<PAGE>
                                                                   Exhibit 10.1

                            MICHAEL BAKER CORPORATION

                2003 "LINE OF SIGHT" INCENTIVE COMPENSATION PLAN


         Section 1. Purpose. The purpose of the Michael Baker Corporation 2003
Incentive Compensation Plan (the "Plan") is to provide for an incentive payment
opportunity to employees of Michael Baker Corporation (the "Company") and its
subsidiaries, which may be earned upon the achievement of established
performance goals. By providing an incentive payment opportunity based upon
market-based performance goals, the Company will establish a clear line of sight
between the overall performance of the Company and the individual contribution
of each employee.

         Section 2. Effective Date. The effective date of this Plan is January
1, 2003. The Plan will remain in effect from year to year (each calendar year
shall be referred to herein as a "Plan Year") until formally amended or
terminated in writing by the Company's Board of Directors (the "Board").

         Section 3. Administration of the Plan.

                  Section 3.01. Committee. Full power and authority to
administer, construe and interpret the Plan, and any incentive program described
within the Plan (any "Incentive Program") shall be vested in the Compensation
Committee of the Board (the "Committee"). The Committee may delegate to any
agent as it deems appropriate to assist it with the administration of the Plan.
Any determination, action or records of the Committee shall be final, conclusive
and binding on all Plan Participants, as defined in Section 3.04 of the Plan,
and their beneficiaries, heirs, personal representatives, executors and
administrators, and upon the Company and all other persons having or claiming to
have any right or interest in or under the Plan.

                  Section 3.02. Rules and Regulations. The Committee may, from
time to time, establish rules, forms and procedures of general application for
the administration of the Plan and each Incentive Program. The Committee shall
determine the Incentive Targets and Incentive Awards, as defined in Sections
5.01 and 5.02 of the Plan, designate the employees who are to participate in the
Plan and determine the Group to which a Participant is assigned, as defined in
Section 4.02 of the Plan.

                  Section 3.03. Quorum. A majority of the members of the
Committee shall constitute a quorum for purposes of transacting business
relating to the Plan. The acts of a majority of the members present (in person,
or by conference telephone) at any meeting of the Committee at which there is a
quorum, or acts reduced to and approved unanimously in writing by all of the
Committee members, shall be valid acts of the Committee.

                  Section 3.04. Notice of Participation. Each employee shall
receive notice informing the employee of the Plan and specifying the group in
which the employee is designated to participate. Designation of participation
does not guarantee a Participant that an Incentive Award will be earned, or that
such Participant will continue to participate in the same group for the current
Plan Year (based upon the achievement of Group qualification metrics) or for
future Plan Years.

         Section 4. Eligibility, Groups and Incentive Programs.

                  Section 4.01. Eligibility. Any employee of the Company or any
wholly-owned subsidiary of the Company shall be eligible to participate in the
Plan upon written designation by

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the Committee as provided in Section 3.04, excluding employees who are covered
under a foreign government regulated bonus plan.

         Section 4.02. Designation of Groups. Any employee who is designated by
the Committee as a Participant for a Plan Year shall be a member of one of the
following Groups:

                  Group 1.     Participants in Group 1 shall be the Company's
                               Chief Executive Officer, President and Chief
                               Operating Officer, Corporate Executive
                               Vice-Presidents, other senior corporate
                               management, Regional Engineering Managers, Energy
                               Manager, Engineering Functional Managers, Energy
                               Executive Vice-President, Project Services
                               Manager, Engineering Practice Leaders, Operations
                               Office Managers, Energy OPCO Regional Managers,
                               Discipline Department Managers and other selected
                               employees who support the entire business
                               segment.

                  Group 2.     Participants in Group 2 shall be those
                               Engineering Project Managers who are primarily
                               responsible for any individual engineering
                               project budgeted to equal or exceed $1,000,000 in
                               gross revenue for the Plan Year, or such other
                               amount as determined from time to time by the
                               Committee, and those Energy Project Managers who
                               are primarily responsible for any individual
                               energy project budgeted to equal or exceed
                               $1,000,000 in gross revenue for the Plan Year, or
                               such other amount as determined from time to time
                               by the Committee.

                  Group 3.     Participants in Group 3 shall be those
                               Engineering Project Managers and Energy Project
                               Managers who are primarily responsible for an
                               individual project or aggregate projects with
                               gross revenue for the Plan Year greater than
                               $200,000, excluding projects with annual gross
                               revenue less than $100,000.

                  Group 4.     Participants in Group 4 shall be any employee
                               who is designated as a Participant in the Plan
                               and who is not otherwise a member of Group 1, 2
                               or 3.

With respect to a Participant who moves to or from Group 1 during a Plan Year,
such Participant shall be treated as a member of each Group for the period of
time in that Group during the Plan Year and the actual achievement of any
Performance Goals, as defined in Section 5.03 of the Plan, established with
respect to participation in each Group shall be used to calculate the pro-rated
Incentive Award applicable for the period of time in each Group.

                  Section 4.03. Incentive Programs. The following Incentive
Programs shall be administered under the Plan:

                  o        The Corporate Incentive Program;

                  o        The Engineering Project Incentive Program;

                  o        The Energy Project Incentive Program; and

                  o        The Discretionary Incentive Program.

All Group 1 Participants shall participate in the Corporate Incentive Program.
All Group 2 and Group 3 Participants who are Engineering Project Managers shall
participate in the Engineering Project Incentive Plan. All Group 2 and Group 3
Participants who are Energy Project Managers



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shall participate in the Energy Project Incentive Program. All Group 4
Participants shall participate in the Discretionary Incentive Program.

                  Section 4.04. Termination of Employment.

                           (a) Except as provided in Section 4.05 of the Plan, a
Participant whose employment with the Company and all subsidiaries is
terminated, either voluntarily, by mutual agreement or by involuntary
termination for cause following the end of a Plan Year but prior to the payment
of an Incentive Award for such Plan Year will forfeit all right to such unpaid
Incentive Awards, except as otherwise determined by the Committee or its
delegate; provided further that a Participant whose employment is terminated by
the Company and all subsidiaries involuntarily other than for cause following
the end of a Plan Year shall not forfeit all right to such unpaid Incentive
Awards.

                           (b) A Participant whose employment with the Company
and all subsidiaries is terminated voluntarily, by mutual agreement or
involuntarily for cause at any time during a Plan Year shall forfeit all rights
to any Incentive Awards for the Plan Year during which termination occurs. A
Participant whose employment is terminated by the Company and all subsidiaries
involuntarily other than for cause on or before June 30 of any Plan Year shall
forfeit all rights to any Incentive Awards for the Plan Year during which
termination occurs; provided further that a Participant whose employment is
terminated by the Company and all subsidiaries involuntarily other than for
cause after June 30 of a Plan Year shall be entitled to a pro-rated Incentive
Award for the period of employment, subject to the other terms and conditions of
the Plan.

                  Section 4.05. Death, Disability or Retirement. If, during a
Plan Year, a Participant dies or becomes disabled, within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended, or retires after
attainment of at least age 55 and with at least 10 years of service with the
Company and/or its subsidiaries, the Committee may, in its discretion or under
such rules as it may prescribe, make a partial or full Incentive Award to the
Participant for the Plan Year provided that the applicable Performance Goals
were achieved.

                  Section 4.06. New Participants. New employees of the Company
or any wholly-owned subsidiary of the Company hired after June 30 of a Plan Year
will become a Group 4 Participant during such Plan Year. New employees hired on
or before June 30 may participate (on a pro-rated basis) in any Group during
such Plan Year based upon achievement of Group qualification metrics.

         Section 5. Incentive Targets, Incentive Awards and Performance Goals.

                  Section 5.01. Incentive Targets. Each Participant under the
Plan shall be assigned an incentive target (an "Incentive Target") that shall be
determined based on market competitive levels, and which may be expressed as a
percentage of the Participant's base salary as related to the level of
achievement attained. Incentive Targets shall be determined within 90 days after
the commencement of each Plan Year and approved by the Committee. The Incentive
Targets for the current Plan Year are attached hereto as Attachment A.

                  Section 5.02. Incentive Awards. No incentive award payment
("Incentive Award") may exceed the Participant's Incentive Target established
for the actual level of achievement attained. Payment of any Incentive Award
under the Plan shall be contingent upon (i) the achievement of the Main Company
Performance Goal (measured at target), as defined in Section 5.03(a) of the
Plan, for the Plan Year, (ii) the achievement of the applicable Performance
Goals, as defined in Section 5.03 of the Plan, for the particular Incentive
Program in which the Participant is a member for the Plan Year, and (iii) the
Participant's receiving an overall "Meets


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Expectations" rating on the values/work standards portion of his or her Company
performance review form for the Plan Year.

                  Section 5.03. Performance Goals.

                           (a) Company Performance Goals. Within 90 days after
the commencement of the Plan Year, the Committee shall establish specific
performance goals for the Company ("Company Performance Goals"), which may be
based upon one or more of the following objective performance measures and
expressed in either, or a combination of, absolute values or rates of change:
earnings per share, earnings per share growth rates, return on total capital,
stock price, revenues, costs, net income, operating income, operating margin,
cash flow, market share, return on equity, return on assets and total
shareholder return. The Committee shall designate one or more of such
Performance Goals as the main Company Performance Goal(s) (the "Main Company
Performance Goal(s)") and the weighting among the various Performance Goals
established. The Company Performance Goals, and the assigned weighting of each
for the current Plan Year, are attached hereto as Attachment B. In order for any
Incentive Awards to be paid to Participants in any Incentive Program with
respect to a Plan Year, the Main Company Performance Goal(s) established by the
Committee for such Plan Year (measured at target) must be achieved.

                           (b) Participants' Performance Goals. Within 90 days
after the commencement of the Plan Year, the Committee shall establish
performance goals for the Participants in each of the Incentive Programs
("Participant Performance Goals") as follows:

                           (i)      Corporate Incentive Program. The Participant
                                    Performance Goals for the Participants in
                                    the Corporate Incentive Program shall be the
                                    Company Performance Goals.

                           (ii)     Engineering Project Incentive Program. The
                                    Participant Performance Goals for each Group
                                    2 Participant in the Engineering Project
                                    Incentive Program shall be (x) the Main
                                    Company Performance Goal and (y) the level
                                    of achievement of budgeted project profits
                                    measured for the Plan Year on those
                                    particular projects for which the
                                    Participant is primarily responsible,
                                    weighted per Attachment C. The Participant
                                    Performance Goals for each Group 3
                                    Participant in the Engineering Project
                                    Incentive Program shall be (x) the Main
                                    Company Performance Goal and (y) the level
                                    of achievement of the Participant's budgeted
                                    project profits measured for the Plan Year
                                    on all projects, weighted per Attachment C.

                           (iii)    Energy Project Incentive Program. The
                                    Participant Performance Goals for each Group
                                    2 and Group 3 Participant in the Energy
                                    Project Incentive Program shall be (x) the
                                    Main Company Performance Goal and (y) the
                                    level of achievement of budgeted project
                                    profits measured for the Plan Year on those
                                    particular projects for which their
                                    Department is primarily responsible,
                                    weighted per Attachment C.

                           (iv)     Discretionary Incentive Program. The
                                    Participant Performance Goals for the
                                    Participants in the Discretionary Incentive
                                    Program shall be (x) the Main Company
                                    Performance Goal and (y) other goals as
                                    established by the Committee in its
                                    discretion.


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The Participant Performance Goals for each of the Engineering Project Incentive
Program and the Energy Project Incentive Program for the current Plan Year are
attached hereto as Attachment C.

                           (c) When the Participant Performance Goals are
established, the Committee shall also specify the manner in which the level of
achievement of such Participant Performance Goals shall be calculated. The
Committee may determine that unusual items or certain specified events or
occurrences, including changes in accounting standards or tax laws, shall be
excluded from the calculation, or may within their discretion adjust the
performance goals. The Committee may also, at its discretion, award up to 50% of
the targeted amount to participants without consideration of performance goals.

                  Section 5.04. Discretion. The Committee shall have no
discretion to increase any Incentive Target or Incentive Award payable that
would otherwise be due upon attainment of the Performance Goals, but the
Committee may in its discretion reduce or eliminate such Incentive Target or
Incentive Award.

                  Section 5.05. Determination of Incentive Award. The amount of
a Participant's Incentive Award for a Plan Year, if any, shall be determined by
the Committee or its delegate in accordance with the level of achievement of the
applicable Participant Performance Goals, the Participant's Incentive Target for
such level of achievement, and the other terms of the Plan.

                  Section 5.06. Determination of Other Bonuses. The Committee
may grant, from time to time in its sole discretion, a bonus to any Participant
based on any criteria it determines. Such bonus, if specifically designated by
the Committee as payable under this Plan, shall be subject to such provisions of
the Plan as it shall specify.

         Section 6. Payment to Participants.

                  Section 6.01. Timing of Payment. Any Incentive Award for a
Plan Year shall be paid to the Participant, or in the case of death to the
Participant's beneficiary, on or before March 30th of the following year.

                  Section 6.02. Beneficiary Designation. The deemed beneficiary
for this plan will be the beneficiary elected under the Company's Life Insurance
Plan. If a Participant would like to elect a different beneficiary, they may
file a completed designation of beneficiary form with the Committee or its
delegate in the form prescribed. Such designation may be made, revoked or
changed by the Participant at any time before death but such designation of
beneficiary will not be effective and supersede all prior designations until it
is received and acknowledged by the Committee or its delegate. If the Committee
has any doubt as to the proper beneficiary to receive payments hereunder, the
Committee shall have the right to withhold such payments until the matter is
finally adjudicated. However, any payment made in good faith shall fully
discharge the Committee, the Company, its subsidiaries and the Board from all
further obligations with respect to that payment.

                  Section 6.03. Tax Withholding. All Incentive Awards and
bonuses shall be subject to Federal income, FICA, and other tax withholding as
required by applicable law.

         Section 7. Miscellaneous.

                  Section 7.01. No Recourse. If the actual level of achievement
of any Performance Goal taken into account for determination of an Incentive
Award is found to be incorrect by the Company's independent certified public
accountants and was more than the correct amount, there shall be no recourse by
the Company against any person or estate.


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<PAGE>

However, the Company shall have the right to correct such error by reducing any
subsequent payments yet to be made under the Plan for current and future Plan
Years by the entire excess amount of any Incentive Awards paid over the correct
amounts.

                  Section 7.02. Merger or Consolidation. All obligations for
amounts earned but not yet paid under the Plan shall survive any merger,
consolidation or sale of all or substantially all of the Company's or a
subsidiary's assets to any entity, and be the liability of the successor to the
merger or consolidation or the purchaser of assets, unless otherwise agreed to
by the parties thereto.

                  Section 7.03. Gender and Number. The masculine pronoun
whenever used in the Plan shall include the feminine and vice versa. The
singular shall include the plural and the plural shall include the singular
whenever used herein unless the context requires otherwise.

                  Section 7.04. Construction. The provisions of the Plan shall
be construed, administered and governed by the laws of the Commonwealth of
Pennsylvania, including its statute of limitations provisions, but without
reference to conflicts of law principles. Titles of Sections of the Plan are for
convenience of reference only and are not to be taken into account when
construing and interpreting the provisions of the Plan.

                  Section 7.05. Non-alienation. Except as may be required by
law, neither the Participant nor any beneficiary shall have the right to,
directly or indirectly, alienate, assign, transfer, pledge, anticipate or
encumber (except by reason of death) any amount that is or may be payable
hereunder, including in respect of any liability of a Participant or beneficiary
for alimony or other payments for the support of a spouse, former spouse, child
or other dependent, prior to actually being received by the Participant or
beneficiary hereunder, nor shall the Participant's or beneficiary's rights to
benefit payments under the Plan be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or beneficiary or to the debts,
contracts, liabilities, engagements, or torts of any Participant or beneficiary,
or transfer by operation of law in the event of bankruptcy or insolvency of the
Participant or any beneficiary, or any legal process.

                  Section 7.06. No Employment Rights. Neither the adoption of
the Plan nor any provision of the Plan shall be construed as a contract of
employment between the Company or a subsidiary and any employee or Participant,
or as a guarantee or right of any employee or Participant to future or continued
employment with the Company or a subsidiary, or as a limitation on the right of
the Company or a subsidiary to discharge any of its employees with or without
cause. Specifically, designation as a Participant does not create any rights,
and no rights are created under the Plan, with respect to continued or future
employment or conditions of employment.

                  Section 7.07. Minor or Incompetent. If the Committee
determines that any Participant or beneficiary entitled to a payment under the
Plan is a minor or incompetent by reason of physical or mental disability, it
may, in its sole discretion, cause any payment thereafter becoming due to such
person to be made to any other person for his benefit, without responsibility to
follow application of amounts so paid. Payments made pursuant to this provision
shall completely discharge the Company, its subsidiaries, the Plan, the
Committee and the Board.

                  Section 7.08. Illegal or Invalid Provision. In case any
provision of the Plan shall be held illegal or invalid for any reason, such
illegal or invalid provision shall not affect the remaining parts of the Plan,
but the Plan shall be construed and enforced without regard to such.


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<PAGE>

                  Section 7.09. Amendment or Termination of this Plan. The Board
shall have the right to amend or terminate the Plan at any time, provided that
any amendment or termination shall not affect any amounts previously deferred.
No employee or Participant shall have any vested right to payment of any
Incentive Award hereunder prior to its payment. The Company shall notify
affected employees in writing of any amendment or Plan termination.

                  Section 7.10. Unsecured Creditor. The Plan constitutes a mere
promise by the Company or a subsidiary to make benefit payments in the future.
The Company's and the subsidiaries' obligations under the Plan shall be unfunded
and unsecured promises to pay. The Company and the subsidiaries shall not be
obligated under any circumstance to fund their respective financial obligations
under the Plan. Any of them may, in its discretion, set aside funds in a trust
or other vehicle, subject to the claims of its creditors, in order to assist it
in meeting its obligations under the Plan, if such arrangement will not cause
the Plan to be considered a funded deferred compensation plan. To the extent
that any Participant or beneficiary or other person acquires a right to receive
payments under the Plan, such right shall be no greater than the right, and each
Participant and beneficiary shall at all times have the status, of a general
unsecured creditor of the Company or a subsidiary.



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                                  ATTACHMENT A

                        INCENTIVE TARGETS, PLAN YEAR 2003


<TABLE>
<CAPTION>
Position                                                            Percentage of Base Salary
--------                                                          -----------------------------
                                                                  at target          at maximum
                                                                  ---------          ----------
<S>                                                              <C>                <C>
Group 1
          CORPORATE
          CEO                                                       55%                  110%

          President & COO                                           40%                   80%

          Corporate EVP, Regional Engineering
          Managers and Energy Manager                               35%                   70%


          Corporate Controller, Division Controllers,
          and Associate Legal Counsel                               25%                   50%

          BUSINESS SEGMENT
          Engineering Functional Managers and
          Controller and Energy EVP and Project
          Services Manager                                          25%                   50%

          Engineering Practice Leaders, Office
          Managers, Energy OPCO Regional Managers
          and Discipline Department Managers                        15%                   30%

          Selected Staff who support the entire Business
          Segment or Corporation                                    10% or 15%            30%

                                                              (2% of project. Profit not to exceed
                                                              the following % of base salary)

Group 2                                                             15%                   30%

Group 3                                                             10%                   20%

Group 4                                                        INDIVIDUAL DISCRETIONARY AWARDS*

</TABLE>


*        Amount of individual award is discretionary, total pool of
         discretionary awards not to exceed 15% of total award payouts for
         Groups 1, 2 and 3.



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                                  ATTACHMENT B

                 MAIN COMPANY PERFORMANCE GOALS, PLAN YEAR 2003




<TABLE>
<CAPTION>
                                                                Target            Maximum
                                                                ------            -------
<S>                                                           <C>                 <C>
Net Earnings per share (after payment of
Incentive Awards) *                                               $1.36             $1.50

Total Gross Sales                                               $455.9MM           $490MM

</TABLE>


*  Main Company Performance Goal.  Payouts prorated between target and maximum.




<PAGE>



                                  ATTACHMENT C
               INCENTIVE PROGRAM PERFORMANCE GOALS, PLAN YEAR 2003

<TABLE>
<CAPTION>
                                   Weight                         Target                                Maximum
                                   ------                         ------                                -------
<S>                       <C>                         <C>                                   <C>
Corporate Incentive        60% Earnings per share      $1.36 Earnings per share              $1.50 earnings per share
Program (Group 1)          40% Total Gross Revenue     $455.9 Gross Revenue                  $490MM Gross Revenue

Engineering Project        Same as Tier One above      (1)   Main Company Performance Goal   (1)   Main Company Performance Goal
Incentive Program                                            (measured at target) and              (measured at target) and
(Group 2)
                                                       (2)   100% of aggregate Budgeted      (2)   100% of aggregate Budgeted
                                                             Project Profit of the                 Project Profit of the
                                                             Participant's projects                Participant's projects + 15%

Engineering Project        Same as Tier One above      (1)   Main Company Performance Goal   (1)   Main Company Performance Goal
Incentive Program                                            (measured at target) and              (measured at target) and
(Group 3)
                                                       (2)   100% of aggregate Budgeted      (2)   100% of aggregate Budgeted
                                                             Project Profit of  the                Project Profit of  the
                                                             Participant's projects                Participant's projects +15%
                                                             (weighted 75%)                        (weighted 75%)

Energy Project Incentive   Same as Tier One above      (1)   Main Company Performance Goal   (1)   Main Company Performance Goal
Program                                                      (measured at target) and              (measured at target) and
(Group 2)
                                                       (2)   100% of aggregate Budgeted      (2)   100% of aggregate Budgeted
                                                             Project Profit of a                   Project Profit of a
                                                             Department's projects                 Department's projects + 15%

Energy Project Incentive   Same as Tier One above      (1)   Main Company Performance Goal   (1)   Main Company Performance Goal
Program                                                      (measured at target) and              (measured at target) and
(Group 3)
                                                       (2)   100% of aggregate Budgeted      (2)   100% of aggregate Budgeted
                                                             Project Profit of a                   Project Profit of  a
                                                             Department's projects.                Department's projects + 15%
</TABLE>


*    Payouts prorated between target and maximum.