<PAGE>

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


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-K/A
                          AMENDMENT NO. 1 TO FORM 10-K
                                  ANNUAL REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
                            For the Fiscal Year Ended

                                NOVEMBER 30, 1996

                         Commission File Number 1-12054

                          MORRISON KNUDSEN CORPORATION

                 (FORMERLY WASHINGTON CONSTRUCTION GROUP, INC.)

                             A Delaware Corporation
                   IRS Employer Identification No. 33-0565601

                   MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
                                 208 / 386-5000

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


   SECURITIES REGISTERED AND NUMBER OF REGISTRANT'S COMMON SHARES OUTSTANDING
At February 5, 1997, 53,836,291 shares of the registrant's $.01 par value common
stock were outstanding. Such common stock and warrants to purchase an aggregate
of 2,765,000 shares of such common stock are listed on the New York Stock
Exchange and registered pursuant to Section 12(b) of the Securities Exchange
Act. The registrant has no securities registered under Section 12(g) of the
Securities Exchange Act.

                     COMPLIANCE WITH REPORTING REQUIREMENTS
The registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and
has been subject to such filing requirements for the past 90 days. 
/X/ Yes  / / No

                DISCLOSURE PURSUANT TO ITEM 405 OF REGULATION S-K
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
/X/ Yes  / / No

          AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NONAFFILIATES
At February 5, 1997, the aggregate market value of the registrant's common stock
held by nonaffiliates of the registrant, based on the New York Stock Exchange
closing price therefor on February 5, 1997, was approximately $323,223,439,
excluding $194,950,862 market value of 20,254,635 shares which are assumed to be
held by affiliates of the registrant for the purposes of this calculation.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its annual meeting
of stockholders to be held on April 11, 1997, which is expected to be filed with
the Securities and Exchange Commission not later than March 31, 1997, are
incorporated by reference into Part III of this Annual Report on Form 10-K. In
the event such proxy statement is not so filed by March 31, 1997, the required
information will be filed as an amendment to this Annual Report on Form 10-K no
later than such date.

<PAGE>

This Amendment No. 1 on Form 10-K/A (this "Amendment") amends Item 8 of the
Annual Report on Form 10-K of Morrison Knudsen Corporation (the "Corporation")
for the fiscal year ended November 30, 1996 (the "Form 10-K"), to correct
certain typographical errors contained therein and to add to Note 3 of Notes to
the Consolidated Financial Statements included therein certain information that
was inadvertently omitted therefrom. In accordance with Rule 12b-15 promulgated
under the Securities Exchange Act of 1934, as amended, this Amendment sets forth
the complete text of Item 8 of the Form 10-K, as amended.


                                       -1-

<PAGE>

                                    SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Corporation has duly caused this Amendment to be signed on its
behalf by the undersigned hereunto duly authorized.


                                             
                                        By: /s/ Stephen G. Hanks
                                            -----------------------------------
                                            Stephen G. Hanks
                                            Executive Vice President and
                                            Chief Legal Officer


                                       -2-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                            INDEX TO FINANCIAL STATEMENTS

MORRISON KNUDSEN CORPORATION AND SUBSIDIARIES
    Consolidated Financial Statements as of November 30, 1996 and 1995, and for
    each of the three years in the period ended November 30, 1996

                                                                  PAGE(S)
    Report of Independent Accountants                               II-8
    Report of Independent Public Accountants                        II-9
    Consolidated Statements of Operations                          II-10
    Consolidated Balance Sheets                                 II-11, II-12
    Consolidated Statements of Cash Flows                          II-13
    Consolidated Statements of Stockholders' Equity                II-14
    Notes to Consolidated Financial Statements                II-15 to II-29


                                         II-7
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors
Morrison Knudsen Corporation

We have audited the accompanying consolidated balance sheet of Morrison Knudsen
Corporation and subsidiaries (the "Corporation") as of November 30, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended and the financial statement schedule listed in the
Table of Contents at Item 14. These financial statements and the financial
statement schedule are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Morrison Knudsen
Corporation and subsidiaries at November 30, 1996, and their consolidated
results of operations and cash flows for the year then ended in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.

As discussed in Note 3 to the consolidated financial statements, the Corporation
changed its method of accounting for impairment of long-lived assets in 1996 to
conform with Statement of Financial Accounting Standards No. 121.

As discussed in Note 13 to the consolidated financial statements, the
Corporation has been named as a potentially responsible party at the Summitville
Mine Superfund Site. The Corporation's share, if any, of the ultimate
environmental liability at the site is not presently determinable and,
accordingly, no remediation costs have been accrued in the accompanying
financial statements.


/s/ Coopers & Lybrand L.L.P

COOPERS & LYBRAND L.L.P.
Boise, Idaho
February 24, 1997


                                         II-8
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and the Board of Directors
of Kasler Holding Company

We have audited the accompanying consolidated balance sheet of Kasler Holding
Company and subsidiaries (the "Company") as of November 30, 1995, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the two-year period ended November 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kasler Holding
Company and subsidiaries as of November 30, 1995, and the results of their
operations and their cash flows for each of the years in the two-year period
ended November 30, 1995, in conformity with generally accepted accounting
principles.


/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP
Los Angeles, California
January 12, 1996


                                         II-9


<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                   1996         1995           1994
--------------------------------------------------------------------------------
Revenue                                 $ 659,100    $ 228,537      $ 258,739
Cost of revenue                          (625,756)    (204,424)      (238,890)
--------------------------------------------------------------------------------
Gross profit                               33,344       24,113         19,849
General and administrative expenses       (22,574)     (15,767)       (17,705)
Impairment loss on long-lived assets      (18,200)         --             -- 
Goodwill amortization                      (1,164)        (420)          (420)
--------------------------------------------------------------------------------
Operating income (loss)                    (8,594)       7,926          1,724
Investment income                           3,679        4,061          3,039
Interest expense                             (993)        (189)           (86)
Other income (expense), net                   634          389         (3,667)
--------------------------------------------------------------------------------
Income (loss) before income taxes          (5,274)      12,187          1,010
Income tax (expense) benefit                  494       (4,022)          (353)
--------------------------------------------------------------------------------
Net income (loss)                      $   (4,780)   $   8,165      $     657
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Income (loss) per share                $     (.14)   $     .28      $     .02
--------------------------------------------------------------------------------
Common shares used to compute 
  income (loss) per share                  34,821       29,478         29,435
--------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                        II-10


<PAGE>

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
NOVEMBER 30,                                             1996           1995
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------


CURRENT ASSETS
Cash and cash equivalents                             $ 48,310       $ 30,035
Accounts receivable, including retentions 
  of $28,348 and $14,513                               222,341         41,327
Unbilled receivables                                   101,564          5,033
Refundable income taxes                                 10,806            -- 
Current portion of notes receivable                      3,000          3,576
Investments in and advances to construction 
  joint ventures                                        24,538          1,846
Deferred income taxes                                   31,291            514
Other                                                   17,399          3,390
--------------------------------------------------------------------------------
Total current assets                                   459,249         85,721
--------------------------------------------------------------------------------


INVESTMENTS AND OTHER ASSETS
Securities available for sale, at fair value            30,494            -- 
Investments in mining ventures                          56,210            -- 
Land held for sale or lease                                --           8,266
Assets held for sale                                    18,853            -- 
Cost in excess of net assets acquired, 
  net of accumulated amortization of $2,177 
  and $1,013                                           140,677         15,777
Long-term notes receivable, net of current portion       5,087          7,935
Deferred income taxes                                   31,555            -- 
Other                                                   12,178            886
--------------------------------------------------------------------------------
Total investments and other assets                     295,054         32,864
--------------------------------------------------------------------------------


PROPERTY AND EQUIPMENT, AT COST
Construction equipment                                 179,483         99,608
Land and improvements                                    7,110         28,374
Buildings and improvements                              25,062          1,941
Equipment and fixtures                                  30,388            576
--------------------------------------------------------------------------------
Total property and equipment                           242,043        130,499
LESS ACCUMULATED DEPRECIATION                         (156,709)       (63,783)
--------------------------------------------------------------------------------
Property and equipment, net                             85,334         66,716
--------------------------------------------------------------------------------
Total assets                                          $839,637       $185,301
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                                        II-11


<PAGE>

--------------------------------------------------------------------------------
NOVEMBER 30,                                            1996           1995  
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable                                     $  68,926        $10,195
Subcontracts payable, including retentions 
  of $27,006 and $9,778                                 75,036         16,658
Billings in excess of cost and estimated earnings 
  on uncompleted contracts                              49,626          4,789
Advances from customers                                 11,280            -- 
Estimated costs to complete long-term contracts        100,832            --
Accrued salaries, wages and benefits                    49,136          8,718
Income taxes payable                                     8,255            501
Other accrued liabilities                               37,513          1,327
--------------------------------------------------------------------------------
Total current liabilities                              400,604         42,188
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
Postretirement benefit obligation                       53,433            -- 
Accrued workers' compensation                           26,061            -- 
Pension and deferred compensation liabilities           20,563            -- 
Environmental remediation obligations                    8,972            -- 
Long-term debt                                             --           5,042
Deferred income taxes                                      --           9,120
--------------------------------------------------------------------------------
Total non-current liabilities                          109,029         14,162
--------------------------------------------------------------------------------

CONTINGENCIES AND COMMITMENTS  (Note 13)

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

REDEEMABLE PREFERRED STOCK, issued 1,800 shares 
  of Series A                                           18,000            -- 

--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 10,000 shares, issued 
 and outstanding 1,800 redeemable shares of Series A
Common stock, par value $.01, authorized 100,000 
  shares, issue and outstanding 53,809 and 29,484 
  shares                                                   538            295
Capital in excess of par value                         242,669         62,134
Stock purchase warrants                                  6,564            -- 
Retained earnings                                       61,827         66,607
Unearned compensation - restricted stock                   (19)           (85)
Cumulative translation adjustments                        (154)           -- 
Net unrealized gain on securities available for sale       579            -- 
--------------------------------------------------------------------------------
Total stockholders' equity                             312,004        128,951
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity            $839,637       $185,301
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                        II-12



<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
 


---------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                                                        1996          1995             1994
---------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>            <C>             <C>
OPERATING ACTIVITIES
Net income (loss)                                                           $ (4,780)      $  8,165        $   657
Adjustments to reconcile net income (loss) to cash provided
  by operating activities:
  Provision for impairment of long-lived assets                               18,200            --             -- 
  Depreciation of property and equipment                                      11,773          8,477          8,793
  Amortization of goodwill                                                     1,164            420            420
  Loss on real estate development partnership                                    --             --           3,882
  Provision for losses on uncompleted contracts, net                           8,860            --             -- 
  Deferred income taxes                                                          703            --             -- 
  Equity in net income of mining ventures less dividends received             (2,636)           --             -- 
  Accrued workers' compensation                                                1,966            --             -- 
  Gain on sale of assets                                                        (694)        (1,236)        (1,235)
  Other investments and assets                                                (2,860)           204            340
  Changes in other assets and liabilities, net of effects of business
     combination:
     Receivables and unbilled receivables                                     (3,541)           454          1,297
     Investment in and advances to construction joint ventures                (9,522)        (1,876)         1,941
     Other assets                                                                (43)          (349)           178
     Accounts payable, accrued salaries, other accrued liabilities,
       subcontracts payable and customer advances                             (6,925)          (259)        (8,147)
     Billings in excess of costs and estimated earnings                        4,599         (4,143)        (1,276)
     Income taxes                                                             (3,052)         1,291         (1,138)
---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                     13,212         11,148          5,712
---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment acquisitions                                          (26,172)       (22,255)       (14,783)
Property and equipment disposals                                              11,013          2,625          2,446
Purchase of securities available for sale                                     (1,096)           --             -- 
Cash acquired in business combination                                         52,640            --             -- 
Collection of notes receivable                                                 7,595            --             -- 
Other investing activities                                                     1,257            (37)          (884)
---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities                              45,237        (19,667)       (13,221)
---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Borrowing under credit agreement                                              30,000            --             -- 
Repayments under credit agreement                                            (63,839)           --             -- 
Long-term borrowings                                                             --             --           6,000
Payments of long-term borrowings                                              (5,042)        (7,562)           (98)
Other                                                                         (1,293)            (4)        (1,495)
---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities                             (40,174)        (7,566)         4,407
---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                              18,275        (16,085)        (3,102)
Cash and cash equivalents at beginning of period                              30,035         46,120         49,222
---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                   $48,310        $30,035        $46,120
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                                        II-13


<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
 

                                                                  CAPITAL IN       STOCK                       UNEARNED
                                                     COMMON       EXCESS OF       PURCHASE      RETAINED     COMPENSATION -
                                                      STOCK       PAR VALUE       WARRANTS      EARNINGS    RESTRICTED STOCK  OTHER
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                    <C>         <C>            <C>            <C>              <C>
DECEMBER 1, 1993                                       $294        $61,781                       $59,261          $(946)
Net income                                                                                           657
Dividend ($.05 per share)                                                                         (1,476)
Restricted stock activity, net                                        (132)                                         517
------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, 1994                                       294         61,649                        58,442           (429)
Net income                                                                                         8,165
Shares issued under stock award plan                      1            485                                          344
------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, 1995                                       295         62,134                        66,607            (85)
Net loss                                                                                          (4,780)
Shares issued under stock award plan                      1            413                                           66
Shares and warrants issued for
  business combination                                  242        180,122         $6,564
Foreign currency translation adjustments                                                                                     $(154)
Net unrealized gain on securities available
  for sale                                                                                                                     579
------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, 1996                                     $538       $242,669          $6,564        $61,827          $  (19)    $ 425 
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
 


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                                        II-14


<PAGE>

MORRISON KNUDSEN CORPORATION
(FORMERLY WASHINGTON CONSTRUCTION GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)

1.  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:  The consolidated balance sheet includes the
accounts of the Corporation and all of its majority-owned subsidiaries,
including the accounts of Morrison Knudsen Corporation and its engineering and
construction subsidiaries ("Old MK") acquired on September 11, 1996. Investments
in 20%- to 50%-owned companies and all joint ventures are accounted for by the
equity method. The Corporation's proportionate share of construction joint
venture and mining venture revenue, cost of revenue and gross profit (loss) is
included in the consolidated statements of operations. Intercompany accounts and
transactions have been eliminated.

REVENUE RECOGNITION:  Revenue on fixed-price construction contracts, including
those of construction joint ventures, is recognized on the
percentage-of-completion method, generally based on the proportion of costs
incurred  to total estimated contract costs. Engineering and construction
management contract revenue is recognized on the accrual method. For certain
long-term contracts, principally those involving environmental and hazardous
substance remediation, revenue is recognized based on units of production or
time and material costs incurred. Recognition of earnings on certain long-term
construction contracts is deferred until progress reaches a level of completion
sufficient to estimate reasonably the probable outcome.

    Revisions of estimates of contract revenue and completion costs are
reflected in the accounting period when known. Such estimates may change in the
near term, and the effects may be material. Anticipated losses on uncompleted
contracts are recognized when determinable. Claims for additional revenue are
generally not recognized until settled.

    The Corporation has a substantial history of making reasonably dependable
estimates of the extent of progress towards completion, contract revenue and
contract completion costs on its long-term construction contracts. However, due
to uncertainties inherent in the estimation process, it is at least reasonably
possible that actual completion costs may vary from estimates in the near term.

USE OF ESTIMATES:  The preparation of the Corporation's consolidated  financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet date and the reported amounts of
revenue and costs during the reporting periods. Actual results could differ in
the near term from those estimates.

UNBILLED RECEIVABLES:  Unbilled receivables at November 30, 1996 arise from the
use of the percentage-of-completion method of accounting, cost
reimbursement-type contracts and routine lags in billing. Substantially all the
unbilled receivables at November 30, 1996 are expected to be billed and
collected within one year.

CLASSIFICATION OF CURRENT ASSETS AND LIABILITIES:  The Corporation includes in
current assets and liabilities amounts realizable and payable under engineering
and construction contracts that extend beyond one year. Accounts receivable at
November 30, 1996 include approximately $5,900 of contract retentions which are
not expected to be collected within one year. Accounts receivable at November
30, 1996 include $9,519 of short-term marketable securities jointly held with
customers as contract retentions, the market value of which approximated the
carrying amounts. The Corporation recognizes interest income from marketable
securities as earned. Advances from customers are non-interest bearing.

CASH EQUIVALENTS:  Cash equivalents consist of liquid securities with original
maturities of three months or less.

FINANCIAL INSTRUMENTS:  Financial instruments which potentially subject the
Corporation to concentrations of credit risk consist of cash and equivalents,
accounts receivable, unbilled receivables and securities available for sale. 
Concentrations of credit risk with respect to accounts receivable and unbilled
receivables are believed to be limited due to the number and character of the
obligors with respect thereto and the Corporation's credit evaluation process.
Historically, the Corporation has not required collateral for such obligations.


                                        II-15
<PAGE>

COST IN EXCESS OF NET ASSETS ACQUIRED:  Cost in excess of net assets acquired in
business combinations ("goodwill") is amortized under the straight-line method
over 40 years. The Corporation recognizes an impairment loss on the unamortized
cost whenever events or changes in circumstances indicate such cost is not
recoverable.

DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT:  Depreciation of
construction equipment is provided under straight-line and accelerated methods,
after an allowance for estimated salvage value, over estimated lives of five to
ten years. Depreciation of buildings is provided under the straight-line method
over 10 years, and improvements are amortized over the shorter of the asset life
or lease term. Depreciation of equipment, principally systems, is provided under
the straight-line method generally over three years. Upon disposition, cost and
related accumulated depreciation of property and equipment are removed from the
accounts and gain or loss is reflected in operations.

FOREIGN CURRENCY TRANSLATION:  The functional currency for foreign operations is
generally the local currency. Translation of assets and liabilities to U.S.
dollars is based on exchange rates at the balance sheet date. Translation of
revenue and expenses to U.S. dollars is based on a weighted average exchange
rate during the period. Translation gains or losses, net of income tax effects
are reported as a component of stockholders' equity.

ENVIRONMENTAL LIABILITIES:  Accruals for estimated costs of response actions for
environmental matters are recorded when it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. On a
quarterly basis, the Corporation reviews estimates of costs of response actions
at various sites, including sites in respect of which government agencies have
designated the Corporation as a potentially responsible party. Accrued
liabilities may be discounted and are exclusive of claims for recovery, if any.

INCOME TAXES:  Deferred income tax assets and liabilities are recognized for the
effects of temporary differences between the carrying amounts and the income tax
basis of assets and liabilities using enacted tax rates. A valuation allowance
is established when it is more likely than not that net deferred tax assets will
not be realized.

INCOME (LOSS) PER SHARE:  Income (loss) per share is based on the weighted
average number of outstanding common and equivalent shares outstanding during
the applicable period. Income (loss) per share is computed separately for each
quarterly and annual period presented.

PREACQUISITION CONTINGENCIES:  The Corporation allocated the purchase price of
Old MK to the assets acquired and liabilities assumed, including preacquisition
contingencies, on the basis of estimated fair values at September 11, 1996. The
effects of resolution of preacquisition contingencies within one year of the
acquisition date will be included in the allocation of the purchase price as an
adjustment to the amount of goodwill recorded as of September 11, 1996. The
effects of resolution of preacquisition contingencies after one year of the
acquisition date will be recognized in the determination of net income.
Preacquisition contingencies in connection with the acquisition of Old MK on
September 11, 1996 include long-term contract obligations, claims for additional
revenue, performance guarantees, letters of credit, environmental liabilities,
results of government audits and legal proceedings.

RECLASSIFICATIONS:  Certain reclassifications have been made in prior period
financial statements to conform to the 1996 presentation.

2.  BUSINESS COMBINATION

On September 11, 1996, the Corporation (which was then known as Washington
Construction Group, Inc., and which had formerly been known as Kasler Holding
Company) acquired the net assets and the engineering and construction operations
of Old MK for $221,736, and changed its name to Morrison Knudsen Corporation.

    The purchase price consisted of (i) $13,300 of cash, (ii) 24,161,421 newly
issued shares of common stock of the Corporation valued at $180,364 in the
aggregate, or $7.465 per share, (iii) 1,800,000 newly issued shares of preferred
stock valued at $18,000, (iv) warrants to purchase 2,952,848 shares of the
Corporation's common stock at $12.00 per share exercisable after September 11,
1996 valued at $6,564, and (v) $3,508 of acquisition costs. The acquisition of
Old MK was structured as a merger of Old MK with and into the Corporation and
was accounted for using the purchase method of accounting. The purchase price
was allocated to the assets acquired and liabilities assumed based on estimated 


                                        II-16
<PAGE>

fair values at September 11, 1996. Such estimates of fair values are subject to
change based on resolution of preacquisition contingencies. The consolidated
results of operations for the quarter and year ended November 30, 1996 include
the results of Old MK for only the period September 12 to November 30, 1996. The
cost in excess of the net assets acquired of $125,065 is being  amortized under
the straight-line method over 40 years.

--------------------------------------------------------------------------------
PURCHASE PRICE ALLOCATION                              
--------------------------------------------------------------------------------
Net working capital                                        $   38,226
Investments and other assets                                  136,778
Cost in excess of net assets acquired                         125,065
Property and equipment                                         28,730
Non-current liabilities                                      (107,063)
--------------------------------------------------------------------------------
Purchase price                                               $221,736
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    The following unaudited pro forma information presents the consolidated
results of operations as if the acquisition of Old MK had occurred on December
1, 1994 and after giving effect to certain adjustments including amortization of
goodwill, depreciation expense, reduction in investment income and related tax
effects. The unaudited pro forma results of operations include Old MK's results
of operations for the eleven months ended November 30, 1996 and the year ended
December 31, 1995. The pro forma results of operations do not purport to be
indicative of operating results that would have been reported had the
acquisition of Old MK occurred on December 1, 1994 or of future operating
results.

--------------------------------------------------------------------------------
PRO FORMA RESULTS OF OPERATIONS                            (UNAUDITED)
PERIOD ENDED NOVEMBER 30,                              1996           1995
--------------------------------------------------------------------------------
Revenue                                             $1,657,371     $1,780,685
Income from continuing operations                       16,447          2,491
Income per common share                                    .31            .05
--------------------------------------------------------------------------------

3.  CHANGE IN ACCOUNTING PRINCIPLE

In the third quarter of 1996, the Corporation adopted Statement of Financial 
Accounting Standards No. 121 ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED 
ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF which requires that long-lived 
assets and certain identifiable intangible assets (i) be reviewed for 
impairment whenever events or changes in circumstances indicate that the 
carrying amount of an asset may not be recoverable and (ii) if impaired, be 
reported at the lower of the carrying amount or fair value thereof, if 
applicable, less the estimated costs of disposal. As of August 31, 1996, the 
Corporation recognized aggregate impairment losses of $18,200 ($11,102 after 
tax, $.32 per share) on certain real property held for sale or use and 
operating assets of a non-core subsidiary held for sale.

4.  STATEMENT OF FINANCIAL ACCOUNTING STANDARDS

The Financial Accounting Standards Board Statement No. 123 ACCOUNTING FOR
STOCK-BASED COMPENSATION ("SFAS No. 123") became effective December 1, 1996.
SFAS No. 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans. 
However, SFAS No. 123 also allows continued use of the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion 25
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25").  The Corporation has
elected to continue accounting for stock-based compensation in accordance with
APB 25, and to make pro forma disclosures of net income and income per share for
periods beginning after November 30, 1996 as if the fair value based method of
accounting had been applied. SFAS No. 123 will not have a material effect on the
Corporation's financial position or results of operations.


                                        II-17


<PAGE>

5.  SECURITIES AVAILABLE FOR SALE

Securities available for sale are reported at fair value and consisted primarily
of debt securities at November 30, 1996. Gross unrealized gains and losses were
$693 and $114, respectively, at November 30, 1996. Unrealized gains and losses,
net of income tax effects, are reported as a component of stockholders' equity.

--------------------------------------------------------------------------------
                                                        November 30, 1996
Maturities of securities                              Fair value       Cost
--------------------------------------------------------------------------------
1997                                                  $  6,881       $  5,869
1998 - 2002                                             19,445         20,059
2003 - 2007                                              4,168          3,987
--------------------------------------------------------------------------------
Totals                                                 $30,494        $29,915
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


    Securities available for sale are held in a captive insurance subsidiary
which insures workers' compensation risks of the Corporation. Securities
available for sale having a fair value of $16,106 at November 30, 1996 are
pledged as collateral for the Corporation's guarantees of third party letters of
credit.

6.  VENTURES

CONSTRUCTION JOINT VENTURES:  The Corporation participates in joint ventures,
generally as sponsor and manager of the projects, which are formed to bid,
negotiate and complete specific projects. The size, scope and duration of
joint-venture projects vary among periods.

--------------------------------------------------------------------------------
COMBINED FINANCIAL POSITION OF CONSTRUCTION JOINT VENTURES
NOVEMBER 30,                                          1996           1995
--------------------------------------------------------------------------------
Current assets                                      $ 247,869       $ 13,341 
Property and equipment, net                             5,684            --  
Current liabilities                                  (216,763)        (9,905)
--------------------------------------------------------------------------------
Net assets                                          $  36,790       $  3,436 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
COMBINED RESULTS OF OPERATIONS OF CONSTRUCTION JOINT VENTURES
YEAR ENDED NOVEMBER 30,                     1996         1995           1994 
--------------------------------------------------------------------------------
Revenue                                 $ 246,636     $ 12,729       $ 21,621
Cost of revenue                          (229,836)     (11,580)       (20,193)
--------------------------------------------------------------------------------
Gross profit                            $  16,800     $  1,149       $  1,428
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
CORPORATION'S SHARE OF RESULTS OF OPERATIONS OF CONSTRUCTION JOINT VENTURES
YEAR ENDED NOVEMBER 30,                    1996          1995           1994 
--------------------------------------------------------------------------------
Revenue                                 $ 103,709      $ 5,327        $ 9,058
Cost of revenue                           (95,953)      (4,886)        (8,266)
--------------------------------------------------------------------------------
Gross profit                            $   7,756      $   441        $   792
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                        II-18


<PAGE>

    Combined financial position and results of operations of joint ventures for
1996 reflect ownership interests in and operating results of joint ventures
acquired as a result of the acquisition of Old MK for the period September 12 to
November 30, 1996.

MINING VENTURES:  At November 30, 1996, the Corporation had ownership interests
in two mining ventures, MIBRAG mbH (33%) and Westmoreland Resources, Inc. 
("Westmoreland Resources") (20%). On September 30, 1996, the Corporation sold 4%
of its 24% ownership interest in Westmoreland Resources to Westmoreland Coal
Company ("Westmoreland Coal") and reduced its ownership interest to 20%. The
Corporation provides contract mining services to these ventures.

--------------------------------------------------------------------------------
COMBINED FINANCIAL POSITION OF MINING VENTURES 
NOVEMBER 30,                                                          1996   
--------------------------------------------------------------------------------
Current assets                                                     $ 352,586 
Non-current assets                                                   114,835 
Property and equipment, net                                          509,919 
Current liabilities                                                 (128,435)
Long-term debt                                                      (259,084)
Other non-current liabilities                                       (411,432)
--------------------------------------------------------------------------------
Net assets                                                         $ 178,389 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
COMBINED RESULTS OF OPERATIONS OF MINING VENTURES
YEAR ENDED NOVEMBER 30,                                               1996   
--------------------------------------------------------------------------------
Revenue                                                            $ 102,701 
Cost of revenue                                                      (92,071)
--------------------------------------------------------------------------------
Gross profit                                                       $  10,630 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
CORPORATION'S SHARE OF RESULTS OF OPERATIONS OF MINING VENTURES
YEAR ENDED NOVEMBER 30,                                               1996   
--------------------------------------------------------------------------------
Revenue                                                             $ 32,786 
Cost of revenue                                                      (29,385)
--------------------------------------------------------------------------------
Gross profit                                                        $  3,401 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    On December 23, 1996, Westmoreland Coal and four subsidiaries, including
Westmoreland Resources, filed for protection under Chapter 11 of the United
States Bankruptcy Code.  At November 30, 1996, the carrying amount of the
Corporation's ownership interest in Westmoreland Resources was $5,186.  The
Corporation cannot presently predict with any certainty to what extent, if any,
the ownership interest in Westmoreland Resources will ultimately be impaired,
but any loss is not expected to have a material adverse effect on the
Corporation's financial position, results of operations and cash flows.

7.  ASSETS HELD FOR SALE

At November 30, 1996, assets held for sale are stated at the lower of cost or
fair value less cost of disposal and are comprised of (i) substantially all of
the operating assets of a non-core subsidiary with a carrying amount of $10,783,
(ii) land with a carrying amount of $2,826, and (iii) a 29.5% stock ownership
interest in a foreign bank with a carrying amount of $5,244. The Corporation has
offered these assets for sale because they are not a part of its core business,
but is unable 


                                        II-19


<PAGE>

to predict disposal dates. In 1996, the Corporation recognized aggregate
impairment losses of $12,100 on assets held for sale and $6,100 on assets held
for use. Included in the Corporation's 1996 results of operations were revenue
and net loss from the non-core subsidiary of $5,400 and $(1,700), respectively,
excluding the estimated impairment loss of $6,500.

8.  CREDIT ARRANGEMENTS


On October 31, 1996, the Corporation obtained from the Bank of Montreal a five-
year, $200,000 revolving loan and letter of credit facility  (the "facility").
Revolving loan borrowings under the facility are limited to $125,000. At October
31, 1997, and annually thereafter, the facility may, upon approval, be extended
by an additional year. The Corporation paid a $1,100 underwriting fee to the
bank and is required to pay commitment and letters of credit fees.

    Substantially all of the assets of the Corporation and certain of its
material domestic subsidiaries are pledged as collateral until such time as the
Corporation obtains an investment grade credit rating. The facility covenants
require the maintenance of financial ratios, the most restrictive of which is
fixed charge coverage and minimum levels of net worth and place limitations on,
among other things, additional indebtedness, investments and loan guarantees.
At November 30, 1996, the Corporation had no outstanding borrowings under the
facility and was in compliance with its covenants. The Corporation is not
restricted from paying dividends if an event of default does not exist.

    The facility provides for loans bearing interest, payable quarterly, at the
applicable LIBOR rate or the base rate, as defined, plus an additional margin.
The additional margin ranges from 3/4% to 1 1/8% for the LIBOR rate and zero to
1/4% for the base rate, based on the ratio of earnings before interest, taxes,
depreciation and amortization to the Corporation's funded debt.

9.  TAXES ON INCOME

The components of the U.S. federal, state and foreign income tax expense
(benefit) were as follows:

--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                     1996          1995         1994
--------------------------------------------------------------------------------
Currently payable
  U.S. federal                            $    (10)      $2,217      $ 1,418 
  State                                        108          723          369 
  Foreign                                    1,019          --           --  
--------------------------------------------------------------------------------
Current                                      1,117        2,940        1,787 
--------------------------------------------------------------------------------
Deferred
  U.S. federal                              (1,459)         844       (1,096)
  State                                       (361)         238         (338)
  Foreign                                      209          --           --  
--------------------------------------------------------------------------------
Deferred                                    (1,611)       1,082       (1,434)
--------------------------------------------------------------------------------
Income tax expense (benefit)              $   (494)      $4,022      $   353 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                        II-20


<PAGE>

--------------------------------------------------------------------------------
DEFERRED TAX ASSETS AND LIABILITIES
NOVEMBER 30, 1996                           ASSETS   LIABILITIES       TOTAL 
--------------------------------------------------------------------------------
Employee benefit plans                    $ 35,087     $    --     $  35,087 
Estimated loss accruals                     66,948          --        66,948 
Revenue recognition                          5,659          --         5,659 
Alternative minimum tax                     13,902          --        13,902 
Joint ventures                               4,293          --         4,293 
Depreciation                                   --        (6,587)      (6,587)
Basis difference in affiliates                 --       (11,016)     (11,016)
Self-insurance accruals                     22,963          --        22,963 
Loss carryforwards acquired in the
   business combination                     83,336          --        83,336 
Valuation allowance                       (126,878)         --      (126,878)
Other, net                                     --       (24,861)     (24,861)
--------------------------------------------------------------------------------
Total deferred tax assets (liabilities)   $105,310     $(42,464)   $  62,846 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
DEFERRED TAX ASSETS AND LIABILITIES
NOVEMBER 30, 1995                           ASSETS   LIABILITIES       TOTAL 
--------------------------------------------------------------------------------
Estimated loss accruals                     $2,281     $    --       $ 2,281 
Joint ventures                                 --          (635)        (635)
Depreciation                                   --        (6,494)      (6,494)
Purchase accounting adjustments                --        (2,861)      (2,861)
Other, net                                     --          (897)        (897)
--------------------------------------------------------------------------------
Total deferred tax assets (liabilities)     $2,281     $(10,887)     $(8,606)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

     At November 30, 1996, the Corporation had consolidated regular tax net
operating loss carryforwards for federal, state and foreign tax purposes of
approximately $211,669, $138,922 and $1,201, respectively, which  expire in the
years 2000 through 2012. In addition, the Corporation had alternative minimum
tax credits of $13,902 at November 30, 1996 which carry forward indefinitely.
The ability of the Corporation to use the net operating loss carryforwards and
tax credits prior to expiration is limited. The $126,878 valuation allowance
reduces these net operating loss carryforwards and other deferred tax assets to
a level which management believes will, more likely than not, be realized based
on estimated future taxable income.  Acquired tax assets that are not recognized
at September 11, 1996 but which are recognized in subsequent periods by a
reduction in the valuation allowance established at September 11, 1996, will
result in an adjustment to the amount of goodwill originally recorded and affect
the related amortization. The valuation allowance is subject to change based on
the occurrence of future events, and any such change could be material. As of
November 30, 1996, U.S. federal income tax returns for the years 1987 through
1993 were in the process of examination.  Management believes that adequate
provision has been made for probable tax assessments. Years prior to 1987 are
closed to examination.

     Income tax expense (benefit) differed from income taxes at the U.S. federal
statutory tax rate of 35% as follows:

--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                       1996         1995         1994 
--------------------------------------------------------------------------------
Tax expense (benefit) at 35% U.S. federal
   statutory rate                          $(1,846)      $4,266         $344 
State income tax, net of federal benefit      (165)         624           20 
Foreign income tax, net of federal benefit     799          --           --  
Nondeductible expenses (nontaxable
   income), net                                447       (1,024)         323 
Other                                          271          156         (334)
--------------------------------------------------------------------------------
Income tax expense (benefit)              $   (494)      $4,022         $353 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                        II-21

<PAGE>


     Nondeductible expenses (nontaxable income), net was comprised principally
of goodwill amortization, tax exempt interest income, meals and entertainment
expense and, in 1995, a change in estimate benefit.
                                                   
     Income (loss) before income taxes was comprised of a domestic source loss
of $(11,786) and foreign source income of $6,512 in 1996 and domestic source
income in 1995 and 1994.

10.  BENEFIT PLANS

PENSION PLAN:  The Corporation succeeded Old MK as sponsor of a defined benefit
pension plan under which benefits have been frozen and no further benefits have
been accrued since 1991. Management expects to terminate sponsorship of the plan
and effect a settlement of the plan's accumulated benefit obligation through
lump-sum cash payments and the purchase of nonparticipating annuities.
Accordingly, the accumulated benefit obligation at November 30, 1996 reflects
the Corporation's estimate of the ultimate termination benefits to be settled
with the cash proceeds from liquidation of the plan's assets and additional
contributions by the Corporation, if required. Pending such settlement, the plan
continues to hold assets, pay benefits and, if required, receive additional
employer contributions.

--------------------------------------------------------------------------------
FUNDED STATUS OF THE PLAN                                      NOVEMBER 30, 1996
--------------------------------------------------------------------------------
Accumulated vested termination benefit obligation                   $(57,492)
Plan assets at fair value                                             54,266 
--------------------------------------------------------------------------------
Accumulated vested termination benefit obligation
   in excess of plan assets                                           (3,226)
Unrecognized net gain                                                 (1,635)
--------------------------------------------------------------------------------
Accrued pension benefit obligation                                 $  (4,861)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

     At November 30, 1996, approximately 53% of plan assets were invested in
equity securities, 40% in fixed-income (corporate and U.S. government)
securities and 7% in cash equivalents. The discount rate used in determining the
actuarial present value of the accumulated vested termination benefit obligation
was 7% for anticipated annuity settlements and 6.75% for anticipated lump-sum
payments. The expected rate of return on plan assets was 8.0%.

MULTIEMPLOYER PENSION PLANS:  The Corporation participates in and makes 
contributions to numerous construction-industry multiemployer pension plans. 
Generally, the plans provide defined benefits to substantially all employees 
covered by collective bargaining agreements. The Corporation's cost of the 
plans was $4,972 in 1996, $2,460 in 1995 and $2,851 in 1994. Under the 
Employee Retirement Income Security Act, a contributor to a multiemployer 
plan is liable, upon termination or withdrawal from a plan, for its 
proportionate share of a plan's unfunded vested liability. Based on the most 
recent information available from the United States Department of Labor, the 
Corporation has estimated that its share of the plans' unfunded vested 
liabilities upon termination or withdrawal would be approximately $7,000. The 
Corporation currently has no intention of withdrawing from any of the 
multiemployer pension plans in which it participates.

ACCRUED PENSION LIABILITIES:  The Corporation has assumed the pension
liabilities to former employees and former non-employee directors of Old MK as
follows:

--------------------------------------------------------------------------------
STATUS OF THE UNFUNDED PENSION PLANS                           NOVEMBER 30, 1996
--------------------------------------------------------------------------------
Accumulated vested benefit obligation,
   discounted at 7.25%                                              $(14,612)
Unrecognized net loss                                                    703 
--------------------------------------------------------------------------------
Accrued pension liabilities                                         $(13,909)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

     The interest expense on the unfunded accumulated vested benefit obligation
for the period September 12 to November 30, 1996 was $207.


                                        II-22
<PAGE>


POSTRETIREMENT HEALTH CARE PLAN:  The Corporation succeeded Old MK as sponsor of
an unfunded plan to provide certain health care benefits for employees of Old MK
who retired before July 1, 1993 including their surviving spouses and dependent
children. Employees who retired after July 1, 1993 are not eligible for
postretirement health care benefits. Prior to November 30, 1996, the Corporation
changed its postretirement health care plan to increase retirees' required cash
contributions, effective January 1, 1997, and the effect of such change was
reflected in the accumulated postretirement benefit obligation ("APBO") at
November 30, 1996. The plan was amended in past years, and the Corporation
reserves the right to amend or terminate the postretirement health care benefits
currently provided under the plan and may increase retirees' cash contributions
at any time. The interest expense on the unfunded APBO for the period September
12 to November 30, 1996 was $803.

--------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION                      NOVEMBER 30, 1996
--------------------------------------------------------------------------------
Accumulated benefit obligation                                      $(50,265)
Unrecognized prior service credit                                     (4,976)
Unrecognized actuarial net loss                                        1,808 
--------------------------------------------------------------------------------
Accrued postretirement benefit obligation                           $(53,433)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

     The unrecognized prior service credit of $4,976 will be amortized to
periodic health care expense over the 13-year average future expected lifetime
of retirees and their surviving spouses beginning in fiscal 1997.

     The APBO was determined using the projected unit credit method and an
assumed discount rate of 7.25%. In addition, an annual rate increase of 9.5% in
the per capita cost of health care benefits was assumed, gradually declining to
5.25% in the year 2006 and continuing thereafter at that rate over the projected
payout period of the benefits. The health care cost trend rate assumption has a
significant effect on the APBO. For example, a 1% increase in the health care
cost trend rate would increase the APBO at November 30, 1996 by approximately
$4,970, increase the 1996 postretirement health care expense by approximately
$80 and increase estimated 1997 postretirement health care expense of $3,140 by
approximately $360.

OTHER RETIREMENT PLANS: The Corporation also sponsors a number of defined
contribution retirement plans. Participation in these plans is available to
substantially all salaried employees and to certain groups of hourly employees.
The Corporation's cash contributions to these plans are based on either a
percentage of employee contributions or on a specified amount per hour based on
the provisions of each plan. The cost of these plans was $3,192 in 1996, $630 in
1995 and $923 in 1994.

11.  TRANSACTIONS WITH AFFILIATES

The Corporation purchased goods and services from affiliates of a principal
stockholder and Chairman of the Board of Directors of the Corporation as
follows:


--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                       1996         1995         1994 
--------------------------------------------------------------------------------
Capital expenditures - equipment             $1,063       $1,545     $  1,933
Cost of revenue                                 318        5,901        8,006
General and administrative expense            1,688        2,446        2,461
--------------------------------------------------------------------------------


                                        II-23
<PAGE>


     The Corporation performed construction services, rented equipment and
realized gains on sales of equipment to affiliates of a principal stockholder
and Chairman of the Board of Directors of the Corporation as follows:


--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                       1996         1995         1994 
--------------------------------------------------------------------------------
Construction services                        $4,696         $848       $7,316
Equipment rental                                346          194          190
Gain on sales of equipment, net                 466          586          537
--------------------------------------------------------------------------------

     In 1996 and 1995, the Corporation participated in a construction joint
venture with an entity controlled by a principal stockholder and Chairman of the
Board of Directors of the Corporation and recognized revenue of $2,103 and
earnings of $393 in 1996 and revenue of $1,800 and earnings of $382 in 1995. The
Corporation's investment in the joint venture was $1,080 at November 30, 1996
and $582 at November 30, 1995.
                                                   
     The Corporation paid $650 in fees and expenses in 1996 to affiliates of a
principal stockholder and Chairman of the Board of Directors of the Corporation
for financial and advisory services in connection with the acquisition of Old
MK.

     The Corporation paid premiums of $11,508 and $3,901 to a brokerage firm 
owned by a member of the Board of Directors of the Corporation and to 
insurance and bonding companies for insurance and surety bonds arranged 
through the brokerage firm in 1996 and 1995, respectively. The brokerage firm 
received approximately $875 and $430 in commissions for services provided in 
1996 and 1995, respectively. In January 1997, the Corporation and the 
brokerage firm concluded an agreement for insurance brokerage services 
covering the period August 1, 1996 through December 31, 1997, pursuant to 
which the brokerage firm receives an annual fee of $1,280 which includes 
commissions earned on insurance. Of the $875 in commissions set forth above, 
$424 is covered by such agreement.

     In 1996, the Corporation paid $992 in fees and expenses and issued stock
purchase warrants to purchase 110,500 shares of the Corporation's common stock
with a fair value of $543 at September 12, 1996, to a financial advisory firm
affiliated with a member of the Board of Directors of the Corporation for
financial and advisory services in connection with the acquisition of Old MK.

12.  GEOGRAPHIC AND CUSTOMER INFORMATION

The Corporation operates in the engineering and construction industry in the
following geographic areas:


--------------------------------------------------------------------------------
GEOGRAPHIC DATA                                                  NOVEMBER 30,
YEAR ENDED                                                            1996   
--------------------------------------------------------------------------------
Revenue
  United States                                                     $589,930 
  International                                                       69,170 
--------------------------------------------------------------------------------
Total revenue                                                       $659,100 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Operating income (loss)
  United States                                                     $(11,787)
  International                                                        3,193 
--------------------------------------------------------------------------------
Operating loss                                                      $ (8,594)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Identifiable assets
  United States                                                     $405,123 
  International                                                      154,083 
Corporate assets                                                     280,431 
--------------------------------------------------------------------------------
Total assets                                                        $839,637 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Corporate assets include cash and equivalents, refundable income taxes, deferred
tax assets, securities available for sale, assets held for sale and cost in
excess of net assets acquired. Revenue from international operations and
identifiable assets


                                        II-24

<PAGE>


of international operations in 1996 were in numerous geographic areas without
significant concentration, and in 1995 and 1994 were less than 10% of
consolidated revenue and assets, respectively.

     Ten percent or more of the Corporation's revenues for the three years in
the period ended November 30, 1996 were derived from contracts and subcontracts
with the following customers:


--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                       1996         1995         1994 
--------------------------------------------------------------------------------
California Department of Transportation    $147,598     $109,033     $117,144
United States Department of Energy           69,614        2,226       13,646
Other U.S. government agencies               36,439       20,537       42,400
--------------------------------------------------------------------------------

13.  CONTINGENCIES AND COMMITMENTS

SUMMITVILLE ENVIRONMENTAL MATTERS: From July 1985 to June 1989, a subsidiary of
the Corporation performed certain contract mining services at the Summitville
mine near Del Norte, Colorado. The United States Environmental Protection Agency
(the "EPA") has notified the Corporation and approximately 20 other parties that
each is a potentially responsible party ("PRP") with regard to hazardous
substances generated or disposed of at the Summitville Mine Superfund Site (the
"Site"). The EPA has not commenced any litigation or other proceedings against
the Corporation. The Corporation has had only preliminary discussions with the
EPA but has been informally advised that the EPA does not consider the
Corporation eligible for a de minimis settlement (the basis for settlement by
several PRPs considered to have contributed less than 3% volume and toxicity of
the hazardous substances at the Site).

     According to a report published in August 1996, the EPA estimated that the
total remediation costs incurred and to be incurred at the Site will be
$120,000. The Corporation is not a party to any agreement regarding an
allocation of responsibility, and the EPA has not made an allocation of
responsibility among the PRPs.  The Corporation's share, if any, of the
aggregate environmental liability associated with the Site is not presently
determinable and depends upon, among other things, the manner in which liability
may be allocated to or among the Corporation or other PRPs associated with the
Site, the efficacy of any defenses that the Corporation or such other PRPs may
have to any assertion of liability, the willingness and ability of such other
PRPs to discharge such liability as may be allocated to them and the outcome of
any negotiations or settlement discussions between the Corporation and the EPA
and/or such other PRPs. Accordingly, no remediation costs have been accrued at
November 30, 1996.

     Management believes that the ultimate resolution of this matter could have
a material adverse effect on the Corporation's financial position and could
materially and adversely effect its results of operations and cash flows in one
or more periods.

OTHER ENVIRONMENTAL MATTERS:  The Corporation assumed a liability of Old MK of
$4,000 for the estimated costs of monitoring and treatment of ground water
contamination at or adjacent to rail facilities in Boise, Idaho, previously
owned by Old MK. In December 1996, the current owner and operator of the
facilities qualified for a post closure permit and assumption of related
monitoring and treatment obligations for such facilities. The Corporation has
not adjusted the accrued liability pending fulfillment of the obligation by the
current owner. The cost, and the Corporation's share thereof, if any, of
remediation of the contamination at the facilities cannot be estimated at this
time and, accordingly, no liability has been accrued.

     The Corporation has been identified as a PRP and is contingently liable for
remediation liabilities in connection with Old MK's former Transit business. The
Corporation agreed to indemnify the buyer of the Transit business for
remediation costs and assumed an estimated undiscounted liability of $3,000. It
is possible that the ultimate cost, which cannot be determined at this time,
could exceed the Corporation's recorded liability by a material amount.

     The Corporation has assumed an undiscounted liability of Old MK which at
November 30, 1996 was $1,972 for environmental cleanup activities at four other
sites. The Corporation estimates that such costs could range from $1,550 to
$3,300 in the aggregate.

CONTRACT RELATED MATTERS:  In 1995, Old MK entered into a fixed-price contract
with the Texas Natural Resource Conservation Commission ("TNRCC") for
construction of a solvent-extraction facility and remediation of contaminated
soil at a Superfund site in Texas. The facility is required to meet certain
specified performance criteria. If the facility does not meet the performance
criteria, the contract may be terminated and TNRCC may recover up to $13,619 of
advances


                                        II-25

<PAGE>


through a letter of credit issued at the request of the Corporation. Management
believes it is probable that the required performance can be achieved.
Accordingly, no provision for loss has been recognized at November 30, 1996.

     In connection with a 1989 sale of Old MK's ownership interest of a
shipbuilding subsidiary, the Corporation assumed a guarantee of port facility
bonds of $21,000 through 2002. The former subsidiary has collateralized the
bonds with certain assets and has established a sinking fund of $2,030 for the
bonds. The Corporation does not anticipate a loss as a result of this guarantee.

     The Corporation is contingently liable under a residual value guarantee at
the termination of a long-term locomotive lease agreement in 2005 between a
third-party equipment lessor and one of Old MK's customers relating to the sale
by Old MK of 25 remanufactured locomotives to the equipment lessor. The
estimated range of the contingent liability is from $1,500 at November 30, 1996
increasing over the lease term to $11,300 in 2005. The Corporation does not
anticipate a loss as a result of this guarantee.

     The Corporation has a number of cost reimbursable contracts with the U.S.
government, the allowable costs of which are subject to adjustments upon audit
by various agencies of the U.S. government. Audits of the Corporation's
allocation of periodic costs of self-insurance programs and general and
administrative expenses for years ended 1987 through 1995 are in progress.
Proposed claims and cost disallowances aggregate approximately $27,000. The
Corporation believes that the government's claims and disallowances are
overstated and has accrued a liability at November 30, 1996 of approximately
$18,000. It is possible that the ultimate cost, which cannot be determined at
this time, could exceed the Corporation's recorded liability.

LETTERS OF CREDIT:  In the normal course of business, the Corporation causes
letters of credit to be issued in connection with contract performance
obligations which are not reflected in the balance sheet. The Corporation is
obligated to reimburse the issuer of such letters of credit for any payments
made thereunder. At November 30, 1996, $33,669 in face amount of such letters of
credit were outstanding, including a $13,619 letter of credit issued in
connection with the contract performance obligation to TNRCC discussed above.
The Corporation has pledged securities available for sale as collateral for its
reimbursement obligations in respect of $16,106 in face amount of certain
letters of credit.

EMPLOYMENT AGREEMENTS AND SEVERANCE PAY PLANS:  The Corporation has employment
agreements with several key employees which generally provide for salary
continuation and certain benefits in the event of termination of employment
without cause (as defined) following a change of control in the Corporation (as
defined). If all employees subject to such agreements at November 30, 1996 were
to be terminated under circumstances giving rise to such salary continuation and
benefits, the Corporation's aggregate liability would be approximately $4,300.
As a result of the acquisition of Old MK, several employees were terminated,
resulting in cash payments of $1,400 and an accrued liability of $519 at
November 30, 1996.

     In addition, the Corporation is committed to pay enhanced severance
benefits to certain covered employees who are involuntarily terminated prior to
December 31, 1997. If all covered employees were to be  terminated, the
Corporation's aggregate liability would be approximately $6,800.

LONG-TERM LEASES: Total rental payments for real estate and equipment under
lease charged to operations in 1996, 1995 and 1994 were $11,780, $4,514 and
$5,451, respectively. Future minimum rental payments under operating leases,
some of which contain renewal or escalation clauses, with remaining
noncancelable terms in excess of one year at November 30, 1996 were as follows:


--------------------------------------------------------------------------------
                                          REAL ESTATE    EQUIPMENT      TOTAL
--------------------------------------------------------------------------------
YEAR ENDING NOVEMBER 30, 1997              $  9,516       $2,583      $12,099
                         1998                 8,205        1,492        9,697
                         1999                 7,483          938        8,421
                         2000                 7,992          482        8,474
                         2001                 6,040           80        6,120
                         2002 and after      48,768           67       48,835
--------------------------------------------------------------------------------
Totals                                      $88,004       $5,642      $93,646
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                        II-26
<PAGE>


     Administrative and engineering facilities in Boise, Idaho, and Cleveland,
Ohio, are leased under long-term, non-cancelable leases expiring in 2004 and
2010, respectively, with aggregate lease obligations of $11,800 and $66,600 for
the Boise facility and Cleveland facility, respectively.

OTHER:  Former shareholders (the plaintiffs) of TMS, Inc. ("TMS"), which was
acquired by Old MK in December 1992, filed an action on December 22, 1995
alleging they were induced to enter into an agreement to exchange TMS shares for
common stock of Old MK (the defendant) and also enter into noncompete agreements
by the defendants' allegedly false statements. Plaintiffs seek compensatory
damages of $7,500, treble damages, punitive damages of $5,000, pre and
postjudgment interest and attorneys' fees. The Corporation's motion to dismiss
the action is pending before the court. The Corporation believes that it has
insurance coverage for all or a substantial part of any damages that may be
awarded in this matter. Although the ultimate outcome of this matter cannot be
predicted with certainty, management believes that the outcome will not have a
material adverse effect on the Corporation's financial position, results of
operations and cash flows.
                                                   
     There are other claims, lawsuits, disputes with third parties,
investigations and administrative proceedings against the Corporation and its
subsidiaries relating to matters in the ordinary course of its business
activities that are not expected to have a material adverse effect on the
Corporation's financial position, results of operations and cash flows.

14.  SUPPLEMENTAL CASH FLOW INFORMATION


--------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,                       1996         1995         1994 
--------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid                              $   993      $   189        $  86 
Income taxes paid                            1,877        3,861          753 
--------------------------------------------------------------------------------
SUPPLEMENTAL NONCASH INVESTING ACTIVITIES
Land, plant and equipment classified as
  assets held for sale                     $25,709 
--------------------------------------------------------------------------------
Business combination:
  Fair value of assets                    $701,188 
  Liabilities assumed                     (479,452)
  Redeemable preferred stock issued        (18,000)
  Equity securities issued                (186,928)
--------------------------------------------------------------------------------
Total cash paid, including acquisition
  cost of $3,508                          $ 16,808 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

15.  REDEEMABLE PREFERRED STOCK

On September 11, 1996, the Corporation issued 1,800,000 shares of Series A
preferred stock in connection with the acquisition of Old MK. Redemptions of the
Series A preferred stock, not to exceed $18,000 in the aggregate, will be made
from amounts, if any, received by the Corporation in respect of certain federal
income tax refunds (including related interest).  Such refunds are reflected in
the Corporation's November 30, 1996 balance sheet. The U.S. Internal Revenue
Service has informally advised the Corporation that it is in agreement with the
amount of the income tax refund claims and is preparing a report in respect of
such claims to the Joint Committee on Taxation of the U.S. Congress. The
Corporation does not presently know the timing of submission of the such report.
If the Series A preferred stock has not been redeemed and canceled through the
distribution of $18,000 within five years of the issuance of the Series A
preferred stock, the Corporation must redeem all shares of Series A preferred
stock at a per share redemption price equal to the greater of $.01 or a pro rata
portion of any undistributed amounts of such refunds. Similarly, upon the
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of Series A preferred stock will be entitled to receive,
before an amount is paid or distributed to any holders of common stock, a per
share amount equal to the greater of $.01 or a pro rata share of any
undistributed amounts of such refunds.

     Holders of Series A preferred stock are entitled to vote together with
holders of common stock as a single class on all


                                        II-27
<PAGE>

matters with respect to which the holders of common stock are entitled to vote.
Each share of Series A preferred stock has 1/10,000 of a vote.

16.  CAPITAL STOCK, STOCK PURCHASE WARRANTS AND STOCK COMPENSATION PLAN

CAPITAL STOCK:  On September 11, 1996, the Corporation's stockholders approved
certain amendments to the Corporation's Certificate of Incorporation including
increases in the number of total authorized shares of the Corporation's (i)
common stock from 39,000,000 to 100,000,000 and (ii) preferred stock from
1,000,000 to 10,000,000. Preferred stock may be issued at any time or from time
to time in one or more series with such designations, powers, preferences and
rights, qualifications, limitations or restriction thereof as determined by the
Board of Directors of the Corporation.

STOCK PURCHASE WARRANTS:  At November 30, 1996, the Corporation had outstanding
stock purchase warrants to acquire 2,952,848 shares of the Corporation's common
stock at an exercise price of $12.00 per share. Warrants to purchase 2,765,000
shares expire in March 2003, and warrants to purchase 187,848 shares expire in
September 2001.

STOCK COMPENSATION PLAN:  The Corporation has a Stock compensation Plan for
employees and non-employee directors as amended (the "1994 plan") which provides
for grants by the Board of Directors in the form of nonqualified stock options
or incentive stock options ("ISOs") and restricted stock awards. Additional
shares of common stock available each year for grants under the 1994 plan are
equal to 3% of the outstanding shares as of December 1. Grant prices per share
for nonqualified stock options are determined by the Board. Grant prices per
share for ISOs are at the fair market value of the Corporation's common stock at
the date of grant. Stock options extend for and vest over periods of up to ten
years as determined by the Board. The Board may accelerate the vesting period
after award of an option. The number of shares available for grant of ISOs may
not exceed 2,900,000 shares, and no individual shall be granted stock options or
restricted stock awards for more than 5,000,000 shares over any three year
period.

     The terms and conditions of restricted stock awards issued to key employees
are determined by the Board. Upon termination of employment, shares that remain
subject to restriction are forfeited. At November 30, 1996, there were 3,675
restricted shares outstanding with restriction periods ranging from January 1997
to January 1998. No restricted stock awards were made in 1996 and 1995.

     Non-employee directors may elect to forego receipt in cash of certain fees
earned during any year in return for an option with a grant price equal to 80%
of the fair market value of the Corporation's common stock, a term and vesting
period of up to ten years as determined by the Board. Non-employee directors
elected options for 50,461 and 55,386 shares in lieu of fees earned in 1996 and
1995, respectively.

--------------------------------------------------------------------------------
OPTIONS OUTSTANDING, EXERCISABLE AND AVAILABLE
  FOR GRANT UNDER THE 1994 PLAN                                 NUMBER OF SHARES
--------------------------------------------------------------------------------
Outstanding at November 30, 1994                                     641,900 
Granted                                                              340,386 
Canceled                                                             (41,300)
--------------------------------------------------------------------------------
Outstanding at November 30, 1995                                     940,986 
Granted                                                              360,461 
Canceled                                                             (26,875)
Exercised ($5.25 per share)                                         (166,667)
--------------------------------------------------------------------------------
Outstanding at November 30, 1996 ($4.625 - $10.00 per share)       1,107,905 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Exercisable at November 30, 1996 ($4.625 - $10.00 per share)         718,782 
--------------------------------------------------------------------------------
Available for grant at November 30, 1996                            1,375,948(a)
--------------------------------------------------------------------------------
(a) Available for grant includes shares which may be granted as either stock
options or restricted stock awards, as determined by the Board. On December 1,
1996, 1,608,090 additional shares became available for grant.

     On April 11, 1997, the Corporation's stockholders will vote upon the
adoption of the 1997 Stock Option and Incentive Plan for Non-employee Directors
(the "1997 plan") which is expected to provide for grants in the form of
nonqualified stock options and restricted stock awards. Grant prices per share
for stock options will be at fair market value at the date


                                        II-28
<PAGE>

of grant. The number of shares available for grant as options and restricted
stock awards will be 500,000 and 100,000, respectively. Grants of nonqualified
stock options and restricted stock awards to the non-employee directors under
the 1997 plan will not preclude grants under the 1994 plan.

17.  FINANCIAL INSTRUMENTS

The estimated fair values of financial instruments at November 30, 1996 have
been determined by the Corporation, using  available market information and
valuation methodologies believed to be appropriate. However, judgment is
necessary in interpreting market data to develop the estimates of fair values.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Corporation could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. The contract or notional
amounts reflect the extent of involvement the Corporation has in particular
classes of financial instruments.

     The carrying amounts and estimated fair values of financial instruments at
November 30, 1996 and 1995 were as follows:


--------------------------------------------------------------------------------
NOVEMBER 30,                                    1996               1995
--------------------------------------------------------------------------------
                                         CARRYING   FAIR     CARRYING   FAIR
                                         AMOUNT    VALUE     AMOUNT    VALUE 
--------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and cash equivalents              $ 48,310  $ 48,310  $ 30,035  $ 30,035
Accounts receivable, excluding
  customer retentions                   193,993   193,993    26,814    26,814
Customer retentions                      28,348    27,444    14,513    13,806
Unbilled receivables                    101,564   101,564     5,033     5,033
Notes receivable                          8,087     9,101    11,511    12,292
Securities available for sale            30,494    30,494      --        --  
FINANCIAL LIABILITIES
Subcontracts payable, excluding
  retentions                             48,030    48,030     6,880     6,880
Subcontract retentions                   27,006    26,145     9,778     9,449
Advances from customers                  11,280    10,920      --        --  
--------------------------------------------------------------------------------

     The fair value of cash and cash equivalents, accounts receivable excluding
customer retentions, unbilled receivables and subcontracts payable excluding
retentions approximate cost because of the immediate or short-term maturity of
these financial instruments. The fair value of securities available for sale is
based on quoted market prices of the securities at the balance sheet date. The
fair value of notes receivable, customer retentions, subcontract retentions and
customer advances is estimated by discounting expected cash flows at rates
currently available to the Corporation for instruments with similar risks and
maturities.


                                        II-29

<PAGE>


ITEM 9.  CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE

On September 12, 1996, the Board of Directors of the Corporation, upon
recommendation by the Audit Committee thereof, approved the engagement of
Coopers & Lybrand L.L.P. ("C&L") to make an examination of the consolidated
financial statements of the Corporation and its subsidiaries for the fiscal year
ended November 30, 1996. C&L replaced KPMG Peat Marwick LLP ("KPMG") which was
concurrently dismissed.

     During the period from December 1, 1993 through September 11, 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
Corporation's financial statements. During the period from December 1, 1993
through September 11, 1996, the Corporation 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 Corporation's
financial statements. KPMG's report on the Corporation'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.


                                        II-30

<PAGE>

                                  EXHIBIT INDEX

COPIES OF EXHIBITS WILL BE SUPPLIED UPON REQUEST.  EXHIBITS WILL BE PROVIDED AT
A FEE OF $.25 PER PAGE REQUESTED.

       EXHIBITS MARKED WITH AN ASTERISK ARE FILED HEREWITH, THE REMAINDER 
         OF THE EXHIBITS HAVE HERETOFORE BEEN FILED WITH THE COMMISSION 
                       AND ARE INCORPORATED BY REFERENCE.

EXHIBIT
NUMBER   EXHIBITS
-------  --------

2.1      First Amended Plan of Reorganization confirmed on August 26, 1996 under
         Chapter 11 of the United States Bankruptcy Code for the District of
         Delaware, Case No. 96-1006(PJW) as filed by Morrison Knudsen
         Corporation (Commission File No. 1-8889 - "Old MK") prior to its merger
         on September 11, 1996 with and into Washington Construction Group, Inc.
         (the "registrant") with the registrant being the surviving corporation
         in the merger and being renamed "Morrison Knudsen Corporation" (filed
         as Exhibit 2.1 to Old MK's Form 10-Q Quarterly Report for the quarter
         ended June 30, 1996 and incorporated herein by reference).

2.2      Restructuring and Merger Agreement dated May 28, 1996 by and between
         the registrant and Old MK (filed as Exhibit 1 to the registrant's Proxy
         Statement dated September 11, 1996 and incorporated herein by
         reference).

3.1      The registrant's Restated and Amended Certificate of Incorporation,
         including all amendments thereto (filed as Exhibit 3.1 to the
         registrant's Form 10-Q Quarterly Report for quarter ended August 31,
         1996 and incorporated herein by reference).

3.2      The registrant's Restated and Amended Bylaws, including all amendments
         thereto (filed as Exhibit 3.2 to the registrant's Form 10-Q Quarterly
         Report for quarter ended August 31, 1996 and incorporated herein by
         reference).

4.1      Specimen certificate for the registrant's Common Stock (filed as
         Exhibit 4.1 to the registrant's Form 10-K Annual Report for fiscal year
         ended November 30, 1996 and incorporated herein by reference).

4.2      Specimen certificate for the registrant's Warrants to expire on March
         11, 2003  (filed as Exhibit 4.2 to the registrant's Form 10-Q Quarterly
         Report for quarter ended August 31, 1996 and incorporated herein by
         reference).

4.3      Specimen certificate for the registrant's Series A Preferred Stock 
         (filed as Exhibit 4.3 to the registrant's Form 10-Q Quarterly Report
         for quarter ended August 31, 1996 and incorporated herein by
         reference).

4.4      Warrant Agreement dated September 11, 1996 by and between the
         registrant and Norwest Bank Minnesota, N.A. (filed as Exhibit 4.4 to
         the registrant's Form 10-Q Quarterly Report for quarter ended August
         31, 1996 and incorporated herein by reference).

4.5      Registration Rights Agreement dated September 11, 1996 by and between
         the registrant and the Holders of Stock to be listed on Schedule 1
         thereof (filed as Exhibit 4.5 to the registrant's Form 10-Q Quarterly
         Report for quarter ended August 31, 1996 and incorporated herein by
         reference).

4.6      Warrant Agreement dated September 11, 1996 among the registrant,
         Batchelder & Partners, Inc. and Schroder Wertheim & Co. Incorporated,
         including the form of certificate attached thereto as Exhibit A for
         certain registrant Warrants to expire on September 11, 2001 (filed as
         Exhibit 4.6 to the registrant's Form 10-Q Quarterly Report for quarter
         ended August 31, 1996 and incorporated herein by reference).

4.7      Registration Rights Agreement dated September 11, 1996 among the
         registrant, Batchelder & Partners, Inc. and Schroder Wertheim & Co.
         Incorporated  (filed as Exhibit 4.7 to the registrant's Form 10-Q
         Quarterly Report for quarter ended August 31, 1996 and incorporated
         herein by reference).

                                       E-1
<PAGE>

10.1     Credit Agreement dated October 8, 1996 among the registrant, Bank of
         Montreal, individually and as Agent, and the Banks which are parties
         thereto ("Credit Agreement") (filed as Exhibit 10.2 to the registrant's
         Form 10-Q Quarterly Report for quarter ended August 31, 1996 and
         incorporated herein by reference) and Amendment No. 1 dated January 31,
         1997 to the Credit Agreement (filed as Exhibit 10.1 to the registrant's
         Form 10-K Annual Report for fiscal year ended November 30, 1996 and
         incorporated herein by reference).

10.2     The registrant's agreement with Batchelder & Partners, Inc. dated April
         1, 1996 (filed as Exhibit 10.2 to the registrant's Form 10-K Annual
         Report for fiscal year ended November 30, 1996 and incorporated herein
         by reference).

10.3     General and Administrative Services Agreement dated as of August 1,
         1993 between the registrant and Washington Corporations (filed as
         Exhibit 10.3 to the registrant's Form 10-K Annual Report for fiscal
         year ended November 30, 1996 and incorporated herein by reference).

10.4     Information Systems (IS) Services Agreement dated as of August 1, 1993
         between the registrant and Washington Corporations (filed as Exhibit
         10.4 to the registrant's Form 10-K Annual Report for fiscal year ended
         November 30, 1996 and incorporated herein by reference).

10.5     The registrant's Environmental Indemnification Agreement with
         Washington Corporations dated July 8, 1993 (filed as Exhibit 10.5 to
         the registrant's Form 10-K Annual Report for fiscal year ended November
         30, 1996 and incorporated herein by reference).

10.6     Shareholders Agreement dated December 18, 1993 among Morrison Knudsen
         BV, a wholly owned subsidiary of the registrant, Lambique Beheer BV and
         Ergon Overseas Holdings Limited (filed as Exhibit 10.6 to the
         registrant's Form 10-K Annual Report for fiscal year ended November 30,
         1996 in redacted form). [Subject to Freedom of Information Act request
         for confidential treatment].

10.7     Form of Guaranty by Old MK, as Guarantor, in favor of Morgan Guaranty
         Trust Company of New York, as Trustee (filed as Exhibit 4.2 to
         Amendment No. 1 to Old MK's Form S-3 Registration Statement No. 33-
         50046 filed on October 30, 1992 and incorporated herein by reference).

10.8     Form of Indenture of Trust between the City of San Diego and Morgan
         Guaranty Trust Company of New York, as Trustee (filed as Exhibit 4.3 to
         Amendment No. 1 to Old MK's Form S-3 Registration Statement No. 33-
         50046 filed on October 30, 1992 and incorporated herein by reference).

10.9     Form of Loan Agreement between the City of San Diego and National Steel
         and Shipbuilding Company (filed as Exhibit 4.4 to Amendment No. 1 to
         Old MK's Form S-3 Registration Statement No. 33-50046 filed on October
         30, 1992 and incorporated herein by reference).


         MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT WHICH IS
         SEPARATELY IDENTIFIED IN ACCORDANCE WITH ITEM 14(A)(3) OF FORM 10-K.

10.10    The registrant's Amended and Restated Stock Option Agreement (filed as
         Exhibit 10.10 to the registrant's Form 10-K Annual Report for fiscal
         year ended November 30, 1996 and incorporated herein by reference).

10.11    The registrant's 1997 Stock Option and Incentive Plan for Non-Employee
         Directors (filed as Exhibit 10.11 to the registrant's Form 10-K Annual
         Report for fiscal year ended November 30, 1996 and incorporated herein
         by reference).

10.12    Old MK's Stock Compensation Plan, as amended (filed as Appendix I to
         Old MK's Proxy Statement dated April 4, 1994 and incorporated herein by
         reference).

10.13    Old MK's Stock Incentive Plan, as amended (filed as Exhibit 10.16 to
         Old MK's Form 10-K Annual Report for year ended December 31, 1992 and
         incorporated herein by reference).


                                       E-2

<PAGE>

10.14    Old MK's 1996 Retention Severance Pay Plan adopted on April 10, 1996
         (filed as Exhibit 10.3 to Old MK Form 10-Q Quarterly Report for quarter
         ended June 30, 1995, and incorporated herein by reference).

10.15    The registrant's Long-Term Incentive Plan for Corporate Executives
         (filed as Exhibit 10.3 to Old MK's Form 10-Q Quarterly Report for
         quarter ended March 31, 1994 and incorporated herein by reference.)

10.17    The registrant's Long-Term Incentive Plan for the Mining Group (filed
         as Exhibit 10.50 to Old MK's Form 10-K Annual Report for year ended
         December 31, 1995 and incorporated herein by reference.)

10.18    The registrant's Key Executive Disability Insurance Plan (filed as
         Exhibit 10.12 to Old MK's Form 10-K Annual Report for year ended
         December 31, 1992 and incorporated herein by reference.) 

10.19    The registrant's Key Executive Life Insurance Plan (filed as Exhibit
         10.13 to Old MK's Form 10-K Annual Report for year ended December 31,
         1992 and incorporated herein by reference). 

10.20    Form of registrant's Indemnification Agreement (filed as Exhibit 10.20
         to the registrant's Form 10-K Annual Report for fiscal year ended
         November 30, 1996 and incorporated herein by reference).  [A schedule
         listing the individuals with whom the registrant has entered into such
         agreements is filed herewith]       

10.21    The registrant's employment agreement with Robert A. Tinstman dated as
         of January 1, 1993, and  and Amendment thereto dated April 22, 1996
         (filed as Exhibit 10.21 to the registrant's Form 10-K Annual Report for
         fiscal year ended November 30, 1996 and incorporated herein by
         reference).

10.22    The registrant's Nonqualified Stock Option Agreement with Robert A.
         Tinstman dated as of January 10, 1997 (filed as Exhibit 10.22 to the
         registrant's Form 10-K Annual Report for fiscal year ended November 30,
         1996 and incorporated herein by reference).
 
10.23    The registrant's Supplemental Retirement Benefit Agreement with Robert
         A. Tinstman dated as of  August 3, 1990 (filed as Exhibit 10.23 to the
         registrant's Form 10-K Annual Report for fiscal year ended November 30,
         1996 and incorporated herein by reference).

10.24    The registrant's employment agreement with Stephen G. Hanks dated as of
         January 1, 1993 and Amendments thereto dated as of August 9, 1993 and
         April 22, 1996 (filed as Exhibit 10.24 to the registrant's Form 10-K
         Annual Report for fiscal year ended November 30, 1996 and incorporated
         herein by reference).

10.25    The registrant's Nonqualified Stock Option Agreement with Stephen G.
         Hanks dated as of January 10, 1997 (filed as Exhibit 10.25 to the
         registrant's Form 10-K Annual Report for fiscal year ended November 30,
         1996 and incorporated herein by reference).

10.26    The registrant's employment agreement with Thomas H. Zarges dated as of
         January 1, 1994 (filed as Exhibit 10.26 to the registrant's Form 10-K
         Annual Report for fiscal year ended November 30, 1996 and incorporated
         herein by reference).

10.27    The registrant's Nonqualified Stock Option Agreement with Thomas H.
         Zarges dated as of January 10, 1997 (filed as Exhibit 10.27 to the
         registrant's Form 10-K Annual Report for fiscal year ended November 30,
         1996 and incorporated herein by reference).

10.28    The registrant's employment agreement with Douglas L. Brigham dated as
         of April 26, 1996 (filed as Exhibit 10.28 to the registrant's Form 10-K
         Annual Report for fiscal year ended November 30, 1996 and incorporated
         herein by reference).

10.29    The registrant's employment agreement with Alvia L. Henderson dated as
         of April 26, 1996 (filed as Exhibit 10.29 to the registrant's Form 10-K
         Annual Report for fiscal year ended November 30, 1996 and incorporated
         herein by reference).


                                       E-3

<PAGE>

16.1     Letter from KPMG Peat Marwick LLP to the registrant dated September 17,
         1996 (filed as Exhibit 16.1 to the registrant's Form 8-K Current Report
         dated September 11, 1996 and incorporated herein by reference).

21.      Subsidiaries of the registrant (filed as Exhibit 21 to the registrant's
         Form 10-K Annual Report for fiscal year ended November 30, 1996 and
         incorporated herein by reference).

23.1 *   Consent of Coopers & Lybrand L.L.P.

23.2 *   Consent of KPMG Peat Marwick LLP.

24.      Powers of Attorney (filed as Exhibit 24 to the registrant's Form 10-K
         Annual Report for fiscal year ended November 30, 1996 and incorporated
         herein by reference).

27.      Financial Data Schedule (filed as Exhibit 27 to the registrant's Form
         10-K Annual Report for fiscal year ended November 30, 1996 and
         incorporated herein by reference).


                                       E-4