BAKER MICHAEL CORP
EXHIBIT 10.3.E
<DOCUMENT>
<TYPE>EX-10.3.E
<SEQUENCE>5
<FILENAME>j0499801exv10w3we.txt
<DESCRIPTION>EXHIBIT 10.3.E
<TEXT>
<PAGE>
                                                                 Exhibit 10.3(e)

                        EMPLOYMENT CONTINUATION AGREEMENT

                  THIS AGREEMENT between Michael Baker Corporation, a
Pennsylvania corporation (the "Company"), and Bradley L. Mallory (the
"Executive"), dated as of this 23rd day of February, 2004.

                              W I T N E S S E T H:
                               - - - - - - - - - -

                  WHEREAS, the Company has employed the Executive in an officer
position and has determined that the Executive holds an important position with
the Company;

                  WHEREAS, the Company believes that, in the event it is
confronted with a situation that could result in a change in ownership or
control of the Company, continuity of management will be essential to its
ability to evaluate and respond to such situation in the best interests of
stockholders;

                  WHEREAS, the Company understands that any such situation will
present significant concerns for the Executive with respect to the Executive's
financial and job security;

                  WHEREAS, the Company desires to assure itself of the
Executive's services during the period in which it is confronting such a
situation, and to provide the Executive certain financial assurances to enable
the Executive to perform the responsibilities of the position without undue
distraction and to exercise judgment without bias due to personal circumstances;

                  WHEREAS, to achieve these objectives, the Company and the
Executive desire to enter into an agreement providing the Company and the
Executive with certain rights and obligations upon the occurrence of a Change of
Control or Potential Change of Control (as defined in Section 2);

                  NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and intending to be legally bound, it is hereby
agreed by and between the Company and the Executive as follows:

                  1. Operation of Agreement. (a) Effective Date. The effective
date of this Agreement shall be the date on which a Change of Control occurs
(the "Effective Date"), provided that, except as provided in Section 1(b), if
the Executive is not employed by the Company on the Effective Date, this
Agreement shall be void and without effect.

                  (b) Termination of Employment Following a Potential Change of
Control. Notwithstanding Section 1(a), if (i) the Executive's employment is
terminated by the Company without Cause (as defined in Section 6(c)) or by the
Executive with Good Reason (as defined in Section 6(d)) after the occurrence of
a Potential Change of



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Control and prior to the occurrence of a Change of Control and (ii) a Change of
Control occurs within one year of such termination, the Executive shall be
deemed, solely for purposes of determining the Executive's rights under this
Agreement, to have remained employed until the Effective Date and to have been
terminated by the Company without Cause immediately after this Agreement becomes
effective.

                  2. Definitions.

                  (a) Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:

                  (i) The acquisition by any individual, entity or group (within
         the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
         Act of 1934, as amended (the "Exchange Act") or any successor rule
         thereto) (a "Person") of beneficial ownership (within the meaning of
         Rule 13d-3 promulgated under the Exchange Act or any successor rule
         thereto) of securities of the Company entitling such Person to 30% or
         more of the combined voting power of the then outstanding voting
         securities of the Company entitled to vote generally in the election of
         directors (the "Voting Power"); provided, however, that for purposes of
         this subsection (i), the following acquisitions shall not constitute or
         cause a Change in Control: (A) any acquisition directly from the
         Company following which the members of the Board continue to be
         comprised of at least 51% of Continuing Directors, (B) any acquisition
         by the Company, or (C) any acquisition by any employee benefit plan (or
         related trust) sponsored or maintained by the Company or by the
         Company's Employee Stock Ownership Plan or related trust or by any
         corporation controlled by the Company; or

                  (ii) Completion of a tender offer to acquire securities of the
         Company entitling the holders thereof to 30% or more of the Voting
         Power of the Company, excepting any acquisitions specified in
         subsection (i), above, that do not constitute a Change of Control; or

                  (iii) A successful solicitation subject to Rule 14a-11 under
         the Exchange Act 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

                  (iv) The occurrence of a merger, consolidation, share
         exchange, division or sale or other disposition of assets of the
         Company, and as a result of which the shareholders of the Company
         immediately prior to such transaction do 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 company, (ii) in the case of a share exchange,
         the acquiring company, or (iii) in the case of a division or a sale or
         other disposition of assets, each surviving, resulting or acquiring
         company which, immediately following the transaction, holds more than
         30% of the consolidated assets of the Company immediately prior to the
         transaction; or




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                  (v) A majority of the Board otherwise determines that a Change
in Control shall have occurred.

                  (b) Potential Change of Control. For the purposes of this
Agreement, a Potential Change of Control shall be deemed to have occurred if:

                  (i) a Person commences a tender offer (with adequate
         financing) for securities representing at least 30% of the Voting Power
         of the Company's securities or announces or otherwise makes known a
         bona fide intent to commence such a tender offer, excepting any offers
         that, if completed, would result in an acquisition not constituting a
         Change of Control; or

                  (ii) the Company enters into an agreement the consummation of
         which would constitute a Change of Control; or

                  (iii) there is commenced a solicitation of proxies for the
         election of directors of the Company by anyone other than the Company
         which solicitation, if successful, would effect a Change of Control; or

                  (iv) any other event occurs which is deemed to be a Potential
         Change of Control by the Board in its reasonable determination after a
         consideration of relevant facts and circumstances.

                  (c) Board. For purposes of this Agreement, "Board" shall mean
the Board of Directors of the Company.

                  (d) Continuing Directors. For purposes of this Agreement,
"Continuing Directors" shall mean a director of the Company who either (i) was a
director of the Company immediately prior to the Effective Date or (ii) 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 Exchange Act).

                  3. Employment Period. Subject to Section 6 of this Agreement,
the Company agrees to continue the Executive in its employ, and the Executive
agrees to remain in the employ of the Company, for the period (the "Employment
Period") commencing on the Effective Date and ending on the twenty-four month
anniversary of the Effective Date.

                  4. Position and Duties. (a) No Reduction in Position. During
the Employment Period, the Executive's position (including titles), authority,
responsibilities and status shall be at least commensurate with those held,
exercised and assigned immediately prior to the Effective Date. It is understood
that, for purposes of this Agreement, such position, authority, responsibilities
and status shall not be regarded as not commensurate merely by virtue of the
fact that a successor shall have acquired all or substantially all of the
business and/or assets of the Company as contemplated by Section 12(b) of this
Agreement. The Executive's services shall be performed at the




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location where the Executive was employed immediately preceding the Effective
Date or any office or location within 35 miles from such location (or such other
distance not in excess of 50 miles as shall be set forth in the Company's
relocation policy as in effect immediately prior to the Effective Date).

                  (b) Business Time. During the Employment Period, the Executive
agrees to devote full attention during normal business hours to the business and
affairs of the Company and to use his best efforts to perform faithfully and
efficiently the responsibilities assigned to the Executive hereunder, to the
extent necessary to discharge such responsibilities, except for (i) time spent
in managing personal, financial and legal affairs and serving on corporate,
civic or charitable boards or committees, in each case only if and to the extent
not substantially interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which the Executive is entitled. It
is expressly understood and agreed that the Executive's continuing to serve on
any boards and committees on which the Executive is serving or with which the
Executive is otherwise associated immediately preceding the Effective Date shall
not be deemed to interfere with the performance of the Executive's services to
the Company.

                  5. Compensation. (a) Base Salary. During the Employment
Period, the Executive shall receive a base salary at a monthly rate at least
equal to the monthly salary paid to the Executive by the Company and any of its
affiliated companies immediately prior to the Effective Date. The base salary
may be increased (but not decreased) at any time and from time to time by action
of the Board or any committee thereof or any individual having authority to take
such action in accordance with the Company's regular practices. The Executive's
base salary, as it may be increased from time to time, shall hereafter be
referred to as "Base Salary". Neither the Base Salary nor any increase in Base
Salary after the Effective Date shall serve to limit or reduce any other
obligation of the Company hereunder.

                  (b) Annual Bonus. During the Employment Period, in addition to
the Base Salary, for each fiscal year of the Company ending during the
Employment Period and for each partial fiscal year during the Employment Period,
the Executive shall be afforded the opportunity to receive an annual bonus or
partial bonus, as applicable, on terms and conditions no less favorable to the
Executive (taking into account reasonable changes in the Company's goals and
objectives) than the annual bonus opportunity that had been made available to
the Executive for the fiscal year ended immediately prior to the Effective Date,
provided that the amount of bonus which shall be awarded to the Executive during
each year of the Employment Period shall be an amount not less than the average
bonus earned by such Executive during the five fiscal year period of the Company
ending immediately prior to the Effective Date (the "Annual Bonus Opportunity"),
with the average bonus calculated by dividing the total bonuses paid to the
Executive for such five year period by the total number of years for which any
bonus was paid. Any amount payable in respect of the Annual Bonus Opportunity
shall be paid as soon as practicable following the year for which the amount (or
prorated portion) is earned or awarded, unless electively deferred by the
Executive pursuant to


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any deferral programs or arrangements that the Company may make available to the
Executive.

                  (c) Long-term Incentive Compensation Programs. During the
Employment Period, the Executive shall participate in all long-term incentive
compensation programs for key executives, including stock option or stock
incentive plans, at a level that is commensurate with the Executive's
opportunity to participate in such plans immediately prior to the Effective
Date, or, if more favorable to the Executive, at the level made available to the
Executive or other similarly situated officers at any time thereafter. During
the Employment Period, the Company will offer such plans and programs to the
Executive as were in effect immediately prior to the Change of Control or, if
more favorable to the Executive when measured against particular plans or
programs previously offered, replacement plans or programs.

                  (d) Benefit Plans. During the Employment Period, the Executive
(and, to the extent applicable, the Executive's dependents) shall be entitled to
participate in or be covered under all pension, retirement, deferred
compensation, savings, medical, dental, health, disability, group life,
accidental death and travel accident insurance plans and programs of the Company
and its affiliated companies at a level that is commensurate with the
Executive's participation in such plans immediately prior to the Effective Date,
or, if more favorable to the Executive, at the level made available to the
Executive or other similarly situated officers at any time thereafter. During
the Employment Period, the Company will offer such plans and programs to the
Executive as were in effect immediately prior to the Change of Control or, if
more favorable to the Executive when measured against particular plans or
programs previously offered, replacement plans or programs. All payments by the
Company hereunder excepting payments for Accrued Obligations shall be taken into
account (to the extent permitted by, and consistent with, law and the terms of
the applicable plan document) in determining the amount of contributions to be
made by or on behalf of the Executive under any tax-qualified defined
contribution plan of the Company.

                  (e) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies and procedures of the
Company as in effect immediately prior to the Effective Date. Notwithstanding
the foregoing, the Company shall apply the policies and procedures in effect
after the Effective Date to the Executive, if such policies and procedures are
more favorable to the Executive than those in effect immediately prior to the
Effective Date.

                  (f) Vacation and Fringe Benefits. During the Employment
Period, the Executive shall be entitled to paid vacation and fringe benefits at
a level that is commensurate with the paid vacation and fringe benefits
available to the Executive immediately prior to the Effective Date, or, if more
favorable to the Executive, at the level made available from time to time to the
Executive or other similarly situated officers at any time thereafter.


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<PAGE>

                  (g) Indemnification. During and after the Employment Period,
the Company shall indemnify the Executive and hold the Executive harmless from
and against any claim, loss or cause of action arising from or out of the
Executive's performance as an officer, Director or employee of the Company or
any of its subsidiaries or in any other capacity, including any fiduciary
capacity, in which the Executive serves at the request of the Company to the
maximum extent permitted by applicable law and the Company's Articles of
Incorporation and By-laws (the "Governing Documents") and the Company shall
maintain existing or comparable policies of insurance covering such matters,
provided that in no event shall the protection afforded to the Executive
hereunder be less than that afforded under the Governing Documents as in effect
immediately prior to the Effective Date.

                  (h) Office and Support Staff. The Executive shall be entitled
to an office with furnishings and other appointments, and to secretarial and
other assistance, at a level that is at least commensurate with the foregoing
provided to other similarly situated officers provided that such items shall be
at least equivalent to those provided for the Executive immediately prior to the
Effective Date.

                  6. Termination. (a) Death, Disability or Retirement. Subject
to the provisions of Section 1 hereof, this Agreement shall terminate
automatically upon the Executive's death, termination due to permanent and total
disability ("Disability") within the meaning of section 22(e)(3) of the Internal
Revenue Code of 1986 (the "Code"), or successor provision, or voluntary
retirement under any of the Company's retirement plans as in effect from time to
time.

                  (b) Voluntary Termination. Notwithstanding anything in this
Agreement to the contrary, following a Change of Control the Executive may, upon
not less than 30 days' written notice to the Company, voluntarily terminate
employment for any reason (including early retirement under the terms of any of
the Company's retirement plans as in effect from time to time), provided that
any termination by the Executive pursuant to Section 6(d) on account of Good
Reason (as defined therein) shall not be treated as a voluntary termination
under this Section 6(b).

                  (c) Cause. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement, "Cause" means (i) the
Executive's conviction of, or plea of nolo contendere to, a felony; (ii) an act
or acts of dishonesty or gross misconduct on the Executive's part which result
or are intended to result in material damage to the Company's business or
reputation; or (iii) the willful and continued failure by Executive to
substantially perform the required duties with the Company (other than any such
failure resulting from Executive's incapacity due to physical or mental illness
or Disability or any actual or anticipated failure after the termination by
Executive for Good Reason as defined in paragraph 6(d), below) after a written
demand for substantial performance is delivered to Executive by the Company,
which demand specifically identifies the manner in which the Company believes
that Executive has not substantially performed the required duties.


                                      -6-
<PAGE>

                  (d) Good Reason. Following the occurrence of a Change of
Control or Potential Change of Control, the Executive may terminate employment
for Good Reason. For purposes of this Agreement, "Good Reason" means the
occurrence of any of the following, without the express written consent of the
Executive, after the occurrence of a Change of Control or Potential Change of
Control:

                  (i) (A) the assignment to the Executive of any duties
         inconsistent in any material adverse respect with the Executive's
         position, authority, responsibilities or status as contemplated by
         Section 4 of this Agreement, or (B) any other material adverse change
         in such position, responsibilities, authority or status, or any removal
         of the Executive from or any failure to re-elect the Executive to any
         position, except in connection with the termination of the Executive's
         employment due to Cause, Disability, retirement, death or voluntary
         termination for reasons other than those set forth in this Section
         6(d);

                  (ii) any failure by the Company to comply with any of the
         provisions of Section 5 of this Agreement, other than an insubstantial
         or inadvertent failure remedied by the Company promptly after receipt
         of notice thereof given by the Executive;

                  (iii) any purported termination of the employment of the
         Executive by the Company which is not due to the Executive's
         Disability, death, retirement, for Cause in accordance with Section
         6(c) or voluntary termination for reasons other than those set forth in
         this Section 6(d);

                  (iv) the Company's requiring the Executive to be based at any
         office or location more than 35 miles (or such other distance not in
         excess of 50 miles as shall be set forth in the Company's relocation
         policy as in effect immediately prior to the Effective Date) from that
         location at which the Executive performed services specified under the
         provisions of Section 4 immediately prior to the Change of Control, or
         the Company's requiring the Executive to travel on Company business to
         a substantially greater extent than required immediately prior to the
         Effective Date; or

                  (v) any failure by the Company to obtain the assumption and
         agreement to perform this Agreement by a successor as contemplated by
         Section 12(b).

In no event shall the mere occurrence of a Change of Control, absent any further
impact on the Executive, be deemed to constitute Good Reason.

                  (e) Notice of Termination. Any termination by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(e).
For purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10 business days of the
Company's having actual knowledge of the


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events giving rise to such termination, and in the case of a termination for
Good Reason, within 180 days of the Executive's having actual knowledge of the
events giving rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.

                  (f) Date of Termination. For the purpose of this Agreement,
the term "Date of Termination" means (i) in the case of a termination for which
a Notice of Termination is required, the date of receipt of such Notice of
Termination or, if later, the date specified therein, as the case may be, and
(ii) in all other cases, the actual date on which the Executive's employment
terminates during the Employment Period.

                  7. Obligations of the Company upon Termination. (a) Death or
Disability. If the Executive's employment is terminated during the Employment
Period by reason of the Executive's death or Disability, this Agreement shall
terminate without further obligations to the Executive or the Executive's legal
representatives under this Agreement other than those obligations accrued
hereunder at the Date of Termination, and the Company shall pay to the Executive
(or the Executive's beneficiary or estate) (i) the Executive's full Base Salary
through the Date of Termination (the "Earned Salary"), (ii) any vested amounts
or benefits owing to the Executive under the Company's otherwise applicable
employee benefit plans and programs, including any compensation previously
deferred by the Executive (together with any accrued earnings thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(the "Accrued Obligations"), and (iii) any other benefits payable due to the
Executive's death or Disability under the Company's plans, policies or programs
(the "Additional Benefits").

                  Any Earned Salary shall be paid in cash in a single lump sum
as soon as practicable, but in no event more than 30 days (or at such earlier
date required by law), following the Date of Termination. Accrued Obligations
and Additional Benefits shall be paid in accordance with the terms of the
applicable plan, program or arrangement.

                  (b) Cause and Voluntary Termination. If, during the Employment
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason following a
Change of Control), the Company shall pay the Executive (i) the Earned Salary in
cash in a single lump sum as soon as practicable, but in no event more than 30
days (or at such earlier date required by law), following the Date of
Termination, and (ii) the Accrued Obligations in accordance with the terms of
the applicable plan, program or arrangement.


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<PAGE>

                  (c) Termination by the Company other than for Cause and
Termination by the Executive for Good Reason.

                  (i) Lump Sum Payments. If, during the Employment Period, the
         Company terminates the Executive's employment other than for Cause, or
         the Executive terminates employment for Good Reason, the Company shall
         pay to the Executive the following amounts:

                  (A) the Executive's Earned Salary;

                  (B) a cash amount (the "Severance Amount') equal to two times
                      the sum of

                      (1)  the Executive's annual Base Salary; and

                      (2)  the average of the bonuses payable to the
                           Executive for the five fiscal years of the
                           Company ending immediately prior to the
                           Effective Date calculated by dividing the
                           total bonuses paid to the Executive for such
                           five year period by the total number of
                           years for which any bonus was paid; and

                  (C) the Accrued Obligations.

The Earned Salary and Severance Amount shall be paid in cash in a single lump
sum as soon as practicable, but in no event more than 30 days (or at such
earlier date required by law), following the Date of Termination. Accrued
Obligations shall be paid in accordance with the terms of the applicable plan,
program or arrangement.

                  (ii) Continuation of Benefits. If, during the Employment
         Period, the Company terminates the Executive's employment other than
         for Cause, or the Executive terminates employment for Good Reason, the
         Executive (and, to the extent applicable, the Executive's dependents)
         shall be entitled, after the Date of Termination until the earlier of
         (x) the twenty-four month anniversary of the Date of Termination (the
         "End Date") and (y) the date the Executive becomes eligible for
         comparable benefits under a similar plan, policy or program of a
         subsequent employer, to continue participation in all of the Company's
         employee and executive welfare and fringe benefit plans (the "Benefit
         Plans"). To the extent any such benefits cannot be provided under the
         terms of the applicable plan, policy or program, the Company shall
         provide a comparable benefit under another plan or from the Company's
         general assets. The Executive's participation in the Benefit Plans will
         be on the same terms and conditions that would have applied had the
         Executive continued to be employed by the Company through the End Date.

                  (d)  Limit on Payments by the Company.

                  (i) Application of Section 7(d). In the event that any amount
         or benefit paid or distributed to the Executive pursuant to this
         Agreement, taken together with any amounts or benefits otherwise paid
         or distributed to the Executive by


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<PAGE>

         the Company or any affiliated company (collectively, the "Covered
         Payments"), would be an "excess parachute payment" as defined in
         Section 280G of the Code and would thereby subject the Executive to the
         tax (the "Excise Tax") imposed under Section 4999 of the Code (or any
         similar tax that may hereafter be imposed), the provisions of this
         Section 7(d) shall apply to determine the amounts payable to Executive
         pursuant to this Agreement.

                  (ii) Calculation of Benefits. Immediately following delivery
         of any Notice of Termination, the Company shall notify the Executive of
         the aggregate present value of all termination benefits to which the
         Executive would be entitled under this Agreement and any other plan,
         program or arrangement as of the projected Date of Termination,
         together with the projected maximum payments, determined as of such
         projected Date of Termination, that could be paid without the Executive
         being subject to the Excise Tax.

                  (iii) Imposition of Payment Cap. If (A) the aggregate value of
         the Severance Amount, Accrued Obligations, and continuation of benefits
         to be paid or provided to the Executive under this Agreement and any
         other plan, agreement or arrangement with the Company exceeds the
         amount which can be paid to the Executive without the Executive
         incurring an Excise Tax and (B) the Executive would receive a greater
         net-after-tax amount (taking into account all applicable taxes payable
         by the Executive, including any Excise Tax) by applying the limitation
         contained in this Section 7(d)(iii), then such amounts payable to the
         Executive under this Section 7 shall be reduced (but not below zero) to
         the maximum amount which may be paid hereunder without the Executive
         becoming subject to such an Excise Tax (such reduced payments to be
         referred to as the "Payment Cap"). In the event that Executive receives
         reduced payments and benefits pursuant to the previous sentence,
         Executive shall have the right to designate which of the payments and
         benefits otherwise provided for in this Agreement that the Executive
         will receive in connection with the application of the Payment Cap.

                  (iv) Application of Section 280G. For purposes of determining
         whether any of the Covered Payments will be subject to the Excise Tax
         and the amount of such Excise Tax,

                  (A)      such Covered Payments will be treated as "parachute
                           payments" within the meaning of Section 280G of the
                           Code, and all "parachute payments" in excess of the
                           "base amount" (as defined under Section 280G(b)(3) of
                           the Code) shall be treated as subject to the Excise
                           Tax, unless, and except to the extent that, in the
                           good faith judgment of the Company's independent
                           certified public accountants appointed prior to the
                           Effective Date or tax counsel selected by such
                           accountants (the "Accountants"), the Company has a
                           reasonable basis to conclude that such Covered
                           Payments (in whole or in part) either do not
                           constitute "parachute payments" or represent
                           reasonable compensation for personal services
                           actually rendered (within the meaning of Section
                           280G(b)(4)(B) of the Code) in excess


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<PAGE>

                           of the "base amount," or such "parachute payments"
                           are otherwise not subject to such Excise Tax, and

                  (B)      the value of any non-cash benefits or any deferred
                           payment or benefit shall be determined by the
                           Accountants in accordance with the principles of
                           Section 280G of the Code.

                  (v) For purposes of determining whether the Executive would
         receive a greater net-after-tax benefit were the amounts payable under
         this Agreement reduced in accordance with Paragraph 7(d)(iii), the
         Executive shall be deemed to pay:

                  (A)    Federal income taxes at the highest applicable marginal
                         rate of Federal income taxation for the calendar year
                         in which the first amounts are to be paid hereunder,
                         and

                  (B)    any applicable state and local income taxes at the
                         highest applicable marginal rate of taxation for such
                         calendar year, net of the maximum reduction in Federal
                         income taxes which could be obtained from the deduction
                         of such state or local taxes if paid in such year;

provided, however, that the Executive may request that such determination be
made based on the Executive's individual tax circumstances, which shall govern
such determination so long as the Executive provides to the Accountants such
information and documents as the Accountants shall reasonably request to
determine such individual circumstances.

                  (vi) If the Executive receives reduced payments and benefits,
         under this Section 7(d) (or this Section 7(d) is determined not to be
         applicable to the Executive because the Accountants conclude that
         Executive is not subject to any Excise Tax) and it is established
         pursuant to a final determination of a court or an Internal Revenue
         Service proceeding (a "Final Determination") that, notwithstanding the
         good faith of the Executive and the Company in applying the terms of
         this Agreement, the aggregate "parachute payments" within the meaning
         of Section 280G of the Code paid to the Executive or for the
         Executive's benefit are in an amount that would result in the
         Executive's being subject to an Excise Tax, then the amount equal to
         such excess parachute payments shall be deemed for all purposes to be a
         loan to the Executive made on the date of receipt of such excess
         payments, which the Executive shall have an obligation to repay to the
         Company on demand, together with interest on such amount at the
         applicable Federal rate (as defined in Section 1274(d) of the Code)
         from the date of the payment hereunder to the date of repayment by the
         Executive. If this Section 7(d) is not applied to reduce the
         Executive's entitlements under this Section 7 because the Accountants
         determine that the Executive would not receive a greater net-after-tax
         benefit by applying this Section 7(d) and it is established pursuant to
         a Final Determination that, notwithstanding the good faith of the
         Executive and the Company in applying the terms of this Agreement, the
         Executive would have received a greater net-after-tax benefit by
         subjecting the Executive's payments and benefits


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<PAGE>

         hereunder to the Payment Cap, then the aggregate "parachute payments"
         paid to the Executive or for the Executive's benefit in excess of the
         Payment Cap shall be deemed for all purposes a loan to the Executive
         made on the date of receipt of such excess payments, which the
         Executive shall have an obligation to repay to the Company on demand,
         together with interest on such amount at the applicable Federal rate
         (as defined in Section 1274(d) of the Code) from the date of the
         payment hereunder to the date of repayment by the Executive. If the
         Executive receives reduced payments and benefits by reason of this
         Section 7(d) and it is established pursuant to a Final Determination
         that the Executive could have received a greater amount without
         exceeding the Payment Cap, then the Company shall promptly thereafter
         pay the Executive the aggregate additional amount which could have been
         paid without exceeding the Payment Cap, together with interest on such
         amount at the applicable Federal rate (as defined in Section 1274(d) of
         the Code) from the original payment due date to the date of actual
         payment by the Company.

                  8. Non-Exclusivity of Rights. Except as expressly provided
herein, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any benefit, bonus, incentive, stock
option or other plan or program provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise prejudice such rights as the Executive may have under any
other agreements with the Company or any of its affiliated companies, including
employment agreements or stock option agreements. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies at or subsequent to
the Date of Termination shall be payable in accordance with such plan or
program.

                  9. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise. In the event of a
termination of the Executive's employment by the Company other than for Cause or
termination of employment by the Executive for Good Reason, the Executive shall
have no duty to seek any other employment after termination of employment with
the Company and the Company hereby waives and agrees not to raise or use any
defense based on the position that the Executive had a duty to mitigate or
reduce the amounts due to the Executive hereunder by seeking other employment
whether suitable or unsuitable and should the Executive obtain other employment,
then the only effect of such on the obligations of the Company hereunder shall
be that the Company shall be entitled to credit against any payments which would
otherwise be made pursuant to Section 7(c)(ii) hereof, any comparable payments
to which the Executive is entitled under the employee and executive welfare
benefit plans maintained by the Executive's other employer or employers in
connection with services to such employer or employers after termination of the
Executive's employment with the Company.


                                      -12-
<PAGE>

                  10. Legal Fees and Expenses. If the Executive asserts any
claim in any contest (whether initiated by the Executive or by the Company) as
to the validity, enforceability or interpretation of any provision of this
Agreement, the Company shall pay the Executive's costs (or cause such costs to
be paid) in so asserting, including, without limitation, reasonable attorneys'
fees and expenses, if the Executive is the prevailing party in such contest, as
determined by the arbitrators selected pursuant to Section 13(b) hereof to
resolve such contest.

                  11. Confidential Information; Company Property. For and in
consideration of the salary and benefits to be provided by the Company
hereunder, including the severance arrangements set forth herein, the Executive
agrees that:

                  (a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, (i) obtained by the Executive during
the Executive's employment by the Company or any of its affiliated companies and
(ii) not otherwise public knowledge (other than by reason of an unauthorized act
by the Executive). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, unless compelled pursuant to an order of a court or other body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.

                  (b) Company Property. Except as expressly provided herein,
promptly following the Executive's termination of employment, the Executive
shall return to the Company all property of the Company and all copies thereof
in the Executive's possession or under the Executive's control.

                  (c) Injunctive Relief and Other Remedies with Respect to
Covenants. The Executive acknowledges and agrees that the covenants and
obligations of the Executive with respect to confidentiality and Company
property relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company irreparable injury for which adequate remedies are not available at law.
Therefore, the Executive agrees that the Company shall (i) be entitled to pursue
an injunction, restraining order or such other equitable relief (without the
requirement to post bond) restraining Executive from committing any violation of
the covenants and obligations contained in this Section 11 and (ii) have no
further obligation to make any payments to the Executive hereunder following any
finding by a court or an arbitrator that the Executive has engaged in a material
violation of the covenants and obligations contained in this Section 11. These
remedies are cumulative and are in addition to any other rights and remedies the
Company may have at law or in equity. In no event shall an asserted violation of
the provisions of this Section 11 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this Agreement.


                                      -13-
<PAGE>

                  12. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives, including by will or the
laws of descent and distribution.

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors. The Company shall require any
successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.

                  13. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, applied without reference to principles of conflict of laws.

                  (b) Arbitration. Except to the extent provided in Section
11(d), any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration. The arbitration shall be
held in the City of Pittsburgh, Commonwealth of Pennsylvania, and except to the
extent inconsistent with this Agreement, shall be conducted in accordance with
the Expedited Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of law or equity.
The arbitrator shall be acceptable to both the Company and the Executive. If the
parties cannot agree on an acceptable arbitrator, the dispute shall be heard by
a panel of three arbitrators, one appointed by each of the parties and the third
appointed by the other two arbitrators.

                  (c) Amendments. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.

                  (d) Entire Agreement. Excepting any plans, agreements or
arrangements specifically referred to in this Agreement, this Agreement
constitutes the entire agreement between the parties hereto with respect to the
matters referred to herein. No other agreement relating to the terms of the
Executive's employment by the Company, oral or otherwise, shall be binding
between the parties unless it is in writing and signed by the party against whom
enforcement is sought. There are no promises, representations, inducements or
statements between the parties other than those that are expressly contained
herein. The Executive acknowledges that he is entering into this Agreement of
his own free will and accord, and with no duress, that he has read this
Agreement and that he understands it and its legal consequences.


                                      -14-
<PAGE>

                  (e) Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

                  If to the Executive:   at the home address of the Executive
                                         noted on the records of the Company

                  If to the Company:     Chairman of the Board
                                         Michael Baker Corporation
                                         Airport Office Park, Building #3
                                         420 Rouser Road
                                         Coraopolis, Pennsylvania 15108

                  with a copy to:        Reed Smith LLP
                                         Attn: David L. DeNinno, Esq.
                                         435 Sixth Avenue
                                         Pittsburgh, PA  15219

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

                  (f) Tax Withholding. The Company shall withhold from any
amounts payable under this Agreement such Federal, state, foreign, or local
taxes or levies as shall be required to be withheld pursuant to any applicable
law or regulation.

                  (g) Severability; Reformation. In the event that one or more
of the provisions of this Agreement shall become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby. In the
event that any of the provisions of Section 11(a) or Section 11(c) are not
enforceable in accordance with its terms, the Executive and the Company agree
that such Sections shall be reformed to make such Sections enforceable in a
manner which provides the Company the maximum rights permitted at law.

                  (h) Effect of Agreement on Rights of Executive. The Executive
and the Company acknowledge that, except as may otherwise be provided under any
other written agreement between the Executive and the Company, the employment of
the Executive by the Company is "at will" and, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement except in circumstances relating to a
Potential Change of Control as provided for herein.

                  (i) Waiver. Waiver by any party hereto of any breach or
default by the other party of any of the terms of this Agreement shall not
operate as a waiver of any other breach or default, whether similar to or
different from the breach or default waived. No waiver of any provision of this
Agreement shall be implied from any course


                                      -15-
<PAGE>

of dealing between the parties hereto or from any failure by either party hereto
to assert its or his rights hereunder on any occasion or series of occasions.

                  (j) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

                  (k) Captions. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.

                  IN WITNESS WHEREOF, the Executive has hereunder set his hand
and the Company has caused this Agreement to be executed in its name on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary, all as of the day and year first above written.

[CORPORATE SEAL]                        MICHAEL BAKER CORPORATION



/s/  Marcia S. Wolk                     /s/ H. James McKnight
-------------------------------         ---------------------------------------
By:  Marcia S. Wolk                     By:  H. James McKnight
Title:  Assistant Secretary             Title: Executive Vice President and
                                               General Counsel

                                        EXECUTIVE



/s/ Silvana Travanti                    /s/ Bradley L. Mallory
-------------------------------         ---------------------------------------
Witnessed                               Bradley L. Mallory


                                      -16-

</TEXT>
</DOCUMENT>
