Exhibit 10.1
1999 INCENTIVE COMPENSATION PLAN
MICHAEL BAKER CORPORATION
INDEX
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ARTICLE I - GENERAL
1.1 ESTABLISHMENT OF THE PLAN
1.2 PURPOSE
1.3 ADMINISTRATION
ARTICLE II - DEFINITIONS
2.1 DEFINITIONS
2.2 GENDER AND NUMBER
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY
3.2 PARTICIPATION
3.3 PARTIAL PLAN YEAR PARTICIPATION
ARTICLE IV - AWARDS
4.1 COMPONENTS OF PARTICIPATION AWARDS
4.2 CORPORATE PERFORMANCE MEASURES AND GOALS
4.3 INDIVIDUAL PERFORMANCE REVIEW CRITERIA
4.4 BUSINESS UNIT PERFORMANCE
4.5 BUSINESS SEGMENT PERFORMANCE
4.6 INDIVIDUAL PERFORMANCE
4.7 DISCRETIONARY AWARDS
ARTICLE V - PAYMENT OF AWARDS
5.1 PAYMENT OF AWARDS
5.2 PLAN FUNDING
ARTICLE VI - CHANGE IN CONTROL
6.1 CHANGE IN CONTROL
6.2 DEFINITION OF CHANGE IN CONTROL
ARTICLE VII - MISCELLANEOUS PROVISIONS
7.1 NON-TRANSFERABILITY
7.2 TAX WITHHOLDING
7.3 AMENDMENTS AND TERMINATION
7.4 INDEMNIFICATION
7.5 BENEFICIARY DESIGNATION
7.6 RIGHTS OF PARTICIPANTS
7.7 GOVERNING LAW
7.8 EFFECTIVE DATE
EXECUTION PAGE
INDEX
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1999 INCENTIVE COMPENSATION PLAN - ATTACHMENT 1
ELIGIBILITY
OPPORTUNITY
PERFORMANCE MEASUREMENT
PERFORMANCE GOALS
POTENTIAL PAYOUT (PERCENTAGE OF ANNUAL SALARY)
THRESHOLD
TYPE OF PAYOUT
FREQUENCY OF PAYOUT
FUNDING
FORFEITURES
ARTICLE I
GENERAL
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1.1 ESTABLISHMENT OF THE PLAN:
Michael Baker Corporation, a Pennsylvania corporation (the "Company"), hereby
adopts this Plan, which shall be known as the MICHAEL BAKER CORPORATION 1999
INCENTIVE COMPENSATION PLAN (the "Plan").
1.2 PURPOSE:
The purpose of the Plan is to focus attention on shareholder value, drive
performance in support of this goal and other business goals, and reward
individual performance.
1.3 ADMINISTRATION:
(a) The Plan shall be administered by the Incentive Compensation Committee (the
"Committee"), of the Company with the concurrence of the Compensation
Committee of the Board of Directors of the Company. The members of the
Committee shall be appointed by the Chief Executive Officer (the "CEO"),
and any vacancy on the Committee shall be filled by an appointee of the
CEO.
(b) Subject to the limitations of the Plan, the Committee shall, subject to
approval by the CEO and Compensation Committee of the Board of Directors:
(i) select from the regular, full- time exempt Employees of the Company,
those who shall participate in the Plan (a "Participant" or
"Participants"), (ii) make awards in such forms and amounts as the
Committee shall determine, (iii) impose such limitations, restrictions, and
conditions upon such awards as the Committee shall deem appropriate, (iv)
interpret the Plan and adopt, amend, and rescind administrative guidelines
and other rules and regulations relating to the Plan, (v) correct any
defect or omission or reconcile any inconsistency in this Plan or in any
award granted hereunder, and (vi) make all necessary determinations and
take all other actions necessary or advisable for the implementation and
administration of the Plan. The Committee's determinations on matters
within its authority shall be conclusive and binding upon the Company and
all other Persons.
ARTICLE II
DEFINITIONS
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2.1 DEFINITIONS:
Whenever used herein, the following terms shall have the meaning set forth
below, unless otherwise expressly provided.
(a) "Base Salary" shall mean the salary reported during a Plan Year to a
participant while participating in the Plan. Base Salary shall include any
salary reduction contributions made to the Company's Internal Revenue Code
Section 401(k) Plan or other deferred compensation plans, but exclusive of
any awards under this Plan and of any other bonuses, incentive pay,
exercise of stock options, overtime pay, special awards, hiring/retention
awards, car allowances, imputed income related to company provided life
insurance, reimbursement for moving expenses, per diem payments, tuition
reimbursement, additional compensation related to international assignments
such as expatriate differential compensation, tax equalization, etc., or
any other extraordinary income.
(b) "Board" shall mean the Board of Directors of Michael Baker Corporation.
(c) "Committee" shall mean the Incentive Compensation Committee of the Company,
which shall consist of at least three employees of the Company.
(d) "Company" shall mean Michael Baker Corporation and its Subsidiaries.
(e) "Corporate" shall mean relating to Michael Baker Corporation.
(f) "Employee" shall mean a regular, full-time, exempt Employee of the Company
who is in a position meeting the defined eligibility criteria for
participation in the Plan, as stated in Section 3.1. - "Eligibility".
(g) "Participant" shall mean an Employee who is approved by the Committee for
participation in the Plan for a specified Plan Year as defined in 3.2 -
"Participation".
(h) "Performance Management Process" shall mean the Company's three-step
performance cycle. The cycle begins with setting individual performance
goals, followed by performance coaching, and ending with formal performance
review at the end of the performance period.
(i) "Plan Year" shall mean the Company's fiscal year.
(j) "Business Unit" shall mean the operating units of: Buildings, Civil,
Energy, Environmental and Transportation, and any other Business Unit added
during the year.
(k) "Business Segment" shall mean Business Unit segments of: Buildings-Design,
Buildings- Construction, Civil-Engineering, Civil-Baker Support Services,
Inc., Energy-Baker/MO, Energy-OTS, Transportation-Engineering and
Transportation-Construction (Heavy & Highway) and any other Business
Segment added during the year.
(l) "Contribution to Corporate Overhead and Profit" shall mean the following:
Business Unit Level -- Income before income taxes plus Corporate overhead,
Engineering Support overhead (related only to Engineering segments),
Intercompany insurance premiums/overhead (VGIC), and internal interest
expense (VGIC).
Engineering Segment Level -- Income before income taxes Corporate overhead,
Business unit overhead, Engineering Support Overhead, Intercompany
insurance premiums/overhead (VGIC), and internal interest expense (VGIC).
Non-Engineering Segment Level -- Income before income taxes plus Corporate
overhead, Business unit overhead, Intercompany insurance premiums/overhead
(VGIC) and internal interest expense (VGIC).
IN MEASURING THE RESULTS OF CONTRIBUTION TO CORPORATE OVERHEAD AND PROFIT,
"MEETS EXPECTATIONS" IS ESTABLISHED AT 90% OF OBJECTIVE, "EXCEEDS
EXPECTATIONS" IS ESTABLISHED AT 100% OF OBJECTIVE AND "FAR EXCEEDS
EXPECTATIONS" IS ESTABLISHED AT 110% OF OBJECTIVE. WHEN POSSIBLE, THE
MINIMUM SPREAD OF $250,000 WILL BE USED TO SEPARATE THE LEVELS OF
MEASUREMENT.
(m) "New work added" (NWA) shall mean and be determined in the following
manner:
FORMULA: CURRENT PLAN YEAR BACKLOG MINUS THE IMMEDIATE PREVIOUS PLAN YEAR
BACKLOG PLUS ACTUAL CURRENT PLAN YEAR REVENUES. NWA IS BASED UPON FUNDED
BACKLOG.
IN CALCULATING NWA AT THE END OF THE YEAR FOR THE ENGINEERING GROUPS, THE
GREATER OF THE "MASTER" OR "TASK" MAY BE USED TO DETERMINE PERFORMANCE
AGAINST GOAL, WHICH PROVIDES FULL PROJECT CREDIT FOR THE ENTITY WHICH OWNS
THE JOB. OTHER GROUPS THAT GAIN WORKLOAD FROM "IMPORTING" WORK FROM OTHER
DEPARTMENTS CAN ALSO USE THE GREATER OF "MASTER" OR "TASK" IF IT IS
BENEFICIAL TO THE OVERALL PERFORMANCE RESULTS.
2.2 GENDER AND NUMBER:
Except when otherwise indicated by the context, words in the masculine gender,
when used in the Plan, shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
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3.1 ELIGIBILITY:
Eligibility for participation in the Plan shall be limited to regular, full-time
exempt Employees of the Company.
3.2 PARTICIPATION:
Participation in the Plan shall be determined by the executive management of the
Company. The CEO shall determine Corporate participants and the Business Unit
Heads shall determine Business Unit participants, in all cases with the
concurrence of the Michael Baker Corporation CEO and the Compensation Committee
of the Board of Directors of the Company. The number of participants in the Plan
shall be influenced by the Business Unit's ability to financially support the
accrual for the projected payout opportunity. (See 5.2 - "Plan Funding")
Participants are to include executive management, business unit managers, and
selected managers who are accountable for significant contributions to
Corporate, as determined by the CEO, and to the Business Unit, as determined by
the Business Unit head. Participants are to be designated as having
accountability associated with Corporate, overall Business Unit or specific
Business Segment performance. Participants are to be designated as having Tier 1
or Tier 2 accountability as defined in an attachment to the Plan.
3.3 PARTIAL PLAN YEAR PARTICIPATION:
An Employee who becomes eligible after the beginning of a Plan Year may
participate in the Plan for that Plan Year. Such situations may include, but are
not limited to (i) new hires, (ii) when an Employee is promoted from a position
which did not meet the eligibility criteria, (iii) when an Employee is
transferred from an affiliate which does not participate in the Plan, or (iv)
when job responsibilities become consistent with other Plan participants.
The CEO retains the right to prohibit or allow participation in the initial Plan
Year of eligibility for any of the aforementioned Employees. Any so added
participant will be eligible to receive a pro-rated share based upon a 2,080
work-hour year.
An Employee is not eligible to receive any payout from the Plan under the
following conditions:
a) Separation from employment prior to July 1 of the Plan year for any reason;
b) Termination for cause or voluntary resignation from the Company at any time
during the Plan Year;
c) TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION FROM THE COMPANY AFTER THE
PLAN YEAR BUT PRIOR TO INCENTIVE PLAN PAYMENT DISTRIBUTION (MARCH 15).
An Employee who leaves the employment of the Company after June 30 of the Plan
Year as a result of Reduction In Force, Divestiture or any other business reason
outside of the Employee's control is eligible to receive a pro-rata payout from
the Plan for that year based upon the percent of the fiscal year employed.
ARTICLE IV
AWARDS
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4.1 COMPONENTS OF PARTICIPANT AWARDS:
Each award may be based on (i) Corporate performance, (ii) Business Unit
performance, (iii) Business Segment, and Individual performance plan
accomplishments.
4.2 INDIVIDUAL PERFORMANCE CRITERIA
In order for an individual to be eligible for any portion of an incentive
compensation payout, they must receive an overall "3.0" or "Meets Expectations"
on the values/work standards portion of the performance review form. This change
is made to further reinforce Baker's cultural strategy which embraces the
importance of goal attainment and how those goals are attained. A Participant
must receive a "2.6" or greater on the performance plan in order to be eligible
for the individual segment of the payout. Participants who do not meet the "2.6"
or greater on the performance plan may still be eligible for the
corporate/business unit portions of the payout, predicated on the "3.0" overall
rating on the annual performance review form.
4.3 CORPORATE PERFORMANCE MEASURES AND GOALS
For each Plan Year, the Compensation Committee of the Board of Directors and the
CEO shall agree on a range of performance goals for Corporate results. Each
performance range shall include a level of performance at which awards shall be
earned.
Measures of performance may include, but are not limited to, one or more
financial ratios such as earnings per share, profitability, return on equity and
return on assets. Performance measures need not be the same within the Company.
For 1999, corporate results shall be dependent upon audited corporate earnings
per share (after all incentives have been paid). Payouts related to this part of
the plan will be based upon step accomplishments and should not be pro-rated.
For treatment of corporate payouts, please refer to sections 4.5- "Business
Segment Performance and 4.6 - "Individual Performance".
For 1999, performance level goals for earnings per share are:
Corporate
Performance Goal Setting
Level (Earnings Per Share)
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LEVEL 1 ON PLAN $ .81
LEVEL 2 COMMENDABLE $ .90
LEVEL 3 OUTSTANDING $ .99
4.4 BUSINESS UNIT PERFORMANCE MEASURES:
Business Unit performance shall be reflected in the final award based upon the
Business Unit's Contribution to Corporate Overhead and Profit. The Incentive
Compensation Committee shall establish and approve "Meets Expectations",
"Exceeds Expectations", and "Far Exceeds Expectations" goals specific to each
Business Unit at the beginning of the Plan year. The "Meets Expectations" goal
shall serve as a Threshold target which must be met in order for Business Unit
Managers and those having overall Business Unit accountability to be eligible to
receive an incentive payout based upon their individual performance plans. In
addition, the "Meets Expectations" goal shall serve as a Threshold target which
must be met in order for all Business Segment participants to receive a payout
based upon Business Unit performance. For Business Segment participants, the
incentive compensation award related to Business Unit performance is based upon
"step" accomplishment of "Meets Expectations", "Exceeds Expectations", and "Far
Exceeds Expectations" goals and is not to be pro-rated.
Any Business Unit with an objective of a positive contribution performance (net
income before tax plus corporate overhead) which results in a year-end negative
contribution, may be eligible for the portion of incentive compensation
dependent on overall corporate earnings per share performance, pending CEO
approval as advised by the Incentive Compensation Committee. Any Business Unit
with an objective of a NEGATIVE contribution performance (net income before tax
plus corporate overhead) which results in a year-end more negative contribution,
may be eligible for the portion of incentive compensation dependent on overall
corporate earnings per share performance, pending CEO approval as advised by the
Incentive Compensation Committee. Factors to be taken into consideration may
include the amount of deviation from objective, impact of the contribution of
the Business Unit to the Corporation and any extraordinary issues. Any Business
Unit with an objective of a NEGATIVE contribution which results in a year-end
more favorable performance, will be eligible for the portion of incentive
compensation dependent on overall corporate performance.
4.5 BUSINESS SEGMENT PERFORMANCE MEASURES:
Business Segment performance shall be reflected in the final award based on the
Business Segment's Contribution to Corporate Overhead and Profit. The Incentive
Compensation Committee shall approve "Meets Expectations", "Exceeds
Expectations", and "Far Exceeds Expectations" goals specific to each Business
Segment at the beginning of the Plan year. The "Meets Expectations" goal shall
serve as a Threshold target which must be met in order for participants within
the Segment to be eligible to receive an incentive payout based upon individual
performance plans.
Any Business Segment with an objective of a positive contribution performance
(net income before tax plus corporate overhead) which results in a year-end
negative contribution, may be eligible for the portion of incentive compensation
dependent on overall corporate earnings per share performance and/or Business
Unit Contribution to Overhead and Profit, pending CEO approval as advised by the
Incentive Compensation Committee. Any Business Segment with an objective of a
NEGATIVE contribution performance (net income before tax plus corporate
overhead) which results in a year-end more negative contribution, may be
eligible for the portion of incentive compensation dependent on overall
corporate earnings per share performance and/or Business Unit Contribution to
Overhead and Profit, pending CEO approval as advised by the Incentive
Compensation Committee. Any Business Segment with an objective of a NEGATIVE
contribution which results in a year-end more favorable performance, will be
eligible for the portion of incentive compensation dependent on overall
corporate performance and Business Unit Contribution to Overhead and Profit.
4.6 INDIVIDUAL PERFORMANCE MEASURES AND GOALS:
Individual performance shall be reflected in the final award based on the
performance rating assigned to an Employee as part of the Performance Management
Process and is based upon a number of factors established by the participant's
manager(s) at the beginning of the Plan Year.
Individual level payouts for participants meeting individual performance goals
in the Corporate category will occur when the Earnings Per Share threshold is
achieved. Individual level payouts for participants meeting individual
performance goals in the Business Unit category will occur when Business Unit
operating profit accomplishes threshold performance. (after all individual
incentives have been paid). Individual level payouts for participants meeting
individual performance goals in the Business Segment category will occur when
Business Segment operating profit accomplishes threshold performance. (after all
individual incentives have been paid).
Guidelines of performance goals and percentage weights for Business Unit
managers are recommended to be:
% of Business Unit
Performance Plans
-----------------
Business Unit Contribution to 20%
Corporate Overhead and Profit
New Work Added To The Company 45%
Cash Flow Return on Investment (CFROI) 15%
Critical Success Factors (Continuous Improvement) 10%
Human Resources Development 10%
Guidelines of performance goals and percentage weights for Business Segment
participants are recommended to be:
% of Business Segment
and Individual
Performance Plans
-----------------
Business Segment Contribution to 20%
Corporate Overhead and Profit
New Work Added To The Company 45%
Accounts Receivables 15%
Critical Success Factors (Continuous Improvement) 10%
Human Resources Development 10%
The guidelines are recommended but are not prescriptive, particularly for
functional positions (e.g.: Finance, Marketing, Human Resources). Individual
performance measures for incentive compensation participants are to be developed
jointly with the employee's immediate supervisor, be consistent with the
participant's respective job responsibilities, and be included on the
participant's performance plan. Participants may have plans that relate to
corporate, unit or segment. The performance plans are to be submitted to the CEO
by the Business Unit head or Functional Unit head by the designated time in the
Plan year. For individuals who become eligible for participation in the Plan
during the course of the year, a completed performance plan is to be submitted
within four weeks of the individual becoming eligible for participation.
At the end of the Plan Year, incentive compensation participants' managers will
determine the level of performance accomplished by the participant. Participant
performance which does not meet or exceed the Meets Expectations-On Plan
Performance-3 level on a specific goal will result in no incentive payout for
that specific performance goal. Once performance has exceeded the Meets
Expectations-On Plan Performance-3 level on a specific financial goal, any
performance beyond the 3 level will result in a pro-rated weighted calculation
of the incremental incentive compensation earned by the participant, until the
maximum level 5 performance is achieved. Once performance has exceeded the Meets
Expectations-On Plan Performance-3 level for major performance areas for
functional unit employees, any performance beyond the 3 level will result in a
pro-rated calculation, in increments of .5 (e.g.: 3.5, 4.0, 4.5 etc.), of the
incremental incentive compensation earned by the participant, until the maximum
level 5 performance is achieved.
The specific accomplishments associated with these goals are to be recorded on
each participant's annual Performance Plan at the end of the Plan Year as part
of the overall performance evaluation.
4.7 DISCRETIONARY AWARDS:
In addition to individual performance incentives, a discretionary pool may be
created within Corporate and within each Business Unit to selectively award
those individuals who have exceeded expected performance. Guidelines for
discretionary awards are indicated within the Corporate and Business Units'
Incentive Compensation Plan Summary in the attachments. Functional Unit
discretionary awards are to be selected by the CEO with the concurrence of the
Incentive Compensation Committee. Business Unit discretionary awards are to be
selected by the Executive Vice President of the Business Unit with the
concurrence of the Incentive Compensation Committee. THE DISCRETIONARY AWARD
POOL WILL EQUAL 15% OF THE ICP PAYOUT FOR THE COMPANY. 12% OF THE DISCRETIONARY
FUNDS WILL BE ALLOCATED PROPORTIONATELY TO EACH BUSINESS UNIT BASED UPON THE
UNIT'S RELATIVE CONTRIBUTION TO CORPORATE PROFITABILITY. 3% OF THE DISCRETIONARY
FUNDS WILL BE AVAILABLE FOR CORPORATE-WIDE DISTRIBUTION AND DETERMINED BY THE
CEO OF THE COMPANY.
ARTICLE V
PAYMENT OF AWARDS
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5.1 PAYMENT OF AWARDS:
At the end of each Plan Year, the CEO shall report the overall Corporate,
Business Unit, Business Segment and individual performance levels to the
Compensation Committee of the Board of Directors, who shall then approve the
payment of awards.
The incentive compensation earned as a result of the Company achieving corporate
profitability goals and through the achievement of Business Unit, Business
Segment and individual goals, will be paid in cash no later than March 15 of the
year after which it was earned.
5.2 PLAN FUNDING:
Accrual for the Incentive Compensation Plan will be established annually by the
Committee, subject to the approval of the CEO. The approved accrual for the
Incentive Compensation Plan shall pre-fund the amounts available to be earned
for incentive compensation distributions. Any forfeitures associated with the
termination of those in the incentive compensation plan prior to year-end will
be allocated toward the funding of the incentive pool for the following year. In
addition, if the incentive pool is not paid out in full because of Business
Unit, Business Segment or participants' failure to achieve goals established
under the Plan or the Performance Management Process, the unearned portion would
be allocated toward the funding of the incentive pool for the following year.
Any excess pre-funding accrual based upon corporate goals which are not met and,
therefore, not earned by Incentive Compensation Plan participants, will be
removed from expense.
ARTICLE VI
CHANGE IN CONTROL
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6.1 CHANGE IN CONTROL:
In the event of a Change in Control of the Company, as defined below, a
Participant shall be entitled to, for the Plan Year in which the Change of
Control occurs, the award determined using:
(i) The Participant's actual Base Salary rate in effect on the date of the
Change in Control,
(ii) Actual Corporate performance results to the date of Change in Control,
and
(iii) Participant's Individual Performance results.
The Committee as constituted immediately prior to the Change in Control shall
determine how actual Corporate performance should be measured for purposes of
the award calculation in 6.1. The Committee's determination shall be conclusive
and final.
Awards and any previously accrued awards shall be paid in cash to the
Participant promptly following any discontinuance of the Plan on or after a
Change of Control.
6.2 DEFINITION OF CHANGE IN CONTROL:
A "Change in Control" will be deemed to have occurred on the first to occur of
the following:
(a) The Company acquires actual knowledge that any Person other than the
Company, a Subsidiary, the Company's Stock Ownership Plan and Trust or any
employee benefit plan(s) sponsored by the Company has acquired the
Beneficial Ownership, directly or indirectly, of securities of the Company
entitling such Person to 20% or more of the Voting Power of the Company;
(b) A Tender Offer is made to acquire securities of the Company entitling the
holders thereof to 20% or more of the Voting Power of the Company; 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 Company
or less than 51% of the members of the Board shall be Continuing Directors;
or
(d) The shareholders of the Company shall 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 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 Company immediately prior to the transaction.
The term "person" shall mean and include any individual, corporation,
partnership, company, association or other "person," as such term is used in
Section 14(d) of the Exchange Act, other than the Company or any employee
benefit plans sponsored by the Company.
"Continuing Directors" shall mean a director of the Company who either (a) was a
director of the Company on the effective date of the Plan or (b) is an
individual whose election, or nomination for election, as a director of the
Company 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 office is in connection with an actual or threatened
election contest relating to the election of directors of the Company which
would be subject to Rule 14a-11 under the 1934 Act, or any successor Rule).
ARTICLE VII
MISCELLANEOUS PROVISIONS
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7.1 NON-TRANSFERABILITY:
No right of interest of any Participant in this Plan shall be assignable or
transferable, or subject to any lien, directly, by operation of law or
otherwise, including execution, levy, garnishment, attachment, pledge, and
bankruptcy.
7.2 TAX WITHHOLDING:
The Company shall have the right to deduct from all payments under this Plan any
foreign, Federal, state, or local taxes required by law to be withheld with
respect to such payments.
7.3 AMENDMENTS AND TERMINATION:
THE COMPANY, IN ITS ABSOLUTE DISCRETION, WITHOUT NOTICE, AT ANY TIME AND FROM
TIME TO TIME, MAY MODIFY OR AMEND, IN WHOLE OR IN PART, ANY OR ALL OTHER
PROVISIONS OF THIS PLAN, OR SUSPEND OR TERMINATE IT ENTIRELY; PROVIDED, THAT NO
SUCH MODIFICATION, AMENDMENT, SUSPENSION, OR TERMINATION MAY AFFECT THE RIGHT OF
A PARTICIPANT (OR HIS BENEFICIARY AS THE CASE MAY BE) TO AN EARNED BUT UNPAID
DISTRIBUTION IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN THIS PLAN.
7.4 INDEMNIFICATION:
Each person who is or shall have been a member of the Committee or the Board or
who is or shall have been an Employee of the Company shall be indemnified and
held harmless by the Company against and from any loss, cost, liability, or
expense, including, without limitation, fees and expenses of legal counsel, that
may have been imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may be a party
or in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satisfaction
of any judgment in any such action, suit, or proceeding against him provided he
shall give the Company an opportunity, as its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
7.5 BENEFICIARY DESIGNATION:
Each Participant under the Plan may name, from time to time, beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Company, and will be
effective only when filed by the Participant in writing with the Company during
his lifetime. In the absence of any such designation, or if the designated
beneficiary is no longer living, benefits shall be paid to the surviving
member(s) of the following classes of beneficiaries, with preference for classes
in the order listed below:
(a) Participant's spouse (unless the parties were divorced or legally separated
by court decree);
(b) Participant's children (including children by adoption); or
(c) Participant's executor or administrator.
Payment of benefits shall be made exclusively to the member(s) of the first
class, in the order listed above, which has surviving member(s). If that class
have more than one member, benefit payment shall be made in equal shares among
members of that class.
7.6 RIGHTS OF PARTICIPANTS:
Nothing in this Plan shall interfere with or limit in any way the right of the
Company to terminate or change a Participant's employment at any time, nor
confer upon any Participant, any right to continue in the employment of the
Company for any period of time or to continue his present or any other rate of
compensation. No Participant in a previous Plan Year, or other Employee at any
time, shall have a right to be selected for participation in a current or future
Plan Year.
7.7 GOVERNING LAW:
The Plan shall be construed in accordance with and governed by the laws of the
State of Pennsylvania.
7.8 EFFECTIVE DATE:
The Plan shall be deemed effective as of January 1, 1999.
EXECUTION PAGE
IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS PLAN, EFFECTIVE AS OF THE
EFFECTIVE DATE TO BE EXECUTED BY ITS DULY AUTHORIZED OFFICER THIS 26TH DAY OF
MAY, 1999.
MICHAEL BAKER CORPORATION
APPROVED /s/ CHARLES I. HOMAN
-----------------------------------------
CHARLES I. HOMAN, CHIEF EXECUTIVE OFFICER
EFFECTIVE DATE JANUARY 1, 1999
-----------------------------------------
1999 MICHAEL BAKER CORPORATION INCENTIVE COMPENSATION PLAN - SUMMARY
ATTACHMENT 1 FEBRUARY 25, 1999
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ELIGIBILITY FOR INCENTIVE COMPENSATION PLAN
- --------------------------------------------------------------------------------
NUMBER OF PARTICIPANTS Tier 1: APPROXIMATELY 48
Tier 2: APPROXIMATELY 80
Tier 3: Discretionary
- --------------------------------------------------------------------------------
Participants
TIER 1
Corporate Executive Management, Officers and
Directors
Business Units Business Unit Heads
Selected Staff who support the
functions of the entire Business Unit
(Designated by Business Unit Head)
BUSINESS SEGMENTS- PROFIT CENTER MANAGERS WITH GREATER
ENGINEERING AND DESIGN THAN $3 MILLION NET REVENUE
RESPONSIBILITY
(DESIGNATED BY BUSINESS UNIT HEAD)
Business Segments-Construction and Profit Center Managers with greater
Heavy/Highway and Baker Support than $60 Million gross revenue
Services, Inc. responsibility
(Designated by Business Unit Head)
TIER 2
Corporate Selected Functional Unit Managers
Business Units Selected Staff who support the
functions of the entire Business Unit
(Designated by Business Unit Head)
Business Segments Selected Managers, Other Profit Center
Managers, and selected Senior Project
Managers
(Designated by Business Unit Head)
TIER 3 Discretionary
- --------------------------------------------------------------------------------
Participant Recommendation Corporate participants and Business
Unit Heads (CEO)
Within Business Units (Head of
Business Unit)
- --------------------------------------------------------------------------------
Participant Approval President and Chief Executive Officer
- --------------------------------------------------------------------------------
Participants Added During Year? Yes, Pro-rata
- --------------------------------------------------------------------------------
Ineligible Employees Termination for Cause/Voluntary
Resignation
- --------------------------------------------------------------------------------
INCENTIVE COMPENSATION OPPORTUNITY
- --------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3
Total % of Annual Salary 0-25% 0-15% Discretionary
First Level (total maximum) 8.333% 5%
To Be
Determined
Second Level (total maximum) 16.667% 10%
Third Level (total maximum) 25% 15%
- --------------------------------------------------------------------------------
PERFORMANCE MEASUREMENT
- --------------------------------------------------------------------------------
Corporate Participants, Heads of Business Units and Staff, Managers with
multiple Business Unit responsibility, and all Environmental Business Unit
Participants
Corporate Profitability Goals 50% of Potential Award
Individual Performance Plan Goals 50% of Potential Award
- --------------------------------------------------------------------------------
Business Unit-Segments and Profit Center Managers
Corporate Profitability Goals 25% of Potential Award
Business Unit Performance Goals 25% of Potential Award
Individual Performance Plan Goals 50% of Potential Award
- --------------------------------------------------------------------------------
PERFORMANCE GOALS
- --------------------------------------------------------------------------------
Corporate Profitability Goals
- --------------------------------------------------------------------------------
Audited Corporate Earnings Per Share % of Payout Based Earnings
(After All Incentives Have Been Paid) Upon Corporate Plan Per Share
------------------- ---------
1st Level (On-Plan Performance) 33% $.81
2nd Level (Commendable) 33% $.90
3rd Level (Outstanding) 34% $.99
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INDIVIDUAL PERFORMANCE PLAN GOALS
% of % of
(Number of goals and % for each Business Business
specific goal is to be customized Unit Segment Functional
for each participant based Participants' Participants' Unit
upon Operating Objective, Individual Individual Individual
Marketing driven orientation Performance Performance Performance
and level of accountability. % Plans Plans Plan
is not to be less than 10% for ------------- ------------- -----------
any goal)
Business Unit or Business Segment 20% 20 *
Contribution to Corporate Overhead
and Profit
New Work Added to the Company 45% 45% *
Cash Flow Return on Investment (CFROI) 15% * *
Accounts Receivables 15% *
Critical Success Factors 10% 10% 10%
Human Resources Development 10% 10% 10%
*Functional Unit Performance Plans are to be determined by Dept. Heads and
participants with CEO approval
- --------------------------------------------------------------------------------
POTENTIAL PAYOUT
- --------------------------------------------------------------------------------
Corporate Individual
Profitability Performance
Goals Goals
(% of Annual Salary) ------------- -----------
Tier 1 Corporate and Business
Unit Heads and Staff
1st Level (On-Plan Performance) 4.167% 4.167%
2nd Level (Commendable) 8.334% 8.334%
3rd Level (Outstanding) 12.500% 12.500%
Business
Corporate Unit Individual
Profitability Performance Performance
Goals Goals Goals
------------- ----------- -----------
Tier 1 Business Unit-Segments
1st Level (On-Plan Performance) 2.084% 2.084% 4.167%
2nd Level (Commendable) 4.167% 4.167% 8.334%
3rd Level (Outstanding) 6.250% 6.250% 12.500%
- --------------------------------------------------------------------------------
Corporate Individual
Profitability Performance
(% of Annual Salary) Goals Goals
------------- ------------
Tier 2 Corporate and Business Unit Staff
1st Level (On-Plan Performance) 2.50% 2.50%
2nd Level (Commendable) 5.00% 5.00%
3rd Level (Outstanding) 7.50% 7.50%
- --------------------------------------------------------------------------------
Business
Corporate Unit Individual
Profitability Performance Performance
Goals Goals Goals
------------- ----------- -----------
Tier 2 Business Unit-Segments
1st Level (On-Plan Performance) 1.25% 1.25% 2.50%
2nd Level (Commendable) 2.50% 2.50% 5.00%
3rd Level (Outstanding) 3.75% 3.75% 7.50%
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- --------------------------------------------------------------------------------
THRESHOLD
- --------------------------------------------------------------------------------
Corporate
Minimum earnings per share for any potential payout $0.81
on corporate component (after all incentives have been paid)
BUSINESS UNITS AND BUSINESS SEGMENTS
MINIMUM CONTRIBUTION TO OVERHEAD AND PROFIT THRESHOLDS (AFTER ACCRUAL FOR
INCENTIVE COMPENSATION PAYMENTS AND INTERNAL INTEREST CHARGES) WILL BE
IDENTIFIED BY CEO, CFO AND APPROVED BY THE BOARD OF DIRECTORS OF THE COMPANY FOR
1999.
CONTRIBUTION
------------
CIVIL BUSINESS UNIT $9,663,704
CIVIL-ENGINEERING $8,657,967
BAKER SUPPORT SERVICES, INC. $1,338,269
BUILDINGS BUSINESS UNIT $ 508,241 (REVISED 6/9/99)
BUILDINGS-DESIGN $2,578,937 (REVISED 6/9/99)
BUILDINGS-CONSTRUCTION $ 0 (REVISED 6/9/99)
TRANSPORTATION BUSINESS UNIT $9,599,484
TRANSPORTATION-ENGINEERING $8,459,309
TRANSPORTATION-HEAVY & HIGHWAY $1,444,108
ENVIRONMENTAL BUSINESS UNIT $2,515,655
ENERGY BUSINESS UNIT $5,663,434
ENERGY/BAKER MO $3,298,016
ENERGY/OTS $2,901,659
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TYPE OF PAYOUT Cash
- --------------------------------------------------------------------------------
FREQUENCY OF PAYOUT Annually, with payment by the end of
the following year's first quarter
- --------------------------------------------------------------------------------
FUNDING Pre-funding accrual in the year earned
- --------------------------------------------------------------------------------
FORFEITURES Allocated toward next year's funding
- --------------------------------------------------------------------------------