MORRISON KNUDSEN CORP//, DEF 14A, 1997-03-11

MORRISON KNUDSEN CORP//
DEF 14A, 1997-03-11
HEAVY CONSTRUCTION OTHER THAN BLDG CONST - CONTRACTORS

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<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

MORRISON KNUDSEN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - APRIL 11, 1997

TO THE STOCKHOLDERS OF MORRISON KNUDSEN CORPORATION:

The Annual Meeting of Stockholders of Morrison Knudsen Corporation, a
Delaware corporation (the "Company"), will be held at the Central Plaza Building
of the Company's World Headquarters Office located at 720 Park Boulevard in
Boise, Idaho, on Friday, April 11, 1997, at 10:00 a.m., local time, for the
following purposes:

1. To elect three directors of the Company.

2. To approve the adoption of the 1997 Stock Option and Incentive Plan for
Non-Employee Directors of Morrison Knudsen Corporation.

3. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors of the Company for the fiscal year ending November 30, 1997.

4. To transact such other business as may properly come before the meeting.

Only stockholders of record at the close of business on February 28, 1997
are entitled to notice of and to vote at the meeting or any adjournments
thereof. In order to ensure your representation at the meeting, please complete
the enclosed proxy and return it promptly in the accompanying envelope which
requires no postage if mailed in the United States.

All stockholders are cordially invited to attend the Annual Meeting.

Dated: March 10, 1997

BY ORDER OF THE BOARD OF DIRECTORS
MORRISON KNUDSEN CORPORATION
Stephen G. Hanks
Executive Vice President, Chief Legal
Officer and Secretary

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

The Company's 1996 Annual Report is being mailed to stockholders and
accompanies these proxy materials. The Annual Report contains financial and
other information about the Company, but is not incorporated in the Proxy
Statement and is not to be deemed a part of the proxy soliciting material.
<PAGE>
MORRISON KNUDSEN CORPORATION
MORRISON KNUDSEN PLAZA
720 PARK BOULEVARD
BOISE, IDAHO 83712
-------------------

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 11, 1997
-------------------

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Morrison Knudsen Corporation, a
Delaware corporation (the "Company"), for use at its Annual Meeting of
Stockholders to be held at the Central Plaza Building of the Company's World
Headquarters Office located at 720 Park Boulevard in Boise, Idaho, on Friday,
April 11, 1997, at 10:00 a.m., local time, and at any adjournments thereof (the
"Annual Meeting"). Any proxy delivered pursuant to this solicitation may be
revoked by the person giving it at any time prior to the exercise thereof (i) by
filing a duly-executed revocation instrument with the Secretary of the Company,
(ii) by delivering a duly-executed proxy bearing a later date or (iii) by
appearing at the Annual Meeting and voting in person.

This Proxy Statement and the related proxy are first being mailed to
stockholders commencing on or about March 10, 1997.

VOTING RIGHTS AND VOTE REQUIRED. The holders of record of shares of the
Company's common stock (the "Common Stock") and the holders of record of the
Company's preferred stock (the "Series A Preferred Stock") at the close of
business on February 28, 1997 (the "Record Date") are entitled to vote such
shares at the Annual Meeting. On the Record Date, 53,836,296 shares of Common
Stock were outstanding and entitled to vote and 1,799,984 shares of Series A
Preferred Stock were outstanding and entitled to vote. The holders of shares
representing a majority of the voting power of the shares of voting stock issued
and outstanding and entitled to vote, present in person or represented by proxy,
will constitute a quorum at the Annual Meeting. A quorum is necessary in order
to transact business at the Annual Meeting.

Each share of Common Stock is entitled to one vote on all matters properly
brought before the Annual Meeting. Each share of Series A Preferred Stock is
entitled to 1/10,000 of a vote on all such matters, voting together with shares
of Common Stock as a single class. The three nominees receiving the greatest
number of votes cast at the Annual Meeting for the election of directors will be
elected whether or not any one of them receives a majority of the votes so cast.
Approval of the adoption of the 1997 Stock Option and Incentive Plan for
Non-Employee Directors (the "Non-Employee Director Plan"), of the appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors and any other
matter properly brought before the Annual Meeting will each require the
affirmative vote of a majority of the voting power of the shares of voting stock
represented at the Annual Meeting and entitled to vote on such matters.
Abstentions and broker nonvotes will be counted for purposes of determining the
presence of a quorum at the Annual Meeting. However, abstentions and broker
nonvotes with respect to any matter brought to a vote at the Annual Meeting will
be treated as shares not represented and entitled to vote with respect to such
matter, and therefore will have no effect on the outcome of the vote on such
matter.

VOTING OF PROXIES. The shares of voting stock represented by all
duly-executed proxies received in time for the Annual Meeting will be voted in
accordance with the directions given by the stockholder executing the same. If
no such directions are given, the shares represented by such proxies will be
voted (i) FOR each of the nominees named herein, or their respective
substitutes, as directors,

1
<PAGE>
(ii) FOR approval of the adoption of the Non-Employee Director Plan and (iii)
FOR ratification of the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors.

The Company knows of no business to be brought before the Annual Meeting
other than the matters described in this Proxy Statement. However, if any other
matters of which the Company is not now aware are properly brought before the
Annual Meeting, the shares of voting stock represented by all duly-executed
proxies will be voted on such matters in accordance with the discretion of
persons named as proxies therein.

TABULATION AND CONFIDENTIAL VOTING. Pursuant to the policies of the
Company, representatives of Norwest Bank Minnesota, N.A. have been appointed to
serve as independent Inspectors of Election to supervise the voting of shares at
the Annual Meeting. The Inspectors of Election will decide all questions
regarding the qualification of voters, the validity of proxies and the
acceptance or rejection of votes. None of the Inspectors of Election is an
officer, employee or stockholder of the Company. In addition, the Company has
engaged Norwest Bank Minnesota, N.A. to receive, inspect, tabulate and maintain
the confidentiality of proxies. The votes of stockholders will be held in
confidence except (i) when disclosure is mandated by the laws of the State of
Delaware, (ii) in the case of a contested election or vote of stockholders or
(iii) when a stockholder expressly requests otherwise.

BUSINESS TO BE TRANSACTED

1. ELECTION OF DIRECTORS.

The Board of Directors of the Company is divided into three classes, each of
which is to be as nearly equal in number to the others as possible. Directors in
each class are elected to a three-year term of office, with terms of office of
the respective classes expiring in successive years. The terms of office of
three directors will expire at the Annual Meeting.

In accordance with the recommendation of the Nominating Committee, the Board
of Directors of the Company has nominated David H. Batchelder, Robert S. Miller,
Jr. and Robert A. Tinstman, each of whom currently serves as a director, for
election as directors for a three-year term to expire at the Annual Meeting of
the Company's stockholders in 2000, or until their successors are duly elected
and qualified. Information regarding these nominees, as well as the other
persons who will continue to serve as directors of the Company following the
Annual Meeting, is set forth below.

The Board of Directors has no reason to believe that any of the foregoing
nominees will not serve if elected, but if any nominee should subsequently
become unavailable to serve as a director, the persons named as proxies, or
their respective substitutes, may, in their discretion, vote for a substitute
nominee designated by the Board of Directors or, alternatively, the Board may
reduce the number of directors to be elected at the Annual Meeting.

On September 11, 1996 (the "Merger Date"), the Company acquired the
engineering and construction business of Morrison Knudsen Corporation, a
Delaware corporation ("Old MK"), in a transaction structured as a merger of Old
MK with and into the Company (the "Merger") and the Company changed its name to
Morrison Knudsen Corporation. In connection with the acquisition of

2
<PAGE>
Old MK, the composition of the Board of Directors was changed to consist of the
individuals named below.

<TABLE>
<CAPTION>
SERVED AS A
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR
NAME FOR PREVIOUS 5 YEARS AGE SINCE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------

CLASS I
NOMINEES FOR ELECTION -
TERM EXPIRES AT THE
ANNUAL MEETING
- ---------------------------------

David H. Batchelder Chairman and Chief Executive Officer of Batchelder 47 1993
& Partners, Inc. (investment advisory and
consulting firm) and Managing Member of Relational
Investors LLC (general partner of active investment
fund), San Diego, California. Mr. Batchelder
formerly served as President and Secretary of
Batchelder & Partners, Inc. Mr. Batchelder also
serves as Chairman of MacFrugal's Bargains*
Closeouts, Inc. and as a director of Santa Fe
Pacific Gold Corporation.

Robert S. Miller, Jr. Formerly served as Chairman of the Board of 55 1996
Morrison Knudsen Corporation (prior to the Merger
into the Company), as well as Senior Partner of
James D. Wolfensohn, Inc. (investment banking firm)
and Vice Chairman of Chrysler Corporation. Mr.
Miller currently serves as a director of Coleman
Company, Federal-Mogul Corp., Fluke Corporation,
Pope & Talbot, Inc. and Symantec Corp.

Robert A. Tinstman President and Chief Executive Officer of the 50 1996
Company. Mr. Tinstman formerly served Morrison
Knudsen Corporation (prior to its Merger into the
Company) as a Director, President and Chief
Executive Officer and as President of its Mining
Group.

CLASS II
DIRECTORS - TERM
EXPIRES AT THE 1999
ANNUAL MEETING
- ---------------------------------

Dorn Parkinson Chairman of the Board and President of Washington 50 1993
Corporations(1) (interstate trucking and repair and
sale of machinery and equipment), Missoula,
Montana. Mr. Parkinson formerly served as President
and Chief Operating Officer of the Company, as well
as Chairman of the Board, and currently serves as
Chairman of the Board and President of Montana
Resources, Inc. (copper mining), Butte, Montana,
and Chairman of the Board of Montana Rail Link,
Inc., Missoula, Montana.

Terry W. Payne Chairman and owner of Terry Payne & Co., Inc. 55 1993
(insurance and construction bonding), Missoula,
Montana. Mr. Payne also serves as a Director of
Washington Corporations(1) and First Interstate
Bank of Commerce - Montana, as well as a Director
and President of Hoiness LaBar Insurance Co., Inc.
and a Director and Vice President of Montana
International, Inc.
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
SERVED AS A
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR
NAME FOR PREVIOUS 5 YEARS AGE SINCE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dennis R. Washington Founder and principal shareholder of Washington 62 1996
Corporations(1) (interstate trucking and repair and
sale of machinery and equipment), Missoula,
Montana. Mr. Washington also is the founder and/or
principal shareholder or partner in entities, the
principal businesses of which include rail
transportation, shipping, barging and ship assist,
mining, heavy construction, environmental
remediation and real estate development. Mr.
Washington's principal business is to make, manage
and hold investments in operating entities.

CLASS III
DIRECTORS - TERM
EXPIRES AT THE 1998
ANNUAL MEETING
- ---------------------------------

Leonard R. Judd Consultant for Phelps Dodge Corporation (copper 58 1993
mining and manufacturing), Phoenix, Arizona. Mr.
Judd formerly served as a Director, President and
Chief Operating Officer of Phelps Dodge
Corporation, as well as President of Phelps Dodge
Mining Company and Director of Washington
Contractors Group, Inc., a subsidiary of the
Company. Mr. Judd also serves as a Director of
Southwest Gas Corporations.

William C. Langley Formerly served as Executive Vice President, Chief 58 1996
Credit and Risk Policy Officer of Chemical Banking
Corporation and Executive Vice President of Chase
Manhattan Corporation (formerly Chemical Banking
Corporation), New York, New York. Mr. Langley
currently serves as a Director of Chase Preferred
Capital Corporation and Seven-Up/RC Bottling
Company of Southern California, Inc.

John D. Roach Chairman of the Board, President and Chief 53 1996
Executive Officer of Fibreboard Corporation
(building products), Dallas, Texas. Mr. Roach also
serves as a Director of Thompson, PBE and is
formerly a Director of Magna Power.
</TABLE>

- ------------------------
(1)Washington Corporations and other entities controlled by Dennis R. Washington
may be deemed to be affiliates of the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES NAMED ABOVE.

There were 13 meetings of the Company's Board of Directors held during the
Company's fiscal year ended November 30, 1996 ("fiscal year 1996"). All
directors attended at least 75% of the aggregate of the meetings of the Board of
Directors and all committees on which such persons served during fiscal year
1996.

AUDIT COMMITTEE. The Audit Committee of the Company's Board of Directors
recommends to the Board independent auditors to serve the Company and reviews
with the auditors and management and approves the scope and results of audits
and the adequacy of the Company's system of internal controls. The Audit
Committee also reviews and approves the annual report, auditors' fees and
non-audit services to be provided by the independent auditors. The Audit
Committee meets at such times as may be deemed necessary by the Board of
Directors or the Audit Committee. Five meetings of

4
<PAGE>
the Audit Committee were held during fiscal year 1996. The members of the Audit
Committee are Leonard R. Judd (Chairman), David H. Batchelder, William C.
Langley and Robert S. Miller, Jr.(1)

COMPENSATION COMMITTEE. The Compensation Committee of the Company's Board
of Directors reviews and recommends to the full Board the compensation of the
principal officers and approves compensation for key executives of the Company.
Although the Board of Directors administers the Company's executive compensation
and benefit plans, the Compensation Committee reviews such compensation and
makes recommendations to the Board with respect thereto. The Compensation
Committee meets at such times as may be deemed necessary by the Board of
Directors or the Compensation Committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Three meetings
of the Compensation Committee were held during fiscal year 1996. Members of the
Compensation Committee are David H. Batchelder (Chairman), Leonard R. Judd, Dorn
Parkinson and John D. Roach.(2)

Batchelder & Partners, Inc., an investment advisory and consulting firm
("BPI"), of which David H. Batchelder is President, was engaged by the Company
to act as a financial advisor to the Company with respect to the Merger. The
Company, pursuant to an agreement with BPI, paid BPI $800,000 in cash (plus
related expenses in the amount of $191,800) and issued to BPI warrants to
purchase 110,500 shares of Company Common Stock at an exercise price of $12.00
per share, which warrants expire at 5:00 p.m., New York City time, on September
11, 2001 (valued at $542,555 as of September 12, 1996, the date of issuance).
The Company has also provided certain piggyback registration rights with respect
to the shares issuable upon exercise of the warrants, to reimburse BPI for its
expenses incurred in connection with its engagement and to indemnify BPI in
connection therewith against certain liabilities and expenses. The terms of the
warrants and the registration rights thereunder are set forth in a Warrant
Agreement among the Company, BPI and Schroder Wertheim & Co. Incorporated and a
Registration Rights Agreement among the Company, BPI and Schroder Wertheim & Co.
Incorporated, each dated September 11, 1996. In addition, from time to time, BPI
advises the Company regarding acquisitions and divestitures.

Terry W. Payne is Chairman and owner of Terry Payne & Co., Inc. ("TPC")
which provides insurance and bonding brokerage services to the Company and its
subsidiaries. During fiscal year 1996, the Company paid premiums to TPC or to
insurance and bonding companies for insurance or bonds arranged by TPC for group
life and disability insurance, workers' compensation, business insurance and
directors and officers' liability insurance and surety bonds in the amount of
$11,508,100. Of such premiums, TPC received approximately $875,000 in
commissions related to the provision of such services.

In January 1997, the Company and TPC concluded a Professional Service
Agreement, covering the period August 1, 1996 through December 31, 1997. Under
the Professional Service Agreement, TPC receives an annual fee of $1,280,000
which includes commissions earned on insurance. Of the $875,000 in commissions
set forth above, $424,000 is covered by such agreement. The Professional Service
Agreement is cancelable by any party upon 90 days' notice.

NOMINATING COMMITTEE. The Nominating Committee of the Company's Board of
Directors recommends nominees for election to the Board of Directors. The
Nominating Committee will consider nominees for election to the Board of
Directors proposed by stockholders for the 1998 Annual Meeting of Stockholders
if the following information concerning each nominee is timely submitted by
means of a written notice to the Secretary of the Company: (i) as to each person
who the stockholder proposes to nominate for election as a director: name, age,
business address, residence address,

- -------------------
(1)Prior to the Merger Date, the Audit Committee consisted of the following
members: Leonard R. Judd (Chairman), Robert G. Hunt, Robert G. Reid, Vincent O.
Smith and Robert G. Wallace.

(2)Prior to the Merger Date, the compensation Committee consisted of the
following members: David H. Batchelder (Chairman), Robert G. Hunt, Leonard R.
Judd, Dorn Parkinson and Terry W. Payne.

5
<PAGE>
principal occupation or employment, class and number of shares of capital stock
of the Company beneficially owned by such person and such other information
relating to such person as is required to be disclosed in solicitations for
proxies for election of directors pursuant to the rules and regulations of the
Securities and Exchange Commission under Section 14 of the Securities Exchange
Act of 1934, as amended, and (ii) as to the stockholder proposing such nominee:
such stockholder's name and address and the class and number of shares of
capital stock of the Company beneficially owned by such stockholder. To be
timely, any such notice must be delivered to or mailed and received at the
Company's principal executive offices not less than 50 days nor more than 75
days prior to the 1998 Annual Meeting of Stockholders; provided, however, that
in the event that less than 65 days notice or prior public disclosure of the
date of such meeting is given or made to stockholders, any such notice must be
received not later than the close of business on the 15th day following the day
on which the notice of the 1998 Annual Meeting of Stockholders is mailed or such
public disclosure is made, whichever first occurs. One meeting of the Nominating
Committee was held during fiscal year 1996. The members of the Nominating
Committee are Dennis R. Washington (Chairman), Robert S. Miller, Jr. and Terry
W. Payne.(3)

DIRECTOR COMPENSATION. Prior to the Merger Date, directors who were not
also officers or employees of the Company ("Non-Employee Directors") were paid
an annual retainer of $12,000, committee chairmen were paid an additional $1,000
annually and all Non-Employee Directors also received an attendance fee of
$1,000 for each regular and special Board Meeting and committee meeting
attended, subject to a maximum of $1,000 per day for attendance. On November 7,
1996, the Compensation Committee voted unanimously to change the fees paid to
the Non-Employee Directors to an annual retainer fee of $20,000, plus $1,000 for
each day of attendance at a Board Meeting and $500 for each standing or special
committee meeting attended. Committee chairmen will receive an additional $3,000
per year. During fiscal year 1996, the following amounts were earned by members
of the Board of Directors: David H. Batchelder -- $27,250; Leonard R. Judd --
$27,000; William C. Langley -- $10,000; Robert S. Miller, Jr. -- $10,250; Dorn
Parkinson -- $10,000; Terry W. Payne -- $23,000; John D. Roach -- $8,500 and
Dennis R. Washington -- $9,750.

Non-Employee Directors are permitted, under the Morrison Knudsen Corporation
Amended and Restated Stock Option Plan (the "Stock Option Plan"), to elect to
forgo cash payment of all or a portion of their annual retainer and chairmanship
fees and receive stock option grants in lieu thereof. Such election is made
annually prior to the commencement of the next fiscal year. The option received
by an electing director in lieu of such fees has a price per share equal to 80%
of the fair market value of a share of Common Stock on December 1 of the
calendar year prior to the scheduled payment of such directors' fees, and the
number of shares of Common Stock subject to such option is the number of shares
(rounded to the nearest whole share) determined by multiplying the fair market
value of a share of Common Stock on such December 1 by .20 and dividing the
product into the amount of the directors' fees forgone. With respect to
directors' fees forgone for the fiscal year commencing December 1, 1996,
elections were made prior to December 31, 1996 and the fair market value of a
share of Common Stock was determined as of such date.

In addition, under the Non-Employee Director Plan to be voted upon at the
Annual Meeting, the Board of Directors may, from time to time, grant (i) options
to purchase Common Stock and/or (ii) restricted Common Stock. The aggregate
amount of all such awards may not exceed 500,000 shares of Common Stock (no more
than 100,000 shares of which may be restricted stock) during the term of the
plan. See "Approval of the 1997 Stock Option and Incentive Plan for Non-Employee
Directors" for additional information regarding the Non-Employee Director Plan.
Subject to stockholder approval of the Non-Employee Director Plan, the Board has
awarded options exercisable to purchase 10,000 shares of Common Stock to each of
Messrs. Batchelder, Judd, Langley, Miller, Parkinson, Payne and Roach and
options exercisable to purchase 25,000 shares of Common Stock to Mr. Washington.

- -------------------
(3)Prior to the Merger Date, the Nominating Committee consisted of the following
members: Robert G. Wallace (Chairman), David H. Batchelder, Terry W. Payne,
Robert G. Reid and Vincent O. Smith.

6
<PAGE>
The Company's Retirement Policy provides that a Non-Employee Director may
continue to serve as a director until the end of the calendar year in which the
director reaches his or her 70th birthday.

EXECUTIVE OFFICERS

Certain information with respect to the executive officers of the Company,
including all positions held by them with the Company is set forth below.
Executive officers of the Company are elected by the Board of Directors for
terms of one year or until their successors are elected and qualified.

<TABLE>
<CAPTION>
POSITION WITH COMPANY AND
NAME BUSINESS EXPERIENCE FOR PREVIOUS 5 YEARS AGE OFFICER SINCE
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Robert A. Tinstman(1) President and Chief Executive Officer 50 1996
Stephen G. Hanks(2) Executive Vice President, Chief Legal Officer and Secretary 46 1996
Darrol N. Groven(3) Senior Vice President and President - Heavy Civil Construction 53 1994
Group
Thomas H. Zarges(4) Senior Vice President and President - Engineering and Construction 48 1996
Group
Douglas L. Brigham(5) Vice President and Treasurer 31 1996
Alvia L. Henderson(5) Vice President - Human Resources 47 1996
Charles W. Simpson(5) Vice President - Government and Public Affairs 60 1996
James E. McCallum(5) Acting Controller 45 1996
</TABLE>

- ------------------------
(1)For certain biographical information regarding Mr. Tinstman, see "Election of
Directors."

(2)Prior to the Merger Date, Mr. Hanks was Executive Vice President, Chief Legal
Officer and Secretary of Old MK and served in various other executive and
management capacities for Old MK.

(3)Prior to the Merger Date, Mr. Groven was Executive Vice President and Chief
Operating Officer of the Company and served in various other executive and
management capacities for the Company and its subsidiaries.

(4)Prior to the Merger Date, Mr. Zarges served as President of Old MK's
Engineering and Construction Group.

(5)Prior to the Merger Date, Ms. Henderson and Messrs. Brigham, McCallum and
Simpson served Old MK in various executive and management capacities.

7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION FOR 1996
On September 11, 1996, Morrison Knudsen Corporation, a Delaware corporation
("Old MK") merged with and into the Company (the "Merger") pursuant to a
Restructuring and Merger Agreement dated May 28, 1996 (the "Merger Agreement"),
and the Company changed its name to Morrison Knudsen Corporation. During 1996,
Old MK completed a financial restructuring (the "Restructuring"), which
culminated in the Merger. Pursuant to the Merger, the executive management of
Old MK makes up substantially all of the executive management of the Company.
Following the Merger, the Board of Directors of the Company changed and a new
Compensation Committee was formed. The following discussions report the policies
of Old MK that were assumed or adopted by the Company and the policies of the
Company prior to the Merger. Following those discussions is a statement of the
new Compensation Committee's recently formed policy for the Company. Application
of such policy will take place in 1997.

I. BASE SALARIES.

A. EXECUTIVE OFFICERS OTHER THAN THE CHIEF EXECUTIVE OFFICER.

OLD MK POLICIES. Old MK had entered into five-year employment agreements
with certain executive officers including Messrs. Hanks and Zarges, all of which
were assumed by the Company pursuant to the Merger. Under the terms of such
agreements, Messrs. Hanks and Zarges were entitled to minimum annual base
salaries of $250,000 each. As of November 30, 1996 their salaries were $300,000
and $260,000, respectively. On April 2, 1996, the Old MK Compensation Committee
resolved to commit Old MK to enter into employment agreements with ten
individuals, including Steven Y. Chi, currently President of the Company's
Mining Group, and C. Stephen Allred, currently President of the Company's
Environmental Group. On April 26, 1996, Old MK entered into an employment
agreement with Mr. Chi, which expires on December 31, 1998 and which was also
assumed by the Company in the Merger. Under the terms of the agreement, Mr. Chi
is entitled to a minimum base salary equal to his annual salary at that time,
$234,000. As of November 30, 1996, Mr. Chi's salary was $234,000. On April 26,
1996, Old MK entered into an employment agreement with Mr. Allred which expires
on December 31, 1998 and which was also assumed by the Company in the Merger.
Under the terms of the agreement, Mr. Allred is entitled to a minimum base
salary equal to his annual salary at the time, $234,000. As of November 30,
1996, Mr. Allred's salary was $234,000.

OLD MK SEVERANCE AGREEMENTS. Old MK entered into employment agreements with
certain individuals in connection with the Restructuring. These agreements were
assumed by the Company pursuant to the Merger and expire on December 31, 1998
and provide severance benefits for involuntary termination ranging from 9 to 18
months. Included in this group were Messrs. Chi and Allred, whose employment
agreements provide for 18 months of severance.

THE COMPANY'S PRE-MERGER POLICIES. In formulating the executive
compensation program, the Compensation Committee's objectives were (i) to
attract and retain competent executive talent and motivate executive officers to
perform to the full extent of their abilities, (ii) to tie a significant portion
of executive compensation to the achievement of specified performance goals for
their respective subsidiaries (each a "Subsidiary") and of the Company as a
whole and (iii) to liken executive and stockholder interests through
equity-based plans.

In 1993, the Company's Compensation Committee retained the services of an
executive compensation consulting firm to compare the historical compensation of
the executive officers of the Company and its subsidiaries with the compensation
paid for comparable positions at comparable construction companies. The
comparative data provided by the consulting firm were based on published
compensation surveys for the construction industry and independent research. The
surveyed companies included heavy construction companies with annual revenues
greater than $100 million and a broader group of construction companies with
annual revenues greater than $100

8
<PAGE>
million. The companies surveyed included a number of the publicly held companies
whose stock price results are included in the heavy construction index referred
to in the Company's Stock Performance Graph included within this Proxy Statement
titled "Company Stock Performance Graph," and a larger number of privately held
companies. The consulting firm reviewed base salary, bonuses as a percentage of
base salary and total cash compensation. In keeping with the Company's
commitment to emphasize incentive compensation, the Company's Compensation
Committee's goals, prior to the Merger, were to set base salaries at or below
the base salary mid-point of the range of salaries of employees holding
comparable positions at the surveyed companies and to emphasize corporate
performance-based compensation. The Compensation Committee prior to the Merger
also considered, to a lesser extent, factors such as individual performance, the
recommendations of senior management, the success in implementing the Company's
long-term strategic plan and any changes in the responsibilities of the
executive.

APPLICATION OF THE COMPANY'S POLICIES PRIOR TO THE MERGER. In 1996, the
base salaries of the executive officers generally were at or below the mid-point
of the range of salaries of employees holding comparable positions at the
surveyed companies when adjusted for inflation. Messrs. Groven, Nelson and
Hughes were paid base salaries of $235,000, $175,000 and $130,000 respectively,
and received bonuses of $10,797, $8,057 and $5,978, respectively.

B. THE CHIEF EXECUTIVE OFFICER.

OLD MK POLICY. Mr. Tinstman has a five-year employment agreement entered
into in 1993 with Old MK in connection with his former duties as President of
Old MK's Mining Group. Under the terms of the agreement, Mr. Tinstman was
entitled to a minimum base salary of $250,000. Mr. Tinstman's employment
agreement was assumed by the Company pursuant to the Merger.

Mr. Tinstman's salary was set at a level of $300,000 until the Merger. In
addition, Old MK approved the payment of $1,618,000 owed to Mr. Tinstman under
his employment agreement to be paid early in 1998. This obligation was assumed
by the Company pursuant to the Merger. Such amount relates to the performance of
the Mining Group during the time Mr. Tinstman was President of the Mining Group
prior to the time he became Chief Executive Officer of Old MK. Following the
Merger, the Board of Directors increased Mr. Tinstman's annual salary to
$400,000, effective November 1, 1996.

COMPANY POLICY AND APPLICATION PRIOR TO THE MERGER. Pursuant to a
three-year employment agreement effective October 1, 1994, Mr. John H. Wimberly,
the Company's Chief Executive Officer prior to the Merger, was to receive an
annual base salary of at least $300,000 per year, or such higher rate as may
have, from time to time, been granted in accordance with Company policies and
procedures. Mr. Wimberly's salary was $330,000 per year prior to the Merger. The
terms of the employment agreement, including the level of base compensation,
were negotiated between the Compensation Committee and Mr. Wimberly and agreed
to based on the Compensation Committee's judgment of what was necessary to
attract Mr. Wimberly. Upon the consummation of the Merger, Mr. Wimberly
terminated his contract with the Company for cause. Upon such termination, he
was entitled to receive and did receive a severance payment of $800,000. In
addition to his severance payment, all equity-based compensation became vested.

II. ANNUAL BONUS PLANS.

A. EXECUTIVE OFFICERS OTHER THAN THE CHIEF EXECUTIVE OFFICER.

COMPANY POLICY PRIOR TO THE MERGER. The Company's Compensation Committee
made bonus determinations under two bonus programs: the Profit Participation
Program and the Management Bonus Program.

9
<PAGE>
PROFIT PARTICIPATION PROGRAM. Pursuant to the Profit Participation Program,
executive officers who were employees of the Company or its Subsidiaries will
receive bonuses based on the pre-tax earnings of the Company, adjusted for
non-recurring extraordinary gains or losses. In general, all management and
salaried employees, including all executive officers, and all home office
employees were eligible to participate in the Profit Participation Program.

During 1996, the total amount which was available (the "Available Amount")
to be paid under the Profit Participation Program to the Company's eligible
employees was 7% of the Company's pre-tax earnings adjusted for non-recurring
extraordinary gains or losses. The Compensation Committee established the
percentage based on historical financial results of the Company so that bonus
payments in an average year would be between 10% and 15% of base salary. The
Available Amount will be allocated to all eligible employees, including
executives, based proportionately on qualifying salary. One-third of each
participant's base salary automatically is qualifying salary. The remaining two-
thirds of each participant's base salary could become qualifying salary based on
gross profit achievements as compared to budget as detailed in the program.

APPLICATION OF THE COMPANY'S PROFIT PARTICIPATION PROGRAM TO THE MERGER. In
1996, after taking into consideration the effects of certain extraordinary
non-recurring losses, the total amount to be paid under the Profit Participation
Program was determined by the Compensation Committee to be $518,000.

MANAGEMENT BONUS PROGRAM. Pursuant to the Management Bonus Program,
selected key employees, including all executive officers of the Company were
eligible to receive bonuses based on the Company's attaining targeted pre-tax
earnings, adjusted for extraordinary non-recurring gains or losses, or in the
case of one Subsidiary's participants, a pre-tax earnings target based partially
on the Company's performance and partially on the Subsidiary's performance
targets.

In 1996, the Board set a targeted range of pre-tax earnings. In setting this
range, the Board used historical pre-tax earnings of the Company (as a
percentage of revenues) multiplied by a revenue benchmark which was intended to
reflect an aggressive target that the Board believed was attainable based on the
Company's capabilities and then current and expected economic and competitive
factors. For 1996, the maximum bonus award which each executive or key employee
was eligible to receive under the Management Bonus Program ranged from 15% to
60% of base salary, depending on which entity employs the executive and the
executive's level of responsibility. The bonus awarded under this program was
calculated based on a comparison of actual results with a range of targeted
pre-tax earnings.

APPLICATION OF COMPANY'S MANAGEMENT BONUS PROGRAM PRIOR TO THE MERGER. In
1996, as a result of the financial performance of the Company, bonuses were not
awarded under the Management Bonus Program to executive officers and key
employees of the Company, except for key employees of the one Subsidiary which
based its bonus partially on the comparison of its pre-tax earnings target to
its actual results. No executive officers were awarded bonuses under this
Program.

B. CHIEF EXECUTIVE OFFICER BONUS PLAN.

THE COMPANY'S CHIEF EXECUTIVE OFFICER PRIOR TO THE MERGER. Pursuant to his
employment agreement, Mr. Wimberly was entitled to participate in the Company's
bonus programs. Upon termination of his contract, Mr. Wimberly ceased
participating in any bonus plans and was entitled to receive a severance payment
of $800,000 as explained previously.

III. LONG-TERM INCENTIVE PLANS - ALL EXECUTIVE OFFICERS, INCLUDING THE CHIEF
EXECUTIVE OFFICER.

OLD MK POLICY. During 1993, Old MK decentralized many functions that were
previously being performed without charge by corporate personnel for the benefit
of Old MK's operating groups. As a result, the Old MK Compensation Committee
modified Old MK's incentive plans to reflect only

10
<PAGE>
operating group performance when measuring the long-term incentive compensation
to be paid to the operating group presidents and developed four 5-Year Plans,
one for each operating group president, including Mr. Tinstman who was President
of the Mining Group at the time, as well as a 5-Year Plan for Mr. Hanks. The
5-Year Plans were designed to measure (i) return on capital employed at the
group level for operating group presidents and (ii) return on total capital at
the corporate level for Mr. Hanks. For a detailed description of such plans, see
the section within this Proxy Statement titled "Individual 5-Year Plans."
Currently, the only executives covered under 5-Year Plans are Messrs. Tinstman
and Hanks.

APPLICATION OF POLICY TO OLD MK PERFORMANCE. During 1996, prior to the
Merger, the Old MK Compensation Committee determined that no amounts would be
accrued under the 5-Year Plan applicable to Mr. Hanks. As set forth previously,
the $1,618,000 accrued to Mr. Tinstman while President of the Old MK Mining
Group was approved for payment when due and no further amount was accrued under
his 5-Year Plan. The Company assumed the 5-Year Plans pursuant to the Merger,
including the obligation to make such payment to Mr. Tinstman.

The Old MK Compensation Committee determined to postpone the development of
any other 5-Year Plans, if any, until the completion of the Restructuring.

COMPANY POLICY PRIOR TO THE MERGER. Prior to the Merger the Company had no
long-term cash-based compensation plan.

IV. EQUITY-BASED COMPENSATION PLANS - EXECUTIVE OFFICERS, INCLUDING THE CHIEF
EXECUTIVE OFFICER.

THE COMPANY'S POLICY PRIOR TO THE MERGER. The 1994 Stock Option and
Incentive Plan for Officers, Directors and Key Employees of Morrison Knudsen
Corporation, as amended, the "1994 Plan"), which was originally approved by the
stockholders of the Company in April 1994, gives the Company's Compensation
Committee authority to grant stock options or issue restricted stock. Stock
options and restricted stock are designed to align the interests of executives
and key personnel with those of the stockholders. The Compensation Committee
believes that significant equity interests in the Company held by the Company's
management serve to retain and motivate management.

In 1996, prior to the Merger, the Compensation Committee administered the
1994 Plan in the following manner. The Board of Directors of the Company
determined a targeted range for improvement in earnings per share of the Company
and a targeted maximum number of stock options that may be granted. The targeted
improvement in earnings per share was set based on the Board's judgment as to
the Company's capabilities and current and expected economic and competitive
factors. If the maximum targeted earnings per share improvement were achieved,
then the maximum number of stock options would be available for grant. If the
Compensation Committee determined stock options were available for grant, the
Compensation Committee would make awards based on the Compensation Committee's
assessment of the individual executive's contribution to the Company's success
in meeting its financial goals. This assessment would be based primarily on the
earnings of the Subsidiary which employed the executive and the level of the
executive's responsibility. The award also would be made based on non-financial
performance measures such as individual performance, the recommendations of
senior management and the success in implementing the Company's long-term
strategic plan. It was expected that most awards under the 1994 Plan would be
stock options which would be granted with an exercise price equal to the market
price of the Common Stock on the date of grant and would vest over three years
(one-third at the end of each year). It was expected that grants of restricted
stock would be used only under limited circumstances based on extraordinary
performance.

As of November 30, 1996, stock options for a maximum of 1,375,948 shares
were available for grant under the 1994 Plan. Included in this amount are
1,767,217 shares which the Compensation Committee made available for issuance
pursuant to Article II of the Plan during the November 1996

11
<PAGE>
Compensation Committee Meeting. In setting this maximum amount, the Compensation
Committee primarily considered the relatively small level of stock ownership
currently held by management.

The Compensation Committee also could from time to time award options to
executive officers, including the Chief Executive Officer, based on its judgment
that such options would serve as an incentive to the executive officers and,
with respect to executive officers other than the Chief Executive Officer, based
on the recommendations of the Chief Executive Officer. The Compensation
Committee's decision whether to grant options and the number of options were
based primarily on the individual executive's responsibility, performance and
existing stock ownership. During 1996, Messrs. Groven, Nelson and Hughes were
awarded 40,000, 24,000 and 20,000 options, respectively, at an exercise price of
$7.50 per share.

Pursuant to the employment agreement with Mr. Wimberly, on September 30,
1996 he was granted options to purchase 50,000 shares of the Company's Common
Stock at an exercise price of $9.8125 per share. Upon Mr. Wimberly's termination
on October 1, 1996, he was granted an option to purchase 50,000 shares at an
exercise price of $9.625 per share. Pursuant to the employment agreement, all of
Mr. Wimberly's options became fully vested, and are exercisable until October 1,
1997.

V. COMBINED COMPANY COMPENSATION POLICY.

In connection with the Merger, a new Board of Directors was elected by the
Company's Stockholders on September 11, 1996. The Compensation Committee of the
post-Merger Board of Directors (the "New Committee") has been developing a
compensation plan for the Company following the Merger and the following
summarizes the general policies of the Company developed by the New Committee
and the Board:

-AUTHORITY AND RESPONSIBILITY. The New Committee has responsibility for
reviewing and recommending the compensation arrangements for Corporate
Officers. Such arrangements must be approved by the full Board of
Directors. The New Committee approves individuals to be classified as "Key
Employees" and their compensation, reviews and recommends to the Board all
stock-based compensation, recommends a succession plan for Corporate
Officers to the Board and approves the annual budget for employee wage
increases.

-GENERAL COMPENSATION POLICY OF THE NEW COMMITTEE. The New Committee
intends to emphasize both Company financial results and stock price
performance in order to give executives incentives to increase shareholder
value. This emphasis will increase in proportion to increased individual
responsibilities resulting in a policy that gives senior executives greater
potential value from incentive and stock-based compensation than base
salary. Total compensation is intended to be competitive and sufficiently
flexible to retain and attract the caliber of talent needed to enhance the
Company's financial and market performance.

-BASE SALARIES AND CASH BONUS INCENTIVES. Base salaries will be generally
targeted at slightly greater than industry average. Annual cash bonus plans
will be tied to pre-defined measurable results. Although the New Committee
intends to exercise substantial discretion with respect to bonuses in the
initial post-Merger period, its goal is to set bonuses based 75% on
measurable financial goals and 25% on discretionary factors. The New
Committee intends to set a bonus pool for Key Employees equal to 7% of
pre-tax profit ("PTP") if the Company's earnings per share ("EPS") reach
between 50% and 100% of a prior year benchmark set by the New Committee.
This amount will increase up to 9% of PTP as EPS increases from 100% of the
benchmark up to the goal which the New Committee has set at 115%.
Allocation of the bonus pool to employees (other than Key Employees) of
operating groups may take into account the revenue and contribution of that
operating group. The allocation to operating groups will be recommended by
the Chief Executive Officer and submitted to the New Committee for
approval. Group Presidents' bonuses will be a function of both corporate
and group performance.

12
<PAGE>
-LONG-TERM EQUITY-BASED INCENTIVES. Long-term compensation opportunities
will be based on increasing shareholder value. Generally, the New Committee
intends to grant fixed-price stock options as the only form of long-term
incentive compensation. Such options will generally have a ten-year life
and will vest over three to five years.

The New Committee's policy is to comply, to the extent it deems it in the
best interests of the Company, with Section 162(m) of the Internal Revenue Code,
as amended, to allow for the tax deductibility of compensation awarded to the
Chief Executive Officer and the four most highly-compensated executive officers
of the Company who are serving at the end of each fiscal year.

Following the Merger, the New Committee increased Mr. Tinstman's salary to
$400,000.

In addition, on January 10, 1997, the New Committee recommended and the
Board approved grants to Messrs. Tinstman, Groven, Hanks, Nelson, Hughes,
Zarges, Chi and Allred, of 200,000; 45,000; 60,000; 10,000; 20,000; 50,000;
45,000; and 45,000 options to purchase Common Stock, respectively.

CONCLUSION. Through the programs described above, a significant portion of
the each executive's compensation is linked directly to the financial
performance of the Company. The policy of these new programs is to award bonuses
based on the success of the Company in attaining targeted earnings through the
application of objective, pre-established formulas rather than subjective
determinations. As circumstances dictate the New Committee expects that it will
continue to refine these programs to provide incentives to executives to enhance
the financial performance of the Company and long-term stockholder value.

David H. Batchelder, Chairman
Leonard R. Judd
Dorn Parkinson
John D. Roach

13
<PAGE>
COMPANY STOCK PERFORMANCE GRAPH

Rules adopted by the Securities and Exchange Commission require that the
Company include in this Proxy Statement a line-graph presentation comparing
cumulative five-year shareholder returns on an indexed basis with the Standard &
Poor's ("S&P") 500 Stock Index and either a nationally recognized industry
standard or an index of peer companies selected by the Company. A list of the
companies selected by the Company as a peer group index follows the graph below:

COMPARISON OF 40 MONTH CUMULATIVE TOTAL RETURN*
AMONG MORRISON KNUDSEN CORPORATION, THE S&P 500 INDEX,
THE DOW JONES HEAVY CONSTRUCTION INDEX AND A PEER GROUP

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
MORRISON KNUDSON CORPORATION PEER GROUP S&P 500 DOW JONES HEAVY CONSTRUCTION
<S> <C> <C> <C> <C>
7/12/1993 $100 $100 $100 $100
Nov-93 92 103 104 103
Nov-94 56 98 105 97
Nov-95 73 133 144 132
Nov-96 115 138 184 135
</TABLE>

Ashland Coal Inc.; Zeigler Coal Holding; Granite Construction Inc.; Perini
Corporation; The Turner Corporation; Fluor Corporation; Foster Wheeler
Corporation; Jacobs Engineering Group Inc.; Stone & Webster, Incorporated;
Michael Baker Corp.; Dames & Moore Inc.; OHM Corp.; Harding Lawson Associates
Group Inc.; ICF Kaiser International Inc.; International Technology Corp.; Roy
F. Weston Inc. While the Company has previously used the Dow Jones Heavy
Construction Index as its comparison Index, the Company's management no longer
believes such Index provides an appropriate comparison following the acquisiton
of Old MK by the Company. Accordingly, the Company's management has elected to
use a peer company index that it believes provides a more appropriate basis of
comparison following the acquisition of Old MK by the Company.

*The Company was incorporated on July 12, 1993 and, therefore, no information
prior to that date is available. One hundred dollars was invested on July 12,
1993 in stock on Index. Fiscal year ending November 30.

14
<PAGE>
EXECUTIVE COMPENSATION. The following table summarizes all plan and
non-plan compensation awarded or paid to, or earned by, each of the Named
Executives (the Chief Executive Officer and the other most highly-compensated
executive officer(s) of the Company and its subsidiaries) during the fiscal
years indicated:

SUMMARY COMPENSATION TABLE
FOR FISCAL YEARS ENDED 1994, 1995 AND 1996(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER SECURITIES ALL
ANNUAL UNDERLYING LTIP OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS PAYOUTS COMP.
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)

<CAPTION>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Tinstman 1996 97,923(2) -- 24,388(3) -- 1,618,000(4) 19,035(5)
President and CEO 1995 -- -- -- -- -- --
1994 -- -- -- -- -- --
Darrol N. Groven 1996 235,000 10,797 -- 40,000 -- 3,000(6)
Senior Vice President and 1995 210,000 96,650 -- 35,000 -- 3,000
President -- Heavy Civil 1994 181,442 100,000 -- 10,000 -- 3,000
Construction Group
Gerald F. Nelson 1996 175,000 8,057 -- 24,000 -- 3,000(6)
President -- Washington 1995 153,255 51,999 -- 25,000 -- 3,000
Construction Co. 1994 133,847 35,650 -- -- -- 3,000
Edward D. Hughes 1996 130,000 5,978 -- 20,000 -- 3,000(6)
Formerly, Vice President, 1995 133,450 40,456 -- -- -- 3,000
Contract Administration 1994 133,624 -- -- -- -- 3,000
John H. Wimberly 1996 279,461 -- -- 100,000 -- 803,000(7)
Former CEO 1995 300,000 108,389 -- 50,000 -- 3,000
1994 46,154 100,000 -- 500,000 -- 692
</TABLE>

- ------------------------
(1)In addition to the individuals reported on the above table, Stephen G. Hanks
and Thomas H. Zarges were also serving as executive officers and Steven Y. Chi
and C. Stephen Allred were serving as operating group presidents of the Company
at the end of fiscal year 1996; however, they are not included in the table
because they were not employees of the Company prior to the Merger Date. Prior
to the Merger Date, Messrs. Tinstman, Hanks, Zarges, Chi, and Allred were
compensated by Old MK. As of November 30, 1996, the base salaries of Messrs.
Tinstman, Hanks, Zarges, Chi, and Allred were $400,000, $300,000, $260,000,
$234,000 and $234,000, respectively. Under applicable rules and regulations of
the Securities and Exchange Commission, information regarding the compensation
of such individuals is not required to be disclosed.

(2)The salary indicated above for Mr. Tinstman was salary paid to him by the
Company from the time of the Merger. Prior to such time, he was compensated by
Old MK.

(3)Disabilty insurance premium of $12,243 and tax gross-up of $12,145 on the
foregoing disability insurance premium and the value of the term life insurance
premium reported under footnote 5 to this table.

(4)Mr. Tinstman's benefit under the Old MK Long-Term Incentive Plan for the
Mining Group (to which the Company has succeeded) could have been accelerated
and become payable during 1996 due to the Restructuring of Old MK. During 1996,
Mr. Tinstman and the Old MK Board of Directors agreed that such plan would be
amended to provide that the Restructuring would not constitute a "change of
control" under the plan, and Mr. Tinstman's accrued benefit of $1,618,000 was
frozen. In connection with such arrangement, Mr. Tinstman waived payment of such
benefit until the completion of the performance period under such plan, which
will occur December 31, 1997.

(5)Amount is comprised of $19,035 attributable to a life insurance policy on Mr.
Tinstman's life under the Key Executive Life Insurance Plan, of which $576
represents the dollar value of the term life insurance premium and $18,459
represents Mr. Tinstman's interest in the policy's cash surrender value as
projected on an actuarial basis attributable to the 1996 premium.

(6)Amount is comprised of matching contributions to employees' 401(k) account.

(7)Amount consists of $3,000 matching contributions to Mr. Wimberly's 401(k)
account and $800,000 paid to Mr. Wimberly upon his termination of employment
under the terms of an employment agreement with Mr. Wimberly dated as of August
25, 1994.

15
<PAGE>
OPTION GRANTS. The following table summarizes pertinent information
concerning individual grants of stock options, including a theoretical grant
date present value for each such grant:

OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/ GRANTED TO OR BASE
SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($)

<CAPTION>
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Robert A. Tinstman -- -- -- -- --
Darrol N. Groven 40,000 12.9 7.5000 01/23/06 188,668
Gerald F. Nelson 24,000 7.7 7.5000 01/23/06 113,201
Edward D. Hughes 20,000 6.5 7.5000 01/23/06 94,334
John H. Wimberly 50,000 16.1 9.8125 10/01/97 24,600
50,000 16.1 9.6250 10/01/97 24,063

- ------------------------------
<S> <C>

NAME 10% ($)
- ------------------------------
<S> <C>
Robert A. Tinstman --
Darrol N. Groven 478,123
Gerald F. Nelson 286,874
Edward D. Hughes 239,061
John H. Wimberly 49,203
48,125
</TABLE>

- ------------------------
(1)Subsequent to fiscal year end, fixed-price nonqualified stock options were
granted on January 10, 1997 to Robert A. Tinstman, Darrol N. Groven, Gerald F.
Nelson, Edward D. Hughes, Stephen G. Hanks, Thomas H. Zarges, Steven Y. Chi and
C. Stephen Allred in the amounts indicated below. Such options are exercisable
at $9.875 per share in four equal increments on each of the first, second, third
and fourth anniversaries of the date of grant. They will expire on January 10,
2007.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- --------------------------------------------- ---------------------------------
<S> <C> <C> <C>
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS/
SARS
NAME GRANTED (#) 5% ($) 10% ($)

<CAPTION>
- --------------------------------------------- ---------------------------------
<S> <C> <C> <C>
Robert A. Tinstman 200,000 1,242,067 3,147,641
Darrol N. Groven 45,000 279,465 708,219
Gerald F. Nelson 10,000 62,103 157,382
Edward D. Hughes 20,000 124,207 314,764
Stephen G. Hanks 60,000 372,620 944,292
Thomas H. Zarges 50,000 310,517 786,910
Steven Y. Chi 45,000 279,465 708,219
C. Stephen Allred 45,000 279,465 708,219
</TABLE>

16
<PAGE>
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES. The following
table summarizes pertinent information concerning the exercise of stock options
during fiscal year 1996 by each of the Named Executives and the fiscal year-end
value of unexercised options:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED,
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FISCAL YEAR END (#) FISCAL YEAR END ($)
<S> <C> <C> <C> <C>
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert A. Tinstman -- -- -- --
Darrol N. Groven -- -- 18,332/66,668 45,310/133,753
Gerald F. Nelson -- -- 8,333/40,667 25,520/85,543
Edward D. Hughes -- -- 7,000/23,000 0/28,750
John H. Wimberly 166,667 666,668 483,333/0 1,369,790/0
</TABLE>

- ------------------------
(1)Options were granted to the Named Executives and other officers of the
Company as reported in footnote to the table entitled "Option/SAR Grants in Last
Fiscal Year." Such options are exercisable in four equal installments on each of
the first, second, third and fourth anniversaries of the date of grant. As of
January 30, 1997, no such options were in the money.

INDIVIDUAL 5-YEAR PLANS. During 1993, Old MK awarded Messrs. Hanks and
Tinstman participation in long-term incentive plans that were tailored to each
of their positions (the "Individual 5-Year Plans"). Such plans, to which the
Company has succeeded, provide the participants with an opportunity for a cash
award at the end of a five-year performance period. No shares of Company Common
Stock, performance units or other stock rights are involved.

Mr. Hanks' Individual 5-Year Plan measures annually (over the five-year
period January 1, 1993 to December 31, 1997) the Company's after-tax net income
as a percentage of its average total capital. In the case of Mr. Tinstman, who
was President of the Old MK Mining Group prior to his becoming Chief Executive
Officer of Old MK in 1995, the performance formula is modified to measure over
the same period the contribution to net income at the Mining Group level over
such group's average annual capital employed ("ROTC").

A positive award pool is created each year during the performance period in
an amount equal to the Company's net income (in the case of Mr. Hanks) or
contribution to net income by each group (in the case of Mr. Tinstman) in excess
of the predetermined ROTC goal set by the Compensation Committee. The award pool
is not capped at any maximum amount. If net income or contribution to net income
falls below the ROTC goal in any given year, the amounts by which the Company or
Mining Group failed to meet its goal become a negative award pool for such
individual. The negative award pool is not capped at any maximum amount.

Each participant shares in the annual award pool (which may be positive or
negative based upon Company or group performance) applicable to his position in
accordance with a sharing percentage established by the Compensation Committee.
The participant's share of the award pool, which may be positive or negative, is
not paid to the executive. Rather, such amounts are tracked throughout the
five-year performance period by the Company and "netted" at the end thereof.
Assuming that the cumulative five-year award is positive, it can be adjusted
upward if the compound annual growth rate in the Company's stock price exceeds
targets established by the Compensation Committee. This latter adjustment is
applicable only to Mr. Hanks and not to Mr. Tinstman.

Except in the case of death, disability or termination without cause, any
payments due to participants under the Individual 5-Year Plans will be made
within 120 days following December 31, 1997. In the event of a change in
control, as defined in the Individual 5-Year Plans, the participants' accrued
awards are immediately vested and payable.

17
<PAGE>
It is impossible for the Company to estimate with reasonable accuracy the
many variables affecting potential payments under the Individual 5-Year Plans.
Thus, it is impossible to determine whether participation in the Individual
5-Year Plan by Mr. Hanks will result in payment of a cash bonus to him at the
end of the performance period.

Mr. Tinstman's benefit under his Individual 5-Year Plan could have been
accelerated and become payable during 1996 due to the Restructuring of Old MK.
During 1996, Mr. Tinstman and the Old MK Board of Directors agreed that such
plan would be amended to provide that the Restructuring would not constitute a
"change of control" under such plan, and Mr. Tinstman's accrued benefit of
$1,618,000 was frozen. In connection with such arrangement, Mr. Tinstman waived
payment of such benefit until the completion of the performance period under
such plan, which will occur December 31, 1997.

Although Mr. Zarges was awarded participation in an Individual 5-Year Plan
during 1994 applicable to his position as President of the Engineering,
Construction and Environmental Group, no such plan was drafted. If such plan is
ultimately drafted for Mr. Zarges, it will function in all material respects as
the plan described for Mr. Tinstman.

PENSION. Company retirement or actuarial benefits to the Named Executives
are derived principally from three sources: (i) an annuity issued by United
Pacific Life Insurance Company arising out of the termination of the Morrison
Knudsen Corporation Retirement Plan established January 1, 1970 and terminated
December 12, 1987 ("UPL Annuity"); (ii) a retirement benefit from the Morrison
Knudsen Corporation Retirement Plan established January 1, 1988 and frozen
December 31, 1991 ("Frozen MKRP Benefit"); and (iii) a retirement benefit from
supplemental retirement benefit agreements ("SRBA Benefit"). The details as to
the source and amount of each Named Executive's retirement benefits are provided
below.

The following table summarizes the estimated annual benefits payable in the
form of a straight-life annuity upon normal retirement to each of the Named
Executives:

PENSION TABLE

<TABLE>
<CAPTION>
SRBA
BENEFIT TOTAL ANNUAL
FROZEN MKRP AT AGE BENEFIT
UPL ANNUITY(2) BENEFIT(3) 65(4) AT AGE 65
NAME(1) ($) ($) ($) ($)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Robert A. Tinstman 9,385 17,860 10,568 37,813
Darrol N. Groven -- -- -- --
Gerald F. Nelson -- -- -- --
Edward D. Hughes -- -- -- --
John Wimberly -- -- -- --
</TABLE>

- ------------------------
(1)The following individuals also receive benefits under the plans discussed
herein: Mr. Hanks, who has accrued a UPL annuity of $7,284 and a Frozen MKRP
Benefit of $13,755, for a total of $21,039; Mr. Chi, who has accrued a UPL
annuity of $14,007 and a Frozen MKRP Benefit of $6,313, for a total of $20,320;
and Mr. Allred, who has accrued a UPL annuity of $4,556 and a Frozen MKRP
benefit of $10,498, for a total of $15,054.

(2)The amounts shown in this column are fixed amounts based upon the formula
contained in the Morrison Knudsen Corporation Retirement Plan established
January 1, 1970 and terminated December 12, 1987. Such amounts will not increase
due to compensation paid or service rendered by the Named Executive after
December 12, 1987.

(3)The amounts shown in this column are fixed amounts based upon the formula
contained in the Morrison Knudsen Corporation Retirement Plan established
January 1, 1988 and frozen December 31, 1991. Such amounts will not increase due
to compensation paid or service rendered by the Named Executive after December
31, 1991.

(4)Old MK has entered into a nonqualified and unfunded SRBA, to which the
Company succeeded, to provide retirement income to Mr. Tinstman. The
supplemental retirement benefit agreement ("SRBA") provides Mr. Tinstman with a
retirement benefit equal to the difference between (a) the retirement benefit
that would be payable to him under the Morrison Knudsen Corporation Retirement
Plan established January 1, 1988 and frozen December 31, 1991, if it were not
for certain limits imposed on the Named Executive under the Internal Revenue
Code of 1986, as amended; and (b) his Frozen MKRP Benefit.

18
<PAGE>
This difference is referred to hereafter as the "Standard SRBA Benefit." The
Standard SRBA Benefit will not increase, absent any future amendments to his
SRBA, due to compensation paid or services rendered after December 31, 1991.

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS. Effective January
1, 1993, Old MK entered into five-year employment agreements (January 1, 1993
through December 31, 1997) with Messrs. Hanks and Tinstman, to which the Company
succeeded in the Merger. Effective January 1, 1994, Old MK entered into a
similar five-year employment agreement with Mr. Zarges (January 1, 1994 through
December 31, 1998), to which the Company also succeeded in the Merger. Pursuant
to the terms of the employment agreements, Messrs. Tinstman, Hanks and Zarges
are entitled to receive a minimum annual base salary of $250,000, $250,000 and
$250,000, respectively, and to participate in the Company's annual bonus plan
applicable to their corporate position or operating group position. They are
also entitled to participate in (i) an Individual 5-Year Plan tailored to their
corporate position or operating group position (for a description of such plans,
see the section herein titled "Individual 5-Year Plans"), (ii) the Key Executive
Life Insurance Plan (which provides pre-retirement life insurance of three times
base salary, inclusive of the Company's group plan and which provides post-
retirement life insurance of one times base salary), (iii) the Key Executive
Disability Insurance Plan (which provides a disability benefit of 60% of base
salary and annual bonus, inclusive of all Company and government programs) and
(iv) all other health and welfare benefits generally available to executive
officers of the Company.

Under the employment agreements, Messrs. Tinstman, Hanks and Zarges are also
entitled to receive a severance benefit equal to twice their base compensation
(which includes such items as base salary in effect immediately preceding the
termination of employment, bonuses and participation in health and retirement
programs) if their employment is terminated for a reason other than death,
disability, cause, voluntary resignation under circumstances not constituting
constructive termination or the expiration of their employment agreements. Under
such circumstances, the Company will fully vest all unvested stock options and
restricted stock awards previously granted, and fully vest and immediately pay
any accrued awards and bonuses. If any payments due under the employment
agreements will result in liability to Messrs. Tinstman, Hanks and Zarges for an
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, the Company has agreed to pay to them an amount which (after deducting
any Federal, state and local income taxes payable with respect to such amount)
is sufficient to fully satisfy such tax.

On January 10, 1997, the employment agreements of Messrs. Tinstman, Hanks
and Zarges were amended to provide that in the event any such executive is
terminated for any reason, no portion of the stock options which were granted to
such executive on January 10, 1997, which were unvested as of the date of such
termination would be exercisable.

On April 26, 1996, Old MK entered into employment agreements with Messrs.
Chi and Allred, to which the Company succeeded in the Merger. Pursuant to the
terms of the employment agreements, Messrs. Chi and Allred are entitled to
receive a minimum base compensation of $234,000 each. Each of Mr. Chi and Mr.
Allred is also entitled to receive a severance benefit of 18 months salary if
his employment is terminated prior to December 31, 1998, for any reason other
than death, disability, cause, voluntary resignation not constituting
constructive termination or retirement.

INDEBTEDNESS OF MANAGEMENT. On February 17, 1995, the Company loaned
$250,000 (the "1995 Loan") to Darrol N. Groven, Senior Vice President of the
Company and President of the Company's Heavy Civil Construction Group, and his
wife, which was secured by their Montana residence. With the sale of the Montana
residence, the non-interest bearing loan was reduced to $113,260. The 1995 Loan
was issued in connection with Mr. Groven's appointment as President of Kasler
Corporation, a subsidiary of the Company, and his relocation to Kasler's
headquarters in Southern California at the request of the Company.

On October 18, 1996, the Company loaned $200,000 (the "1996 Loan") to Mr.
Groven and his wife. Such loan is secured by their California Residence. In
February of 1997, the Company loaned $50,000 (the "1997 Loan") to Mr. Groven and
his wife. Such loan is secured by their Idaho residence.

19
<PAGE>
Both such loans are non-interest bearing, become due and payable on February 17,
1999 and were made in connection with Mr. Groven's relocation to Boise, Idaho.

Since the beginning of fiscal year 1996, the largest aggregate amount due
and owing by Mr. Groven was $363,260 and Mr. Groven remains indebted to the
Company for such amounts.

No other director or executive officer of the Company has been indebted to
the Company at any time since the beginning of fiscal year 1996 in an amount in
excess of $60,000.

RELATED TRANSACTIONS. Prior to the Merger, Washington Corporations ("WC")
and other entities owned by Dennis R. Washington, Chairman of the Board of
Directors of the Company, regularly engaged in transactions with the Company as
part of WC's and the Company's ongoing business and operations. Such
transactions were on terms comparable to those available from outside sources.

WC has historically provided the Company various administrative and support
services pursuant to certain intercompany agreements. During the fiscal year
1996, the Company paid to WC for administrative services, data processing, usage
of the Missoula office complex, benefit plan administration services and
aircraft services, the following amounts, respectively: $1,128,000, $518,400,
$264,000, $134,800 and $128,800.

The Company expects to enter into an aircraft lease agreement with WC for
the lease of a corporate jet owned by WC, the payments for which are anticipated
to be approximately $500,000 during the fiscal year ended November 30, 1997.

During fiscal year 1996, the Company paid to WC $485,000 in cash for
financial and other advisory services provided to the Company with respect to
the Merger. The Company also reimbursed WC for its expenses incurred as a result
of its engagement in the amount of $165,000 and indemnified WC against certain
liabilities and expenses in connection therewith.

The Company regularly purchases equipment, parts and services from Modern
Machinery Co., Inc. ("MMCI"), a wholly owned subsidiary of WC. During fiscal
year 1996, the Company purchased goods and services in the amount of $4,781,400
from MMCI and MMCI purchased $416,500 in used or surplus equipment from the
Company for resale to third parties.

The Company regularly employs Westran, Inc. ("Westran"), a wholly owned
subsidiary of WC, which provides heavy highway transportation services
throughout the United States to mobilize or relocate its equipment. Westran
submits competitive bids to provide these services. In addition, Westran
provides subcontract hauling for the Company on a project in Grand Junction,
Colorado. Services purchased from Westran by the Company in fiscal year 1996
totaled $1,024,000.

Equipco, Inc. ("Equipco"), a wholly owned subsidiary of WC, provides repair
services for equipment owned by the Company. Services are provided at cost and
no warranty is made on work performed. The Company pays a proportionate share of
Equipco's fixed costs in return for Equipco's maintaining its repair facility
conveniently located and readily available to the Company. Services and products
provided by Equipco to the Company in fiscal year 1996 totaled $1,384,400.
Equipco also purchased $113,100 in equipment from the Company.

Pro Builders, Corp., a wholly owned subsidiary of the Company, has contracts
in progress with Gateway Limited Partnership, a real estate entity in which Mr.
Washington has an indirect ownership interest. In fiscal year ended 1996,
revenues paid to Pro Builders from this project totaled $4,696,000.

On July 8, 1993, WGC Holdings, Inc., a wholly owned subsidiary of the
Company ("Holdings"), and WC entered into a Tax Indemnification Agreement with
respect to certain tax liabilities. Following the combination of Kasler
Corporation and Holdings as subsidiaries of the Company on July 12, 1993 (the
"Combination"), Holdings no longer participates in WC's consolidated income tax
returns. The Tax Indemnification Agreement clarifies responsibilities for the
payment of taxes and the resolution of disputes regarding taxes following the
Combination. Holdings is subject to potential liability for any unpaid federal
income tax liabilities of WC's consolidated group during any part of

20
<PAGE>
such taxable year in which Holdings was a member of WC's consolidated group.
Pursuant to the Tax Indemnification Agreement, WC has agreed to indemnify
Holdings for all income tax liabilities attributable to any member of WC's
consolidated group other than Holdings for any taxable year.

On July 8, 1993, Holdings and WC entered into an Environmental
Indemnification Agreement with respect to possible environmental liabilities
which arise following the Combination. The Environmental Indemnification
Agreement provides that WC and Holdings each will indemnify the other for their
respective environmental liabilities arising from the operation of their
respective businesses.

Batchelder & Partners, Inc., an investment advisory and consulting firm
("BPI"), of which David H. Batchelder, a Director of the Company, is President,
was engaged by the Company to act as a financial advisor to the Company with
respect to the Merger. The Company, pursuant to an agreement with BPI, paid BPI
$800,000 in cash (plus related expenses in the amount of $191,800) and issued to
BPI warrants to purchase 110,500 shares of Company Common Stock at an exercise
price of $12.00 per share, which warrants expire at 5:00 p.m., New York City
time, on September 11, 2001 (valued at $542,555 as of September 12, 1996, the
date of issuance). The Company has also provided certain piggyback registration
rights with respect to the shares issuable upon exercise of the warrants, to
reimburse BPI for its expenses incurred in connection with its engagement and to
indemnify BPI in connection therewith against certain liabilities and expenses.
The terms of the warrants and the registration rights thereunder are set forth
in a Warrant Agreement among the Company, BPI and Schroder Wertheim & Co.
Incorporated and a Registration Rights Agreement among the Company, BPI and
Schroder Wertheim & Co. Incorporated, each dated September 11, 1996. In
addition, from time to time, BPI advises the Company regarding acquisitions and
divestitures.

Terry W. Payne, a Director of the Company, is Chairman and owner of Terry
Payne & Co., Inc. ("TPC") which provides insurance and bonding brokerage
services to the Company and its subsidiaries. During fiscal year 1996, the
Company paid premiums to TPC or to insurance and bonding companies for insurance
or bonds arranged by TPC for group life and disability insurance, workers'
compensation, business insurance and directors and officers' liability
insurance, and surety bonds in the amount of $11,508,100. Of such premiums, TPC
received approximately $875,000 in commissions related to the provision of such
services.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the Securities Exchange Act of 1934, as amended, and the rules thereunder
require the Company's officers and directors and persons who own more than 10%
of the outstanding Common Stock to file reports of ownership and changes in
ownership with, among others, the Securities and Exchange Commission and to
furnish the Company with copies.

Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that,
during the last fiscal year all officers, directors and the beneficial owners of
greater than 10% of the outstanding Common Stock complied with the filing
requirements applicable to them, except Mr. Batchelder who failed to timely file
an Amended Form 5, ANNUAL STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP, for
fiscal year ended November 30, 1996, to report the award on September 12, 1996
of warrants to purchase 110,500 shares of Common Stock and Mr. Groven who failed
to timely file Form 5, ANNUAL STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP, for
fiscal year ended November 30, 1996, to report the award on January 23, 1996 of
options to purchase 40,000 shares of Common Stock. Such forms are intended to be
filed during March 1997.

21
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. The following table shows
the persons (as the term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934) known to the Company to beneficially own more than 5% of the
Company's Common Stock. It also shows the shares of Common Stock of the Company
beneficially owned by all directors of the Company, the Named Executives, and
the directors and other executive officers of the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------
(1) (2) (3) (4)
<S> <C> <C> <C>
AMOUNT AND
NATURE OF BENEFICIAL
OWNERSHIP AS OF
JANUARY 31,1997 RIGHT TO ACQUIRE
NAME AND ADDRESS INCLUDING SHARES WITHIN 60 DAYS OF PERCENT
OF BENEFICIAL OWNER(1) IN COLUMN (3) JANUARY 31, 1997 OF CLASS(2)

<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dennis R. Washington 20,216,025(3) 6,390 37.55
c/o Washington Corporations
101 International Way
Missoula, Montana 59807
Pioneering Management Corporation 2,809,600(4) -- 5.22
60 State Street
Boston, Massachusetts 02109
CS First Boston, Inc. 2,796,985(5) -- 5.19
Eleven Madison Avenue
New York, New York 10010

Directors:
David H. Batchelder 144,121(6) 134,121 *
Leonard R. Judd 20,621 15,621 *
William C. Langley 5,556 5,556 *
Robert S. Miller, Jr. 7,889 7,889 *
Dorn Parkinson 115,556(7) 105,556 *
Terry W. Payne 42,787 22,787 *
John D. Roach 5,556 5,556 *
Robert A. Tinstman 2,172 2,172 *
Dennis R. Washington 20,216,025(3) 6,390 37.55

Named Executives:
Darrol N. Groven 43,333 43,333 *
Edward D. Hughes 44,196(8) 13,667 *
Gerald F. Nelson 24,666 24,666 *
John H. Wimberly 371,748(9) 316,666 *
20,606,144 351,509 38.03
All Directors and Executive Officers
as a Group (16)
</TABLE>

- ------------------------
*Indicates that the percentage of shares beneficially owned does not exceed 1%
of the class.

(1)For purposes of this table, shares are considered to be "beneficially" owned
if the person directly or indirectly has the sole or shared power to vote or
direct the voting of the securities or the sole or shared power to dispose of or
direct the disposition of the securities; and a person is considered to be the
beneficial owner of shares if that person has the right to acquire the
beneficial ownership of the shares within 60 days of January 31, 1997, unless
otherwise noted.

(2)For purposes of this table, the percentages shown are calculated based upon
the number of shares of the Company's Common Stock indicated in column (2) which
include shares that the shareholder has the right to acquire beneficial
ownership of within 60 days of January 31, 1997.

(3)Such amount includes 828,000 shares held by D. W. Holdings, Inc. which is
wholly owned by Mr. Washington and as to which Mr. Washington may be deemed to
be the beneficial owner and excludes 77,838 shares held by Mr. Washington's wife
as to which Mr. Washington disclaims beneficial ownership.

(4)Pioneering Management Corporation ("Pioneering") filed Schedule 13G dated
January 23, 1997 with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended. Such Schedule 13G states that as of
such date, Pioneering is the beneficial owner of 2,809,600 shares of the
Company's Common Stock of which Pioneering has sole voting power as to 2,809,600
shares, shared voting power as to -0- shares, sole dispositive power as to
58,000 shares and shared dispositive power as to 2,751,600 shares.

22
<PAGE>
(5)CS First Boston, Inc. ("CSFBI") filed Amendment No. 1 to Schedule 13G dated
November 22, 1996 with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended. Such Amendment states that as of
such date, CS First Boston Corporation ("CSFBC"), a wholly owned subsidiary of
CSFBI, has beneficial ownership of 2,796,985 shares of the Company's Common
Stock of which CSFBC has sole voting power as to -0- shares, shared voting power
as to 2,796,985 shares, sole dispositive power as to -0-shares and shared
dispositive power as to 2,796,985 shares; and CSFBI may be deemed the beneficial
owner of such shares by virtue of its ownership of 100% of the outstanding
shares of CSFBC.

(6)Such shares include warrants to purchase 110,500 shares of Common Stock which
are held by Batchelder & Partners, Inc. (of which Mr. Batchelder is a director
and owner), as to which Mr. Batchelder shares voting and investment power with
two other directors of Batchelder & Parters, Inc.

(7)Of such shares, Mr. Parkinson has no voting or dispositive power as to 5,000
shares owned by Mr. Parkinson's wife and Mr. Parkinson has shared voting and
dispositive power as to 5,000 shares held in joint tenancy with his wife.

(8)Of such shares, Mr. Hughes shares voting and dispositive power as to 13,778
shares held in joint tenancy with his wife.

(9)Of such shares, Mr. Wimberly shares voting and dispositive power as to 55,082
shares held in joint tenancy with his wife.

2. APPROVAL OF THE 1997 STOCK OPTION AND INCENTIVE PLAN FOR NON-EMPLOYEE
DIRECTORS.

INTRODUCTION. On January 10, 1997, the Company's Board of Directors adopted
the 1997 Stock Option and Incentive Plan for Non-Employee Directors of Morrison
Knudsen Corporation (the "Non-Employee Director Plan"), set forth in Appendix I
attached hereto, subject to stockholder approval at the Annual Meeting. The
purposes of the Non-Employee Director Plan are (i) to provide an additional
incentive for Non-Employee Directors (as defined in the Non-Employee Director
Plan) to further the growth, development and financial success of the Company
and (ii) to enable the Company to obtain and retain the services of Non-Employee
Directors, which services are considered essential to the long range success of
the Company.

The principal features of the Non-Employee Director Plan are summarized
below, and the summary is qualified in its entirety by reference to the
Non-Employee Director Plan itself, attached to this Proxy Statement as Appendix
I. Capitalized terms not defined in this section shall have the meanings set
forth in Appendix I.

PARTICIPANTS. Under the proposed Non-Employee Director Plan, directors of
the Company who are not officers or other employees of the Company or any
subsidiary of the Company are eligible to receive awards of stock options or
restricted stock. The Company currently has eight such directors.

SHARES AVAILABLE UNDER THE NON-EMPLOYEE DIRECTOR PLAN. Subject to the
discretionary equitable adjustment by the Board of Directors for stock
dividends, stock splits, mergers, consolidations, spin-offs, distributions of
assets or other similar corporate transactions, the maximum number of shares of
Common Stock issued under the Non-Employee Director Plan will not exceed, in the
aggregate, 500,000. Included in such number is a maximum of 100,000 shares
issuable in the form of Restricted Stock.

ADMINISTRATION OF THE NON-EMPLOYEE DIRECTOR PLAN. The Non-Employee Director
Plan will be administered by the Board of Directors. The Board may from time to
time delegate all or any part of its authority under the Non-Employee Director
Plan to a committee of not less than two Non-Employee Directors who are
"non-employee directors" as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or any successor rule to the same
effect. In any discussion regarding the Non-Employee Director Plan herein, the
"Board" will mean the Board of Directors of the Company or any such committee.

The Board shall have the power to interpret the Non-Employee Director Plan,
the Option Rights and the Restricted Stock and the agreements related thereto.
Expenses of administration of the Non-Employee Director Plan shall be borne by
the Company.

23
<PAGE>
AWARDS OF STOCK OPTIONS. Under the Non-Employee Director Plan, the Board
may award nonqualified options to purchase shares of the Company's Common Stock
to Non-Employee Directors of the Company. The term of such options will be set
by the Board but shall not exceed a period of ten years from the date of award.
During the term of the option, the options may be exercised at such time, in
such amounts, and in accordance with such terms and conditions and subject to
such restrictions as are determined by the Board and set forth in option
agreements evidencing the award of such options. The exercise price of an option
may not be less than 100% of the Market Value per Share of the Company's Common
Stock on the date of award. On January 10, 1997, the Market Value per Share was
$9.875. The Board may specify Performance Objectives that must be achieved as a
condition to the exercise of an option.

The shares purchased upon the exercise of an option will be paid for in
cash, through the delivery of other shares of the Company's Common Stock with a
value equal to the total exercise price, by any other legal consideration as
deemed appropriate by the Board, or a combination of the foregoing. The Board
has the authority to specify at the time Option Rights are granted that shares
of the Company's Common Stock will only be accepted in payment of the exercise
price for the option if such shares are nonforfeitable and nonrestricted;
however, the Non-Employee Director Plan allows the Board to permit payment of
the exercise price in shares of the Company's Common Stock which are subject to
risk of forfeiture or restrictions on transfer, which method of payment would
permit immediate sequential exchanges of shares of the Company's Common Stock at
the time of exercise of Option Rights. The Board may allow the deferred payment
of the Option Price from the proceeds of a sale through a broker of some or all
of the shares of Common Stock to which the exercise relates. Unless otherwise
determined by the Board, an option will not be transferrable, except by laws of
descent and distribution. Without further approval of the stockholders, the
Board may not either authorize the amendment of any outstanding Option Right to
reduce the exercise price thereunder or cancel an outstanding Option Right and
replace it with an award having a lower exercise price.

AWARDS OF RESTRICTED STOCK. The Board may authorize awards or sale of
shares of Restricted Stock to Non-Employee Directors, to be evidenced by a
written Restricted Stock Agreement between the Company and the Restricted
Stockholder. Such awards or sales are generally subject to the restriction that
such shares may not be sold, exchanged, transferred, pledged or otherwise
disposed of until such restriction lapses. The restriction may lapse due to the
passage of time or the achievement of certain predetermined performance criteria
as determined by the Board. All certificates representing shares of Restricted
Stock are held in custody by the Company until all restrictions thereon lapse. A
Restricted Stockholder has ownership rights of the shares covered by the
Restricted Stock Agreement, including voting power and receipt of dividends, if
any. The Board may require that all dividends or other distributions paid on the
shares of Restricted Stock during the period of such restrictions be
automatically held and reinvested on an immediate or deferred basis as
additional shares of Common Stock, which may be subject to the same restrictions
as the underlying award or such other restrictions as the Board may specify.

The Board may provide that the Company will have the right to repurchase
Restricted Stock then subject to restrictions upon the Termination of
Directorship of a Non-Employee Director at a cash price per share equal to the
cash price paid by the Restricted Stockholder, if any. Provision may be made
that no such right of repurchase will exist if the Termination of Directorship
was without cause or because of the retirement, death, or disability of the
Restricted Stockholder.

If an Optionee or Restricted Stockholder ceases service as a Non-Employee
Director by reason of death, disability, hardship or other special circumstance,
the Board may take such action as it deems equitable under the circumstances or
in the best interests of the Company with respect to any unvested Options or
Restricted Stock of such terminating Non-Employee Director, including waiving or
modifying any limitation or requirement with respect to any award under the
Non-Employee Director Plan. In no case, however, will an option be exercisable
later than the expiration date specified in the option award.

24
<PAGE>
The Non-Employee Director Plan permits a Non-Employee Director, with the
consent of the Board, to pay any income tax incurred by such Non-Employee
Director upon the exercise of an Option or the receipt of shares from an award
of Restricted Stock, with shares of Company Common Stock otherwise issuable to
him at that time. The number of shares issued to the Non-Employee Director is
thereby reduced, and the Company pays the taxes of the Non-Employee Director. In
addition, the Board may provide for the payment of a cash award intended to
offset the amount of tax that the Non-Employee Director may incur in connection
with Restricted Stock.

The Non-Employee Director Plan may be amended, in whole or in part,
suspended or terminated by the Board. However, no action may be taken by the
Board to increase the limits on the maximum number of shares of Common Stock and
shares of Restricted Stock which may be issued under the Plan, without further
approval by the stockholders of the Company. Furthermore, the Board may not
amend the Non-Employee Director Plan in any fashion that would otherwise require
stockholder approval as a matter of applicable law or the rules of any U.S.
stock exchange on which the Common Stock may be listed for trading. No
amendment, suspension, or termination may be made without the consent of the
holder of an Option Right or Restricted Stock, which would impair any rights or
obligations under any such Option Right or Restricted Stock theretofore awarded,
unless the award itself so provides. No amendment may be made, without further
stockholder approval, which would reduce the Option Price of any outstanding
Option, or which would cancel any Option Rights and replace with awards having a
lower Option Price.

No further awards will be made under the Non-Employee Director Plan after
the passage of ten years from the date such plan is approved by the stockholders
of the Company.

ACCOUNTING EFFECTS. Under current accounting rules, neither the grant nor
exercise of options under the Non-Employee Director Plan is expected to result
in any charge to the earnings of the Company.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of certain Federal income tax aspects of awards made under the Non-Employee
Director Plan based upon the Federal income tax laws in effect on the date
hereof. This summary is not intended to be exhaustive and does not describe
state or local tax consequences.

For Federal income tax purposes, an optionee holding a Nonqualified Stock
Option ("NQSO") will not be taxed upon the grant of any such option, but rather,
at the time of exercise of such option. Upon exercise, the optionee generally
recognizes ordinary income equal to the difference between the option price and
the fair market value of the shares subject to the option, at the time the
option is exercised. The grantee of an award of Common Stock generally
recognizes ordinary income in an amount equal to the fair market value, less
purchase price, if any, of such shares when they become freely transferable or
are no longer subject to restrictions. The Company is entitled to a Federal
income tax deduction at the time and to the extent the optionee or the grantee
of an award recognizes income. If stock so acquired is later sold or exchanged,
then the difference between the sales price and the fair market value of such
stock on the date of exercise of the option is generally taxable as long-term or
short-term capital gain or loss depending upon whether the stock has been held
for more than one year after such date.

As stated above, generally income is realized by an optionee upon exercise
of an NQSO. However, in the case of an optionee whose sale of shares at a profit
could subject the optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended, realization of income is postponed so long as
a sale of the shares would expose the optionee to such suit, unless the optionee
elects within 30 days after the exercise to be taxed as of the exercise date in
the manner described above. Absent such election, such an optionee will realize
ordinary income at the time a sale would no longer expose him to such suit in an
amount equal to the excess of the fair market value of the shares at that time
over the exercise price. That fair market value will also govern for purposes of
the Company's deduction and for determining the optionee's gain or loss upon
subsequent disposition of the shares.

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<PAGE>
An optionee who pays the exercise price upon exercise of an NQSO, in whole
or in part, by delivering shares of the Company's stock already owned by him
will realize no gain or loss for Federal income tax purposes on the shares
surrendered, but otherwise will be taxed according to the rules described above
for NQSOs. With respect to shares acquired upon exercise which are equal in
number to the shares surrendered, the basis of such shares will be equal to the
basis of the shares surrendered, and the holding period of such shares will
include the holding period of the shares surrendered. The basis of additional
shares received upon exercise will be equal to the fair market value of such
shares on the date of exercise, and the holding period for such additional
shares will commence on the date the option is exercised.

On January 10, 1997, subject to stockholder approval of the Non-Employee
Director Plan, the Board awarded 10,000 options to purchase shares of the
Company's Common Stock to each of Messrs. Batchelder, Judd, Langley, Miller,
Parkinson, Payne and Roach, and options to purchase 25,000 shares to Mr.
Washington. Such options carry a ten-year term, will vest in four equal
increments on each of the first, second, third and fourth anniversaries of the
date of grant, and are exercisable at $9.875 per share.

Set forth in the table below is the dollar value of the shares of the
Company's Common Stock awarded under the Non-Employee Director Plan prior to the
date hereof, which awards are subject to stockholder approval of the
Non-Employee Director Plan at the Annual Meeting.

NEW PLAN BENEFITS TABLE
THE 1997 STOCK OPTION AND INCENTIVE PLAN FOR
NON-EMPLOYEE DIRECTORS OF
MORRISON KNUDSEN CORPORATION

<TABLE>
<CAPTION>
NUMBER OF
DOLLAR UNITS
NAME AND POSITION VALUE ($) (SHARES)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Executive Group -- --

Non-Executive Director Group(1) $ 938,125(2) 95,000
</TABLE>

- ------------------------
(1)The Non-Executive Director Group consists of eight Non-Employee Directors.

(2)The dollar value was calculated using the fair market value of the Company's
Common Stock on January 10, 1997, the date of grant, which was $9.875 per share.

The text of the proposed resolution is as follows:

"RESOLVED, that the 1997 Stock Option and Incentive Plan for
Non-Employee Directors of Morrison Knudsen Corporation, as set forth in
Appendix I to the Proxy Statement for the Annual Meeting of Stockholders to
be held on April 11, 1997, is approved, and the Board of Directors, the
Executive Committee and the appropriate officers of the Company are
authorized and directed to take all steps and do all acts which in their
judgment are deemed necessary or proper to carry out the terms of the Plan,
including but not limited to the registration of shares to be awarded with
the Securities and Exchange Commission and such other governmental or
regulatory authorities as the said Executive Committee or officers may deem
appropriate and the listing of such shares with the appropriate stock
exchanges."

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997 STOCK
OPTION
AND INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS.

26
<PAGE>
3. RATIFICATION OF THE APPOINTMENT OF AUDITORS.

The Board of Directors of the Company has appointed Coopers & Lybrand L.L.P.
("C&L") as auditors to make an examination of the consolidated financial
statements of the Company and its subsidiary corporations for the fiscal year
ending November 30, 1997. A proposal that the appointment of C&L be ratified
will be submitted to stockholders at the meeting, and the Board of Directors
recommends ratification of the appointment. Representatives of C&L will be
present at the Annual Meeting, will be given the opportunity to make a statement
if they wish and will be available to respond to appropriate questions.

The Board of Directors of the Company, upon recommendation by the Audit
Committee thereof, initially approved the engagement of C&L on September 12,
1996, in connection with the examination of the financial statements of the
Company and its subsidiaries for fiscal year 1996. C&L replaced the accounting
firm of KPMG Peat Marwick LLP ("KPMG") which was concurrently dismissed. During
the period December 1, 1993 through September 12, 1996, there were no
disagreements with KPMG on any matters of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to KPMG's satisfaction, would have caused such firm to make reference
to the subject matter thereof in connection with its report on the Company's
financial statements. During the period from December 1, 1993 through September
12, 1996, the Company did not consult with C&L regarding the application of
accounting principles to any completed or proposed transaction or the type of
opinion that might be rendered on the Company's financial statements. KPMG's
report on the Company's financial statements for the past two fiscal years did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles.

The Audit Committee of the Company's Board of Directors has approved a
policy which states that the Company's principal independent accountants may be
engaged to perform any service normally provided by accounting firms to publicly
held clients, provided that management is satisfied that the independence
requirements of the American Institute of Certified Public Accountants and the
Securities and Exchange Commission have been met. The Audit Committee, after
reviewing compliance with this policy, has approved all services rendered.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

In order for any proposal submitted by a stockholder for action at the
Company's 1998 Annual Meeting of Stockholders to be considered for inclusion in
the Company's 1998 Proxy Statement, such proposal must be in writing and
received by the Secretary of the Company on or before November 10, 1997.

27
<PAGE>
SOLICITATION OF PROXIES

Proxies are being solicited from the Company's stockholders on behalf of the
Board of Directors. The cost of such solicitation will be borne by the Company.
In addition to the use of the mails, proxies may be solicited by the directors,
officers and employees of the Company by personal interview, telephone,
facsimile or telegram. Such directors will not be additionally compensated for
such solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of the Common Stock and Series A Preferred
Stock held of record by such persons, and the Company will reimburse such
brokerage houses, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred in connection therewith. The Board of Directors
intends to utilize the services of Georgeson & Company Inc. of New York, New
York, an investor relations, counseling and proxy solicitation firm, in
connection with this solicitation of proxies. Although the exact cost of those
services is not known at this time, it is anticipated that the cost will be
approximately $8,000.

<TABLE>
<S> <C>
Dated: March 10, 1997 BY ORDER OF THE BOARD OF DIRECTORS
MORRISON KNUDSEN CORPORATION
Stephen G. Hanks
Executive Vice President, Chief Legal Officer
and Secretary
</TABLE>

28
<PAGE>
APPENDIX I
THE 1997 STOCK OPTION AND INCENTIVE PLAN FOR
NON-EMPLOYEE DIRECTORS OF
MORRISON KNUDSEN CORPORATION

1. PURPOSE. The purposes of the Plan are (1) to provide an additional
incentive for Non-Employee Directors of Morrison Knudsen Corporation, a Delaware
corporation (the "Company") to further the growth, development and financial
success of the Company by personally benefiting through the ownership of Company
stock, and (2) to enable the Company to obtain and retain the services of
Non-Employee Directors, which services are considered essential to the long
range success of the Company, by offering them an opportunity to own stock in
the Company.

2. DEFINITIONS. In addition to the other terms defined elsewhere herein,
wherever the following terms are used in this Plan with initial capital letters,
they shall have the meanings specified below, unless the context clearly
indicates otherwise.

"1994 PLAN" shall mean the Morrison Knudsen Corporation Amended and Restated
Stock Option Plan adopted January 19, 1994.

"BOARD" shall mean the Board of Directors of the Company.

"CODE" shall mean the Internal Revenue Code of 1986, as amended.

"COMMON STOCK" shall mean the common stock of the Company, par value $.01
per share, and any security into which such common stock may be converted or for
which such common stock may be exchanged by reason of any transaction or event
of the type described in Section 7 of this Plan.

"COMPANY" shall mean Morrison Knudsen Corporation, a Delaware corporation,
and shall include its successors.

"DATE OF AWARD" shall mean the date specified by the Board on which an award
of Option Rights or Restricted Stock shall become effective, which shall not be
earlier than the date on which the Board takes action with respect thereto.

"EMPLOYEE" shall mean any officer or other employee of the Company or of any
corporation which is then a Subsidiary.

"MARKET VALUE PER SHARE" shall mean either (a) the closing price of a share
of Common Stock on the date in question (or if there was no sale on the date in
question, the closing price of a share of Common Stock on the most recent date
on which there was a sale) on the New York Stock Exchange, as published in the
Western Edition of THE WALL STREET JOURNAL, or (b) if there is no trading of
Common Stock on such Exchange, the fair market value of a share of Common Stock
as determined by the Board from time to time.

"NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is not an
officer or other employee of the Company or of any corporation which is then a
Subsidiary.

"OPTIONEE" shall mean a Non-Employee Director to whom an Option Right is
awarded under this Plan.

"OPTION PRICE" shall mean the purchase price payable upon the exercise of an
Option Right.

"OPTION RIGHT" shall mean the right to purchase shares of Common Stock from
the Company upon the exercise of an option awarded hereunder.

"PARTICIPANT" shall mean a Non-Employee Director (or a person who has agreed
to commence serving in such capacity) who is selected by the Board to receive
benefits under this Plan.

29
<PAGE>
"PERFORMANCE OBJECTIVES" shall mean the achievement or performance
objectives that may be established by the Board pursuant to this Plan for
Participants who have received Restricted Stock or, when so determined by the
Board, Option Rights.

"PLAN" shall mean The 1997 Stock Option and Incentive Plan for Non-Employee
Directors of Morrison Knudsen Corporation as set forth herein, as the same may
be amended or restated from time to time.

"RESTRICTED STOCK" shall mean Common Stock awarded pursuant to Section 5 of
this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 5 hereof have expired.

"RESTRICTED STOCKHOLDER" shall mean a Non-Employee Director to whom
Restricted Stock has been awarded under this Plan.

"SUBSIDIARY" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

"TERMINATION OF DIRECTORSHIP" shall mean the time when a Participant ceases
to be a Director for any reason, including (without limitation) a termination by
resignation, failure to be elected, death or retirement.

3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 7 of this Plan, the number of shares of Common Stock issued or
transferred and not forfeited under this Plan shall not in the aggregate exceed
500,000 shares, which may be shares of original issuance or shares held in
treasury or a combination thereof; PROVIDED, HOWEVER, that the number of shares
awarded as Restricted Stock (and not forfeited) shall not exceed 100,000,
subject to adjustment as provided in Section 7 of this Plan.

4. OPTION RIGHTS. The Board may from time to time authorize awards to
Participants of options to purchase shares of Common Stock upon such terms and
conditions as the Board may determine in accordance with the following
provisions:

(a) Each award shall specify the number of shares of Common Stock to
which it pertains.

(b) Each award shall specify an Option Price per share of Common Stock,
which shall be equal to or greater than the Market Value per Share on the
Date of Award.

(c) Each award shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Company, (ii) nonforfeitable,
nonrestricted shares of Common Stock, which are already owned by the
Optionee and have a value at the time of exercise that is equal to the
Option Price, (iii) any other legal consideration that the Board may deem
appropriate, including (without limitation) any form of consideration
authorized under Section 4(d) below, on such basis as the Board may
determine in accordance with this Plan, and (iv) any combination of the
foregoing.

(d) On or after the Date of Award of any Option Right, the Board may
determine that payment of the Option Price may also be made in whole or in
part in the form of shares of Restricted Stock or other shares of Common
Stock that are subject to risk of forfeiture or restrictions on transfer.
Unless otherwise determined by the Board on or after the Date of Award,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this Section 4(d), the shares of Common
Stock received by the Optionee upon the exercise of the Option Right shall
be subject to the same risks of forfeiture or restrictions on transfer as
those that applied to the consideration surrendered by the Optionee;
PROVIDED, HOWEVER, that such risks of forfeiture and restrictions on
transfer shall apply only to the same

30
<PAGE>
number of shares of Common Stock received by the Optionee as applied to the
forfeitable or restricted shares of Common Stock surrendered by the
Optionee.

(e) Any award may provide for deferred payment of the Option Price from
the proceeds of sale through a broker of some or all of the shares of Common
Stock to which the exercise relates.

(f) Successive awards may be made to the same Participant regardless of
whether any Option Rights previously awarded to the Participant remain
unexercised.

(g) Each award shall specify the period or periods of continuous service
as a Non-Employee Director by the Optionee that are necessary before the
Option Rights or installments thereof shall become exercisable, and any
award may provide for the earlier exercise of the Option Rights in the event
of a change in control of the Company or other transaction or event.

(h) Any award of Option Rights may specify Performance Objectives that
must be achieved as a condition to the exercise of such rights.

(i) On or after the Date of Award of any Option Right, the Board may
provide for the payment to the Optionee of dividend equivalents thereon in
cash or shares of Common Stock on a current, deferred or contingent basis,
or the Board may provide that any dividend equivalents shall be credited
against the Option Price.

(j) The term of an Option Right shall be set by the Board; PROVIDED,
HOWEVER, that no Option Right awarded pursuant to this Section 4 may have a
term of more than 10 years from the Date of Award.

(k) Each award shall be evidenced by a written Stock Option Agreement,
which shall be executed on behalf of the Company by any officer thereof and
delivered to and accepted by the Optionee and shall contain such terms and
provisions as the Board may determine consistent with this Plan.

5. RESTRICTED STOCK. The Board may also authorize awards or sales to
Participants of shares of Restricted Stock upon such terms and conditions as the
Board may determine in accordance with the following provisions:

(a) Each award or sale shall constitute an immediate transfer of the
ownership of shares of Common Stock to the Participant in consideration of
the performance of services, entitling such Participant to dividend, voting
and other ownership rights, subject to the substantial risk of forfeiture
and restrictions on transfer hereinafter referred to.

(b) Each award or sale shall provide that the shares of Restricted Stock
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined
by the Board on the Date of Award, and any sale may provide for the earlier
termination of such period in the event of a change in control of the
Company or other transaction or event.

(c) Each award or sale shall provide that, during the period for which
such substantial risk of forfeiture is to continue, the transferability of
the shares of Restricted Stock shall be prohibited or restricted in the
manner and to the extent prescribed by the Board on the Date of Award. Such
restrictions may include (without limitation) rights of repurchase or first
refusal in the Company or provisions subjecting the shares of Restricted
Stock to a continuing substantial risk of forfeiture in the hands of any
transferee.

(d) Any award or sale may be made in consideration of payment by the
Participant of an amount that is less than the Market Value per Share on the
Date of Award, but in no event shall the value of the consideration provided
with respect to any award or sale be less than the par value per share of
Common Stock.

31
<PAGE>
(e) Any award or sale may require that any or all dividends or other
distributions paid on the shares of Restricted Stock during the period of
such restrictions be automatically sequestered and reinvested on an
immediate or deferred basis in additional shares of Common Stock, which may
be subject to the same restrictions as the underlying award or such other
restrictions as the Board may determine.

(f) Each award or sale shall be evidenced by a Restricted Stock
Agreement, which shall be executed on behalf of the Company by any officer
thereof and delivered to and accepted by the Participant and shall contain
such terms and provisions as the Board may determine consistent with this
Plan. Unless otherwise directed by the Board, all certificates representing
shares of Restricted Stock, together with a stock power that shall be
endorsed in blank by the Participant with respect to the shares of
Restricted Stock, shall be held in custody by the Company until all
restrictions thereon lapse.

(g) Any Restricted Stock Agreement may specify one or more Performance
Objectives, and to the extent that any Restricted Stock Agreement so
specifies one or more Performance Objectives:

(i) it shall also specify a minimum level of acceptable achievement,
below which all of the shares of Restricted Stock covered by the award
shall be forfeited, and shall set forth a formula for determining the
number of shares of Restricted Stock to be retained by the Restricted
Stockholder if performance is at or above the minimum level of acceptable
achievement, but falls short of full achievement of the specified
Performance Objectives; and

(ii) the Board may adjust the specified Performance Objectives and
the related minimum level of acceptable achievement if, in the sole
judgment of the Board, events or transactions have occurred after the
Date of Award that result in distortion of the specified Performance
Objectives or the related minimum level of acceptable achievement.

(h) The Board may provide, at or after the Date of Award of any
Restricted Stock, for the payment of a cash award intended to offset the
amount of tax that the Participant may incur in connection with such
Restricted Stock, including (without limitation) tax on the receipt of such
cash award.

(i) The Board may provide in any individual Restricted Stock Agreement
that the Company shall have the right to repurchase from the Restricted
Stockholder the Restricted Stock then subject to restrictions under the
Restricted Stock Agreement immediately upon a Termination of Directorship
for any reason at a cash price per share equal to the cash price paid by the
Restricted Stockholder for such Restricted Stock. In the discretion of the
Board, provision may be made that no such right of repurchase shall exist in
the event of a Termination of Directorship without cause or because of the
Restricted Stockholder's retirement, death or permanent and total
disability.

6. TRANSFERABILITY.

(a) Except as may be otherwise determined by the Board, Option Rights
awarded under this Plan may be transferred by a Participant only by will or
the laws of descent and distribution and Option Rights may not be exercised
during a Participant's lifetime except by the Participant or, in the event
of the Participant's legal incapacity, by his guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant
under state law and court supervision.

(b) Any award made under this Plan may provide that all or any part of
the shares of Common Stock that are to be issued or transferred by the
Company upon the exercise of Option Rights, or are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 5 of this Plan, shall be subject to further restrictions upon
transfer.

7. ADJUSTMENTS. The Board may make or provide for such adjustments in the
(a) number of shares of Common Stock covered by outstanding Option Rights
awarded hereunder, (b) prices per share applicable to such Options Rights, and
(c) kind of shares (including (without limitation) shares

32
<PAGE>
of another issuer) covered thereby, as the Board in its sole discretion may in
good faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Optionees that otherwise would result from (x) any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company, (y) any merger, consolidation,
spin-off, split-off, split-up, reorganization, partial or compete liquidation or
other distribution of assets, issuance of rights or warrants to purchase
securities or (z) any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event,
the Board may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it may in good faith determine to be
equitable under the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers and kind of shares specified in Section 3 of this
Plan as the Board may in good faith determine to be appropriate in order to
reflect any transaction or event described in this Section 7.

8. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Board may provide
for the elimination of fractions or for the settlement thereof in cash.

9. WITHHOLDING TAXES. To the extent, if any, that the Company is required
to withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Company for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or the
realization of any such benefit that the Participant or such other person make
arrangements satisfactory to the Company for payment of the balance of any taxes
required to be withheld. At the discretion of the Board, any such arrangements
may include relinquishment of a portion of any such payment or benefit. The
Company and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.

10. CERTAIN TERMINATIONS OF DIRECTORSHIPS.

(a) Notwithstanding any other provision of this Plan to the contrary, in
the event of Termination of Directorship by reason of death, disability, or
in the event of hardship or other special circumstances, of a Participant
who holds an Option Right that is not immediately and fully exercisable or
any Restricted Stock as to which the substantial risk of forfeiture or the
prohibition or restriction on transfer has not lapsed, the Board may in its
sole discretion take any action that it deems to be equitable under the
circumstances or in the best interests of the Company, including (without
limitation) waiving or modifying any limitation or requirement with respect
to any award under this Plan.

(b) If a Non-Employee Director becomes an Employee while continuing to
serve as a Director, that fact alone shall not result in a Termination of
Directorship or otherwise impair the rights such Director may have under
this Plan, including (without limitation) the rights such Director may have
under any Option Right outstanding under this Plan, but such Director shall
no longer be eligible to receive any further awards under this Plan.

11. ADMINISTRATION.

(a) ADMINISTRATION BY THE BOARD; DELEGATION. This Plan shall be
administered by the Board, which may from time to time delegate all or any
part of its authority under this Plan to a committee or subcommittee of not
less than two Directors appointed by the Board who are "Non-Employee
Directors" within the meaning of that term as defined in Rule 16b-3 under
the Securities Exchange Act of 1934, or any successor rule to the same
effect. To the extent of any delegation by the Board under this Plan,
references in this Plan to the Board shall also refer to the applicable
committee or subcommittee. The majority of any such committee or
subcommittee shall constitute a quorum, and the action of a majority of its
members present at any meeting at

33
<PAGE>
which a quorum is present, or acts unanimously approved in writing, shall be
the acts of such committee or subcommittee.

(b) ADMINISTRATIVE POWERS. The Board shall have the power to interpret
this Plan, the Option Rights and the Restricted Stock, and the agreements
pursuant to which the Option Rights and Restricted Stock are awarded, and to
adopt such rules for the administration, interpretation and application of
this Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Any award under this Plan need not be the same with respect to
each Optionee or Restricted Stockholder.

(c) PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. All expenses and
liabilities which members of the Board incur in connection with the
administration of this Plan shall be borne by the Company. The Board may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Board, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and determinations
made by the Board in good faith shall be final and binding upon all
Optionees, Restricted Stockholders, the Company and all other interested
persons. No members of the Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this
Plan, any Option or any Restricted Stock, and all members of the Board shall
be fully protected by the Company in respect of any such action,
determination or interpretation.

(d) DELEGATION TO CHIEF EXECUTIVE OFFICER. The Board may delegate to
the Chief Executive Officer of the Company or the Secretary of the Company,
or both, any or all of the administrative duties and authority of the Board
under this Plan.

(e) NO LIABILITY. No member of the Board, or officer or employee of the
Company or any Subsidiary shall be liable, responsible or accountable in
damages or otherwise for any determination made or other action taken or any
failure to act by such person so long as such person is not determined to be
guilty by a final adjudication of willful misconduct with respect to such
determination, action or failure to act.

(f) INDEMNIFICATION. To the fullest extent permitted by law, each of
the members of the Board and each of the directors, officers and employees
of the Company or any Subsidiary shall be held harmless and be indemnified
by the Company for any liability, loss, including (without limitation)
amounts paid in settlement, damages or expenses, including (without
limitation) reasonable attorneys' fees suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to act,
in connection with the administration of this Plan so long as such person is
not determined by a final adjudication to be guilty of willful misconduct
with respect to such determination, action or failure to act.

12. AMENDMENT, SUSPENSION, TERMINATION AND OTHER MATTERS.

(a) This Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board.
However, without further approval of the stockholders of the Company, no
action of the Board may, except as provided in Section 7 of this Plan,
increase the limits imposed in Section 3 on the maximum number of shares of
Common Stock and shares of Restricted Stock which may be issued under this
Plan, and no action of the Board may be taken that would otherwise require
stockholder approval as a matter of applicable law or the rules of any U.S.
stock exchange on which the Common Stock may be listed for trading. No
amendment, suspension or termination of this Plan shall, without the consent
of the holder of an Option Right or Restricted Stock, alter or impair any
rights or obligations under any Option Right or Restricted Stock theretofore
awarded, unless the award itself otherwise expressly so provides.

(b) The Board shall not, without further approval of the stockholders of
the Company, authorize the amendment of any outstanding Option Right to
reduce the Option Price.

34
<PAGE>
Furthermore, no Option Rights awarded under this Plan shall be canceled and
replaced with awards having a lower Option Price without the further
approval of the stockholders of the Company.

(c) The Board may make under this Plan any award or combination of
awards authorized under this Plan in exchange for the cancellation of an
award that was not made under this Plan.

(d) The making of one or more awards to a Non-Employee Director under
this Plan shall not preclude the making of awards to such Non-Employee
Director under the 1994 Plan, or under any other stock option or incentive
plan previously or subsequently adopted by the Board, nor shall the fact
that a Non-Employee Director has received one or more awards under the 1994
Plan or under any other stock option or incentive plan of the Company
preclude such Non-Employee Director from receiving awards under this Plan.

13. TERMINATION OF THE PLAN. No further awards shall be made under this
Plan after the passage of 10 years from the date on which this Plan is first
approved by the stockholders of the Company.

35
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MORRISON KNUDSEN CORPORATION

COMMON STOCK/SERIES A PREFERRED STOCK

The undersigned hereby constitutes and appoints Robert A. Tinstman, Stephen
G. Hanks and James E. McCallum, or any one of them, with full power of
substitution, as attorneys and proxies to appear and vote all of the shares of
stock designated as "Common Stock" and all shares of stock designated as "Series
A Preferred Stock" on the reverse side of this proxy card and which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Morrison Knudsen Corporation (the "Company") to be held at the Central Plaza
Building of the Company's World Headquarters Office located at 720 Park
Boulevard, Boise, Idaho, on Friday, April 11, 1997, at 10:00 a.m., local time,
and at any and all adjournments thereof, for the election of the nominees listed
on the reverse side of this proxy card, or their respective substitutes, as
directors; for approval of the adoption of the 1997 Stock Option and Incentive
Plan for Non-Employee Directors of Morrison Knudsen Corporation; for the
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
auditors; and on any other matters properly brought before the meeting or any
adjournments thereof, and as to such other matters the undersigned hereby
confers discretionary authority, with all the powers which the undersigned would
possess if personally present. The shares designated on the reverse side of this
proxy card as Common and as Series A Preferred and represented by this proxy
will be voted as directed by the stockholder. Where no direction is given when
the duly-executed and dated proxy is returned, such shares will be voted FOR
each nominee listed in Item 1, FOR Item 2 and FOR Item 3 if such items are
presented at the meeting.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
THE BOARD RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.

1. Election of directors duly nominated: David H. Batchelder, Robert S.
Miller, Jr. and Robert A. Tinstman.

/ / FOR all nominees listed above. / / WITHHOLD AUTHORITY to vote for
all nominees listed above.

TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE ABOVE LIST.

2. Approval of the adoption of the 1997 Stock Option and Incentive Plan for
Non-Employee Directors.

/ / FOR / / AGAINST / / ABSTAIN

3. Ratification of the appointment of Coopers & Lybrand, L.L.P. as independent
auditors of the Company for the fiscal year ending November 30, 1997.

/ / FOR / / AGAINST / / ABSTAIN

ALL VOTES RECEIVED BY NORWEST BANK MINNESOTA, N.A., WILL BE KEPT CONFIDENTIAL.

Please sign your name exactly as it appears printed hereon. Executors,
administrators, guardians, officers of corporations and others signing in a
fiduciary capacity should sign their full title as such. Each joint tenant
should sign.

Date:
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Receipt of the Proxy Statement for
the meeting is acknowledged.

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(Signature of Stockholder)

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(Signature of other joint tenant,
if held jointly)

Whether or not you expect to attend the meeting, you are urged to date, execute
and return this proxy, which may be revoked at any time prior to its use.