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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Complete the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MORRISON KNUDSEN CORPORATION
A Delaware Corporation
Commission File Number 1-12054
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 )-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.
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary matierals
[ ] 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 date of its filing.
1) Amount previously paid:
2) Form, schedule or registration statement no.:
3) Filing party:
4) Date filed:
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[MKC LOGO] February 12, 1998/3:30 pm
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - APRIL 8, 1998
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 Wednesday, April 8, 1998, at 10:00 a.m., local
time, for the following purposes:
1. To amend the Company's Restated and Amended Certificate of Incorporation
to eliminate provisions with respect to class designations for directors
and to add provisions to elect annually and to allow the removal of
directors at any time, with or without cause, by a majority vote of the
stockholders of the Company.
2. To elect either (i) nine directors to terms expiring at the Annual
Meeting of Stockholders in 1999 or (ii) three directors to terms
expiring at the Annual Meeting of Stockholders in 2001, depending on
whether the proposed amendment to the Company's Restated and Amended
Certificate of Incorporation is approved by the appropriate vote of the
stockholders.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors of the Company for the fiscal year ending November 30, 1998.
4. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on February 27, 1998
are entitled to notice of and to vote at the meeting or any postponement or
adjournment 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 2, 1998 BY ORDER OF THE BOARD OF DIRECTORS
MORRISON KNUDSEN CORPORATION
Stephen G. Hanks
Executive Vice President,
Chief Legal Officer and Secretary
The Company's 1997 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.
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[MKC LOGO] MORRISON KNUDSEN CORPORATION
MORRISON KNUDSEN PLAZA
720 PARK BOULEVARD
BOISE, IDAHO 83729
_________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 8, 1998
_________
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 Wednesday,
April 8, 1998, at 10:00 a.m., local time, and at any postponement or adjournment
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 2, 1998.
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 27, 1998 (the "Record
Date") are entitled to vote such shares at the Annual Meeting. On the Record
Date, __________ shares of Common Stock were outstanding and entitled to vote
and ________ 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
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. Approval of the amendment to the Company's
Restated and Amended Certificate of Incorporation to eliminate provisions with
respect to class designations for directors and to add provisions to elect
directors annually and to allow the removal of directors at any time, with or
without cause, by a majority vote of the stockholders of the Company will
require the affirmative vote of not less than two-thirds of the issued and
outstanding voting power of the stock of the Company entitled to vote thereon.
The nominees for election as directors 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. 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 the holders 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.
Abstentions and broker nonvotes will be counted as votes against the amendment
to the Company's Restated and Amended Certificate of Incorporation. Abstentions
and broker nonvotes with respect to any other 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.
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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 approval
of the amendment to the Company's Restated and Amended Certificate of
Incorporation, (ii) FOR each of the nominees named herein, or their respective
substitutes, as directors and (iii) FOR ratification of the appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors for the fiscal
year ending November 30, 1998.
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.
HISTORICAL INFORMATION
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 "Restructuring"); and the Company
changed its name to Morrison Knudsen Corporation.
BUSINESS TO BE TRANSACTED
1. AMENDMENT TO THE COMPANY'S RESTATED AND AMENDED CERTIFICATE OF
INCORPORATION.
The Company's Restated and Amended Certificate of Incorporation (the
"Certificate of Incorporation") currently provides for a classified Board of
Directors; that is, a system under which one-third of the directors are elected
annually, each for a three-year term. Over the years, many companies have
adopted classified boards, reflecting widespread concern over the use of abusive
techniques by corporate "raiders" and others who engaged in hostile and non-
negotiated attempts to acquire corporations to the disadvantage of stockholders.
A classified board was widely viewed as discouraging proxy contests for the
election of directors, or acquisitions of substantial blocks of stock, by a
person or group seeking to acquire control of a company, because the extended
terms of directors would operate to prevent the acquisition of control of the
board in a relatively short period of time. A classified board was also viewed
as promoting stability and continuity among a corporation's directors.
Corporate acquisition techniques have evolved, and the ability of boards of
directors to exercise their fiduciary responsibilities to stockholders in the
context of proposed acquisitions has been substantially strengthened through the
use of the continuing development of basic principles of corporate law and
practice.
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Against this background, some investors have come to view classified boards
as having the effect of insulating directors from a corporation's stockholders;
and a number of major companies have determined that, regardless of the merits
of a classified board in deterring coercive takeover attempts, principles of
good corporate governance dictate that all directors of a company be elected
annually. The Board of Directors of the Company agrees with this conclusion.
Accordingly, the Board of Directors has unanimously approved, and
recommends to stockholders that they consider and approve, a proposal to amend
the Certificate of Incorporation to eliminate the provisions with respect to
class designations for directors and to provide instead for the annual election
of directors and to allow for the removal of directors at any time, with or
without cause, by a majority vote of the stockholders of the Company (the
"Amendment to the Certificate of Incorporation").
In addition, the Amendment to the Certificate of Incorporation would
replace the existing Article VI of the Certificate of Incorporation which
provides, in accordance with the provisions of Delaware law applicable to
classified boards of directors, that directors may be removed only for cause.
Under Delaware law, unless otherwise provided in the Certificate of
Incorporation, directors of companies that do not have classified boards may be
removed by stockholders, with or without cause, by the affirmative vote of the
holders of a majority of the outstanding shares then entitled to vote generally
in the election of directors. Amendment of the existing Article VI would have
the effect of returning such power to the stockholders of the Company.
Because any or all directors could be removed at any time by a simple
majority vote, approval of the proposed changes to the Certificate of
Incorporation may result in the holder of a significant block of stock having a
greater influence on the Board of Directors. However, the Board of Directors is
not aware of any stockholder plans to seek removal or replacement of any
director, and the Board of Directors has concluded that the advantages of the
proposed changes outweigh this possible effect.
The Amendment to the Certificate of Incorporation also would correct
typographical errors in ARTICLE IV, Section 1, to add the word "One" before
"Hundred" in each instance in which it occurs.
If the Amendment to the Certificate of Incorporation is approved at the
Annual Meeting, the Certificate of Incorporation will be amended, as follows:
ARTICLE IV, Section 1, will be amended to correct typographical errors by
adding the word "One" before "Hundred" in each instance in which it occurs.
ARTICLE V will be amended to read in its entirety, as follows:
The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors, which shall consist
of not less than six directors nor more than 12 directors, the exact
number of directors to be determined from time to time by resolution
adopted by the Board of Directors. At each annual meeting of the
stockholders of the Corporation, commencing with the 1998 annual
meeting, all directors will be elected to serve for a term expiring at
the next annual meeting of the stockholders of the Corporation. A
director shall hold office until the annual meeting at which his or
her term expires and until his or her successor shall be elected and
shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on
the Board of Directors, howsoever resulting, may be filled by a
majority of the directors then in office, even if less than a quorum,
or by a sole remaining director. Any director elected to fill a
vacancy shall hold office for a term expiring at the next annual
meeting of the stockholders of the Corporation. Notwithstanding
anything to the contrary in this Restated and Amended Certificate of
Incorporation or any provision of the Bylaws of the Corporation, there
shall be no cumulative voting.
ARTICLE VI will be amended to read in its entirety, as follows:
Any or all of the directors of the Corporation may be removed
from the Board of Directors, with or without cause, by the affirmative
vote of the holders of a majority of the voting power of the
outstanding shares of voting stock of the Corporation entitled to vote
thereon.
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
2. ELECTION OF DIRECTORS.
Currently, 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, Leonard R. Judd, William C. Langley and
John D. Roach, will expire at the Annual Meeting. The current terms of office
of Dorn Parkinson, Terry W. Payne and Dennis R. Washington are scheduled to
expire at the annual meeting in 1999; and the current terms of office of David
H. Batchelder, Robert S. Miller, Jr. and Robert A. Tinstman are scheduled to
expire at the annual meeting in 2000.
If the Amendment to the Certificate of Incorporation is approved by the
stockholders, each director will be elected to a one-year term of office rather
than a three-year term and the classes of directors will be eliminated. The
directors whose terms are scheduled to expire in 1999 and 2000 have indicated
that they will resign their current terms and stand for election to one-year
terms at the Annual Meeting if the Amendment to the Certificate of Incorporation
is approved. If the Amendment to the Certificate of Incorporation is not
approved by the stockholders, the directors whose terms are scheduled to expire
in 1999 and 2000 will not resign, and only the positions of the three directors
whose terms expire at this Annual Meeting will be open for election.
In accordance with the recommendation of the Nominating Committee, the
Board of Directors of the Company has nominated two alternative slates for
election as directors, depending upon the outcome of the stockholder vote on the
Amendment to the Certificate of Incorporation. If the Amendment to the
Certificate of Incorporation is approved, the Board of Directors has nominated
David H. Batchelder, Leonard R. Judd, William C. Langley, Robert S. Miller, Jr.,
Dorn Parkinson, Terry W. Payne, John D. Roach, Robert A. Tinstman and Dennis R.
Washington, each of whom currently serves as a director, for election as
directors for a one-year term to expire at the annual meeting of the Company's
Stockholders in 1999, or until their successors are duly elected and qualified.
If the Amendment to the Certificate of Incorporation is not approved, the Board
of Directors has nominated Leonard R. Judd, William C. Langley and John D.
Roach, 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 2001, or until their successors are duly elected and qualified.
Information regarding these nominees 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 of
Directors may reduce the number of directors to be elected at the Annual
Meeting.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR
NAME FOR PREVIOUS FIVE YEARS AGE SINCE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David H. Batchelder Chairman and Chief Executive Officer of Batchelder & Partners, Inc. 48 1993
(investment advisory and consulting firm) and Managing Member of
Relational Investors LLC (general partner of active investment fund), San
Diego, California.
Leonard R. Judd Consultant for Phelps Dodge Corporation (copper mining and manufacturing), 58 1993
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 Corporation.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR
NAME FOR PREVIOUS FIVE YEARS AGE SINCE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William C. Langley Formerly served as Executive Vice President, Chief Credit and Risk Policy 59 1996
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.
Robert S. Miller, Jr. Acting Chairman and Chief Executive Officer of Waste Management, Inc. 56 1996
(environmental services), Oak Brook, Illinois. Formerly served as Acting
Chairman and Chief Executive Officer of Federal-Mogul Corp. (motor vehicle
parts and accessories), Detroit, Michigan; and formerly Chairman of the Board
of Old MK, as well as Senior Partner of James D. Wolfensohn, Inc. (investment
banking firm) and Vice Chairman of Chrysler Corporation. Mr. Miller also
currently serves as a Director of Federal-Mogul Corp., Fluke Corporation, Pope
& Talbot, Inc. and Symantec Corp.
Dorn Parkinson Chairman of the Board and consultant of Washington Corporations/1/ (interstate 51 1993
trucking and repair and sale of machinery and equipment), Missoula, Montana.
Mr. Parkinson formerly served as President of Washington Corporations.
Terry W. Payne Chairman and owner of Terry Payne & Co., Inc. (insurance and construction 56 1993
bonding), Missoula, Montana. Mr. Payne also serves as a Director of
Washington Corporations and First Interstate Bank - Montana, as well as a
Director and President of Hoiness LaBar Insurance Co., Inc. and as a Director
and Vice President of Montana International, Inc.
John D. Roach Chairman of the Board, President and Chief Executive Officer of Stonegate 54 1996
Resources LLC (building products), Dallas, Texas. Formerly, Chairman of the
Board, President and Chief Executive Officer of Fibreboard Corporation
(building products), Dallas, Texas. Mr. Roach also serves as a Director of PMI
Group, Inc. and was formerly a Director of Magma Power Co., Thompson PBE
and the American Stock Exchange.
Robert A. Tinstman President and Chief Executive Officer of the Company. Mr. Tinstman 51 1996
formerly served Old MK as a Director, President and Chief Executive Officer
and as President of its Mining Group.
Dennis R. Washington Founder and principal shareholder of Washington Corporations/1/ (interstate 63 1996
trucking and repair and sale of machinery equipment), Missoula, Montana.
Mr. Washington also is the founder and/or principal stockholder 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.
</TABLE>
- --------------------
/1/ Washington Corporations and other entities controlled by Dennis R.
Washington may be deemed to be affiliates of the Company.
IF THE STOCKHOLDERS APPROVE THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION,
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE NOMINEES
NAMED ABOVE.
IF THE STOCKHOLDERS DO NOT APPROVE THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION,THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF LEONARD R. JUDD, WILLIAM C. LANGLEY AND JOHN D. ROACH.
There were six meetings of the Company's Board of Directors held during the
Company's fiscal year ended November 30, 1997 ("fiscal year 1997"). 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
1997.
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AUDIT COMMITTEE
The Audit Committee of the Company's Board of Directors recommends to the
Board of Directors 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.
Three meetings of the Audit Committee were held during fiscal year 1997. The
members of the Audit Committee are David H. Batchelder, Leonard R. Judd
(Chairman), William C. Langley and Robert S. Miller, Jr.
COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors reviews and
recommends to the full Board of Directors 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 of Directors with respect thereto. The
Compensation Committee meets at such times as may be deemed necessary by the
Board of Directors or the Compensation Committee. Five meetings of the
Compensation Committee were held during fiscal year 1997. Members of the
Compensation Committee are David H. Batchelder (Chairman), Leonard R. Judd, Dorn
Parkinson and John D. Roach.
COMPENSATION SUBCOMMITTEE
In 1997, the Compensation Committee established a subcommittee (the
"Subcommittee") to comply with Section 162(m) of the Internal Revenue Code, as
amended ("Section 162(m)"), 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
(the "Covered Employees"). The Subcommittee is made up solely of outside
directors, as defined in Section 162(m), and establishes and administers the
compensation of Covered Employees and the performance goals related to such
compensation. The Subcommittee met once during fiscal year 1997. Members of
the Subcommittee are Leonard R. Judd and John D. Roach.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Batchelder & Partners, Inc., an investment advisory and consulting firm
("BPI"), of which Mr. Batchelder is Chairman and Chief Executive Officer, was
engaged by the Company to act as financial advisor to the Company with respect
to a possible transaction between the Company and Guy F. Atkinson Company of
California. Pursuant to the engagement agreement, the Company agreed to pay BPI
a retainer fee of $50,000 per month, commencing September 1, 1997, not to exceed
$250,000 and a success fee equal to one percent of the total transaction (as
defined in the agreement), reduced by the retainer fee paid to BPI. The
transaction was abandoned; therefore, no success fee was payable to BPI. During
fiscal year 1997, the Company paid the retainer fee of $150,000 to BPI and
$4,267 in related expenses. Additionally, in December 1997, the Company paid to
BPI $50,000 in retainer fees and $8,130 for expenses incurred in connection with
the transaction. From time to time, BPI also has advised the Company regarding
other potential acquisitions and divestitures.
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 1999 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
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stockholder proposes to nominate for election as a director: name, age,
business address, residence address, 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 (the "SEC")
under Section 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") 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 1999 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 1999 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 1997. The members of the Nominating
Committee are Robert S. Miller, Jr., Terry W. Payne and Dennis R. Washington
(Chairman).
SPECIAL COMMITTEE
On February 20, 1997, the Board of Directors established a Special
Committee composed of independent directors to review, analyze and evaluate the
possible acquisition by the Company of Mr. Washington's interest in a copper
mine in Butte, Montana. On January 15, 1998, discussions between the Company
and Mr. Washington relating to the possible acquisition were terminated. Eleven
meetings of the Special Committee were held during fiscal year 1997. Members of
the Special Committee are William C. Langley, Robert S. Miller, Jr. (Chairman)
and John D. Roach.
DIRECTOR COMPENSATION
Directors of the Company who are not also officers or employees of the
Company (the "Non-Employee Directors") are paid an annual retainer fee of
$20,000, plus $1,000 for each day of attendance at a Board of Directors meeting
and $500 for each standing committee meeting attended. Committee chairmen
receive an additional $3,000 per year. Effective February 20, 1997, the
Compensation Committee approved a fee schedule specific to the Special Committee
pursuant to which each member of the Special Committee receives $1,000 for each
day of attendance at Special Committee meetings and a $10,000 one-time retainer,
with the Chairman of the Special Committee receiving a $15,000 one-time
retainer.
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 options received by an electing director in lieu of such fees have 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 1997, 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.
All Non-Employee Directors made the election to forgo their retainer and
chairmanship fees for fiscal year 1997. During fiscal year 1997, the following
amounts were earned by members of the Board of Directors: David H. Batchelder -
$15,000 plus 12,778 stock options; Leonard R. Judd - $16,000 plus 12,778 stock
options; William C. Langley - $34,500 plus 11,111 stock options; Robert S.
Miller, Jr. - $39,750 plus 12,778 stock options; Dorn Parkinson - $14,500 plus
11,111 stock options; Terry W. Payne - $12,500 plus 11,111 stock options; John
D. Roach - $35,500 plus 11,111 stock options; and Dennis R. Washington - $10,750
plus 12,778 stock options.
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In addition, under the 1997 Stock Option and Incentive Plan for Non-
Employee Directors, 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. During fiscal year 1997, the Board of Directors awarded
options to purchase 10,000 shares of Common Stock to each of Messrs.
Batchelder, Judd, Langley, Miller, Parkinson, Payne and Roach and options to
purchase 25,000 shares of Common Stock to Mr. Washington. Such options will
vest in four equal increments on each of the first, second, third and fourth
anniversaries of the date of grant.
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 and 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 51 1996
Anthony S. Cleberg/2/ Executive Vice President and Chief Financial Officer 45 1997
Stephen G. Hanks/3/ Executive Vice President, Chief Legal Officer and Secretary 47 1996
Darrol N. Groven/4/ Senior Vice President and President - Heavy Civil 54 1994
Construction Group
Thomas H. Zarges/5/ Senior Vice President and President - Engineering and 49 1996
Construction Group
Douglas L. Brigham/6/ Vice President and Controller 32 1996
Frank S. Finlayson/7/ Vice President and Treasurer 37 1997
Alvia L. Henderson/8/ Vice President - Human Resources 48 1996
Charles W. Simpson/8/ Vice President - Government and Public Affairs 61 1996
</TABLE>
- ---------------------
/1/ For certain biographical information regarding Mr. Tinstman, see "Election
of Directors."
/2/ Mr. Cleberg formerly served in various management positions with Honeywell,
Inc., including Corporate Vice President of Taxes and Vice President of Finance
for Space and Aviation Control.
/3/ 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.
/4/ Mr. Groven formerly served as 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 since 1981.
/5/ Prior to the Merger Date, Mr. Zarges served as President of Old MK's
Engineering and Construction Group.
/6/ Mr. Brigham formerly served the Company as Vice President and Treasurer and,
prior to the Merger Date, served Old MK in various management capacities.
/7/ Mr. Finlayson formerly served the Company as Vice President of Project
Finance, and served the Company's Heavy Civil Construction Group as Vice
President of Finance and Vice President of Project Development. Prior to the
Merger Date, he served Old MK in various management capacities.
/8/ Prior to the Merger Date, Ms. Henderson and Mr. Simpson served Old MK in
various executive and management capacities.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION FOR 1997
GENERAL COMPENSATION POLICY
The goals of the Company's compensation program are to align compensation
with business objectives and performance and Company values, and to enable the
Company to attract, retain and reward executive officers whose contributions are
essential to the long-term success of the Company. The Company's compensation
program for executive officers is based upon the following principles:
. Considerable emphasis is placed upon Company financial results and
stock price performance to provide incentives to executives to
increase shareholder value. This emphasis increases in proportion to
an executive's level of responsibility within the Company.
. Total compensation will be competitive and sufficiently flexible to
retain and attract the caliber of talent needed to enhance the
Company's financial and market performance.
. Total compensation also will reflect individual performance,
contribution, innovation and long-term potential.
The Company regularly participates in an executive compensation study to
compare its pay practices with those of other companies in the engineering and
construction industry. The study uses executive compensation data from
approximately 30 engineering and construction companies in a comparative
analysis of each component of compensation (i.e., base salary, bonus, long-term
incentives and total compensation) for executive officers in companies of
various sizes. Three primary factors are used in analyzing compensation for
each executive operations position: revenue of the Company or business unit,
organizational levels from the chief executive officer ("CEO") of the Company,
and autonomy (i.e., the freedom to act or ability to influence the outcome of
major decisions) within the Company. Of these three factors, revenue carries
the most weight.
CASH-BASED COMPENSATION
Base Salaries. The Company generally targets base salaries to be
-------------
competitive in the market. In setting the actual base salary for an individual
executive officer, the Company takes into account the comparative base salary
data for the officer's position from the compensation study described above and
the officer's overall individual performance. Overall individual performance is
measured by financial results, compliance with Company policies, adherence to
professional ethical standards, degree of responsibility within the Company and
level of individual experience. In both setting goals and measuring an
executive officer's performance against those goals, the Company takes into
account the performance of its competitors and general economic and market
conditions.
A few of the Company's executive officers, including the CEO and three of
the four other most highly compensated officers of the Company, have employment
agreements with the Company. The agreements with Robert A. Tinstman, Stephen G.
Hanks and Thomas H. Zarges entitle those officers to minimum annual base
salaries of $250,000 each. The agreement with C. Stephen Allred entitles him to
a minimum annual base salary of $234,000. The base salaries for the CEO and
other highly-compensated officers for fiscal year 1997, established using the
factors described in the preceding paragraph, exceeded the contractual minimums.
Therefore, the employment agreements were not a factor in determining the base
salaries of those officers.
Bonuses. The Company has an annual cash bonus plan designed to motivate
-------
eligible employees to achieve specific annual growth levels in the Company's net
after-tax earnings per share. The bonus plan is simple in design and is tied to
pre-defined measurable results. Currently, the Compensation Committee exercises
substantial discretion with respect to the award of bonuses. Each year, the
Company establishes performance objectives upon which bonuses may be based.
After the end of the Company's fiscal year, the Compensation Committee
establishes a bonus pool equal to a specified level of the Company's pre-tax
profits if the Company's earnings per share fall within a certain range. The
9
<PAGE>
bonus pool may increase to a higher percentage of the Company's pre-tax profits
if the Company's earnings per share fall within a higher range. The allocation
of a specific bonus amount to an individual executive officer is determined
taking into account the comparative bonus data for that officer from the
compensation study described above, the overall financial performance of the
Company and the overall individual performance factors described above. In
addition, the financial performance of the operating group to which an
individual is assigned is taken into account for officers and key employees who
are assigned to operating groups.
On occasion, the Company may pay a signing bonus to a newly hired executive
officer, if the Compensation Committee determines that such a bonus is necessary
and appropriate to attract the caliber of officer needed to accomplish the
Company's financial and market goals.
EQUITY-BASED COMPENSATION
The Company maintains a stock option plan designed to provide additional
long-term incentives to employees to work to increase stockholder value. The
Company also recognizes that a stock incentive program is an important element
of a competitive compensation package for its executive officers. The program
utilizes vesting periods to encourage key employees to continue in the employ of
the Company and thereby acts as a retention device for key employees. The
Company believes that the program encourages employees to maintain a long-term
perspective. The Company grants fixed-price stock options to a small group of
key employees. For the CEO and the four other most highly compensated executive
officers, the size of option awards is based upon recommendations from the
Subcommittee, described under "Corporate Tax Deduction on Compensation in Excess
of $1 Million a Year" below, and approval of the entire Compensation Committee
and the Board of Directors. For other eligible executive officers, the size of
option awards is based upon recommendations of the Compensation Committee and
approval of the entire Board of Directors.
In determining the size of an option award to recommend for an executive
officer, the Compensation Committee's and Subcommittee's primary considerations
are the "grant value" of the award and the performance of the officer measured
against the same performance criteria described above under "Cash-Based
Compensation." In determining the grant value guidelines for option awards, the
Compensation Committee and Subcommittee use the same compensation study
described above, which employs the Black-Scholes pricing model for assigning
prospective values to stock options on the date of grant. The Compensation
Committee and Subcommittee take into account the comparative data from other
publicly traded companies concerning long-term incentive compensation for the
given executive position and the percentage of total compensation the
Compensation Committee and Subcommittee believe should be represented by the
value of an option grant. In addition to considering the grant value and the
officer's performance, the Compensation Committee and Subcommittee also may
consider the number of outstanding unvested options the officer holds and the
size of previous option awards to that officer. The Compensation Committee and
Subcommittee do not assign specific weights to these items.
Corporate Tax Deduction on Compensation in Excess of $1 Million a Year.
----------------------------------------------------------------------
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Company's CEO or any of the four other most highly compensated
executive officers. Certain performance-based compensation, however, is
specifically exempt from the deduction limit. The Compensation Committee's
policy is to qualify incentive-based compensation to executive officers for
deductibility under Section 162(m) of the Internal Revenue Code to the extent
that the Compensation Committee deems such qualification to be in the best
interests of the Company. Accordingly, the Board of Directors has established a
Subcommittee of the Compensation Committee, comprised solely of outside
directors, to approve incentive-based compensation awarded to the CEO and the
four other most highly compensated executive officers of the Company.
10
<PAGE>
CEO COMPENSATION
Robert A. Tinstman has been President and CEO of the Company since
September 11, 1996. The Compensation Committee used the same compensation
policy described above for all employees to determine Mr. Tinstman's fiscal year
1997 compensation.
Salary. Mr. Tinstman's base salary reflects a consideration of both
------
competitive forces and the Company's performance. The Compensation Committee
does not assign specific weights to these categories. As described under "Cash-
Based Compensation" above, the Company participates in a compensation study that
compares the various components of compensation for chief executive officers at
companies with revenue at the level achieved by the Company. When recommending
a salary for the CEO, the Compensation Committee takes into account the
comparative salary data from the compensation study for companies with revenue
equal to or exceeding those of the Company. Based upon this analysis, and the
leadership that Mr. Tinstman demonstrated in guiding Old MK through the
Restructuring and Merger that was consummated on September 11, 1996, the
Compensation Committee recommended and the Board of Directors approved that Mr.
Tinstman's salary be set at the level that appears in the summary compensation
table for 1997.
After considering the Company's financial results for fiscal year 1997 as
compared to fiscal year 1996, the progress the Company has made towards its
business objectives and competitive data showing compensation for other
comparable chief executive officers, the Compensation Committee recommended and
the Board of Directors approved an increase in Mr. Tinstman's annual salary to
$415,000, effective February 7, 1998.
Bonus. The Company follows the same policy described above to determine
-----
Mr. Tinstman's bonus as it does for other executive officers. The Company
establishes specific earnings objectives against which actual financial
performance may be measured to determine the size of the bonus pool, if any,
that will be available for bonus awards. The allocation of a specific bonus
amount to an individual officer takes into account individual performance
factors and comparative bonus data from the compensation study. Bonuses for a
particular fiscal year are paid within 75 days after the end of the fiscal year.
As a result of the financial performance of the Company during fiscal year
1996, no bonuses were awarded to executive officers during fiscal year 1997.
After considering the Company's financial results for fiscal year 1997 as
compared to fiscal 1996, the progress the Company has made towards achieving its
business objectives and competitive data showing compensation for other
comparable chief executive officers, the Compensation Committee recommended and
the Board of Directors approved that Mr. Tinstman be awarded a bonus of $255,000
in January 1998.
Stock Options. The Company follows the same policy described above to
-------------
determine Mr. Tinstman's stock option awards as it does for other executive
officers. Stock options are granted to encourage and facilitate personal stock
ownership by the executive officers and thus strengthen both their personal
commitment to the Company and a longer-term perspective in their managerial
responsibilities. This component of an executive officer's compensation
directly links the officer's interests with those of the Company's other
stockholders.
In January 1997, the Subcommittee recommended and the Compensation
Committee and Board of Directors approved the grant to Mr. Tinstman of an option
to purchase 200,000 shares of Common Stock with an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant. In
recommending the grant of the option to Mr. Tinstman, the Subcommittee reviewed
the grant value guidelines described under "Equity-Based Compensation,"
evaluated his performance against the criteria described above and considered
competitive data from the compensation study showing total compensation for Mr.
Tinstman and comparable chief executive officers.
In January 1998, the Subcommittee recommended and the Compensation
Committee and Board of Directors approved that Mr. Tinstman be granted an option
to purchase 100,000 additional shares of Common Stock with an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. In recommending the grant of this option to Mr. Tinstman, the
Subcommittee followed the same procedure and employed the same criteria
11
<PAGE>
used in determining the January 1997 option grant. In addition, the Subcommittee
took into account the size of the 1997 option grant and the size of the proposed
grant to Mr. Tinstman as compared to the size of grants to Mr. Tinstman's senior
staff members. Working within these parameters the Subcommittee made an
assessment that a grant to Mr. Tinstman of an option to purchase 100,000
additional shares of Common Stock was appropriate.
David H. Batchelder, Chairman
Leonard R. Judd
Dorn Parkinson
John D. Roach
COMPANY STOCK PERFORMANCE GRAPH
Rules adopted by the SEC require that the Company include in this Proxy
Statement a line-graph presentation comparing cumulative five-year stockholder
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 52 MONTH CUMULATIVE TOTAL RETURN*
AMONG MORRISON KNUDSEN CORPORATION,
THE S&P 500 INDEX AND A PEER GROUP
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------------
7/12/93 11/30/93 11/30/94 11/30/95 11/30/96 11/30/97
<S> <C> <C> <C> <C> <C> <C>
Morrison Knudsen Corp New MK 100 92 56 73 115 126
PEER GROUP 100 102 97 133 138 106
S & P 500 100 104 105 144 184 236
</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.
*The Company was incorporated on July 12, 1993; therefore, no information prior
to that date is available. One hundred dollars was invested on July 12, 1993 in
stock or index. The Company's fiscal year ends November 30.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all plan and non-plan compensation awarded or
paid to, or earned by, the CEO and the four most highly compensated executive
officers of the Company (the "Named Executives") during the fiscal years
indicated:
12
<PAGE>
SUMMARY COMPENSATION TABLE
FOR FISCAL YEARS ENDED 1995, 1996 AND 1997
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------------------------------------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING LTIP OTHER
NAME AND PRINCIPAL SALARY/1/ BONUS COMPENSATION OPTIONS/ PAYOUTS COMP.
POSITION YEAR ($) ($) ($) SARS (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Tinstman
President and Chief
Executive Officer 1997 402,840 255,000 24,631/2/ 200,000 0 25,340/3/
1996 73,462 0 24,388/4/ 0 1,618,000/5/ 19,035
1995 - -- - - - -
Anthony S. Cleberg
Executive Vice President
and Chief Financial
Officer 1997 144,231/6/ 305,000/7/ 21,489/8/ 150,000 0 20,965/9/
1996 -- -- - - - -
1995 -- -- - - - -
Stephen G. Hanks
Executive Vice
President, Chief Legal
Officer and Secretary 1997 308,077 130,000 21,304/10/ 60,000 0 24,532/11/
1996 65,769 0 20,711/12/ 0 0 15,059
1995 -- -- - - - -
Thomas H. Zarges
Senior Vice President of
Operations and President
- Engineering and
Construction Group 1997 268,078 150,000 14,070/13/ 50,000 0 24,758/14/
1996 57,001 0 13,699/15/ 0 0 18,339
1995 -- -- - - - -
C. Stephen Allred
President -
Environmental/
Government Group 1997 240,154 80,000 10,300/16/ 45,000 0 7,500/17/
1996 51,300 0 0 0 0 0
1995 -- -- - - - -
</TABLE>
- ---------------------
/1/ Prior to the Merger, Messrs. Tinstman, Hanks, Zarges, and Allred were
compensated by Old MK. The 1996 compensation included in this table represents
amounts earned by such individuals from the Merger Date through November 30,
1996. As of November 30, 1996, the base salaries of Messrs. Tinstman, Hanks,
Zarges, and Allred were $400,000, $300,000, $260,000, and $234,000,
respectively. Under applicable rules and regulations of the SEC, information
regarding the compensation of such individuals prior to the Merger Date is not
required to be disclosed.
13
<PAGE>
/2/ Consists of disability insurance premium of $12,243 and tax gross-up of
$12,388 on the foregoing disability insurance premium and the value of the term
life insurance premium reported under footnote 3 to this table.
/3/ Consists of $7,500 matching contributions to Mr. Tinstman's 401(k) account
and $17,840 attributable to a life insurance policy on Mr. Tinstman's life under
the Key Executive Life Insurance Plan, of which $832 represents the dollar value
of the term life insurance premium and $17,008 represents Mr. Tinstman's
interest in the policy's cash surrender value as projected on an actuarial basis
attributable to the 1997 premium.
/4/ Consists of disability 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 included for such year in the last column to this table.
/5/ 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 after the completion of the performance period under such
plan, which occurred December 31, 1997.
/6/ Mr. Cleberg started employment with the Company in May 1997, with an annual
salary rate of $250,000.
/7/ Consists of a $200,000 signing bonus paid to Mr. Cleberg in May 1997 when he
joined the Company and a $105,000 performance bonus paid in January 1998.
/8/ Consists of tax gross-up of $9,588 on relocation expenses, disability
insurance premium of $5,891 and tax gross-up of $6,010 on the foregoing
disability insurance premium and the value of the term life insurance premium
reported under footnote 9 to this table.
/9/ Consists of $20,965 attributable to a life insurance policy on Mr. Cleberg's
life under the Key Executive Life Insurance Plan, of which $453 represents the
dollar value of the term life insurance premium and $20,512 represents Mr.
Cleberg's interest in the policy's cash surrender value as projected on an
actuarial basis attributable to the 1997 premium.
/10/ Consists of disability insurance premium of $10,712 and tax gross-up of
$10,592 on the foregoing disability insurance premium and the value of the term
life insurance premium reported under footnote 11 to this table.
/11/ Consists of $7,500 matching contributions to Mr. Hanks' 401(k) account,
$2,748 for service recognition, and $14,284 attributable to a life insurance
policy on Mr. Hanks' life under the Key Executive Life Insurance Plan, of which
$468 represents the dollar value of the term life insurance premium and $13,816
represents Mr. Hanks' interest in the policy's cash surrender value as projected
on an actuarial basis attributable to the 1997 premium.
/12/ Consists of disability insurance premium of $10,422 and tax gross-up of
$10,289 on the foregoing disability insurance premium and the value of the term
life insurance premium included for such year in the last column of this table.
/13/ Consists of disability insurance premium of $6,802 and tax gross-up of
$7,268 on the foregoing disability insurance premium and the value of the term
life insurance premium reported under footnote 14 to this table.
/14/ Consists of $7,500 matching contributions to Mr. Zarges' 401(k) account and
$17,258 attributable to a life insurance policy on Mr. Zarges' life under the
Key Executive Life Insurance Plan, of which $481 represents the dollar value of
the term life insurance premium and $16,777 represents Mr. Zarges' interest in
the policy's cash surrender value as projected on an actuarial basis
attributable to the 1997 premium.
/15/ Consists of disability insurance premium of $6,638 and tax gross-up of
$7,061 on the foregoing disability insurance premium and the value of the term
life insurance premium included for such year in the last column of this table.
/16/ Consists of $5,076 attributable to relocation expenses and $5,224 tax
gross-up thereon.
/17/ Consists of matching contributions to Mr. Allred's 401(k) account.
OPTION GRANTS
The following table summarizes pertinent information concerning individual
grants of options to purchase Common Stock during fiscal year 1997, including a
theoretical grant date present value for each such grant:
14
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION
FOR OPTION TERM
- ----------------------------------------------------------------------------------- -----------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARS GRANTED TO OR BASE
GRANTED EMPLOYEES PRICE EXPIRATION
NAME (#) IN FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Tinstman 200,000/1/ 16.6 9.875 1/10/07 1,242,067 3,147,641
Anthony S. Cleberg 150,000/2/ 12.4 12.500 5/05/07 1,179,177 2,988,267
Stephen G. Hanks 60,000/1/ 5.0 9.875 1/10/07 372,620 944,292
Thomas H. Zarges 50,000/1/ 4.1 9.875 1/10/07 310,517 786,910
C. Stephen Allred 45,000/1/ 3.7 9.875 1/10/07 279,465 708,219
</TABLE>
- ---------------------
/1/ The options were granted on January 10, 1997 and become exercisable in four
equal increments on the first four anniversaries of the date of grant.
/2/ The options were granted on May 5, 1997 in connection with the start of Mr.
Cleberg's employment with the Company and become exercisable in four equal
increments on the first four anniversaries of the date of grant.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table summarizes pertinent information concerning the
exercise of stock options to purchase Common Stock during fiscal year 1997 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
<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 ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE /1/ UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert A. Tinstman 0 0 2,173/200,000 0/12,500
Anthony S. Cleberg 0 0 0/150,000 0/0
Stephen G. Hanks 0 0 1,755/60,000 0/3,750
Thomas H. Zarges 0 0 428/50,097 0/3,125
C. Stephen Allred 0 0 13/45,000 0/2,813
</TABLE>
- ---------------------
/1/ Pursuant to the Restructuring of Old MK, in 1996 shares of previously
awarded restricted and unrestricted stock of Old MK held by Messrs. Tinstman,
Hanks, Zarges, and Allred were converted to warrants exercisable to purchase
Common Stock. Securities underlying such warrants at November 30, 1997 are
included in the above totals.
15
<PAGE>
INDIVIDUAL FIVE-YEAR PLANS
During 1993, Old MK awarded Robert A. Tinstman and Stephen G. Hanks
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 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 President and
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.
Because of the losses incurred by Old MK before the Merger and
Restructuring, no benefit is payable to Mr. Hanks under the terms of his
Individual 5-Year Plan.
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 after the completion of the performance period
under such plan, which occurred on December 31, 1997.
Although Thomas H. 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 originally issued by
United Pacific Life Insurance Company, which was subsequently purchased by GE
Capital Assurance, arising out of the termination of the Morrison Knudsen
Corporation Retirement Plan established January 1, 1970 (the "1970 Retirement
Plan") and terminated December 12, 1987 ("GE Capital Annuity"); (ii) a
16
<PAGE>
retirement benefit from the Morrison Knudsen Corporation Retirement Plan
established January 1, 1988 (the "1988 Retirement Plan"), frozen December 31,
1991 and terminated October 31, 1997 ("Frozen MKRP Benefit") and (iii) a
retirement benefit from supplemental retirement benefit agreements ("SRBAs")
("SRBA Benefit"). Benefits under the 1988 Retirement Plan are offset by
benefits under the 1970 Retirement Plan. There are no offsets in benefits under
the 1970 Retirement Plan or the 1988 Retirement Plan for social security
benefits. Messrs. Tinstman, Hanks and Allred have 10 years, 12 years and 10
years of credited service, respectively. 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 five-year certain and life annuity upon normal retirement to each of
the Named Executives:
PENSION TABLE
<TABLE>
<CAPTION>
GE CAPITAL FROZEN MKRP SRBA BENEFIT TOTAL ANNUAL BENEFIT AT
ANNUITY/1/ BENEFIT/2/ AT AGE 65 AGE 65
NAME ($) ($) ($) ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert A. Tinstman 9,385 17,860 10,568/3/ 37,813
Anthony S. Cleberg 0 0 0 0
Stephen G. Hanks 7,284 13,755 0 21,039
Thomas H. Zarges 0 0 0 0
C. Stephen Allred 4,556 10,498 0 15,054
</TABLE>
- ---------------------
/1/ The amounts shown in this column are fixed amounts based upon the formula
contained in the 1970 Retirement Plan. Such amounts will not increase due to
compensation paid or service rendered by the Named Executive after December 12,
1987.
/2/ The amounts shown in this column are fixed amounts based upon the formula
contained in the 1988 Retirement Plan. Such amounts will not increase due to
compensation paid or service rendered by the Named Executive after December 31,
1991.
/3/ The Company has entered into a nonqualified and unfunded SRBA to provide
retirement income to Mr. Tinstman. The 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 1988 Retirement Plan, if it were not for
certain limits imposed on the Named Executive under the Code and (b) his Frozen
MKRP Benefit. 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 AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
Effective January 1, 1993, Old MK entered into employment agreements with
Robert A. Tinstman and Stephen G. Hanks, to which the Company succeeded in the
Merger. Effective January 1, 1994, Old MK entered into a similar employment
agreement with Thomas H. Zarges, to which the Company also succeeded in the
Merger. The agreements were for initial five-year terms (January 1, 1993
through December 31, 1997 for Messrs. Tinstman and Hanks and January 1, 1994
through December 31, 1998 for Mr. Zarges) with automatic continuing year-long
extensions after the end of the initial term. Pursuant to the terms of the
employment agreements, Messrs. Tinstman, Hanks, and Zarges each are entitled to
receive a minimum annual base salary of $250,000, 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
17
<PAGE>
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 Code, 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 and January 14, 1998, 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 and January 14, 1998,
which were unvested as of the date of such termination would be exercisable.
On April 26, 1996, Old MK entered into an employment agreement with C.
Stephen Allred, to which the Company succeeded in the Merger. Pursuant to the
terms of the employment agreement, Mr. Allred is entitled to receive a minimum
base compensation of $234,000 per year. He 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 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 $114,453. 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. Also, on October 18, 1996, the Company loaned $200,000 (the "1996
Loan") to Mr. Groven and his wife which was secured by their California
residence. In February of 1997, the Company loaned $50,000 (the "1997 Loan")
to Mr. Groven and his wife which was secured by their Idaho residence. The 1996
and 1997 Loans were non-interest bearing and were made in connection with Mr.
Groven's relocation to Boise, Idaho, at the request of the Company. With the
sale of the California residence, the 1996 Loan and the 1997 Loan were paid in
full and $7,065 was credited against the 1995 Loan. Since the beginning of
fiscal year 1997, the largest aggregate amount due and owing to the Company by
Mr. Groven was $364,453, and he remains indebted to the Company for $107,388.
Mr. Groven has executed a non-interest bearing promissory note in favor of the
Company, which becomes due and payable on June 7, 2001 for such outstanding
amount which is secured by his Idaho residence.
On August 8, 1997, the Company funded through its agent, HFS Mobility
Services, a $150,000 non-interest bearing bridge loan (equity advance) to
Anthony S. Cleberg and his wife for the purchase of their Boise residence
pending the sale of their Minnesota residence. The advance was repaid on August
15, 1997, when HFS Mobility Services acquired the property from Mr. and Mrs.
Cleberg. Since the beginning of fiscal year 1997, the largest aggregate amount
due and owing to the Company by Mr. Cleberg was $150,000; and he has not been
indebted to the Company since August 15, 1997 when the bridge loan was repaid.
No other director or executive officer of the Company has been indebted to
the Company at any time since the beginning of fiscal year 1997 in an amount in
excess of $60,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Washington Corporations ("WC"), which is owned by Dennis R. Washington, has
historically provided various administrative and support services to the Company
pursuant to certain intercompany agreements. During fiscal year 1997, the
Company paid $959,000 to WC for administrative and support services. In
addition, during fiscal year 1997, the Company paid $931,000 to WC for the lease
and maintenance of two corporate jets from WC.
18
<PAGE>
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 maintaining its repair facility
conveniently located and readily available to the Company. During fiscal year
1997, services and products provided by Equipco to the Company totaled $905,000.
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. In January 1997, the Company and
TPC concluded a Professional Service Agreement, effective August 1, 1996 and
expiring December 31, 1997. Under such agreement, TPC received an annual fee of
$1,280,000 which includes commissions earned on insurance. During fiscal year
1997, total fees paid by the Company to TPC, net of commissions paid by the
insurance carrier to TPC, was $67,390. In January 1998, the Board of Directors
approved a new agreement for insurance brokerage services supplied by TPC to the
Company effective January 1, 1998 and expiring December 31, 2000 with automatic
renewal annually for 12-month terms thereafter, unless canceled by either party
prior to the annual date. Pursuant to the new agreement, an annual fixed fee of
$1,150,000 will be paid in equal quarterly installments to TPC, with all
insurance commissions earned by TPC to be credited 100% against the fee.
Also, see "Compensation Committee Interlocks and Insider Participation" in
this Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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 SEC 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 fiscal year 1997, all directors, executive officers and beneficial owners
of greater than 10% of the outstanding common stock complied with the filing
requirements applicable to them.
SECURITY OWNERSHIP OF CERTAIN PERSONS
Common Stock. The following table shows the persons (as the term is used
------------
in Section 13(d)(3) of the Exchange Act) known to the Company to beneficially
own more than 5% of the Common Stock. It also shows the shares of Common Stock
beneficially owned by all directors of the Company, the Named Executives and all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE RIGHT TO ACQUIRE
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP WITHIN 60 DAYS OF
OF BENEFICIAL OWNER/1/ AS OF JANUARY 31, 1998/2/ JANUARY 31, 1998/3/ PERCENT OF CLASS/4/
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dennis R. Washington 20,234,561 /5/ 24,926 37.29
c/o Washington Corporations
101 International Way
Missoula, Montana 59802
Pioneering Management 3,670,400 /6/ -- 6.77
Corporation
60 State Street
Boston, Massachusetts 02109
CS First Boston, Inc. 2,796,985 /7/ -- 5.15
Eleven Madison Avenue
New York, New York 10010
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE RIGHT TO ACQUIRE
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP WITHIN 60 DAYS OF
OF BENEFICIAL OWNER/1/ AS OF JANUARY 31, 1998/2/ JANUARY 31, 1998/3/ PERCENT OF CLASS/4/
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Directors:
David H. Batchelder 168,445 /8/ 158,445 *
Leonard R. Judd 44,945 39,945 *
William C. Langley 18,739 18,739 *
Robert S. Miller, Jr. 22,675 22,675 *
Dorn Parkinson 173,739 /9/ 168,739 *
Terry W. Payne 64,585 44,585 *
John D. Roach 28,739 18,739 *
Robert A. Tinstman 52,173 52,173 *
Dennis R. Washington 20,234,561 /5/ 24,926 37.29
Named Executives:
C. Stephen Allred 11,263 11,263 *
Anthony S. Cleberg 10,000 0 *
Stephen G. Hanks 17,355 17,355 *
Robert A. Tinstman 52,173 52,173 *
Thomas H. Zarges 12,928 12,928 *
All Directors and Executive
Officers as a Group (19 persons) 20,919,138 649,138 38.11
</TABLE>
- --------------------
*Indicates that the percentage of shares beneficially owned does not exceed 1%
of the class.
/1/ Except as otherwise indicated, the mailing address of each person shown is
c/o Morrison Knudsen Corporation, Morrison Knudsen Plaza, 720 Park Boulevard,
Boise, Idaho 83729.
/2/ 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, 1998. Unless
otherwise noted, the beneficial owners have sole voting and dispositive power
over their shares listed in this column.
/3/ Indicates shares included in the amounts shown to be beneficially owned as
of January 31, 1998 by reason of a right to acquire beneficial ownership thereof
within 60 days of January 31, 1998.
/4/ The percentages shown are calculated based upon the number of shares of the
Company's Common Stock shown in the second column of this table, which include
shares that the stockholder has the right to acquire beneficial ownership of
within 60 days of January 31, 1998.
/5/ Such shares include 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 exclude 77,838 shares held by Mr. Washington's wife
as to which Mr. Washington disclaims beneficial ownership.
/6/ Pioneering Management Corporation ("PMC") has filed an Amendment No. 1 to
Schedule 13G dated January 21, 1998 with the SEC. Such Amendment states that,
as of such date, PMC was the beneficial owner of 3,670,400 shares of Common
Stock and had sole voting and dispositive power as to such shares.
/7/ CS First Boston, Inc. ("CSFBI") has filed an Amendment No. 1 to Schedule 13G
dated November 22, 1996 with the SEC. Such Amendment states that, as of such
date, CS First Boston Corporation ("CSFBC"), a wholly owned subsidiary of CSFBI,
was the beneficial owner of 2,796,985 shares of the Common Stock, of which CSFBC
had sole voting power as to no shares, shared voting power as to 2,796,985
shares, sole dispositive power as to no shares, and shared dispositive power as
to 2,796,985 shares, and that CSFBI may be deemed to be the beneficial owner of
such shares by virtue of its ownership of 100% of the outstanding shares of
CSFBC.
/8/ 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 shareholder), as to which Mr. Batchelder shares voting and
investment power with two other directors of Batchelder & Partners, Inc.
/9/ Such shares include 5,000 shares held in joint tenancy with Mr. Parkinson's
wife as to which Mr. Parkinson shares voting and dispositive power with his wife
and exclude 5,000 shares held by Mr. Parkinson's wife as to which Mr. Parkinson
disclaims beneficial ownership.
Series A Preferred Stock. As of the Record Date, Merrill Lynch Pierce
------------------------
Fenner & Smith Incorporated ("Merrill Lynch"), 101 Hudson Street, Jersey City,
New Jersey 07303, was the holder of record of 1,303,302 shares of the Series A
Preferred Stock, representing 72.41% of the outstanding Series A Preferred
Stock. The Company does not have
20
<PAGE>
information as to whether such shares are beneficially owned by Merrill Lynch or
by one or more other persons. To the knowledge of the Company, the directors and
executive officers of the Company as a group beneficially own less than 1% of
the Series A Preferred Stock.
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, 1998. 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
SEC 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 THE 1999 ANNUAL MEETING OF STOCKHOLDERS
In order for any proposal submitted by a stockholder for action at the
Company's 1999 annual meeting of stockholders to be considered for inclusion in
the Company's 1999 Proxy Statement, such proposal must be in writing and
received by the Secretary of the Company on or before November 2, 1998.
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
21
<PAGE>
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.
Dated: March 2, 1998 BY ORDER OF THE BOARD OF DIRECTORS
MORRISON KNUDSEN CORPORATION
Stephen G. Hanks
Executive Vice President,
Chief Legal Officer and Secretary
<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, Anthony
S. Cleberg and Stephen G. Hanks, 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 Wednesday, April 8, 1998, at 10:00 a.m., local
time, and at any and all postponements or adjournments thereof, for the approval
of the amendment to the Company's Restated and Amended Certificate of
Incorporation (the "Amendment to the Certificate of Incorporation"), for the
election of the nominees listed on the reverse side of this proxy card, or their
respective substitutes, as directors; 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 postponements or 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 Stock and as Series A Preferred Stock 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 2, FOR Item 1 and FOR Item 3 if such items are
presented at the meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Common Shares Series A Preferred Shares
THE BOARD RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
1. The approval of the Amendment to the Company's Certificate of Incorporation
to eliminate provisions with respect to class designations for directors,
and to add provisions to elect annually and to allow the removal of
directors at any time, with or without cause, by a majority vote of the
stockholders of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. If the Amendment to the Company's Certificate of Incorporation IS approved:
. The election of nine directors duly nominated to terms expiring at the
annual meeting of stockholders in 1999: David H. Batchelder, Leonard
R. Judd, William C. Langley, Robert S. Miller, Jr., Dorn Parkinson,
Terry W. Payne, John D. Roach, Robert A. Tinstman and Dennis R.
Washington.
[ ] 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.
If the Amendment to the Company's Certificate of Incorporation IS NOT
approved:
. The election of three directors duly nominated to terms expiring at
the annual meeting of stockholders in 2001: Leonard R. Judd, William
C. Langley and John D. Roach.
[ ] 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.
3. Ratification of the appointment of Coopers & Lybrand, L.L.P. as independent
auditors of the Company for the fiscal year ending November 30, 1998.
[ ] 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:______________________________________
Receipt of the Proxy Statement for the
meeting is acknowledged.
-------------------------------------------
(Signature of stockholder)
-------------------------------------------
(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.
