiration of the applicable exercise
period, if any, specified in this Section 5(E).
(F) All stock options shall be confirmed by an agreement, or an
amendment thereto, which shall be executed on behalf of the Corporation by
the Chief Executive Officer or by the Chief Financial Officer and by the
grantee.
(G) Fair market value of the Common Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (a) if the Common Stock is listed on the New York
or American Stock Exchange, the highest and lowest sales prices per share
of the Common Stock as quoted in the Composite Transactions listing for
such exchange on such date, (b) if the Common Stock is not listed on either
such exchange, the highest and lowest sales price per share of Common Stock
for such date on (or on any composite index including) the principal United
States securities exchange registered under the 1934 Act on which the
Common Stock is listed, or (c) if the Common Stock is not listed on any
such exchange, the highest and lowest sales prices per share of the Common
Stock for such date on the National Association of Securities Dealers
Automated Quotations System or any successor system then in use ("NASDAQ").
If there are no such sale price quotations for the date as of which fair
market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair
market value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of the Common Stock
as so quoted on the nearest date before and the nearest date after the date
as of which fair market value is to be determined. The average should be
weighted inversely by the respective numbers of trading days between the
selling dates and the date as of which fair market value is to be
determined. If there are no such sale price quotations on or within a
reasonable period both before and after the date as of which fair market
value is to be determined, then fair market value of the Common Stock shall
be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on NASDAQ, or if none, the weighted
average of the means between such bona fide bid and asked prices on the
nearest trading date before and the nearest trading date after the date as
of which fair market value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in the manner
described above in this Section 5(G). If the fair market value of the
Common Stock cannot be determined on the basis previously set forth in this
Section 5(G) on the date as of which fair market value is to be determined,
the Committee shall in good faith determine the fair market value of the
Common Stock on such date. Fair market value shall be determined without
regard to any restriction other than a restriction which, by its terms,
will never lapse.
(H) The obligation of the Corporation to issue shares of the Common
Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Corporation, (ii) the condition that the shares shall have been listed
(or authorized for listing upon official notice of issuance)
B-3
upon each stock exchange, if any, on which the Common Stock shares may then
be listed and (iii) all other applicable laws, regulations, rules and
orders which may then be in effect.
SECTION 6
TERMS AND CONDITIONS OF RESTRICTED SHARES
Awards of restricted shares shall be confirmed by an agreement which shall
set forth the number of shares of Common Stock awarded. The agreement shall be
executed on behalf of the Corporation by the Chief Executive Officer or by the
Chief Financial Officer and by the awardee. Any award of restricted shares shall
be subject to the following terms and restrictions:
(A) None of the shares of the restricted shares may be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the
Restricted Period (as hereinafter defined), except that shares may be
transferred by Will or, if the awardee dies intestate, by the laws of
descent and distribution of the state of domicile of awardee at the time of
death.
(B) The restricted shares shall be forfeited during the Restricted
Period in the event the awardee ceases to be a Director of the Corporation
for any reason, other than as a result of voluntary retirement with the
consent of the Corporation, disability, or death.
(C) The restrictions set forth in this Section 6 shall apply for a
period (the "Restricted Period") of two years commencing on the date of the
award of the restricted shares, except that, in the event the awardee
ceases to be a Director of the Corporation as a result of voluntary
retirement with the consent of the Corporation, disability, or death, the
Restricted Period set forth in this Section 6 shall end on the date of such
retirement, disability, or death, whichever the case.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, share certificates for the restricted shares shall
be issued in the name of the awardee and deposited with the Corporation in
escrow together with related stock powers signed by the awardee. Upon the lapse
or termination of the applicable restrictions (and not before such time), the
awardee shall be issued or transferred share certificates for such restricted
shares. From the date a restricted share award is effective, the awardee shall
be a shareholder with respect to all the shares represented by such certificates
and shall have all the rights of a shareholder with respect to all the shares,
including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares.
SECTION 7
ADJUSTMENT AND SUBSTITUTION SHARES
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
subject to any outstanding stock options and the number of shares of the Common
Stock which may be issued under the Plan but are not subject to outstanding
stock options on the date fixed for determining the shareholders entitled to
receive such stock dividend or distribution shall be adjusted by adding thereto
the number of shares of the Common Stock which would have been distributable
thereon if such shares had been outstanding on such date. Shares of Common Stock
so distributed with respect to any restricted shares held in escrow shall also
be held by the Corporation in escrow and shall be subject to the same
restrictions as are applicable to the restricted shares on which they were
distributed.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option and for
each share of the Common Stock which may be issued under the Plan but which is
not then subject to any outstanding stock option, the number and kind of shares
of stock or other securities into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be exchangeable.
Any such stock or securities, as well as any cash or other property, into or for
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which any restricted shares held in escrow shall be changed or exchangeable in
any such transaction shall also be held by the Corporation in escrow and shall
be subject to the same restrictions as are applicable to the restricted shares
in respect of which such stock, securities, cash or other property was issued or
distributed.
In case of any adjustment or substitution as provided for in the first two
paragraphs of this Section 7, the aggregate option price for all shares subject
to each then outstanding stock option prior to such adjustment or substitution
shall be the aggregate option price for all shares of stock or other securities
(including any fraction) to which such shares shall have been adjusted or which
shall have been substituted for such shares. Any new option price per share
shall be carried to at least three decimal places with the last decimal place
rounded upwards to the nearest whole number.
If the outstanding shares of the Common Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash, or extraordinary distribution
to shareholders of the Common Stock, (a) the Committee shall make any
adjustments to any then outstanding stock option which it determines are
equitably required to prevent dilution or enlargement of the rights of optionees
which would otherwise result from any such transaction, and (b) any stock,
securities, cash or other property distributed with respect to any restricted
shares held in escrow shall also be held by the Corporation in escrow and shall
be subject to the same restrictions as are applicable to the restricted shares
in respect of which such stock, securities, cash or other property was
distributed or exchanged.
No adjustment or substitution provided for in this Section 7 shall require
the Corporation to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution. Owners of restricted shares held in
escrow shall be treated in the same manner as owners of Common Stock not held in
escrow with respect to fractional shares created by an adjustment or
substitution of shares, except that, any cash or other property paid in lieu of
a fractional share shall be subject to restrictions similar to those applicable
to the restricted shares exchanged therefor.
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) Definitions.
For purposes of the Plan, the following terms shall have the following
meanings:
(1) The term "Person" shall be used as the term is used in Section
13(d) and 14(d) of the 1934 Act.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) "Voting Shares" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors (without
consideration of the rights of any class of stock other than the Common
Stock to elect directors by a separate class vote); and a specified
percentage of "Voting Power" of a company shall mean such number of the
Voting Shares as shall enable the holders thereof to cast such percentage
of all the votes which could be cast in an annual election of directors
(without consideration of the rights of any class of stock other than
Common Stock to elect directors by a separate class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Corporation (other than such an offer made by the
Corporation), whether or not such offer is approved or opposed by the
Board.
(5) "Continuing Director" shall mean a director of the Corporation who
either (a) was a director of the Corporation on the effective date of the
Plan or (b) is an individual whose election, or nomination for election, as
a director of the Corporation was approved by a vote of at least two-thirds
of the directors then still in office who were Continuing Directors (other
than an individual whose initial assumption of
B-5
office is in connection with an actual or threatened election contest
relating to the election of directors of the Corporation which would be
subject to Rule 14a-11 under the 1934 Act, or any successor Rule.
(6) "Section 8 Event" shall mean the date upon which any of the
following events occur:
(a) The Corporation acquires actual knowledge that any Person other
than the Corporation, a Subsidiary, the Corporation's Stock Ownership
Plan and Trust or any employee benefit plan(s) sponsored by the
Corporation has acquired the Beneficial Ownership, directly or
indirectly, of securities of the Corporation entitling such Person to
20% or more of the Voting Power of the Corporation; or
(b) A Tender Offer is made to acquire securities of the Corporation
entitling the holders thereof to 20% or more of the Voting Power of the
Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act (or
any successor Rule) relating to the election or removal of 50% or more
of the members of any class of the Board shall be made by any person
other than the Corporation or less than 51% of the members of the Board
shall be Continuing Directors; or
(d) The shareholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other disposition of
assets of the Corporation as a result of which the shareholders of the
Corporation immediately prior to such transaction shall not hold,
directly or indirectly, immediately following such transaction a
majority of the Voting Power of (i) in the case of a merger or
consolidation, the surviving or resulting corporation, (ii) in the case
of a share exchange, the acquiring corporation or (iii) in the case of a
division or a sale or other disposition of assets, each surviving,
resulting or acquiring corporation which, immediately following the
transaction, holds more than 10% of the consolidated assets of the
Corporation immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a grantee
or awardee are included in determining the Beneficial Ownership of a Person
referred to in paragraph 6(a), (ii) a grantee or awardee is required to be named
pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing
requirement) required to be filed by the bidder making a Tender Offer referred
to in paragraph 6(b) or (iii) if a grantee or awardee is a "participant" as
defined in 14a-11 under the 1934 Act (or any successor Rule) in a solicitation
(other than a solicitation by the Corporation) referred to in paragraph 6(c),
then no Section 8 Event with respect to such grantee or awardee shall be deemed
to have occurred by reason of such event.
(B) Acceleration of the Exercise Date of Stock Options.
Notwithstanding any other provision contained in the Plan, in case any
"Section 8 Event" occurs, all outstanding stock options (other than those held
by a person referred to in the proviso to Section 8(A)(6)) shall become
immediately and fully exercisable whether or not otherwise exercisable by their
terms.
(C) Lapse of Restrictions on Awards.
If any "Section 8 Event" occurs prior to the scheduled lapse of all
restrictions applicable to awards under the Plan (other than those held by a
person referred to in the proviso to Section 8(A)(6)), all such restrictions
shall lapse upon the occurrence of any such "Section 8 Event" regardless of the
scheduled lapse of such restrictions.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF NONEMPLOYEE DIRECTORS AND THE CORPORATION
Nothing in the Plan, in any stock option, in any award under the Plan or in
any agreement providing for any of the foregoing shall confer any right to any
person to continue as a Director of the Corporation or interfere in any way with
the rights of the shareholders of the Corporation or the Board to elect and
remove Directors.
B-6
SECTION 10
AMENDMENT
The right to alter and amend the Plan at any time and from time to time and
the right to revoke or terminate the Plan are hereby specifically reserved to
the Board; provided that no such termination shall terminate any outstanding
stock options granted under the Plan; and provided further that no alteration or
amendment of the Plan shall (a) be made without shareholder approval if
shareholder approval of the amendment is at the time required for stock options
under the Plan to qualify for the exemption from Section 16(b) of the 1934 Act
provided by Rule 16b-3 or by the rules of any stock exchange on which the Common
Stock may then be listed, (b) amend more than once every six months the
provisions of the Plan relating to the selection of the Directors to whom stock
options are to be granted or restricted shares are to be awarded, the timing of
such grants and awards, the number of shares subject to any stock option or
restricted share award, the exercise price of any stock option, the periods
during which any stock option may be exercised and the term of any stock option,
other than to comport with changes in the Internal Revenue Code or the rules and
regulations thereunder or (c) otherwise amend the Plan in any manner that would
cause stock options under the Plan not to qualify for the exemption provided by
Rule 16b-3. No alteration, amendment, revocations or termination of the Plan
shall, without the written consent of the holder of stock option or restricted
share award, theretofore awarded under the Plan, adversely affect the rights of
such holder with respect thereto.
SECTION 11
EFFECTIVE DATE AND DURATION OF PLAN
The effective date of the Plan shall be February 27, 1996, the date of
adoption of the Plan by the Board, and the effective date of the amendments to
the Plan adopted by the Board on February 19, 2004 shall be February 19, 2004,
provided that such amendment of the Plan by the Board is approved by the
affirmative vote of the holders of at least a majority of the shares of Common
Stock represented in person or proxy and entitled to vote at a duly called and
convened meeting of shareholders called and held on or prior to February 18,
2005. No stock option may be granted and no awards may be made under the Plan
subsequent to February 18, 2014.
B-7
ANNUAL MEETING OF STOCKHOLDERS OF
MICHAEL BAKER CORPORATION
April 22, 2004
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and
mail in the envelope provided.
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
FOR AGAINST ABSTAIN
1. Elect Directors 2. Amend 1996 Nonemployees Directors Stock Incentive [ ] [ ] [ ]
Plan
NOMINEES:
[ ] FOR ALL NOMINEES - Robert N. Bontempo
- Nicholas P. Constantakis
[ ] WITHHOLD AUTHORITY - William J. Copeland
FOR ALL NOMINEES - Donald P. Fusilli, Jr.
- Roy V. Gavert, Jr.
[ ] FOR ALL EXCEPT - Thomas D. Larson
(See instructions below) - John E. Murray, Jr.
- Richard L. Shaw
INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark "FOR ALL EXCEPT"
and fill in the circle next to each nominee you
wish to withhold, as shown here: -
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that [ ]
changes to the registered name(s) on the account may not be submitted
via this method.
--------------------------------------------------------------------------------
Signature of Stockholder [ ] Date: [ ] Signature of Stockholder [ ] Date: [ ]
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is 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, and in their
discretion on any other business which may properly come before the Annual
Meeting, all the shares of stock of Michael Baker Corporation (the "Company"),
held of record by the undersigned on March 18, 2004, at the Annual Meeting of
the Stockholders (the "Annual Meeting") to be held on April 22, 2004, or any
adjournments thereof. If this proxy card is executed and no direction is given,
such shares will be voted "FOR" Proposals 1 and 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ANNUAL MEETING OF STOCKHOLDERS OF
MICHAEL BAKER CORPORATION
April 22, 2004
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
MAIL - Sign, date and mail your proxy card in the ---------------------------
envelope provided as soon as possible. COMPANY NUMBER
-OR- ---------------------------
TELEPHONE - Call toll-free 1-800-PROXIES from ACCOUNT NUMBER
any touch-tone telephone and follow the instructions. ---------------------------
Have your proxy card available when you call.
-OR- ---------------------------
INTERNET - Access "WWW.VOTEPROXY.COM" and
follow the on-screen instructions. Have your proxy
card available when you access the web page.
Please detach along perforated line and
mail in the envelope provided.
IF you are not voting via telephone or the Internet.
--
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Elect Directors 2. Amend 1996 Nonemployees Directors Stock Incentive [ ] [ ] [ ]
Plan
NOMINEES:
[ ] FOR ALL NOMINEES - Robert N. Bontempo
- Nicholas P. Constantakis
[ ] WITHHOLD AUTHORITY - William J. Copeland
FOR ALL NOMINEES - Donald P. Fusilli, Jr.
- Roy V. Gavert, Jr.
[ ] FOR ALL EXCEPT - Thomas D. Larson
(See instructions below) - John E. Murray, Jr.
- Richard L. Shaw
INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark "FOR ALL EXCEPT"
and fill in the circle next to each nominee you
wish to withhold, as shown here: -
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that [ ]
changes to the registered name(s) on the account may not be submitted
via this method.
--------------------------------------------------------------------------------
Signature of Stockholder [ ] Date: [ ] Signature of Stockholder [ ] Date: [ ]
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.