Document:

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                                                                   EXHIBIT 10.37

                               SEVERANCE AGREEMENT

     This Agreement (the "Agreement") is made and entered into as of July 10,
2000, between MTI Technology Corporation, a corporation organized under the laws
of the State of Delaware (the "Company"), and Paul W. Emery, II (the
"Executive").

                                    RECITALS

     A. Executive is being hired to serve as an officer of the Company.

     B. The Board of Directors of the Company (the "Board") recognizes that the
possibility of a Change in Control (as hereinafter defined) exists and that the
threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;

     C. The Board has determined that it is essential and in the best interest
of the Company and its stockholders to obtain and retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and

     D. In order to induce the Executive to accept employment with the Company,
particularly in the event of a threat or the occurrence of a Change in Control,
the Company desires to enter into this Agreement with the Executive to provide
the Executive with certain benefits in the event that the Executive's employment
is terminated as a result of, or in connection with, a Change in Control.

                                    AGREEMENT

     In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:

     1. Term Of Agreement. This Agreement shall commence as of the date first
set forth above and shall continue in effect until July 10, 2001; provided,
however, that commencing on July 10, 2000 and on each July 10 thereafter, the
term of this Agreement shall automatically be extended for one (1) year unless
the Company or the Executive shall have given written notice to the other at
least ninety (90) days prior thereto that the term of this Agreement shall not
be so extended; and provided, further, however, that notwithstanding any such
notice by the Company not to extend, the term of this Agreement shall not expire
prior to the expiration of twelve (12) months after the occurrence of a Change
in Control.

     2. Definitions.

        2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,

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including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the Pro Rata Bonus (as hereinafter defined)).

        2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall
mean the greater of the Executive's annual base salary (a) at the rate in effect
on the Termination Date or (b) at the highest rate in effect at any time during
the ninety (90) day period prior to the Change in Control, and shall include all
amounts of base salary that are deferred under the Executive benefit plans of
the Company or any other agreement or arrangement.

        2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall
mean the greatest of: (a) 100% of the annual bonus payable to the Executive
under the Company's Executive Management Bonus Plan for the fiscal year in which
the Termination Date occurs; (b) the annual bonus paid or payable to the
Executive under the Company's Executive Management Bonus Plan for the full
fiscal year ended prior to the fiscal year during which the Termination Date
occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three (3) full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.

        2.4. Cause. The Company may terminate this Agreement for Cause (as
defined) at any time upon written notice. For purposes of this Agreement, the
term "Cause" shall mean: (i) a material breach of any term of this Agreement and
failure to cure such breach within ten (10) days after written notice thereof
from the Company; (ii) the willful and continued failure by Executive
substantially to perform his duties for the Company (other than any such failure
resulting from his incapacity due to death or physical or mental illness), after
written demand for substantial performance is delivered to Executive by the
Company, which specifically identifies the manner in which the Company believes
that Executive has not substantially performed his duties; (iii) the failure by
Executive to follow the reasonable instructions of the Board of Directors; (iv)
the willful engaging by Executive in misconduct that is materially injurious to
the Company, monetarily or otherwise; (v) Executive's final conviction for fraud
or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse
of alcohol; provided, however, that as to alcohol abuse, Executive shall be
given notice and a thirty (30) day opportunity to remedy the problem. For
purposes of this paragraph, no act, or failure to act, on Executive's part shall
be considered "willful" unless done, or omitted to be done, by Executive other
than in good faith and without reasonable belief that Executive's action or
omission was in the best interest of the Company.

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        2.5. Change In Control.

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

                 (i) any "person" as such term is defined in Sections 13(d) and
     14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
     Act"), other than (1) a trustee or other fiduciary holding securities under
     an Executive benefit plan of the Company, (2) a corporation owned, directly
     or indirectly, by the stockholders of the Company in substantially the same
     proportions as their ownership of stock of the Company, or (3) any current
     beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange
     Act, of securities possessing more than twenty-five percent (25%) of the
     total combined voting power of the Company's outstanding securities,
     hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of
     the Exchange Act, directly or indirectly, of securities of the Company
     representing twenty-five percent (25%) or more of the total combined voting
     power of the Company's then outstanding securities; or

                 (ii) during any period of two (2) consecutive years,
     individuals who at the beginning of such period constitute the Board of
     Directors of the Company and any new director whose election by the Board
     of Directors or nomination for election by the Company's stockholders was
     approved by a vote of at least two-thirds (2/3) of the directors then still
     in office who either were directors at the beginning of the period or whose
     election or nomination for election was previously so approved, cease for
     any reason to constitute a majority thereof; or

                 (iii) the stockholders of the Company approve a merger or
     consolidation of the Company with any other corporation, other than a
     merger or consolidation which would result in the voting securities of the
     Company outstanding immediately prior thereto continuing to represent
     (either by remaining outstanding or by being converted into voting
     securities of the surviving entity) at least eighty percent (80%) of the
     total voting power represented by the voting securities of the Company or
     such surviving entity outstanding immediately after such merger or
     consolidation, or the stockholders of the Company approve a plan of
     complete liquidation of the Company or an agreement for the sale or
     disposition by the Company, in one transaction or a series of transactions,
     of all or substantially all of the Company's assets; or

                 (iv) the sale of substantially all of the Company's assets.

        2.6. Company. For purposes of this Agreement, the "Company" shall mean
MTI Technology Corporation and its Subsidiaries and shall include MTI's
Successors and Assigns (as hereinafter defined).

        2.7. Disability. For purposes of this Agreement, "Disability" shall mean
a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."

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        2.8. Good Reason.

             (a) For purposes of this Agreement, "Good Reason" shall mean any of
the events or conditions described in subsections (1) through (8) hereof:

                 (i) a change in the Executive's status, title, position or
     responsibilities (including reporting responsibilities) which, in the
     Executive's reasonable judgment, represents an adverse change from the
     Executive's status, title, position or responsibilities as in effect at any
     time within ninety (90) days preceding the date of a Change in Control or
     at any time thereafter; the assignment to the Executive of any duties or
     responsibilities which, in the Executive's reasonable judgment, are
     inconsistent with the Executive's status, title, position or
     responsibilities as in effect at any time within ninety (90) days preceding
     the date of a Change in Control or at any time thereafter; or any removal
     of the Executive from or failure to reappoint or reelect the Executive to
     any of such offices or positions, except in connection with the termination
     of the Executive's employment for Disability, Cause, as a result of the
     Executive's death or by the Executive;

                 (ii) a reduction in the Executive's base salary or any failure
     to pay the Executive any compensation or benefits to which the Executive is
     entitled within ten (10) days of the date due after receipt of written
     notice from Executive;

                 (iii) the Company's requiring the Executive to be based at any
     place outside a 25-mile radius from the Company's Anaheim Office, located
     at 4905 East La Palma Avenue, Anaheim, California 92807, except for
     reasonably required travel on the Company's business which is not
     materially greater than such travel requirements prior to the Change in
     Control;

                 (iv) the failure by the Company to (A) continue in effect
     (without reduction in benefit level and/or reward opportunities) any
     material compensation or Executive benefit plan in which the Executive was
     participating at any time within ninety (90) days preceding the date of a
     Change in Control or at any time thereafter unless such plan is replaced
     with a plan that provides substantially equivalent compensation or benefits
     to the Executive, or (B) provide the Executive with compensation and
     benefits, in the aggregate, at least equal (in terms of benefit levels
     and/or reward opportunities) to those provided for under each other
     Executive benefit plan, program and practice in which the Executive was
     participating at any time within ninety (90) days preceding the date of a
     Change in Control or at any time thereafter;

                 (v) the insolvency or the filing (by any party, including the
     Company) of a petition for bankruptcy of the Company, which petition is not
     dismissed within sixty (60) days;

                 (vi) any material breach by the Company of any provision of
     this Agreement, and failure of the Company to cure such breach within ten
     (10) days

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     from the Company's receipt of written notice from the Executive setting
     forth the nature of the alleged breach;

                 (vii) any purported termination of the Executive's employment
     for Cause by the Company which does not comply with the terms of Section
     2.4; or

                 (viii) the failure of the Company to obtain an agreement,
     satisfactory to the Executive, from any Successors and Assigns to assume
     and agree to perform this Agreement, as contemplated in Section 6 hereof.

             (b) The Executive's right to terminate the Executive's employment
pursuant to this Section 2.8 shall not be affected by the Executive's incapacity
due to physical or mental illness.

        2.9. Notice Of Termination. For purposes of this Agreement, "Notice of
Termination" shall mean a written notice of termination of the Executive's
employment from the Company, which notice indicates the date on which
termination is to be effective, the specific termination provision in this
Agreement relied upon and which 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.

        2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus"
shall mean an amount equal to the Bonus Amount multiplied by a fraction the
numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.

        2.11. Successors And Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.

        2.12. Termination Date. For purposes of this Agreement, "Termination
Date" shall mean in, the case of the Executive's death, the Executive's date of
death, in the case of Good Reason, the last day of the Executive's employment
and, in all other cases, the date specified in the Notice of Termination;
provided, however, that if the Executive's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least thirty (30) days.

     3. Termination Of Employment.

        3.1. If, during the term of this Agreement, the Executive's employment
with the Company shall be terminated within twelve (12) months following a
Change in Control, the Executive shall be entitled to the following compensation
and benefits:

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             (a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation and, if such
termination is other than by the Company for Cause, the Company shall also pay
the Executive a Pro Rata Bonus.

             (b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:

                 (i) the Company shall pay the Executive all Accrued
     Compensation and a Pro Rata Bonus;

                 (ii) the Company shall pay the Executive as severance pay and
     in lieu of any further compensation for periods subsequent to the
     Termination Date, in a single payment, an amount in cash equal to the sum
     of (A) the Base Amount and (B) the Bonus Amount; and

                 (iii) for a number of months equal to twelve (12) (the
     "Continuation Period"), the Company shall, at its expense, continue on
     behalf of the Executive and the Executive's dependents and beneficiaries
     the life insurance, disability, medical, dental and hospitalization
     benefits provided (A) to the Executive at any time during the 90-day period
     prior to the Change in Control or at any time thereafter or (B) to other
     similarly situated executives who continue in the employ of the Company
     during the Continuation Period. The coverage and benefits (including
     deductibles and costs) provided in this Section 3.1(b)(iii) during the
     Continuation Period shall be no less favorable to the Executive and the
     Executive's dependents and beneficiaries, than the most favorable of such
     coverages and benefits during any of the periods referred to in clauses (A)
     and (B) above. The Company's obligation hereunder with respect to the
     foregoing benefits shall be limited to the extent that the Executive
     obtains any such benefits pursuant to a subsequent employer's benefit
     plans, in which case the Company may reduce the coverage of any benefits it
     is required to provide the Executive hereunder as long as the aggregate
     coverages and benefits of the combined benefit plans are no less favorable
     to the Executive than the coverages and benefits required to be provided
     hereunder. This subsection (iii) shall not be interpreted so as to limit
     any benefits to which the Executive or the Executive's dependents or
     beneficiaries may be entitled under any of the Company's Executive benefit
     plans, programs or practices following the Executive's termination of
     employment, including without limitation, retiree medical and life
     insurance benefits.

             (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and
(ii) shall be paid in a

single lump sum cash payment within forty-five (45) days after the Executive's
Termination Date (or earlier, if required by applicable law).

             (d) The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, and no such

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payment shall be offset or reduced by the amount of any compensation or benefits
provided to the Executive in any subsequent employment except as provided in
Section 3.1(b)(iii).

        3.2. (a) The severance pay and benefits provided for in this Section 3
shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.

             (b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's Executive benefit
plans and other applicable programs, policies and practices then in effect.

     4. Notice Of Termination. Within one (1) year following a Change in
Control, any purported termination of the Executive's employment shall be
communicated by Notice of Termination to the Executive. For purposes of this
Agreement, no such purported termination shall be effective without such Notice
of Termination.

     5. Excise Tax Limitation.

        (a) Notwithstanding anything in this Agreement to the contrary, if any
portion of any payments to Executive by the Company under this Agreement and any
other present or future plan of the Company or other present or future agreement
between Executive and the Company would not be deductible by the Company
(collectively, "Payments") for federal income tax purposes by reason of
application of Section 162(m) of the Internal Revenue Code (the "Code"), then
payment of that portion to Executive shall be deferred until the earliest date
upon which payment thereof can be made to Executive without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred amount at 120% of the
applicable federal rate provided for in Section 1274(d)(1) of the Code. In
addition, notwithstanding any provision of this Agreement to the contrary, the
aggregate present value of the payments and benefits (excluding those payments
and benefits not treated as parachute payments under Code Section 280G(b)) to be
made or provided to the Executive by the Company (whether pursuant to this
Agreement or otherwise) shall not exceed three times the Executive's annualized
includible compensation for the base period, as defined in Code Section 280G(d)
of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any
excess payments or benefits shall be forfeited; provided, however, that the
forfeiture provision of this sentence shall apply only if such forfeiture
provision results in larger aggregate after-tax payments and benefits to the
Executive than if the forfeiture provision did not apply. The intent of this
portion of this subsection 5(a) is to prevent any payment or benefit to the
Executive from being subject to the excise tax imposed by Code Section 4999 and
to prevent any item of expense or deduction of the Company from being disallowed
as a result of the application of Code Section 280G, but only if the after-tax
payments and benefits payable or provided to the Executive are greater after
application of the forfeiture provision than if the forfeiture provision did not
apply. The interpretation of this subsection 5(a), its application to any
occurrence or event, the determination of whether any payment or benefit would
not be treated as a parachute payment, the determination of the aggregate
present value of all payments and benefits to be made or provided to the
Executive, the determination of the value of the payments and benefits payable
or to be provided to the Executive after reduction for all applicable taxes, and
what specific payments or benefits otherwise available to the Executive

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shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.

        (b) An initial determination as to whether the Payments shall be reduced
to the Limited Payment Amount and the amount of such Limited Payment Amount
shall be made, at the Company's expense, by the accounting firm that is the
Company's independent accounting firm as of the date of the Change in Control
(the "Accounting Firm"). The Accounting Firm shall provide its determination
(the "Determination"), together with detailed supporting calculations and
documentation, to the Company and the Executive within twenty (20) days of the
Termination Date if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax), and if the Accounting Firm
determines that there is substantial authority (within the meaning of Section
6662 of the Code) that no Excise Tax is payable by the Executive with respect to
a Payment or Payments, it shall furnish the Executive with an opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with respect to
any such Payment or Payments. Within ten (10) days of the delivery of the
Determination to the Executive, the Executive shall have the right to dispute
the Determination (the "Dispute"). If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and the Executive.

     6. Successors; Binding Agreement.

        (a) This Agreement shall be binding upon and shall inure to the benefit
of the Company, its Successors and Assigns and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.

        (b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive or the Executive's beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal personal representative.

     7. Confidential Information. Executive understands and acknowledges that
his work as an employee of the Company involves access to and creation of
confidential, proprietary, and trade secret information of the Company and its
affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively in Exhibit "A," "Proprietary
Information"). As part of this Agreement, Executive agrees to execute, and be
bound by, the Company's "Employee/ Consultant Proprietary Information
Agreement," a copy of which is attached hereto as Exhibit "A."

     8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with return receipt requested. Each such
notice, request, demand, or other communication shall be effective (a) if
delivered by hand, when delivered at the address specified in this Section; (b)
if given by facsimile, when such facsimile is transmitted to the telefacsimile
number specified

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in this Section and confirmation is received; or (c) if given by certified or
registered mail, three days after the mailing thereof. Notices shall be
delivered as follows:

                           If to the Company:
                           MTI Technology Corporation
                           4905 E. La Palma Avenue
                           Anaheim, California 92807
                           Attention:  Chief Financial Officer
                           Fax:  (714) 693-2202

                           With a copy to:

                           Morrison & Foerster LLP
                           19900 MacArthur Boulevard
                           12th Floor
                           Irvine, California 92612
                           Attention:  Tamara Powell Tate
                           Fax:  (714) 251-0900

                           If to the Executive:

                           Paul W. Emery, II
                           22 Cape Woodbury
                           Newport Beach, California 92660

Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.

     9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Executive may qualify, nor shall anything herein limit or reduce such rights
as the Executive may have under any other agreements with the Company (except
for any severance or termination agreement). Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.

     10. No Implied Employment Rights. Executive acknowledges and agrees that
nothing in this Agreement shall be construed to imply that his employment is
guaranteed for any period of time. Executive understands that his employment is
"at will," which means that either the Company or the Executive can terminate
the employment relationship at any time, with or without advance notice, for any
reason or no reason, with or without cause. Executive understands that the only
way that his "at will" employment relationship can be altered is by a written
agreement signed by the Executive and the President of the Company.

     11. Settlement Of Claims. 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

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any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against an
Executive or others.

     12. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.

     13. Governing Law. This Agreement has been negotiated and executed in the
State of California and is to be performed in Orange County, California. This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.

     14. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

     15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.

     16. Remedies. All rights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.

     17. Interpretation. The language in all parts of this Agreement shall be in
all cases construed simply according to its fair meaning and not strictly for or
against any party. Whenever the context requires, all words used in the singular
will be construed to have been used in the plural, and vice versa. The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.

     18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

     19. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.

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     20. Consultation with Counsel. Executive acknowledges (a) that he has
been given the opportunity to consult with counsel of his own choice concerning
this Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.

EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.

                                 MTI TECHNOLOGY CORPORATION

                                 By: /s/
                                     -------------------------------------------
                                 Title: President & CEO

                                 /s/
                                 -----------------------------------------------
                                 Paul W. Emery, II

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                                   EXHIBIT "A"
<PAGE>   13

                     STATEMENT REGARDING EMPLOYEE/CONSULTANT
                        PROPRIETARY INFORMATION AGREEMENT

Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").

Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.

If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.

If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.

I HAVE READ AND UNDERSTAND

THE ATTACHED AGREEMENT:

Executive Name:     Paul W. Emery II
                 ----------------------

Executive Signature: /s/
                     ------------------

Title:              COO
       --------------------------------

Date:
       --------------------------------

                                       A-1

<PAGE>   14
              EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT

     In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:

     1. Proprietary Information.

        (a) I understand and acknowledge that my work as an employee of the
Company has involved and will continue to involve access to and creation of
confidential, proprietary, and trade secret information of the Company and its
affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.

        (b) I understand and acknowledge that, for purposes of this Agreement,
"Proprietary Information" means all confidential, proprietary, or trade secret
information and ideas in whatever form, tangible or intangible, whether
disclosed to or learned or developed by me, prior or subsequent to the date
hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.

        (c) Without limiting the generality of the foregoing, I understand and
acknowledge that "Proprietary Information" includes all: (i) inventions,
computer codes, computer programs, formulas, schematics, techniques, algorithms,
employee suggestions, development tools and processes, computer printouts,
design drawings and manuals, and improvements or modification to any of the
foregoing; (ii) information about costs, profits, markets, and sales; (iii)
plans for future development and new product concepts; and (iv) all documents,
books, papers, drawings, models, sketches, and other data of any kind and
description, including electronic data recorded or retrieved by any means, that
have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.

                                       A-2

<PAGE>   15

     2. Use Of Proprietary Information.

     I agree that I will maintain at my work station or in other places under my
control only such Proprietary Information that I have a current "need to know,"
and that I will return to the appropriate person or location, or otherwise
dispose of, Proprietary Information once my need to know no longer exists. I
agree that I will not make copies of information unless I have a legitimate need
for such copies in connection with my work.

     3. Third-Party Information.

     I recognize that the Company has received and in the future will receive
from third parties their confidential or proprietary information subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. I agree that I owe the Company
and such third parties, during the term of my employment and thereafter, a duty
to hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm, or corporation (except as
necessary in carrying out my work for the Company consistent with the Company's
agreement with such third party) or to use it for the benefit of anyone other
than for the Company or such third party (consistent with the Company's
agreement with such third party) without the express written authorization of a
duly authorized officer of the Company.

     4. Inventions.

        (a) Subject to Section 9 below, I hereby assign to the Company, without
additional consideration, all right, title and interest (throughout the United
States and in all foreign countries) in all ideas, processes, inventions,
technology, writings, computer programs, designs, formulas, discoveries,
patents, copyrights, trademarks, service marks, original works of authorship,
any claims or rights, and any improvements or modifications to the foregoing
(collectively, "Inventions"), whether or not subject to patent or copyright
protection, relating to any activities of the Company that have been or will be
conceived, developed, or reduced to practice by me alone or with others (i)
during the term of my employment, whether or not conceived or developed during
regular business hours, and whether or not conceived before, on, or after the
date hereof or (ii) if based on Proprietary Information, after termination of my
employment. Such Inventions shall be the sole property of the Company and, to
the maximum extent permitted by applicable law, shall be deemed works made for
hire.

        (b) I will, whether during or after my employment by the Company,
execute such written instruments and do other such acts as may be necessary in
the opinion of the Company to obtain a patent, register a copyright, or
otherwise enforce the Company's rights in such Inventions (and I hereby
irrevocably appoint the Company and any of its officers as my attorney in fact
to undertake such acts in my name).

        (c) I understand that the assignment by me to the Company does not apply
to Inventions that qualify fully under Section 2870(a) of the California Labor
Code, which is set forth on Schedule "A." I understand that nothing in this
Agreement is intended to expand the scope of protection provided by Sections
2870 through 2872 of the California Labor Code. Except as disclosed in Schedule
"B", there are no ideas, inventions, technology, computer programs, processes,
trademarks, service marks, original works of authorship, designs, formulas,

                                      A-3
<PAGE>   16

discoveries, patents, copyrights, any claims or rights, and any improvements or
modifications to the foregoing that I wish to exclude from the operation of this
Agreement.

        (d) To the best of my knowledge, there is no existing contract in
conflict with this Agreement or any other contract in existence between me and
any other person or entity to assign ideas, inventions, technology, computer
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing.

     5. Termination of Employment.

        (a) I hereby acknowledge and agree that nothing in this Agreement shall
be construed to imply that the term of my employment is of any definite
duration. I further acknowledge and agree that I am employed on an "at-will"
basis, which means that I may quit at any time with or without cause, and the
Company may terminate my employment at any time with or without cause.

        (b) I acknowledge that, because of my responsibilities at the Company, I
have helped and will continue to help to develop and have been and will be
exposed to the Company's research and development, products, business
strategies, information on customers and clients, and other valuable Proprietary
Information, and that use or disclosure of such Proprietary Information in
breach of this Agreement would be extremely difficult to detect or prove. I also
acknowledge that the Company's relationships with its employees, affiliates,
consultants, customers, clients, business associates, and other persons are
valuable business assets. To forestall any use or disclosure of Proprietary
Information in breach of this Agreement, I agree that for the term of this
Agreement and for a period of one (1) year after termination of my employment
with the Company, I shall not, for myself or any third party, directly or
indirectly:

            (i) divert or attempt to divert from the Company any business of any
     kind in which it is engaged, including, without limitation, the
     solicitation of or interference with any of its suppliers or customer; or

            (ii) employ, solicit for employment, or recommend for employment any
     person employed by the Company.

     Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company. I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.

        (c) I acknowledge that, because of the difficulty of establishing when
any Invention is first conceived or developed by me, or whether it results from
access to Proprietary Information or the Company's equipment, facilities, and
data, I agree that any ideas, inventions, technology, computer programs,
processes, trademarks, service marks, original works of authorship, designs,
formulas, discoveries, patents, copyrights, any claims or rights, and any
improvements or modifications to the foregoing shall be presumed to be an
Invention if conceived, developed, used, sold, exploited, or reduced to practice
by me or with my aid within one (1) year after my termination of employment with
the Company. I can rebut the above

                                      A-4

<PAGE>   17

presumption if I prove that the invention, idea, process, etc., is not an
Invention as defined in paragraph 4(a).

        (d) I hereby acknowledge and agree that all personal property including,
without limitation, all books, manuals, records, models, drawings, reports,
notes, contracts, lists, files, computer software, computer tapes or disks,
blueprints, and other documents or materials (or copies thereof), Proprietary
Information, and equipment furnished to or prepared by me in the course of or
incident to my employment, belong to the Company and shall be promptly returned
to the Company once my employment with the Company is terminated, for any
reason. I will not retain any written or other tangible information pertaining
to any Invention. In the event of the termination of my employment, I agree to
sign and deliver the Termination Certificate attached as Schedule "C" to this
Agreement.

        (e) I understand that my obligations contained in this Agreement will
survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.

     6. Disclosure.

     I agree to maintain adequate and current written records on the development
of all Inventions and to disclose promptly to the Company all Inventions and
relevant records, which records will remain the sole property of the Company. I
further agree that all information and records pertaining to any Inventions
conceived, developed, or reduced to practice by me (alone or with others) during
my period of employment or during the one-year period following termination of
my employment, shall be promptly disclosed to the Company (any such disclosures
made after the termination of my employment shall be received by the Company in
confidence for the purpose of determining if they have been based on any
Proprietary Information). The Company shall examine such information to
determine if in fact such information are Inventions subject to this Agreement.

     7. Former or Conflicting Agreements.

     During my employment with the Company, I will not disclose to the Company,
or use, or induce the Company to use, any confidential, proprietary, or trade
secret information of others. I represent and warrant that I have returned all
property and confidential, proprietary and trade secret information belonging to
all prior employers, if any. I further represent and warrant that my performance
of the terms of this Agreement will not breach any agreement to keep in
confidence confidential proprietary and trade secret information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.

     8. Information on Company Premises.

     I acknowledge that all information generated, received, or maintained by or
for me on the premises or equipment of the Company (including, without
limitation, computer systems and electronic-mail or voicemail systems) is the
property of the Company, and I hereby waive any property or privacy rights that
I may have with respect to such information.

                                      A-5
<PAGE>   18

     9. Reserved Inventions.

     To avoid future confusion, I have listed on Schedule "B" a description of
all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.

     10. Choice of Law.

     The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.

     11. Remedies.

     I recognize that nothing in this Agreement is intended to limit any remedy
of the Company under the California Uniform Trade Secrets Act and that I could
face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
right shall be in addition to any other remedy available to the Company in law
or equity.

     12. Successors and Assigns.

         (a) I understand and agree that the Company may assign to another
     person or entity any of its rights under this Agreement.

         (b) I further understand and agree that this Agreement shall be binding
     upon me and my heirs, executors, administrators, and successors, and shall
     inure to the benefit of the Company's successors and assigns.

     13. Severability.

     If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the validity or enforceability of the other provisions shall not
be affected.

                                       A-6
<PAGE>   19

     14. Entire Agreement.

     The terms of this Agreement are the final expression of my agreement with
respect to the subject matter hereof and may not be contradicted by evidence of
any prior or contemporaneous agreement. This Agreement shall constitute the
complete and exclusive statement of its terms and no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other legal
proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.

I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.

         This Agreement is made and entered into as of _________________, 2000.

                                  MTI TECHNOLOGY CORPORATION

                                  By: /s/
                                      ------------------------------------------
                                  Title:  President & CEO

                                  Executive:  Paul W. Emery II
                                              ----------------------------------

                                  Signature: /s/
                                             -----------------------------------

                                      A-7

<PAGE>   20

                                   SCHEDULE A

                      California Labor Code Section 2870(a)

         Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information, except for those
inventions that either:

     (1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or

     (2) Result from any work performed by the employee for the employer.

                                   Schedule A

<PAGE>   21

                                   SCHEDULE B

1.   Proprietary Information. Except as set forth below, I acknowledge that at
     this time I know nothing about the business or Proprietary Information of
     the Company, other than information I have learned from the Company in the
     course of being hired:

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

2.   Reserved Inventions. Except as set forth below, there are no ideas,
     processes, inventions, technology, writings, programs, designs, formulas,
     discoveries, patents, copyrights, or trademarks, or any claims, rights, or
     improvements to the foregoing, that I wish to exclude from the operation of
     this Agreement:

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

Name:
      -------------------------------

Signature:
          ---------------------------

Date:
      -------------------------------

                                   Schedule B

<PAGE>   22

                                   SCHEDULE C

                             TERMINATION CERTIFICATE

     This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.

     I further certify that I have reviewed the Employee/Consultant Proprietary
Information Agreement signed by me and that I have complied with and will
continue to comply with all of its terms including, without limitation: (i) the
reporting of any invention, process, idea, etc. conceived or developed by me and
covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.

     On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Name:
      --------------------------------
Signature:
           ---------------------------
Date:
      ---------------------------------

                                   Schedule CExhibit 10.3(a)

                    FIRST AMENDED AND RESTATED LOAN AGREEMENT

Agreement, dated the 27th day of September, 2000, by and among the Borrowers (as
hereinafter  defined) and Mellon Bank, N.A., a national banking association (the
"Bank").

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

WHEREAS, Michael Baker Corporation,  a Pennsylvania corporation ("MBC"), Michael
Baker,  Jr., Inc., a Pennsylvania  corporation  ("Michael  Baker,  Jr."),  Baker
Environmental,   Inc.,  a  Pennsylvania   corporation  ("Baker  Environmental"),
Baker/MO  Services,  Inc.,  a  Texas  corporation  ("Baker/MO"),  Baker  Support
Services,  Inc.,  a Texas  corporation  ("Baker  Support"),  Baker/OTS,  Inc., a
Delaware corporation  ("Baker/OTS"),  Baker/Mellon Stuart Construction,  Inc., a
Pennsylvania corporation ("Baker/Mellon Stuart"), Baker Heavy & Highway, Inc., a
Pennsylvania  corporation  ("Baker  Heavy & Highway")  and the Bank entered into
that  certain  Loan  Agreement,  dated as of June 12,  1997,  as amended by that
certain (i) First  Amendment to Loan  Agreement,  dated as of July 24, 1998, and
(ii) Second  Amendment to Loan  Agreement,  dated November 1, 1999,  pursuant to
which  the Bank  extended  to MBC,  Michael  Baker,  Jr.,  Baker  Environmental,
Baker/MO,  Baker Support and Baker/OTS (and Baker/Mellon Stuart through the date
immediately preceding the date of the Second Amendment and Baker Heavy & Highway
and  Baker  Support  through  the date  immediately  preceding  the date of this
Agreement) a revolving credit loan facility in the original principal amount not
to exceed Twenty Five Million and 00/100 Dollars  ($25,000,000.00)  (as amended,
the "Existing Loan Agreement"); and

WHEREAS,  the  Borrowers  and the Bank desire to amend and restate the  Existing
Loan Agreement pursuant to the terms and conditions set forth herein.

NOW,  THEREFORE,  in  consideration  of the premises and of the mutual covenants
contained in this  Agreement,  the receipt and  sufficiency  of which are hereby
acknowledged,  and  intending to be legally bound  hereby,  the parties  hereto,
agree as follows:

                                   ARTICLE I.

                                  DEFINITIONS
                                  -----------

     1.01  CERTAIN  DEFINITIONS.  In addition  to other words and terms  defined
elsewhere in this  Agreement,  the following  words and terms have the following
meanings, respectively, unless the context otherwise clearly requires:

     "Affiliate"  shall mean,  as the date hereof or any time during the term of
this Agreement,  any Person which directly or indirectly controls, is controlled
by or is under common control with any Borrower.  The term "control"  shall mean
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction  of the  management  or  policies  of a Person,  whether  through  the
ownership of voting securities, by contract or otherwise.

<PAGE>

     "Agreement"  shall mean the Loan  Agreement,  dated as of June 12, 1997, by
and among MBC, Michael Baker, Jr., Baker Environmental, Baker/MO, Baker Support,
Baker/Mellon Stuart,  Baker Heavy & Highway,  Baker/OTS and Bank, (a) as amended
by (i) the First Amendment to Loan Agreement, dated as of July 24, 1998 and (ii)
the  Second  Amendment  to Loan  Agreement,  dated  November  1, 1999 and (b) as
amended and  restated by this First  Amended and  Restated  Loan  Agreement,  as
further amended, modified or supplemented from time to time.

     "Authorized  Representative" shall mean each Person designated from time to
time, as  appropriate,  in writing by each Borrower to the Bank for the purposes
of giving  notices of borrowing,  conversion  or  continuation  of Loans,  which
designation  shall  continue in force and effect until  terminated in writing by
such Borrower to the Bank.

     "Baker  Environmental"  shall have the meaning assigned to such term in the
preamble hereof.

     "Baker  Engineering"  shall  mean  Baker  Engineering,  Inc.,  an  Illinois
corporation.

     "Baker  GeoResearch"  shall mean Baker  GeoResearch,  Inc.,  a District  of
Columbia corporation.

     "Baker Global" shall mean Baker Global Project  Services,  Inc., a Delaware
corporation.

     "Baker  International"  shall mean  Michael  Baker  International,  Inc., a
Delaware corporation.

     "Baker NY" shall mean Baker Engineering NY, Inc., a New York corporation.

     "Baker Heavy & Highway" shall have the meaning assigned to such term in the
preamble hereof.

     "Baker/Mellon  Stuart" shall have the meaning  assigned to such term in the
preamble hereof.

     "Baker/Mellon  Stuart Security  Agreement"  shall mean the Revolving Credit
Note and Security Agreement, dated November 1, 1999, made by Baker/Mellon Stuart
in favor of MBC, as amended, modified or supplemented from time to time.

     "Baker/MO"  shall have the meaning  assigned  to such term in the  preamble
hereof.

     "Baker/OTS"  shall have the meaning  assigned to such term in the  preamble
hereof.

     "Baker  Support"  shall  have  the  meaning  assigned  to such  term in the
preamble hereof.

     "Bank" means Mellon Bank,  N.A., a national  banking  association  with its
main office located at Two Mellon Bank Center, Pittsburgh, Pennsylvania 15259.

<PAGE>

     "Borrower" or "Borrowers"  shall mean  singularly or  collectively,  as the
context may require,  MBC,  Michael Baker Jr.,  Baker  Environmental,  Baker/MO,
Baker/OTS, Baker Engineering, Baker NY, Baker GeoResearch and Baker Global.

     "Borrowing Base" shall mean that as set forth in Section 2.01(c) hereof.

     "Borrowing  Base  Certificate"  shall  mean  that as set  forth in  Section
2.01(d)(i) hereof.

     "Business Day" shall mean a day of the year on which banks are not required
or authorized to close in Pittsburgh, Pennsylvania.

     "Capital Expenditure" shall mean any expenditure made or liability incurred
which is, in accordance with GAAP,  treated as a capital  expenditure and not as
an expense item for the year in which it was made or  incurred,  as the case may
be.

     "Capital  Lease" shall mean any amount payable with respect to any lease of
any tangible or intangible property (whether real,  personal or mixed),  however
denoted, which is required by GAAP to be reflected as a liability on the balance
sheet of the lessee.

     "Capitalized  Lease  Obligation"  shall mean,  with respect to each Capital
Lease, the amount of the liability reflecting the aggregate discounted amount of
future payments under such Capital Lease  calculated in accordance with GAAP and
statement of financial accounting standards No. 13 (as supplemented and modified
from time to time, and any corresponding future interpretations by the Financial
Accounting Standards Board or any successor thereto).

     "Change of Control" shall mean (i) any Person (other than the Michael Baker
Corporation Employee Stock Ownership Plan and Trust) or group within the meaning
of Rule 13d-5 under the  Securities  Exchange  Act of 1934,  as  amended,  as in
effect on the date of this  Agreement,  has  become  the owner of,  directly  or
indirectly,  beneficially  or of  record,  shares  representing  more than fifty
percent (50%) of the aggregate  ordinary voting power  represented by the issued
and  outstanding  capital  stock of MBC or (ii) during any period of twelve (12)
consecutive calendar months,  individuals who were directors of MBC on the first
day of such period,  together with individuals  elected as directors by not less
than a majority of the  individuals  who were  directors  of the Borrower on the
first day of such period,  shall cease to hold at least sixty  percent  (60%) of
the total number of directors of MBC.

     "Closing" shall mean the closing of the  transactions  provided for in this
Agreement on the Closing Date.

     "Closing  Date"  shall mean  September  27th,  2000 or such other date upon
which the parties may agree.

     "Code" shall mean the Internal  Revenue Code of 1986 as amended  along with
the  rules,  regulations,   decisions  and  other  official  interpretations  in
connection therewith.

<PAGE>

     "Collateral  Assignment"  shall  mean  the  Collateral  Assignment,   dated
November  1,  1999,  made by MBC to the Bank with  respect  to the  Baker/Mellon
Stuart Security  Agreement,  as amended,  modified or supplemented  from time to
time.

     "Consolidated"  shall  mean the  resulted  consolidation  of the  financial
statements  of the  Borrowers and their  Subsidiaries  in accordance  with GAAP,
including   principles  of  consolidation   consistent  with  those  applied  in
preparation of the Consolidated financial statements referred to in Section 3.08
hereof.

     "Debt"  shall  mean,  collectively,   (A)  all  Indebtedness,   whether  of
principal,  interest,  fees,  expenses or  otherwise,  of any  Borrower to Bank,
whether now existing or hereafter incurred including, but not limited to, future
loans and advances,  if any, under this Agreement,  the Notes and the other Loan
Documents,  as the same may from time to time be amended,  together with any and
all  extensions,  renewals,  refinancings  or refundings  thereof in whole or in
part; (B) all other obligations for the repayment of borrowed money,  whether of
principal,  interest,  fees, expenses or otherwise,  of any Borrower to Bank now
existing or  hereafter  incurred,  whether  under  letters or advices of credit,
lines  of  credit,   interest  rate  protection   agreements,   other  financing
arrangements  or  otherwise  (including,  but not  limited  to, any  obligations
arising as a result of any overdrafts), whether or not related to this Agreement
or to the Note,  whether or not contemplated by Bank or any Borrower at the date
hereof and whether direct, indirect, matured or contingent, joint or several, or
otherwise,  together  with any and all  extensions,  renewals,  refinancings  or
refundings  thereof in whole or in part;  (C) all costs and expenses  including,
without limitation,  to the extent permitted by Law, reasonable  attorneys' fees
and  legal  expenses,  incurred  by  Bank  in  the  collection  of  any  of  the
indebtedness referred to in clauses (A) or (B) above in amounts due and owing to
Bank  under  this  Agreement;  and  (D)  any  advances  made  by  Bank  for  the
maintenance,  preservation,  protection or enforcement of, or realization  upon,
any property or assets now or hereafter made subject to a Lien granted  pursuant
hereto or pursuant to this  Agreement or the other Loan Documents or pursuant to
any  agreement,  instrument  or note  relating  to any of the  Debt,  including,
without limitation, advances for taxes, insurance, repairs and the like.

     "Distributions"  shall  mean,  for the  period  of  determination,  (a) all
distributions  of cash,  securities or other property (other than capital stock)
on or in respect of any  shares of any class of capital  stock of any  Borrower;
and (b) all purchases,  redemptions or other acquisitions by any Borrower of any
shares of any class of capital stock of such Borrower,  in each case  determined
and  Consolidated  for the Borrowers and their  Subsidiaries  in accordance with
GAAP.

     "Eligible  Accounts" means an account  receivable,  net of any prepayments,
progress  payments,  deposits and  retentions,  owing to a Borrower  (other than
Baker/OTS)  which met the  specifications  established  from time to time by the
Bank,  in its  reasonable  discretion,  at the time it came into  existence  and
continues to meet such  specifications  until it is collected in full. As of the
date of this Agreement,  an account receivable,  to be an Eligible Account, must
meet  the  following  specifications  at the time it comes  into  existence  and
continue to meet such specifications until it is collected in full:

          (a) The account is not more than ninety (90) days from the date of the
invoice therefor;

<PAGE>

          (b) The account arose from the  performance of services or an outright
sale of goods by the Borrower in the ordinary course of the Borrower's  business
and such goods have been shipped,  or services  provided,  to the account debtor
and the Borrower has possession of, or has delivered to the Bank, in the case of
goods,  shipping and delivery receipts evidencing such shipment and, in the case
of  services,  receipts  or other  evidence  satisfactory  to the Bank that such
services have been provided;

          (c) The account is not subject to any prior assignment or Lien and the
Borrower will not create any further Lien on the account,  nor permit its rights
in the account to be reached by attachment,  levy, garnishment or other judicial
process;

          (d) The  account  is not  subject to  set-off,  credit,  allowance  or
adjustment by the account debtor,  except discounts  allowed for prompt payment,
and the account  debtor has not complained in writing as to its liability on the
account and has not returned,  or retained the right to return, any of the goods
from the sale of which the account arose;

          (e) The  account  arose  in  the  ordinary  course  of the  Borrower's
business and did not arise from the  performance  of services or a sale of goods
to a supplier, an employee or an Affiliate of the Borrower;

          (f) The  account  does  not  constitute  a  finance  charge  or  lease
receivable;

          (g) No notice of bankruptcy,  insolvency or material adverse change of
the account debtor has been received by or is known to the Borrower;

          (h) The  account is not an account  evidenced  by an  "instrument"  or
"chattel paper" (each as defined in the UCC) not in the possession of the Bank;

          (i) The Bank has not notified the Borrower that, despite the fact that
the  account  debtor  meets  other  specifications  established  by the  Bank in
accordance  with this  Agreement,  the Bank has  determined,  in its  reasonable
discretion, that the account or account debtor is unsatisfactory;

          (j) The  account  is  payable  in freely  transferable  United  States
dollars.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
in effect as of the date of this  Agreement  and as amended from time to time in
the future.

     "ERISA  Affiliate" shall mean a Person which is under common control with a
Borrower  within the meaning of Section  414(b) of the Code  including,  but not
limited to, a Subsidiary of such Borrower.

     "Event of Default" means any of the Events of Default  described in Section
7.01 of this Agreement.

     "Excess Amount" shall mean that as set forth in Section 2.01(d) hereof.

<PAGE>

     "Existing Loan Agreement"  shall have the meaning  assigned to such term in
the preamble hereof.

     "Expiry Date" shall mean January 31, 2002 or such earlier date on which the
Revolving Credit Facility Commitment shall have been terminated pursuant to this
Agreement.

     "Fiscal Quarter(s)" shall mean the period(s) of January 1 through March 31,
April 1 through  June 30,  July 1 through  September  30, and  October 1 through
December 31 of each calendar year.

     "GAAP" means generally accepted  accounting  principles (as such principles
may change from time to time), which shall include the official  interpretations
thereof by the Financial  Accounting  Standards  Board,  applied on a consistent
basis.

     "Income From  Operations"  shall mean income from  operations  before other
income and expenses and income taxes,  as determined  and  Consolidated  for the
Borrowers and their Subsidiaries in accordance with GAAP.

     "Indebtedness"  shall mean,  for any Borrower or its  Subsidiaries  (i) all
obligations  for borrowed  money,  direct or  indirect,  incurred,  assumed,  or
guaranteed (including, without limitation, all notes payable and drafts accepted
representing   extensions  of  credit,  all  obligations   evidenced  by  bonds,
debentures,  notes or similar  instruments,  all  obligations  on which interest
charges are customarily  paid, all obligations  under  conditional sale or other
title retention  agreements,  all obligations for the deferred purchase price of
capital assets and all obligations  issued or assumed as full or partial payment
for  property  whether  or  not  any  such  notes,  drafts  or  obligations  are
obligations  for  borrowed  money),  (ii) all  obligations  secured  by any Lien
existing  on  property  owned or acquired  subject  thereto,  whether or not the
obligations  secured  thereby shall have been assumed,  (iii) all  reimbursement
obligations  (contingent  or  otherwise),   (iv)  indebtedness   represented  by
obligations under a Capital Lease and the amount of such  indebtedness  shall be
the Capitalized  Lease  Obligations  with respect to such Capital Lease, (v) all
obligations  (contingent  or  otherwise)  under any letter of  credit,  banker's
acceptance,  guaranty,  indemnification  agreement or interest  rate  protection
agreement,  (vi) all  obligations  to advance  funds to, or to purchase  assets,
property or services  from,  any other Person in order to maintain the financial
condition of such Person and (vii) any other transaction (including forward sale
or purchase  agreements)  having the  commercial  effect of a borrowing of money
entered into by such Borrower to finance its operations or capital requirements.

     "Indemnities" shall mean that as set forth in Section 8.19 hereof.

     "Indemnifying  Liabilities"  shall mean that as set forth in  Section  8.19
hereof.

     "Interest  Period"  shall mean,  with  respect to any Libor Rate Loan,  the
period  commencing on the date such Loan is made as,  continued or converted and
ending on the last day of such period as selected by a Borrower  pursuant to the
provisions below and, thereafter,  each subsequent period commencing on the last
day of the immediately  preceding  Interest Period and ending on the last day of
such period as selected by a Borrower  pursuant  to the  provisions  below.  The
duration of each  Interest  Period for any As Offered Rate Loan shall be for any
number of months  selected  by  Borrower  upon  notice,  as set forth in Section
2.01(c) provided that:

<PAGE>

               (i) the Interest Period for any Libor Rate Loan shall be one (1),
two (2),  three (3) or six (6) months or such other period as may be agreed upon
by Borrowers and Bank;

               (ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such  Interest  Period
shall occur on the next succeeding Business Day, provided that if such extension
of time would  cause the last day of such  Interest  Period to occur in the next
following  calendar  month,  the last day of such Interest Period shall occur on
the last  Business  Day  immediately  preceding  the  last day of such  Interest
Period;

               (iii)  if a  Borrower  continues  any  Libor  Rate  Loan  for  an
additional  Interest  Period,  the first day of the new Interest Period shall be
the last day of the preceding Interest Period;  however,  interest shall only be
charged once for such day at the rate  applicable to the Libor Rate Loan for the
new Interest Period;

               (iv)  if a  Borrower  fails  to so  select  the  duration  of any
Interest  Period in requesting  the Bank to make,  continue or convert any Libor
Rate Loan, the duration of such Interest Period shall be one (1) month; and

               (v) the last day of any Interest Period shall not occur after the
Expiry Date.

     "Law" shall mean any law  (including  common law),  constitution,  statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.

     "Lease  Obligation"  means an  obligation  of a lessee under a lease of any
tangible or intangible  property  (whether real,  personal or mixed)  including,
without  limitation,  with  respect  to any  period  under any such  lease,  the
aggregate  amounts payable by such lessee to or on behalf of the lessor for such
period including,  without limitation,  property taxes, insurance,  interest and
amortized  charges  which such lessee is required to pay pursuant to such lease.
Whenever it is necessary to determine  the amount of Lease  Obligations  for any
period with respect to which any of the rentals under the relevant lease are not
definitely  determinable  by the terms of the lease,  all such  rentals  will be
estimated in a reasonable amount for such period.

     "Letter of Credit  Commission" shall mean that as set forth in Section 2.09
hereof.

     "Letter of Credit Face Amount" shall mean,  for each Letter of Credit,  the
face amount of such Letter of Credit.

     "Letters of Credit" shall mean as set forth in Section 2.08 hereof.

     "Letter  of  Credit  Related   Documents"  shall  mean  any  agreements  or
instruments relating to a Letter of Credit.

<PAGE>

     "Letter of Credit  Reserve" shall mean, at any time, an amount equal to (a)
the aggregate Letter of Credit Undrawn  Availability at such time plus,  without
duplication,  (b) the aggregate amount  theretofore paid by the issuer under the
Letters  of Credit  and not  debited  to the  Borrowers'  account  or  otherwise
reimbursed by the Borrowers.

     "Letter of Credit  Undrawn  Availability"  at any time,  means the  maximum
amount available to be drawn at such time under all then outstanding  Letters of
Credit, including any amounts drawn thereunder and not reimbursed, regardless of
the existence or satisfaction of any conditions or limitations on drawing.

     "Libor Rate" shall mean, for any Interest Period for any Libor Rate Loan, a
fixed rate per annum  (rounded  upwards to the next  higher  whole  multiple  of
1/100%  if such rate is not such a  multiple)  equal at all  times  during  such
Interest  Period to the  quotient of (a) the rate per annum  determined  in good
faith by Bank in accordance with its usual procedures (which determination shall
be conclusive  absent  manifest  error) to be the average of the rates per annum
(rounded upwards to the next higher whole multiple of 1/100% if such rate is not
such a  multiple)  at which  deposits in  immediately  available  United  States
Dollars are offered at 11:00 a.m. (London,  England Time) (or as soon thereafter
as is reasonably  practicable) to major money center banks by prime banks in the
London interbank  eurodollar market two (2) Business Days prior to the first day
of such  Interest  Period in an amount  and  maturity  equal to the  amount  and
maturity  of such Libor Rate Loan,  divided by (b) a number  equal to 1.00 minus
the  aggregate  (without  duplication)  of the  rates  (expressed  as a  decimal
fraction) of the Libor Reserve Requirements.

     "Libor Rate Loan" shall mean any Loan that bears interest with reference to
the Libor Rate.

     "Libor Reserve Requirements" shall mean, for any day of any Interest Period
for a Libor Rate Loan, the percentage  (rounded  upward to the next higher whole
multiple of 1/100% if such rate is not such a multiple)  as  determined  in good
faith by the Bank  (which  determination  shall be  conclusive  absent  manifest
error) as  representing  the  maximum  reserves  (whether  basic,  supplemental,
marginal,  emergency or  otherwise)  prescribed by the Board of Governors of the
Federal  Reserve System (or any successor) with respect to liabilities or assets
consisting of or including "Eurocurrency  Liabilities" (as defined in Regulation
D of the Board of Governors of the Federal  Reserve System) in an amount and for
a maturity  equal to such Libor Rate Loan and such  Interest  Period.  The Libor
Rate shall be adjusted  automatically as of the effective date of each change in
the Libor Reserve Requirement.

     "Lien"  shall mean any  mortgage,  deed of trust,  pledge,  lien,  security
interest,  charge or other  encumbrance  or security  arrangement  of any nature
including,  but  not  limited  to,  any  conditional  sale  or  title  retention
arrangement,  and any assignment,  deposit  arrangement or lease intended as, or
having the effect of, security.

     "Loan" or "Loans" shall mean the Revolving  Credit Loans  (whether made as,
continued  as or  converted  to Prime  Rate  Loans and any  other  credit to any
Borrower  extended by the Bank in accordance with Article II hereof as evidenced
by the Notes, as the case may be.

     "Loan Account" shall mean that as set forth in Section 2.16 hereof.

<PAGE>

     "Loan Document" or "Loan Documents" mean, singularly or collectively as the
context may require,  (i) this Agreement,  (ii) the Notes,  (iii) the Collateral
Assignment,  (iv) the Security Agreement,  (v) the Stock Pledge Agreement,  (vi)
the Letters of Credit, (vii) the Letter of Credit Related Documents,  (viii) all
UCC-1 financial statements filed in accordance with the Security Agreement,  the
Collateral Assignment and the Stock Pledge Agreement and (vii) any and all other
documents,  instruments,  certificates and agreements  executed and delivered in
connection  with  this  Agreement,  as any of  them  may be  amended,  modified,
extended or supplemented from time to time.

     "Material  Adverse Change" shall mean a material  adverse change in the (a)
business,  operations  or  condition  (financial  or  otherwise)  of MBC and its
Subsidiaries  taken as a whole; (b) the ability of the Borrowers,  collectively,
to  perform  any of their  payment  or other  material  obligations  under  this
Agreement or any of the other Loan Documents to which they are a party;  (c) the
legality,  validity,  or enforceability of the obligations of any Borrower under
this  Agreement  or any of the other Loan  Documents;  or (d) the ability of the
Bank to exercise its rights and remedies  with respect to, or otherwise  realize
upon, any of the collateral or any other security for the Debt.

     "Material  Adverse Effect" shall mean a material  adverse effect on (a) the
business,  operations  or  condition  (financial  or  otherwise)  of MBC and its
Subsidiaries  taken as a whole; (b) the ability of the Borrowers,  collectively,
to  perform  any of their  payment  or other  material  obligations  under  this
Agreement or any of the other Loan Documents to which they are a party;  (c) the
legality,  validity,  or enforceability of the obligations of any Borrower under
this  Agreement  or any of the other Loan  Documents;  or (d) the ability of the
Bank to exercise its rights and remedies  with respect to, or otherwise  realize
upon, any of the collateral or any other security for the Debt.

     "MBC" shall mean Michael Baker Corporation, a Pennsylvania corporation.

     "Michael  Baker,  Jr." shall have the meaning  assigned to such term in the
preamble hereof.

     "Net Income"  means,  for the period of  determination,  net income  (after
taxes),  excluding,  however,  extraordinary  gains, in each case determined and
Consolidated for the Borrowers and their Subsidiaries in accordance with GAAP.

     "Notes" shall  collectively  mean the  Revolving  Credit Note and any other
note of the  Borrowers  executed  and  delivered  pursuant  to  this  Agreement,
together with all extensions,  renewals,  refinancings or refundings in whole or
in part.

     "Office",  when  used in  connection  with the Bank,  means its  designated
office located at Two Mellon Bank Center, Pittsburgh, Pennsylvania 15259 or such
other office of the Bank as the Bank may designate in writing from time to time.

     "Official  Body"  means any  government  or  political  subdivision  or any
agency,   authority,   bureau,   central   bank,   commission,   department   or
instrumentality of either, or any court, tribunal, grand jury or arbitrator,  in
each case whether foreign or domestic.

     "Operating Lease" shall mean any lease other than a Capital Lease.

<PAGE>

     "Owners Equity" means, as of the date of determination,  net worth, in each
case  determined and  Consolidated  for the Borrowers and their  Subsidiaries in
accordance with GAAP.

     "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation  established
pursuant to Title IV of ERISA.

     "Person" shall mean an individual,  corporation, limited liability company,
partnership,  joint venture, trust, or unincorporated organization or government
or agency or political subdivision thereof.

     "Plan" means any deferred compensation  program,  including both single and
multi-employer  plans,  subject  to  Title  IV  of  ERISA  and  established  and
maintained  for  employees  of any  Borrower  or  any  Subsidiary  or any  ERISA
Affiliate.

     "Potential  Default" shall mean any event or condition which with notice or
passage of time , or any combination of the foregoing, would constitute an Event
of Default.

     "Prime Rate" shall mean that rate of interest  per annum  announced by Bank
from time to time as its Prime Rate  which may not  represent  the  lowest  rate
charged by Bank to other borrowers at any time or from time to time.

     "Prime Rate Loan" shall mean any Loan that bears interest with reference to
the Prime Rate.

     "Prohibited  Transaction"  shall mean any  transaction  which is prohibited
under  Section  4975 of the Code or Section  406 of ERISA and not  exempt  under
Section 4975 of the Code or Section 408 of ERISA.

     "Reportable  Event"  shall  mean any of the  events  set  forth in  Section
4043(b)  of ERISA or the  regulations  thereunder,  except  any such event as to
which the  provision  for thirty  (30) days  notice to the PBGC is waived  under
applicable regulations.

     "Revolving  Credit Facility  Commitment" shall mean as set forth in Section
2.01(a) hereof.

     "Revolving Credit Loans" shall mean as set forth in Section 2.01(a) hereof.

     "Revolving  Credit Note" means the joint and several Revolving Credit Note,
dated  as of June 12,  1997,  as  amended  by the  First  Amended  and  Restated
Revolving  Credit Note, dated November 1, 1999, as amended by the Second Amended
and Restated Revolving Credit Note, dated of even date herewith, as the same may
be  amended,  modified  or  supplemented  from time to time,  together  with all
extensions, renewals, refinancings or refundings, in whole or in part.

     "Security Agreement" shall mean the Security Agreement,  dated December 31,
1999, made by MBC,  Michael Baker,  Jr., Baker  Environmental,  Baker/MO,  Baker
Support and Baker OTS in favor of the Bank, as amended and restated by the First
Amended and Restated Security  Agreement,  dated of even date herewith,  made by
the Borrowers in favor of the Bank, as further amended, modified or supplemented
from time to time.

<PAGE>

     "Stock Pledge  Agreement" shall mean the Stock Pledge  Agreement,  dated of
even date herewith,  made by MBC,  Michael Baker Jr. and Baker  International to
the Bank with respect to the issued and  outstanding  shares of capital stock of
Michael Baker Jr., Baker Environmental,  Baker/MO, Baker OTS, Baker Engineering,
Baker  NY,  Baker  GeoResearch  and  Baker  Global,  as  amended,   modified  or
supplemented from time to time.

     "Subsidiary" of a Borrower at any time means (i) any corporation  more than
fifty percent  (50%) of whose stock of any class or classes  having by the terms
thereof  ordinary  voting  power to elect a majority  of the  directors  of such
corporation is owned  (directly or  indirectly)  by such Borrower  and/or one or
more Subsidiaries of the Borrower and (ii) any partnership,  association,  joint
venture or other entity in which the Borrower and/or one or more Subsidiaries of
the Borrower has more than a fifty percent (50%) equity interest.

     "Termination   Event"  shall  mean  (i)  a  "Reportable   Event,  (ii)  the
termination of a single employer Plan or the treatment of a single employer Plan
amendment as the  termination  of such Plan under Section 4041 of ERISA,  or the
filing of a notice of intent to terminate a single  employer  Plan, or (iii) the
institution of proceedings to terminate a single employer Plan by the PBGC under
Section 4042 of ERISA,  or (iv) the  appointment  of a trustee to administer any
single employer Plan.

     "UCC" shall mean the Uniform Commercial Code or similar Law as in effect of
the date of this  Agreement  and as amended  from time to time,  of the Official
Body having  jurisdiction  with respect to all or any portion of the  collateral
granted or  assigned to the Bank from time to time under or in  connection  with
this Agreement.

     1.02 CONSTRUCTION AND INTERPRETATION.
          -------------------------------

          (a)  OBLIGATIONS  OF AND  REFERENCES  TO  BORROWERS.  Each  and  every
obligation of the Borrowers  contained in this  Agreement or any Loan  Document,
whether or not expressly stated,  shall be the joint and several  obligations of
the  Borrowers.  Any  and  all  references  to the  Borrowers  contained  in any
representation or covenant of the Borrowers' hereunder shall be a representation
or covenant  with  respect to each and every  Borrower,  both  individually  and
collectively.

          (b)  CONSTRUCTION.  Unless  the  context of this  Agreement  otherwise
clearly  requires,  references to the plural include the singular,  the singular
the plural, the part the whole and "or" has the inclusive meaning represented by
the phrase "and/or". References in this Agreement to "judgments" of Bank include
good faith  estimates by Bank (in the case of  quantitative  judgments) and good
faith beliefs by Bank (in the case of qualitative judgments).  The definition of
any document or instrument  includes all  schedules,  attachments,  and exhibits
thereto and all renewals, extensions,  supplements,  restatements and amendments
thereof.  "Hereunder",  "herein", "hereto", "hereof", "this Agreement" and words
of similar import refer to this entire  document;  "including" is used by way of
illustration and not by way of limitation,  unless the context clearly indicates
to the contrary;  and any action  required to be taken by any Borrower or all of
the Borrowers is to be taken promptly,  unless the context clearly  indicates to
the contrary.

          (c) ACCOUNTING TERMS. Any accounting term not  specifically defined in
Section 1.01 hereofshall have the meaning ascribed thereto by GAAP.

<PAGE>

                                   ARTICLE II.

                               THE CREDIT FACILITY

     2.01 REVOLVING CREDIT FACILITY COMMITMENT.
          ------------------------------------

          (a) REVOLVING  CREDIT LOANS.  Subject to the terms and  conditions and
relying upon the  representations and warranties set forth in this Agreement and
the other Loan  Documents,  the Bank agrees to make,  continue or convert  loans
(the "Revolving Credit Loans") to the Borrowers at any time or from time to time
on or after the Closing Date and to and including  the Business Day  immediately
preceding the Expiry Date, in an aggregate principal amount not exceeding at any
one time  outstanding  the Borrowing  Base as described in Section  2.01(c) (the
"Revolving  Credit Facility  Commitment").  Within the limits of time and amount
set forth in this Section 2.01,  and subject to the provisions of this Agreement
including,  without  limitation,  the Bank's  right to demand  repayment  of the
Revolving Credit Loans upon the occurrence of an Event of Default, Borrowers may
borrow, repay and reborrow under this Section 2.01; provided, however, that if a
Borrower  prepays  any Libor  Rate Loan on a day other  than the last day of the
applicable  Interest  Period for such Libor Rate Loan,  then the Borrowers shall
comply with the terms and  conditions  of Section  2.13(c)  with respect to such
prepayment.

          (b) REVOLVING  CREDIT  NOTE.  The  joint and  several  obligations  of
Borrowers to repay the unpaid  principal  amount of the  Revolving  Credit Loans
made to Borrowers by the Bank and to pay interest on the unpaid principal amount
thereof is evidenced in part by the Revolving Credit Note.

          (c)  BORROWING  BASE.  Subject  to the  terms and  conditions  of this
Agreement,  the  aggregate  principal  amount  of  all  Revolving  Credit  Loans
outstanding  under  this  Agreement  shall not  exceed  the lesser of (A) Twenty
Million and 00/100 Dollars  ($20,000,000.00)  (including the aggregate Letter of
Credit Undrawn  Availability) or (B) the difference of (x) up to seventy percent
(70%)  of the  aggregate  gross  amount  of  Eligible  Accounts,  minus  (y) the
aggregate  Letter of Credit  Undrawn  Availability  (the  lesser of the  amounts
described in clauses (A) and (B) of this  sentence is  sometimes  referred to in
this  Agreement  as  the  "Borrowing  Base").  Notwithstanding  anything  to the
contrary  contained  herein,  upon the  occurrence  or existence of any Material
Adverse  Change,  the Bank may, in its sole  discretion,  at any time hereafter,
decrease the advance percentage for Eligible Accounts,  or increase the level of
any  reserves  or  ineligibles,  or define or  maintain  such other  reserves or
ineligibles,  as the Bank may deem  necessary  or  appropriate.  Any such change
shall become  effective  immediately  upon  written  notice from the Bank to the
Borrowers for the purpose of calculating the Borrowing Base hereunder.

<PAGE>

          (d) MAKING,  CONTINUING  OR  CONVERTING  OF  REVOLVING  CREDIT  LOANS.
Subject to the terms and  conditions  set forth in this  Agreement and the other
Loan  Documents,  and provided that the Borrowers  have satisfied all applicable
conditions  specified  in Article IV hereof  and,  if  applicable,  the Bank has
received,  reviewed and approved the most recent  borrowing base  certificate of
the Borrowers in the form of EXHIBIT "B", attached hereto and made a part hereof
(the "Borrowing Base  Certificate")  due pursuant to Section  5.01(h),  properly
completed and setting forth the Borrowing Base  calculations  for the Borrowers,
together  with  the  appropriate  backup  documentation,  the  Bank  shall  make
Revolving  Credit Loans to the  Borrowers  which,  as selected by the  Borrowers
pursuant to this Section 2.01(d), shall be Prime Rate Loans or Libor Rate Loans.

               (i) Each Revolving Credit Loan that is made as or converted (from
a Libor Rate Loan)  into a Prime  Rate Loan shall be made or  converted  on such
Business Day and in such amount as Borrowers  shall request by written notice or
telephonic  notice  from an  Authorized  Representative  (confirmed  promptly in
writing  which  notice  shall be  irrevocable  by and binding on the  Borrowers)
received by the Bank no later than 12:00 noon (Pittsburgh, Pennsylvania time) on
the date of requested  disbursement  of the  requested  Prime Rate Loan. On each
borrowing  date,  the Bank  shall  make the  proceeds  of the  Prime  Rate  Loan
available to Borrowers at the Bank's Office in immediately  available  funds not
later than 4:00 p.m. (Pittsburgh,  Pennsylvania,  time). Unless a Borrower shall
provide  the  Bank  with  the  required   written   notice  from  an  Authorized
Representative to convert a Prime Rate Loan into a Libor Rate Loan on the second
(2nd)  business day prior to the date of requested  conversion,  such Prime Rate
Loan shall  automatically  continue as a Prime Rate Loan.  The Bank shall not be
obligated  to make any  Revolving  Credit Loan so long as an Event of Default or
Potential Default has occurred and is continuing.

(ii) Each Revolving Credit Loan that is made as, continued as or converted (from
a Prime Rate Loan) into a Libor Rate Loan shall be made,  continued or converted
on such  Business  Day, in such amount  (greater  than or equal to Five  Hundred
Thousand Dollars ($500,000) provided, however, that any amount in excess of Five
Hundred  Thousand  Dollars  ($500,000)  may only be in increments of One Hundred
Thousand  Dollars  ($100,000)),  and with such an Interest  Period as  Borrowers
shall  request  by  written  notice  or  telephonic  notice  from an  Authorized
Representative  (confirmed  promptly in  writing)  received by the Bank no later
than 12:00 noon (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day
prior to the date of  disbursement  of,  continuation  of or conversion into the
requested  Libor  Rate Loan.  On each  borrowing  date,  the Bank shall make the
proceeds of the Libor Rate Loan  available to Borrowers at the Bank's  Office in
immediately available funds, no later than 12:00 noon (Pittsburgh,  Pennsylvania
time). In addition,  in the event that Borrowers desire to continue a Libor Rate
Loan for an  additional  Interest  Period,  Borrowers  shall  provide  Bank with
written notice or telephonic  notice  thereof from an Authorized  Representative
(confirmed  promptly in writing) on the Second  (2nd)  Business Day prior to the
expiration of the applicable Interest  Period. In the  event that Borrowers fail

<PAGE>

to provide the Bank with the required  notice on the Second  (2nd)  Business Day
prior to the expiration of the applicable Interest Period for a Libor Rate Loan,
Borrowers shall be deemed to have given notice that such Loan shall be converted
to a Prime Rate Loan on the last day of the  applicable  Interest  Period.  Each
notice of any Libor Rate Loan shall be irrevocable  and binding on Borrowers and
Borrowers shall  indemnify the Bank against any loss or expense  incurred by the
Bank as a result of any failure by  Borrowers  to  consummate  such  transaction
calculated as set forth in Section 2.13(c) hereof.

               (iii) all  Revolving  Credit Loans that are As Offered Rate Loans
(as defined in the Existing Agreement) shall be converted to Prime Rate Loans on
the last day of the  applicable  Interest  Period (as  defined  in the  Existing
Agreement) for each such Revolving  Credit Loan. All Revolving Credit Loans that
are ABS Rate Loans (as defined in the Existing  Agreement) shall be converted to
Prime Rate Loans on the Closing Date.

          (e) MAXIMUM PRINCIPAL BALANCE OF REVOLVING CREDIT LOANS. The aggregate
principal  amount of all Revolving  Credit Loans (including the Letter of Credit
Undrawn  Availability)  outstanding  shall not exceed the  Borrowing  Base.  The
Borrowers  agree  that if at any  time the  aggregate  principal  amount  of all
Revolving  Credit  Loans  outstanding  (including  the Letter of Credit  Undrawn
Availability) exceeds the Borrowing Base ("Excess Amount"),  the Borrowers shall
promptly  pay to the Bank such Excess  Amount.  If not sooner  paid,  all of the
Revolving Credit Loans, all unpaid accrued interest thereon,  and all other sums
and costs owed to Bank by Borrowers  pursuant to this  Agreement with respect to
the Revolving  Credit Loans,  shall be immediately due and payable on the Expiry
Date, without notice, presentment or demand.

     2.02  INTEREST  ON  REVOLVING  CREDIT  LOANS.  Subject  to  the  terms  and
conditions of this  Agreement,  at all times during the term of this  Agreement,
the aggregate  outstanding principal balance of all Revolving Credit Loans shall
be, at the option of the Borrowers, as elected pursuant to Section 2.01(c):

               (i) Prime Rate Loans  which  shall  bear  interest  at a rate per
annum equal to the Prime Rate; or

               (ii) Libor  Rate Loans  which  shall bear  interest  during  each
Interest  Period  at a rate per annum  equal to the Libor  Rate plus two and one
quarter of one percent (2.25%).

     2.03 INTEREST PAYMENTS. The Borrowers shall pay to the Bank interest on the
unpaid principal balance of the aggregate  outstanding  balance of the Revolving
Credit  Loans which are Prime Rate Loans in  arrears,  on the first (1st) day of
the first (1st) full calendar  month after the Closing Date and on the first day
of each calendar  month  thereafter  through and including the Expiry Date.  The
Borrowers shall pay to the Bank interest on the unpaid principal  balance of the
aggregate outstanding balance of the Revolving Credit Loans which are Libor Rate
Loans on the earlier of (i) the last day of the applicable  Interest  Period for
such Loan or (ii) for such Loans with an applicable  Interest  Period  exceeding
three (3)  months,  on each and every three (3) month  anniversary  of each such
Loan during the period from the Closing Date to and  including  the Expiry Date.
After maturity of any part of the Loans (whether upon the occurrence of an Event
of Default,  by acceleration  or otherwise),  interest on such part of the Loans
shall be  immediately  due and payable  upon  delivery by Bank of an invoice for
such interest without further notice, presentment, or demand.

<PAGE>

     2.04 INTEREST AFTER DEFAULT; USURY. Whenever the unpaid principal amount of
the Loans or any portion  thereof,  accrued interest  thereon,  any fees, or any
other sums  payable  hereunder  shall  become due and payable and remain  unpaid
(whether  at  maturity,   upon  the  occurrence  of  an  Event  of  Default,  by
acceleration  or otherwise)  the amount thereof shall  thereafter  until paid in
full bear  interest  at a rate per annum two  percent  (2.00%)  in excess of the
interest  rate  otherwise  applicable  to such Loans.  In the event the rates of
interest  provided  for in this  section  2.04,  or any  other  section  of this
Agreement,  are finally  determined  by any Official  Body to exceed the maximum
rate of interest  permitted by applicable  usury or similar  laws,  their or its
application will be suspended and there will be charged instead the maximum rate
of interest permitted by such laws.

     2.05 [RESERVED]

     2.06 FEES.  The Borrowers  shall pay to Bank a commitment fee on the unused
portion of the Revolving Credit Facility  Commitment  during the period from the
date  of this  Agreement  to the  Expiry  Date,  payable  quarterly  in  arrears
beginning  on  October  1, 2000 and  continuing  on the first  (1st) day of each
January,  April,  July, and October  thereafter and on the Expiry Date. Such fee
shall  be  equal to the  amount  by which  Twenty  Million  and  00/100  Dollars
($20,000,000.00) has exceeded the average daily closing principal balance of the
Revolving  Credit Loans during the  preceding  calendar  quarter,  multiplied by
three  hundred  and  seventy-five  one-  hundredths  of  one  percent  (0.375%),
multiplied by a fraction, the numerator of which is the actual number of days in
such  calendar  quarter and the  denominator  of which is 360. In addition,  the
Borrowers shall pay to the Bank, on or before the Closing Date, a non-refundable
amendment  fee  in the  amount  of  Twenty  Five  Thousand  and  00/100  Dollars
($25,000.00).

     2.07 COMPUTATION OF INTEREST AND FEES;  ADJUSTMENT TO PRIME RATE.  Interest
on the  Prime  Rate  Loans  shall be  computed  on the  basis of a year of three
hundred  sixty-five  (365) days and paid for the actual  number of days elapsed.
Interest  on the Libor Rate Loans  shall be  computed  on the basis of a year of
three  hundred  sixty (360) days and paid for the actual number of days elapsed.
Interest on unpaid fees and other sums  payable  hereunder  shall be computed on
the basis of a year of three  hundred  sixty  five  (365)  days and paid for the
actual number of days elapsed. In the event of any change in the Prime Rate, the
rate of  interest  upon each Prime Rate Loan shall be  adjusted  to  immediately
correspond  with such change;  except any interest  charged  hereunder shall not
exceed the highest rate permitted by Law.

<PAGE>

     2.08 AGREEMENT  TO ISSUE  LETTERS OF CREDIT.  From  time to time during the
period from the Closing  Date to the  Business  Day  immediately  preceding  the
Expiry Date, subject to the further terms and conditions hereof, including those
required in connection with the making of Revolving Credit Loans, the Bank shall
issue standby or trade letters of credit (collectively, "Letters of Credit") for
the account of the  Borrowers  in an amount not to exceed the  Revolving  Credit
Facility   Commitment  as  a  sub-facility  of  the  Revolving  Credit  Facility
Commitment;  PROVIDED, HOWEVER, that on any date on which the Borrowers' request
a Letter of Credit,  and after giving effect to the Letter of Credit Face Amount
of such Letter of Credit,  the sum of all Revolving Credit Loans outstanding and
the Letter of Credit Undrawn  Availability shall not exceed the Revolving Credit
Facility  Commitment.  All such Letters of Credit shall be issued by the Bank in
accordance with its then current practice relating to the issuance of letters of
credit  including,  but not limited to, the  execution  and  delivery to Bank of
applications and agreements required by Bank and the payment by the Borrowers of
all applicable fees with respect thereto.

     2.09 LETTER OF CREDIT  FEES.  The  Borrowers  shall pay to Bank (a) one and
ninety five  hundredths of one percent (1.95%) per annum of the Letter of Credit
Face Amount of all Letters of Credit issued and outstanding hereunder,  such fee
to be paid  quarterly in arrears (the  "Letter of Credit  Commission"),  (b) the
Bank's standard issuance fees for each Letter of Credit issued  hereunder,  such
fee to be paid on the date of  issuance  of such  Letter of Credit,  and (c) any
reasonable out-of-pocket expenses and costs incurred by Bank for the issuance of
any  Letter  of  Credit  issued  hereunder,  such  fees to be paid on the day of
issuance  of such Letter of Credit.  Notwithstanding  the  foregoing,  after the
occurrence  and during the  continuance  of an Event of  Default,  the Letter of
Credit Commission shall be increased to four percent (4.0%) per annum.

     2.10  PAYMENTS  UNDER  LETTERS OF  CREDIT.  Upon a draw under any Letter of
Credit,  the  Borrowers  shall  immediately  reimburse the Bank for such drawing
under a Letter  of  Credit.  If (i) the  Borrowers  shall  not have  immediately
reimbursed the Bank for such drawing under such Letter of Credit,  (ii) the Bank
must for any  reason  return  or  disgorge  such  reimbursement,  or  (iii)  the
Borrowers are required to make a payment under  Section  7.02(a)(ii)  hereof and
fail to make such payment,  then the amount of each  unreimbursed  drawing under
such Letter of Credit and payment required to be made under Section  7.02(a)(ii)
hereof shall automatically be converted into a Revolving Credit Loan made on the
date of such  drawing  for  all  purposes  of  this  Agreement.  The  Borrowers'
obligation  to reimburse the Bank with respect to each drawing under a Letter of
Credit shall be absolute and unconditional.  The Borrowers irrevocably authorize
Bank to treat such draw as a request for a Revolving  Credit Loan which shall be
a Prime Rate Loan in the amount of such draw,  so long as the  Revolving  Credit
Facility Commitment has not terminated.

     2.11 PERIOD OF ISSUANCE  AND TERM OF LETTERS OF CREDIT.  Letters  of Credit
shall  only be issued by Bank for the  account of the  Borrowers  for such terms
which expire prior to or on the Expiry Date.

     2.12 [RESERVED]

<PAGE>

     2.13 ADDITIONAL COSTS.
          ----------------

          (a) If, due to either (i) the introduction of, or any change in, or in
the  interpretation  of, any Law or (ii) the  compliance  with any  guideline or
request from any central bank or other  governmental  authority  (whether or not
having  the  force  of Law),  there  shall be any  increase  in the cost to,  or
reduction in income  receivable  by, the Bank of making,  funding or maintaining
Loans (or commitments to make the Loans),  then the Borrowers shall from time to
time,  upon  demand by the Bank  made  within a  reasonable  time  after  Bank's
determination  thereof,  pay  to  the  Bank  additional  amounts  sufficient  to
reimburse such Bank for any such  additional  costs or reduction in income.  All
such  additional  amounts  shall  be  determined  by Bank in  good  faith  using
appropriate attribution and averaging methods ordinarily employed by the Bank. A
certificate  of the Bank  submitted  to the  Borrowers  in good  faith as to the
amount of such  additional  costs shall be presumptive  evidence of such amount.
Upon notice from the Bank to the  Borrowers  within ten (10) Business Days after
the Bank notifies the Borrowers of any such  additional  costs  pursuant to this
Section  2.13(a),  the Borrowers may (A) repay in full all Loans of any types so
affected then outstanding, together with interest accrued thereon to the date of
such  repayment,  or (B)  convert  all  Loans  of any  types  so  affected  then
outstanding into Loans of any other type not so affected upon not less than four
(4) Business  Days' notice to the Bank.  If any such  repayment or conversion of
any Libor Rate Loan occurs on any day other than the last day of the  applicable
Interest  Period for such Loan,  the  Borrowers  also shall pay to the Bank such
additional amounts as set forth in Section 2.13(c).

          (b) If either (i) the  introduction  of, or  any  change in, or in the
interpretation  of, any Law or (ii) the compliance with any guideline or request
from any central bank or other governmental authority (whether or not having the
force of Law),  affects  or would  affect  the  amount of  capital  required  or
expected to be maintained by the Bank or any  corporation  controlling  the Bank
and the Bank reasonably determines in good faith that the amount of such capital
is increased by or based upon the existence of the Loans (or  commitment to make
the  Loans),  then,  within ten (10)  Business  Days of demand by the Bank,  the
Borrowers  shall  pay to the Bank  from  time to time as  specified  by the Bank
additional  amounts  sufficient  to  compensate  the  Bank in the  light of such
circumstances,  to the extent that the Bank reasonably  determines in good faith
such  increase in capital to be allocable  to the  existence of the Bank's Loans
(or  commitment to make the Loans).  Any such demand by Bank must be made by the
Bank within a reasonable time. A certificate of the Bank in good faith submitted
to the  Borrowers  as to such  amounts  shall be  presumptive  evidence  of such
amounts.  Upon notice from the  Borrowers  to the Bank within ten (10)  Business
Days after the Bank notifies the Borrowers of any such additional costs pursuant
to this Section  2.13(b),  the  Borrowers may (A) repay in full all Loans of any
types so affected then  outstanding,  together with interest  accrued thereon to
the date of such  prepayment,  or (B) convert all Loans of any types so affected
then outstanding into Loans of any other type not so affected upon not less than
four (4) Business Days' notice to the Bank. If any such prepayment or conversion
of any  Libor  Rate  Loan  occurs  on any day  other  than  the  last day of the
applicable  Interest  Period for such Loan,  the Borrowers also shall pay to the
Bank such additional amounts as set forth in Section 2.13(c).

<PAGE>

          (c) If the  Borrowers  shall  repay any Libor Rate Loan on a day other
than the last day of the applicable  Interest Period for such Loan (whether such
repayment is  permitted  by Section 2.13 or 2.14,  as a result of the failure of
the Borrowers to consummate a transaction after providing notice as set forth in
Section 2.01(c)(ii), otherwise permitted by Bank or otherwise required under the
terms of this  Agreement),  the Borrowers shall within ten (10) Business Days of
demand pay to the Bank such additional amounts reasonably  determined by Bank in
good faith to be  sufficient  to indemnify  the Bank against any loss,  cost, or
expense incurred by the Bank as a result of such prepayment  including,  without
limitation,  any loss (including loss of anticipated profits),  costs or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund such Loan,  and a  certificate  as to the amount of
any such loss,  cost or expense  submitted by the Bank to the  Borrowers in good
faith shall be presumptive evidence of such amount.

     2.14  ILLEGALITY;  IMPRACTICABILITY.  Notwithstanding  any other  provision
contained  in this  Agreement,  if: (a) it is  unlawful,  or any central bank or
other governmental  authority shall determine that it is unlawful,  for the Bank
to perform  its  obligations  hereunder  to make,  continue,  or  convert  Loans
hereunder;  or (b) on any date on which a Libor Rate would otherwise be set, the
Bank  shall  have  in  good  faith  determined  (which  determination  shall  be
conclusive  absent manifest error) that (i) adequate and reasonable means do not
exist for  ascertaining  a Libor Rate,  (ii) a  contingency  has occurred  which
materially and adversely affects the interbank  markets,  or (iii) the effective
cost to the Bank of funding a proposed  Libor Rate Loan  exceeds  the Libor Rate
then (y) on notice thereof by the Bank to the  Borrowers,  the obligation of the
Bank to make or  continue a Loan of a type so affected or to convert any type of
Loan  into a Loan of a type so  affected  shall  terminate  and the  Bank  shall
thereafter  be  obligated to make Prime Rate Loans  whenever any written  notice
requests any type of Loans so affected and (z) upon demand  therefor by the Bank
to the Borrowers,  the Borrowers shall (i) forthwith prepay in full all Loans of
the type so affected then outstanding, together with interest accrued thereon or
(ii) request that the Bank,  upon five (5) Business  Days'  notice,  convert all
Loans of the  type so  affected  then  outstanding  into  Loans of a type not so
affected.  If any such prepayment or conversion of any Libor Rate Loan occurs on
any day other than the last day of the applicable Interest Period for such Loan,
the Borrowers also shall pay to the Bank such additional amounts as set forth in
Section 2.13(c).

     2.15 PAYMENTS. All payments to be made with respect to principal, interest,
fees or other amounts due from the Borrowers  under this  Agreement or under the
Notes are payable at 12:00 noon (Pittsburgh, Pennsylvania Time), on the day when
due, without  presentment,  demand,  protest or notice of any kind, all of which
are  hereby  expressly  waived,  and an  action  for the  payments  will  accrue
immediately.  All such  payments  must be made to the Bank at its Office in U.S.
Dollars and in funds  immediately  available  at such  Office,  without  setoff,
counterclaim  or other  deduction of any nature.  The Bank may in its discretion
deduct such payments from the Borrowers' demand or deposit accounts with Bank if
not paid within  five (5) days after the due date.  All such  payments  shall be
applied at the option of the Bank to accrued  and unpaid  interest,  outstanding
principal and other sums due under this  Agreement in such order as the Bank, in
its sole discretion, shall elect. All such payments shall be made absolutely net
of, without  deduction or offset,  and altogether  free and clear of any and all
present and future taxes, levies, deductions,  charges, and withholdings and all
liabilities with respect  thereto,  excluding income and franchise taxes imposed
on the Bank  under  the laws of the  United  States  or any  state or  political
subdivision  thereof.  If the  Borrowers are compelled by law to deduct any such

<PAGE>

taxes or levies  (other  than  such  excluded  taxes) or to make any such  other
deductions,  charges, or withholdings,  they will pay such additional amounts as
may be necessary in order that the net payments after such deduction,  and after
giving effect to any United States  federal or state income taxes required to be
paid by the Bank in respect of such additional  amounts,  shall equal the amount
of such payment without such tax, deduction or withholding.

     2.16 LOAN  ACCOUNT.  The Bank will  open and  maintain  on its books a loan
account  (the "Loan  Account")  for the  Borrowers  with  respect to Loans made,
repayments,  prepayments,  the  computation and payment of interest and fees and
the  computation and final payment of all other amounts due and sums paid to the
Bank  under  this  Agreement.  The  Loan  Account  for  the  Borrowers  will  be
presumptive  evidence  as to the  amount  at any time  due to the Bank  from the
Borrowers under this Agreement or the Notes.

     2.17  FINANCING  STATEMENTS.  Promptly  following  request by the Bank, the
Borrowers  shall execute and deliver and file and record and refile and rerecord
such financing statements,  assignments and other such documents in such manner,
at such time or times and in such place or places as may be  required by Law and
cause to be taken such  other  actions  as may be  required  by Law or as may be
requested  by Bank in  order  to  cause  the Lien  granted  under  the  Security
Agreement,  the Collateral  Assignment,  the Stock Pledge Agreement or any other
Loan Document to be, at all times valid,  perfected and enforceable  against the
Borrowers and all third parties. The Borrowers irrevocably appoint Bank as their
agent and attorney to execute any such  financing  statements in the  Borrowers'
names upon the  Borrowers'  failure to comply  with the first  sentence  of this
Section 2.17. The Borrowers  further agree that a carbon,  photographic or other
reproduction of a financing statement is sufficient as a financing statement and
may be filed as such.  All  expenses of such  filing,  recording,  refiling  and
re-recording shall be borne by the Borrowers.

     2.18 SECURITY.  The Loans shall be secured by the Security  Agreement,  the
Stock  Pledge  Agreement,  the  Collateral  Assignment  and  all  UCC  financing
statements executed and recorded with respect thereto.

     2.19 ESTOPPEL. As further consideration for the entry of the Bank into this
Agreement,  Borrowers  hereby  represent  and warrant that they do not presently
have any  claims or  actions  of any kind at Law or in equity  against  the Bank
arising out of or in any way  relating to the  Existing  Loan  Agreement  or any
related  documents  with respect  thereto,  the  transactions  referenced  in or
contemplated by this Agreement or any acts, transactions,  or events that are or
were the  subject  matter of any other prior loans or  agreement  or  guaranties
involving one or more of the Borrowers and the Bank.

                                  ARTICLE III.

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     The Borrowers represent and warrant to the Bank that:

     3.01. ORGANIZATION AND QUALIFICATION.  The Borrowers and their Subsidiaries
are  corporations  duly organized,  validly  existing and in good standing under
their respective jurisdictions of incorporation.  Except where the failure to be
so qualified or licensed would not have a Material Adverse Effect, the Borrowers

<PAGE>

and their  Subsidiaries  are duly  qualified  or  licensed  to do  business as a
foreign corporation or partnership and are in good standing in all jurisdictions
in which the ownership of their  properties or the nature of their activities or
both makes such qualification or licensing necessary.

     3.02  POWER  TO  CARRY  ON  BUSINESS;   LICENSES.  Each  Borrower  and  its
Subsidiaries  have all  requisite  power and  authority  to own and  operate its
properties  and to carry  on its  business  as now  conducted  and as  presently
planned to be  conducted.  Except  where the  failure to have any such  license,
permit,  consent or  approval  would not have a Material  Adverse  Effect,  each
Borrower  and  its  Subsidiaries  have  all  licenses,   permits,  consents  and
governmental  approvals or authorizations  necessary to carry on its business as
now conducted and as presently planned to be conducted.

     3.03 EXECUTION AND BINDING EFFECT. This Agreement, the Notes, and the other
Loan  Documents to which the Borrowers are a party have been duly  authorized by
all appropriate  corporation action of each Borrower, have been duly and validly
executed and delivered by each Borrower which is a party thereto,  and each such
document or agreement  constitutes a legal,  valid and binding obligation of the
Borrowers who are a party thereto, enforceable in accordance with its terms.

     3.04  ABSENCE OF  CONFLICTS.  Neither the  execution  and  delivery of this
Agreement or the other Loan Documents,  nor the consummation of the transactions
contemplated  in any of them, nor the  performance  of or compliance  with their
terms and conditions  will (a) violate any Law, (b) conflict with or result in a
breach of or a default  under the  articles of  incorporation  or by-laws of any
Borrower,  (c)  conflict  with or  result  in a breach  or a  default  under any
material  agreement or instrument to which any Borrower or its Subsidiaries is a
party or by which any of them or any of their  properties (now owned or acquired
in the  future)  may be  subject  or  bound or (d)  result  in the  creation  or
imposition  of any  material  Lien upon any  property  (owned or  leased) of any
Borrower or its Subsidiaries.

     3.05  AUTHORIZATIONS  AND FILINGS.  No  authorization,  consent,  approval,
license,  exemption  or other  action  by, and no  registration,  qualification,
designation,  declaration  or  filing  with,  any  Official  Body  is or will be
necessary or advisable in  connection  with the  execution  and delivery of this
Agreement or the other Loan  Documents,  the  consummation  of the  transactions
contemplated  in any of them, or the performance of or compliance with the terms
and conditions of this Agreement or the other Loan Documents.

     3.06 [RESERVED]

     3.07 TITLE TO PROPERTY.  Each Borrower and its  Subsidiaries  have good and
marketable  title in fee  simple to all real  property  and good and  marketable
title  to all  other  property  purported  to be  owned  by it,  including  that
reflected in the most recent  balance sheet  referred to in Section 3.08 of this
Agreement or submitted  pursuant to Section 5.01(a) of this Agreement (except as
sold or otherwise disposed of in the ordinary course of business),  subject only
to Liens not forbidden by Section 6.01 of this Agreement.

<PAGE>

     3.08 FINANCIAL STATEMENTS.
          --------------------

          (a) The Borrowers have  delivered to the Bank a  Consolidated  balance
sheet and related  statements of income,  retained earnings and cash flow of the
Borrowers and their  Subsidiaries  for the fiscal year ending December 31, 1999,
as audited by Pricewaterhouse Coopers LLP without qualification.  Such financial
statements  (including  the notes)  present  fairly the  Consolidated  financial
condition of the Borrowers and their  Subsidiaries  as of the end of such fiscal
period and the results of their operations and the changes in financial position
for  the  fiscal  period  then  ended,  all  in  accordance  with  GAAP  applied
consistently with that of the preceding fiscal year.

          (b) The  Borrowers  have  delivered to  the  Bank  internally prepared
Consolidated and Consolidating  balance sheets and related statements of income,
cash flow and retained earnings of the Borrowers and their Subsidiaries and each
Borrower and its  Subsidiaries  as of, and for the fiscal year ending,  December
31, 1999. Such financial statements provided by the Borrowers present fairly the
financial  position of each Borrower and its  Subsidiaries as of the end of such
period and the  results of their  operations  and their cash flow for the period
then ended, all in conformity with GAAP, applied on a basis consistent with that
of the preceding fiscal periods.

     3.09 TAXES.  All tax returns  required to be filed by each Borrower and its
Subsidiaries have been properly prepared,  executed and filed.  Except as may be
permitted under Section 5.05 hereof, all material taxes,  assessments,  fees and
other governmental charges upon each Borrower and their Subsidiaries or upon any
of their properties,  income, sales or franchises which are due and payable have
been paid.  The reserves and  provisions for taxes on the books of the Borrowers
and their  Subsidiaries  are  adequate  for all open  years and for the  current
fiscal period. No Borrower knows of any proposed  additional material assessment
or basis for any  material  assessment  for  additional  taxes  (whether  or not
reserved against).

     3.10 [RESERVED]

     3.11 LITIGATION.  Except as reflected in MBC's most recent periodic reports
filed with the  Securities  and Exchange  Commission  pursuant to the Securities
Exchange Act of 1934, copies of which have been delivered to Bank and, except as
on SCHEDULE 3.11 hereto,  there is no pending,  or to the best knowledge of MBC,
contemplated or threatened, action, suit or proceeding by or before any Official
Body against or affecting  any Borrower or its  Subsidiaries,  at law or equity,
which, if adversely decided, would have a Material Adverse Effect.

     3.12 COMPLIANCE WITH LAWS.  To the best of MBC's  knowledge,  except as set
forth in SCHEDULE 3.12 hereto,  no Borrower nor any  Subsidiary of a Borrower is
in violation of or subject to any  material  contingent  liability on account of
any Law which in the aggregate would have a Material Adverse Effect.

     3.13 PENSION PLANS. Except as described in SCHEDULE 3.13 to this Agreement,
(a)  each  Plan  has been and will be  maintained  and  funded  in all  material
respects in accordance with its terms and with all provisions of ERISA and other
applicable laws; (b) no Reportable Event, as defined in ERISA,  which could have
a Material  Adverse  Effect,  has occurred and is continuing with respect to any
Plan; (c) no material liability to the PBGC has been incurred and is outstanding
with respect to any Plan,  other than for premiums due and payable;  (d) no Plan

<PAGE>

has been terminated,  no proceedings have been instituted to terminate any Plan,
and there exists no intent to terminate  or institute  proceedings  to terminate
any Plan where such  termination  would have a Material  Adverse Effect;  (e) no
withdrawal,  either complete or partial,  has occurred or commenced with respect
to any  multi-employer  Plan,  and there  exists no  intent to  withdraw  either
completely or partially from any multi-employer  Plan; and (f) there has been no
cessation  of,  and there is no intent to cease,  operations  at a  facility  or
facilities  where such  cessation  could  reasonably  be expected to result in a
separation from employment of more than 20% of the total number of employees who
are participants under a Plan.

     3.14 PATENTS,  LICENSES,  FRANCHISES.  The Borrowers and their Subsidiaries
own or possess the right to use all of the material patents, trademarks, service
marks, trade names, copyrights, licenses, franchises and permits and rights with
respect to the foregoing  necessary to own and operate their  properties  and to
carry on their  business as  presently  conducted  and  presently  planned to be
conducted  without  conflict  with the rights of others.  There are no currently
pending or, to the best  knowledge  of MBC  threatened  claims  with  respect to
infringement  by or against any Borrower or any  Subsidiary of a Borrower of any
of the foregoing.

     3.15 ENVIRONMENTAL MATTERS.  Except as set forth in SCHEDULE 3.15 hereof,
          ---------------------                          -------------

          (a) To the best knowledge of MBC, no Borrower nor any Subsidiary of a
Borrower  is  in  violation  of  The   Comprehensive   Environmental   Response,
Compensation and Liability Act of 1980 ("CERCLA"),  the Superfund Amendments and
Reauthorization Act of 1986, The Resource Conservation and Recovery Act of 1976,
as amended by the Hazardous and Solid Waste  Amendments of 1984, The Clean Water
Act,  The  Toxic  Substances  Control  Act and The  Clean Air Act or any rule or
regulation  promulgated pursuant to any of the foregoing statutes,  or any other
federal,  state  or  local  environmental  law,  statute,  rule,  regulation  or
ordinance  applicable to any Borrower,  its  Subsidiaries,  or their  respective
properties (all of the foregoing are sometimes  collectively referred to in this
Section 3.17 as the  "Environmental  Laws") except where such  violations in the
aggregate would not have a Material Adverse Effect;

          (b) To the  best  knowledge  of  MBC,  neither  the  Borrowers,  their
Subsidiaries nor any of their Affiliates, directors, officers, employees, agents
or independent  contractors have arranged, by contract,  agreement or otherwise,
(i) for the  disposal  or  treatment  of,  or (ii)  with a  transporter  for the
transport,  disposal or treatment  of, any  Hazardous  Substance  (as defined by
CERCLA, as amended), owned, used or possessed by any Borrower, whether or not to
a location identified by the EPA on the National Priorities List, 40 C.F.R. Part
300,  (or  proposed  by the EPA in the  Federal  Register  for  listing  on such
National Priorities List) or identified under any corresponding state statute or
regulation  concerning cleanup of waste disposal sites (a "State Superfund Law")
except where the same has been  performed in compliance  with all  Environmental
Laws, the  non-compliance  with which in the aggregate would not have a Material
Adverse Effect;

          (c) To the best  knowledge  of MBC, no  predecessor  of a Borrower has
arranged by contract,  agreement or otherwise, (i) for the disposal or treatment
of, or (ii) with a  transporter  for transport for the disposal or treatment of,
any  Hazardous  Substance  (as defined by CERCLA,  as amended),  owned,  used or
possessed  by the  predecessor,  except  where  the same has been  performed  in
compliance with all  Environmental  Laws, the  non-compliance  with which in the
aggregate would not have a Material Adverse Effect;

<PAGE>

          (d)  Neither  the  Borrowers,  their  Subsidiaries  nor  any of  their
Affiliates  "owned"  or  "operated"  any  "facility"  at the time any  Hazardous
Substances  were disposed of at such facility  within the meaning of CERCLA,  as
amended, or any State Superfund Law except where such disposals would not have a
Material Adverse Effect.

     3.16 PROCEEDS.  The Borrowers will use the proceeds of the Revolving Credit
Loans for general corporate purposes.

     3.17 MARGIN  STOCK.  The  Borrowers  will  make  no  borrowing  under  this
Agreement for the purpose of buying or carrying any "margin stock", as such term
is used in Regulation U and related regulations of the Board of Governors of the
Federal  Reserve  System,  as amended  from time to time.  No Borrower  owns any
"margin  stock".  No Borrower is engaged in the business of extending  credit to
others for such purpose, and no part of the proceeds of any borrowing under this
Agreement  will be used to  purchase  or carry any  "margin  stock" or to extend
credit to others for the purpose of purchasing or carrying any "margin stock".

     3.18 NO EVENT OF DEFAULT: COMPLIANCE WITH MATERIAL AGREEMENTS. No event has
occurred and is continuing and no condition exists which constitutes an Event of
Default or Potential Default.  No Borrower nor any of its Subsidiaries is (i) in
violation  of any term of any  charter  instrument  or bylaw or (ii) in  default
under any material  agreement,  lease or instrument to which it is a party or by
which it or any of its properties (owned or leased) may be subject or bound.

     3.19 NO MATERIAL  ADVERSE  CHANGE.  Except as otherwise  disclosed  herein,
since December 31, 1999, there has been no Material Adverse Change.

     3.20 SUBSIDIARIES.   SCHEDULE  3.20  to  this  Agreement  sets  forth  each
Subsidiary of each Borrower,  the authorized and  outstanding  capital stock (or
other equity interest) of such Subsidiary and the outstanding  capital stock (or
other equity  interest) of such Subsidiary which is owned by any Borrower or any
of its Subsidiaries.

     3.21 LABOR CONTROVERSIES.  There are no labor controversies  pending or, to
the best knowledge of the officers and directors of MBC, threatened, against any
Borrower or any of its Subsidiaries which, if adversely determined, would have a
Material Adverse Effect.

     3.22  SOLVENCY.  After the making of the Loans,  each  Borrower (a) will be
able to pay its  debts as they  become  due,  (b) will have  funds  and  capital
sufficient to carry on its businesses and all businesses in which it is about to
engage,  and (c) will own property  having a value at both fair valuation and at
fair  saleable  value in the ordinary  course of its  business  greater than the
amount  required to pay its debts as they become due. No Borrower was  insolvent
immediately prior to the date of this Agreement and no Borrower will be rendered
insolvent  by the  execution  and  delivery  of this  Agreement,  the  borrowing
hereunder  and/or the  consummation  of any  transactions  contemplated  by this
Agreement.

     3.23 ACCURATE AND COMPLETE  DISCLOSURE.  No representation or warranty made
by any Borrower under this Agreement,  the other Loan Documents or the schedules
and exhibits  attached  thereto,  and to the best  knowledge of the officers and
directors of MBC no statement  made by any Borrower or its  Subsidiaries  in any
financial statement  (furnished pursuant to Sections 3.08 or 5.01 or otherwise),
certificate,  report,  exhibit or  document  furnished  by any  Borrower  or its
Subsidiaries  to the Bank  pursuant to or in connection  with this  Agreement is
false or misleading (including by omission of information necessary to make such
representation,  warranty or statement not misleading) in any manner which would
have a Material Adverse Effect.

<PAGE>

     3.24 SECURITY INTEREST. The security interests in the collateral granted to
the Bank pursuant to the Security Agreement,  the Collateral  Assignment and the
Stock Pledge Agreement (the "Collateral") are valid security  interests.  To the
extent that  perfection  of such  security  interests in the  Collateral  can be
accomplished by the filing of UCC-1 financing  statements ("UCC-1  Collateral"),
the  presentation  of  such  UCC-1  financing   statements  for  filing  in  the
appropriate offices of the appropriate jurisdictions,  together with the payment
of the  appropriate  filing fees will  constitute  all such action  necessary to
perfect the  security  interests of the Bank in the UCC-1  Collateral.  Upon the
appropriate  filing of such UCC-1 financing  statements as described  above, the
Bank's  security  interests  in the UCC-1  Collateral  (i)  constitute  and will
continue to constitute  perfected  security  interests under the UCC entitled to
all of the rights,  benefits and priorities  provided by the UCC and (ii) except
as  otherwise  permitted  under  Section  6.01 of this  Agreement,  are and will
continue to be superior and prior to the rights of all third parties existing on
the date of this Agreement or arising after the date of this  Agreement  whether
by Lien or otherwise,  to the fullest extent provided by Law. All such action as
is necessary or advisable to establish such rights of the Bank has been taken or
will be taken at or prior to the time  required  for such purpose and there will
be upon execution and delivery of the Loan Documents no necessity of any further
action in order to preserve,  protect and continue such rights except the filing
of continuation statements with respect to filed financing statements within six
(6)  months  prior to each  five  (5) year  anniversary  of the  filing  of such
financing  statements  and continued  possession  by the Bank of the  collateral
delivered to it. All filing fees and other expenses in connection with each such
action shall be paid by the  Borrowers  and the Bank shall be  reimbursed by the
Borrowers for any such fees and expenses incurred by the Bank.

     3.25 ACCOUNT WARRANTIES. With respect to all Eligible Accounts from time to
time scheduled,  listed or referred to in any  certificate,  statement or report
delivered to the Bank, the Borrowers  warrant and represent to the Bank that (a)
the accounts are genuine,  are in all respects  what they purport to be, and are
not  evidenced by a note,  instrument  or judgment;  (b) the accounts  represent
undisputed,  bona fide  transactions  completed in accordance with the terms and
provisions  contained in the documents delivered to the Bank with respect to the
accounts;  (c) no  payments  have  been or will be made on the  accounts  except
payments immediately delivered to the Bank pursuant to this Agreement; (d) there
are no material  setoffs,  counterclaims  or disputes  existing or asserted with
respect to the accounts and the  Borrower  has not made any  agreement  with any
account  debtor  for any  deduction  from any  account;  (e) there are no facts,
events or occurrences which in any way impair the validity or enforcement of any
account or tend to reduce the amount  payable  under any account as shown on the
respective  certificates  and  statements,  any of the  books and  records  of a
Borrower and all invoices and  statements  delivered to the Bank with respect to
any account;  (f) all account  debtors have the capacity to contract and, to the
best of the Borrowers' knowledge, are solvent; (g) the services furnished and/or
goods sold giving rise to any account are not subject to any Lien except that of
the Bank; (h) to the best of the Borrowers' knowledge,  there are no proceedings
or actions  which are  threatened  or pending  against any account  debtor which
might result in any material adverse change in such account  debtor's  financial
condition;  (i) the account is not an account  with respect to which the account
debtor is an  Affiliate  or a director,  officer or employee of a Borrower or an
Affiliate;  (j) the account  does not arise with respect to goods which have not
been  shipped  or arise  with  respect  to  services  which  have not been fully

<PAGE>

performed and accepted as satisfactory by the account debtor; (k) the account is
not an account with respect to which the account debtor's  obligation to pay the
account is  conditional  upon the  account  debtor's  approval  or is  otherwise
subject to any  repurchase  obligation or return right,  as with sales made on a
bill-and- hold, guaranteed sale, sale-and-return, or sale on approval basis; and
(l) the amounts shown on the applicable certificates,  statements, the books and
records of the Borrowers and all invoices and statements  which may be delivered
to the Bank with respect to such accounts are actually and  absolutely  owing to
one or more Borrower, as the case may be, and are not in any way contingent. The
Borrowers shall immediately  notify the Bank in the event that any such Eligible
Account ceases to satisfy the above representations and warranties.

<PAGE>

                                   ARTICLE IV.

                              CONDITIONS OF LENDING
                              ---------------------

     The obligation of the Bank to make any Loan is subject to the  satisfaction
of the following conditions:

     4.01  REPRESENTATIONS  AND  WARRANTIES:  EVENTS OF  DEFAULT  AND  POTENTIAL
DEFAULTS.  The representations and warranties  contained in Article III shall be
true and  correct  on and as of the date of each  Loan  with the same  effect as
though made on and as of each such date.  On the date of each Loan,  no Event of
Default and no Potential  Default shall have occurred and be continuing or exist
or shall occur or exist after giving effect to the Loan to be made on such date.
Each request by the Borrowers for any Loan shall constitute a representation and
warranty by the  Borrowers  that the  conditions  set forth in this Section 4.01
have  been  satisfied  as of the date of such  request.  Failure  of the Bank to
receive notice from the Borrowers to the contrary before such Loan is made shall
constitute  a further  representation  and  warranty by the  Borrowers  that the
conditions  referred to in this Section 4.01 have been  satisfied as of the date
such Loan is made.

     4.02 PROCEEDINGS AND INCUMBENCY.  As of the Closing Date, each Borrower and
Baker International shall have delivered to the Bank a certificate,  in form and
substance  satisfactory to the Bank,  dated as of the Closing Date and signed on
behalf  of  such   Borrower  by  the   Secretary  of  such   Borrower  or  Baker
International,  as the case may be,  certifying  as to (a)  true  copies  of the
articles of incorporation and bylaws of such Borrower or Baker  International as
in effect on such date,  (b) true copies of all  corporate  action taken by such
Borrower or Baker  International  relative to this Agreement,  the Notes and the
other Loan  Documents  including,  but not limited to, that described in Section
3.03 of this Agreement, and (c) the names, true signatures and incumbency of the
officers  of such  Borrower  or Baker  International  authorized  to execute and
deliver this  Agreement,  the Notes and the other Loan  Documents.  The Bank may
conclusively rely on each such certificate  unless and until a later certificate
revising the prior certificate has been furnished to the Bank.

     4.03 LOAN  DOCUMENTS.  On or prior to the Closing Date, the Loan Documents,
satisfactory in terms,  form and substance to the Bank, shall have been executed
and  delivered  by the  Borrowers to the Bank and all UCC  financing  statements
required  to be filed  pursuant  to the Loan  Documents  shall  have  been  duly
executed and shall be prepared for filing thereof.

     4.04  OPINION  OF  COUNSEL.  On the  Closing  Date,  there  shall have been
delivered to the Bank a written  opinion,  dated the Closing Date, of counsel to
the Borrowers, in form and substance satisfactory to Bank and its counsel.

     4.05 OTHER  DOCUMENTS AND  CONDITIONS.  On or before the Closing Date,  the
following  documents  and  conditions  shall  have  been  delivered  to  Bank or
satisfied by or on behalf of the Borrowers:

<PAGE>

          (a)  GOOD  STANDING  AND  TAX  LIEN  CERTIFICATES.   A  good  standing
certificate of Baker  Engineering,  Baker NY, Baker GeoResearch and Baker Global
certifying to the good  standing and  corporate  status of each such Borrower in
its  jurisdiction  of   incorporation,   good   standing/foreign   qualification
certificates from other  jurisdictions in which such Borrower is qualified to do
business and tax lien  certificates  of such Borrower from each  jurisdiction in
which such Borrower is qualified to do business.

          (b) FINANCIAL  STATEMENTS.  Financial statements in form and substance
satisfactory to the Bank, as described in Section 3.08 of this Agreement.

          (c) INSURANCE.  Evidence,  in form and substance  satisfactory  to the
Bank,  that the business and all assets of the Borrowers and their  Subsidiaries
are  adequately  insured and that the issuers of such policies shall endeavor to
provide  the  Bank  with  thirty  (30)  days  notice  of  any   cancellation  or
modification to such policies.

          (d) LIEN SEARCH.  Copies of record  searches  (including UCC searches,
judgment,  tax and other  lien  searches)  at the local and state  office of the
jurisdiction of the chief executive  office of each Borrower  evidencing that no
Liens exist against any Borrower or any of its  Subsidiaries  except those Liens
permitted by Section 6.01 of this Agreement.

          (e) NO MATERIAL ADVERSE CHANGE.  No Material Adverse Change shall have
occurred with respect to any Borrower since December 31, 1999.

          (f)  STOCK   CERTIFICATES   AND  STOCK  POWERS.   The  original  share
certificates with respect to the issued and outstanding  shares of capital stock
of each of Michael Baker, Jr., Baker Environmental,  Baker/MO,  Baker/OTS, Baker
Engineering,  Baker NY,  Baker  GeoResearch  and Baker Global along with a stock
power endorsed in blank with respect to each such share certificate.

          (g) BORROWING BASE CERTIFICATE. If, on the Closing Date, the aggregate
principal  amount of all Revolving  Credit Loans (including the Letter of Credit
Undrawn  Availability)  outstanding  exceeds  Five  Million  and 00/100  Dollars
($5,000,000.00), an initial Borrowing Base Certificate of the Borrowers dated as
of the Closing Date.

          (h)  OTHER  DOCUMENTS  AND   CONDITIONS.   Such  other  documents  and
conditions  as may be required to be  submitted to the Bank by the terms of this
Agreement  or of any Loan  Document or set forth on the Closing  Checklist  with
respect to the transaction contemplated by this Agreement.

     4.06 DETAILS,  PROCEEDINGS AND DOCUMENTS. All legal details and proceedings
in connection  with the  transactions  contemplated  by this Agreement  shall be
reasonably  satisfactory  to the Bank and the Bank shall have  received all such
counterpart  originals  or  certified  or other  copies  of such  documents  and
proceedings  in  connection  with  such  transactions,  in  form  and  substance
reasonably satisfactory to the Bank, as the Bank may from time to time request.

     4.07 FEES AND EXPENSES.  The Borrowers  shall have paid all reasonable fees
and charges as required for the Closing and  relating to the Closing,  including
reasonable  legal  fees,  closing  costs,  filing and notary  fees and any other
similar matters pertinent to the Closing.

<PAGE>

                                   ARTICLE V.

                              AFFIRMATIVE COVENANTS
                              ---------------------

     The Borrowers covenant to the Bank as follows:

     5.01 REPORTING AND INFORMATION REQUIREMENTS.
          --------------------------------------

          (a) ANNUAL AUDITED REPORTS.  As soon as practicable,  and in any event
within  ninety (90) days after the close of each  fiscal year of the  Borrowers,
the  Borrowers  will  furnish to the Bank  Consolidated  audited  statements  of
income,  retained earnings and cash flow of the Borrowers and their Subsidiaries
for such fiscal year and a Consolidated  audited  balance sheet of the Borrowers
and their  Subsidiaries  as of the close of such fiscal year, and notes to each,
all in reasonable  detail,  setting forth in comparative form the  corresponding
figures for the preceding fiscal year,  prepared in accordance with GAAP applied
on a basis consistent with that of the preceding fiscal year (except for changes
in  application  in which such  accountants  concur)  with such  statements  and
balance sheet to be certified by  independent  certified  public  accountants of
recognized  standing selected by the Borrowers and satisfactory to the Bank. The
certificate  or  report  of such  accountants  shall  be free  of  exception  or
qualifications  not  reasonably  acceptable  to the Bank and  shall in any event
contain a written statement of such accountants substantially to the effect that
such  accountants  examined such statements and balance sheet in accordance with
generally accepted auditing standards.

          (b) QUARTERLY REPORTS. As soon as practicable, and in any event within
forty-five  (45) days after the close of each Fiscal  Quarter during the term of
this  Agreement,  the  Borrowers  will  furnish  to the  Bank  Consolidated  and
Consolidating  statements of income for MBC for such Fiscal  Quarter and for the
portion of the fiscal year to the end of such Fiscal Quarter, and a Consolidated
and  Consolidating  balance sheet of MBC as of the close of such Fiscal Quarter,
all in reasonable detail. All such income statements and balance sheets shall be
prepared by the  Borrowers  and  certified  by the  President,  Chief  Financial
Officer or Vice President and Corporate  Controller of MBC as presenting  fairly
the Consolidated and  Consolidating  financial  position of MBC as of the end of
such Fiscal  Quarter and the results of their  operations  for such periods,  in
conformity   with  GAAP  (subject  to  normal  and  recurring  year-  end  audit
adjustments) applied in a manner consistent with that of the most recent audited
financial  statements  furnished  to  the  Bank.  For  each  Borrower  and  each
Subsidiary which is operating in the construction  industry, the Borrowers shall
also, along with the quarterly financial statements referred to above, submit to
the Bank a summary job status report for all on-going  construction  projects of
such Borrower or Subsidiary.

          (c) MONTHLY REPORTS.  As soon as practicable,  and in any event within
twenty (20) days after the close of each  calendar  month,  the  Borrowers  will
furnish  to  the  Bank  financial  statements  with  respect  to  the  Borrowers
substantially  in form and  substance as set forth on Exhibit C attached  hereto
and made a part hereof.

          (d) QUARTERLY  COMPLIANCE  CERTIFICATE.   The  income  statements  and
balance  sheets as of and for the end of each Fiscal Quarter which are delivered
pursuant  to  Section  5.01(b)  of this  Agreement  shall  be  accompanied  by a

<PAGE>

compliance  certificate,  substantially  in the  form of  Exhibit  "A"  attached
hereto, executed by the President, Chief Financial Officer or Vice President and
Corporate  Controller  of MBC,  stating  that no Event of Default  or  Potential
Default  exists and that the  Borrowers are in  compliance  with all  applicable
covenants  contained  in this  Agreement.  Such  certificate  shall  include all
figures  necessary to calculate  the  Borrowers'  compliance  with all financial
covenants  set forth in this  Agreement.  If an Event of  Default  or  Potential
Default has occurred and is continuing or exists, such certificate shall specify
in detail  the  nature  and  period of  existence  of the  Event of  Default  or
Potential  Default  and any  action  taken  or  contemplated  to be taken by the
Borrowers.

          (e) REPORTS TO GOVERNMENTAL  AGENCIES AND OTHER CREDITORS.  As soon as
practicable,  and in event  within ten (10) days after the filing  thereof,  the
Borrower  shall furnish to Bank a copy of its 10-K and 10-Q reports,  each proxy
statement,  each registration statement and all other reports which any Borrower
is or may be required to file with the United  States  Securities  and  Exchange
Commission or any State Securities Commission.

          (f) AUDIT  REPORTS.  Promptly upon receipt  thereof,  and in any event
within five (5) Business Days after receipt by any Borrower,  the Borrowers will
deliver to the Bank one copy of each other  report  submitted to any Borrower by
its  independent  accountants,  including  comment  or  management  letters,  in
connection with any annual,  interim or special audit report made by them of any
Borrower or its banks and records.

          (g) ANNUAL PLAN. On or before  January 31 of each calendar  year,  the
Borrowers  shall  submit to the Bank  projections  for the  Borrowers  and their
Subsidiaries for such calendar year setting forth Consolidated and Consolidating
projected income and cash flow for each quarter and the  Consolidated  projected
balance sheet as of the end of each quarter.  Such projections shall be prepared
in a manner fully and accurately  presenting the projected  financial  condition
and results of operation of the Borrowers and their Subsidiaries and making such
projections not misleading under the circumstances.

          (h) MONTHLY BORROWING BASE CERTIFICATE.  Within twenty (20) days after
the last day of each calendar  month during the term of this  Agreement on which
the aggregate  principal  amount of all Revolving  Credit Loans  (including  the
Letter of Credit  Undrawn  Availability)  outstanding  exceeds  Five Million and
00/100 Dollars ($5,000,000.00),  Borrowers shall furnish to the Bank a Borrowing
Base Certificate signed by the Vice President and Corporate Controller of MBC.

          (i) VISITATION:  AUDITS. The Borrowers will permit such persons as the
Bank may  designate to visit and inspect any of the  properties of the Borrowers
and their  Subsidiaries  to examine,  and to make copies and extracts  from, the
books and records of the Borrowers and their  Subsidiaries  and to discuss their
affairs with their officers during normal business hours. Provided that no Event
of Default has occurred,  the Bank shall  provide the Borrower  with  reasonable
notice of any such visitation or inspection.  Upon the occurrence and during the
continuation  of an Event of Default,  the Borrowers will permit such persons as
the Bank may  designate  to  visit  and  inspect  any of the  properties  of the
Borrowers  and their  Subsidiaries  to examine,  and to make copies and extracts
from,  the books and  records of the  Borrowers  and their  Subsidiaries  and to
discuss their affairs with their  officers and  independent  accountants  at any
time and without notice.

<PAGE>

          (j) NOTICE OF EVENT OF DEFAULT. Promptly, and in any event within five
(5)  Business  Days,  after  becoming  aware of an Event of Default or Potential
Default,  the  Borrowers  will give the Bank  notice of the Event of  Default or
Potential Default,  together with a written statement of the Presidents or Chief
Financial  Officers of the  Borrowers  setting forth the details of the Event of
Default or Potential Default and any action taken or contemplated to be taken by
the Borrowers.

          (k) NOTICE OF  MATERIAL  ADVERSE  CHANGE.  Promptly,  and in any event
within five (5) Business Days, after becoming aware thereof,  the Borrowers will
give the Bank telephonic or telegraphic  notice (with written  confirmation sent
on the same or next Business Day) with respect to any Material Adverse Change or
any development or occurrence which would have a Material Adverse Effect.

          (l) NOTICE OF PROCEEDINGS.  Promptly, and in any event within five (5)
Business Days,  after  becoming aware thereof,  the Borrowers will give the Bank
notice of the commencement,  existence or threat of all proceedings by or before
any Official Body against or affecting any Borrower which, if adversely decided,
would have a Material Adverse Effect.

          (m) FURTHER INFORMATION. The Borrowers will promptly, but in any event
within  fifteen (15) days,  furnish to the Bank such other  information,  and in
such form, as the Bank may reasonably request from time to time.

     5.02  PRESERVATION  OF  EXISTENCE  AND  FRANCHISES.   Except  as  otherwise
permitted  under this  Agreement,  the Borrowers will maintain their  respective
corporate  existences,  rights and  franchises in full force and effect in their
respective  jurisdictions  of  incorporation  unless the Bank provides its prior
written consent otherwise. Except where the failure to be so qualified would not
have a Material  Adverse  Effect,  the  Borrowers  and their  Subsidiaries  will
qualify and remain  qualified as a foreign  corporation in each  jurisdiction in
which the  ownership of their  properties  or the nature of their  activities or
both makes such qualification necessary.

     5.03  INSURANCE.  The Borrowers and their  Subsidiaries  will maintain with
financially  sound  and  reputable  insurers  insurance  with  respect  to their
properties   and  business  and  against  such   liabilities,   casualties   and
contingencies   and  of  such  types  and  in  such  amounts  as  is  reasonably
satisfactory  to the Bank and as is  customary  in the case of  corporations  or
other  entities  engaged  in the same or  similar  business  or  having  similar
properties  similarly  situated.  The Borrowers will deliver to the Bank, on the
last day of each fiscal year during the term of this  Agreement,  a statement or
insurance  company  certificate in such detail as the Bank may request as to all
insurance  coverage of the Borrower and all of its  Subsidiaries.  The Borrowers
agree  to  provide  the  Bank  with  thirty  (30)  days  advance  notice  of the
termination of any such insurance coverage.

     5.04 MAINTENANCE OF PROPERTIES. Except where the failure to do so would not
have a Material  Adverse  Effect,  the  Borrowers  and their  Subsidiaries  will
maintain or cause to be maintained  in good repair,  working order and condition
(ordinary  wear and tear  excepted),  the properties now or in the future owned,
leased or otherwise possessed by each of them and shall make or cause to be made
all needful and proper repairs,  renewals,  replacements and improvements to the
properties so that the business carried on in connection with the properties may
be properly and advantageously conducted at all times.

<PAGE>

     5.05 PAYMENT OF LIABILITIES.  The Borrowers and their Subsidiaries will pay
or discharge:

          (a) on or  prior to the date on  which  penalties  attach, all  taxes,
assessments,  fees and other governmental charges or levies imposed upon them or
any of their respective properties, income, sales or franchises other than those
contested with due diligence,  in good faith, without the occurrence of any Lien
which would have a Material Adverse Effect and for which the Borrowers and their
Subsidiaries have established sufficient reserves on their books;

          (b)  on  or  prior  to  the  date  when  due,  all  lawful  claims  of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
which,  if  unpaid,  might  result in the  creation  of a Lien upon any of their
respective  property  other than those  contested  with due  diligence,  in good
faith, and for which the Borrower or its Subsidiaries have established  adequate
reserves on their books and for which the Borrower and its Subsidiaries have put
in place adequate bonds or other security to cover the amount of any such Lien;

          (c) on or prior to the date when due, all other lawful  claims  which,
if unpaid,  might  result in the  creation of a Lien upon any of their  property
other  than those  contested  with due  diligence,  in good  faith  without  the
occurrence of any Lien which would have a Material  Adverse Effect and for which
the Borrower and its Subsidiaries have established  sufficient reserves on their
books; and

          (d) all other  current  liabilities  so that none is due more than one
hundred twenty (120) days after the due date for each liability,  except current
liabilities  which  are  subject  to good  faith  dispute  and as to  which  the
Borrowers or their Subsidiaries have created adequate reserves on their books.

     5.06 FINANCIAL ACCOUNTING  PRACTICES.  The Borrowers and their Subsidiaries
will make and keep books,  records and accounts  which,  in  reasonable  detail,
accurately and fairly reflect their respective  transactions and dispositions of
assets and  maintain a system of  internal  accounting  controls  sufficient  to
provide  reasonable  assurances that (a) transactions are executed in accordance
with  management's  general or  specific  authorization,  (b)  transactions  are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with GAAP and to maintain  accountability  for assets,  (c) access to
assets is permitted  only in accordance  with  management's  general or specific
authorization  and (d) the recorded  accountability  for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

     5.07  COMPLIANCE  WITH LAWS.  The  Borrowers and their  Subsidiaries  shall
comply  with all  applicable  Laws the  non-compliance  with which  would have a
Material Adverse Effect.

     5.08 PENSION PLANS. The Borrowers and their  Subsidiaries shall (a) keep in
full force and effect any and all Plans which are presently in existence or may,

<PAGE>

from time to time,  come into  existence  under ERISA,  unless such Plans can be
terminated  without  material  liability  to any Borrower or its  Subsidiary  in
connection with such termination;  (b) make contributions to each of their Plans
in a timely manner and in a sufficient amount to comply in all material respects
with the  requirements  of ERISA;  (c) comply with all material  requirements of
ERISA  which  relate  to such  Plans so as to  preclude  the  occurrence  of any
Reportable Event,  Prohibited  Transaction (other than a Prohibited  Transaction
subject to an exemption under ERISA) or material  accumulated funding deficiency
as such term is defined  in ERISA;  and (d)  notify  the Bank  immediately  upon
receipt by any Borrower or its  Subsidiaries of any notice of the institution of
any proceeding or other action which may result in the  termination of any Plan.
The Borrowers shall deliver to the Bank,  promptly,  but in any event within ten
(10) Business Days, after the filing or receipt  thereof,  copies of all reports
or notices which any Borrower or its Subsidiaries  files or receives under ERISA
with or from the Internal Revenue Service,  the PBGC, or the U.S.  Department of
Labor, other than reports or notices which do not materially or adversely affect
any Borrower,  their businesses,  assets, financial condition, or the ability of
such Borrower to perform its respective obligations under this Agreement.

     5.09 USE OF PROCEEDS. The Borrowers shall use the proceeds of the Loans for
the purposes set forth in Section 3.16 hereof.

     5.10  CONTINUATION  OF AND  CHANGE IN  BUSINESS.  The  Borrowers  and their
Subsidiaries  will  continue  to engage  generally  in business  and  activities
substantially similar to those described in MBC's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 (the "1999 Form 10-K") and the Borrowers
and their Subsidiaries will not engage in any other business or activity without
the prior written consent of the Bank.

     5.11 LIEN SEARCHES.  Upon an Event of Default,  the Bank may, but shall not
be obligated to, conduct lien searches of the Borrowers,  their Subsidiaries and
their assets and properties at any time. The Borrowers  shall reimburse the Bank
for the Bank's out of pocket  costs and  expenses in  connection  with such lien
searches.

     5.12 FURTHER ASSURANCES. The Borrowers, at their own cost and expense, will
cause to be promptly and duly taken,  executed,  acknowledged  and delivered all
further  acts,  documents  and  assurances  as the Bank  may  from  time to time
reasonably  request  in order  to more  effectively  carry  out the  intent  and
purposes of this Agreement and the transactions  contemplated by this Agreement.
Upon any failure of the Borrowers to do so, the Bank may make,  execute,  record
or file any and each Loan Document,  instrument,  certificate,  document and UCC
financing statement for and in the name of any or all of the Borrowers.

     5.13 [RESERVED]

     5.14. FINANCIAL  COVENANTS.  The following financial covenants with respect
to the Borrowers shall apply:

          (a) INCOME FROM OPERATIONS.  The Borrowers shall  maintain Income from
Operations in an amount not less than (i) Two Million Seven Hundred Thousand and
00/100  Dollars  ($2,700,000.00)  for the Fiscal  Quarter ending March 31, 2000;

<PAGE>

(ii) Three Million Three Hundred Thousand and 00/100 Dollars ($3,300,000.00) for
the Fiscal  Quarter  ending June 30,  2000;  (iii) Three  Million  Five  Hundred
Thousand  and 00/100  Dollars  ($3,500,000.00)  for the Fiscal  Quarters  ending
September  30, 2000 and  December 31,  2000;  and (iv) Three  Million and 00/100
Dollars  ($3,000,000.00)  for the Fiscal  Quarter  ending March 31, 2001 and for
each Fiscal Quarter thereafter.

          (b) MINIMUM OWNER'S EQUITY.  The Borrowers shall maintain at all times
Owner's Equity in an amount not less than the sum of (i) Forty-Four Million Five
Hundred Thousand and 00/100  ($44,500,000.00)  plus (ii) ninety percent (90%) of
the Net Income of the Borrowers for the Fiscal Quarter ending March 31, 2000 and
each  Fiscal  Quarter  thereafter  (excluding  any net loss in any  such  Fiscal
Quarter).

     5.15 AMENDMENT TO SCHEDULES. The Borrowers may amend any one or more of the
schedules  referred to in this  Agreement  (subject to prior notice to the Bank)
and any representation,  warranty,  or covenant contained herein which refers to
any such schedule shall from and after the date of any such  amendment  refer to
such  schedule  as so  amended;  PROVIDED,  HOWEVER,  that in no event shall the
amendment of any such schedule constitute a waiver by the Bank of any default or
Event of Default that exists notwithstanding the amendment of such schedule.

                                   ARTICLE VI.

                               NEGATIVE COVENANTS
                               ------------------

     The Borrowers covenant to the Bank as follows:

     6.01 LIENS.  No Borrower,  nor any Subsidiary of a Borrower  shall,  at any
time,  incur,  create,  assume  or  permit  to  exist,  any Lien on any of their
property or assets, tangible or intangible,  now or hereafter owned, or agree to
become liable to do so, except:

          (a) such Liens  existing on the Closing Date and set forth on SCHEDULE
6.01 to this Agreement;

          (b) Liens granted in favor of Bank;

          (c)  pledges or  deposits  under  workers  compensation,  unemployment
insurance  and  social  security  laws,  or to secure the  performance  of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases or
to secure statutory  obligations or surety or similar bonds used in the ordinary
course of business;

          (d) Liens arising from taxes,  assessments,  fees, charges,  levies or
claims described in Section 5.05 of this Agreement;

          (e) purchase money security interests to secure Indebtedness permitted
under Section 6.02(d);  PROVIDED,  HOWEVER, that such security interest shall be
limited   solely  to  the  equipment   purchased   with  the  proceeds  of  such
Indebtedness;

<PAGE>

          (f) any unfiled  materialmen's,  mechanics,  workmen's and repairmen's
liens  (provided,  that if such a lien shall be filed or perfected,  it shall be
discharged of record immediately by payment, bond or otherwise);

          (g) attachment, judgment and other similar Liens arising in connection
with court  proceedings,  so long as the existence of such Liens do not cause an
Event of Default under Section 7.01(h) or 7.01(i) hereof;

          (h) reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions,  restrictions,  leases and other similar title exceptions
or encumbrances affecting real property, provided that they do not, individually
or in the  aggregate,  diminish  the fair  market  value  of the  real  property
affected thereby or the utility of such real property for the purposes for which
such property is presently devoted;

          (i) Liens or deposits made in connection  with  contracts with or made
at the  request of the United  States of  America  or any  department  or agency
thereof  resulting  from progress  payments or partial  payments  under any such
contracts, incurred in the ordinary course of business of the Borrowers or their
Subsidiaries; and

          (j) Liens granted by Baker/Mellon Stuart to secure the loans permitted
pursuant to Section 6.04(f) hereof.

     6.02 INDEBTEDNESS.  No Borrower, nor any Subsidiary of a Borrower shall, at
any time, create, incur, assume or suffer to exist any Indebtedness, except:

          (a)  Indebtedness  under this  Agreement,  the  Notes,  the other Loan
Documents  or under any other  document,  instrument  or  agreement  between any
Borrower and the Bank;

          (b)  Indebtedness  existing  on the  date  hereof,  and  described  in
SCHEDULE  6.02  to  this   Agreement,   including  all  extension   renewals  or
refinancings thereof which do not increase the amount thereof;

          (c) Current accounts payable, accrued expenses and other current items
arising out of  transactions  (other than  borrowings) in the ordinary course of
business;

          (d) Purchase money  Indebtedness or Capitalized  Lease Obligations for
purchases  or leases of  equipment  in the  ordinary  course of business  and in
amounts which shall not exceed Five Million and 00/100  Dollars  ($5,000,000.00)
as to the aggregate,  at any time, of all such purchase money  Indebtedness  and
Capitalized Lease Obligations;

          (e)  Indebtedness  represented by unsecured  promissory notes provided
that such  Indebtedness  shall not  exceed  Three  Million  and  00/100  Dollars
($3,000,000.00)  as to any single  promissory  note or Five  Million  and 00/100
Dollars  ($5,000,000.00)  as  to  the  aggregate,  at  any  time,  of  all  such
outstanding notes; and

<PAGE>

          (f) Indebtedness of Baker/Mellon  Stuart to MBC in connection with the
loans permitted pursuant to Section 6.04(f) hereof.

     6.03 GUARANTEES AND CONTINGENT LIABILITIES.  No Borrower nor any Subsidiary
of a Borrower  shall,  at any time  directly or  indirectly  assume,  guarantee,
endorse or otherwise  agree,  become or remain directly or  contingently  liable
upon or with  respect to any  obligation  or liability of any other Person other
than a Borrower or any Subsidiary of a Borrower, except:

          (a) indemnities of directors and officers in their capacities as such,
as permitted by Law;

          (b) endorsements on negotiable or other  instruments in any amount for
deposit or collection or similar  transactions  in the ordinary  course of their
businesses; and

          (c) those  guarantees  existing on the  Closing  Date and set forth on
SCHEDULE 6.03 attached to this Agreement.

     6.04 LOANS AND  INVESTMENTS.  No Borrower nor any  Subsidiary of a Borrower
shall purchase, own or invest in any stock or other securities of any Person, or
make or permit to exist any investment or capital contribution to or acquire any
interest whatsoever in any other Person or permit to exist any loans or advances
to any Person except:

          (a) equity  investments in the  Subsidiaries  as set forth on SCHEDULE
3.20 to this Agreement;

          (b) Acquisitions permitted under Section 6.05 hereof;

          (c) other loans and  investments  existing on the Closing Date and set
forth on SCHEDULE 6.04 attached to this Agreement; or

          (d)  investments  in (i) direct  obligations  of the United  States of
America or any agency thereof, (ii) obligations  guaranteed by the United States
of America,  (iii) prime commercial paper (rated by Moody's Investors Service at
not  less  than a A-2 and by  Standard  & Poors  at not  less  than  P-2),  (iv)
certificates  of  deposit  or  repurchase  agreements  issued  by  Bank  or  any
commercial  bank having  capital  and  surplus in excess of One Hundred  Million
Dollars  ($100,000,000);  (v) deposit  accounts in and Banker's  acceptances of,
commercial banks, and (vi) investments  (other than equity investments listed on
SCHEDULE  3.20) in any other  Borrower or  Subsidiary  incurred in the  ordinary
course of business and usual and customary terms in the form of advances to such
Borrower or Subsidiary; provided, however, that (A) the total amount of all such
advances made by the Borrowers to those  Subsidiaries  which are not  Borrowers,
minus (B) the total amount of all such advances made by those Subsidiaries which
are not  Borrowers  to the  Borrowers  shall not,  at any time,  exceed  Fifteen
Million and 00/100  Dollars  ($15,000,000.00)  and provided,  further,  that the
total amount of all such advances made by the Borrowers to any single Subsidiary
that  is not a  Borrower  shall  not  exceed  Ten  Million  and  00/100  Dollars
($10,000,000.00);

          (e) so long as no Event of  Default  has  occurred  or will occur as a
result thereof, additional repurchases of outstanding common stock of MBC as may
hereafter be authorized by the Board of Directors of MBC from time to time; and

<PAGE>

          (f)  loans  made  by  MBC  to  Baker/Mellon  Stuart  pursuant  to  the
Baker/Mellon Stuart Security Agreement,  provided,  however,  that the aggregate
amount of all such loans shall not exceed an amount equal to Twenty-Six  Million
Five Hundred Thousand and 00/100 Dollars ($26,500,000.00).

     6.05  ACQUISITIONS.  No Borrower  nor any  Subsidiary  of a Borrower  shall
acquire,  directly or indirectly,  substantially all of the assets or all of the
stock,  other  securities or other equity  interest of any Person  (whether in a
single  or  series  of  related  transactions)  or make or  permit  to exist any
agreement for any of the  foregoing  (any of the  foregoing  arrangements  being
herein  referred  to as an  "Acquisition"),  except  Acquisitions  of Persons in
businesses  similar to those  described in the 1999 Form 10-K so long as each of
the following conditions are satisfied:

          (a) the Bank shall be given at  least thirty (30) days advance written
notice of any such  Acquisition  with a purchase  price in excess of Two Million
Dollars ($2,000,000.00);

          (b) the Bank shall have  received  all  documentation  with respect to
such Acquisition  including,  but not limited to, the purchase agreement and all
related documentation and approvals as requested by Bank;

          (c) if requested by Bank, Bank shall have received pro forma financial
statements of the Borrowers and their  Subsidiaries  after giving affect to such
Acquisition;

          (d)  immediately  after the  closing of such  Acquisition,  the amount
available under the Revolving  Credit Facility  Commitment shall be greater than
or equal to Ten Million and 00/100 Dollars ($10,000,000.00);

          (e) no Event of Default or Potential Default shall exist prior to such
Acquisition and no Event of Default or Potential Default shall occur or exist as
a result of such Acquisition; and

          (f) the  aggregate  purchase  price  of all such  Acquisitions  in any
fiscal year shall not exceed Five Million and 00/100 Dollars  ($5,000,000.00) in
the aggregate.

     6.06 PARTNERSHIPS, COMBINATIONS, MERGERS OR CONSOLIDATIONS. No Borrower nor
any  Subsidiary of a Borrower  shall form a partnership  or merge or consolidate
with or into any other Person, or agree to do any of the foregoing, except:

          (a) the Borrowers may permit any of their  Subsidiaries  to merge with
or consolidate into a Borrower if the Borrower is the surviving entity;

          (b) the Borrowers may permit any of their  Subsidiaries  to merge with
or consolidate with another Subsidiary;

          (c) any Borrower may merge with any other Borrower; and

          (d) the Borrowers  and their  Subsidiaries  may complete  Acquisitions
permitted under Section 6.05 hereof.

<PAGE>

     6.07  DISPOSITIONS OF ASSETS.  No Borrower nor any Subsidiary of a Borrower
shall sell,  convey,  pledge,  assign,  lease,  abandon or otherwise transfer or
dispose of, voluntarily or involuntarily (any of the foregoing being referred to
in  this  Section  as a  transaction  and any  series  of  related  transactions
constituting but a single  transaction),  any of their respective  properties or
assets, tangible or intangible (including stock of Subsidiaries) except:

          (a) sales of  inventory  and other  assets in the  ordinary  course of
business;

          (b) sales of assets which are no longer  useful to the business of the
Borrowers or their Subsidiaries, made in the ordinary course of business;

          (c) so long as no Event of Default  or  Potential  Default  shall have
occurred, sales or dispositions of assets in the ordinary course of a Borrower's
business having a fair market value,  at the time of disposition,  not in excess
of One Million and 00/100 Dollars  ($1,000,000.00) in the aggregate for all such
dispositions in any fiscal year.

     6.08 DOUBLE NEGATIVE  PLEDGE.  No Borrower nor any Subsidiary of a Borrower
shall enter into or suffer to exist any agreement with any Person, other than in
connection  with this  Agreement,  which  prohibits or limits the ability of the
Borrowers or any Subsidiary to create, incur, assume or suffer to exist any Lien
upon or with  respect to any  property or assets of any kind (real or  personal,
tangible or intangible) of the Borrowers or any Subsidiary, whether now owned or
hereafter acquired or created.

     6.09 SELF-DEALING. No Borrower nor any Subsidiary of a Borrower shall enter
into or carry out any loan,  advance or other  transaction  (including,  without
limitation,  purchasing  property or services,  or selling property or services)
with any Affiliate, except that shareholders, directors, officers or partners of
a Borrower or a Subsidiary  may render  services to such  Borrower or Subsidiary
for   compensation   at  the  same  rates  generally  paid  by  corporations  or
partnerships  engaged in the same or  similar  businesses,  and a Borrower  or a
Subsidiary may enter into  transactions with Affiliates if such transactions are
disclosed to Bank and made on terms  comparable to those which could be obtained
in arms length transactions with a Person who is not an Affiliate.

     6.10 OPERATING  LEASES.  No Borrower nor any Subsidiary of a Borrower shall
enter into or become  subject to any  operating  leases  which in the  aggregate
provide for Lease Obligations to be paid during any one fiscal year in excess of
Twenty Million and 00/100 Dollars ($20,000,000.00).

     6.11 [RESERVED]

     6.12 MARGIN  STOCK.  The  Borrowers  will not use the proceeds of any Loans
directly or  indirectly  to purchase  or carry any  "margin  stock"  (within the
meaning of  Regulations  U, G, T, or X of the Board of  Governors of the Federal
Reserve  System) or to extend  credit to others for the purpose of purchasing or
carrying, directly or indirectly, any margin stock.

<PAGE>

                                  ARTICLE VII.

                                    DEFAULTS
                                    --------

     7.01  EVENTS  OF  DEFAULT.  An Event of  Default  means the  occurrence  or
existence of one or more of the  following  events or  conditions  (whatever the
reason for such Event of Default and whether voluntary,  involuntary or effected
by operation of Law):

          (a) The Borrowers shall fail to pay principal on any of the Notes when
due; or

          (b) The Borrowers  shall fail to pay interest on the Loans or any fees
payable  pursuant  to Article II of this  Agreement  within five (5) days of the
date when due; or

          (c) The  Borrowers  shall fail to pay any other fee,  or other  amount
payable pursuant to this Agreement, the Notes or any of the other Loan Documents
within ten (10) days after notice to MBC by the Bank; or

          (d) Any  representation  or warranty  made by any Borrower  under this
Agreement, the Notes or any of the other Loan Documents or any statement made by
any  Borrower  in any  financial  statement,  certificate,  report,  exhibit  or
document  furnished by the Borrowers to the Bank  pursuant to this  Agreement or
the other Loan  Documents  shall prove to have been false or  misleading  in any
material respect as of the time when made; or

          (e) Any Borrower shall be in default in the  performance or observance
of any covenant contained in Sections 5.01(h);  5.01(j);  5.01(k); 5.01(l); 5.14
or any section in Article VI hereof; or

          (f) Any Borrower shall be in default in the  performance or observance
of any  covenant  contained  in Sections  5.01(a);  5.01(b);  5.01(c);  5.01(d);
5.01(e);  5.01(f);  5.01(g); 5.07 or 5.08 hereof and such default shall not have
been cured within fifteen (15) days of the occurrence of such default; or

          (g) Any Borrower shall be in default in the  performance or observance
of any covenant contained in Sections 5.02; 5.03; 5.05; 5.09; or 5.10 hereof and
such default shall not have been cured within thirty (30) days of the occurrence
of such default; or

          (h) Any Borrower shall be in default in the  performance or observance
of any other  covenant  hereof and such default shall not have been cured within
thirty (30) days after notice to MBC by the Bank;

          (i) Any Borrower or any Subsidiary  shall (i) default (as principal or
guarantor  or other  surety) in any payment of  principal  of or interest on any
obligation (or set of related  obligations)  for borrowed money in excess of One
Million  and  00/100  Dollars  ($1,000,000.00),  beyond any period of grace with
respect to the payment or, if such obligation (or set of related obligations) is
or are payable or repayable on demand,  fails to pay or repay such obligation or
obligations  when  demanded,  or (ii)  default  in the  observance  of any other
covenant, term or condition contained in any agreement or instrument by which an
obligation  (or  set of  related  obligations)  is or are  created,  secured  or
evidenced, if the effect of such default is to cause, or to permit the holder or
holders of such  obligation or  obligations  (or a trustee or agent on behalf of
such holder or holders) to cause,  all or part of such obligation or obligations
to become due before its or their otherwise stated maturity; or

<PAGE>

          (j) Except  for a final  judgment  in an amount  less than or equal to
Five  Million  and 00/100  Dollars  ($5,000,000.00)  with  respect to the matter
described on Schedule  7.01(j)  attached  hereto and made a part hereof,  one or
more  final  judgments  for the  payment of money in excess of One  Million  and
00/100 Dollars  ($1,000,000.00)  shall have been entered against any Borrower or
any Subsidiary  and, in the case of any such judgment or judgments  which in the
aggregate  are less than Two Million and 00/100  Dollars  ($2,000,000.00),  such
judgment or judgments shall have remained undischarged and unstayed for a period
of thirty (30) consecutive days; or

          (k) A writ or warrant of attachment, garnishment, execution, distraint
or similar  process,  exceeding  in value the  aggregate  amount of One  Hundred
Thousand and 00/100  Dollars  ($100,000.00),  shall have been issued against any
Borrower or any  Subsidiary or any of their  respective  properties  and, in the
event the value of such  matters is in the  aggregate  less than One Million and
00/100 Dollars ($1,000,000.00),  such shall remain undischarged and unstayed for
a period of thirty (30) consecutive days; or

          (l) Bank has determined that a Material Adverse Change has occurred or
that the prospect of payment or performance  of any covenant,  agreement or duty
under this Agreement,  the Notes or the other Loan Documents is impaired or that
the Bank is insecure; or

          (m) a Change of Control shall occur; or

          (n) (i) A Termination  Event with respect to a Plan shall occur,  (ii)
any Person shall engage in any prohibited  transaction involving any Plan, (iii)
an  accumulated  funding  deficiency,  whether or not  waived,  shall exist with
respect  to any  Plan,  (iv) any  Borrower  or any ERISA  Affiliate  shall be in
"Default"  (as defined in Section  4219(c)(5)  of ERISA with respect to payments
due to a  multi-employer  Plan  resulting  from  such  Borrower's  or any  ERISA
affiliate's,  complete or partial  withdrawal  (as  described in Section 4203 or
4205 of ERISA) from such Plan,  or (v) any other event or condition  shall occur
or exist with respect to a single  employer  Plan,  except that no such event or
condition  shall  constitute an Event of Default if it,  together with all other
events or conditions  at the time  existing,  would not have a Material  Adverse
Effect;

          (o) A proceeding shall be instituted in respect of any Borrower or any
Subsidiary:

               (i) seeking  to  have an  order for  relief entered in respect of
such Borrower or any  Subsidiary or seeking a declaration or entailing a finding
that such Borrower or any  Subsidiary is insolvent or a similar  declaration  or
finding, or seeking dissolution,  winding- up, charter revocation or forfeiture,
liquidation,  reorganization,  arrangement,  adjustment,  composition  or  other
similar  relief with respect to such Borrower or any  Subsidiary,  its assets or
debts under any law  relating to  bankruptcy,  insolvency,  relief of debtors or
protection of creditors,  termination of legal entities or any other similar law
now or in the future which shall not have been dismissed or stayed within thirty
(30) days after such proceedings were instituted; or

               (ii) seeking  appointment  of  a  receiver,  trustee,  custodian,
liquidator, assignee, sequestrator or other similar official for any Borrower or
any  Subsidiary or for all or any  substantial  part of its property which shall
not have been dismissed or stayed within thirty (30) days after such proceedings
were instituted; or

<PAGE>

          (p)  Any  Borrower  shall  voluntarily   suspend  transaction  of  its
business,  any Borrower or any Subsidiary shall become  insolvent,  shall become
generally  unable  to pay its debts as they  become  due,  shall  make a general
assignment for the benefit of creditors,  shall institute a proceeding described
in  Section  7.01(o)(i)  of this  Agreement  or shall  consent  to any order for
relief,  declaration,  finding or relief described in Section 7.01(o)(i) of this
Agreement, shall institute a proceeding described in Section 7.01(o)(ii) of this
Agreement or shall consent to the  appointment or to the taking of possession by
any such official of all or any substantial  part of its property whether or not
any proceeding is instituted, shall dissolve, wind-up or liquidate itself or any
substantial part of its property, or shall take any action in furtherance of any
of the foregoing.

     7.02 CONSEQUENCES OF AN EVENT OF DEFAULT.
          -----------------------------------

          (a) If an Event of Default specified in subsections (b) through (n) of
Section  7.01 of this  Agreement  occurs,  the Bank  will be  under  no  further
obligation  to make Loans and may at its option (i) demand the unpaid  principal
amount of the Notes,  interest  accrued on the unpaid  principal  amount and all
other  amounts owing by the Borrowers  under this  Agreement,  the Notes and the
other Loan  Documents to be  immediately  due and payable  without  presentment,
demand,  protest  or  further  notice  of any kind,  all of which are  expressly
waived,  and an action for any amounts due shall  accrue  immediately;  and (ii)
require  the  Borrowers  to, and the  Borrowers  shall  thereupon,  deposit in a
non-interest  bearing  account  with the  Bank,  as cash  collateral  for  their
obligations  under the Loan  Documents,  an amount  equal to the maximum  amount
currently or at any time  thereafter  available  to be drawn on all  outstanding
Letters of Credit, and the Borrowers hereby pledge to the Bank, and grant to the
Bank a security  interest in, all such cash as security for such  obligations of
the Borrowers.

          (b) If an Event of Default specified in subsections (a), (o) or (p) of
Section 7.01 of this Agreement occurs and continues or exists,  the Bank will be
under no further  obligation  to make  Loans or issue  Letters of Credit and the
unpaid principal  amount of the Notes,  interest accrued on the unpaid principal
amount of the Notes and all other  amounts  owing by the  Borrowers  under  this
Agreement,  the Notes and the other Loan Documents  shall  automatically  become
immediately due and payable without  presentment,  demand,  protest or notice of
any kind, all of which are expressly  waived,  and an action for any amounts due
shall accrue immediately.

     7.03 SET-OFF. If the unpaid principal amount of the Notes, interest
accrued on the unpaid principal amount of the Notes or other amount owing by the
Borrowers under this Agreement, the Notes or the other Loan Documents shall have
become due and payable (at maturity,  by acceleration  or otherwise),  the Bank,
any  assignee of the Bank and the holder of any  participation  in any Loan will
each have the right,  in addition to all other rights and remedies  available to
it, without notice to the Borrowers,  to set-off  against and to appropriate and
apply to such due and  payable  amounts  any debt owing to, and any other  funds
held in any  manner  for the  account  of,  any  Borrower  by the Bank,  by such

<PAGE>

assignee  or by such  holder  including,  without  limitation,  all funds in all
deposit  accounts  (whether  time or demand,  general or special,  provisionally
credited or finally  credited,  or otherwise) now or in the future maintained by
any Borrower with the Bank, such assignee or such holder.  The Borrowers consent
to and confirm the foregoing  arrangements  and confirm the Bank's rights,  such
assignee's rights and such holder's rights of banker's lien and set-off. Nothing
in this  Agreement  will be deemed a waiver or  prohibition of or restriction on
the  Bank's  rights,  such  assignee's  rights  or any such  holder's  rights of
banker's lien or set-off.

                                  ARTICLE VIII.

                                  MISCELLANEOUS
                                  -------------

     8.01  BUSINESS  DAYS.  Except  as  otherwise  provided  in this  Agreement,
whenever  any  payment or action to be made or taken  under this  Agreement,  or
under the Notes or under any of the other Loan  Documents is stated to be due on
a day which is not a Business  Day, such payment or action will be made or taken
on the next  following  Business Day and such extension of time will be included
in  computing  interest or fees,  if any,  in  connection  with such  payment or
action.

     8.02 RECORDS. The unpaid principal amount of the Notes, the unpaid interest
accrued thereon,  the interest rate or rates applicable to such unpaid principal
amount and the duration of such applicability  shall at all times be ascertained
from the records of the Bank, which shall be conclusive absent manifest error.

     8.03  AMENDMENTS  AND WAIVERS.  The Bank and the Borrowers may from time to
time enter into agreements amending,  modifying or supplementing this Agreement,
the Notes or any other Loan  Document or  changing  the rights of the Bank or of
the  Borrowers  under  this  Agreement,  under the Notes or under any other Loan
Document  and the Bank may from  time to time  grant  waivers  or  consent  to a
departure  from the due  performance of the  obligations of the Borrowers  under
this  Agreement,  under the Notes or under any  other  Loan  Document.  Any such
agreement,  waiver or consent must be in writing and will be  effective  only to
the  extent  specifically  set  forth in such  writing.  In the case of any such
waiver or consent  relating to any  provision  of this  Agreement,  any Event of
Default  or  Potential  Default so waived or  consented  to will be deemed to be
cured and not continuing, but no such waiver or consent will extend to any other
or  subsequent  Event of  Default  or  Potential  Default  or  impair  any right
consequent to any other or subsequent  Event of Default or Potential  Default or
impair any right consequent thereto.

     8.04 NO IMPLIED WAIVER:  CUMULATIVE  REMEDIES.  No course of dealing and no
delay or failure of the Bank in exercising any right,  power or privilege  under
this  Agreement,  the Notes or any other Loan  Document will affect any other or
future  exercise of any such right,  power or privilege or exercise of any other
right,  power or privilege except as and to the extent that the assertion of any
such  right,  power or  privilege  shall be barred by an  applicable  statute of
limitations;  nor shall any single or partial exercise of any such right,  power
or privilege or any  abandonment  or  discontinuance  of steps to enforce such a
right,  power or privilege preclude any further exercise of such right, power or
privilege or of any other right, power or privilege.  The rights and remedies of
the Bank  under  this  Agreement,  the  Notes or any  other  Loan  Document  are
cumulative  and not  exclusive  of any rights or  remedies  which the Bank would
otherwise have.

<PAGE>

     8.05  NOTICES.  All  notices,  requests,   demands,  directions  and  other
communications (collectively,  "Notices") under the provisions of this Agreement
or the Notes must be in writing (including telexed or telecopied  communication)
unless  otherwise  expressly  permitted under this Agreement and must be sent by
first-class or first-class  express mail, private overnight or next Business Day
courier or by telecopy with  confirmation  in writing mailed first class, in all
cases with charges prepaid, and any such properly given Notice will be effective
when received. All Notices will be sent to the applicable party at the addresses
stated below or in accordance  with the last  unrevoked  written  direction from
such party to the other parties.

          If to Borrowers:  William P. Mooney
                            Executive Vice President and Chief Financial Officer
                            Michael Baker Corporation
                            Airport Office Park, Building No. 3
                            420 Rouser Road
                            Coraopolis, PA  15108

          and a copy to:    H. James McKnight
                            Secretary and General Counsel
                            Michael Baker Corporation
                            Airport Office Park, Building No. 3
                            420 Rouser Road
                            Coraopolis, PA  15108

          If to Bank:       Mark T. Latterner
                            Vice President
                            Mellon Bank, N.A.
                            Two Mellon Bank Center, Room 152-0230
                            Pittsburgh, PA 15259-0001
                            Telecopier:  (412) 236-9010

          and a copy to:    Jeffrey J. Conn, Esquire
                            Thorp Reed & Armstrong, LLP
                            One Riverfront Center
                            Pittsburgh, PA 15222
                            Telecopier:  (412) 394-2555

     8.06 EXPENSES;  TAXES;  ATTORNEYS FEES. The Borrowers agree to pay or cause
to be paid and to save the Bank  harmless  against  liability for the payment of
all reasonable out-of-pocket expenses,  including, but not limited to reasonable
fees and expenses of counsel and paralegals  for the Bank,  incurred by the Bank
from time to time (i) arising in  connection  with the  preparation,  execution,
delivery  and  performance  of this  Agreement,  the Notes  and the  other  Loan
Documents,  (ii)  relating to any requested  amendments,  waivers or consents to
this  Agreement,  the Notes or any of the other Loan Documents and (iii) arising
in connection  with the Bank's  enforcement or preservation of rights under this
Agreement,  the  Notes or any of the other  Loan  Documents  including,  but not
limited to, such  expenses as may be incurred by the Bank in the  collection  of
the outstanding  principal  amount of the Loans.  The Borrowers agree to pay all

<PAGE>

stamp,  document,  transfer,  recording  or  filing  taxes or fees  and  similar
impositions  now or in the  future  determined  by the  Bank  to be  payable  in
connection  with  this  Agreement,  the Notes or any other  Loan  Document.  The
Borrowers  agree to save the Bank  harmless from and against any and all present
or future  claims,  liabilities  or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes,  fees or impositions.  In the
event of a  determination  adverse to a Borrower of any action at law or suit in
equity in relation to this Agreement, the Notes or the other Loan Documents, the
Borrowers  will pay, in addition  to all other sums which the  Borrowers  may be
required to pay, a reasonable sum for attorneys and paralegals  fees incurred by
the Bank or the holder of the Notes in connection  with such action or suit. All
payments due from the  Borrowers  under this Section will be added to and become
part of the Loans until paid in full.

     8.07  SEVERABILITY.  The  provisions  of this  Agreement are intended to be
severable.  If any provision of this Agreement is held invalid or  unenforceable
in  whole  or in  part  in any  jurisdiction,  the  provision  will,  as to such
jurisdiction,   be   ineffective   to  the   extent   of  such   invalidity   or
unenforceability  without in any manner affecting the validity or enforceability
of the provision in any other  jurisdiction or the remaining  provisions of this
Agreement in any jurisdiction.

     8.08 GOVERNING LAW: CONSENT TO JURISDICTION.  This Agreement will be deemed
to be a contract under the laws of the  Commonwealth of Pennsylvania and for all
purposes will be governed by and  construed and enforced in accordance  with the
substantive  laws,  and not the laws of  conflicts,  of said  Commonwealth.  The
Borrowers  consent to the  exclusive  jurisdiction  and venue of the federal and
state  courts  located  in  Allegheny  County,  Pennsylvania,  in any action on,
relating to or mentioning this Agreement,  the Notes,  the other Loan Documents,
or any one or more of them.

     8.09 PRIOR  UNDERSTANDINGS.  This  Agreement,  the Notes and the other Loan
Documents supersede all prior understandings and agreements,  whether written or
oral,  among the  parties  relating  to the  transactions  provided  for in this
Agreement, the Notes and the other Loan Documents.

     8.10  DURATION:   SURVIVAL.  All  representations  and  warranties  of  the
Borrowers  contained in this Agreement or made in connection with this Agreement
or any of the other Loan  Documents  shall survive the making of and will not be
waived by the execution and delivery of this  Agreement,  the Notes or the other
Loan  Documents,  by any  investigation  by the Bank, or the making of any Loan.
Notwithstanding  termination  of this  Agreement  or an  Event of  Default,  all
covenants and agreements of the Borrowers will continue in full force and effect
from and after the date of this  Agreement so long as the  Borrowers  may borrow
under this Agreement and until payment in full of the Notes,  interest  thereon,
and all fees and other  obligations of the Borrowers under this Agreement or the
Notes.  Without  limitation,  it is  understood  that  all  obligations  of  the
Borrowers to make  payments to or indemnify the Bank will survive the payment in
full of the Notes and of all  other  obligations  of the  Borrowers  under  this
Agreement, the Notes and the other Loan Documents.

     8.11 TERM OF AGREEMENT. This Agreement will terminate when all Indebtedness
of the Borrowers to Bank including,  without limitation,  the Loans and interest
on the Loans is paid in full,  and the  Borrowers  have no right to borrow under
this  Agreement  and the  Bank  has no  obligation  to  make  Loans  under  this
Agreement.

<PAGE>

     8.12  COUNTERPARTS.  This  Agreement  may  be  executed  in any  number  of
counterparts  and by  the  different  parties  to  this  Agreement  on  separate
counterparts  each of which, when so executed,  will be deemed an original,  but
all such counterparts will constitute but one and the same instrument.

     8.13 SUCCESSORS AND ASSIGNS.  This Agreement will be binding upon and inure
to the benefit of the Bank,  the  Borrowers  and their  successors  and assigns,
except that the  Borrowers  may not assign or transfer  any of its rights  under
this Agreement without the prior written consent of the Bank.

     8.14  NO  THIRD  PARTY  BENEFICIARIES.  The  rights  and  benefits  of this
Agreement and the other Loan Documents are not intended to, and shall not, inure
to the benefit of any third party.

     8.15  PARTICIPATION  AND  ASSIGNMENT.  The Bank may from time to time sell,
assign or grant one or more  participations in all or any part of the Loans made
by Bank or which may be made by the Bank,  or its right,  title and  interest in
the  Loans  in or to this  Agreement,  to  another  lending  office,  lender  or
financial institution. Except to the extent otherwise required by the context of
this Agreement,  the word "Bank" where used in this Agreement means and includes
any  holder of a Note  originally  issued to the Bank and each such  holder of a
Note will be bound by and have the benefits of this Agreement,  the same if such
holder had been a signatory to this Agreement. In connection with any such sale,
assignment  or grant of  participation,  the  Bank  may  make  available  to any
prospective  purchaser,  assignee or participant any information relative to the
Borrowers in the Bank's possession.

     8.16.  EXHIBITS.  All exhibits and schedules attached to this Agreement are
incorporated and made a part of this Agreement.

     8.17  HEADINGS.  The section  headings  contained in this Agreement are for
convenience  only and do not  limit or  define or  affect  the  construction  or
interpretation of this Agreement in any respect.

     8.18  LIMITATION OF LIABILITY.  To the fullest extent  permitted by Law, no
claim may be made by the Borrowers  against the Bank, or by the Bank against the
Borrowers,  or by the  Borrowers  or the Bank against any  affiliate,  director,
officer, employee,  attorney or agent of the other for any special,  incidental,
indirect, consequential or punitive damages in respect of any claim arising from
or related to this Agreement or any other Loan Document or any statement, course
of conduct, act, omission or event occurring in connection herewith or therewith
(whether for breach of contract,  tort or any other  theory of  liability).  The
Borrowers and the Bank hereby waive, release and agree not to sue upon any claim
for any such damages,  whether such claim presently  exists or arises  hereafter
and whether or not such claim is known or suspected to exist in its favor.  This
Section  8.18 shall not limit any rights of the  Borrowers  or the Bank  arising
solely out of gross negligence or willful misconduct.

     8.19  INDEMNITIES.  In  addition  to the  payment of  expenses  pursuant to
Section 8.06 hereof, the Borrowers agree to indemnify, pay and hold the Bank and
its officers and directors  (collectively,  called the "Indemnitees"),  harmless
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions, judgments, suits, claims, costs, expenses and disbursements
of  any  kind  or  nature   whatsoever   (including  the  reasonable   fees  and

<PAGE>

disbursements   of  counsel  for  such   Indemnitees  in  connection   with  any
investigative,  administrative or judicial  proceeding  commenced or threatened,
whether or not such Indemnitee  shall be designated a party thereto) that may be
imposed on,  incurred  by or asserted  against  that  Indemnitee,  in any matter
arising from the occurrence of an Event of Default  hereunder or under the other
Loan  Documents,  or the exercise of any right or remedy  hereunder or under the
other Loan Documents (the "Indemnified  Liabilities");  provided,  however, that
the Borrowers  shall have no obligation to an Indemnitee  hereunder with respect
to  Indemnified  Liabilities  arising  from  the  gross  negligence  or  willful
misconduct of that Indemnitee.

<PAGE>

8.18  WAIVER OF TRIAL BY JURY.                          INITIALS:
      -----------------------
THE BORROWERS AND THE BANK EXPRESSLY,                   /s/ WPM
KNOWINGLY AND VOLUNTARILY WAIVE ALL                     -------------------
BENEFIT AND ADVANTAGE OF ANY RIGHT TO A                 MBC
TRIAL BY JURY, AND NEITHER WILL AT ANY TIME             /s/ WPM
INSIST UPON, OR PLEAD OR IN ANY MANNER                  -------------------
WHATSOEVER CLAIM OR TAKE THE BENEFIT OR                 Michael Baker, Jr.
ADVANTAGE OF A TRIAL BY JURY IN ANY ACTION              /s/ WPM
ARISING IN CONNECTION WITH THIS AGREEMENT,              -------------------
THE NOTE OR ANY OF THE OTHER LOAN                       Baker Environmental
DOCUMENTS.                                              /s/ WPM
                                                        -------------------
                                                        Baker/MO
                                                        /s/ WPM
                                                        -------------------
                                                        Baker/OTS
                                                        /s/ WPM
                                                        -------------------
                                                        Baker Engineering
                                                        /s/ WPM
                                                        -------------------
                                                        Baker NY
                                                        /s/ WPM
                                                        -------------------
                                                        Baker GeoResearch
                                                        /s/ WPM
                                                        -------------------
                                                        Baker Global

                                                        Bank
                                                        /s/ ML
                                                        -------------------

                          [INTENTIONALLY LEFT BLANK]

<PAGE>

            IN WITNESS WHEREOF,  and intending to be legally bound, the parties,
by their duly authorized officers, have executed and delivered this Agreement as
of the date set forth at the beginning of this Agreement.

Attest:                             Michael Baker Corporation

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Michael Baker Jr., Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Baker Environmental, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Baker/MO Services, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Baker/OTS, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

<PAGE>

Attest:                             Baker Engineering, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Baker Engineering NY, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Baker GeoResearch, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

Attest:                             Baker Global Project Services, Inc.

By: /s/ H. James McKnight           By: /s/ William P. Mooney
    --------------------------          ---------------------------------

Title: Secretary                    Title: Executive Vice President & CFO
       -----------------------             ------------------------------

                                    Mellon Bank, N.A.

                                    By: /s/Mark Latterner
                                        ---------------------------
                                        Vice President

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