FLUOR CORP/DE/, DEF 14A, 2000-11-01

FLUOR CORP/DE/
DEF 14A, 2000-11-01
HEAVY CONSTRUCTION OTHER THAN BLDG CONST - CONTRACTORS

Previous: FLORIDA POWER CORP /, 10-Q, EX-27.B, 2000-11-01

Next: FORD MOTOR CO, 8-K, 2000-11-01

<PAGE>

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

Proxy Statement Pursuant to Section 14(a) of The Securities Exchange Act of
1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement

[_] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

FLUOR CORPORATION
(Name of Registrant as Specified in its Charter)

N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee:

[_] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[X] Fee paid previously with preliminary materials: $198,400

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE>

Fluor Corporation
One Enterprise Drive
Aliso Viejo, California 92656

[FLUOR LOGO]

[MASSEY LOGO]

November 1, 2000

Dear Shareholder,

As you know, Fluor is proposing to effect a spin-off distribution to its
shareholders which will separate Fluor into two publicly-traded companies:

. a "new" Fluor Corporation ("New Fluor") which will continue to own and
conduct all of Fluor's existing businesses other than the coal business
and other related operations conducted by A. T. Massey Coal Company,
Inc. and

. Massey Energy Company which will continue to own and conduct the coal
business and other operations conducted by A. T. Massey.

The separation of these businesses will be accomplished through a
distribution of 100% of the common stock of New Fluor to shareholders of
existing Fluor. As a result of the spin-off distribution, each existing Fluor
shareholder will (1) receive one share of New Fluor common stock for each share
of existing Fluor common stock and (2) retain their shares in existing Fluor
(whose name will be changed to Massey Energy Company).

We believe that this distribution will enable the respective management
teams to focus more closely on their businesses and provide flexibility for
each of the separated companies to grow in the way best suited for its
industry. We believe that each of these companies will be well-positioned to
continue as leaders in their respective industries.

Before completing this distribution, we are seeking your approval, as a
shareholder of Fluor Corporation. You are cordially invited to attend a Special
Meeting of Shareholders of Fluor Corporation to be held on Thursday, November
30, 2000 at the Fluor Daniel Engineering Campus, Building A, located at One
Fluor Daniel Drive, Aliso Viejo, California, at 9:00 a.m., local time. Enclosed
are a Notice of Special Meeting of Shareholders and a Proxy Statement relating
to the Special Meeting.

YOUR BOARD OF DIRECTORS BELIEVES THAT THE DISTRIBUTION IS IN THE BEST
INTERESTS OF SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE IT.

Fluor Corporation has requested a ruling from the Internal Revenue Service
that for federal income tax purposes the distribution of the shares of New
Fluor common stock to Fluor Corporation shareholders will be tax-free to Fluor
Corporation and its shareholders. Fluor Corporation expects to receive a
favorable ruling prior to the distribution.

Details of the distribution, which will be considered at the Special
Meeting, as well as other important information, are set forth in the
accompanying Proxy Statement and should be considered carefully. BECAUSE OF THE
SIGNIFICANCE OF THIS TRANSACTION TO FLUOR CORPORATION AND ITS SHAREHOLDERS, IT
IS VITAL THAT EVERY SHAREHOLDER VOTES AT THE SPECIAL MEETING IN PERSON OR BY
PROXY.
<PAGE>

PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY in the
accompanying envelope, which requires no postage if mailed in the United
States.

You are, of course, welcome to attend the special meeting and vote in
person, even if you have previously returned your proxy card.

Sincerely yours,

/s/ Philip J. Carroll, Jr.

Philip J. Carroll, Jr.
Chairman and Chief Executive Officer
of Fluor Corporation

/s/ Don L. Blankenship
Don L. Blankenship
Chairman and Chief Executive Officer
of A.T. Massey Coal Company, Inc.
<PAGE>

FLUOR CORPORATION

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 30, 2000

November 1, 2000

A Special Meeting of Shareholders (the "Meeting") of Fluor Corporation will
be held on November 30, 2000 at 9:00 a.m., local time, at the Fluor Daniel
Engineering Campus, Building A, located at One Fluor Daniel Drive, Aliso Viejo,
California.

The Meeting will be conducted:

1. To consider and vote upon the following proposal: approval of a
special dividend to the holders of the outstanding shares of Fluor
Corporation Common Stock of all outstanding shares of capital stock of a
"new" Fluor Corporation, a wholly owned subsidiary of Fluor Corporation
("New Fluor"), on a pro rata and corresponding basis, all to be effected in
accordance with the terms of a Distribution Agreement to be entered into
between Fluor Corporation and New Fluor.

2. To transact such other business as may properly come before the
Meeting. Shareholders of record at the close of business on October 26,
2000 will be entitled to notice of and to vote at the Meeting.

Fluor Corporation's Board of Directors unanimously recommends that
shareholders vote for the Distribution.

PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY/VOTING INSTRUCTION
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.

By order of the Board of Directors

/s/Lawrence N. Fisher
Lawrence N. Fisher
Senior Vice President--Law and
Secretary
<PAGE>

PROXY STATEMENT/INFORMATION STATEMENT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
CAUTIONARY STATEMENTS..................................................... 1
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION.............................. 3
SUMMARY................................................................... 5
New Fluor............................................................... 5
Massey Energy Company................................................... 5
The Special Meeting..................................................... 6
The Proposal............................................................ 6
Special Meeting Record Date............................................. 6
Vote Required........................................................... 6
The Distribution........................................................ 7
Effect on Shareholders.................................................. 7
Recommendation of the Board............................................. 7
Certain Federal Income Tax Consequences................................. 8
No Appraisal Rights..................................................... 8
Dividends After the Distribution........................................ 8
Listing of New Fluor and Massey Stock................................... 8
Risk Factors............................................................ 8
FLUOR CORPORATION SUMMARY FINANCIAL DATA.................................. 9
MASSEY ENERGY COMPANY SUMMARY FINANCIAL DATA.............................. 10
RISK FACTORS.............................................................. 11
Risks Relating to the Distribution...................................... 11
Risks Relating to New Fluor............................................. 12
Risks Relating to Massey................................................ 15
THE SPECIAL MEETING....................................................... 20
Date, Time and Place of Special Meeting................................. 20
Matters for Consideration at Special Meeting............................ 20
Special Meeting Record Date............................................. 20
Vote Required........................................................... 20
Voting and Revocation of Proxies........................................ 20
Solicitation of Proxies................................................. 21
BACKGROUND AND REASONS FOR THE DISTRIBUTION............................... 22
Reasons for the Recommendation of the Fluor Corporation Board of
Directors.............................................................. 22
Review of Financial Advisors............................................ 22
THE DISTRIBUTION.......................................................... 26
Introduction............................................................ 26
Form of Transaction..................................................... 26
Manner of Effecting the Distribution.................................... 26
Federal Income Tax Consequences of the Distribution..................... 27
Listing and Trading of New Fluor Common Stock and Massey Common Stock... 29
Financing............................................................... 29
RELATIONSHIP BETWEEN NEW FLUOR AND MASSEY AFTER THE DISTRIBUTION.......... 30
Distribution Agreement.................................................. 30
Tax Sharing Agreement................................................... 31
DIVIDEND POLICIES......................................................... 33
NEW FLUOR CORPORATION CAPITALIZATION...................................... 34
FLUOR CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA.................... 35
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
NEW FLUOR CORPORATION UNAUDITED PRO FORMA FINANCIAL STATEMENTS........... 36
Unaudited Pro Forma Statement of Earnings.............................. 36
Unaudited Pro Forma Balance Sheet...................................... 40
FLUOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 41
BUSINESS OF NEW FLUOR.................................................... 56
Overview............................................................... 56
Industry Overview...................................................... 56
Strategy............................................................... 57
Competitive Strengths.................................................. 58
Operations............................................................. 59
Properties............................................................. 62
Legal Proceedings...................................................... 63
MASSEY ENERGY COMPANY CAPITALIZATION..................................... 64
MASSEY ENERGY COMPANY SELECTED COMBINED FINANCIAL DATA................... 65
MASSEY ENERGY COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION............................................................. 66
Unaudited Pro Forma Combined Statement of Earnings..................... 66
Unaudited Pro Forma Combined Balance Sheet............................. 68
MASSEY ENERGY COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 69
BUSINESS AND PROPERTIES OF MASSEY........................................ 74
Overview............................................................... 74
Industry Overview...................................................... 74
Strategy............................................................... 76
Competitive Strengths.................................................. 77
Coal Reserves.......................................................... 79
Mining Methods......................................................... 80
Mining Operations...................................................... 81
Other Related Operations............................................... 85
Marketing and Sales.................................................... 86
Distribution........................................................... 86
Customers.............................................................. 87
Coal Contracts......................................................... 87
Competition............................................................ 87
Employees and Labor Relations.......................................... 87
Legal Proceedings...................................................... 88
Regulation............................................................. 89
MANAGEMENT OF NEW FLUOR.................................................. 94
New Fluor Board of Directors........................................... 94
Committees of the New Fluor Board...................................... 95
Compensation Committee Interlocks and Insider Participation............ 97
Compensation of New Fluor Directors.................................... 97
Description of New Fluor Director Stock Plan........................... 98
New Fluor Executive Officers........................................... 98
Compensation of New Fluor Executive Officers........................... 100
New Fluor Treatment of Outstanding Fluor Corporation Compensatory Stock
Awards................................................................ 102
Description of New Fluor Stock Plan.................................... 103
Change of Control Provisions in New Fluor Stock Awards................. 110
Employment Contracts and Termination of Employment Arrangements for New
Fluor Executive Officers.............................................. 110
NEW FLUOR CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 114
</TABLE>

ii
<PAGE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
MANAGEMENT OF MASSEY...................................................... 115
Massey Board of Directors............................................... 115
Committees of Massey Board.............................................. 115
Compensation Committee Interlocks and Insider Participation............. 117
Compensation of Massey Directors........................................ 117
Massey Executive Officers............................................... 118
Compensation of Massey Executive Officers............................... 119
Change of Control Provisions in Fluor Corporation Stock Plans........... 124
Massey Treatment of Outstanding Fluor Corporation Compensatory Stock
Awards................................................................. 124
Employment Contracts and Termination of Employment Arrangements for
Massey Executive Officers.............................................. 124
MASSEY CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 127
SECURITY OWNERSHIP OF NEW FLUOR........................................... 128
SECURITY OWNERSHIP OF MASSEY.............................................. 131
SECURITY OWNERSHIP OF FLUOR CORPORATION................................... 133
DESCRIPTION OF NEW FLUOR CAPITAL STOCK.................................... 136
General................................................................. 136
Common Stock............................................................ 136
Preferred Stock......................................................... 137
Anti-Takeover Provisions of the New Fluor Charter and Bylaws and
Delaware Law........................................................... 137
Transfer Agent and Registrar............................................ 138
DESCRIPTION OF MASSEY CAPITAL STOCK....................................... 139
General................................................................. 139
Common Stock............................................................ 139
Preferred Stock......................................................... 140
Anti-Takeover Provisions of the Massey Charter and Bylaws and Delaware
Law.................................................................... 140
Transfer Agent and Registrar............................................ 141
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR NEW FLUOR DIRECTORS AND
OFFICERS................................................................. 142
Indemnification of Liability for Directors & Officers................... 142
Limitation of Liability of Directors.................................... 142
SUBMISSION OF SHAREHOLDER PROPOSALS....................................... 144
AVAILABLE INFORMATION..................................................... 144
INDEX TO FINANCIAL STATEMENTS............................................. F-1

APPENDIX A -- FORM OF DISTRIBUTION AGREEMENT.............................. A-1
APPENDIX B -- FORM OF TAX SHARING AGREEMENT............................... B-1
APPENDIX C -- SOLVENCY OPINION............................................ C-1
</TABLE>

iii
<PAGE>

CAUTIONARY STATEMENTS

This Proxy Statement/Information Statement (this "Proxy Statement") contains
statements relating to future results of the newly created Fluor Corporation
("New Fluor") and Fluor Corporation, to be renamed Massey Energy Company in
connection with the transaction described in this Proxy Statement ("Massey"),
including certain projections and business trends, that are "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995.
All statements regarding New Fluor's or Massey's expected future financial
positions, results of operations, cash flows, dividends, financing plans,
business strategies, budgets, projected costs and capital expenditures,
competitive positions, growth opportunities for existing services, plans and
objectives of management for future operations and markets for stock are
forward-looking statements. Moreover, when used in this Proxy Statement with
respect to New Fluor or Massey, the words "believe," "anticipate," "hope,"
"estimate," "project," "intend," "expect," and similar expressions are intended
to identify forward-looking statements. Although New Fluor and Massey believe
the expectations reflected in the forward-looking statements are based on
reasonable assumptions, no assurance can be given that the expectations will
prove to have been correct. Any forward-looking statements contained in this
Proxy Statement should not be relied upon as predictions of future events.
These statements are necessarily dependent on assumptions, data or methods that
may be incorrect or imprecise and may be incapable of being realized.
Shareholders are hereby notified that such information reflects the opinions of
New Fluor's and Massey's management as to the future. Shareholders should use
their own judgment as to the significance of this information to their
individual decisions.

With respect to New Fluor, important factors that could cause actual results
to differ materially from the expectations reflected in any forward-looking
statements in this Proxy Statement include, among other things:

. risks relating to cost overruns

. project performance problems

. uncertainty of future contract awards

. uncertainty of timing of project revenues

. uncertainties relating to government contracts

. regulatory requirements

. global economic and political uncertainties

. foreign currency fluctuations and

. competitive forces

With respect to Massey, important factors that could cause actual results to
differ materially from the expectations reflected in any forward-looking
statements in this Proxy Statement include, among other things:

. competition in the coal industry

. a decline in coal prices

. reduced demand for Massey's coal

. increased labor costs

. workforce disruptions

. transportation problems

. changes in transportation costs

. devaluation of foreign currencies and

. regulatory concerns

For a further discussion of the matters listed above, see the section
entitled "Risk Factors" contained in this Proxy Statement.

1
<PAGE>

Readers are cautioned not to place undue reliance on the forward-looking
statements contained in this Proxy Statement, which speak only as of the date
hereof. Neither New Fluor nor Massey will update that information except as
required by law in the normal course of their respective public disclosure
practices.

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

This Proxy Statement is first being mailed to shareholders of Fluor
Corporation on or about November 1, 2000.

2
<PAGE>

QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

Q1: WHAT IS THE DISTRIBUTION?

A: The Distribution is the method by which Fluor Corporation will be separated
into two publicly traded companies:

. Fluor Corporation ("New Fluor"), a leading professional services
company offering a diverse range of value-added, knowledge-based
services, from traditional engineering, procurement and construction
to total asset management

. Massey Energy Company ("Massey"), a leader in the U.S. coal industry
that produces high-quality, low sulfur coal for electric-generation,
steel-making and a variety of industrial applications

Pursuant to the Distribution, Fluor Corporation will distribute to its
shareholders in a tax-free dividend one share of New Fluor Common Stock for
every share of Fluor Corporation Common Stock held. Immediately after the
Distribution, Fluor Corporation's shareholders will still own all of Fluor
Corporation's current businesses, but they will own them through their
investments in New Fluor and Massey.

Q2: WHAT IS NEW FLUOR?

A: New Fluor is a new company which will continue to operate the non-coal
businesses currently at Fluor Corporation, which include a diverse range of
value-added, knowledge-based services, from traditional engineering,
procurement and construction to total asset management (the "New Fluor
Business").

Q3: WHAT IS MASSEY?

A: Massey will be the corporation currently named Fluor Corporation, which
will be renamed in connection with the Distribution. Massey will continue
to produce high-quality, low sulfur coal for electric-generation, steel-
making and a variety of industrial applications (the "Massey Business").

Q4: WHY IS FLUOR CORPORATION SEPARATING ITS BUSINESSES?

A: The management of Fluor Corporation believes that a separation of the New
Fluor Business and the Massey Business will allow each business to focus on
its respective markets and customers and allow each business to respond
more quickly to its particular changing competitive and economic
conditions. A separation will allow management of New Fluor to focus on its
core businesses. Moreover, the Massey Business will benefit greatly from
management independence and by eliminating the need for approval from non-
Massey entities for Massey's significant acquisitions and transactions. A
separation will enable Massey to pursue capital investment and expansion
opportunities based on the conditions in the coal industry, without
unrelated constraints imposed by Fluor Corporation's other businesses.

Q5: WHY IS THIS TRANSACTION STRUCTURED AS A DISTRIBUTION?

A: The Distribution is the most tax-efficient means of separating Fluor
Corporation's businesses. Fluor Corporation has applied for a ruling from
the Internal Revenue Service that for federal income tax purposes the
Distribution of the shares of New Fluor Common Stock to Fluor Corporation
shareholders will be tax-free to Fluor Corporation and its shareholders.

Q6: WHAT WILL FLUOR CORPORATION SHAREHOLDERS RECEIVE IN THE DISTRIBUTION?

A: In the Distribution, Fluor Corporation shareholders will receive one share
of New Fluor Common Stock for every share of Fluor Corporation Common Stock
they own. Immediately after the Distribution, Fluor

3
<PAGE>

Corporation's shareholders will still own their shares of Fluor Corporation
Common Stock and the same shareholders will still own all of Fluor
Corporation's businesses, but they will own them as two separate
investments rather than as a single investment.

Q7: WHAT WILL HAPPEN TO THE "OLD" FLUOR CORPORATION SHARE CERTIFICATES?

A: After the Distribution, the certificates representing the "old" Fluor
Corporation Common Stock will represent a shareholder's interest in the
Massey business.

Q8: WHAT DOES A FLUOR CORPORATION SHAREHOLDER NEED TO DO NOW?

A: Each Fluor Corporation shareholder, after reviewing this Proxy Statement,
should indicate on the proxy card how he or she would like to vote and sign
and mail it in the enclosed return envelope as soon as possible so that the
shares will be represented at the Special Meeting. If a proxy card is
signed and returned without an indication of how the shareholder would like
to vote, the proxy will be counted as a vote in favor of the Distribution.

THE BOARD OF DIRECTORS OF FLUOR CORPORATION UNANIMOUSLY RECOMMENDS VOTING
IN FAVOR OF THE DISTRIBUTION.

The Special Meeting will take place on November 30, 2000. Each Fluor
Corporation shareholder may attend the Special Meeting and vote his or her
shares in person rather than signing and returning a proxy card. In
addition, a proxy can be revoked at any time up to and including the date
of the Special Meeting by following the directions on page 20.

Q9: WHERE CAN FLUOR CORPORATION SHAREHOLDERS GET MORE INFORMATION?

A: Fluor Corporation shareholders with additional questions related to the
Distribution should contact ChaseMellon Shareholder Services, L.L.C., the
Transfer Agent for the Distribution, at P.O. Box 3315, South Hackensack,
New Jersey 07606, telephone number: (800) 813-2847. Questions may also be
directed to Investor Relations at Fluor Corporation at One Enterprise
Drive, Aliso Viejo, California 92656, telephone number: (949) 349-2000.
Information regarding the Distribution is also available at Fluor
Corporation's web site located at www.fluor.com.

4
<PAGE>

SUMMARY

This summary highlights selected information from this Proxy Statement and
may not contain all of the information that is important to you. To better
understand the legal terms of the Distribution, you should read this entire
document carefully, as well as the additional documents referred to in this
summary and elsewhere. In this Proxy Statement, "Fluor Corporation" refers to
Fluor Corporation on or prior to the Distribution Date (as defined herein),
"New Fluor" refers to the newly created entity named Fluor Corporation whose
shares are being distributed to shareholders in the Distribution, and "Massey"
refers to A.T. Massey Coal Company, Inc., a subsidiary of Fluor Corporation
prior to the Distribution, and to Fluor Corporation following the Distribution
Date, which will change its name to Massey Energy Company.

New Fluor

New Fluor is a leading professional services company offering a diverse
range of value-added, knowledge-based services, from traditional engineering,
procurement and construction to total asset management. New Fluor will continue
to provide these services to its customers globally through four strategic
business enterprises:

. Fluor Daniel(SM) provides design, engineering, procurement and
construction services on a worldwide basis to an extensive range of
infrastructure, industrial, commercial, utility, natural resource,
chemical and energy clients.

. Fluor Global Services(SM) provides outsourcing of maintenance services
and asset operations, design and build-out services in the
telecommunications market, equipment rental and sales, services to the
U.S. government and temporary staffing for client projects and other
staffing needs.

. Fluor Constructors International, Inc. provides unionized construction
management services to a wide variety of industrial businesses
worldwide.

. Fluor Signature Services(SM) provides business support services
including information technology, real estate, safety consulting,
transactional accounting and human resource support for New Fluor and
potentially for outside clients.

The wide range of services provided by New Fluor strategically positions and
differentiates it as a full-service provider of exceptional industry expertise
and technical knowledge. New Fluor provides these services through a global
network of offices in more than 25 countries on 6 continents.

In recent years, New Fluor has substantially restructured its business
operations to lower its cost structure and sharpen its selling and marketing
focus. New Fluor's business strategy is to build on its excellent reputation
among global customers for project management capability and other professional
services while maintaining its strong financial condition and operating
flexibility.

Massey Energy Company

Massey is the leading coal producer in the Central Appalachian area of the
United States, a region containing substantial reserves of premium
metallurgical coal demanded by steel manufacturers as well as low sulfur, high
Btu coal desired by electricity providers. Over a number of years, Massey and
its parent, Fluor Corporation, have consistently made substantial investments
in the operating infrastructure to develop the 18 state-of-the-art mining
complexes currently operated by Massey.

5
<PAGE>

Massey has a highly capable management team with a long and proven track
record in the coal industry. This team has consistently achieved high levels of
productivity while also achieving one of the best safety records in the
industry. The Massey accident rate (non-fatal days lost) is less than one-half
the coal industry average.

Massey believes that its strategic location and consistent performance have
led to a strong and diverse customer base. Its competitive position is enhanced
by its strategic access to customers--via rail, rivers, the Great Lakes
shipping routes and coastal shipping terminals for export--providing Massey the
flexibility to supply different types of coal to meet the varying demands of
its customers.

Massey plans to maintain its disciplined growth strategy that has resulted
in a threefold increase in coal reserves and a doubling of production over the
past ten years. This strategy involves selectivity in acquiring new properties
and efficiency in integrating acquired properties into existing infrastructure.
Massey also intends to maintain its historically strong financial condition
relative to its competitors.

The Special Meeting

We will hold the special meeting on November 30, 2000 at 9:00 a.m., local
time, at the Fluor Daniel Engineering Campus, Building A, located at One Fluor
Daniel Drive, Aliso Viejo, California.

The Proposal

At the Special Meeting, the shareholders of Fluor Corporation will vote on
the following proposal:

. To approve a special dividend (the "Distribution") to the holders of the
outstanding shares of Fluor Corporation Common Stock of all outstanding
shares of capital stock of New Fluor in accordance with the terms of a
Distribution Agreement to be entered into between New Fluor and Massey
(the "Distribution Agreement").

Special Meeting Record Date

The board of directors of Fluor Corporation has fixed the close of business
on October 26, 2000 as the record date (the "Special Meeting Record Date") for
the determination of the holders of Fluor Corporation Common Stock entitled to
receive notice of and to vote at the Special Meeting.

Vote Required

Each holder of record of Fluor Corporation Common Stock as of the Special
Meeting Record Date is entitled to one vote for each share held. Approval of
the Distribution requires the affirmative vote of the majority of the shares of
Fluor Corporation Common Stock present in person or represented by proxy at the
Special Meeting.

As of October 26, 2000, there were 75,744,873 shares of Fluor Corporation
Common Stock outstanding and entitled to vote at the Special Meeting.

For additional information relating to the Special Meeting, see the
information set forth under the heading "The Special Meeting" in this Proxy
Statement.

6
<PAGE>

The Distribution

You should note that notwithstanding the legal form of the Distribution
described above whereby Fluor Corporation will spin off New Fluor, because of
the relative significance of the New Fluor operations to Fluor Corporation, New
Fluor will be treated as the "accounting successor" to Fluor Corporation for
financial reporting purposes. Therefore, the historical financial information
for New Fluor included in this Proxy Statement is that of Fluor Corporation and
does not reflect the separation of New Fluor's business from Massey's business
that will occur through the Distribution.

The historical financial information for Massey has been prepared on a
stand-alone basis as described in Note 1 to the financial statements of Massey
included elsewhere in this Proxy Statement. Massey's historical financial
information includes allocations of certain Fluor Corporation corporate assets,
liabilities and expenses.

Effect on Shareholders

Upon the Distribution, each Fluor Corporation shareholder will retain his or
her shares of Fluor Corporation Common Stock and, for each share of Fluor
Corporation Common Stock held by the shareholder on the Distribution Record
Date (as defined herein), will be entitled to receive one share of New Fluor
Common Stock. For additional information regarding the Distribution, see the
information set forth under the heading "The Distribution" in this Proxy
Statement.

Following the Distribution, the certificates representing the "old" Fluor
Corporation Common Stock will represent such shareholders' interests in the
Massey business.

Recommendation of the Board

The board of directors of Fluor Corporation believes that the Distribution
will enhance shareholder value by allowing New Fluor and Massey to focus on
their separate businesses and maximize their opportunities for growth. For a
discussion of the factors considered by the board of directors in reaching its
decision with respect to the Distribution, see "Background and Reasons for the
Distribution--Reasons for the Recommendation of the Fluor Corporation Board of
Directors."

The board of directors unanimously recommends that shareholders vote in
favor of the Distribution.

7
<PAGE>

Certain Federal Income Tax Consequences

Fluor Corporation has applied to the Internal Revenue Service for a ruling
that the Distribution will be tax free to Fluor Corporation and its
shareholders for U.S. federal income tax purposes. Fluor Corporation
shareholders will apportion their tax basis in Fluor Corporation Common Stock
held immediately before the Distribution among the Fluor Corporation Common
Stock (which will represent shares of Massey after the Distribution) and the
New Fluor Common Stock received in the Distribution based on the relative fair
market values of the stock.

No Appraisal Rights

Under Delaware law, Fluor Corporation shareholders have no right of
appraisal of the value of their shares in connection with the Distribution.

Dividends After the Distribution

Following the Distribution and in accordance with its past policies, New
Fluor intends to pay an overall annual cash dividend equal to approximately 30
percent to 35 percent of New Fluor's long-term operating performance
expectations. The declaration of dividends by Massey will depend on a number of
factors, including future earnings, capital requirements, financial conditions
and future prospects. The payment and level of cash dividends by New Fluor and
Massey will be subject to the discretion of their respective boards of
directors.

Listing of New Fluor and Massey Stock

The shares of New Fluor Common Stock to be issued in the Distribution are
expected to be listed on the New York Stock Exchange under the symbol "FLR."
There is currently no public trading market for these shares.

Massey's common stock (i.e. the "old" Fluor Corporation Common Stock) will
continue to trade on the New York Stock Exchange, but the symbol under which it
trades will change from "FLR" to "MEE." However, because of the significant
changes that will take place at Fluor Corporation as a result of the
Distribution, the trading market for Massey's common stock may be significantly
different from that for Fluor Corporation Common Stock prior to the
Distribution.

Risk Factors

Shareholders should carefully evaluate the matters set forth under the
section entitled "Risk Factors," in addition to the other matters described in
this Proxy Statement, when deciding whether to approve the Distribution.

8
<PAGE>

FLUOR CORPORATION

SUMMARY FINANCIAL DATA

The following table summarizes certain financial data of Fluor Corporation
as of and for the periods indicated. The information set forth below should be
read in conjunction with, and is qualified in its entirety by, the information
under "Fluor Corporation Selected Consolidated Financial Data," "Fluor
Corporation Management's Discussion and Analysis of Financial Condition and
Results of Operations," "New Fluor Corporation Unaudited Consolidated Pro Forma
Financial Statements" and Fluor Corporation's Consolidated Financial Statements
and Notes thereto included elsewhere in this Proxy Statement. For information
regarding developments since July 31, 2000, see "Fluor Corporation Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Recent Developments."

<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
October 31, October 31, Nine Months Ended July 31, (unaudited)
----------------------------- ----------------------------- ------------------------------------------
Historical Unaudited Pro Forma (1) Historical Historical Pro Forma (1)
----------------------------- ----------------------------- ------------ ------------ -------------
1997 1998 1999 (2) 1997 1998 1999 1999 (2) 2000 (2) 2000
--------- --------- --------- --------- --------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
EARNINGS DATA
(in millions):
Revenues............ $14,298.5 $13,504.8 $12,417.4 $13,220.6 $12,383.7 $11,341.3 $ 9,544.8 $ 8,458.9 $ 7,666.4
Net earnings........ 146.2 235.3 104.2 49.3 132.2 23.7 28.3 136.6 77.8
EARNINGS PER SHARE
Basic............... $ 1.76 $ 2.99 $ 1.38 $ 0.61 $ 1.72 $ 0.32 $ 0.38 $ 1.81 $ 1.06
Diluted............. 1.75 2.97 1.37 0.60 1.71 0.32 0.37 1.79 1.06
Shares used in
calculating earnings
per share
(in thousands):
Basic............... 83,091 78,801 75,228 81,241 76,951 73,378 75,158 75,340 73,490
Diluted............. 83,478 79,135 75,929 81,618 77,175 73,478 75,884 76,345 73,555
</TABLE>

<TABLE>
<CAPTION>
As of October 31, As of July 31, 2000
------------------ ------------------------
Historical Historical Pro Forma (1)
------------------ ---------- -------------
1998 1999 (unaudited)
-------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
(in millions):
Working capital (deficit)........ $ (218.4) $ (294.1) $ (271.6) $(285.8)
Total assets..................... 5,019.2 4,886.1 4,876.6 2,878.3
Total debt....................... 731.0 565.5 743.1 337.6
Shareholders' equity............. 1,525.6 1,581.4 1,645.9 692.3
</TABLE>
-------
(1) See "New Fluor Corporation (Accounting Successor to Fluor Corporation)
Unaudited Pro Forma Financial Statements."

(2) In March 1999, Fluor Corporation announced a new strategic direction,
including a reorganization of the operating units and administrative
functions of its engineering and construction segment. In connection with
this reorganization Fluor Corporation recorded a pre-tax charge of $136.5
million to cover direct and other reorganization related costs. In October
1999 and April 2000, Fluor Corporation reversed into earnings $19.3 million
and $17.9 million, respectively, due to changes in Fluor Corporation's
reorganization plans.

9
<PAGE>

MASSEY ENERGY COMPANY

SUMMARY FINANCIAL DATA

The following table summarizes certain financial data for Massey for the
periods indicated:

. on a historical basis as Massey has operated as a subsidiary of Fluor
Corporation, combined with the operations of Appalachian Synfuel, LLC,
another subsidiary of Fluor Corporation, ownership of which will
transfer to Massey in connection with the Distribution.

. on a pro forma basis as if the transaction had occurred on July 31, 2000
for the unaudited combined pro forma balance sheet data and on November
1 of the respective periods for unaudited combined pro forma statement
of earnings data.

The information set forth below should be read in conjunction with, and is
qualified in its entirety by, the information under "Massey Energy Company
Capitalization," "Massey Energy Company Selected Combined Financial Data,"
"Massey Energy Company Unaudited Pro Forma Combined Financial Information,"
"Massey Energy Company Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Massey Energy Company Combined
Financial Statements and Notes thereto included elsewhere in this Proxy
Statement. For information regarding developments since July 31, 2000, see
"Massey Energy Company Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments."

<TABLE>
<CAPTION>
Nine Months Ended July 31,
Year Ended October 31, (unaudited)
---------------------------------------- -----------------------------------
Historical Pro Forma (1) Historical Historical Pro Forma (1)
-------------------------- ------------- ---------- ---------- -------------
1997 1998 1999 1999 1999 2000 2000
-------- -------- -------- ------------- ---------- ---------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF
EARNINGS DATA (in
millions):
Total revenue.......... $1,109.8 $1,154.0 $1,114.5 $1,114.5 $ 821.6 $ 844.1 $ 844.1
Net earnings........... 119.0 128.3 103.4 74.3 74.5 77.1 53.5
UNAUDITED PRO FORMA
EARNINGS PER SHARE (2):
Basic.................. $ 1.61 $ 1.74 $ 1.40 $ 1.01 $ 1.01 $ 1.04 $ 0.72
Diluted................ 1.61 1.74 1.40 1.01 1.01 1.04 0.72
SHARES USED IN
CALCULATING UNAUDITED
PRO FORMA EARNINGS PER
SHARE (in thousands)
(2):
Basic.................. 73,819 73,819 73,819 73,819 73,819 73,819 73,819
Diluted................ 73,829 73,826 73,826 73,826 73,825 73,820 73,820
OTHER DATA (in
millions):
EBITDA (3)............. $ 286.1 $ 320.6 $ 306.9 $ 306.9 $ 224.2 $ 221.7 $ 221.7
</TABLE>

<TABLE>
<CAPTION>
As of October 31, As of July 31, 2000
----------------- ------------------------
Historical Historical Pro Forma (1)
----------------- ---------- -------------
1998 1999 (unaudited)
-------- --------
<S> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA (in
millions):
Working capital (deficit).......... $ 4.0 $ 43.9 $ 128.3 $ (114.9)
Total assets....................... 1,836.9 1,980.0 2,086.7 2,088.9
Total debt......................... -- -- -- 530.0
Shareholder's equity............... 1,181.2 1,277.4 1,391.1 854.6
</TABLE>
-------
(1) See "Massey Energy Company Unaudited Pro Forma Combined Financial
Information."
(2) Shares used to calculate basic pro forma earnings per share is based on the
number of shares expected to be outstanding at the date of the Distribution
(assumed to be equal to the 75,669,076 shares of Fluor Corporation common
stock outstanding on July 31, 2000 less 1.85 million shares of common stock
expected to be acquired upon the settlement of its forward purchase
contract). Shares used to calculate diluted earnings per share is based on
the number of shares expected to be issued in the Distribution and the
dilutive effect of stock options and other stock-based instruments of Fluor
Corporation, held by Massey employees, that will be converted to equivalent
instruments in Massey Energy Company.
(3) EBITDA is defined as earnings before deducting net interest expense
(interest expense less interest income), income taxes and depreciation,
depletion and amortization. Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles,
management believes that it is useful to an investor in evaluating Massey
because it is widely used in the coal industry as a measure to evaluate a
company's operating performance before debt expense and its cash flow.
EBITDA does not purport to represent cash generated by operating activities
and should not be considered in isolation or as a substitute for measures
of performance in accordance with generally accepted accounting principles.
In addition, because EBITDA is not calculated identically by all companies,
the presentation here may not be comparable to other similarly titled
measures of other companies. Management's discretionary use of funds
depicted by EBITDA may be limited by working capital, debt service and
capital expenditure requirements and by restrictions related to legal
requirements, commitments and uncertainties.

10
<PAGE>

RISK FACTORS

Shareholders should consider the following factors, as well as the other
information set forth in this Proxy Statement, before voting on the
Distribution.

Risks Relating to the Distribution

Neither Massey nor New Fluor has a recent operating history as a separate
company.

Following the Distribution, New Fluor will own and operate all of Fluor
Corporation's businesses other than the coal business and related businesses
operated by Massey prior to the Distribution, which will be operated by Massey.
Neither of these companies has a recent operating history as a separate
company, and each has historically been able to rely on the earnings, assets
and cash flow of the other.

Following the Distribution, Massey will be substantially leveraged.

On a historical basis, Massey was not allocated any of Fluor Corporation's
debt. At the time of the Distribution, Massey expects to have approximately
$530 million in indebtedness. Following the Distribution, Massey will be
substantially more leveraged on a relative basis than Fluor Corporation was
prior to the Distribution, and New Fluor will have significantly less debt than
Fluor Corporation had prior to the Distribution. Assuming the Distribution had
occurred on July 31, 2000, on a pro forma basis Massey would have had total
long-term debt of $300 million and a shareholder's equity of $854.6 million and
New Fluor would have had total long-term debt of $17.6 million and total
shareholder's equity of $692.3 million. On a pro forma basis, Massey's annual
interest expense would have been $37.8 million in fiscal 1999 had the
Distribution occurred on November 1, 1998. See "Massey Energy Company Unaudited
Pro Forma Combined Financial Information" and Massey's Combined Financial
Statements and Notes thereto included in this Proxy Statement.

There may be substantial changes in Massey's shareholder base.

Many investors holding Fluor Corporation Common Stock may hold that stock
because of a decision to invest in a company in the professional services
industry. Following the Distribution, the shares of Fluor Corporation Common
Stock held by those investors will represent an investment in an energy
company. This may not be aligned with a holder's investment strategy, causing
the investor to sell the shares. As a result, Massey may experience a
dislocation of shareholders as shares of its stock are transferred to
shareholders seeking an investment in the energy industry.

There has been no prior trading market for the New Fluor Common Stock.

There is not currently a public market for the New Fluor Common Stock, and
there can be no assurance as to the prices the stock will trade at following
the Distribution. Until the New Fluor Common Stock is fully distributed and an
orderly trading market develops, the price at which the stock trades may
fluctuate significantly. The marketplace will determine the prices for the New
Fluor Common Stock based on many factors including the depth and liquidity of
the market for the stock, developments affecting New Fluor's business and
general economic and market conditions. New Fluor intends to file an
application to list the New Fluor Common Stock on the New York Stock Exchange
under the symbol "FLR."

Holders of Massey Common Stock may experience price fluctuations following the
Distribution.

11
<PAGE>

"new" company after the Distribution, and it may not be the subject of
significant research analyst coverage. There can be no assurance as to the
prices at which Massey Common Stock will trade before, on or after the
Distribution Date and, until an orderly market develops in the Massey Common
Stock, the price at which it trades may fluctuate significantly. Prices for
Massey Common Stock will be determined in the marketplace and may be influenced
by many factors, including the depth and liquidity of the market for Massey
Common Stock, developments affecting the Massey Business and general economic
and market conditions.

There are tax risks relating to the Distribution.

Fluor Corporation has applied to the Internal Revenue Service (the "IRS")
for a ruling that the Distribution will qualify as a tax-free spin-off under
Section 355 of the Internal Revenue Code of 1986, as amended (the "Code").

The IRS ruling, if issued, will be based on certain representations that
have been made by Fluor Corporation. The ruling may not be relied upon if those
representations are incorrect or incomplete in a material respect. Fluor
Corporation is not aware of any facts or circumstances that would cause those
representations to be incorrect or incomplete in a material respect.

Even if the Distribution otherwise qualifies for tax-free treatment under
Section 355 of the Code, the distribution may become taxable to Fluor
Corporation pursuant to Section 355(e) of the Code if 50% or more of the stock
of New Fluor or Massey (the renamed Fluor Corporation) is acquired, directly or
indirectly, as part of a plan or series of related transactions that include
the Distribution. For this purpose, acquisitions (including acquisitions which
are neither planned nor accepted or recommended by the management of the
company whose stock is acquired) of New Fluor's stock or Massey's stock within
two years before or after the Distribution are presumed to be part of such a
plan, although New Fluor or Massey may be able to rebut that presumption. If
such an acquisition of New Fluor's stock or Massey's stock triggers the
application of Section 355(e), Fluor Corporation would recognize taxable gain
to the extent that the fair market value of New Fluor's stock at the time of
the Distribution exceeds Fluor Corporation's tax basis for such stock. But the
Distribution in such circumstances should generally remain tax-free to Fluor
Corporation's shareholders. Under the Tax Sharing Agreement between New Fluor
and Massey, Massey would be responsible for payment of the tax liability
resulting from an acquisition of Massey's stock, and New Fluor would be
required to reimburse Massey for the payment of any tax liability resulting
from an acquisition of New Fluor's stock. Such tax liability would be
substantial, and there is no assurance that New Fluor or Massey would be able
to satisfy its obligation under the Tax Sharing Agreement. See "The
Distribution--Federal Income Tax Consequences of the Distribution."

Risks Relating to New Fluor

Some of New Fluor's contracts create significant cost overrun risks.

New Fluor conducts its business under various types of contractual
arrangements. In terms of dollar amount, the majority of contracts are of the
cost-reimbursable type where the risk of cost increases belongs to

12
<PAGE>

the client. However, a significant percentage of New Fluor's contracts are
guaranteed maximum, lump sum or unit priced contracts, where New Fluor bears
all or a significant portion of the risk for cost overruns. Contract prices are
established in part on estimates which are subject to a number of assumptions,
such as assumptions regarding future economic conditions, price and
availability of labor, equipment and materials and other exigencies which may
affect project schedule or cost. If these estimates prove inaccurate, or
circumstances change, cost overruns may occur. New Fluor's results of
operations and financial condition could be materially adversely affected by
cost overruns.

Project performance problems could result in additional costs.

In certain instances, New Fluor guarantees to a customer that it will
complete a project by a scheduled date or that the facility will achieve
certain performance standards. If the project or facility subsequently fails to
meet the schedule or performance standards, New Fluor could incur additional
costs. Depending on the nature of the project performance problem, New Fluor
may not be able to recover the additional costs incurred, which could exceed
revenues realized from a project. Therefore, if New Fluor experiences a project
performance problem, its results of operations and financial condition could be
materially adversely affected.

The receipt of future contract awards is uncertain.

Estimates of future performance depend on, among other matters, New Fluor's
estimates as to whether and when it will receive certain new contract awards.
While these estimates are based upon good faith judgment, these estimates can
be unreliable and may frequently change based on new facts as they become
available. In the case of large-scale domestic and international projects where
timing is often uncertain, it is particularly difficult to predict whether and
when New Fluor will receive a contract award. The uncertainty of contract award
timing can present difficulties in matching workforce size with contract needs.
In some cases, New Fluor maintains and bears the cost of a ready workforce that
is larger than called for under existing contracts in anticipation of future
workforce needs under expected contract awards. If an expected contract award
is delayed or not received, New Fluor would incur costs that could have a
material adverse effect on its results of operations and financial condition.

Timing of receipt of project revenues is uncertain.

A number of factors outside of New Fluor's control can affect the time at
which it receives revenue from engineering and construction projects. Depending
upon external conditions, a client may either cancel a project, put it on hold
or extend the schedule. Also, future economic conditions, price and
availability of labor, equipment and materials, applicable law, weather delays,
civil unrest or labor disruptions may impact the realization of revenues. If
revenue that New Fluor expects to receive from a project is either delayed or
not received, New Fluor's results of operations and financial condition could
be materially adversely affected.

Government contracts expose New Fluor to uncertainties.

A number of New Fluor's contracts are government contracts. Typically,
government contracts are subject to various restrictions and uncertainties such
as oversight audits by government representatives and profit and cost controls.
In some cases, government contracts are exposed to the uncertainties associated
with Congressional funding. In addition, government contracts are subject to
specific procurement regulations and a variety of other socio-economic
requirements. New Fluor must comply with these government regulations and
requirements, as well as various statutes related to employment practices,
environmental protection, recordkeeping and accounting. Its failure to comply
with any of these regulations, requirements and statutes could lead to
suspension from government contracting or subcontracting for a period of time.
If one of New Fluor's government contracts was terminated for any reason, or if
New Fluor was suspended from government contract work, its results of
operations and financial condition could be materially adversely affected.

The amount of backlog is not indicative of future earnings.

The dollar amount of New Fluor's backlog is not necessarily indicative of
future earnings. Cancellations or scope adjustments may occur with respect to
contracts reflected in New Fluor's backlog. If New Fluor

13
<PAGE>

experiences significant cancellations or scope adjustments in backlog
contracts, its results of operations and financial condition could be
materially adversely affected.

Future environmental, safety and health requirements could affect New Fluor's
financial condition.

It is impossible to reliably predict the full nature and impact of future
judicial, legislative or regulatory developments relating to the environmental
protection, safety and health requirements applicable to New Fluor's
operations. The requirements to be met, as well as the technology and length of
time available to meet those requirements, continue to develop and change. To
the extent that the costs associated with meeting those requirements are
substantial, there could be a material adverse effect on New Fluor's results of
operations and financial condition.

Global economic and political conditions create uncertainties.

New Fluor's businesses are subject to fluctuations in demand and to changing
economic and political conditions, not only domestically, but internationally,
which are beyond New Fluor's control. In particular, the engineering and
construction businesses are global and are affected by market conditions
outside of the United States. These businesses are often subject to, among
other matters, foreign government policies and regulations, embargoes, U.S.
government policies and international hostilities. Although New Fluor tries to
reduce exposure to uncertain international market conditions, it is unable to
completely predict or control the amount and mix of business and sales. To the
extent that international businesses are affected by unexpected international
market conditions, New Fluor's results of operations and financial condition
could be materially adversely affected.

Foreign currency fluctuations could adversely affect New Fluor's operating
results.

Because New Fluor's functional currency is the U.S. dollar, non-U.S.
operations sometimes face the additional risk of fluctuating currency values
and exchange rates, hard currency shortages and controls on currency exchange.
New Fluor attempts to limit its exposure to foreign currency fluctuations in
contracts by requiring client payments in U.S. dollars or other currencies that
correspond to the currency in which project costs are incurred. Changes in the
value of foreign currencies could materially adversely affect New Fluor's
results of operations and financial condition.

Intense competition poses challenges to profitability.

New Fluor serves markets that are highly competitive and in which a large
number of multinational companies compete. In particular, the engineering and
construction business is highly competitive and requires substantial resources
and capital investment in equipment, technology and skilled personnel.
Competition also impacts contract prices and profit margins. New Fluor expects
intense competition to continue in this market, presenting New Fluor with
significant challenges in its ability to maintain strong growth rates and
acceptable profit margins. If New Fluor is unable to meet these competitive
challenges, there could be a material adverse effect on New Fluor's results of
operations and financial condition.

Competition and other factors in AMECO's equipment rental business could
impact New Fluor's operating results.

AMECO, one of the subsidiaries in the Fluor Global Services strategic
business enterprise, derives its revenues from equipment rental and sales. This
industry is highly fragmented, competitive and is rapidly consolidating. Many
of AMECO's competitors are more geographically diverse and have greater name
recognition than AMECO. There can be no assurance that AMECO will not encounter
increased competition from existing competitors or new market entrants that
will be significantly larger or have greater marketing and other resources than
AMECO. In addition, to the extent existing or future competitors seek to gain
or retain market share by reducing prices, AMECO may be required to lower its
prices and rates, thereby adversely affecting operating results. New Fluor's
results of operations and financial condition could be materially adversely
effected by such events.

14
<PAGE>

Risks Relating to Massey

Coal markets are highly competitive and affected by factors beyond Massey's
control.

Massey competes with coal producers in various regions of the United States
for domestic sales and with both domestic and overseas producers for sales to
international markets. Continued demand for Massey's coal and the prices that
it will be able to obtain primarily will depend upon coal consumption patterns
of the domestic electric utility industry and the domestic steel industry.
Consumption by the domestic utility industry is affected by the demand for
electricity, environmental and other governmental regulations, technological
developments and the price of competing coal and alternative fuel supplies
including nuclear, natural gas, oil and renewable energy sources, including
hydroelectric power. Consumption by the domestic steel industry is primarily
affected by the demand for U.S. steel. Massey's sales of metallurgical coal are
dependent on the continued financial viability of domestic steel companies and
their ability to compete with steel producers abroad. Reduced demand for
Massey's coal could have a material adverse effect on Massey's business,
financial condition and results of operations.

A significant decline in coal prices could adversely affect Massey's operating
results and cash flows.

Massey's results of operations are highly dependent upon the prices it
receives for its coal and its ability to improve productivity and reduce costs.
Recent demand for coal has decreased because of the warm winters in the
northeastern United States in 1998 and 1999. Prices for export coal also have
declined because foreign currency fluctuations compared to the U.S. dollar have
increased competitive pressures. This has caused pricing pressures within the
coal industry and requires Massey to increase productivity and decrease costs
in order to maintain its margins. If Massey is not able to do so, its operating
results could be adversely affected. Price declines may adversely affect
operating results for future periods and Massey's ability to generate cash
flows necessary to improve productivity and expand operations. A decline in
coal prices could have a material adverse effect on Massey's business,
financial condition and results of operations.

Massey depends on continued demand from its customers.

Massey depends on the continued demand for coal by domestic utilities and
domestic steel manufacturers in order to maintain its volume of sales. Reduced
demand from Massey's largest customers could have an adverse impact on Massey's
ability to achieve its projected revenues. When Massey's contracts with its
customers reach expiration, there can be no assurance that the customers either
will extend or enter into new long-term contracts or, in the absence of long-
term contracts, that they will continue to purchase the same amount of coal as
they have in the past or on terms, including pricing terms, as favorable as
under existing agreements. The loss of customers or changes in the amounts of
coal that they purchase from Massey or the terms on which they buy could have a
material adverse effect on Massey's business, financial condition and results
of operations.

Union represented labor creates an increased risk of work stoppages and higher
labor costs.

Eight of Massey's coal processing plants and one of its smaller surface
mines have a workforce that is represented by the United Mine Workers of
America. In fiscal 1999, these eight processing plants handled approximately
25% of Massey's coal production. There may be an increased risk of strikes and
other related work actions, in addition to higher labor costs, associated with
these operations. At July 31, 2000 less than 5% of Massey's total workforce was
represented by a union. The United Mine Workers of America has filed a petition
for an election to represent the hourly workforce at Performance Coal Company's
Upper Big Branch mine. Massey has also experienced other union organizing
campaigns at some of its open shop facilities within the past five years. If
some or all of Massey's current open shop operations were to become union
represented, Massey could incur additional risk of work stoppages and higher
labor costs. Increased labor costs or work stoppages could have a material
adverse effect on Massey's business, financial condition and results of
operations.

Recent cost reduction initiatives could have an adverse effect on Massey's
workforce.

In 1999, Massey focused on cost reductions in order to maintain its
profitability in the face of dropping coal prices. Massey began with negotiated
price reductions from its vendors and then turned to internal cost

15
<PAGE>

savings initiatives. These initiatives included reduced salaries and wages,
lowered bonuses and reduced benefits coverage. As a result of these efforts,
Massey has experienced somewhat increased employee turnover. There can be no
assurance that this trend will not continue in the near future. In addition,
there may be an increased risk of labor disruption or union organizing
efforts. These disruptions or activities could have a material adverse effect
on Massey's business, financial condition and results of operations.

Transportation disruptions could impair Massey's ability to sell coal.

Massey's transportation providers are important in order to provide access
to markets. Massey's major rail transportation providers, CSX Transportation,
Inc. and Norfolk Southern Corporation, have experienced some operational
difficulties in the past year due to the integration by each of a portion of
Conrail's operations. In mid-1999, these providers' delays in service caused
Massey to miss some of its shipments. There has been recent improvement by
these carriers; however, Massey cannot be assured that these transportation
providers will not face continued difficulties. Disruption of transportation
services because of such problems or from weather-related problems, strikes,
lockouts or other events could temporarily impair Massey's ability to supply
coal to customers and could have a material adverse effect on its business,
financial condition and results of operations.

Fluctuations in transportation costs could affect the demand for Massey's
coal.

Transportation costs represent a significant portion of the delivered cost
of coal and, as a result, the cost of delivery is a critical factor in a
customer's purchasing decision. Increases in transportation costs could make
coal a less competitive source of energy. Such increases could have a material
adverse effect on Massey's ability to compete with other energy sources and on
its business, financial condition and results of operations. On the other
hand, significant decreases in transportation costs could result in increased
competition from coal producers in other parts of the country. For instance,
coal mines in the western United States could become an attractive source of
coal to consumers in the eastern part of the country if the costs of
transporting coal from the west were significantly reduced. This increased
competition could have a material adverse effect on Massey's business,
financial condition and results of operations.

Foreign currency fluctuations could adversely affect the competitiveness of
Massey's coal abroad.

Massey relies on customers in other countries for a portion of its sales,
with shipments to countries in Europe, North America, South America and Asia.
Massey competes in these international markets against coal produced in other
countries. Coal is sold internationally in U.S. dollars. As a result, mining
costs in competing producing countries may be reduced in U.S. dollar terms
based on currency exchange rates, providing an advantage to foreign coal
producers. Currency fluctuations in producing countries could adversely affect
the competitiveness of U.S. coal in international markets and could have a
material adverse effect on Massey's business, financial condition and results
of operations.

Coal mining is subject to inherent risks.

Massey's operations are subject to certain events and conditions which
could disrupt operations, including fires and explosions from methane,
accidental minewater discharges, natural disasters, equipment failures and
maintenance problems, flooding, changes in geologic conditions, failure of
reserve estimates to prove correct and inability to acquire mining rights or
permits. Massey maintains business interruption insurance and property and
general liability insurance policies that provide limited coverage for some,
but not all, of these risks. Even where insurance coverage applies, there can
be no assurance that these risks would be fully covered by Massey's insurance
policies. Any disruption of Massey's operations could have a material adverse
effect on Massey's business, financial condition and results of operations.

Government regulations increase Massey's costs and may discourage customers
from buying Massey's coal.

Numerous governmental permits and approvals are required for coal mining
operations. Massey may be required to prepare and present to federal, state
and local authorities more extensive data describing the effect

16
<PAGE>

or impact that any proposed mining operations may have upon the environment.
For example, the West Virginia Division of Environmental Protection is involved
in litigation regarding its alleged failure to consider the hydrologic effects
of mining operations in issuing mining permits. This suit could lead to
additional requirements that Massey and other mining companies assess potential
hydrologic risks. These and any other increased requirements may be costly and
time-consuming and may delay commencement or continuation of mining operations.

New legislation and new regulations may be adopted which could materially
adversely affect Massey's mining operations, cost structure or its customers'
ability to use coal. New legislation and new regulations may also require
Massey or its customers to change operations significantly or incur increased
costs. The U.S. Environmental Protection Agency (the "EPA") has undertaken
broad initiatives aimed at increasing compliance with emissions standards and
to provide incentives to customers for decreasing emissions, often by switching
to an alternative fuel source. These efforts and continued stringent
legislation, regulation and enforcement could have a material adverse effect on
Massey's business, financial condition and results of operations.

The Clean Air Act affects Massey's customers and could influence their
purchasing decisions.

The Clean Air Act and corresponding state laws extensively regulate
emissions into the air of particulate matter and other substances, including
sulfur dioxide, nitrogen oxides and mercury. In order to comply with
limitations on emissions, Massey's customers may switch to other fuels or coal
from other regions, which could have a material adverse effect on Massey's
business, financial condition and results of operations.

The Clean Air Act affects coal mining operations by requiring utilities that
currently are major sources of nitrogen oxides in moderate or higher ozone
nonattainment areas to install reasonably available control technology. In July
1997, the EPA adopted new, more stringent National Ambient Air Quality
Standards for particulate matter and ozone. The adoption and implementation of
these more stringent standards have been challenged in litigation and the
outcome of that challenge is uncertain at this time. The specific provisions of
these standards could be revised by the EPA.

In October 1998, the EPA issued its final rule entitled "Finding of
Significant Contribution and Rulemaking for Certain States in the Ozone
Transport Assessment Group Region for Purposes of Reducing Regional Transport
of Ozone" (the NOx SIP Call rule). In the final rule, the EPA found that
sources in 22 states and the District of Columbia emit NOx in amounts that
significantly contribute to nonattainment of National Ambient Air Quality
Standards, or will interfere with maintenance of those standards, in one or
more downwind states. The rule requires the 22 upwind states and the District
of Columbia to submit state implementation plan revisions to prohibit specified
amounts of emissions of oxides of nitrogen (NOx)--one of the precursors to
ozone (smog) pollution--for the purpose of reducing NOx and ozone transport
across state boundaries in the eastern half of the United States. Although
states may choose any mix of pollution reduction measures that will achieve the
required reductions, it is widely anticipated that states will target large
utility and industrial boilers, which could materially reduce the demand for
coal by these users.

Additionally, the EPA has granted petitions filed by four northeast states
under section 126 of the Clean Air Act. The granting of these petitions means
that stationary sources located in upwind states--mostly coal-fired utilities--
must reduce their emissions of NOx. The deadline for compliance under the
section 126 petitions is May 2003.

The EPA has filed suit against a number of leading electric utilities
(including Massey customers) in U.S. District Court, asserting that these
utilities must install new emission controls at plants previously
"grandfathered" from the more stringent requirements now applicable under the
Clean Air Act. The EPA is also pursuing an administrative proceeding against
the Tennessee Valley Authority on the same basis. Installation of these
controls would require very significant capital investment, and some utilities
might choose to switch to non-coal generation rather than make such investment.
This could materially decrease the demand for coal.

No assurance can be given that the implementation of the Clean Air Act, the
new National Ambient Air Quality Standards, the NOx SIP Call rule or any other
future regulatory action will not materially adversely affect Massey's
business, financial condition and results of operation.

17
<PAGE>

The passage of legislation responsive to the Framework Convention on Global
Climate Change could have an adverse effect on Massey's business.

The United States and more than 160 other nations are signatories to the
1992 Framework Convention on Global Climate Change ("Kyoto Protocol") which is
intended to limit emissions of greenhouse gases, such as carbon dioxide.
Although the U.S. Senate has not yet ratified the Kyoto Protocol and no
comprehensive regulations controlling greenhouse gas emissions have been
issued, efforts to control greenhouse gas emissions could result in reduced
use of coal if electric power generators switch to lower carbon sources of
fuel. Such restrictions could have a material adverse effect on Massey's
business, financial condition and results of operations.

Massey is subject to the Clean Water Act which imposes monitoring and
reporting obligations.

The federal Clean Water Act affects coal mining operations by imposing
restrictions on discharge of pollutants into waters and dredging and filling
of wetlands. Regular monitoring, as well as compliance with reporting
requirements and performance standards, are preconditions for the issuance and
renewal of permits governing the discharge of pollutants into water. The
requirements under the Clean Water Act may materially adversely affect
Massey's business, financial condition and results of operations.

On October 20, 1999, the U.S. District Court for the Southern District of
West Virginia issued an injunction which prohibits the construction of valley
fills over both intermittent and perennial stream segments as part of mining
operations. While Massey is not a party to this litigation, virtually all
mining operations (including Massey's) utilize valley fills to dispose of
excess materials mined during coal production. This decision is now under
appeal to the Fourth Circuit Court of Appeals and the district court has
issued a stay of its decision pending the outcome of the appeal. If and to the
extent that the district court's decision is upheld and legislation is not
passed which limits the impact of the decision, all or a portion of Massey's
mining operations could be affected which could have a material adverse effect
on Massey's business, financial condition and results of operations.

Deregulation of the electric utility industry could lead to efforts to reduce
coal prices.

Deregulation of the electric utility industry, when implemented, will
enable industrial, commercial and residential customers to shop for the lowest
cost supply of electricity. This fundamental change in the power industry may
result in efforts to reduce coal prices, which could have a material adverse
effect on Massey's business, financial condition and results of operations.

Massey has significant obligations for legislatively mandated benefits
programs.

Under black lung benefits legislation, each coal mine operator is required
to make payments of black lung benefits to current and former coal miners,
survivors of a miner who dies from black lung disease and a trust fund for
some qualified claimants. In addition to federal acts, Massey is also liable
under various state statutes for black lung claims. Massey's unfunded black
lung benefits liabilities totaled approximately $29.4 million at October 31,
1999.

In recent years, legislation on black lung reform has been introduced but
not enacted in Congress. It is possible that such legislation will be
reintroduced for consideration by Congress. If any of the proposals included
in such or similar legislation is passed, the number of claimants who are
awarded benefits could significantly increase. There can be no assurance that
any such changes in black lung legislation, if approved, will not have a
material adverse effect on Massey's business, financial condition and results
of operations.

The U.S. Department of Labor has issued proposed amendments to the
regulations implementing the federal black lung laws which, among other
things, establish a presumption in favor of a claimant's treating physician
and limit a coal operator's ability to introduce medical evidence regarding
the claimant's medical condition. If adopted, the amendments could have an
adverse effect on Massey, the extent of which cannot be accurately predicted.

18
<PAGE>

Additionally, Massey is required to compensate employees for work-related
injuries. Its self-insured workers' compensation liabilities were $25.6
million at October 31, 1999. Several states in which Massey operates consider
changes in workers' compensation laws from time to time. Such changes, if
enacted, could adversely affect Massey's business, financial condition and
results of operations.

Massey has significant obligations for company-sponsored health and welfare
benefit plans.

Massey provides various health and welfare benefits to inactive and retired
employees. These obligations have been estimated based on the assumptions
described in Notes 3 and 5 of Massey's Notes to Combined Financial Statements.
At October 31, 1999, these obligations include post-retirement medical and
life insurance ($62.7 million) and long-term disability ($6.9 million). If
Massey's assumptions are proven inaccurate, cash expenditures and costs could
be materially greater than those reflected in its financial statements. This
could have a material adverse effect on Massey's business, financial condition
and results of operations.

Massey's acquisition strategy may not be realized or may require it to raise
capital by incurring substantial debt or issuing additional equity.

Massey intends to pursue growth through acquisitions. The coal industry is
experiencing rapid consolidation, with many companies seeking to consummate
acquisitions and increase their market share. Massey competes and will
continue to compete with many other buyers for acquisitions. Massey cannot
provide any assurance that future acquisitions will be available on attractive
terms. Massey's ability to consummate any acquisition will be subject to
various conditions, including the negotiation of satisfactory agreements,
obtaining necessary regulatory approvals and financing. Failure to achieve its
acquisition strategy could adversely affect Massey's business, financial
condition and results of operations.

19
<PAGE>

THE SPECIAL MEETING

Date, Time and Place of Special Meeting

The Special Meeting of Fluor Corporation will be held on November 30, 2000
at 9:00 a.m., local time, at the Fluor Daniel Engineering Campus, Building A,
located at One Fluor Daniel Drive, Aliso Viejo, California.

Matters for Consideration at Special Meeting

At the Special Meeting, the shareholders of Fluor Corporation will be asked
to consider and vote on the following proposal: to approve a special dividend
(the "Distribution") to the holders of the outstanding shares of Fluor
Corporation Common Stock of all outstanding shares of capital stock of New
Fluor in accordance with the terms of a Distribution Agreement to be entered
into between New Fluor and Massey (the "Distribution Agreement").

THE BOARD OF DIRECTORS OF FLUOR CORPORATION UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE DISTRIBUTION.

Special Meeting Record Date

Fluor Corporation's board of directors has fixed the close of business on
October 26, 2000 as the Special Meeting Record Date for the determination of
the holders of Fluor Corporation Common Stock entitled to receive notice of and
to vote at the Special Meeting.

Vote Required

Fluor Corporation believes that under Delaware law, which governs the
Distribution, a vote of shareholders is not required in connection with the
Distribution. Delaware law requires the approval of the holders of at least a
majority of a corporation's outstanding shares entitled to vote thereon for a
sale, lease or exchange of all or substantially all of the assets of the
corporation. Fluor Corporation believes that a dividend, such as the
Distribution, is not such a sale, lease or exchange and that, in any event, the
Distribution does not involve all or substantially all of Fluor Corporation's
assets. Although Fluor Corporation believes that shareholder approval is not
required, it is seeking such approval because of the significance of the
Distribution to its shareholders.

Fluor Corporation is seeking approval of the Distribution by the holders of
at least a majority of the shares present in person or by proxy at the Special
Meeting. If the Distribution is not approved by the holders of at least a
majority of the shares present in person or by proxy at the Special Meeting,
the Distribution will not be consummated. Each shareholder of record as of the
Special Meeting Record Date is entitled at the Special Meeting to one vote for
each share of Fluor Corporation Common Stock held. The presence, either in
person or by properly executed proxy, of the holders of a majority of the
shares of Fluor Corporation Common Stock outstanding on the Special Meeting
Record Date is necessary to constitute a quorum at the Special Meeting.

Abstentions and executed proxies returned by a broker holding shares of
Fluor Corporation Common Stock in street name which indicate that the broker
does not have discretionary authority as to certain shares to vote on one or
more matters ("broker non-votes") will be considered present at the Special
Meeting for purposes of establishing a quorum. Abstentions will not be voted.
Broker non-votes will not be counted as votes cast for the Distribution. Since
approval of the Distribution requires the affirmative vote of the majority of
the shares present in person or represented by proxy at the Special Meeting,
abstentions and broker non-votes will have the effect of votes cast against the
Distribution.

Voting and Revocation of Proxies

Shares of Fluor Corporation Common Stock represented by a proxy properly
signed and received at or prior to the Special Meeting, unless subsequently
revoked, will be voted in accordance with the instructions

20
<PAGE>

thereon. IF A PROXY IS SIGNED AND RETURNED WITHOUT INDICATING ANY VOTING
INSTRUCTIONS, SHARES OF FLUOR CORPORATION COMMON STOCK REPRESENTED BY THE PROXY
WILL BE VOTED FOR THE DISTRIBUTION.

Fluor Corporation proxy holders may, in their discretion, vote shares to
adjourn the Special Meeting to solicit additional proxies in favor of the
Distribution. However, shares of Fluor Corporation Common Stock with respect to
which a proxy is signed and returned indicating a vote against the Distribution
will not be so voted to adjourn.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the proxy is voted by the filing of an instrument
revoking it or of a duly executed proxy bearing a later date with the Secretary
of Fluor Corporation prior to or at the Special Meeting, or by voting in person
at the Special Meeting. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed to
Fluor Corporation, c/o ChaseMellon Shareholder Services, L.L.C., Attention:
Proxy Processing, Church Street Station, P.O. Box 1677, New York, New York
10008-1677 (the "Transfer Agent"). Attendance at a Special Meeting will not in
and of itself constitute a revocation of a proxy.

The board of directors of Fluor Corporation is not currently aware of any
business to be acted upon at the Special Meeting other than as described in
this Proxy Statement. If, however, other matters are properly brought before
the Special Meeting, the persons appointed as proxies will have discretion to
vote or act thereon according to their best judgment.

Fluor Corporation shareholders will not be entitled to present any matters
for consideration at the Special Meeting.

Solicitation of Proxies

In addition to solicitation by mail, directors, officers and employees of
Fluor Corporation, who will not be specifically compensated for such services,
may solicit proxies from the shareholders of Fluor Corporation, personally or
by telephone, telecopy or telegram or other forms of communication. Brokers,
nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy materials to beneficial owners.

In addition, Fluor Corporation has retained Georgeson & Company Inc. to
assist in the solicitation of proxies. The fees to be paid to such firm for
such services by Fluor Corporation are not expected to exceed $20,000, plus
reasonable out-of-pocket costs and expenses. Fluor Corporation will pay the
costs incurred in printing this Proxy Statement.

21
<PAGE>

BACKGROUND AND REASONS FOR THE DISTRIBUTION

Fluor Corporation, directly and through its subsidiaries, currently engages
in:

. the provision of a diverse range of value-added, knowledge-based
services, from traditional engineering, procurement and construction to
total asset management (the "New Fluor Business")

. the production of high-quality, low sulfur coal for electric-generation,
steel-making and a variety of industrial applications (the "Massey
Business")

The board of directors of Fluor Corporation has decided, for the reasons set
forth below, to distribute to Fluor Corporation's shareholders all of the
outstanding stock of New Fluor. After the consummation of the Distribution, New
Fluor will conduct the New Fluor Business, and Fluor Corporation will be
renamed "Massey Energy Company" and will conduct the Massey Business.

During the period from January 2000 through May 2000, Fluor Corporation's
management and legal and financial advisors considered various alternative
transactions involving the Massey Business. The proposal to effect the
Distribution was presented to and approved by the board of directors of Fluor
Corporation on June 7, 2000. On June 8, 2000, Fluor Corporation publicly
announced its intention to complete the Distribution and held a press
conference in New York City. Thereafter, Fluor Corporation's management and
legal and financial advisors continued to meet to resolve business issues and
to prepare the necessary documentation.

Reasons for the Recommendation of the Fluor Corporation Board of Directors

The board of directors of Fluor Corporation believes that the Distribution
is in the best interests of Fluor Corporation and Fluor Corporation's
shareholders and that the separation of New Fluor and Massey will enable the
respective management teams to focus more closely on their businesses and
provide flexibility for each of the separated companies to grow in the way best
suited for its industry.

After the separation, New Fluor and Massey will each be able to pursue the
separate, and at times fundamentally different, business strategies that are
appropriate in their respective industries. New Fluor, for example, may operate
with minimal debt levels so as to be able to use its financial strength to
augment its competitive position and to pursue other business opportunities.
Massey may choose to assume more debt in order to take advantage of future coal
industry consolidation. Massey, as an independent company, will also be in a
better position to offer targeted incentives to its management and employees.

The board of directors of Fluor Corporation considered all of these factors,
as well as the advice of its financial advisors referred to below, in
connection with its decision to proceed with the Distribution and recommend
that shareholders vote in favor of the Distribution. In this regard, the board
of directors of Fluor Corporation did not assign any particular weight to
specific factors, and individual directors may have assigned different weights
to different factors.

FLUOR CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE DISTRIBUTION TO BE VOTED UPON AT THE SPECIAL MEETING.

Review of Financial Advisors

As described below, in connection with its evaluation of the Distribution,
Fluor Corporation's board of directors received advice from its financial
advisor, Salomon Smith Barney Inc. ("SSB"), and a solvency opinion from
American Appraisal Associates.

22
<PAGE>

Financial Review of Salomon Smith Barney

SSB reviewed with the board of directors, and assisted management in its
evaluation of, certain financial aspects related to the potential separation of
the coal business from the professional services business, including the stand-
alone capital structures of each business and the potential advantages and
disadvantages of various alternatives to the distribution. Among the
alternatives considered by the board of directors, with the assistance of
management and SSB, were a sale of the coal business, a public offering of the
coal business, a joint venture between the coal business and another party, and
a master limited partnership offering for the coal business. Evaluation
criteria for each of these alternatives included its feasibility, the potential
for the respective management teams to focus more closely on their core
business and whether such alternative would provide the financial flexibility
necessary for future growth for each business. Additionally, SSB reviewed with
management and the board the trading prices and multiples of selected companies
in the coal mining business and Fluor Corporation's other businesses and the
terms of certain other spin-off transactions.

Solvency Opinion

In a written opinion delivered on October 27, 2000 (the "Solvency Opinion"),
American Appraisal Associates stated that, based upon the considerations set
forth therein and on other factors it deemed relevant, it was of the opinion
that, assuming the Distribution is consummated substantially as proposed: (a)
the fair value of the aggregate assets of Fluor Corporation before consummation
of the Distribution, and the aggregate assets of each of New Fluor and Massey
after consummation of the Distribution, will exceed their respective total
liabilities (including contingent liabilities); (b) the present fair saleable
value of the aggregate assets of Fluor Corporation before consummation of the
Distribution, and of each of New Fluor and Massey after consummation of the
Distribution, will be greater than their respective probable liabilities on
their debts as such debts become absolute and matured; (c) each of New Fluor
and Massey, after consummation of the Distribution, will be able to pay its
respective debts and other liabilities (including contingent liabilities and
other commitments) as they mature; (d) each of New Fluor and Massey, after
consummation of the Distribution, will not have unreasonably small capital for
the business in which it is engaged, as management of Fluor Corporation has
indicated such businesses are now conducted and as management of New Fluor and
Massey have indicated their businesses are proposed to be conducted following
consummation of the Distribution; and (e) the excess of the fair value of
aggregate assets of Fluor Corporation, before consummation of the Distribution,
over the total identified liabilities (including contingent liabilities) of
Fluor Corporation is equal to or exceeds the value of the Distribution to
shareholders plus the stated capital of Fluor Corporation. The full text of the
Solvency Opinion is set forth in Appendix C, and this summary is qualified in
its entirety by reference to the text of such opinion.

In rendering its opinion, American Appraisal Associates valued the aggregate
assets of Fluor Corporation, before consummation of the Distribution, and of
each of New Fluor and Massey, after consummation of the Distribution, each on a
consolidated basis and as a going concern. The valuation included the aggregate
assets of Fluor Corporation's business enterprise (total invested capital
excluding cash and equivalents) represented by the total net working capital,
tangible plant, property and equipment, and intangible assets of the business
enterprise before consummation of the Distribution, and that of New Fluor and
Massey after consummation of the Distribution, each on a consolidated basis.
American Appraisal Associates stated its belief that this is a reasonable basis
to value each of Fluor Corporation, before, and New Fluor and Massey, after,
consummation of the Distribution on a consolidated basis, and that nothing had
come to its attention that caused it to believe that either New Fluor and/or
Massey, on a consolidated basis, after giving effect to the Distribution, is
not a going concern. For purposes of its opinion, the following terms have the
meanings set forth below:

(1) "Fair value" means the amount at which the aggregate assets would
change hands between a willing buyer and a willing seller, within a
commercially reasonable period of time, each having reasonable
knowledge of the relevant facts, neither being under any compulsion to
act, with equity to both;

(2) "Present fair saleable value" means the amount that may be realized if
the aggregate assets are sold with reasonable promptness in an arms-
length transaction under present conditions in a current market for the
sale of assets of a comparable business enterprise;

23
<PAGE>

(3) "Contingent liabilities" means the maximum estimated amount of
contingent liabilities, of a specified entity and time, which
contingent liabilities were identified to American Appraisal Associates
by responsible officers and employees of Fluor Corporation, their
respective accountants and financial advisors, and such other experts
as American Appraisal Associates deemed necessary to consult, and
valued by American Appraisal Associates after consultation with
responsible officers and employees of Fluor Corporation and/or such
industry, economic and other experts as American Appraisal Associates
deemed necessary to consult (the valuation of contingent liabilities to
be computed in light of all the facts and circumstances existing at the
time of such valuation as the maximum amount that can reasonably be
expected to become an actual or matured liability), which contingent
liabilities may not meet the criteria for accrual under Statement of
Financial Accounting Standards No. 5 and therefore may not be recorded
as liabilities under GAAP;

(4) "Able to pay its debts and other liabilities including contingent
liabilities and other commitments, as they mature" means that assuming
the Distribution has been consummated as proposed (and taking into
consideration additional borrowing capacity under New Fluor's and
Massey's borrowing facilities) during the period covered by the
financial projections (the "Financial Projections") prepared by the
managements of New Fluor and Massey, respectively, each of New Fluor
and Massey will have positive cash flow after paying its scheduled
anticipated indebtedness; the realization of current assets in the
ordinary course of business will be sufficient to pay recurring current
debt, short-term debt, long-term debt service and other contractual
obligations, including contingent liabilities, as such obligations
mature; and the cash flow will be sufficient to provide cash necessary
to repay long-term indebtedness as such debt matures; and

(5) "Will not have unreasonably small capital for the businesses in which
it is engaged" means that an entity will not lack sufficient capital
for the needs and anticipated needs for capital of the business,
including contingent liabilities, as the managements of New Fluor and
Massey have indicated that their businesses are proposed to be
conducted following the consummation of the Distribution.

The determination of the fair value and present fair saleable value of Fluor
Corporation, before the consummation of the Distribution, and New Fluor and
Massey after consummation of the Distribution was based on the generally
accepted valuation principles used in the market and discounted cash flow
approaches, described as follows:

Market Approach--Based on correlation of: (a) current stock market prices of
publicly held companies whose businesses are similar to that of Fluor
Corporation, New Fluor and Massey and premiums paid over market price by
acquirers of total or controlling ownership in such businesses; and (b)
acquisition prices paid for total ownership positions in businesses whose lines
of business are similar to that of Fluor Corporation, New Fluor and Massey.

Discounted Cash Flow Approach--Based on the present value of Fluor
Corporation's, New Fluor's and Massey's individual future debt-free operating
cash flow as estimated by their respective managements, and contained in the
Financial Projections. The present value is determined by discounting the
projected operating cash flow at a rate of return that reflects the financial
and business risks individually.

In the course of its investigation of contingent liabilities, certain areas
brought to American Appraisal Associates attention by management of Fluor
Corporation, New Fluor and Massey included: (1) contracts and commitments; (2)
consents and approvals; (3) tax audit exposure; (4) environmental exposure; (5)
employee benefits programs; and (6) various lawsuits and claims filed and/or
pending.

Provisions for the ongoing expenses related to contingent liabilities,
deemed to be material by the respective managements of Fluor Corporation, New
Fluor and Massey, are included in the projections of income and expenses
presented in the Financial Projections. American Appraisal Associates took
these contingent liabilities into account in rendering its opinion and
concluded that such liabilities do not require

24
<PAGE>

qualification of its opinion. American Appraisal Associates conclusion was
based upon, among other things: (i) the opinion of the respective managements
of Fluor Corporation, New Fluor and Massey that the issues concerning various
lawsuits, claims and other identified contingent liabilities do not and are not
reasonably likely to have a material adverse effect on their respective
consolidated financial positions; and (ii) its discussions with respective
managements of Fluor Corporation, New Fluor and Massey, their accountants,
consultants and outside counsel concerning, and its investigation of, the
contingent liabilities identified to it.

In preparing its opinion, American Appraisal Associates relied on the
accuracy and completeness of all information supplied or otherwise made
available to it by Fluor Corporation, and did not independently verify such
information or undertake any physical inspection or independent appraisal of
the assets or liabilities of Fluor Corporation. Such opinion was based on
business, economic, market and other conditions existing on the date such
opinion was rendered.

The Solvency Opinion is also based on, among other things, a review of the
agreements relating to the Distribution, historical and pro forma financial
information, certain business information and certain assumptions relating to
Fluor Corporation, including that contained in this Proxy Statement, as well as
certain financial forecasts and other data provided by Fluor Corporation
relating to the businesses and prospects of New Fluor and Massey. American
Appraisal Associates also conducted discussions with Fluor Corporation's
management with respect to the businesses and prospects of New Fluor and Massey
and conducted such financial studies, analyses and investigations as it deemed
appropriate in rendering its opinion.

American Appraisal Associates was retained to render its opinion as to the
solvency of Fluor Corporation, New Fluor and Massey because of its familiarity
with the businesses and assets of Fluor Corporation and its qualifications and
reputation in appraising and valuing companies.

Fluor Corporation will pay American Appraisal Associates fees of $90,000 for
services rendered in connection with the Distribution, including services it
has conducted to render its opinion.

25
<PAGE>

THE DISTRIBUTION

Introduction

On June 8, 2000, Fluor Corporation announced a plan to separate New Fluor
and Massey in a tax free distribution of New Fluor to the shareholders of Fluor
Corporation. On October 26, 2000, the Fluor Corporation board of directors
formally approved the Distribution. Each Fluor Corporation shareholder of
record at the close of business on the date which will be fixed by the Fluor
Corporation board of directors as the record date for the Distribution (the
"Distribution Record Date") will receive one share of New Fluor Common Stock
for every share of Fluor Corporation Common Stock held by such holder at the
close of business on the Distribution Record Date. Fluor Corporation has
applied for a tax ruling from the IRS that the receipt by Fluor Corporation
shareholders of the New Fluor Common Stock in the Distribution will be tax-free
to such shareholders and Fluor Corporation for federal income tax purposes. On
the date on which the Fluor Corporation board of directors declares the
dividend that constitutes the Distribution (the "Distribution Date"), Fluor
Corporation will deliver a global certificate representing all of the
outstanding shares of New Fluor Common Stock to the Transfer Agent. As soon as
practicable thereafter, the Transfer Agent will deliver the shares of New Fluor
Common Stock to Fluor Corporation shareholders of record on the Distribution
Record Date. If a Fluor Corporation shareholder sells or otherwise transfers
shares of Fluor Corporation Common Stock between the Distribution Date and the
time shares of New Fluor are delivered by the Transfer Agent, such selling or
transferring shareholder generally will be required to assign to the purchaser
or transferee the right to receive the shares of New Fluor Common Stock
distributed on such transferred shares. Questions relating to the Distribution
prior to the Distribution Date or relating to transfers of New Fluor Common
Stock after the Distribution Date should be directed to: ChaseMellon
Shareholder Services, L.L.C., P.O. Box 3315, South Hackensack, New Jersey
07606, telephone number: (800) 813-2847.

Form of Transaction

The Distribution is the method by which Fluor Corporation will be separated
into two publicly traded companies, New Fluor and Massey. In the Distribution,
Fluor Corporation will distribute to its shareholders shares of New Fluor
Common Stock, which will represent a continuing interest in the New Fluor
Business to be conducted by New Fluor. After the Distribution, Fluor
Corporation's only business will be the Massey Business, and the shares of
Fluor Corporation Common Stock held by Fluor Corporation shareholders will
represent a continuing ownership interest only in that business. In connection
with the Distribution, Fluor Corporation will change its name to "Massey Energy
Company" (and therefore from and after the Distribution, Fluor Corporation
Common Stock will be "Massey Common Stock"). Shareholders should note that
notwithstanding the legal form of the Distribution described above whereby
Fluor Corporation expects to spin off New Fluor, because of the relative
significance of the New Fluor Business to Fluor Corporation, New Fluor will be
treated as the "accounting successor" to Fluor Corporation for financial
reporting purposes. Therefore, the historical financial information for New
Fluor included in this Proxy Statement is that of Fluor Corporation. The
historical financial information for Massey has been prepared on a stand-alone
basis as described in Note 1 to the Massey Financial Statements included
elsewhere in this Proxy Statement. Such historical financial information
includes allocations of certain Fluor Corporation corporate headquarters
assets, liabilities and expenses relating to Massey.

Manner of Effecting the Distribution

The Distribution will be made to shareholders of record of Fluor Corporation
at the close of business on the Distribution Record Date. Based on the
75,744,873 shares of Fluor Corporation Common Stock outstanding as of October
26, 2000, assuming the purchase prior to the Distribution by Fluor Corporation
of 1,850,000 shares of Fluor Corporation Common Stock pursuant to a forward
purchase contract, the Distribution will consist of 73,894,873 shares of New
Fluor Common Stock. On the Distribution Date, Fluor Corporation will deliver a
global certificate representing all outstanding shares of New Fluor Common
Stock to the Transfer Agent. As soon as practicable thereafter, the Transfer
Agent will deliver to shareholders stock certificates representing shares of
New Fluor Common Stock. Fluor Corporation shareholders will not be required to
pay for shares of New Fluor Common Stock received in the Distribution, or to
surrender or exchange certificates representing shares of Fluor Corporation
Common Stock in order to receive credit for shares of New Fluor Common Stock.

26
<PAGE>

IN ORDER TO BE ENTITLED TO RECEIVE SHARES OF NEW FLUOR COMMON STOCK IN THE
DISTRIBUTION, FLUOR CORPORATION SHAREHOLDERS MUST BE SHAREHOLDERS AT THE CLOSE
OF BUSINESS ON THE DISTRIBUTION RECORD DATE.

Federal Income Tax Consequences of the Distribution

The following discussion summarizes certain of the material U.S. federal
income tax consequences that should result from the Distribution. This
discussion is based on provisions of the Code and the regulations promulgated
thereunder, and on current administrative rulings and court decisions, all of
which are subject to change.

Fluor Corporation has applied to the IRS for a ruling that the Distribution
will qualify as a tax-free spin-off under Section 355 of the Code.

It is expected that the ruling, if issued, will provide, in part, that for
U.S. federal income tax purposes:

. no gain or loss will be recognized by Fluor Corporation on the
distribution of the stock of New Fluor to the shareholders of Fluor
Corporation;

. no gain or loss will be recognized by (and no amount will be included in
the income of) Fluor Corporation's shareholders on the Distribution;

. the aggregate basis of the New Fluor and Massey stock in the hands of
the shareholders of Fluor Corporation immediately after the Distribution
will equal the aggregate basis of their Fluor Corporation stock
immediately before the Distribution, with such aggregate basis being
allocated between the New Fluor and the Massey stock in proportion to
their respective fair market values; and

. the holding period of the New Fluor stock received on the Distribution
will include the holding period of the Fluor Corporation stock with
respect to which the Distribution is made, provided that the Fluor
Corporation stock is held as a capital asset on the date of the
Distribution.

The receipt of a ruling from the IRS confirming these conclusions is a
condition to the Distribution. Fluor Corporation believes, and has been
advised by its tax advisor, Ernst & Young LLP, that the rulings requested are
consistent with the requirements for a tax-free spin-off under Section 355 of
the Code and the rules and regulations promulgated thereunder. However, there
can be no assurance that the IRS will issue a favorable ruling.

The IRS ruling, if issued, will be based on certain representations that
have been made by Fluor Corporation. The ruling may not be relied upon if
those representations are incorrect or incomplete in a material respect. Fluor
Corporation is not aware of any facts or circumstances that would cause those
representations to be incorrect or incomplete in a material respect.

New Fluor and Massey will agree in the Tax Sharing Agreement on certain
restrictions on their future actions to provide assurances that Section 355 of
the Code will apply to the Distribution.

If the Distribution were not to qualify under Section 355 of the Code,
then, in general, a corporate tax (which would be very substantial) would be
payable by the consolidated group of which Fluor Corporation is the parent.
This corporate tax would be based on the excess of the fair market value of
the New Fluor stock at the time of the Distribution over Fluor Corporation's
tax basis for such stock. Except under limited circumstances, the Tax Sharing
Agreement allocates such corporate tax 60% to New Fluor and 40% to Massey. See
the discussion in "Relationship Between New Fluor and Massey After the
Distribution--Tax Sharing Agreement" and the discussion of Code Section 355(e)
below. The corporate tax, if incurred, would have a material adverse effect on
the financial position, operations and cash flow of New Fluor and/or Massey,
depending upon which corporation or corporations bear the burden of the tax.

27
<PAGE>

In addition, if the Distribution failed to qualify for tax-free treatment
for the shareholders, each Fluor Corporation shareholder who receives the New
Fluor stock in the Distribution would generally be treated as receiving a
taxable distribution in an amount equal to the fair market value of the New
Fluor stock received. That distribution would be taxable as a dividend to the
extent of Fluor Corporation's current and accumulated earnings and profits (as
increased to reflect Fluor Corporation's gain on a taxable Distribution as
discussed above). If the amount of the Distribution exceeds Fluor Corporation's
current and accumulated earnings and profits (as so increased), each
shareholder's allocable share of such excess (based on the number of shares
held) would generally be treated first as a non-taxable reduction in the tax
basis of the shareholder's Fluor Corporation stock to the extent of such basis,
and thereafter as short-term or long-term capital gain, provided that the Fluor
Corporation stock were held by the shareholder as a capital asset on the date
of the Distribution. Upon such a taxable distribution, the shareholder's tax
basis in the New Fluor stock received in the Distribution would equal the fair
market value of such stock on the date of the Distribution, and the
shareholder's holding period for the shares of New Fluor stock would begin on
the day after the date of the Distribution. Shareholders which are corporations
may be subject to additional special provisions dealing with taxable
distributions, such as the dividend received deduction and the extraordinary
dividend rules. Such shareholders should consult their tax advisors with
respect to such matters in the event that the Distribution fails to qualify for
tax-free treatment under Section 355 of the Code.

Even if the Distribution otherwise qualifies for tax-free treatment under
Section 355 of the Code, the Distribution may become taxable to Fluor
Corporation pursuant to Section 355(e) of the Code if 50% or more of the stock
of New Fluor or Massey (the renamed Fluor Corporation) is acquired, directly or
indirectly, as part of a plan or series of related transactions that include
the Distribution. For this purpose, acquisitions (including acquisitions which
are neither planned nor accepted or recommended by the management of the
company whose stock is acquired) of New Fluor's stock or Massey's stock within
two years before or after the Distribution are presumed to be part of such a
plan, although New Fluor or Massey may be able to rebut that presumption. If
such an acquisition of New Fluor's stock or Massey's stock triggers the
application of Section 355(e), Fluor Corporation would recognize taxable gain
to the extent that the fair market value of New Fluor's stock at the time of
the Distribution exceeds Fluor Corporation's tax basis for such stock. But the
Distribution in such circumstances should generally remain tax-free to Fluor
Corporation's shareholders. Under the Tax Sharing Agreement between New Fluor
and Massey, Massey would be responsible for payment of the tax liability
resulting from an acquisition of Massey's stock, and New Fluor would be
required to reimburse Massey for the payment of the tax liability resulting
from an acquisition of New Fluor's stock. Such tax liability would be
substantial, and there is no assurance that New Fluor or Massey would be able
to satisfy its obligation under the Tax Sharing Agreement.

U.S. Treasury regulations require each Fluor Corporation shareholder that
receives shares of New Fluor stock in the Distribution to attach to the
shareholder's U.S. federal income tax return for the year in which such stock
is received a detailed statement setting forth such data as may be appropriate
to show the applicability of Section 355 of the Code to the Distribution.
Subsequent to the Distribution, Fluor Corporation will provide its shareholders
who receive New Fluor stock pursuant to the Distribution with the information
necessary to comply with such requirement.

THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY. THE SUMMARY DOES NOT ADDRESS THE EFFECTS OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS. MOREOVER, THE SUMMARY MAY NOT BE APPLICABLE
TO CERTAIN FLUOR SHAREHOLDERS WHO, AMONG OTHER CIRCUMSTANCES, ARE EXEMPT FROM
FEDERAL INCOME TAX OR WHO ARE NEITHER CITIZENS NOR RESIDENTS OF THE UNITED
STATES. ACCORDINGLY, EACH FLUOR CORPORATION SHAREHOLDER SHOULD CONSULT HIS OR
HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION
TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX
LAWS, AND POSSIBLE CHANGES IN TAX LAW THAT MAY AFFECT THE TAX CONSEQUENCES
DESCRIBED ABOVE.

28
<PAGE>

Listing and Trading of New Fluor Common Stock and Massey Common Stock

Prior to the date hereof, there has not been any established trading market
for New Fluor Common Stock. We have applied for listing of New Fluor Common
Stock on the New York Stock Exchange under the symbol "FLR", and trading is
expected to commence prior to the Distribution. We cannot provide any assurance
as to the prices at which the New Fluor Common Stock will trade before, on or
after the Distribution Date. Until the New Fluor Common Stock is fully
distributed and an orderly market develops in the New Fluor Common Stock, the
price at which it trades may fluctuate significantly and may be lower or higher
than the price that would be expected for a fully distributed issue. Prices for
the New Fluor Common Stock will be determined in the marketplace and may be
influenced by many factors, including the depth and liquidity of the market for
New Fluor Common Stock, developments affecting the New Fluor Business generally
and general economic and market conditions.

Shares of New Fluor Common Stock distributed to Fluor Corporation
shareholders will be freely transferable, except for shares of New Fluor Common
Stock received by persons who may be deemed to be "affiliates" of New Fluor
under the Securities Act of 1933, as amended. Persons who may be deemed to be
affiliates of New Fluor after the Distribution generally include individuals or
entities that control, are controlled by, or are under common control with, New
Fluor, and may include certain officers and directors of New Fluor, as well as
principal shareholders of New Fluor. Persons who are affiliates of New Fluor
will be permitted to sell their shares of New Fluor Common Stock only pursuant
to an effective registration statement under the Securities Act or an exemption
for the registration requirements of the Securities Act, such as the exemption
afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.

Massey Common Stock (i.e., the "old" Fluor Corporation Common Stock) will
continue to trade on the New York Stock Exchange after the Distribution, but
the symbol under which it trades will change from "FLR" to "MEE." However,
because of the significant changes that will take place as a result of the
Distribution, the trading market for Massey Common Stock after the Distribution
may be significantly different from that for Fluor Corporation Common Stock
prior to the Distribution. The market may view Massey as a "new" company after
the Distribution, and it may not be the subject of significant research analyst
coverage. There can be no assurance as to the prices at which Massey Common
Stock will trade before, on or after the Distribution Date and until an orderly
market develops in the Massey Common Stock, the price at which it trades may
fluctuate significantly. Prices for Massey Common Stock will be determined in
the marketplace and may be influenced by many factors, including the depth and
liquidity of the market for Massey Common Stock, developments affecting the
Massey Business and general economic and market conditions.

Financing

New Fluor. In connection with the Distribution, it is expected that New
Fluor will put in place a commercial paper program supported by a bank credit
agreement. Borrowings under these new facilities are expected to be
approximately $400 million at the time of the Distribution.

Massey. Massey will retain the $300 million of outstanding 6.95% Senior
Notes. In addition, it is expected that Massey will put in place a commercial
paper program supported by a bank credit agreement. Borrowings under these new
facilities are expected to be approximately $230 million at the time of the
Distribution.

29
<PAGE>

RELATIONSHIP BETWEEN NEW FLUOR AND MASSEY
AFTER THE DISTRIBUTION

New Fluor is currently a wholly owned subsidiary of Fluor Corporation, and
the results of operations of entities that are or will be its subsidiaries have
been included in Fluor Corporation's consolidated financial results. After the
Distribution, Fluor Corporation (which will change its name to "Massey Energy
Company") will not have any ownership interest in New Fluor, and New Fluor will
be an independent public company. In addition, after the Distribution, New
Fluor will not have any ownership interest in Massey, and Massey will be an
independent public company.

Prior to the Distribution, Fluor Corporation and New Fluor will enter into
certain agreements, described below, governing the relationship between Massey
and New Fluor subsequent to the Distribution and providing for the allocation
of tax, employee benefits and certain other liabilities and obligations arising
from periods prior to the Distribution. In addition, there will be individuals
on the Board of Directors of New Fluor and Massey who will also serve on the
Board of Directors of the other company. See "Management of New Fluor --New
Fluor Board of Directors" and "Management of Massey--Massey Board of
Directors." Copies of the forms of the agreements entered into between New
Fluor and Massey have been filed as exhibits to this Proxy Statement. These
agreements may be amended by Fluor Corporation on or prior to the Distribution
Date.

The following description summarizes certain terms of the agreements, but is
qualified by reference to the text of the agreements, which are incorporated
herein by reference.

Distribution Agreement

Fluor Corporation and New Fluor will enter into the Distribution Agreement
providing for, among other things, certain corporate transactions required to
effect the Distribution and other arrangements between Massey and New Fluor
subsequent to the Distribution.

In particular, the Distribution Agreement defines the assets and liabilities
which are being allocated to and assumed by New Fluor and those which will
remain with Massey. The Distribution Agreement also defines what constitutes
the "New Fluor Business" and what constitutes the "Massey Business."

Pursuant to the Distribution Agreement, Fluor Corporation is obligated to
transfer or cause to be transferred all its right, title and interest in the
assets comprising the New Fluor Business and other assets not specifically
included in the Massey Business to New Fluor and New Fluor is obligated to
transfer or cause to be transferred all its right, title and interest, if any,
in the assets comprising the Massey Business to Fluor Corporation. All assets
are being transferred without any representation or warranty, "as is-where is."
Each party also agrees to exercise its respective commercially reasonable
efforts promptly to obtain any necessary consents and approvals and to take
such actions as may be reasonably necessary or desirable to carry out the
purposes of the Distribution Agreement.

In general, pursuant to the terms of the Distribution Agreement, all assets
of Fluor Corporation prior to the Distribution Date, other than those relating
to the Massey Business, will become assets of New Fluor. The Distribution
Agreement also provides for assumptions of liabilities and cross-indemnities
designed to allocate generally, effective as of the Distribution Date,
financial responsibility for all liabilities arising out of or in connection
with the New Fluor Business to New Fluor and all liabilities arising out of or
in connection with the Massey Business to Massey. In addition, New Fluor will
assume responsibility for certain liabilities and expenses incurred by the
parties in connection with the Distribution and will indemnify Massey for
liabilities relating to past divestitures made by Fluor Corporation and for
liabilities relating to certain litigation in which

30
<PAGE>

Fluor Corporation is involved. For a discussion of the respective businesses of
New Fluor and Massey, see "Business of New Fluor" and "Business and Properties
of Massey."

In the event that any transfers contemplated by the Distribution Agreement
are not effected on or prior to the Distribution Date, the parties will be
required to cooperate to effect such transfers as promptly as practicable
following the Distribution Date, and pending any such transfers, to hold any
asset not so transferred in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto), and to retain any
liability not so transferred for the account of the party by whom such
liability is to be assumed.

Under the Distribution Agreement, each of Fluor Corporation and New Fluor
agrees to provide to the other party, subject to certain conditions, access to
certain corporate records and information.

Massey maintains separate welfare and pension benefit plans for its
employees and Fluor Corporation maintains separate welfare and pension plans
for employees of the New Fluor Business. The assets of the pension benefit
plans of both companies are held in a single master trust. Upon completion of
the Distribution, the assets of the master trust will be partitioned into two
separate trusts; one for the Massey pension benefit plans and one for the New
Fluor pension benefit plans.

Sponsorship of those welfare and pension benefit plans which cover employees
of the New Fluor Business will be transferred to New Fluor. Massey will
indemnify New Fluor for any liabilities arising from the Massey welfare and
pension benefit plans and New Fluor will indemnify Massey for any liabilities
arising from the New Fluor welfare and pension benefit plans.

Tax Sharing Agreement

Effective as of the Distribution Date, New Fluor and Massey will enter into
a Tax Sharing Agreement which will set forth each party's rights and
obligations with respect to tax matters for periods before and after the
Distribution Date.

Currently, Fluor Corporation and its subsidiaries file consolidated federal
income tax returns separate from the consolidated federal income tax returns
filed by A.T. Massey Coal Company, Inc. and its subsidiaries. A.T. Massey Coal
Company, Inc. and its subsidiaries will join Fluor Corporation and its
subsidiaries in a single consolidated federal income tax return for a portion
of the year ending October 31, 2000, and also for a portion of the year ending
October 31, 2001.

The Tax Sharing Agreement will provide that, if New Fluor and A.T. Massey
Coal Company, Inc. and their subsidiaries are included in the same consolidated
federal income tax return for the year ending October 31, 2001, Massey will be
responsible for the tax that would have been incurred had New Fluor and its
subsidiaries not been so included, and New Fluor will be responsible for the
balance of the tax.

The Tax Sharing Agreement will detail New Fluor and Massey's
responsibilities relating to tax payments and refunds, the filing of returns
and the conduct of audits. The Tax Sharing Agreement also will provide for
cooperation with respect to certain tax matters and for the exchange of
information and retention of records which may affect the tax liability of
either party.

The Tax Sharing Agreement will allocate the federal income tax liability
which may arise if the Distribution of New Fluor's stock is found to be a
taxable transaction. Generally, New Fluor will bear 60% of any such corporate
tax liability and Massey will bear 40% at any such corporate tax liability,
except where the liability is attributable to one party's breach of a covenant
or to a change of ownership, as described in Section 355(e) of the Code, with
respect to one party's stock. In any such event, the party that has breached
the covenant or with respect to which the change of ownership has occurred will
bear the entire corporate tax liability.

31
<PAGE>

Since the Distribution will be implemented only following receipt of a
favorable tax ruling, it is not anticipated that the IRS will challenge the
tax-free status of the Distribution unless the provisions of Section 355(e)
were to apply. See the discussion of Section 355(e) in "The Distribution--
Federal Income Tax Consequences of the Distribution."

Each corporation included as a member of a consolidated federal income tax
return group is jointly and severally liable for all of the federal income tax
associated with such return. Although the Tax Sharing Agreement will allocate
between the parties the tax liabilities with respect to consolidated returns
which include Fluor Corporation and A.T. Massey Coal Company, Inc., New Fluor
and Massey may each be liable for all of the federal income tax with respect to
such returns, if the party upon whom the Tax Sharing Agreement imposes
responsibility for all or a portion of such tax fails to discharge that
responsibility.

Although valid as between New Fluor and Massey, the Tax Sharing Agreement
will not be binding on the IRS or other taxing authorities.

32
<PAGE>

DIVIDEND POLICIES

Following the Distribution and in accordance with its past policies, New
Fluor intends to pay an overall annual cash dividend equal to approximately 30%
to 35% of New Fluor's long-term operating performance expectations. The
declaration of dividends by Massey will depend on a number of factors,
including future earnings, capital requirements, financial conditions and
future prospects. The payment and level of cash dividends by New Fluor and
Massey will be subject to the discretion of their respective boards of
directors.

33
<PAGE>

NEW FLUOR CORPORATION
(Accounting Successor to Fluor Corporation)

CAPITALIZATION

The following table sets forth the capitalization of Fluor Corporation as of
July 31, 2000:

. on an actual basis

. on an as adjusted basis to reflect (for financial reporting purposes):

. The retention by Massey of $300 million of Senior Notes.

. The transfer from Massey to New Fluor of $230 million, $131.0
million of which will be used to reduce Fluor Corporation's
commercial paper outstanding, and $99.0 million of which will be
used to settle Fluor Corporation's forward purchase contract to buy
back 1.85 million shares of its common stock.

. The retirement of $25.5 million of Fluor Corporation commercial
paper held by Massey through issuance to third party investors.

. The elimination of Fluor Corporation's net equity in Massey
resulting from the Distribution.

This information should be read in conjunction with Fluor Corporation's
Consolidated Financial Statements and Notes thereto and other information
contained elsewhere in this proxy statement. See "Cautionary Statements."

<TABLE>
<CAPTION>
July 31, 2000
----------------------
As
Actual Adjusted
---------- ----------
(In thousands)
<S> <C> <C>
Short-term debt:
Commercial paper..................................... $ 273,527 $ 167,973
Note payable to affiliate............................ 122,338 122,338
Notes payable to banks............................... 27,528 27,528
Trade notes payable.................................. 2,136 2,136
Long-term debt......................................... 317,569 17,569
---------- ----------
Total debt......................................... 743,098 337,544
---------- ----------
Shareholders' equity:
Capital stock
Preferred-authorized 20,000,000 shares without par
value, none issued................................ -- --
Common-authorized 150,000,000 shares of $0.625 par
value 75,669,076 issued and outstanding,
historical, $0.01 par value 73,819,076 issued and
outstanding, as adjusted (1)...................... 47,293 738
Additional capital................................... 210,144 157,704
Retained earnings.................................... 1,454,924 595,924
Unamortized executive stock plan expense............. (26,062) (21,712)
Accumulated other comprehensive income............... (40,370) (40,370)
---------- ----------
Total shareholders' equity......................... 1,645,929 692,284
---------- ----------
Total capitalization............................... $2,389,027 $1,029,828
========== ==========
</TABLE>
--------
(1) Excludes 6,383,822 shares of common stock issuable upon the exercise of
options outstanding with a weighted average exercise price of $46 per
share. 3,407,379 of these options are exercisable at July 31, 2000 and the
balance are subject to future vesting requirements.

34
<PAGE>

FLUOR CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data of Fluor Corporation have
been derived from the consolidated financial statements of Fluor Corporation,
which financial statements as of and for each of the five years ending October
31, 1999, (not presented separately herein as to 1995 and 1996) have been
audited by Ernst & Young LLP, independent auditors. The selected financial data
as of and for the nine month periods ending July 31, 1999 and 2000 are
unaudited and have been derived from the unaudited interim financial statements
of Fluor Corporation contained elsewhere in this Proxy Statement. The unaudited
financial data includes adjustments that management considers necessary for a
fair presentation of this data in accordance with generally accepted accounting
principles. The consolidated statement of earnings data for the nine months
ended July 31, 2000 are not necessarily indicative of the results to be
expected for the full fiscal year ended October 31, 2000 or any future period.
Also, the consolidated selected financial data does not reflect the separation
of New Fluor and Massey that will occur through the Distribution. The
information in the following table should be read in conjunction with "Fluor
Corporation Management's Discussion and Analysis of Financial Condition and
Results of Operations," "New Fluor Corporation Unaudited Consolidated Pro Forma
Financial Statements" and Fluor Corporation's Consolidated Financial Statements
and Notes thereto included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended July 31,
----------------------------------------------------- ------------------
1995 1996 1997 1998 1999(1) 1999(1) 2000(1)
--------- --------- --------- --------- --------- -------- --------
(unaudited)
(amounts in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF EARNINGS DATA:
Revenues................................. $ 9,301.4 $11,015.2 $14,298.5 $13,504.8 $12,417.4 $9,544.8 $8,458.9
Earnings before taxes.................... 362.2 413.2 255.3 362.6 185.7 83.9 194.4
Net earnings............................. 231.8 268.1 146.2 235.3 104.2 28.3 136.6
Basic earnings per share................. 2.82 3.24 1.76 2.99 1.38 0.38 1.81
Diluted earnings per share............... 2.81 3.21 1.75 2.97 1.37 0.37 1.79
Return on average shareholders' equity... 17.6% 17.4% 8.7% 14.5% 6.8% 6.1% 13.3%
Cash dividends per common share.......... $ 0.60 $ 0.68 $ 0.76 $ 0.80 $ 0.80 $ 0.60 $ 0.75

CONSOLIDATED BALANCE SHEET DATA:
Current assets........................... $ 1,411.6 $ 1,796.8 $ 2,213.4 $ 2,277.2 $ 1,910.2 $2,034.0 $1,823.2
Current liabilities...................... 1,238.6 1,645.5 1,978.2 2,495.6 2,204.3 2,304.3 2,094.8
--------- --------- --------- --------- --------- -------- --------
Working capital (deficit)................ 173.0 151.3 235.2 (218.4) (294.1) (270.3) (271.6)
Property, plant and equipment, net....... 1,435.8 1,677.7 1,938.8 2,147.3 2,223.0 2,191.3 2,314.8
Total assets............................. 3,228.9 3,951.7 4,685.3 5,019.2 4,886.1 4,897.8 4,876.6
Capitalization
Short-term debt(2)...................... 60.8 67.2 88.8 430.7 247.9 299.8 425.5
Long-term debt.......................... 2.9 3.0 300.5 300.4 317.5 317.5 317.6
Shareholders' equity.................... 1,430.8 1,669.7 1,741.1 1,525.6 1,581.4 1,514.3 1,645.9
--------- --------- --------- --------- --------- -------- --------
Total capitalization..................... $ 1,494.5 $ 1,739.9 $ 2,130.4 $ 2,256.7 $ 2,146.8 $2,131.6 $2,389.0
Total debt as a percent of total
capitalization.......................... 4.3% 4.0% 18.3% 32.4% 26.3% 29.0% 31.1%
Shareholders' equity per common share.... 17.20 19.93 20.79 20.19 20.80 19.96 21.75
Common shares outstanding at period end.. 83.2 83.8 83.7 75.6 76.0 75.9 75.7

OTHER DATA:
New awards............................... $10,257.1 $12,487.8 $12,122.1 $ 9,991.9 $ 6,789.4 $4,923.7 $6,360.4
Backlog at period end.................... 14,724.9 15,757.4 14,370.0 12,645.3 9,142.0 9,124.9 8,792.5
Capital expenditures and acquisitions.... 335.1 484.5 647.4 612.9 504.3 362.4 385.7
Cash provided by operating activities.... 366.4 406.9 328.6 702.5 464.9 304.5 90.3
</TABLE>
--------
(1) In March 1999, Fluor Corporation announced a new strategic direction,
including a reorganization of the operating units and administrative
functions of its engineering and construction segment. In connection with
this reorganization Fluor Corporation recorded a pre-tax charge of $136.5
million to cover direct and other reorganization related costs. In October
1999 and April 2000, Fluor Corporation reversed into earnings $19.3 million
and $17.9 million, respectively, due to changes in Fluor Corporation's
reorganization plans.
(2) Includes commercial paper, loan notes, a note payable to affiliate,
miscellaneous trade notes payable and the current portion of long-term
debt.

35
<PAGE>

NEW FLUOR CORPORATION
(Accounting Successor to Fluor Corporation)

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements have been prepared
giving effect to the Distribution and related transactions as if it occurred on
July 31, 2000 for the unaudited pro forma balance sheet and as of November 1 of
the respective periods for the unaudited pro forma statements of earnings for
the years ended October 31, 1999, 1998 and 1997 and nine months ended July 31,
2000. The pro forma balance sheet and statements of earnings set forth below do
not purport to represent what New Fluor's financial position actually would
have been had the Distribution occurred on the dates indicated or to project
New Fluor's operating results for any future period. The pro forma adjustments
are based upon available information and certain assumptions that Fluor
Corporation management believes are reasonable. The unaudited pro forma
financial statements set forth below should be read in conjunction with, and
are qualified in their entirety by, the information under "Fluor Corporation
Selected Consolidated Financial Data," "Fluor Corporation Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Fluor Corporation's Consolidated Financial Statements and Notes thereto
included elsewhere in this Proxy Statement.

UNAUDITED PRO FORMA STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Year Ended October 31, 1999
---------------------------------------------------
Fluor Massey Pro Forma
Historical Historical Adjustments Pro Forma (1)
---------- ---------- ----------- -------------
(in millions, except share and per share
amounts)
<S> <C> <C> <C> <C>
Revenues...................... $12,417.4 $(1,076.1) $11,341.3
Costs and expenses
Cost of revenues............ 12,026.7 (936.7) 11,090.0
Special provision........... 117.2 117.2
Corporate administrative and
general expense............ 55.3 55.3
Interest income............. (18.4) 14.4 (12.8)(2) (16.8)
Interest expense............ 50.9 (0.8) (6.6)(3) 22.6
(20.9)(4)
--------- --------- ---------
Total costs and expenses... 12,231.7 (923.1) 11,268.3
--------- --------- ---------
Earnings before taxes......... 185.7 (153.0) 73.0
Income tax expense............ 81.5 (49.6) 14.1 (5) 49.3
3.3 (6)
--------- --------- ---------
Net earnings.................. $ 104.2 $ (103.4) $ 23.7
========= ========= =========
Earnings per share
Basic....................... $ 1.38 $ 0.32
========= =========
Diluted..................... $ 1.37 $ 0.32
========= =========
Shares used to calculate
earnings per share
(in thousands)
Basic....................... 75,228 (1,850)(7) 73,378
========= ====== =========
(1,850)(7)
Diluted..................... 75,929 (601)(8) 73,478
========= ====== =========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the consolidated pro forma financial statements.
(2) Represents the elimination of interest income earned by Massey on its
intercompany loans to Fluor Corporation and investment in Fluor Corporation
commercial paper.
(3) Reduced interest expense arising from the repayment of $131.0 million of
commercial paper at a weighted average effective interest rate of 5
percent.
(4) Reduced interest expense arising from the elimination of $300 million of
Senior Notes at 6.95% that will remain with Massey. See "The Distribution--
Financing."
(5) The impact of the pretax pro forma adjustments on income tax expense, at
the federal statutory tax rate of 35 percent.
(6) Reversal of the tax benefit of the operating losses and tax credits of
Appalachian Synfuel, LLC due to the Distribution.
(7) Represents a reduction in the number of shares outstanding resulting from
Fluor Corporation's anticipated buyback of 1.85 million shares of its
common stock upon the settlement of its forward purchase contract in
connection with the completion of the Distribution.
(8) The elimination of dilutive shares associated with the Fluor Corporation
forward purchase contract and Massey employee stock options.

36
<PAGE>

NEW FLUOR CORPORATION
(Accounting Successor to Fluor Corporation)

UNAUDITED PRO FORMA STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Year Ended October 31, 1998
---------------------------------------------------
Fluor Massey Pro Forma
Historical Historical Adjustments Pro Forma (1)
---------- ---------- ----------- -------------
(in millions, except share and per share
amounts)
<S> <C> <C> <C> <C>
Revenues.................. $13,504.8 $(1,121.1) $12,383.7
Costs and expenses
Cost of revenues........ 13,095.4 (951.0) 12,144.4
Corporate administrative
and general expense.... 22.6 22.6
Interest income......... (21.1) 16.1 (14.2)(2) (19.2)
Interest expense........ 45.3 (0.5) (7.9)(3) 16.0
(20.9)(4)
--------- --------- ---------
Total costs and
expenses............. 13,142.2 (935.4) 12,163.8
--------- --------- ---------
Earnings before taxes..... 362.6 (185.7) 219.9
Income tax expense........ 127.3 (57.4) 16.8 (5) 87.7
1.0 (6)
--------- --------- ---------
Net earnings.............. $ 235.3 $ (128.3) $ 132.2
========= ========= =========
Earnings per share
Basic................... $ 2.99 $ 1.72
========= =========
Diluted................. $ 2.97 $ 1.71
========= =========
Shares used to calculate
earnings per share
(in thousands)
Basic................... 78,801 (1,850)(7) 76,951
========= ====== =========
(1,850)(7)
Diluted................. 79,135 (110)(8) 77,175
========= ====== =========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the consolidated pro forma financial statements.

(2) Represents the elimination of interest income earned by Massey on its
intercompany loans to Fluor Corporation and investment in Fluor Corporation
commercial paper.

(3) Reduced interest expense arising from the repayment of $131.0 million of
commercial paper at a weighted average effective interest rate of 6
percent.

(4) Reduced interest expense arising from the elimination of $300 million of
Senior Notes at 6.95% that will remain with Massey. See "The Distribution--
Financing."

(5) The impact of the pretax pro forma adjustments on income tax expense, at
the combined federal/state net statutory tax rate of 39 percent.

(6) Reversal of the tax benefit of the operating losses of Appalachian Synfuel,
LLC due to the Distribution.

(7) Represents a reduction in the number of shares outstanding resulting from
Fluor Corporation's anticipated buyback of 1.85 million shares of its
common stock upon the settlement of its forward purchase contract in
connection with the completion of the Distribution.

(8) The elimination of dilutive shares associated with the Fluor Corporation
forward purchase contract and Massey employee stock options.

37
<PAGE>

NEW FLUOR CORPORATION
(Accounting Successor to Fluor Corporation)

UNAUDITED PRO FORMA STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Year Ended October 31, 1997
--------------------------------------------------
Fluor Massey Pro Forma
Historical Historical Adjustments Pro Forma (1)
---------- ---------- ----------- ------------
(in millions, except share and per share
amounts)
<S> <C> <C> <C> <C>
Revenues.................. $14,298.5 $(1,077.9) $13,220.6
Costs and expenses
Cost of revenues........ 14,022.6 (923.2) 13,099.4
Corporate administrative
and general expense.... 13.2 13.2
Interest income......... (23.3) 17.6 (15.8)(2) (21.5)
Interest expense........ 30.7 (0.5) (8.2)(3) 9.8
(12.2)(4)
--------- --------- ---------
Total costs and
expenses............. 14,043.2 (906.1) 13,100.9
--------- --------- ---------
Earnings before taxes..... 255.3 (171.8) 119.7
Income tax expense........ 109.1 (52.8) 14.1 (5) 70.4
--------- --------- ---------
Net earnings.............. $ 146.2 $ (119.0) $ 49.3
========= ========= =========
Earnings per share
Basic................... $ 1.76 $ 0.61
========= =========
Diluted................. $ 1.75 $ 0.60
========= =========
Shares used to calculate
earnings per share (in
thousands)
Basic................... 83,091 (1,850)(6) 81,241
========= ====== =========
(1,850)(6)
Diluted................. 83,478 (10)(7) 81,618
========= ====== =========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the consolidated pro forma financial statements.

(2) Represents the elimination of interest income earned by Massey on its
intercompany loans to Fluor Corporation and investment in Fluor Corporation
commercial paper.

(3) Reduced interest expense arising from the repayment of $131.0 million of
short-term borrowings at a weighted average effective interest rate of 6.25
percent.

(4) Reduced interest expense arising from the elimination at the date of issue
of $300 million of Senior Notes at 6.95% that will remain with Massey. See
"The Distribution--Financing."

(5) The impact of the pretax pro forma adjustments on income tax expense, at
the combined federal/state net statutory tax rate of 39 percent.

(6) Represents a reduction in the number of shares outstanding resulting from
Fluor Corporation's anticipated buyback of 1.85 million shares of its
common stock upon the settlement of its forward purchase contract in
connection with the completion of the Distribution.

(7) The elimination of dilutive shares associated with Massey employee stock
options.

38
<PAGE>

NEW FLUOR CORPORATION
(Accounting Successor to Fluor Corporation)

UNAUDITED PRO FORMA STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Nine Months Ended July 31, 2000
---------------------------------------------
Fluor Massey Pro Forma Pro
Historical Historical Adjustments Forma (1)
---------- ---------- ----------- ---------
(in millions, except share and per share
amounts)
<S> <C> <C> <C> <C>
Revenues......................... $8,458.9 $ (792.5) $ 7,666.4
Costs and expenses
Cost of revenues............... 8,207.7 (696.9) 7,510.8
Special provision.............. (17.9) (17.9)
Corporate administrative and
general expense............... 45.3 45.3
Interest income................ (14.5) 19.8 (12.9)(2) (7.6)
Interest expense............... 43.9 (0.2) (5.9)(3) 22.2
(15.6)(4)
-------- -------- ---------
Total costs and expenses..... 8,264.5 (677.3) 7,552.8
-------- -------- ---------
Earnings before taxes............ 194.4 (115.2) 113.6
Income tax expense............... 57.8 (38.1) 12.0 (5) 35.8
4.1 (6)
-------- -------- ---------
Net earnings..................... $ 136.6 $ (77.1) $ 77.8
======== ======== =========
Earnings per share
Basic.......................... $ 1.81 $ 1.06
======== =========
Diluted........................ $ 1.79 $ 1.06
======== =========
Shares used to calculate earnings
per share-
(in thousands)
Basic.......................... 75,340 (1,850)(7) 73,490
======== ====== =========
(1,850)(7)
Diluted........................ 76,345 (940)(8) 73,555
======== ====== =========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the consolidated pro forma financial statements.
(2) Represents the elimination of interest income earned by Massey on its
intercompany loans to Fluor Corporation and investment in Fluor Corporation
commercial paper.
(3) Reduced interest expense arising from the repayment of $131.0 million of
commercial paper at a weighted average effective interest rate of 6
percent.
(4) Reduced interest expense arising from the elimination of $300 million of
Senior Notes at 6.95% that will remain with Massey. See "The Distribution--
Financing."
(5) The impact of the pretax pro forma adjustments on income tax expense, at
the federal statutory tax rate of 35 percent.
(6) Reversal of the tax benefit of the operating losses and tax credits of
Appalachian Synfuel, LLC due to the Distribution.
(7) Represents a reduction in the number of shares outstanding resulting from
Fluor Corporation's anticipated buyback of 1.85 million shares of its
common stock upon the settlement of its forward purchase contract in
connection with the completion of the Distribution.
(8) The elimination of dilutive shares associated with the Fluor Corporation
forward purchase contract and Massey employee stock options.

39
<PAGE>

NEW FLUOR CORPORATION
(Accounting Successor to Fluor Corporation)

UNAUDITED PRO FORMA BALANCE SHEET

<TABLE>
<CAPTION>
As of July 31, 2000
----------------------------------------------
Fluor Massey Pro Forma Pro
Historical Historical Adjustments Forma (1)
---------- ---------- ------------- ---------
(in millions)
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents....... $ 105.6 $ (5.1) $ 100.5
Accounts and notes receivable... 826.7 (168.2) 658.5
Contract work in progress....... 449.5 449.5
Deferred taxes.................. 126.1 (7.5) 118.6
Inventory and other current
assets......................... 315.3 (145.1) 170.2
-------- --------- --------
Total current assets.......... 1,823.2 (325.9) 1,497.3
Net property, plant and
equipment....................... 2,314.8 (1,548.6) 766.2
Investments and goodwill......... 238.4 238.4
Deferred taxes................... 65.1 (2) 65.1
Other............................ 500.2 (212.2) (2.2) (3) 311.3
25.5 (4)
-------- --------- --------
$4,876.6 $(2,086.7) $2,878.3
======== ========= ========
Liabilities and Shareholders'
Equity
Current Liabilities
Trade accounts payable.......... $ 709.8 $ (111.7) $ 598.1
Short-term debt................. 425.5 25.5 (4) 320.0
(131.0) (5)
Advance billings on contracts... 443.9 443.9
Accrued salaries, wages and
benefit plans.................. 274.8 (22.9) 251.9
Other accrued liabilities....... 240.8 (63.0) (8.7) (3) 169.1
-------- --------- --------
Total current liabilities..... 2,094.8 (197.6) 1,783.0
Long-term debt due after one
year............................ 317.6 (300.0) (3) 17.6
Deferred taxes................... 182.3 (247.4) 65.1 (2) --
Other noncurrent liabilities..... 636.0 (250.6) 385.4
Shareholders' Equity
Common stock.................... 47.3 (46.6) (6) 0.7
Additional capital.............. 210.2 46.6 (6) 157.8
(99.0) (5)
Retained earnings............... 1,454.9 306.5 (3) 595.9
230.0 (5)
(1,391.1) (6)
(4.4) (7)
Unamortized executive stock
plan expense................... (26.1) 4.4 (7) (21.7)
Accumulated other comprehensive
income......................... (40.4) (40.4)
Net investment by Fluor
Corporation.................... (1,391.1) 1,391.1 (6) --
-------- --------- --------
Total shareholders' equity.... 1,645.9 (1,391.1) 692.3
-------- --------- --------
$4,876.6 $(2,086.7) $2,878.3
======== ========= ========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the consolidated pro forma financial statements.
(2) Reclassification of remaining deferred tax balance to the appropriate
balance sheet category.
(3) Represents the elimination of the $300 million of Fluor Corporation 6.95%
Senior Notes due March 1, 2007 and related accrued interest. Following the
Distribution the Notes will become an obligation of Massey.
(4) Fluor Corporation commercial paper held by Massey that will be retired at
the time of the Distribution. Such amount will be funded by Fluor
Corporation through the issuance of commercial paper to third party
investors.
(5) At the effective time of the Distribution, Massey will issue approximately
$230 million of commercial paper, the proceeds of which will be transferred
to Fluor Corporation to repay existing Fluor Corporation indebtedness,
primarily commercial paper ($131.0 million), and to settle Fluor
Corporation's forward purchase contract to buy back 1.85 million shares of
its common stock ($99.0 million). See "The Distribution--Financing."
(6) Adjustment of shareholders' equity balances to reflect the capital
structure of Fluor Corporation.
(7) To eliminate restricted stock held by Massey employees.

40
<PAGE>

FLUOR CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED JULY 31, 2000 COMPARED WITH JULY 31, 1999

The following discussion and analysis is provided to increase understanding
of, and should be read in conjunction with, the condensed consolidated
financial statements and accompanying notes and Fluor Corporation's annual
financial statements and the related management's discussion and analysis
thereof contained elsewhere in this Proxy Statement. For purposes of reviewing
this document "operating profit" is calculated as revenues less cost of
revenues excluding: special provision; corporate administrative and general
expense; interest expense; interest income; domestic and foreign income taxes;
gain or loss on discontinued operations; the cumulative effect of a change in
accounting principles; and certain other miscellaneous non-operating income and
expense items which are immaterial.

In this Proxy Statement, "Fluor Corporation" refers to Fluor Corporation on
or prior to the Distribution Date, "New Fluor" refers to the newly created
entity named Fluor Corporation whose shares are being distributed to
shareholders in the Distribution, and "Massey" refers to A.T. Massey Coal
Company, Inc., a subsidiary of Fluor Corporation prior to the Distribution, and
to Fluor Corporation following the Distribution Date, which will change its
name to Massey Energy Company.

Results of Operations

Revenues for the nine month period ended July 31, 2000 decreased 11 percent
compared with the same period of 1999. Net earnings for the nine month period
ended July 31, 2000 were $136.6 million, compared with net earnings of $28.3
million for the same period of 1999. The 1999 net earnings include the effect
of a $136.5 million pretax special provision ($119.8 million after tax, or
$1.59 per diluted share). The special provision is not allocated to Fluor
Corporation's business segments. Operating results for the nine months ended
July 31, 2000 were impacted by several nonrecurring transactions. Nonrecurring
credits of $12.0 million were recorded which related to the recovery of excise
taxes paid on coal export sales by the Coal segment plus related interest of
$5.3 million. The taxes were determined to be unconstitutional by a 1998
federal district court decision and the Internal Revenue Service has recently
issued procedures for obtaining refunds of the excise taxes. Additionally,
$17.9 million of the special provision recorded in 1999 was reversed into
earnings as a result of Fluor Corporation's decision to retain ownership and
remain in its current office location in Camberley, U.K. Lastly, the Fluor
Global Services segment recorded a nonrecurring charge in the amount of $19.3
million relating to the write-off of certain assets and the loss on the sale of
a European-based consulting business. Excluding all nonrecurring items, net
earnings from operations for the nine months ended July 31, 2000 were $125.8
million ($1.65 per diluted share), compared with $148.1 million ($1.96 per
diluted share) for the 1999 period. As discussed in greater detail in the
following section, the Fluor Daniel segment has recorded significant provisions
for cost overruns on one project during 2000 and for process design problems on
another project during 1999.

Fluor Daniel

Revenues and operating profit for the Fluor Daniel segment for the nine
month periods ended July 31, 1999 and 2000 are summarized as follows:

<TABLE>
<CAPTION>
1999 2000
-------- --------
(in millions)
<S> <C> <C>
Revenues................................................... $6,598.2 $5,444.2
Operating profit........................................... $ 128.2 $ 82.4
</TABLE>

Revenues declined by 17 percent for the nine months ended July 31, 2000
compared with the same period of 1999, primarily due to a reduction in work
performed which is consistent with the downward trend in new awards experienced
during 1999 and 1998.

41
<PAGE>

During the nine months ended July 31, 2000, Fluor Daniel recorded a
provision of $60 million, representing its equal share of cost overruns on a
Duke/Fluor Daniel lump sum power project in Dearborn, Michigan. Duke/Fluor
Daniel is a joint-venture partnership between Duke Energy and Fluor Daniel. The
Dearborn project has been impacted by a number of adverse factors, including
labor productivity and substantial scope of work changes.

Operating profit for the nine months ended July 31, 1999 included a
provision totaling $64 million for process design problems on the Murrin Murrin
nickel cobalt project in Western Australia. Fluor Daniel anticipates recovering
a portion of that amount and, accordingly, recorded $44 million in potential
insurance recoveries during the same period. The result was a negative $20
million impact for the 1999 nine month period. Partially offsetting this was
the recognition of $10 million of earnings from a project in Indonesia.
Realization of these earnings had been in question primarily due to the
uncertainty of collection of certain progress billings. The collection of the
billings combined with the resolution of other normal project completion
contingencies during the 1999 period, resulted in recognition of project
earnings in accordance with contract accounting principles. Expressed as
percentages of revenues, operating margins were 1.5 percent for the nine month
period ended July 31, 2000, compared with 1.9 percent for the comparable period
of 1999. Excluding the loss provisions and recoveries discussed above,
operating margin has increased to 2.6 percent for the nine months ended July
31, 2000, compared with 2.1 percent during the corresponding 1999 period. This
increase has resulted from improvements in both overhead cost management and
project margins during 2000.

New awards for the nine months ended July 31, 2000 and 1999 were $4.1
billion and $3.9 billion, respectively. Approximately 48 percent of the new
awards for the nine months ended July 31, 2000 were for projects located
outside of the United States. The increase in 2000 new awards compared with
1999 reflects substantial new awards in the Mining business unit, partially
offset by lower new awards due to deferred capital spending in the chemicals
industry.

The following table sets forth backlog for each of the segment's business
units:

<TABLE>
<CAPTION>
July July
31, October 31, 31,
1999 1999 2000
------ ----------- ------
(in millions)
<S> <C> <C> <C>
Chemicals & Life Sciences......................... $2,292 $1,964 $1,159
Oil, Gas & Power.................................. 2,530 2,583 2,825
Mining............................................ 716 657 1,002
Manufacturing..................................... 1,282 1,170 865
Infrastructure.................................... 435 396 382
------ ------ ------
Total backlog..................................... $7,255 $6,770 $6,233
====== ====== ======
United States..................................... $3,032 $2,870 $2,939
International..................................... 4,223 3,900 3,294
------ ------ ------
Total backlog..................................... $7,255 $6,770 $6,233
====== ====== ======
</TABLE>

The decrease in total backlog compared with July 31, 1999 is consistent with
the reduced levels of new awards in the prior two years, reflecting both the
lingering impact of deferred capital spending by clients and Fluor
Corporation's continuing emphasis on greater project selectivity. Although
backlog reflects business which is considered to be firm, cancellations or
scope adjustments may occur. Backlog is adjusted to reflect any known project
cancellations, deferrals and revised project scope and cost, both upward and
downward.

42
<PAGE>

Fluor Global Services

Revenues and operating profit for the Fluor Global Services segment for the
nine month periods ended July 31, 1999 and 2000 are summarized as follows:

<TABLE>
<CAPTION>
1999 2000
-------- --------
(in millions)
<S> <C> <C>
Revenues................................................... $2,152.3 $2,203.6
Operating profit........................................... $ 56.4 $ 71.4
</TABLE>

Revenues increased by 2 percent for the nine month period ended July 31,
2000 compared with the same period of 1999. Revenue gains by the
Telecommunications and Operations & Maintenance business units during 2000 have
more than offset declines experienced by the other business units.

Operating profits have increased as the result of both higher project gross
margins and reductions in overhead. Operating profit for the nine months ended
July 31, 2000 includes a $19.3 million charge relating to the write-off of
certain assets and a loss on the sale of a European-based consulting business.
Excluding this 2000 impact, operating profit for the nine month period ended
July 31, 2000 increased to $90.7 million from $56.4 million in the comparable
period of 1999.

New awards for the nine months ended July 31, 2000 and 1999 were $2.2
billion and $1.1 billion, respectively. Approximately 24 percent of the new
awards for the nine months ended July 31, 2000 were for projects located
outside of the United States. The increase in new awards during 2000 compared
with 1999 is due to higher Telecommunications and Operations & Maintenance
awards.

The following table sets forth backlog for each of the segment's business
units:

<TABLE>
<CAPTION>
July 31, October 31, July 31,
1999 1999 2000
-------- ----------- --------
(in millions)
<S> <C> <C> <C>
Fluor Federal Services........................ $ 326 $ 710 $ 178
Telecommunications............................ 585 525 1,017
Operations & Maintenance...................... 945 1,127 1,363
Other......................................... 14 10 1
------ ------ ------
Total backlog............................... $1,870 $2,372 $2,559
====== ====== ======

United States................................. $1,657 $2,137 $1,984
International................................. 213 235 575
------ ------ ------
Total backlog............................... $1,870 $2,372 $2,559
====== ====== ======
</TABLE>

The increase in total backlog is consistent with the growth in new awards.
Although backlog reflects business which is considered to be firm,
cancellations or scope adjustments may occur. Backlog is adjusted to reflect
any known project cancellations, deferrals and revised project scope and cost,
both upward and downward.

Coal

Revenues and operating profit for the Coal segment for the nine month
periods ended July 31, 1999 and 2000 are summarized as follows:

<TABLE>
<CAPTION>
1999 2000
------ ------
(in millions)
<S> <C> <C>
Revenues....................................................... $794.3 $797.3
Operating profit............................................... $104.1 $101.5
</TABLE>

43
<PAGE>

Revenues have remained essentially flat for the nine month period ended July
31, 2000 compared with the same period of 1999. The volume of steam coal sold
has increased significantly during the current year (17 percent for the first
nine months of 2000 compared with 1999). The volume of the higher priced
metallurgical coal has decreased by 6 percent during that same period. The
average realized prices for both steam and metallurgical coal have declined
during the current year, by 6 percent for both types of coal compared with the
same period in 1999. The metallurgical coal market continues to be adversely
affected by a weak coal export market and the slow recovery of the domestic
steel market. Demand is weak for U.S. coal exported to foreign markets as the
U.S. dollar remains strong. The market for steam coal, which is used to fire
electric-generating plants, continues to be adversely impacted by high customer
inventory levels resulting from recent mild weather and competition from
western coals, which is increasing its penetration of the traditional eastern
coal market areas.

Operating profit for the nine months ended July 31, 2000 includes a $12.0
million credit for excise taxes paid on coal export sales tonnage. The payment
of excise taxes on export coal was determined to be unconstitutional by a 1998
federal district court decision and the Internal Revenue Service recently
issued procedures for obtaining refunds related to such excise taxes.

Cost of sales on a per ton of coal sold basis, excluding the excise tax
credit, increased by approximately 1 percent during the nine months ended July
31, 2000 compared with the same period of 1999. The Coal segment has
experienced recent operational problems and encountered adverse geologic
conditions at several mines which have resulted in material increases in the
cost per ton of coal sold. Such increases more than offset the cost reductions
that had been achieved during the nine months ended July 31, 2000. Indirect
costs (which include depreciation, depletion and amortization and
administrative expenses) declined by 1 percent during the first nine months of
2000 compared with the same period of 1999 as the result of lower
administrative expenses, due in part to reduced accruals related to long term
executive compensation plans.

Partially offsetting the impact of operational problems on operating profit
has been an increase in gains from the sale or exchange of coal reserves in
place. As the Coal segment manages its coal reserves, it regularly sells or
exchanges non-strategic reserves for reserves located in more synergistic
locations. During the first nine months of 2000, the Coal segment realized
gains of $26.5 million from such transactions, compared with gains of $10.2
million during the first nine months of 1999.

The geologic conditions encountered at one mine during the nine months ended
July 31, 2000 may necessitate a charge of up to $10 million during the final
quarter of 2000, depending on an evaluation of mining conditions and the
resulting recoverability of mine development costs.

Harman Mining Corporation and certain of its affiliates (collectively
"Harman") filed a breach of contract action against Wellmore Coal Corporation,
a former Massey subsidiary, in Buchanan County, Virginia Circuit Court. In May
2000, in a trial to determine liability only, Harman received a jury verdict
that Wellmore breached the contract. On August 24, 2000, as part of the damages
phase of the trial, a jury awarded damages in the amount of $6 million. Massey
intends to appeal the award and will defend the action vigorously.

Fluor Signature Services

The Fluor Signature Services segment, which was created to provide business
and administrative support services to the operating units with distinct
profit-and-loss accountability, officially began operations at the start of
fiscal 2000. External revenues during the first nine months of the year totaled
$13.8 million. The segment reported an operating profit of $0.7 million during
the nine months ended July 31, 2000.

Strategic Reorganization Costs

In March 1999, Fluor Corporation announced a new strategic direction,
including a reorganization of the operating units and administrative functions
of its engineering and construction segment. In connection with this
reorganization, Fluor Corporation recorded during the nine months ended July
31, 1999 a special provision of $136.5 million pretax to cover direct and other
reorganization related costs, primarily for personnel, facilities

44
<PAGE>

and asset impairment adjustments. During the nine months ended July 31, 2000,
$17.9 million of the special provision was reversed into earnings as a result
of Fluor Corporation's decision to retain ownership and remain in its current
office location in Camberley, U.K.

Fluor Corporation continues to implement this reorganization plan. To date,
slightly more than 5,000 jobs have been eliminated with additional separations
to be completed by the end of the fiscal year. Two offices were closed during
the nine months ended July 31, 2000. These closures and the decision to retain
facilities in Camberley, bring total offices closed to 15 thus completing the
office utilization initiatives under the reorganization plan.

The special provision liability as of July 31, 2000 totaled $17.0 million
and is comprised of $12.4 million for personnel costs and $4.6 million for
lease termination costs. The remaining liability for personnel costs will be
substantially utilized by year-end. The remaining liability associated with
abandoned lease space will be amortized as an offset to lease expense over the
remaining life of the respective leases starting on the date of abandonment.

Other

Net interest expense for the nine month period ended July 31, 2000 increased
by $5.5 million compared with the corresponding period of 1999 as the combined
result of a decline in interest income resulting from lower average cash
balances outstanding during 2000, higher levels of short-term debt, and an
increase in interest rates for commercial paper during the latter part of the
2000 period. These factors were partially offset by a nonrecurring interest
credit of $5.3 million associated with the Coal segment's excise tax recovery.

Corporate administrative and general expense for the nine months ended July
31, 2000 was $4.8 million higher compared with the same period in 1999 as the
net result of several factors. Development costs associated with Fluor
Corporation's knowledge management and global sales development programs have
increased current year expenses significantly. Costs related to Fluor
Corporation's Enterprise Resource Management system, Knowledge@Work, totaled
$15.8 million for the first nine months of 2000. Expenditures of $5.1 million
for this program started during the third quarter of 1999. The Global Business
Development organization had expenditures during the nine months ended July 31,
2000 of $14.8 million. Higher expenses in these areas were partially offset
during the 2000 period by the reversal of previously recorded long-term (stock-
based) incentive compensation expense as a result of the decline in trading
prices of Fluor Corporation stock during the period.

Fluor Corporation's effective tax rate during 1999 was significantly
impacted by the special provision due to certain non-U.S. items that did not
receive full tax benefit. The reversal of a portion of the reserve during the
nine months ended July 31, 2000 had an offsetting positive impact on the
effective tax rate. However, that benefit was substantially offset by the
absence of a tax benefit on the nonrecurring charge for disposition of the
European-based consulting business recorded by Fluor Global Services during the
same period. The nonrecurring item recorded by the Coal segment and associated
interest did not impact the effective tax rate. Excluding the impacts of the
special provision in each year and the nonrecurring charge recorded by Fluor
Global Services during the 2000 period, the effective tax rate in the nine
month period ended July 31, 2000 was 29.5 percent, compared with 32.8 percent
during the corresponding period of 1999. The current year decrease has resulted
from the successful implementation of a number of tax reduction initiatives.

Financial Position and Liquidity

At July 31, 2000, Fluor Corporation had cash and cash equivalents of $105.6
million and a total debt to total capital ratio of 31.1 percent, compared with
cash and cash equivalents of $209.6 million and a total debt to total capital
ratio of 26.3 percent at the end of fiscal year 1999.

Cash flow provided by operating activities was $90.3 million during the nine
month period ended July 31, 2000, compared with $304.5 million during the same
period in 1999. This change is primarily due to an increase in net operating
assets and liabilities associated with engineering and construction activities.
The level

45
<PAGE>

of operating assets and liabilities is affected from period to period by the
mix, stage of completion and commercial terms of engineering, procurement and
construction projects.

Cash utilized by investing activities totaled $299.4 million during the nine
month period ended July 31, 2000 compared with $246.6 million during the same
period in 1999. Capital expenditures increased by $23.2 million, including
$47.0 million of capitalized costs for Knowledge@Work during the first nine
months of 2000. Proceeds from the sale of property, plant and equipment were
$21.3 million lower in the first nine months of 2000 compared with that same
period in 1999, reflecting the cyclical nature of the equipment sale/rental
business. Fluor Corporation completed the sale of its ownership interest in
Fluor Daniel GTI, Inc. during the first quarter of 1999 and received proceeds
totaling $36.3 million.

Cash provided by financing activities totaled $105.1 million during the nine
month period ended July 31, 2000 compared with cash utilized of $160.5 million
for the same period in 1999. During the first nine months of fiscal year 2000,
Fluor Corporation increased its short-term borrowings by $171.8 million,
including increases in commercial paper of $159.8 million and notes payable to
banks of $12.0 million. In addition, Fluor Corporation increased its note
payable to affiliate by $9.0 million during the first nine months of fiscal
year 2000. Dividends paid during the first nine months of 2000 were $57.0
million ($0.75 per share) compared with $45.5 million ($0.60 per share) for the
same period in 1999. In connection with a stock buyback program approved by the
Board of Directors on March 8, 2000, Fluor Corporation purchased 747,000 shares
of its outstanding common stock for $23.0 million during the second quarter of
2000. Up to 7.5 million shares of common stock may be repurchased under the
program. The repurchase program was suspended in the third quarter. The
repurchase program is being funded from operating cash flow and supplemented by
short-term credit facilities as repurchase opportunities arise.

Financial Instruments

Fluor Corporation has a forward purchase contract for 1,850,000 shares of
its common stock. The contract matures in October 2000 and gives Fluor
Corporation the ultimate choice of settlement option, either physical
settlement or net share settlement. As of July 31, 2000, the contract
settlement cost per share exceeded the current market price per share by
$23.70.

If during the term of the contract, the price of Fluor Corporation's stock
falls to certain levels, as defined in the contract, the holder of the contract
has the right to require Fluor Corporation to register the shares or, if the
price declines beyond a stated level, to settle the contract at Fluor
Corporation's choice of settlement option.

Fluor Corporation utilizes forward exchange contracts to hedge foreign
currency transactions entered into in the ordinary course of business and not
to engage in currency speculation. At July 31, 2000 and October 31, 1999, Fluor
Corporation had forward foreign exchange contracts of less than eighteen months
duration, to exchange principally Euros, British pounds, Australian dollars,
Canadian dollars, Dutch guilders and German marks for U.S. dollars. The total
gross notional amount of these contracts at July 31, 2000 and October 31, 1999
was $28 million and $124 million, respectively. Forward contracts to purchase
foreign currency amounted to $1 million and $122 million at July 31, 2000 and
October 31, 1999, respectively. Forward contracts to sell foreign currency
totaled $27 million and $2 million at July 31, 2000 and October 31, 1999,
respectively.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS

46
<PAGE>

No. 133 establishes new standards for recording derivatives in interim and
annual financial statements. This statement, as amended, is effective for Fluor
Corporation's fiscal year 2001. Management does not anticipate that the
adoption of the new statement will have a significant impact on the results of
operations or the financial position of Fluor Corporation.

Recent Developments

Fluor Corporation announced on October 25, 2000 that it had made the
decision to sell or shut down the dealership operations of AMECO, its heavy
equipment business. Reviews at AMECO have identified required provisions that
will be recorded in the fourth quarter of 2000 amounting to approximately $25
million pretax to adjust dealership accounts receivable and equipment inventory
to fair value and for the shutdown of three foreign operations.

In addition, Fluor Corporation announced that it anticipates the
Distribution will occur prior to December 31, 2000 and that it will record a
charge in the fourth quarter of 2000 of about $25 million pretax to recognize
the transaction expenses related to the Distribution.

47
<PAGE>

FLUOR CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE YEARS ENDED OCTOBER 31, 1999

The following discussion and analysis is provided to increase understanding
of, and should be read in conjunction with, the consolidated financial
statements and accompanying notes. For purposes of reviewing this document
"operating profit" is calculated as revenues less cost of revenues excluding:
corporate administrative and general expense; interest expense; interest
income; domestic and foreign income taxes; gain or loss on discontinued
operations; the cumulative effect of a change in accounting principles; and
certain other miscellaneous non-operating income and expense items which are
immaterial.

Results of Operations

As a result of a strategic reorganization, during 1999 Fluor Corporation
realigned its operating units into four business segments (which Fluor
Corporation refers to as Strategic Business Enterprises): Fluor Daniel, Fluor
Global Services, Coal and Fluor Signature Services. The Fluor Daniel segment
provides design, engineering, procurement and construction services on a
worldwide basis to an extensive range of industrial, commercial, utility,
natural resources and energy clients. The Fluor Global Services segment, which
includes American Equipment Company, TRS Staffing Solutions, Fluor Federal
Services, Telecommunications, Operations & Maintenance and Consulting Services,
provides outsourcing and asset management solutions to its customers. The Coal
segment produces, processes and sells high-quality, low-sulfur steam coal for
the utility industry as well as industrial customers, and metallurgical coal
for the steel industry. Fluor Signature Services, which commenced operations on
November 1, 1999, was created to provide business administration and support
services for the benefit of the company and ultimately, to unaffiliated
customers.

To implement the reorganization, Fluor Corporation recorded a special
provision of $117.2 million. See "Strategic Reorganization Costs" elsewhere in
Management's Discussion and Analysis. The provision was not allocated to the
business segments.

Fluor Daniel Segment

Total 1997 new awards were $10.4 billion compared with $8.2 billion in 1998
and $4.8 billion in 1999. The following table sets forth new awards for each of
the segment's business units:

<TABLE>
<CAPTION>
Year Ended October
31,
-----------------------
1997 1998 1999
------- ------ ------
(in millions)
<S> <C> <C> <C>
Chemicals & Life Sciences.............................. $ 4,166 $3,053 $1,211
40% 37% 25%
Oil, Gas & Power....................................... 2,814 2,302 2,599
27% 28% 55%
Mining................................................. 1,595 464 26
15% 6% 1%
Manufacturing.......................................... 1,741 1,856 785
17% 23% 16%
Infrastructure......................................... 50 498 136
1% 6% 3%
------- ------ ------
Total new awards....................................... $10,366 $8,173 $4,757
100% 100% 100%
======= ====== ======
United States.......................................... $ 3,885 $4,112 $2,267
37% 50% 47%
International.......................................... 6,481 4,061 2,490
63% 50% 53%
------- ------ ------
Total new awards....................................... $10,366 $8,173 $4,757
100% 100% 100%
======= ====== ======
</TABLE>

48
<PAGE>

New awards in 1999 were lower compared with 1998, reflecting both the
lingering impact of deferred capital spending by clients, primarily in the
petrochemical and mining industries, and Fluor Corporation's continuing
emphasis on greater project selectivity. The large size and uncertain timing of
complex, international projects can create variability in the company's award
pattern; consequently, future award trends are difficult to predict with
certainty. However, given the improving global economic conditions, including
significantly higher oil prices and the recent stabilizing of commodity prices,
the company is optimistic about the level of new awards in 2000.

Since 1997 the trend in new awards activity within each business unit
reflects the impact of the economic conditions and operating strategies noted
above. There were no individual new awards in excess of $550 million in either
1999 or 1998. New awards for the Chemicals & Life Sciences business unit in
1997 included the $1.9 billion Yanpet project, a petrochemical complex in Saudi
Arabia. The Mining business unit's new awards are down significantly from 1997
primarily due to depressed commodity prices, thereby limiting new projects, as
well as this unit's focus on project selectivity. The decrease in new awards in
1999 compared with 1998 and 1997 for the Manufacturing business unit is
primarily the result of an increased focus on project selectivity.

Backlog at October 31, 1997, 1998 and 1999 was $12.3 billion, $10.4 billion
and $6.8 billion, respectively. The decrease in total backlog is consistent
with the downward trend in new awards. Work performed on existing projects has
exceeded new awards in both 1998 and 1999. The decrease in backlog from
projects located outside the United States at October 31, 1999, resulted from
work performed on international projects such as a copper and gold mine in
Indonesia and the aforementioned petrochemical project in Saudi Arabia, in
addition to a 39 percent decrease in international-related new awards. Although
backlog reflects business which is considered to be firm, cancellations or
scope adjustments may occur. Backlog is adjusted to reflect any known project
cancellations, deferrals and revised project scope and cost, both upward and
downward.

Fluor Daniel revenues decreased to $8.4 billion in 1999 compared with $9.7
billion in 1998 and $10.2 billion in 1997, primarily due to a continuing
decline in the volume of work performed. The decline in revenues is consistent
with the downward trend in new awards, reflecting both deferred capital
spending by clients as well as Fluor Corporation's emphasis on project
selectivity. Fluor Daniel operating profit was $160 million in 1999, $161
million in 1998 and $70 million in 1997. Despite a 14 percent decline in
revenues, operating margins for the year ended October 31, 1999 improved over
the same period in 1998, primarily due to improved project execution. Operating
results for the year ended October 31, 1997, reflect provisions totaling $118.2
million recorded for estimated losses on certain contracts and adjustments to
project-related investments and accounts receivable. Results for 1997 also
included charges totaling $25.4 million related to implementation of certain
cost reduction initiatives.

Results for the year ended October 31, 1999 for Fluor Daniel include a
provision totaling $84 million for process design problems which arose on its
Murrin Murrin Nickel Cobalt project located in Western Australia. Fluor
Corporation anticipates recovering a portion of this amount and, accordingly,
has recorded $64 million in expected insurance recoveries. The result on
operating profit was a negative $20 million impact which reflects costs in
excess of contract maximums and which are not otherwise recoverable from any
insurance coverage. During the fourth quarter of 1999, Fluor Daniel completed a
more definitive estimate of costs required to address the design problems and
potential insurance recoveries. As a result of this effort, both the estimated
cost and expected insurance recovery amounts discussed above include an upward
revision of $20 million.

The majority of Fluor Daniel's engineering and construction contracts
provide for reimbursement of costs plus a fixed or percentage fee. In the
highly competitive markets served by this segment, there is an increasing trend
for cost-reimbursable contracts with incentive-fee arrangements and fixed or
unit price contracts. In certain instances, Fluor Daniel has provided
guaranteed completion dates and/or achievement of other performance criteria.
Failure to meet schedule or performance guarantees or increases in contract
costs can result in non-recoverable costs, which could exceed revenues realized
from the project. Fluor Daniel continues

49
<PAGE>

to focus on improving operating margins by enhancing selectivity in the
projects it pursues, lowering overhead costs and improving project execution.

The Fluor Daniel segment made no significant business acquisitions during
1997, 1998 or 1999.

Fluor Global Services Segment

Total new awards in each of 1997 and 1998 were $1.8 billion, compared with
$2.0 billion in 1999. The following table sets forth new awards for each of the
segment's business units:

<TABLE>
<CAPTION>
Year Ended October
31,
----------------------
1997 1998 1999
------ ------ ------
(in millions)
<S> <C> <C> <C>
Fluor Federal Services............................... $ 497 $ 451 $ 582
28% 25% 29%
Telecommunications................................... 277 30 646
16% 2% 32%
Operations & Maintenance............................. 713 1,106 772
41% 61% 38%
Consulting Services and Other........................ 269 232 32
15% 12% 1%
------ ------ ------
Total new awards..................................... $1,756 $1,819 $2,032
100% 100% 100%
====== ====== ======
United States........................................ $1,558 $1,524 $1,928
89% 84% 95%
International........................................ 198 295 104
11% 16% 5%
------ ------ ------
Total new awards..................................... $1,756 $1,819 $2,032
100% 100% 100%
====== ====== ======
</TABLE>

New awards in 1999 were higher compared with 1998, as a result of an
increase in telecommunications projects. New awards in 1998 were slightly
higher than 1997 primarily due to the renewal of facility management service
contracts for IBM at various facilities located throughout the United States.
Because of the nature of the services performed by Fluor Global Services,
primarily related to American Equipment Company (AMECO) and TRS Staffing
Solutions, a significant portion of this segment's activities are not
includable in backlog.

Backlog at October 31, 1997, 1998 and 1999 was $2.1 billion, $2.2 billion
and $2.4 billion, respectively. The increase in total backlog is consistent
with the increasing trend in new awards. The backlog of Fluor Global Services
is concentrated in the United States, representing approximately 92 percent, 88
percent and 90 percent of the total backlog at the end of 1997, 1998 and 1999,
respectively. Although backlog reflects business that is considered to be firm,
cancellations or scope adjustments may occur. Backlog is adjusted to reflect
any known project cancellations, deferrals and revised project scope and cost,
both upward and downward.

Fluor Global Services revenues increased to $2.9 billion in 1999 compared
with $2.6 billion in 1998, as the result of higher revenues in its AMECO, Fluor
Federal Services and Telecommunications business units. The decline in Fluor
Global Services revenues from $3.0 billion in 1997 to $2.6 billion in 1998 was
primarily due to a reduction in revenues related to its environmental
strategies business which was phased out during 1998. Operating profit for the
segment was $52 million in 1997, $81 million in 1998 and $92 million in 1999.
Gross margin in 1999 declined to 9.4 percent from 11.2 percent in 1998
primarily due to the AMECO business

50
<PAGE>

unit, which is being adversely impacted by the increasingly competitive
equipment sale and rental industry. Despite the lower gross margin, operating
profit increased in 1999 compared with 1998 primarily due to the elimination of
certain unprofitable operations which negatively impacted 1998. The improvement
in operating results in 1998 as compared with 1997 is due primarily to losses
incurred during 1997 by various unprofitable business units that were
eliminated in 1998.

The majority of Fluor Global Services' contracts provide for reimbursement
of costs plus a fixed or percentage fee. Due to intense competitive market
conditions, there is an increasing trend for contracts with incentive-fee
arrangements or fixed or unit price contracts. In certain instances, contracts
provide guaranteed completion dates and/or achievement of other performance
criteria. Failure to meet schedule or performance guarantees or increases in
contract costs can result in non-recoverable costs, which could exceed revenues
realized from the project.

In December 1996, TRS Staffing Solutions, the segment's temporary personnel
services business unit, acquired the ConSol Group; in May 1997, AMECO acquired
the SMA Companies; and, in June 1997, AMECO acquired J.W. Burress, Inc. These
businesses, in addition to other smaller acquisitions, were purchased for a
total of $142 million.

All acquisitions have been accounted for under the purchase method of
accounting and their results of operations have been included in Fluor
Corporation's consolidated financial statements from the respective acquisition
dates. If these acquisitions had been made at the beginning of 1997, pro forma
consolidated results of operations would not have differed materially from
actual results.

In October 1998, Fluor Corporation entered into an agreement to sell its
ownership interest in Fluor Daniel GTI, Inc. ("FD/GTI"), an environmental
services company. Under terms of the agreement, Fluor Corporation sold its
4,400,000 shares in FD/GTI for $8.25 per share, or $36.3 million in cash, on
December 3, 1998. This transaction did not have a material impact on Fluor
Corporation's results of operations or financial position. In August 1997,
Fluor Corporation completed the sale of ACQUION, a global provider of supply
chain management services, for $12 million in cash, resulting in a pre-tax gain
of $7 million.

Coal Segment

Revenues and operating profit from Coal operations in 1999 were $1.08
billion and $147 million, respectively, compared with $1.13 billion and $173
million in 1998. Revenues and operating profit in 1997 were $1.08 billion and
$155 million, respectively.

Revenues decreased $44 million in 1999 compared with 1998 primarily due to
the combination of a reduction in volume of the higher priced metallurgical
coal and a decline in prices. Metallurgical coal volume decreased nearly 18
percent during 1999 compared with 1998. This decrease was more than offset by
an increase in lower priced steam coal volume. Also contributing to the decline
in coal revenues were lower realized prices for both steam and metallurgical
coal. Steam coal prices declined 4 percent while metallurgical coal prices
declined 2 percent. The metallurgical coal market continues to be adversely
affected by steel imports from outside the United States and a weak U.S. coal
export market. The imports have reduced demand for steel produced in the United
States and thereby reduced U.S. demand for metallurgical coal, which is used in
steel production. Demand is weak for U.S. coal exported to foreign markets as
the U.S. dollar remains strong and the Asian economies slowly recover from
their financial crises. Additionally, the market for steam coal, which is used
to fire electric-generating plants, continues to be impacted by high customer
inventory levels resulting from last year's mild winter and competition from
western coals, which continue to penetrate the traditional eastern coal market
areas. Gross profit for the year ended October 31, 1999 is down slightly from
the same period in 1998 as a result of lower metallurgical coal sales volume
and lower prices for both metallurgical and steam coal. Operating profit for
1999 is lower than 1998 due to higher fixed costs, primarily depreciation,
depletion and amortization, as volume levels have remained relatively flat.

51
<PAGE>

The market conditions described above have placed pressure on both the sales
volume and pricing outlook for 2000. Fluor Corporation continues to focus on
reducing mining production costs through expansion of its surface mining
capabilities and utilization of longwall mining.

Revenues increased $46 million in 1998 compared with 1997 primarily due to
increased sales volume of metallurgical coal, partially offset by lower steam
coal prices. Metallurgical coal revenues increased 11 percent primarily due to
higher demand by steel producers. Steam coal revenues were flat on steady
volume in 1998 as compared with 1997, while steam coal prices declined
approximately 3 percent as overall demand was down due to both a mild winter
and summer in 1998. Gross profit increased by 15 percent and operating profit
increased by 12 percent in 1998 compared with 1997, primarily due to reduced
production costs and an increased proportion of higher margin metallurgical
coal sales, partially offset by lower steam coal prices.

Coal segment acquisitions during the three years ended October 31, 1999 were
primarily focused on the purchase of additional low-sulfur coal reserves in
areas adjacent to existing mine and mill operations. All acquisitions have been
accounted for under the purchase method of accounting and their results of
operations have been included in Fluor Corporation's consolidated financial
statements from the respective acquisition dates. If these acquisitions had
been made at the beginning of the respective year acquired, pro forma
consolidated results of operations would not have differed materially from
actual results.

Strategic Reorganization Costs

As noted above, during 1999 Fluor Corporation reorganized its engineering
and construction operations. Fluor Corporation recorded a special provision of
$117.2 million ($100.5 million after-tax) to cover direct and other
reorganization related costs, primarily for personnel, facilities and asset
impairment adjustments. The provision was initially recorded during the second
quarter at the then estimated amount of $136.5 million ($119.8 million after-
tax). Total estimated personnel costs associated with the reorganization were
reduced during the fourth quarter as both the actual number of employee
terminations as well as the cost per employee termination were lower than
originally estimated.

Under the reorganization plan, approximately 5,000 jobs are expected to be
eliminated. The provision includes amounts for personnel costs for certain
affected employees that are entitled to receive severance benefits under
established severance policies or by government regulations. Additionally,
outplacement services may be provided on a limited basis to some affected
employees. The provision also reflects amounts for asset impairment, primarily
for property, plant and equipment; intangible assets (goodwill); and certain
investments. The asset impairments were recorded primarily because of Fluor
Corporation's decision to exit certain non-strategic geographic locations and
businesses. The carrying values of impaired assets were adjusted to their
current market values based on estimated sale proceeds, using either discounted
cash flows or contractual amounts. Lease termination costs were also included
in the special provision. Fluor Corporation anticipates closing 15
non-strategic offices worldwide as well as consolidating and downsizing other
office locations. The closure or rationalization of these facilities is
expected to be substantially complete by the end of fiscal year 2000.

As of October 31, 1999, Fluor Corporation has reduced headcount by
approximately 5,000 employees and has closed 13 offices. Fluor Corporation
anticipates closing two additional offices within the next six months. The
special provision liability as of October 31, 1999 totaled $58.5 million. The
remaining liability for personnel costs ($25.2 million) and asset impairments
($23.3 million) will be substantially utilized by April 30, 2000. The remaining
liability associated with abandoned lease space ($9.7 million) will be
amortized as an offset to lease expense over the remaining life of the
respective leases starting on the date of abandonment.

Overhead beginning in 2000 is expected to be reduced by approximately $100
to $120 million annually as a result of the personnel reductions and office
closures.

52
<PAGE>

Other

Net interest expense for 1999 increased by $8.4 million compared with 1998
primarily due to an increase in interest expense resulting from higher average
outstanding short-term borrowings used to fund Fluor Corporation's share
repurchase program, which was completed in 1998. In addition, interest income
declined as a result of lower average cash balances outstanding during the
year. Net interest expense for 1998 increased compared with 1997 primarily due
to an increase in short-term borrowings required to fund Fluor Corporation's
share repurchase program and a full year of interest related to the $300
million in long-term debt issued in March 1997.

Corporate administrative and general expense for the year ended October 31,
1999 was $55.4 million compared with $22.6 million for the same period in 1998.
The increase is due to higher stock-based compensation plan expense and an
increase in consulting costs related to the development and implementation of
Fluor Corporation's new strategic direction. Also included in corporate
administrative and general expense for 1999 is approximately $8 million for the
development of Fluor Corporation's Enterprise Resource Management system,
Knowledge@Work. In addition, the year ended October 31, 1998 included a credit
of approximately $10 million related to a long-term incentive compensation
plan. Fluor Corporation accrues for certain long-term incentive awards whose
ultimate cost is dependent on attainment of various performance targets set by
the Organization and Compensation Committee (the "Committee") of the Board of
Directors. Under the long-term incentive compensation plan referred to above,
the performance target expired, without amendment or extension by the
Committee, on December 31, 1997. Corporate administrative and general expense
for the year ended October 31, 1998, increased as compared with 1997 due to
costs associated with Fluor Corporation's strategic business planning effort,
executive severance and recruiting costs. Also included was the $10 million
credit noted above.

The effective tax rate for year ended October 31, 1999 is significantly
higher than the amount reported for the same period in 1998 primarily due to
certain non-U.S. items included in the special provision which did not receive
full tax benefit. The effective tax rate for the year ended October 31, 1998
was essentially the same as the U.S. federal statutory rate. In 1997, the
effective tax rate was materially higher than the U.S. federal statutory tax
rate primarily due to foreign-based project losses, other project-related
investment losses and certain implementation costs for cost reduction
initiatives incurred during the year which did not receive full tax benefit.

Discontinued Operations

In October 1997, Fluor Corporation received $60 million representing a
negotiated prepayment of the remaining amounts outstanding stemming from the
1994 sale of its Lead business. The amount received slightly exceeded the
recorded discounted value of the receivable.

Financial Position and Liquidity

The decrease in cash provided by operating activities in 1999, compared with
1998, is primarily due to lower net earnings (adjusted for the non-cash and
unexpended amounts of the special provision in 1999) and an increase in
project-related operating assets and liabilities. Also contributing to the
decline was an increase in inventories, for both equipment for sale/rental and
coal. The increase in inventories is the result of slowing markets. The receipt
of a $30 million tax refund also positively impacted operating cash flow in
1998. The increase in cash provided by operating activities in 1998, compared
with 1997, is primarily due to a net decrease in operating assets and
liabilities (excluding the effects of business acquisitions and dispositions),
primarily related to a decrease in the volume of work performed on engineering
and construction contracts, and the aforementioned tax refund. Changes in
operating assets and liabilities vary from year to year and are affected by the
mix, stage of completion and commercial terms of engineering and construction
projects.

53
<PAGE>

Cash utilized by investing activities totaled $375.2 million in 1999
compared with $563.3 million in 1998. The decrease resulted primarily from
lower capital expenditures and acquisitions, net of proceeds from the sale of
property, plant and equipment. Capital expenditures in 1999 were primarily for
the Fluor Global Services segment, specifically for AMECO and directed toward
acquiring machinery and equipment for its rental business, and for the Coal
segment, which were directed toward developing existing reserves. In addition,
capital expenditures in 1999 include approximately $26 million of costs
associated with Knowledge@Work. Fluor Corporation also completed the sale of
its ownership interest in FD/GTI during 1999 and received proceeds totaling
$36.3 million. The increase in cash utilized by investing activities in 1998
compared with 1997, is primarily attributable to monies received in 1997 from
notes receivable related to the ongoing collection of deferred amounts
associated with Fluor Corporation's 1994 sale of its Lead business. Capital
expenditures, net of proceeds from the sale of property, plant and equipment,
increased in 1998 compared with 1997, primarily in the Fluor Global Services
and Coal segments. Offsetting this increase was a significant decline in
acquisitions, again primarily in the Fluor Global Services and Coal segments.

Cash utilized by financing activities totaled $220.6 million in 1999
compared with $98.0 million in 1998. During 1999 Fluor Corporation reduced
commercial paper and loan notes by $299.2 million partially offset by the
issuance of a $113.4 million note payable to an affiliate. In addition, Fluor
Corporation became obligated with respect to $17.6 million in long-term
municipal bonds. Cash utilized by financing activities totaled $98.0 million in
1998 compared with 1997 during which time Fluor Corporation provided cash from
financing activities of $235.7 million. In 1998, Fluor Corporation had short-
term borrowings of $341.8 million to fund its 1997/1998 share repurchase
program. Under this program, Fluor Corporation repurchased 8.3 million shares
of its common stock for a total of $379.0 million. In 1997, Fluor Corporation
issued $300 million of 6.95 percent senior notes due March 1, 2007. Proceeds
were used to fund operating working capital, capital expenditures and the
company's share repurchase program. During 1997, Fluor Corporation purchased
0.6 million shares of its common stock for a total of $34 million.

In connection with the Distribution, Fluor Corporation's 6.95% Senior Notes
due March 1, 2007 are expected to become an obligation of Massey. In addition,
proceeds from commercial paper borrowings totaling $200 million at Massey will
be used by Fluor to settle its forward purchase contract to buy back 1.85
million shares of its common stock for $97.5 million with the $102.5 million
remainder used to reduce Fluor's outstanding commercial paper.

Cash dividends decreased in 1999 to $60.7 million ($0.80 per share) from
$63.5 million ($0.80 per share) in 1998 and $63.8 million ($0.76 per share) in
1997 as a consequence of the reduced number of shares outstanding that resulted
from Fluor Corporation's share repurchase program. In December 1999, Fluor
Corporation announced an increase in its quarterly cash dividend from $0.20 per
share to $0.25 per share in 2000.

The total debt to capitalization ratio at October 31, 1999, was 26.3 percent
compared with 32.4 percent at October 31, 1998.

Fluor Corporation has on hand and access to sufficient sources of funds to
meet its anticipated operating needs. Significant short- and long-term lines of
credit are maintained with banks which, along with cash on hand, provide
adequate operating liquidity. Liquidity is also provided by Fluor Corporation's
commercial paper program under which there was $113.7 million outstanding at
October 31, 1999, compared with $245.5 million at October 31, 1998. In December
1998, Fluor Corporation expanded both its revolving credit facility and its
commercial paper program from $400 million to $600 million. During January
1999, Fluor Corporation filed a shelf registration statement with the
Securities and Exchange Commission for the sale of up to $500 million in debt
securities.

Although Fluor Corporation is affected by inflation and the cyclical nature
of the industry, its engineering and construction operations are generally
protected by the ability to fix costs at the time of bidding or to recover cost
increases in most contracts. Coal operations produce a commodity that is
internationally traded at prices established by market factors outside the
control of Fluor Corporation. However, commodity prices generally tend over the
long term to correlate with inflationary trends, and Fluor Corporation's
substantial coal reserves provide a hedge against the long-term effects of
inflation. Although Fluor Corporation has taken actions to reduce its

54
<PAGE>

dependence on external economic conditions, management is unable to predict
with certainty the amount and mix of future business.

Financial Instruments

In connection with its 1997/1998 share repurchase program, Fluor Corporation
entered into a forward purchase contract for 1,850,000 shares of its common
stock at a price of $49 per share. The contract matures in October 2000 and
gives Fluor Corporation the ultimate choice of settlement option, either
physical settlement or net share settlement. As of October 31, 1999, the
contract settlement cost per share exceeded the current market price per share
by $11.44.

Fluor Corporation's investment securities and substantially all of its debt
instruments carry fixed rates of interest over their respective maturity terms.
Fluor Corporation does not currently use derivatives, such as swaps, to alter
the interest characteristics of its investment securities or its debt
instruments. Fluor Corporation's exposure to interest rate risk on its $300
million senior notes, due in 2007, is not material given Fluor Corporation's
strong balance sheet and creditworthiness which provides the ability to
refinance.

Fluor Corporation utilizes forward exchange contracts to hedge foreign
currency transactions entered into in the ordinary course of business and not
to engage in currency speculation. At October 31, 1999 and 1998, Fluor
Corporation had forward foreign exchange contracts of less than eighteen months
duration, to exchange principally Australian dollars, Canadian dollars, Korean
won, Dutch guilders and German marks for U.S. dollars. In addition, Fluor
Corporation has a forward foreign currency contract to exchange U.S. dollars
for British pounds sterling to hedge annual lease commitments which expired
December 1999. The total gross notional amount of these contracts at October
31, 1998 and 1999 was $106 million and $124 million, respectively. Forward
contracts to purchase foreign currency represented $102 million and $122
million, and forward contracts to sell foreign currency represented $4 million
and $2 million, at October 31, 1998 and 1999, respectively.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes new standards
for recording derivatives in interim and annual financial statements. This
statement, as amended, is effective for Fluor Corporation's fiscal year 2001.
Management does not anticipate that the adoption of the new statement will have
a significant impact on the results of operations or the financial position of
Fluor Corporation.

55
<PAGE>

BUSINESS OF NEW FLUOR

In this section, "New Fluor" refers to the newly created entity whose shares
are being distributed to shareholders in the Distribution and also to Fluor
Corporation and its historical operation of the businesses that will be
operated by New Fluor following the Distribution.

Overview

. Fluor DanielSM provides design, engineering, procurement and
construction services on a worldwide basis to an extensive range of
infrastructure, industrial, commercial, utility, natural resource,
chemical and energy clients.

. Fluor Global ServicesSM provides outsourcing of maintenance services and
asset operations, design and build-out services in the
telecommunications market, equipment rental and sales, services to the
U.S. government and temporary staffing for client projects and other
staffing needs.

. Fluor Constructors International, Inc. provides unionized construction
management services to a wide variety of industrial businesses
worldwide.

. Fluor Signature ServicesSM provides business support services including
information technology, real estate, safety consulting, transactional
accounting and human resource support for New Fluor and potentially for
outside clients.

The wide range of services provided by these enterprises strategically
position and differentiate New Fluor as a full-service provider of exceptional
industry expertise and technical knowledge. New Fluor provides these services
through a global network of offices in more than 25 countries on 6 continents.

Industry Overview

Design, Engineering, Construction and Maintenance Industries

The industries served by New Fluor are diverse, sharing common
characteristics and each also having unique characteristics. The common
industry characteristics center around the need to design, build and maintain
an efficiently operating industrial infrastructure. The unique characteristics
of each industry are generally segmented by industry sector. Each industry
sector generally requires a different type and degree of technical expertise to
design, build and maintain its infrastructure. The contracting methods and
means by which owners engage companies such as New Fluor also vary by industry
sector.

In 1999, according to Engineering News Record ("ENR"), the top 375
international design and construction firms accounted for approximately $400
billion of the design, build and maintenance revenues in the following industry
sectors:(/1/)

<TABLE>
<CAPTION>
Industry Sector % of Total
--------------- ----------
<S> <C>
Petroleum...................................................... 13%
Industrial .................................................... 6%
Power.......................................................... 6%
Manufacturing.................................................. 4%
Hazardous Waste................................................ 2%
Transportation................................................. 19%
Water & Sewer.................................................. 7%
Building....................................................... 36%
Other.......................................................... 7%
---
Total.......................................................... 100%
===
</TABLE>
--------
(/1/The)sector definitions are established by ENR and are not the same as the
industry definitions used by New Fluor in establishing the scope of
industries served by each of its strategic business enterprises. The
industries served by each strategic business enterprise are determined
generally by marketing focus and technical and operational efficiencies.

56
<PAGE>

The petroleum sector includes oil and gas production, refineries,
petrochemical plants, pipelines, offshore and underwater facilities. This
includes facilities for the production (both onshore and offshore) and
transport of crude oil, gas and LNG, including gas processing facilities,
pumping stations, and terminals, as well as process plants that refine crude
oil or are involved in the further processing of fractions from crude oil to
improve their quality for use as fuels, asphalt, lubricants and similar
products. Also included are plants that process a petroleum-derived gas or
fraction into a finished petrochemical product, and plants for manufacture of
chemical additives.

The industrial sector includes process plants that prepare chemical raw
material feedstocks, chemical intermediates and chemical end products. This
sector also includes life sciences, agricultural, pharmaceuticals, biotech, R&D
laboratories, consumer products, foods processing, pulp and paper plants and
facilities for the production of steel and non-ferrous metals.

The power sector includes production, transmission and distribution
facilities for established utilities and Independent Power Producers (IPPs),
consisting of fossil fuel, cogeneration, nuclear, geothermal and renewables.

The manufacturing sector includes automobile assembly & parts fabrication,
semiconductor and microelectronics fabrication, aerospace and textile plants.

The hazardous waste sector includes hazardous chemical & soil remediation,
nuclear waste, asbestos and lead abatement .

The transportation sector includes highways, bridges, airports, mass
transit, light rail and marine & port facilities. This includes new programs
and modernization projects in the United States stimulated by AIR-21 (for
airports) and TEA-21 (for highways) legislation.

The water and sewer sector consists of water treatment, desalination, water
transmission, aqueducts, dams, reservoirs and wastewater treatment, landfills
and major sanitary/storm sewer projects.

The building sector includes hotels, convention centers,
distribution/warehousing, health care, government, correctional, commerical
office, commercial retail, educational, sports, entertainment and multi-unit
residential.

The other sector category consists of telecommunications infrastructure,
including communications transmissions systems, regional cellular and cable
systems and communications systems. This category also includes metallurgical
extraction facilities for the processing and production of copper, gold and
aluminum.

Construction Equipment Industry

The construction equipment industry includes the provision of construction
and industrial equipment, fleet maintenance and repairs, and tool services to
international capital projects and plant operations for all industries.
Included is the aftermarket parts and services businesses. Equipment
maintenance includes repair, renovation, replacement, upgrade and preventive
and predictive maintenance.

Personnel Staffing Industry

The personnel staffing industry consists of the provision of temporary,
contract and direct-hire positions for all industries. Staffing categories
generally consist of different skill types; professional and non-professional.
Professional include information technology, accounting and finance, legal and
engineering. Non-professional typically include secretarial services.

Strategy

New Fluor will continue to focus on its strategic priorities to create
shareholder value. These strategies include the following:

Leveraging New Fluor's project management capabilities to better serve its
global clients. New Fluor has a strong reputation among its global customers
for project management capability in large complex or geographically
challenging projects. By making substantial investments in knowledge-based
execution,

57
<PAGE>

procurement and risk management tools and human resource development, New Fluor
is enhancing its ability to shrink schedules, reduce costs and monitor and
communicate status on projects. These investments will improve New Fluor's
competitiveness and ability to earn higher margins.

Focusing on clients, segments and projects where New Fluor's specific
capabilities are valued. New Fluor has focused its marketing and selling effort
on clients where growth prospects are high and where it delivers greater value
through the capabilities of its member workforce, technology, scale, know-how
and global alliances. This focus is designed to enhance margins and increase
its volume of business with each targeted client.

Investing in information technology. New Fluor is investing heavily in a new
generation of information technology which will enable procurement cost
reductions, improved cost estimation, reduced administrative cost and more
timely and accurate project monitoring, review and oversight.

Offering a broader array of services. New Fluor intends to capitalize on its
success in providing services to its client base that do not relate to
engineering and construction projects. New Fluor's clients require significant
assistance and support throughout the life cycle of asset ownership. These
expanded services include providing initial site selection, maintenance,
operations, equipment leasing and rental and temporary support personnel. New
Fluor will also focus on asset management alternatives, including development
of and participation in structures for off-balance sheet ownership. Through
Fluor Global Services, New Fluor will create new business units to develop,
sell and execute against each of these identified opportunities.

Utilizing New Fluor's financial strength for selective investments. New
Fluor's strong financial condition, which is a critical differentiator to its
clients, demonstrates New Fluor's staying power and offers significant new
growth potential. New Fluor's expanding scope of business activities will offer
a wide array of attractive investments in projects and joint ventures to manage
technology or enhance geographic execution. These investments will provide
improved financial returns, spread risk and enhance New Fluor's range of
capabilities to improve client service levels.

Competitive Strengths

New Fluor believes it is in a strong position to successfully execute its
business strategy due to its many competitive strengths, which include the
following:

New Fluor is a recognized industry leader with demonstrated experience and
global scope. New Fluor's global scope, experience and capabilities have
positioned it as an industry leader with the ability to provide a complete
value-added array of services to meet the full life cycle needs of its clients'
asset base. A trusted global leader, with nearly 100 years of experience in
executing projects for international customers across a diverse range of
industries, New Fluor has developed specialized skills to manage large, complex
capital projects on a global basis. New Fluor's depth of knowledge and
expertise have been key to building a strong global reputation for delivering
projects on schedule, including the ability to develop innovative approaches to
meeting unique project requirements. Engineering News-Record consistently ranks
New Fluor among the top three international design firms and international
contractors.

New Fluor has an excellent client base with strong long-term
relationships. With nearly 100 years of world-class project experience, New
Fluor has developed an excellent client base, including strong, long-term
relationships with key global companies. Leveraging these relationships for
repeat business opportunities and expanding the scope of value-added services
provided offers important growth potential.

New Fluor has a strong financial condition which is of critical importance
to its clients and offers flexibility to capitalize on a variety of growth
initiatives. Financial strength is a key differentiator to New Fluor's clients,
providing confidence in its ability to complete its projects, as well as
lending credibility and assistance for client projects seeking public
financing. Additionally, New Fluor's financial strength provides the
flexibility to invest in maintaining and enhancing its systems, services and
work processes to ensure its capabilities are leading edge and provide unique
added value for its clients.

58
<PAGE>

New Fluor has a high-quality work force. New Fluor has a highly talented,
dedicated and experienced work force strategically located across the globe.
Additionally, its compensation philosophy has long been directed at providing
employee incentives and benefits designed to optimize performance and to ensure
the company's ability to attract and retain a quality work force.

New Fluor has an outstanding track record for safety performance. New Fluor
has long been committed to fostering a strong safety culture across the entire
scope of its business activities. New Fluor's safety performance, which
continues to improve, is currently 60 times better than the national industry
average. Achieving this level of safety performance translates into significant
value in both cost savings and clients' valuation of New Fluor's key services.

New Fluor is an expert in global project execution logistics. New Fluor has
the logistical know-how to move, assemble and expedite components, sub-
assemblies and necessary construction materials around the world in a highly
accurate and timely manner, which few competitors can match. This is a key
project management capability, especially where worldwide transportation and
customs approvals are necessary for successful project execution.

New Fluor's new strategic direction is well underway, with restructuring
actions completed. While many of its competitors were slow or unwilling to
recognize market changes, New Fluor undertook extensive restructuring, cost
reduction and development of a new highly focused selling and marketing
organization in the early stages of the last market downturn. As a result, New
Fluor is particularly well positioned to capitalize on a cyclical upturn in key
markets, as well as achieving growing success in penetrating new service-based
growth opportunities.

Operations

A summary of New Fluor's operations and activities by business segment and
geographical area is set forth below.

Fluor Daniel

The Fluor Daniel strategic business enterprise ("Fluor Daniel") provides a
full range of design, engineering, procurement, construction and other services
to clients in a broad range of industrial and geographic markets on a worldwide
basis. Fluor Daniel's operations are organized into five business units
responsible for identifying and capitalizing on opportunities in their market
segments on a global basis. The operations of Fluor Daniel are detailed below
by business unit:

Chemicals and Life Sciences: The Chemicals and Life Sciences business unit
furnishes a full line of services to the following market segments: specialty
and fine chemicals, petrochemicals, bulk pharmaceuticals, secondary
pharmaceutical manufacturing and biotechnology. A representative sample of the
projects being performed in this business unit include a film processing plant
in China, a major petrochemical complex in the western province of Saudi Arabia
and a pharmaceutical plant in Ireland. Life Sciences clients continue to
concentrate their manufacturing capabilities in certain tax-advantaged
locations including Puerto Rico, Ireland and Singapore where Fluor Daniel has
an existing and expanding presence. In addition, the Chemicals and Life
Sciences business unit is targeting development opportunities to leverage key
customer relationships by matching available technologies with regional market
needs and feedstock availability. For example, the Chemicals and Life Sciences
business unit has recently partnered with Du Pont to license, design and
construct industrial plants using Du Pont's PET technology for the production
of polyethylene.

Oil, Gas and Power: Fluor Daniel's Oil, Gas and Power business unit is an
integrated service supplier providing a full range of design, engineering,
procurement, construction and project management services in a broad spectrum
of energy industries ranging from upstream production to refining to power
generation. Typical oil and gas projects include new facilities, upgrades,
revamps and expansions for refineries, pipeline installations and oil sands
development projects. Current projects include development of an offshore oil
field in the Timor Sea, various pipeline projects in the Caspian Sea region and
a major oil sands project in Alberta, Canada. In power generation, this
business unit designs, engineers and constructs power generation facilities

59
<PAGE>

predominantly in the fossil fuel power industry through Duke/Fluor Daniel, a
partnership with Duke Energy. Duke/Fluor Daniel was awarded contracts for the
development of seven new power generation facilities in fiscal year 1999.

Mining: The Mining business unit operates internationally in a wide range of
mineral markets providing services ranging from mine planning and development,
project management, technical and engineering services, resource evaluation,
geologic modeling, equipment selection, permitting, construction and
remediation. Projects being performed include the design and installation of
the longest single strand underground conveyor in the world in Colorado,
engineering, procurement and construction services for a major copper and gold
project in Indonesia, design and construction management of the world's largest
"grass roots" copper concentrator on the island of Sumbawa and construction of
the world's largest vanadium production facility located in Western Australia.

Manufacturing: The Manufacturing business unit provides comprehensive
engineering, architectural, construction, design, programming and management
services to the general manufacturing, electronics, food, beverage and consumer
products industries along with specialized construction management expertise
for the pharmaceutical and biotechnology industries. This business unit strives
to build longstanding business relationships with clients as best evidenced by
its thirty year alliance with Procter & Gamble. Current projects of the
Manufacturing business unit include wafer fabrication and processing facilities
in Malaysia, a major electronics facility in the Philippines, a resort/hotel in
Las Vegas, Nevada and a research and development and headquarters facility for
a major pharmaceutical company in the northeastern United States.

Infrastructure: The Infrastructure business unit provides design,
engineering, procurement, construction and construction management services for
the transportation industry. In highway construction, the business unit has
completed numerous projects and the anticipated growth of public-private
ventures should serve as a platform to increase its role in this area. For
example, the business unit was recently selected by the South Carolina
Department of Transportation to provide construction and management support for
the statewide highway development program. Other localities are emulating this
innovative approach and, in concert with U.S. government funding of over $200-
plus billion from the TEA-21 transportation bill resulting in numerous new
transportation opportunities domestically, this business unit is well-
positioned to grow in this area. In the area of railroad construction, numerous
public/private venture projects are now under development in Europe. The
Infrastructure business unit has expanded into this area as exemplified by its
recent joint venture with Mott MacDonald in the United Kingdom to be one of
three primary suppliers of program management services to Britain's Railtrack
for a multi-billion dollar improvement project on one of England's most heavily
traveled rail lines. Finally, due to global increases in air traffic, there is
a need for improvement and expansion of major airports. In this area, the
Infrastructure business unit has managed numerous projects including its
present involvement in a major expansion project at John F. Kennedy Airport in
New York.

Competition

Fluor Daniel is one of the world's larger providers of engineering,
procurement and construction services. The markets served by the business are
highly competitive and for the most part require substantial resources,
particularly highly skilled and experienced technical personnel. A large number
of companies are competing in the markets served by the business. Competition
is primarily centered on performance and the ability to provide the design,
engineering, planning, management and project execution skills required to
complete complex projects in a safe, timely and cost-efficient manner. Fluor
Daniel's engineering, procurement and construction business derives its
competitive strength from its diversity of projects, reputation for quality,
technology, cost-effectiveness, worldwide procurement capability, project
management expertise, strong safety record, geographic coverage and ability to
meet client requirements by performing construction on either a union or an
open shop basis.

Fluor Global Services

The Fluor Global Services strategic business enterprise ("Fluor Global
Services") supplies a full array of business asset and operation management
services outside the traditional engineering, procurement and

60
<PAGE>

construction value chain. Services provided by Fluor Global Services include
operations, maintenance and consulting services; construction and rental
equipment; contract and direct-hire staffing services and training; services to
the U.S. government; and program and asset management services to industries on
a global basis. This separate enterprise was created in order to better serve
clients and to take advantage of a growing outsourcing market across a broad
range of industries. Fluor Global Services' operations are organized into the
following five business units:

AMECO: AMECO sells, rents, services and outsources equipment for
construction and industrial needs on a global basis. In order to better serve
clients, AMECO has reorganized into three business lines: Fleet Services which
provides outsourcing services to targeted industrial markets; Site Services
which provides complete rental equipment and tool programs for capital
construction projects; and Dealerships which provide new and used equipment
sales, parts and services in targeted geographic regions.

TRS Staffing Solutions: TRS Staffing Solutions is a global enterprise of
staffing specialists that provides clients with assistance in temporary,
contract and direct hire positions specializing in information technology,
accounting and financing and engineering personnel. The temporary staffing unit
affords clients flexibility and economies by providing temporary workers on a
cost-effective basis. The contract and direct hire segment is focused on
helping clients to effectively recruit and retain staff.

Operations & Maintenance: Operations & Maintenance furnishes repair,
renovation, replacement, predictive and preventative services to commercial,
industrial, nuclear, fossil fuel, manufacturing and oil, gas and power
facilities worldwide. In addition, it is a leading supplier of integrated
facility management for commercial and government operations, providing on-
location maintenance and operations support coupled with workplace consulting
and facility management services. The services provided by this business unit
are those that are typically outsourced by a client in that they are ancillary
to the primary business of the client. By outsourcing these services, the
client is better able to focus on its primary business activities. Many of
these contracts are evergreen in nature and can be extended for many years.

Fluor Federal Services: Fluor Federal ServicesSM is a leading provider of
services to the U.S. government, especially with respect to the operation and
environmental remediation of government facilities for the U.S. Department of
Energy and Department of Defense. These projects tend to be extremely large,
complex in nature and take many years to complete. Examples of activities being
performed by Fluor Federal Services include environmental restoration,
engineering, construction, site operations and maintenance at government sites
located in Hanford, Washington and Fernald, Ohio.

Telecommunications: The Telecommunications business unit is a leading
provider of systems integration and project management services for the global
telecommunications market. As an example, this business unit was recently named
project manager of a $320 million project to build out a network of fiber optic
cable and point of presence units for Level 3 Communications. Additionally,
this unit was awarded a $465 million project to provide a new integrated radio
and transmission communications network for the London underground subway
system.

Competition

The markets served by each Fluor Global Services business unit, while
containing some similarities, have discrete issues particularly impacting that
unit. Each business unit has a large number of companies competing in its
markets. With respect to American Equipment Company, which operates in numerous
markets, the equipment rental industry is highly fragmented and very
competitive, with most competitors operating in specific geographic areas. In
the sales and service area, the equipment distribution market consists
primarily of firms which operate dealerships representing equipment
manufacturers. Competition in the equipment arena is driven primarily by price,
service and locality to where the client's services are required. With respect
to TRS Staffing Solutions, this is a highly fragmented industry with over 100
companies competing nationally. The key competitive factors in this segment are
price, service quality, breadth of service and geographical coverage. Key

61
<PAGE>

competitive factors in both Fluor Federal Services and Telecommunications are
primarily centered on performance and the ability to provide the design,
engineering, planning, management and project execution skills required to
complete complex projects in a safe, timely and cost-efficient manner. In the
Operations & Maintenance sector, the barriers to entry are low, resulting in a
highly fragmented competitive environment with no single company being
dominant. Competition is generally driven by reputation, price and capacity to
perform.

Fluor Constructors

Fluor Constructors is organized and operated separately from Fluor Daniel.
Fluor Constructors provides unionized construction management, construction and
maintenance services in the United States and Canada, both independently and as
a subcontractor to Fluor Daniel and global support to all Fluor Daniel industry
and regional groups.

Fluor Signature Services

The Fluor Signature Services strategic business enterprise ("Fluor Signature
Services") commenced operations effective November 1, 1999. This strategic
business enterprise was created primarily to provide traditional business
services and business infrastructure support to Fluor Corporation's business
enterprises, including human resource, finance, accounting, safety, information
technology, knowledge management and office support services. Fluor Signature
Services brings a new approach to doing business. By assuming responsibility
for the delivery of business administration and support services, Fluor
Signature Services will allow New Fluor's operating units to focus on their
core businesses. The individual operating units will define and choose which
services to purchase from Fluor Signature Services. Consolidation of these
services into one organization should reduce costs and improve quality
standards. Ultimately, such services may be marketed to external customers.

Properties

Operations of New Fluor and its subsidiaries are conducted in both owned and
leased properties totaling approximately 7.0 million square feet. In addition,
certain owned or leased properties of New Fluor and its subsidiaries are leased
or subleased to third party tenants. The following table describes the location
and general character of the major existing facilities:

<TABLE>
<CAPTION>
Location Interest Purpose
-------- -------- -------
<S> <C> <C>
United States and Canada:
Aliso Viejo, California............. Leased Fluor Corporate Headquarters and
Fluor Daniel and Fluor Global Services Operations
Calgary, Canada..................... Leased Fluor Daniel Canada Operations
Charlotte, North Carolina........... Leased Duke/Fluor Daniel Operations
Cincinnati, Ohio.................... Leased Fluor Daniel Operations and
Procter & Gamble Alliance
Greenville, South Carolina.......... Owned and Leased Fluor Daniel, Fluor Global Services
and AMECO Operations
Houston (Sugar Land office), Texas.. Owned Fluor Daniel and Fluor Global
Services Operations
Irvine, California.................. Leased Fluor Signature Services Operations
Richland, Washington................ Leased Fluor Federal Services Operations
Rumford, Rhode Island............... Leased Fluor Daniel Operations
San Juan, Puerto Rico............... Leased Fluor Daniel Operations
Vancouver, Canada................... Leased Fluor Daniel Wright Operations
Washington, D.C..................... Leased Fluor Daniel Operations
</TABLE>

62
<PAGE>

<TABLE>
<S> <C> <C>
The Americas:
Mexico City, Mexico..... Leased ICA Fluor Daniel Operations
Monterey, Mexico........ Owned AMECO Offices and Yard
Santiago, Chile......... Owned and Leased Fluor Daniel Chile and AMECO Operations
Buenos Aires, Leased Fluor Daniel Operations
Argentina..............
Europe, Africa and
Middle East:
Al Khobar, Saudi Arabia Owned Fluor Daniel Arabia Operations
(Dhahran area).........
Asturias, Spain......... Owned Fluor Daniel Espana Operations
Camberley, England...... Owned Fluor Daniel Limited Operations
Haarlem, Netherlands.... Owned and Leased Fluor Daniel Operations
Sandton, South Africa... Leased Fluor Daniel Southern Africa Operations
Gliwice, Poland......... Leased Fluor Daniel Operations
Asia and Asia Pacific:
Jakarta, Indonesia...... Leased Fluor Daniel Eastern, Inc. Operations
Manila, Philippines..... Owned and Leased Fluor Daniel Inc. Philippines Operations
Melbourne, Australia.... Leased Fluor Daniel Pty Ltd. Operations
Perth, Australia........ Leased Fluor Daniel Pty Ltd. Operations
New Dehli, India........ Leased Fluor Daniel India Private Ltd. Operations
</TABLE>

Legal Proceedings

Disputes have arisen between a subsidiary of Fluor Daniel and its client,
Anaconda Nickel, over the Murrin Murrin Nickel Cobalt project located in
Western Australia. Both parties have initiated the dispute resolution process
under the contract. Anaconda's primary contention is that the process design,
through which pressurized and super heated metal slurry flows through a series
of depressurization flash vessels, is defective and incapable of proper
operation. Anaconda also contends that it has suffered other consequential
losses, such as loss of profit, for which it seeks payment from New Fluor.
Anaconda contends that New Fluor is liable to Anaconda in the total amount of
A$1 billion, A$800 million of which is alleged consequential damages.

New Fluor vigorously disputes and denies Anaconda's allegations. Among other
things, New Fluor contends that Anaconda has and continues to improperly
operate the facility causing the flash vessels to fail. When Anaconda complied
with the written operating procedures, the flash vessels operated properly and
continuously. Moreover, New Fluor contends that Anaconda has failed to supply
the contractually guaranteed feedstock, adversely affecting the performance of
the facility. New Fluor rejects Anaconda's claim of loss of profit, since New
Fluor has complied with the applicable standards of care in the industry and
otherwise, the contract between New Fluor and Anaconda contains a waiver of
consequential damages, such as loss of profit.

New Fluor has provided notice to all applicable insurance carriers of the
disputes between the parties. If and to the extent that these problems are
ultimately determined to be the responsibility of New Fluor, New Fluor
anticipates recovering a substantial portion of this amount from available
insurance. For additional discussion, see Contingencies and Commitments in the
Notes to New Fluor's Consolidated Financial Statements contained elsewhere in
this Proxy Statement.

In addition, New Fluor and its subsidiaries, incident to their normal
business activities, are parties to a number of other legal proceedings and
other matters in various stages of development. While New Fluor cannot predict
the outcome of these proceedings, based on reports of counsel, in its opinion
any liability arising from these matters individually and in the aggregate will
not have a material adverse effect upon the financial position or results of
operations of New Fluor after giving effect to provisions already recorded.

63
<PAGE>

MASSEY ENERGY COMPANY

CAPITALIZATION

The following table sets forth the historical capitalization of Massey
Energy Company as of July 31, 2000:

. on an actual basis

. on an as adjusted basis to reflect

. The retention of $300 million of Fluor Corporation Senior Notes which
will remain an obligation of Massey following the Distribution

. The issuance of $230 million of commercial paper, the proceeds of
which will be transferred to New Fluor

. The assumption by Massey of Fluor Corporation's capital structure.

This information should be read in conjunction with Massey Energy Company's
Combined Financial Statements and Notes thereto and other information
contained elsewhere in this Proxy Statement. See "Cautionary Statements."

<TABLE>
<CAPTION>
July 31, 2000
-----------------------
Actual As Adjusted
---------- -----------
(In thousands)
<S> <C> <C>
Short-term debt........................................ $ -- $ 230,000
Long-term debt......................................... -- 300,000
---------- ----------
Total debt......................................... -- 530,000
---------- ----------
Shareholder's equity
Net investment by Fluor Corporation.................. 1,646,048 --
Due from Fluor Corporation........................... (254,921) --
Capital stock
Preferred--authorized 20,000,000 shares without par
value, none issued................................ -- --
Common--authorized 150,000,000 shares of $0.625 par
value, 73,819,076 issued and outstanding, as
adjusted (1)...................................... -- 46,137
Retained earnings.................................... -- 812,840
Unamortized executive stock plan expense............. -- (4,350)
---------- ----------
Total shareholder's equity....................... 1,391,127 854,627
---------- ----------
Total capitalization............................. $1,391,127 $1,384,627
========== ==========
</TABLE>
--------
(1) The as adjusted shares outstanding represent the number of shares expected
to be outstanding at the date of the Distribution, which is assumed to be
equal to the 75,669,076 shares of Fluor Corporation common stock
outstanding at July 31, 2000 less 1.85 million shares of common stock
expected to be acquired upon the settlement of its equity derivative
contract.

64
<PAGE>

MASSEY ENERGY COMPANY

SELECTED COMBINED FINANCIAL DATA

The following selected combined financial data of Massey have been derived
from the audited combined financial statements of Massey, which financial
statements as of and for each of the five years ending October 31, 1999, (not
presented separately herein as to 1995 and 1996) have been audited by Ernst &
Young LLP, independent auditors. The selected financial data of Massey as of
July 31, 2000, and for the nine months ended July 31, 1999 and 2000, have been
derived from the unaudited interim combined financial statements of Massey
included elsewhere in this Proxy Statement, and, in the opinion of management,
include all necessary adjustments for a fair presentation of such data in
conformity with generally accepted accounting principles.

The financial data included herein may not necessarily reflect the results
of operations and financial position of Massey in the future or what they would
have been had it been a separate entity. The information set forth below should
be read in conjunction with the information under "Massey Energy Company
Capitalization," "Massey Energy Company Unaudited Pro Forma Combined Financial
Information," "Massey Energy Company Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Massey Energy Company
Combined Financial Statements and Notes thereto included elsewhere in this
Proxy Statement.

<TABLE>
<CAPTION>
Nine Months Ended
For the Year Ended October 31, July 31,
----------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000(1)
-------- -------- -------- -------- -------- -------- --------
(in millions, except per share, per ton and number of
employees amounts)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF
EARNINGS DATA:
Net sales............. $ 846.8 $ 957.8 $1,077.9 $1,121.1 $1,076.1 $ 790.1 $ 792.5
Other revenue (2)..... 17.7 18.0 31.9 32.8 38.4 31.5 51.6
Income from
operations........... 111.0 134.5 154.8 170.1 139.4 99.4 95.6
Net earnings.......... 107.3 107.6 119.0 128.3 103.4 74.5 77.1
Pro forma earnings per
share (3)
Basic and diluted
(unaudited)........ 1.45 1.46 1.61 1.74 1.40 1.01 1.04

COMBINED BALANCE SHEET
DATA:
Working capital
(deficit)............ $ (27.6) $ (5.3) $ (2.4) $ 4.0 $ 43.9 $ 98.4 $ 128.3
Total assets.......... 1,204.2 1,398.9 1,641.6 1,836.9 1,980.0 1,941.5 2,086.7
Shareholder's equity.. 824.2 905.2 1,054.8 1,181.2 1,277.4 1,326.7 1,391.1

OTHER DATA:
EBIT (4).............. $ 111.0 $ 134.5 $ 154.8 $ 170.1 $ 139.4 $ 99.4 $ 95.6
EBITDA (4)............ 194.7 239.9 286.1 320.6 306.9 224.2 221.7
Tons sold............. 27.4 31.1 35.6 37.6 37.9 27.6 29.7
Tons produced......... 27.4 31.2 36.6 38.0 38.4 28.3 30.4
Average cost per ton.. $ 23.71 $ 22.99 $ 22.47 $ 21.36 $ 20.39 $ 20.70 $ 20.13
Average sales price
per ton.............. 30.89 30.81 30.24 29.83 28.40 28.63 26.64
Capital expenditures.. $ 181.8 $ 225.7 $ 305.2 $ 307.9 $ 230.0 $ 175.4 $ 169.2
Number of employees... 2,479 2,809 2,968 3,094 3,190 3,113 3,470
</TABLE>
-------
(1) Includes a $12.0 million excise tax refund and related interest of $5.3
million.
(2) Other revenue consists of royalties, rentals, miscellaneous income and
gains on the sale of non-strategic assets.
(3) Shares used to calculate basic pro forma earnings per share is based on the
number of shares expected to be outstanding at the date of Distribution
(assumed to be equal to the 75,669,076 shares of Fluor Corporation common
stock outstanding on July 31, 2000 less 1.85 million shares of common stock
expected to be acquired upon the settlement of its forward purchase
contract). Shares used to calculate diluted earnings per share is based on
the number of shares expected to be issued in the Distribution and the
dilutive effect of stock options and other stock-based instruments of Fluor
Corporation, held by Massey employees, that will be converted to equivalent
instruments in Massey Energy Company.
(4) EBIT is defined as earnings before deducting net interest expense (interest
expense less interest income) and income taxes. EBITDA is defined as
earnings before deducting net interest expense (interest expense less
interest income), income taxes and depreciation, depletion and
amortization. Although EBIT and EBITDA are not measures of performance
calculated in accordance with generally accepted accounting principles,
management believes that they are useful to an investor in evaluating
Massey because they are widely used in the coal industry as measures to
evaluate a company's operating performance before debt expense and its cash
flow. EBIT and EBITDA do not purport to represent income and cash generated
by operating activities and should not be considered in isolation or as a
substitute for measures of performance in accordance with generally
accepted accounting principles. In addition, because EBIT and EBITDA are
not calculated identically by all companies, the presentation here may not
be comparable to other similarly titled measures of other companies.
Management's discretionary use of funds depicted by EBIT and EBITDA may be
limited by working capital, debt service and capital expenditure
requirements and by restrictions related to legal requirements, commitments
and uncertainties.

65
<PAGE>

MASSEY ENERGY COMPANY

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information has been
prepared giving effect to the Distribution as if it occurred on July 31, 2000
for the pro forma combined balance sheet and as of November 1 of the respective
periods for the pro forma combined statements of earnings for the year ended
October 31, 1999 and nine months ended July 31, 2000. The pro forma combined
balance sheet and statements of earnings set forth below do not purport to
represent what Massey's financial position actually would have been had the
Distribution occurred on the dates indicated or to project Massey's operating
results for any future period. The pro forma adjustments are based upon
available information and certain assumptions that Fluor Corporation management
believes are reasonable. The pro forma combined financial statements set forth
below should be read in conjunction with, and are qualified in their entirety
by, the information under "Massey Energy Company Selected Combined Financial
Data," "Massey Energy Company Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Massey Energy Company's Combined
Financial Statements and Notes thereto included elsewhere in this Proxy
Statement.

UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Year Ended October 31, 1999
------------------------------------
Pro Forma
Historical Adjustments Pro Forma(1)
---------- ----------- ------------
(in millions, except share and
per share amounts)
<S> <C> <C> <C>
Net sales................................ $1,076.1 $1,076.1
Other revenue............................ 38.4 38.4
-------- --------
Total revenue............................ 1,114.5 1,114.5
Costs and expenses
Cost of revenues........................ 774.8 774.8
Depreciation, depletion and
amortization........................... 167.6 167.6
Selling, general and administrative
expense................................ 32.7 32.7
-------- --------
Total costs and expenses.............. 975.1 975.1
-------- --------
Income from operations................... 139.4 139.4
Interest income.......................... 14.4 (11.7)(2) 2.7
Interest expense......................... (0.8) (16.1)(3) (37.8)
(20.9)(4)
-------- --------
Earnings before taxes.................... 153.0 104.3
Income tax expense....................... 49.6 (17.0)(5) 30.0
(2.6)(6)
-------- --------
Net earnings............................. $ 103.4 $ 74.3
======== ========
Pro forma earnings per share
Basic................................... $ 1.40 $ 1.01
======== ========
Diluted................................. $ 1.40 $ 1.01
======== ========
Shares used to calculate pro forma
earnings per share (in thousands) (7)
Basic................................... 73,819 73,819
======== ========
Diluted................................. 73,826 73,826
======== ========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the pro forma combined financial statements.
(2) The reduction of interest income resulting from the elimination of net
intercompany receivables from Fluor Corporation.
(3) Additional interest expense arising from the issuance of $230 million of
commercial paper at an assumed interest rate of 7 percent.
(4) Additional interest expense arising from $300 million of Senior Notes
assuming an interest rate of 6.95 percent. See "The Distribution--
Financing."
(5) The impact of the pretax pro forma adjustments on income tax expense, at
the federal statutory tax rate of 35 percent.
(6) Tax benefit of the operating losses of Appalachian Synfuel, LLC realizable
due to the Distribution.
(7) Shares used to calculate basic pro forma earnings per share is based on the
number of shares expected to be outstanding at the date of the Distribution
(assumed to be equal to the 75,669,076 shares of Fluor Corporation common
stock outstanding on July 31, 2000 less 1.85 million shares of common stock
expected to be acquired upon the settlement of its forward purchase
contract). Shares used to calculate diluted earnings per share is based on
the number of shares expected to be issued in the Distribution and the
dilutive effect of stock options and other stock-based instruments of Fluor
Corporation, held by Massey employees, that will be converted to equivalent
instruments in Massey Energy Company.

66
<PAGE>

MASSEY ENERGY COMPANY

UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Nine Months Ended July 31, 2000
---------------------------------
Pro Forma Pro
Historical Adjustments Forma (1)
---------- ----------- --------
(in millions, except share and
per share amounts)
<S> <C> <C> <C>
Net sales.................................. $ 792.5 $ 792.5
Other revenue.............................. 51.6 51.6
------- -------
Total revenue.............................. 844.1 844.1
------- -------

Costs and expenses
Cost of revenues......................... 600.5 600.5
Depreciation, depletion and
amortization............................ 126.0 126.0
Selling, general and administrative
expense................................. 22.0 22.0
------- -------
Total costs and expenses............... 748.5 748.5
------- -------
Income from operations..................... 95.6 95.6

Interest income............................ 19.8 (11.7) (2) 8.1
Interest expense........................... (0.2) (12.1) (3) (27.9)
(15.6) (4)
------- -------
Earnings before taxes...................... 115.2 75.8
Income tax expense......................... 38.1 (13.8) (5) 22.3
(2.0) (6)
------- -------
Net earnings............................... $ 77.1 $ 53.5
======= =======

Pro forma earnings per share
Basic.................................... $ 1.04 $ 0.72
======= =======
Diluted.................................. $ 1.04 $ 0.72
======= =======

Shares used to calculate pro forma earnings
per share (in thousands) (7)
Basic.................................... 73,819 73,819
======= =======
Diluted.................................. 73,820 73,820
======= =======
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately
$20 to $25 million will be required to complete the Distribution. These
costs have not been reflected in the pro forma combined financial
statements.

(2) The reduction of interest income resulting from the elimination of net
intercompany receivables from Fluor Corporation.

(3) Additional interest expense arising from the issuance of $230 million of
commercial paper at an assumed interest rate of 7 percent.

(4) Additional interest expense arising from $300 million of Senior Notes
assuming an interest rate of 6.95 percent. See "The Distribution--
Financing."

(5) The impact of the pretax pro forma adjustments on income tax expense, at
the federal statutory tax rate of 35 percent.

(6) Tax benefit of the operating losses of Appalachian Synfuel, LLC realizable
due to the Distribution.

(7) Shares used to calculate basic pro forma earnings per share is based on the
number of shares expected to be outstanding at the date of the Distribution
(assumed to be equal to the 75,669,076 shares of Fluor Corporation common
stock outstanding on July 31, 2000 less 1.85 million shares of common stock
expected to be acquired upon the settlement of its forward purchase
contract). Shares used to calculate diluted earnings per share is based on
the number of shares expected to be issued on the Distribution and the
dilutive effect of stock options and other stock-based instruments of Fluor
Corporation, held by Massey employees, that will be converted to equivalent
instruments in Massey Energy Company.

67
<PAGE>

MASSEY ENERGY COMPANY

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
As of July 31, 2000
----------------------------------
Pro Forma Pro
Historical Adjustments Forma (1)
---------- ------------- ---------
(in millions)
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents.................. $ 5.1 $ 5.1
Accounts receivable........................ 168.2 168.2
Inventories................................ 92.1 92.1
Prepaid expenses and other................. 60.5 60.5
-------- --------
Total current assets..................... 325.9 325.9
-------- --------
Net property, plant and equipment........... 1,548.6 1,548.6
Other assets
Pension assets............................. 63.7 63.7
Other...................................... 148.5 2.2 (2) 150.7
-------- --------
Total other assets.......................... 212.2 214.4
-------- --------
$2,086.7 $2,088.9
======== ========
Liabilities and Shareholder's Equity
Current liabilities
Accounts and notes payable and bank
overdrafts................................ $ 111.7 $ 111.7
Commercial paper........................... -- 230.0 (3) 230.0
Payroll and employee benefits.............. 22.9 22.9
Other current liabilities.................. 63.0 8.7 (2) 76.2
4.5 (4)
-------- --------
Total current liabilities................ 197.6 440.8
-------- --------
Long-term debt due after one year........... -- 300.0 (2) 300.0
Noncurrent liabilities
Deferred taxes............................. 247.4 (4.5) (4) 242.9
Other noncurrent liabilities............... 250.6 250.6
-------- --------
Total noncurrent liabilities............. 498.0 493.5
-------- --------
Shareholder's equity
Common stock............................... -- 46.1 (5) 46.1
Retained earnings.......................... -- (306.5) (2) 812.9
(230.0) (3)
1,345.0 (5)
4.4 (6)
Unamortized executive stock plan expense... (4.4) (6) (4.4)
Net investment by Fluor Corporation........ 1,391.1 (1,391.1) (5) --
-------- --------
Total shareholder's equity............... 1,391.1 854.6
-------- --------
$2,086.7 $2,088.9
======== ========
</TABLE>
--------
(1) Management estimates that one-time pretax expenditures of approximately $20
to $25 million will be required to complete the Distribution. These costs
have not been reflected in the pro forma combined financial statements.

(2) The $300 million of Fluor Corporation 6.95% Senior Notes due March 1, 2007
will be an obligation of Massey following the Distribution.

(3) At the effective time of the Distribution, Massey will issue approximately
$230 million of commercial paper, the proceeds of which will be transferred
to New Fluor. See "The Distribution--Financing."

(4) Represents federal income tax relating to the change in ownership of
Appalachian Synfuel, LLC that becomes payable as a result of the
Distribution.

(5) Adjustment of shareholder's equity balances to reflect the new capital
structure of Massey.

(6) To reflect restricted stock held by Massey former employees.

68
<PAGE>

MASSEY ENERGY COMPANY

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Massey plans to maintain its disciplined growth strategy that has resulted
in a threefold increase in coal reserves and a doubling of production over the
past ten years. This strategy involves selectively acquiring new properties and
efficiently integrating acquired properties into existing infrastructure.
Massey also intends to maintain its historically strong financial condition
relative to its competitors.

Results of Operations

Nine months ended July 31, 2000 compared with the nine months ended July 31,
1999

Net sales increased slightly to $792.5 million for the nine months ended
July 31, 2000 compared with $790.1 million for the nine months ended July 31,
1999 as a result of three factors:
. The volume of steam coal sold has increased significantly during the
current year (17 percent for the first nine months of 2000 compared with
1999).
. The volume of the higher priced metallurgical coal has declined by 6
percent for the first nine months of 2000 compared with the
corresponding period of 1999.

. The average realized prices for both steam and metallurgical coal have
declined during the current year by 6 percent for the first nine months
of 2000 compared with the same period in 1999.

The metallurgical coal market continues to be adversely affected by a weak
coal export market and the slow recovery of the domestic steel market. Demand
is weak for U.S. coal exported to foreign markets as the U.S. dollar remains
strong. The market for steam coal continues to be adversely impacted by two
factors: (1) recent mild weather and (2) competition from western coals, which
is increasing its penetration of traditional eastern coal market areas.

Other revenue, which consists of royalties, rentals, miscellaneous income
and gains on the sale of non-strategic assets, increased 64 percent to $51.6
million for the 2000 period compared with $31.5 million for the 1999 period.
The increase was primarily due to an increase in income from dispositions of
non-strategic mineral reserves which generated $26.5 million in the 2000 period
compared with $10.2 million in the 1999 period. As part of its management of
coal reserves, Massey regularly sells non-strategic reserves or exchanges them
for reserves located in more synergistic locations.

Cost of sales increased 5 percent to $600.5 million for the 2000 period from
$572.8 million in the 1999 period. This was primarily due to the increase in
tons sold by 8 percent from 27.6 million tons in the 1999

69
<PAGE>

period to 29.7 million tons in the 2000 period. Cost of sales for the nine
months ended July 31, 2000 includes a $12.0 million refund related to excise
taxes paid on coal export sales tonnage. The payment of excise taxes on
exported coal was determined to be unconstitutional by a 1998 federal district
court decision. During the third quarter, the Internal Revenue Service issued
procedures for obtaining refunds related to such excise taxes. Cost of sales on
a per ton of coal sold basis, excluding the excise tax refund, increased by
approximately 1 percent in the 2000 period compared with the corresponding
period in 1999 as operational problems and adverse geologic conditions
encountered during the third quarter of 2000 more than offset cost reductions
that had been achieved in previous quarters of the 2000 period.

Depreciation, depletion and amortization slightly increased to $126.0
million for the 2000 period from $124.9 million in the 1999 period. The
increase of $1.1 million was primarily due to capital expenditures made in
recent years.

Selling, general and administrative expenses decreased 11 percent to $21.9
million for the 2000 period compared with $24.6 million for the 1999 period,
due in part to reduced accruals related to long-term executive compensation
plans.

Interest income increased to $19.8 million for the 2000 period compared with
$10.5 million for the 1999 period. This increase of $9.3 million was primarily
due to the additional interest income of $5.3 million related to the excise tax
refunds discussed above and a general increase in the floating interest rate on
a note receivable from Fluor Corporation.

Income taxes increased 10.1 percent to $38.1 million for the 2000 period
compared with $34.6 million in the 1999 period. The increase primarily reflects
the increased earnings in the 2000 period compared with the 1999 period. The
effective tax rate was 33.1 percent for the 2000 period compared with 31.7
percent for the 1999 period.

1999 Compared with 1998

Net sales for 1999 decreased 4 percent to $1,076.1 million from $1,121.1
million for 1998. Sales decreased $45.0 million in 1999 compared with 1998
primarily due to the combination of a reduction in volume of the higher priced
metallurgical coal and a decline in prices. Metallurgical coal volume decreased
nearly 18 percent during 1999 compared with 1998. This decrease was more than
offset by an increase in lower priced steam coal volume. Also contributing to
the decline in coal revenues were lower realized prices for both steam and
metallurgical coal. Steam coal prices declined 4 percent while metallurgical
coal prices declined 2 percent. The metallurgical coal market was adversely
affected by steel imports from outside the United States and a weak U.S. coal
export market. The imports reduced demand for steel produced in the U.S. and
thereby reduced U.S. demand for metallurgical coal, which is used in steel
production. Demand was weak for U.S. coal exported to foreign markets as the
U.S. dollar was strong and the Asian economies slowly recover from their
financial crises. Additionally, the market for steam coal continued to be
impacted by two factors: (1) a mild winter in 1998 and (2) competition from
western coals, which have continued to penetrate the traditional eastern coal
market areas.

Other revenue, which consists of royalties, rentals miscellaneous income and
gains on the sale of non-strategic assets, increased 17 percent to $38.4
million for 1999 compared with $32.8 million for 1998. The increase of $5.6
million was primarily due to an increase in rebates received from railroads.

Cost of sales decreased 4 percent to $774.8 million for 1999 from $805.8
million in 1998 as a result of lower production costs. Cost reductions were
achieved which lowered the cost per ton of coal sold during the period by 5
percent from $21.36 per ton in 1998 to $20.39 in 1999. Massey continues to
focus on reducing mining production costs through expansion of its surface
mining capabilities and utilization of longwall mining.

Depreciation, depletion and amortization increased 11 percent to $167.6
million for 1999 from $150.5 million in 1998. The increase of $17.1 million was
primarily due to the start-up of Appalachian Synfuel, LLC's synthetic fuel
plant and the development of a new surface mine and a new longwall mine.

70
<PAGE>

Selling, general and administrative expenses increased 19 percent to $32.7
million for 1999 compared with $27.6 million for 1998 as a result of a long-
term retention agreement negotiated with Massey's Chief Executive Officer.

Interest income decreased to $14.4 million for 1999 compared with $16.1
million for 1998. This decrease of $1.7 million was primarily due to a lower
outstanding balance on the note receivable from Fluor Corporation caused by
capital spending exceeding cash generated from operations.

Income taxes decreased 14 percent to $49.6 million for 1999 compared with
$57.4 million in 1998. The $7.8 million decrease reflects decreased earnings in
1999 compared with 1998. The effective tax rate was 32.4 percent for 1999
compared with 30.9 percent for 1998.

1998 Compared with 1997

Net sales for 1998 increased 4 percent to $1,121.1 million from $1,077.9
million for 1997. Sales increased in 1998 compared with 1997 primarily due to
increased sales volume of metallurgical coal, partially offset by lower steam
coal prices. Metallurgical coal revenues increased 11 percent primarily due to
higher demand by steel producers. Steam coal revenues were flat on steady
volume in 1998 as compared with 1997, while steam coal prices declined
approximately 3 percent as overall demand was down due to both a mild winter
and summer in 1998.

Other revenue, which consists of royalties, rentals, miscellaneous income
and gains on the sale of non-strategic assets, remained flat at $32.8 million
for 1998 compared with $31.9 million for 1997.

Cost of sales increased 1 percent to $805.8 million for 1998 from $801.4
million in 1997 as a result of increased sales volume of 37.6 million tons in
1998 compared with 35.6 million tons in 1997. The average cost per ton sold
decreased by 5 percent to $21.36 in 1998 from $22.47 in 1997 as a result of
increased production from low cost surface and longwall mines.

Depreciation, depletion and amortization increased 15 percent to $150.5
million for 1998 from $131.3 million in 1997. The increase of $19.2 million was
primarily due to the upgrading of several coal preparation plants, development
of several new underground mines and a major new surface mine.

Selling, general and administrative expenses increased 23 percent to $27.6
million for 1998 compared with $22.4 million for 1997 as a result of increased
payroll costs associated with the expansion of Massey's field services office
in West Virginia and increased outside professional fees related to information
technology and legal costs.

Interest income decreased to $16.1 million for 1998 compared to $17.5
million for 1997. This decrease of $1.4 million was primarily due to a decrease
in the balance of Massey's note receivable from Fluor Corporation caused by
capital spending exceeding cash generated from operations.

Income taxes increased 9 percent to $57.4 million for 1998 compared to $52.8
million in 1997. The $4.6 million increase reflects increased earnings in 1998
compared with 1997. The effective tax rate was 30.9 percent for 1998 compared
with 30.7 percent for 1997.

Liquidity and Capital Resources

Massey's cash and cash equivalents were $5.1 million at July 31, 2000. The
cash flow provided by operating activities was $255.7 million in 1997, $285.5
million in 1998 and $236.5 million in 1999 and $100.6 million in the nine
months ended July 31, 2000. Cash provided by operating activities reflect net
earnings adjusted for non-cash charges and changes in working capital
requirements. Net cash used in investing activities was $284.9 million in 1997,
$282.3 million in 1998, $223.6 million in 1999 and $139.8 million in the nine
months ended July 31, 2000. The cash used in investing activities reflects
expenditures for replacement of

71
<PAGE>

mining equipment, the expansion of mining capacity and projects to improve the
efficiency of mining operations. Financing activities primarily reflect changes
in the note receivable from Fluor Corporation.

Massey is expected to have approximately $530 million in debt at the time of
the Distribution. Fluor Corporation's $300 million of 6.95% Senior Notes due
March 1, 2007 will remain an obligation of Massey following the Distribution.
In addition, it is expected that Massey will have a commercial paper program
that will provide up to $400 million of operating liquidity. Initially, it is
expected that approximately $230 million of commercial paper borrowing will be
outstanding at the time of the Distribution.

Massey generally has satisfied its working capital requirements and funded
its capital expenditures from cash generated from operations. Massey believes
that cash generated from operations and its borrowing capacity will be
sufficient to meet its working capital requirements, anticipated capital
expenditures (other than major acquisitions), scheduled debt payments and
anticipated dividend payments for at least the next several years.
Nevertheless, the ability of Massey to satisfy its debt service obligations, to
fund planned capital expenditures or pay dividends will depend upon its future
operating performance, which will be affected by prevailing economic conditions
in the coal industry and financial, business and other factors, some of which
are beyond Massey's control. Massey frequently evaluates potential
acquisitions. In the past, Massey has funded acquisitions primarily with cash
generated from operations, but Massey may consider a variety of other sources,
depending on the size of any transaction, including debt or equity financing.
There can be no assurance that such additional capital resources will be
available to Massey on terms which Massey finds acceptable, or at all.

Inflation

Inflation in the United States has been relatively low in recent years and
did not have a material impact on Massey's results of operations for the years
presented.

New Accounting Standards

Accounting for Derivative Instruments and Hedging Activities. In June 1998,
the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value.

In June 1999, FASB issued SFAS No. 137 which deferred the effective date of
SFAS No. 133 for all fiscal quarters of all fiscal years beginning after June
15, 2000. Massey does not expect adoption to have a significant impact on
Massey's financial position, results of operations or liquidity.

Recent Developments

In the fourth quarter of 2000, Massey will provide $9.8 million for the
impairment of certain mine development costs at the Upper Cedar Grove longwall
mine, which is part of the Independence resource group. The roof conditions
encountered on a recently completed panel were very poor and are not expected
to improve in the adjacent panel. Evaluation of the mining conditions and the
resulting recoverability of mine development costs will be completed in the
fourth quarter.

72
<PAGE>

On October 11, 2000, a partial failure of Martin County Coal Corporation's
Big Branch impoundment resulted in the release of approximately 230 million
gallons of coal slurry into adjacent underground mine workings and two
tributary streams of the Big Sandy River in eastern Kentucky. During the fourth
quarter of 2000, Massey will record a $3 million charge for estimated costs net
of anticipated insurance recoveries relating to the slurry spill.

73
<PAGE>

BUSINESS AND PROPERTIES OF MASSEY

Overview

Massey is one of the foremost coal producers in the United States. In the
Energy Ventures Analysis ranking of coal companies by 1999 revenues, Massey is
the fifth largest coal company in the United States, and the largest in the
Central Appalachian region. Massey produces, processes and sells bituminous,
low sulfur coal of steam and metallurgical grades through its 18 processing and
shipping centers, called "resource groups," many of which receive coal from
multiple coal mines. Massey currently operates more than 50 coal mines in West
Virginia, Kentucky and Virginia. Its steam coal is primarily purchased by
utilities and industrial clients as fuel for power plants. Its metallurgical
coal is used primarily to make coke for use in the manufacture of steel.

Massey was originally incorporated in Richmond, Virginia in 1920 as a coal
brokering business. In the late 1940s, Massey expanded its business to include
coal mining and processing. In 1974, St. Joe Minerals acquired a majority
interest in Massey. St. Joe Minerals was then acquired by Fluor Corporation in
1981. Since 1987, Massey has been wholly owned by Fluor Corporation and has
operated as one of Fluor Corporation's principal business segments.

Industry Overview

Coal is one of the world's most abundant, efficient, and affordable fuels. A
major contributor to the world energy supply, coal currently represents
approximately 26% of the world's primary energy consumption. The primary use
for coal is to fuel electrical power generation. In 1999, coal was used to
generate 53% of electricity demand in the United States and 37% worldwide.

The United States is the second largest coal producer in the world, exceeded
only by China. Other leading coal producers include India, South Africa, and
Australia. The United States is the largest holder of coal reserves in the
world, with over 250 years supply at current production rates. U.S. coal
reserves are more plentiful than oil or natural gas, with coal representing
approximately 95% of the nation's fossil fuel reserves.

U.S. coal production has more than doubled during the last 30 years. In
1999, total coal production was 1.08 billion tons. The primary producing
regions were the West (45%), Central Appalachia (25%), Midwest (15%), and
Northern Appalachia (13%). Approximately 62% of U.S. coal is produced by
surface mining methods. The remaining 38% is produced by underground mining
methods that include room and pillar mining and longwall mining.

Coal is used by utilities to generate electricity, by steel companies to
make steel products with blast furnaces, and by a variety of industrial users
to heat and power foundries, cement plants, paper mills, chemical plants and
other manufacturing and processing facilities. Significant quantities of coal
are also exported from both east and west coast terminals. The breakdown of
1999 U.S. coal demand, as estimated by Resource Data International, Inc.
("RDI"), is as follows:

<TABLE>
<CAPTION>
End Use Tons (millions) % of Total
------- --------------- ----------
<S> <C> <C>
Electric generation............................... 919 85.0%
Industrial users.................................. 70 6.5%
Exports........................................... 59 5.5%
Steel making...................................... 26 2.5%
Residential & commercial.......................... 7 0.5%
----- ------
Total............................................. 1,081 100.0%
===== ======
</TABLE>

Coal has long been favored as the electrical generating fuel of choice
because of its basic economic advantage. The largest cost component in
electrical generation is fuel. This fuel cost, normally measured in dollars per
million Btu, is typically lower for coal than competing fuels such as oil and
natural gas. The

74
<PAGE>

National Mining Association estimated the relative cost of coal versus other
electrical generating fuels in 1999 as follows:

<TABLE>
<CAPTION>
Electrical Generation Fuel Type Cost per million Btu Cost versus Coal
------------------------------- -------------------- ----------------
<S> <C> <C>
Natural Gas $3.81 2.8 times coal
Residual Oil $2.46 1.8 times coal
Wood & waste $1.88 1.4 times coal
Coal $1.37 1.0 times coal
</TABLE>

According to RDI, 19 of the 25 lowest operating cost electric generation
power plants in the United States during 1999 were fueled by coal. Coal used as
fuel to generate electricity is commonly referred to as "steam coal."

There are several factors other than fuel cost that influence each utility's
choice of electrical generation mode, including facility construction cost,
access to fuel transportation infrastructure, environmental restrictions, and
other factors. The breakdown of U.S. electrical generation by fuel source in
1999, as estimated by RDI, is as follows:

<TABLE>
<CAPTION>
Electrical Generation Source % of Total Electrical Generation
---------------------------- --------------------------------
<S> <C>
Coal 53%
Nuclear 21%
Natural Gas 13%
Hydro 8%
Oil 3%
Other 2%
---
Total 100%
===
</TABLE>

RDI projects that generators of electricity will increase their demand for
coal as demand for electricity increases. Because coal-fired generation is used
in most cases to meet base load requirements, coal consumption has generally
grown at the pace of electricity demand growth. Demand for electricity has
historically grown in proportion to U.S. economic growth.

The United States ranks second among worldwide exporters of coal. Australia
is the largest exporter, with other major exporters including South Africa,
Indonesia, Canada, Taiwan, and Colombia. U.S. exports have decreased by over
40% since 1992 as a result of increased international competition and the U.S.
dollar's strength in comparison to foreign currencies. According to RDI, the
usage breakdown for 1999 U.S. exports of 59 million tons was 46% for electrical
generation and 54% for steel making. U.S. coal exports were shipped to more
than 40 countries. The largest purchaser of steam coal exports was Canada,
which took 16 million tons or 59% of total steam exports. The largest purchaser
of metallurgical coal exports was Europe, which represented 19 million tons or
61% of total metallurgical exports.

The type of coal used in steel making is referred to as metallurgical coal,
and is distinguished by special quality characteristics that include high
carbon content, low expansion pressure, low sulfur content, and various coal
chemistry attributes. These metallurgical coal reserves are also high in heat
content, and therefore are desirable to utilities as fuel for electrical
generation. Consequently, metallurgical coal producers have the ongoing
opportunity to select the market that provides maximum revenue. The premium
price offered by steel makers for the metallurgical quality attributes is
typically higher than the price offered by utility coal buyers that value only
the heat content. The primary concentration of U.S. metallurgical coal reserves
is located in the Central Appalachian region. RDI estimates that the Central
Appalachian region supplied 83% of domestic metallurgical coal and 92% of U.S.
exported metallurgical coal during 1999.

Industrial users of coal typically purchase high Btu products with the same
type of quality focus as utility coal buyers. The primary goal is to maximize
heat content, with other specifications like ash content, sulfur content, and
size varying considerably among different customers. Because most industrial
coal consumers use

75
<PAGE>

considerably less tonnage than electric generating stations, they typically
prefer to purchase coal that is screened and sized to specifications that
streamline coal handling processes. Due to the more stringent size and quality
specifications, industrial customers often pay a 10 to 15% premium above
utility coal pricing (on comparable quality). According to RDI, the largest
buyer of industrial coals is the cement industry, which represented 10 million
tons or 14% of total U.S. industrial shipments in 1999. The largest regional
supplier to the industrial market sector has historically been Central
Appalachia, which supplied 39% of all U.S. industrial coal demand in 1999.

Coal shipped for North American consumption is typically sold at the mine
loading facility with transportation costs being borne by the purchaser.
Offshore export shipments are normally sold at the ship-loading terminal, with
the purchaser paying the ocean freight. According to the National Mining
Association, approximately two-thirds of U.S. coal production is shipped via
railroads. Final delivery to consumers often involves more than one
transportation mode. A significant portion of U.S. production is delivered to
customers via barges on the inland waterway system and ships loaded at Great
Lakes ports.

Strategy

Massey's primary objective is to continue to enhance its position as one of
the premier coal companies in the United States, building upon its leading
position in Central Appalachia and its other competitive strengths.
Specifically, Massey intends to pursue its strategy in the following ways:

Enhancing Profitability Through Continued Safety Improvement, Productivity
Gains and Cost Measurement. Massey has implemented three major initiatives that
have enhanced its profitability.

. Its "S-1" program ("Safety is Job One") prescribes rigorous safety
standards for all of Massey's operating facilities. Management believes
that Massey is one of the leaders in the industry with respect to its
safety requirements, which include measures that are more stringent than
the industry standard. To ensure that all Massey operations are pursuing
compliance with the S-1 safety measures, unannounced safety audits are
conducted using third party professionals. These safety measures improve
Massey's profitability by lowering workers compensation costs and
reducing job inefficiencies caused by using less-skilled substitute
workers.

. Its "P-2" program ("Productivity is Job Two") involves the application
of best practices, including ideal mining sequence, staffing levels and
equipment configuration, at each of Massey's operations. A well-focused
time study program is used to continually refine and improve the P-2
guidelines and to confirm effective implementation throughout the
organization. These productivity improvement initiatives have been
instrumental in allowing Massey mines to achieve productivity
performance in thin coal seams that is virtually unprecedented in the
Central Appalachian coal industry.

. Its "M-3" program ("Measurement is Job Three") is designed to measure
performance, cost and usage, and to clearly and concisely communicate
that data to managers who can identify and correct problems. The M-3
program is responsive to the Massey philosophy that supervisors can only
effectively manage costs that are measured. Accurate and complete
reporting is essential to the M-3 process. Reports include daily
profit/loss statements, daily production reports and extremely detailed
budgets, in addition to the standard monthly, quarterly and annual
financial reporting. Massey employees, who are referred to as members,
have the information they need to make objective management decisions.
Such information is required to be accurate, timely, accessible and easy
to understand while maintaining adequate security and confidentiality.

Investing in New Development Projects. Massey seeks opportunities to
maximize the use of its properties and invest in promising development
projects.

. Development of the long-term Aracoma longwall mine is now underway in
Logan County, West Virginia. In 1998, Massey acquired an idle
preparation plant in an acquisition unrelated to the Aracoma reserves.
The availability of that plant, which considerably reduced the required
project capital, has made it feasible for Massey to develop high
capacity, low cost production from this low sulfur coal reserve on the
CSX railway system.

76
<PAGE>

. Facilities have been upgraded to begin production at the recently
acquired Delbarton Mining complex, Massey's newest operation, located in
Mingo County, West Virginia. New underground mine developments will
service Norfolk Southern railway customers with high quality, low sulfur
coal.

These and similar efforts in the planning stages should enable Massey to
increase production, better serve its customers and enhance its position in
Central Appalachia.

Expanding Use of More Productive Mining Techniques. Massey is engaged in
each of the three types of coal mining techniques: "room and pillar" mining
(with continuous mining machines), longwall mining and surface mining. Each
method is employed where appropriate throughout Massey's operations. Because
longwall mining and large-scale surface mining are high-productivity, low-cost
mining methods, Massey seeks to increase its use of those methods. A further
benefit to Massey's increased use of longwall and surface mining methods is
increased reserve recovery, with recovery levels at 70% and 90%, respectively,
as compared to 55% recovery for room and pillar mining. Massey has been
successful in using longwall mining on thinner coal seams and smaller reserve
areas that have historically been mined only with continuous mining techniques.
Massey intends to continue to increase its use of these mining methods to
further enhance its productivity levels.

Forming Strategic Partnerships with Major Customers. Massey works closely
with its customers to develop opportunities for cooperation in order to benefit
both Massey and the customer. Massey feels that these initiatives strengthen
its relationships with its customers and provide opportunities to increase
sales. For example, Massey has worked with some of its industrial clients to
assist them in upgrading their coal handling facilities in order to lower their
freight and coal handling costs. In return for this assistance, Massey receives
coal handling fees and the opportunity to negotiate a coal supply agreement
with these customers. Massey also works with its steel manufacturing customers
and industrial customers to develop delivery arrangements that lower working
capital requirements, primarily by stockpiling coal near a customer's operating
facility and delivering on demand. Massey intends to continue to work with its
customers to find solutions that benefit both parties.

Pursuing Acquisitions within Central Appalachia. Massey believes that the
coal industry in Central Appalachia will undergo increasing consolidation over
the coming years. Massey plans to capitalize on its position as the largest
low-cost producer by pursuing growth through the acquisition of additional
mining facilities. Massey's acquisition strategy has been highly selective,
with an emphasis on purchasing properties near Massey's existing facilities in
order to take advantage of infrastructure already in place. Massey intends to
continue to expand its business through this focused growth strategy.

Competitive Strengths

Massey believes that it is in a strong position to successfully execute its
business strategy due to the following competitive strengths:

Massey is the leading producer in Central Appalachia. Massey is the leading
coal company in its region with a proven reputation as a skilled, long-term
operator. This is an advantage with customers, who look for a reliable
supplier, and with land owners, who seek to lease their land to operators
likely to develop production from the reserves and generate royalty income.
Massey feels that it benefits from concentrating its coal mining activities in
Central Appalachia. The region contains the primary U.S. reserves of premium,
high volatile metallurgical coal demanded by steel manufacturers. It also holds
low sulfur, high Btu coal desired by utilities and industrial customers. Massey
is able to produce both types of coal for a wide range of customers.

Massey has developed highly productive operations with an excellent safety
record. One of the keys to Massey's success in developing its coal production
business has been its ability to reach high levels of productivity at its mines
while placing primary emphasis on safety. Massey's coal production rose from
approximately 20 million tons in 1993 to approximately 38 million tons in 1999.
During the same time, Massey

77
<PAGE>

has achieved one of the best safety records in the coal industry. Its accident
rate (non-fatal days lost) is less than one-half the industry average. These
achievements are attributable to the tangible safety improvements that Massey
puts in place at each of its facilities.

Massey has a highly capable management team with a proven track
record. Massey has a highly capable management team that is familiar with the
region in which Massey operates, the mining environment and trends in the
industry. Under this leadership, Massey has achieved a strong safety record,
expanded its mining facilities, increased production at existing mines, reduced
production costs and increased overall profitability. This management team has
demonstrated its ability to acquire and integrate new operations and maintain
consistent performance at all of its mining facilities.

Massey has demonstrated its ability to successfully execute and integrate
acquisitions. Massey has adopted a disciplined acquisition strategy that has
helped it to avoid difficulties often associated with rapid expansion. Massey
makes selective purchases of mines and reserves that are close to its existing
operations. This allows it to use existing infrastructure as the new operations
are developed. For example, 18 Massey processing/shipping facilities handle the
production from more than 50 mines. Once an operation is acquired, Massey uses
its "P-2" strategy to apply its proven productivity-improvement practices to
the new facility. This standardized approach allows successful turnaround of
acquired operations in a relatively short time frame.

Massey has a strong financial position relative to its competitors and an
extended record of profitability. Massey's financial position following the
Distribution will support an investment grade credit rating and position Massey
as one of the most conservatively capitalized companies in its industry. In
addition, Massey has lower employee benefit liabilities than is common in its
industry due to its prudent acquisition strategy and effective management of
inactive employee benefit costs. Massey's financial position has been
strengthened by its long record of substantial profitability. It has achieved
earnings growth by holding its margins steady (largely by reducing costs) while
expanding its output.

Massey has substantial operating expertise. Massey is the largest
underground mining company in the United States in terms of the number of mines
operated. Through its many operations, it has developed substantial knowledge
and expertise regarding the most effective mining, processing and shipping
methods. This knowledge base has been effectively applied through the
development of Massey's "P-2" initiative. Standards for best practices have
been implemented at each facility to allow each facility to operate at optimal
levels. These standards are continually being revised to incorporate additional
experiences and technological developments.

Massey has a large, high-quality reserve base. Massey estimates that, at the
beginning of fiscal 2000, Massey's reserve base was approximately 2.1 billion
tons, a three-fold increase over the past ten years. During that ten-year
period, Massey acquired 1.3 billion tons of reserves and only mined 277 million
tons of reserves. Management estimates that approximately 68% of Massey's
reserves are made up of coal containing less than 1% sulfur. Low sulfur coal is
critically important to utility customers seeking to reduce emissions and lower
their costs of compliance with the Clean Air Act. In addition, Massey's
reserves contain large stores of metallurgical coal, which is required by steel
manufacturers for their production.

Massey is a major producer of both steam and metallurgical coal. An
advantage of Massey's large reserve base is its ability to process and sell
coal of both steam and metallurgical grade. This allows Massey to adjust to
changing market conditions and sustain high sales volume by supplying a wide
range of customers.

Massey has strong customer relationships. Massey has developed good working
relationships with its broad base of customers. Approximately two-thirds of its
sales volume is pursuant to contracts with terms of more than one year.
Massey's largest customer, Duke Energy, has been a customer for more than 30
years and in fiscal 1999 accounted for 12% of Massey's total sales revenues.

78
<PAGE>

Massey is not dependent on coal contracts priced above market. Although
Massey has a strong base of long-term, coal supply commitments, it is not
dependent upon agreements priced materially above the current market. (Long-
term commitments are agreements with a term exceeding one year.) Several of
Massey's prominent competitors derive the majority of current earnings from
coal supply contracts negotiated in the late 1970's and early 1980's when
customers were willing to pay a premium for long term tonnage commitments.
Those competitors face significant cost reduction pressure over the next few
years as their agreements expire. Massey has generally taken the lead in
renegotiating agreements of this nature by providing the customer with price
relief in exchange for extended term or increased tonnage commitments.
Additionally, Massey's contract negotiation strategy over the last several
years has been to secure market share without subjecting the customer to price
risks in a rapidly changing market. Recent coal supply agreements typically
include "price re-opener" language that is designed to keep contract prices in
line with the current market while providing the coal producer with certainty
of committed sales. The combination of these efforts has resulted in Massey
having a substantial level of contracted sales (currently projected at 72% for
fiscal year 2000 and 56% for fiscal year 2001), but with Massey customers
having prices that generally reflect the current market.

Coal Reserves

Massey estimates that, as of October 31, 1999, Massey had total recoverable
reserves of approximately 2.1 billion tons of proven and probable reserves.
Reserves are coal deposits that could be economically and legally extracted or
produced. "Recoverable" reserves means coal that is recoverable using existing
equipment and methods under federal and state laws currently in effect.
Approximately 1.4 billion tons of Massey's reserves are classified as proven
reserves. This means that these deposits have been substantiated by adequate
information, including information derived from exploration, current and
previous mining operations, outcrop data and knowledge of mining conditions.
The remaining approximately 700 million tons of Massey's reserves are
classified as probable reserves. These are deposits of coal which are based on
information of a more preliminary or limited extent or character, but which are
considered likely.

Massey's reserve estimates are prepared by the engineering and accounting
departments of Massey's various operating subsidiaries using technical
standards and geologic criteria that are then further adjusted by Massey's
internal reserve guidelines.

Reserve estimates are updated annually using geologic data taken from drill
holes, adjacent mine workings, outcrop prospect openings and other sources.
Coal tonnages are categorized according to coal quality, seam thickness,
mineability and location relative to existing mines and infrastructure. In
accordance with applicable industry standards, proven reserves are those for
which reliable data points are spaced no more than 2,700 feet apart. Probable
reserves are those for which reliable data points are spaced 2,700 feet to
7,900 feet apart. Further scrutiny is applied using geological criteria and
other factors related to profitable extraction of the coal. These criteria
include seam height, roof and floor conditions, yield and marketability.

The following table provides reserve data by state as follows:

<TABLE>
<CAPTION>
Tons % of Total
---------- ----------
(millions)
<S> <C> <C>
Southern West Virginia................................... 1,670 80%
Eastern Kentucky......................................... 328 16
Southwestern Virginia.................................... 55 3
Southeastern Tennessee................................... 34 1
----- ---
Total.................................................... 2,087 100%
===== ===
</TABLE>

79
<PAGE>

When categorized by sulfur content, the reserve breakdown is as follows:

<TABLE>
<CAPTION>
Tons % of Total
---------- ----------
(millions)
<S> <C> <C>
Sulfur Content
Compliance sulfur or less................................. 954 46%
Greater than compliance and less than 1%.................. 452 22
Greater than 1% sulfur and less than 2%................... 631 30
Greater than 2% sulfur.................................... 50 2
----- ---
Total..................................................... 2,087 100%
===== ===
</TABLE>

Massey's reserve holdings include premium quality, high volatile,
metallurgical coal reserves. Properties in Massey's operating region are widely
recognized as containing metallurgical coal quality with attributes that are in
significant demand by the U.S. steel industry. Although these metallurgical
coal reserves receive the highest selling price in the current coal market when
marketed to steel-making customers, they also represent significant value as an
ultra high Btu, low sulfur steam coal for electrical generation. If future
market dynamics ever favor the latter alternative, Massey will be well
positioned to take advantage of the opportunity. The categorization of Massey's
coal reserves as utility/industrial or metallurgical quality is as follows:

<TABLE>
<CAPTION>
Tons % of Total
---------- ----------
(millions)
<S> <C> <C>
Coal Type
High volatile metallurgical............................... 795 38%
Low volatile metallurgical................................ 73 3
Utility or industrial markets............................. 1,219 59
----- ---
Total..................................................... 2,087 100%
===== ===
</TABLE>

As with most coal-producing companies in Central Appalachia, the majority of
Massey's coal reserves are controlled pursuant to leases from third party
landowners. These leases convey mining rights to the coal producer in exchange
for a per ton royalty payment to the lessor. However, a significant portion of
Massey's reserves holdings are owned and require no royalty or per ton payment
to other parties. The following table summarizes the portion of Massey reserves
controlled by ownership versus lease:

<TABLE>
<CAPTION>
Tons % of Total
---------- ----------
(millions)
<S> <C> <C>
Method of Reserve Control
Owned reserves............................................ 523 25%
Leased reserves........................................... 1,564 75
----- ---
Total..................................................... 2,087 100%
===== ===
</TABLE>

Massey properties have been extensively explored, drilled, analyzed and
mapped using cutting-edge computer technology and advanced geological
evaluation techniques. The result is a relatively high level of confidence that
Massey has accurately measured and identified the reserve quantities, quality
specifications and potential geologic risks. This confidence translates to
greater consistency and dependability in projecting operating performance and
contributes significantly to Massey's ability to operate low cost mining
operations.

Mining Methods

Massey produces coal using three distinct mining methods: underground room
and pillar, underground longwall and surface/highwall mining.

Use of continuous miner machines in the room and pillar method of
underground mining represented approximately 58% of Massey's 1999 production.
Massey is a proven leader in the use of this common coal mining technique and
has achieved unprecedented productivity performance in relatively thin coal
seams.

80
<PAGE>

Production from underground longwall mining operations constituted about 14%
of Massey's 1999 production. Massey's Upper Big Branch Mine is ranked (per 1999
Department of Labor productivity statistics) as the most productive longwall
mine in the Eastern United States. Massey began operating two additional
longwall units in 1999 and 2000 and has a fourth projected for start up in
early 2001.

Surface mining represented approximately 28% of Massey's 1999 coal
production. Massey has invested significant capital in establishing state-of-
the-art, large-scale surface mines in Boone and Nicholas counties of West
Virginia. Using 53-cubic-yard electric shovels for excavation, and 320-ton rock
trucks for haulage, these mines clearly demonstrate Massey's ability to produce
high volumes of low cost, high quality, surface-mined coal. Other Massey
surface mines are smaller in scale. Massey surface mines also use cutting-edge
highwall mining systems to produce low cost coal from high overburden areas.
Massey has established record-breaking productivity in the use of these
highwall mining systems, as confirmed by the manufacturer.

Mining Operations

Massey currently has eighteen distinct resource groups or mining complexes,
including thirteen in West Virginia, four in Kentucky and one in Virginia.
These complexes receive, blend, process and ship coal that is produced from one
or more mines, with a single complex handling the coal production of as many as
eight distinct underground or surface mines. These mines have been developed at
strategic locations in close proximity to the Massey preparation plants and
rail shipping facilities. Coal is transported from Massey's mining complexes to
customers by means of railroad cars or trucks, with rail shipments representing
approximately 92% of 1999 coal shipments.

81
<PAGE>

The following table provides key summary information on all Massey mining
complexes that were active in 1999.

Massey Resource Groups

<TABLE>
<CAPTION>
1999 1999 Year Established
Resource Group Name Location Production(1) Shipments(1) Coal Quality Reserves or Acquired
------------------- ------------------- ------------- ------------ --------------------- ----------- ----------------
(000's (000's (000's
of Tons) of Tons) of Tons)(2)
<S> <C> <C> <C> <C> <C> <C>
Delbarton............... Mingo County, WV 0 0 Low Sulfur Utility 259,000 1999
Low Sulfur Industrial
Eagle Energy............ Boone County, WV 860 860 High Vol Met 4,000 1996
Elk Run................. Boone County, WV 4,700 7,600 High Vol Met 160,000 1978
Low Sulfur Utility
Low Sulfur Industrial
Green Valley............ Nicholas County, WV 540 540 High Vol Met 8,000 1996
Low Sulfur Utility
Low Sulfur Industrial
Independence............ Boone County, WV 4,500 2,600 High Vol Met 62,000 1994
Low Sulfur Utility
Low Sulfur Industrial
Knox Creek.............. Tazewell County, VA 800 800 High Vol Met 51,000 1997
Low Sulfur Utility
Low Sulfur Industrial
Logan County............ Logan County, WV 510 510 Low Sulfur Utility 92,000 1998
Low Sulfur Industrial
Long Fork............... Pike County, KY 0 1,400 Low Sulfur Utility 62,000 1991
Low Sulfur Industrial
Marfork................. Raleigh County, WV 2,700 7,300 High Vol Met 115,000 1993
Low Sulfur Utility
Low Sulfur Industrial
Martin County........... Martin County, KY 3,900 3,900 Low Sulfur Utility 79,000 1969
Low Sulfur Industrial
New Ridge............... Pike County, KY 0 320 Low Sulfur Utility 0 1992
Low Sulfur Industrial
Nicholas Energy......... Nicholas County, WV 2,100 2,100 High Vol Met 119,000 1997
Low Sulfur Utility
Low Sulfur Industrial
Omar.................... Boone County, WV 0 290 Low Sulfur Utility 35,000 1954
Low Sulfur Industrial
Performance............. Raleigh County, WV 5,300 1,600 High Vol Met 48,000 1994
Progress................ Boone County, WV 3,500 1,400 Low Sulfur Utility 79,000 1998
Low Sulfur Industrial
Rawl.................... Mingo County, WV 2,900 2,400 High Vol Met 95,000 1974
Low Sulfur Utility
Low Sulfur Industrial
Sidney.................. Pike County, KY 5,200 3,680 Low Sulfur Utility 133,000 1984
Low Sulfur Industrial
Stirrat................. Logan County, WV 0 360 High Vol Met 42,000 1993
Low Sulfur Utility
Low Sulfur Industrial
Other/Unassigned........ N/A N/A 240 N/A 641,000 N/A
------ ------ ---------
Total.................. 37,510 37,900 2,087,000
====== ====== =========
</TABLE>
--------
(1) For purposes of this table, coal production has been allocated to the
Resource Group where the coal is mined, rather than the Resource Group
where the coal is processed and shipped. Several Massey Resource Groups
provide processing and rail shipping services for coal mined at other
nearby Massey operations.
(2) Reserves allocated to individual mining complexes include both assigned
reserves and unassigned reserves that are accessible from the established
operations.

82
<PAGE>

Most Massey mining operations have been designed to avoid trucking and allow
direct conveyor transportation of coal from the mine face or surface pit to the
coal processing plant. These conveyor transportation systems are well designed,
computer monitored, high capacity structures with very low operating cost.
While trucking of coal remains an integral part of the transportation system
for some operations, Massey has made a focused effort, and invested
considerable capital, to minimize use of coal trucks on public highways. In
many instances, production from one Massey operating subsidiary is directed to
another operating subsidiary of closer proximity for processing in order to
avoid trucking or re-handling of coal. The obvious reasons to minimize use of
coal trucks include both improving public safety and eliminating avoidable
cost.

West Virginia Resource Groups

Delbarton. The Delbarton complex processes coal produced by an underground
room and pillar mine in the Lower Cedar Grove seam. Production from this mine,
located adjacent to the Delbarton complex, is transported to the Delbarton
preparation plant via overland conveyor. The Delbarton preparation plant can
process 800 tons per hour of raw coal. The clean coal product is shipped to
customers via the Norfolk Southern railway in unit trains of up to 110
railcars.

Eagle Energy. The Eagle Energy complex is currently inactive but has
historically processed coal production from the adjacent underground longwall
mine in the Eagle seam. The economically accessible Eagle seam reserves were
depleted in January 2000 and the operation was idled. The Eagle Energy
preparation plant is a modern facility with a rated feed capacity of 750 tons
per hour. Customers can be served via CSX railway shipments loaded in unit
trains of up to 90 railcars. Plans are now under review to re-activate this
complex using production from new mines in seams above the Eagle seam.

Elk Run. The Elk Run complex is Massey's largest shipper of coal. Elk Run
produces coal from five underground room and pillar mines that are belted
directly to the preparation plant. Elk Run also has a large surface mine that
ships direct to customers via the Kanawha River docks. Additionally, the Elk
Run complex processes coal for shipment that is produced from two other Massey
resource groups. The Independence production shipped from Elk Run includes
underground mines in the Upper Cedar Grove and the Hernshaw seams. The Twilight
surface mine in the Progress resource group transports all of its production to
the Elk Run facilities via underground conveyor system. The Elk Run preparation
plant has a processing capacity of 2200 tons per hour. Customer shipments are
loaded on the CSX rail system in unit trains of up to 150 railcars.

Green Valley. The Green Valley complex specializes in premium quality coals
servicing industrial customers in a variety of industries. The Green Valley
preparation plant receives coal via truck that is produced from two underground
room and pillar mines in the Sewell seam. The Green Valley preparation plant
has a processing capacity of 600 tons per hour. The rail loading facility
services customers on the CSX rail system with unit train shipments of up to 75
railcars.

Independence. The Independence complex processes coal from one large
underground longwall mine and one room and pillar mine. Production from both
mines is transported via underground conveyor system directly to the
Independence preparation plant. Independence has five additional underground
mining operations that produce coal for processing and shipment by other Massey
resource groups. The Independence plant has a processing capacity of 1400 tons
per hour. Customers are served via rail shipments on the CSX rail system in
unit trains of up to 150 railcars.

Logan County. The Logan County complex processes coal through the Bandmill
preparation plant from four surface mining operations and one underground mine.
All four surface mines deliver coal to the Bandmill plant via truck. The
Aracoma underground mine, which belts coal directly to the Bandmill plant,
currently produces with two continuous miner sections but plans call for a
future longwall installation. The Bandmill preparation plant completed a major
renovation this year and has a processing capacity of 1200 tons per hour. The
rail loading facility services customers via the CSX rail system with unit
train shipments of up to 150 cars.

83
<PAGE>

Marfork. The Marfork complex is Massey's leading shipper of premium
metallurgical coal. The largest production source for the Marfork complex is
the Upper Big Branch underground longwall mine of Massey's Performance resource
group. Other production sources for the Marfork complex include five
underground room and pillar mines. All Marfork production sources are belted
directly to the preparation plant via conveyor systems. The Marfork preparation
plant is a unique, high capacity, processing facility that processes 2300 tons
per hour. All customers are serviced via the CSX rail system with unit trains
of up to 150 railcars.

Nicholas Energy. The Nicholas Energy complex processes coal from two large
surface mines and two underground room and pillar mines. All coal from the
underground mines, as well as the portion of surface mined coal requiring
processing, is transported to the Power Mountain preparation plant via overland
conveyor system. The Power Mountain plant was upgraded in 1999, and currently
has a processing capacity of 1200 tons per hour. All coal shipments are loaded
into rail cars for delivery via the Norfolk Southern railway in unit trains of
up to 140 railcars.

Omar. The Omar mining complex processes coal from adjacent mining operations
of Massey's Independence and Elk Run resource groups. All production sources
are transported via underground conveyor system to the Omar preparation plant.
The Omar plant can process 800 tons per hour. A new rail loading facility was
completed in May 2000. Omar can now service its CSX rail system customers with
unit train shipments of up to 150 railcars.

Performance. The Performance mining complex includes the Upper Big Branch
Mine and the Goals preparation plant. The Upper Big Branch underground mine is
a highly successful longwall operation in the Eagle seam, with most production
being processed and shipped from Massey's Marfork resource group. The Goals
preparation plant processes the balance of the Upper Big Branch mine's
production, as well as production from adjacent underground mines of Massey's
Independence resource group. The Goals preparation plant can process 800 tons
per hour. The rail loading facility services CSX railway customers with unit
trains of up to 90 railcars.

Progress. The Progress mining complex includes the Twilight MTR surface
mine, coal handling system and stoker plant. All production is processed
through a high-tech coal handling system and transported via underground
conveyor to Massey's Elk Run resource group for rail shipment.

Rawl. The Rawl complex includes six underground room and pillar mines and
the Sprouse Creek Processing plant. Four mines transport coal to the Sprouse
Creek plant--three via trucks and one via short-tagged rail cars. The other two
mines produce coal that is processed for shipment by Massey's Stirrat resource
group. The Sprouse Creek preparation plant has a throughput capacity of 1450
tons per hour. Customers are serviced via the Norfolk Southern railway with
unit trains of up to 150 railcars.

Stirrat. The Stirrat complex processes coal produced by the adjacent Diamond
Energy and Spring Branch underground mines of Massey's Rawl resource group. All
production is transported via truck to the Stirrat preparation plant. The plant
has a rated capacity of 500 tons per hour. Customers are serviced via the CSX
rail system with unit trains of up to 100 railcars.

Kentucky Resource Groups

Long Fork. The Long Fork complex processes coal produced by the adjacent
Solid Energy mine of Massey's Sidney resource group. All production is
transported via overland conveyor system to the Long Fork preparation plant.
The Long Fork plant has a rated capacity of 1100 tons per hour. The rail
loading facility services customers on the Norfolk Southern railway with unit
trains of up to 150 railcars.

Martin County. Production at the Martin County complex is sourced from two
surface mines and two underground room and pillar mines. Approximately 70% of
all surface mined production is saleable without processing and is shipped to
customers at the Ohio/Big Sandy river docks via truck. Both the underground

84
<PAGE>

mine production and the portion of surface mine production requiring processing
are transported to the preparation plant via underground conveyor system. The
Martin County preparation plant has a throughput capacity of 1500 tons per
hour. All coal processed through the preparation plant is shipped via the
Norfolk Southern railway in unit trains of up to 125 railcars. Because of a
partial failure at the Martin County preparation plant's impoundment on October
11, 2000, the preparation plant is currently idled for an indefinite period.
Raw coal production that requires processing (approximately 40% of total Martin
County production) is being shipped to the Sprouse Creek plant of Massey's Rawl
resource group for processing and shipment on to customers.

New Ridge. The New Ridge complex processes coal that is transported via
truck from mining operations of Massey's Sidney resource group. The New Ridge
preparation plant has a throughput capacity of 800 tons per hour. All coal is
loaded for shipment to customers via the CSX rail system in unit trains of up
to 100 railcars.

Sidney. The Sidney complex includes five underground room and pillar mines
and the Big Creek preparation plant. All mines transport production via
underground conveyor to the Big Creek plant, except one mine that belts coal to
Massey's Long Fork resource group for processing and shipment. The Big Creek
preparation plant has a throughput capacity of 1500 tons per hour. The Sidney
rail loading facility services customers on the Norfolk Southern rail system
with unit trains of up to 140 railcars.

Virginia Resource Group

Knox Creek. The Knox Creek complex processes coal from two underground room
and pillar mines. Production from the Tiller No. 1 mine is belted directly to
the Knox Creek preparation plant, whereas production from the Kennedy mine is
transported via truck. The Knox Creek plant has a feed capacity of 850 tons per
hour. The rail loading facility services customers on the Norfolk Southern rail
system with unit trains of up to 100 railcars.

Other Related Operations

Massey has other related operations and activities in addition to its normal
coal production and sales business. The following business activities are
included in this category:

Appalachian Synfuel Plant: Appalachian Synfuel, LLC ("Appalachian Synfuel")
has a synthetic fuel manufacturing facility located adjacent to Massey's
Marfork complex in Boone County, West Virginia. This facility converts coal
products to synthetic fuel and has operated since June 1998. Appalachian
Synfuel has obtained a private letter ruling from the IRS that production from
this synfuel facility qualifies the owner for tax credits pursuant to Section
29 of the Code. Massey's Marfork subsidiary sells the coal feedstock to
Appalachian Synfuel, and also operates the synthetic fuel manufacturing
facility pursuant to a contract with Appalachian Synfuel. Massey's sales
organization markets the synthetic fuel and coordinates shipments to
Appalachian Synfuel's customers. Synthetic fuel sales during fiscal year 1999
were approximately 300,000 tons. Certain process enhancements initiated in June
2000 may allow manufacture of synthetic fuel at a significantly increased rate.
Appalachian Synfuel is owned 95% by Fluor Corporation and 5% by Marfork. Fluor
Corporation's ownership interest will be transferred to Massey in conjunction
with the Distribution.

Westvaco Coal Handling Facility: Massey subsidiaries own and operate the
coal unloading, storage and conveying facilities at Westvaco Corporation's
paper manufacturing facility in Covington, Virginia ("Westvaco CHF"). The
Westvaco CHF was constructed by Massey in 1992 as a means of reducing coal
transportation and handling costs for Westvaco Corporation, a long term
industrial coal customer. The Westvaco CHF operating agreement extends through
2007, and provides that Massey be paid a per ton fee (annually adjusted) for
coal handling services. The annual coal throughput is approximately 500,000
tons.

Other: In addition to the business activities described above, Massey has
two regional land management offices that focus on opportunities to generate
income from non-strategic coal reserves and other assets. Most of

85
<PAGE>

these non-strategic assets have been acquired by Massey as incidental items
connected to larger coal property transactions. The primary activities include:

. Leasing of non-strategic lands and/or coal reserves to other coal
companies.

. Sale of coal reserves to third parties.

. Sale of timber, gas & oil rights, and surface properties to third
parties.

Massey also generates ongoing income through ownership of over 80 natural
gas wells in Southern West Virginia.

Marketing and Sales

The Massey marketing and sales force is based in the corporate office at
Richmond, Virginia. Total staffing of 22 members includes sales managers,
distribution/traffic managers, technical support and administrative personnel.
Sales management is organized along product lines of utility, metallurgical and
industrial sales--as opposed to the geographic segregation of responsibilities
that is more common among Massey competitors.

During the fiscal year ended October 31, 1999, Massey sold 37.9 million tons
of produced coal for total revenues of $1.08 billion. The breakdown by market
served was 52% utility, 39% metallurgical and 9% industrial. Sales were
concluded with over 140 customers. Export shipments (including Canada)
represented approximately 15% of 1999 tonnage sold. Massey's 1999 export
shipments serviced customers in 12 countries across North America, South
America, Europe and Asia.

Technical guidance on optimizing coal blends and other coal consumption
issues is provided to customers by Massey's technical group. The technical
specialists work directly with the sales force to meet the needs of current and
potential customers. These highly skilled individuals have established
credentials in petrography, coal chemistry and coal analysis techniques.
Customers often seek input from Massey's technical group on issues such as
improving coke oven performance or identifying lower cost coals to meet a
particular market opportunity.

The Massey marketing and sales group has established several highly
successful partnering arrangements with customers wherein services other than
coal supply are provided on an ongoing basis. Examples of such partnership
arrangements include:

. At the Westvaco paper manufacturing plant in Covington, Virginia, a
Massey subsidiary owns and operates the coal unloading and storage
facilities. As consideration for performing this service, the Massey
subsidiary receives a per ton fee and also secures the right to supply
100% of the coal required by this plant.

. At two large steel companies, one synthetic fiber manufacturer and one
tobacco processing plant, a Massey subsidiary coordinates shipment of
coal to the customer's stockpile, maintains ownership of the coal
inventory on site and sells tonnage to the customer as it is consumed.

Other such partnering services are provided periodically in response to the
current needs of each individual customer.

Distribution

Massey employs transportation specialists who negotiate freight and terminal
agreements with various providers, including railroads, barge lines, steamship
lines, bulk motor carriers and terminal facilities. Transportation specialists
also coordinate with customers, mining facilities and transportation providers
to establish shipping schedules that meet the customer's needs. These
specialists assist the company in providing quality service to its customers.

86
<PAGE>

Massey's 1999 shipments of 37.9 million tons were loaded from 18 mining
complexes. Rail shipments constituted 92% of total shipments, with 37% loaded
on the Norfolk Southern and 55% loaded on the CSX. The 8% balance was shipped
from Massey mining complexes via truck.

Approximately 18% of Massey's production is delivered via the inland
waterway system. Coal is transported by rail or truck to docks on the Ohio, Big
Sandy and Kanawha Rivers and then ultimately transported by barge to electric
utilities, integrated steel producers and industrial consumers served by the
inland waterway system. Massey also moves approximately 15% of its production
to Great Lakes Ports for transport beyond to various U.S. and Canadian
customers.

Customers

Massey has coal supply commitments with a wide range of electric utilities,
steel manufacturers and industrial customers. The majority of Massey's
customers purchase coal for terms of one year or longer, but Massey also
supplies coal on a spot basis for some of its customers. Massey's biggest
client, Duke Energy, accounted for 12% of Massey's total 1999 revenues. Massey
has been serving this customer for over thirty years and has agreements in
place to continue to supply coal through June 2003.

Coal Contracts

As is customary in the coal industry, Massey has entered into long-term
contracts (of terms exceeding one year) with many of its customers. These
arrangements allow customers to secure a supply for their future needs and
provide Massey with greater predictability of sales volume and sales prices.
During fiscal years 2000 and 2001, Massey's sales pursuant to long-term sales
arrangements are projected to be 72% and 56%, respectively.

By offering coal of both metallurgical and steam grades, Massey is able to
serve a diverse customer base. This market diversity allows Massey to adjust to
changing market conditions and sustain high sales volumes.

The terms of Massey's long-term contracts are a result of extensive
negotiations with the customer. As a result, the terms of these contracts vary
with respect to price adjustment mechanisms, pricing terms, permitted sources
of supply, force majeure provisions, quality adjustments and other parameters.
Most of the contracts contain price adjustment mechanisms that allow for
changes to prices based on statistics from the U.S. Department of Labor.
Contracts contain specifications for coal quality, which may be especially
stringent for steel customers. Many of these contracts also specify the
approved locations from which the coal is to be mined.

Massey is continuously engaged in efforts to renew or extend contracts that
are scheduled to expire. Although Massey cannot guarantee that it will be able
to renew or extend these contracts, Massey has frequently been successful in
doing so in the past. Many of the principal terms of the contracts are adjusted
in the negotiation of the renewal or extension.

Competition

The coal industry in the United States is highly competitive. Massey
competes with other large producers and many small coal producers. Massey
competes with other producers primarily on the basis of price, coal quality,
transportation cost and reliability of supply. Continued demand for coal is
also dependent on factors outside Massey's control, including demand for
electricity, environmental and governmental regulations, technological
developments and the availability of alternative fuel sources.

Employees and Labor Relations

As of July 31, 2000, Massey had 3,470 employees, including 141 employees
affiliated with the United Mine Workers of America. Relations with employees
are generally good, and there have been no material work stoppages in the past
ten years.

87
<PAGE>

Legal Proceedings

Massey is involved in numerous legal proceedings in the ordinary course of
its business. Except as described below, Massey does not believe that the
outcome of any of these legal proceedings could have a material adverse effect
on its business, financial condition or results of operations.

Big Sandy Dispute

Sidney Coal Company, Inc. ("Sidney"), a wholly-owned subsidiary of Massey,
is the sublessee of Cliffs Mining Company ("Cliffs") under two coal leases from
Big Sandy Company, L.P. ("Big Sandy"). The leases cover coal reserves in Pike
County, Kentucky, and include active mining areas and reserves for Sidney's
Clean Energy and Freedom Energy Mines. Big Sandy claims that Sidney breached
the terms of the leases by underpaying certain coal royalties and that Big
Sandy has terminated both leases. Sidney and Cliffs deny that Big Sandy was
underpaid any royalties and deny that Big Sandy has terminated, or is entitled
to terminate, the leases. Big Sandy filed an action in the Fayette Circuit
Court, Lexington, Kentucky, seeking a declaration that the leases have been
terminated and seeking to recover unpaid royalties in the amount of
approximately $100,000 with interest through December 31, 1996, plus additional
royalties and interest through the date of judgment. Cliffs successfully sought
an order compelling arbitration and the case is currently being heard by a
panel of three arbitrators. Sidney has continued to mine and pay royalties
throughout the controversy based upon its interpretation of the leases. Big
Sandy has made no effort to evict Sidney from the property or to compel it to
cease mining although Big Sandy obtained an order from the Fayette Circuit
Court permitting it to pay the royalties received from Sidney into escrow
pending the outcome of the arbitration. Sidney believes that it has paid all
royalties in accordance with the terms of the leases and that it has good
defenses to the claim that the leases have been terminated.

Harman Litigation

Harman Mining Corporation and certain of its affiliates (collectively
"Harman") have instituted two civil actions against Massey or its present or
former subsidiaries. In June 1998, Harman filed a breach of contract action
against Wellmore Coal Corporation ("Wellmore"), a former Massey subsidiary, in
Buchanan County, Virginia Circuit Court. Harman claims that Wellmore breached a
coal supply agreement, pursuant to which Harman sold coal to Wellmore, by
declaring a force majeure event and reducing the amount of coal to be purchased
from Harman as a result thereof. Wellmore claimed force majeure when its major
customer was forced to close its Pittsburgh coke plant due to regulatory
action. In May 2000, in a trial to determine liability only, Harman received a
jury verdict that Wellmore breached the contract. The damages phase of the
trial was held in August 2000. On August 24, 2000, Harman received a jury
verdict against Wellmore assessing $6 million in damages. Massey's subsidiary,
Knox Creek Coal Corporation, has assumed the defense of this action under the
terms of the stock purchase agreement by which it sold the stock of Wellmore.
The adverse determination on liability and damages will be appealed. Massey
believes that it has several grounds for reversal on appeal.

Additionally, Harman and its sole shareholder, Hugh Caperton, filed a
separate action against Massey and certain subsidiaries in Boone County, West
Virginia Circuit Court, alleging that Massey and its subsidiaries tortiously
interfered with Harman's contract with Wellmore and, as a result, caused Harman
to go out of business. Massey has filed a notice to remove this action to
federal court. The plaintiffs seek unspecified compensatory damages and
punitive damages. Massey believes that compensatory damages, if any, are
duplicative of any damages that may be awarded in the contract action, and are
limited by the same factors as in the contract action. Massey is defending this
action vigorously and believes that it has numerous valid defenses to the
claims.

Environmental Protection Order

On June 27, 2000, the West Virginia Division of Environmental Protection
issued an administrative order to one of Massey's subsidiaries, Elk Run Coal
Company, requiring Elk Run either to suspend operations for

88
<PAGE>

three days beginning July 17, 2000 or expend $100,000 on local community
improvement projects. The order was based on alleged violations of the surface
mining laws relating to dust, and Elk Run appealed the order to the West
Virginia Surface Mining Board. On October 25, 2000 the West Virginia Surface
Mining Board upheld the order. Elk Run intends to timely appeal the Surface
Mining Board's order to the Kanawha Circuit Court, Charleston, West Virginia.
Elk Run believes that it has good defenses to the violations.

Martin County Impoundment Discharge

On October 11, 2000, a partial failure of Martin County Coal Corporation's
Big Branch impoundment released approximately 230 million gallons of coal
slurry from the impoundment into adjacent underground mine workings. The slurry
then discharged into two tributary streams of the Big Sandy River in eastern
Kentucky. No one was injured in the discharge. Clean up efforts began
immediately and are continuing. Certain downstream businesses have indicated an
intention to assert claims for business interruption alleged to have been
caused by the existence of coal slurry in the Big Sandy River. The State of
Kentucky has issued various notices of violation related to the discharge and
ordered remedial measures. Fines and penalties have not yet been assessed.
Massey has pollution insurance coverage and believes that such insurance will
cover clean up costs and third party claims arising out of this event. Massey
has not as yet received a formal coverage determination from its insurance
carriers.

As a result of the discharge described above, the Martin County preparation
plant is currently idled. It is still uncertain as to when or under what
conditions the plant will be able to resume operations.

At this early stage, it is not possible to accurately predict the full scope
of the cleanup costs, related liabilities or insurance recoveries and,
therefore, no assurance can be given at this time that the Martin County
discharge will not have a material adverse impact on Massey's business.

Regulation

The coal mining industry is subject to regulation by federal, state and
local authorities. Massey tries to conduct its operations in compliance with
all applicable federal, state and local laws and regulations. However, because
of extensive and comprehensive regulatory requirements, violations during
mining operations are not unusual in the industry and, notwithstanding
compliance efforts, Massey does not believe such violations can be eliminated
completely. None of the violations to date or the monetary penalties assessed
have been material.

While it is not possible to quantify the costs of compliance with all
applicable federal and state laws, those costs have been significant and Massey
expects them to continue to be significant. Compliance with these laws has
substantially increased the cost of coal mining, but is, in general, a cost
common to all domestic coal producers.

Mining Permits and Approvals. Numerous governmental permits or approvals are
required for mining operations. Massey may be required to prepare and present
to federal, state or local authorities extensive data pertaining to the effect
or impact that any proposed mining operations may have upon the environment.
The requirements imposed by any of these authorities may be costly and time-
consuming and may delay commencement or continuation of mining operations.
Future legislation and regulations, as well as future interpretations of
existing laws, may result in substantial increases in equipment and operating
costs and delays, interruptions or a termination of operations, the extent of
which cannot be predicted.

Mine Health and Safety Laws. Stringent safety and health standards have been
imposed by federal legislation since 1969 when the Federal Coal Mine Health and
Safety Act of 1969 was adopted. The Federal Mine Safety and Health Act of 1977,
which significantly expanded the enforcement of health and safety standards of
the Mine Health and Safety Act of 1969, imposes comprehensive safety and health
standards on all mining operations. In addition, as part of the Mine Health and
Safety Act of 1969 and the Mine Safety and Health Act of 1977, the Black Lung
Act requires payments of benefits by all businesses conducting current

89
<PAGE>

mining operations to coal miners with black lung and to some survivors of a
miner who dies from this disease. Most of the states in which Massey operates
have state programs for mine safety and health regulation and enforcement. In
combination, federal and state safety and health regulation in the coal mining
industry is perhaps the most comprehensive and pervasive system for protection
of employee safety and health affecting any segment of U.S. industry. This
regulation has a significant effect on Massey's operating costs. However,
Massey's competitors in all of the areas in which it operates are subject to
the same degree of regulation.

One of Massey's goals is to achieve excellent health and safety performance
as measured by accident frequency rates and other measures. Massey believes
that attainment of this goal is inherently tied to the attainment of
productivity and financial goals. Massey tries to achieve this goal by:

. training employees in safe work practices;

. openly communicating with employees;

. establishing, following and improving safety standards;

. involving employees in establishing safety standards; and

. recording, reporting and investigating all accidents, incidents and
losses to avoid reoccurrences.

Black Lung Legislation. The Black Lung Act levied a tax on production of
$1.10 per ton for deep-mined coal and $0.55 per ton for surface-mined coal, but
not to exceed 4.4% of the sales price, in order to compensate miners who are
totally disabled due to black lung and some survivors of miners who died from
the disease and who were last employed as miners prior to 1970 or subsequently
where no responsible coal mine operator has been identified for claims. In
addition, the Black Lung Act provides that some claims for which coal operators
had previously been responsible will be obligations of the government trust
funded by the tax. For miners last employed as miners after 1969 who are
determined to have contracted black lung, Massey self insures against potential
cost using actuarially determined estimates of the cost of present and future
claims. Massey is also liable under state statutes for black lung claims.

In the past, legislation that would favor black lung claimants in various
ways has been introduced in Congress, but not enacted. If this or similar
legislation is passed, the number of claimants who are awarded benefits could
significantly increase. Massey cannot provide any assurance that such proposed
legislation or other proposed changes in black lung legislation will not have
an adverse effect on its business.

The U.S. Department of Labor has issued proposed amendments to the
regulations implementing the federal black lung laws which, among other things,
establish a presumption in favor of a claimant's treating physician and limit a
coal operator's ability to introduce medical evidence regarding the claimant's
medical condition. If adopted, the amendments could have an adverse impact on
Massey, the extent of which cannot be accurately predicted.

Workers' Compensation. Massey is required to compensate employees for work-
related injuries. Several states in which Massey operates consider changes in
workers compensation laws from time to time. Such changes, if enacted, could
adversely affect Massey's financial condition and results of operations.

Surface Mining Control and Reclamation Act. The Surface Mining Control and
Reclamation Act establishes operational, reclamation and closure standards for
all aspects of surface mining as well as many aspects of deep mining. The act
requires that comprehensive environmental protection and reclamation standards
be met during the course of and upon completion of mining activities. Permits
for surface mining operations must be obtained from the federal Office of
Surface Mining Reclamation and Enforcement or, where state regulatory agencies
have adopted federally approved state programs under the act, the appropriate
state regulatory authority. All states in which Massey's active mining
operations are located have achieved primary jurisdiction for enforcement of
the act through approved state programs.

90
<PAGE>

The Surface Mining Control and Reclamation Act and similar state statutes
require, among other things, that mined property be restored in accordance with
specified standards and approved reclamation plans. The act generally requires
Massey to restore the surface to approximate the original contours as
contemporaneously as practicable with the completion of surface mining
operations. Federal law and some states also impose on mine operators the
responsibility for repairing or compensating for damage occurring on the
surface as a result of subsidence due to underground mining. In addition, the
Abandoned Mine Lands Act, which is part of the Surface Mining Control and
Reclamation Act, imposes a tax on all current mining operations, the proceeds
of which are used to restore mines closed before 1977. The maximum tax is $0.35
per ton on surface-mined coal and $0.15 per ton on underground-mined coal.
Massey accrues for the costs of final mine closure, including the cost of
treating mine water discharge where necessary, over the estimated useful mining
life of the property and for current mine disturbance which will be reclaimed
prior to final mine closure. The reclamation costs, mine-closing costs and
other environmental liability accruals were $98.9 million at October 31, 1999.
The amount that was included as an operating expense for the year ended October
31, 1999 was $10.3 million, while the related cash expenditure for such
liability in such period was $11.4 million. Although Massey's management
believes it is making adequate provisions for all expected reclamation and
other costs associated with mine closures, future operating results would be
adversely affected if such accruals were later determined to be insufficient.

Under the Surface Mining Control and Reclamation Act, responsibility for
unabated violations, unpaid civil penalties and unpaid reclamation fees of
independent contract mine operators can be imputed to other companies which are
deemed, according to the regulations, to have "owned" or "controlled" the
contract mine operator. Sanctions against the "owner" or "controller" are quite
severe and can include being blocked from receiving new permits and revocation
of any permits that have been issued since the time of the violations or, in
the case of civil penalties and reclamation fees, since the time such amounts
became due. Massey is not aware of any currently pending or asserted claims
relating to the "ownership" or "control" theories discussed above. However,
Massey cannot provide any assurance that claims will not develop in the future.

The Ohio River Valley Environmental Coalition, Inc. and the Hominy Creek
Preservation Association, Inc. filed suit against the West Virginia Division of
Environmental Protection ("DEP") in the Southern District of West Virginia, in
Ohio River Valley Environmental Coalition, Inc., et. al. v. Michael C. Castle,
Civil Action No. 3:00-0058, U. S. District Court, S. D. W.V., alleging that the
DEP issues permits to mining operations without complying with the Surface
Mining Control and Reclamation Act. Particularly, the plaintiffs allege that
DEP does not properly consider the hydrologic effects of mining operations in
issuing permits and request that no further permits be issued for the Hominy
Creek and Island Creek watersheds until this deficiency is remedied by
requiring more thorough Cumulative Hydrologic Impact Assessments. Massey has
mining operations in these watersheds and could be adversely affected by a
long-term delay in permitting if the court rules against DEP. On June 22, 2000,
the court temporarily enjoined a permit for refuse disposal at one of Massey's
subsidiaries in Hominy Creek, but allowed another refuse disposal permit for
the same operation to go forward on a conditional basis. The permit that was
allowed to go forward should allow Massey an additional 18 to 24 months of
refuse disposal before more permitted refuse area is needed. Massey is not a
defendant in the lawsuit, but its subsidiary intervened to protect its
interests in the injunction proceedings. The court should reach a decision on
the merits of the case in the latter part of 2000 or in the first half of 2001.

Clean Air Act. The Clean Air Act and corresponding state laws extensively
regulate emissions into the air of particulate matter and other substances,
including sulfur dioxide, nitrogen oxides and mercury. In order to comply with
limitations on emissions, Massey's customers may switch to other fuels or coal
from other regions, which could have a material adverse effect on Massey's
business, financial condition and results of operations.

The Clean Air Act affects coal mining operations by requiring utilities that
currently are major sources of nitrogen oxides in moderate or higher ozone
nonattainment areas to install reasonably available control technology. In July
1997, the U.S. EPA adopted new, more stringent National Ambient Air Quality
Standards for particulate matter and ozone. In May 1999, the U.S. Court of
Appeals for the District of Columbia Circuit

91
<PAGE>

remanded both standards to the EPA, finding that the EPA relied on an
interpretation of the Clean Air Act that reflects an unconstitutional
delegation of power. The court also found that the EPA erred when it refused to
consider the "disbenefits" associated with the ozone standard. The court
vacated the revised particulate matter standard on the ground that the EPA's
choice of a coarse particulate matter indicator was arbitrary. In May 2000, the
U.S. Supreme Court granted petitions for a writ of certiorari on the
unconstitutional delegation and enforcement issues and on consideration of cost
benefits analysis in setting National Ambient Air Quality Standards. The
specific provisions of these standards could be revised by the EPA.

In October 1998, the EPA issued its final rule entitled "Finding of
Significant Contribution and Rulemaking for Certain States in the Ozone
Transport Assessment Group Region for Purposes of Reducing Regional Transport
of Ozone" rule (the NOx SIP Call rule). In the final rule, the EPA found that
sources in 22 states and the District of Columbia emit NOx in amounts that
significantly contribute to nonattainment of the 1-hour and 8-hour ozone
National Ambient Air Quality Standards, or will interfere with maintenance of
the 8-hour ozone National Ambient Air Quality Standards, in one or more
downwind states. The rule requires the 22 upwind states and the District of
Columbia to submit state implementation plan revisions to prohibit specified
amounts of emissions of oxides of nitrogen (NOx)--one of the precursors to
ozone (smog) pollution--for the purpose of reducing NOx and ozone transport
across state boundaries in the eastern half of the United States. Although
states may choose any mix of pollution reduction measures that will achieve the
required reductions, it is widely anticipated that states will target large
utility and industrial boilers, which could materially reduce the demand for
coal by these industries.

On March 3, 2000, the U.S. Court of Appeals for the District of Columbia in
Michigan v. EPA, No. 98-1497 (D.C. Cir. 2000), generally upheld the NOx SIP
Call. On June 22, 2000, the D.C. Circuit lifted the stay of the deadline for
the states to submit their NOx state implementation plans ("SIPs") and directed
the states to submit their SIPs. The SIPs are due October 30, 2000, pursuant to
the D.C. Circuit's order of June 22, 2000. On August 30, 2000, the D.C. Circuit
extended the compliance deadline for full implementation of NOx SIP Call
controls to May 31, 2004. On September 18, 2000, the EPA finalized its stay of
the 8-hour portion of the NOx SIP Call (65 Fed. Reg. 56245). On September 20,
2000, industry petitioned the U.S. Supreme Court for a writ of certiorari.

On April 30, 1999, the EPA issued "final determinations" that six out of
eight petitions filed under section 126 of the Clean Air Act are "partially
approvable" and that sources in 19 states and the District of Columbia
"significantly contribute" to ozone nonattainment in one or more of the
petitioning states (64 Fed. Reg. 28250, May 25, 1999). The EPA deferred
granting the approvable portions of the petitions until the affected states
submit their revised SIPs, in response to the EPA's NOx SIP Call. Following the
adverse decision on the new 8-hour ozone standard in May 1999, however, the EPA
stayed final action on the section 126 petitions and "decoupled" the NOx SIP
Call and section 126 rulemakings. On January 18, 2000, the EPA published its
final rulemaking entitled "Findings of Significant Contribution and Rulemaking
on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport,"
granting petitions filed by four northeast states (Connecticut, Massachusetts,
New York and Pennsylvania) under section 126 of the Clean Air Act (65 Fed. Reg.
2674). As a result of these findings, facilities located in Delaware, the
District of Columbia, Indiana, Kentucky, Maryland, Michigan, North Carolina,
New Jersey, New York, Ohio, Pennsylvania, Virginia and West Virginia will have
to reduce their NOx emissions by 2003. Petitions for review of the EPA's final
section 126 rule are pending in the United States Court of Appeals for the
District of Columbia.

92
<PAGE>

Framework Convention On Global Climate Change. The United States and more
than 160 other nations are signatories to the 1992 Framework Convention on
Global Climate Change (the "Kyoto Protocol") which is intended to limit or
reduce emissions of greenhouse gases, such as carbon dioxide. In the Kyoto
Protocol, the signatories to the Framework Convention on Global Climate Change
established a binding set of emissions targets for developed nations. The
specific limits vary from country to country. Under the terms of the Kyoto
Protocol, the United States would be required to reduce emissions to 93% of
1990 levels over a five-year budget period from 2008 through 2012. The Clinton
Administration signed the protocol in November 1998. Although the U.S. Senate
has not yet ratified the Kyoto Protocol and no comprehensive regulations
focusing on greenhouse gas emissions have been issued, efforts to control
greenhouse gas emissions could result in reduced use of coal if electric power
generators switch to lower carbon sources of fuel. These restrictions, if
established through regulation or legislation, could have a material adverse
effect on Massey's business, financial condition and results of operations.

Clean Water Act. The federal Clean Water Act affects coal mining operations
by imposing restrictions on effluent discharge into waters. Regular monitoring,
as well as compliance with reporting requirements and performance standards,
are preconditions for the issuance and renewal of permits governing the
discharge of pollutants into water.

On October 20, 1999, the U.S. District Court for the Southern District of
West Virginia issued an injunction which prohibits the construction of valley
fills over both intermittent and perennial stream segments as part of mining
operations. While Massey is not a party to this litigation, virtually all
mining operations (including Massey's) utilize valley fills to dispose of
excess materials mined during coal production. This decision is now under
appeal to the Fourth Circuit Court of Appeals and the district court has issued
a stay of its decision pending the outcome of the appeal. If and to the extent
that the district court's decision is upheld and legislation is not passed
which limits the impact of the decision, all or a portion of Massey's mining
operations could be affected which could have a material adverse effect on
Massey's business, financial condition and results of operations.

93
<PAGE>

MANAGEMENT OF NEW FLUOR

New Fluor Board of Directors

The business of New Fluor will be managed under the direction of its board
of directors. As of the Distribution Date, the twelve persons listed in the
table below will constitute the entire New Fluor board. Each person listed in
the table below is currently a director of Fluor Corporation and, except for
Admiral Bobby R. Inman and Dr. Martha R. Seger, is expected to resign as a
director of Fluor Corporation as of the effective date of the Distribution.
Similar to the current Fluor Corporation board of directors, the New Fluor
board of directors will be divided into three classes. Directors for each class
will be elected at the annual meeting of shareholders held in the year in which
the term for such class expires and will serve thereafter for three years.

<TABLE>
<CAPTION>
Initial Term
Name Age Class Expires
---- --- ----- ------------
<S> <C> <C> <C>
The Honorable Carroll A. Campbell, Jr.................... 60 II 2001
Mr. Philip J. Carroll, Jr................................ 62 I 2003
Mr. Peter J. Fluor....................................... 53 III 2002
Dr. David P. Gardner..................................... 67 III 2002
Mr. Thomas L. Gossage.................................... 66 I 2003
Admiral Bobby R. Inman................................... 69 III 2002
Ms. Vilma S. Martinez.................................... 57 I 2003
Mr. Dean R. O'Hare....................................... 58 I 2003
Lord Robin W. Renwick, KCMG.............................. 62 II 2001
Mr. James O. Rollans..................................... 58 III 2002
Dr. Martha R. Seger...................................... 68 II 2001
Mr. James C. Stein....................................... 57 II 2001
</TABLE>

Set forth below is information concerning each person expected to serve as a
director of New Fluor after the Distribution. The year set forth in the
parentheses is the year each director was originally elected to the board of
directors of Fluor Corporation. For information concerning Messrs. Carroll,
Rollans and Stein, see "--New Fluor Executive Officers" below.

The Honorable Carroll A. Campbell, Jr. is president and chief executive
officer of the American Council of Life Insurance. He is a former two-term
Governor of South Carolina, served in the U.S. House of Representatives and was
a member of the Appropriations and Ways and Means committees. He was a chairman
of the National Governors' Association from 1993 to 1994. Governor Campbell is
a director of AVX Corporation, Norfolk Southern Corporation and Wackenhut
Corporation. (1995)

Peter J. Fluor is president and chief executive officer of Texas Crude
Energy, Inc., and served as Fluor Corporation's non-executive chairman of the
board during fiscal 1998. He also serves as a director of Ocean Energy
Corporation and Chase Bank of Texas, N.A. (1984)

Dr. David P. Gardner recently retired as president of the William and Flora
Hewlett Foundation and is a former president of both the University of
California and the University of Utah. Dr. Gardner is a director of United
Funds, First Security Corporation, Digital Ventures and Charitableway.com.
(1998)

Thomas L. Gossage is the chairman and chief executive officer of Hercules
Incorporated. Mr. Gossage also serves as a director of The Dial Corporation and
Alliant Techsystems Inc. (1997)

Admiral Bobby R. Inman U.S. Navy (retired), served as Director of the
National Security Agency and Deputy Director of Central Intelligence. He is
also a director of Science Applications International Corporation, SBC
Communications Inc., Temple-Inland Inc. and Xerox Corporation, and after the
Distribution will be a director of Massey Energy Company. (1985)

94
<PAGE>

Vilma S. Martinez is a partner with the law firm of Munger, Tolles & Olson
LLP, and the former president and general counsel for the Mexican-American
Legal Defense and Educational Fund. Ms. Martinez is also a director of
Anheuser-Busch Companies, Inc., Sanwa Bank California, Shell Oil Company and
Burlington Northern Santa Fe Corporation, and serves on a variety of advisory
boards and community organizations. (1993)

Dean R. O'Hare is chairman and chief executive officer of the Chubb
Corporation. He is chairman of the Coalition of Service Industries, chairman of
the U.S.-India Business Council and a member of the White House Advisory
Committee for Trade Policy & Negotiations and the U.S. Trade Representative's
Investment and Services Policy Advisory Committee. (1997)

Lord Robin W. Renwick is a deputy chairman of the merchant bank Robert
Fleming, and a director of British Airways. During his 30-year career in the
British Foreign Service, he served in senior posts in New Delhi, Paris and
London, and was British Ambassador to South Africa from 1987 to 1991 and
British Ambassador to the United States from 1991 to 1995. He was appointed to
the House of Lords by Prime Minister Blair in 1997. (1997)

Dr. Martha R. Seger is a distinguished visiting professor of Finance at
Adrian College and a former member of the Board of Governors of the Federal
Reserve System. She is also a director of Kroger Company, Tucson Electric Power
Company and Xerox Corporation, and after the Distribution will be a director of
Massey Energy Company. (1991)

Committees of the New Fluor Board

The standing committees of the New Fluor board of directors will consist of
an Audit Committee, Executive Committee, Finance Committee, Governance
Committee, Organization and Compensation Committee and Public Policy Committee.

Audit Committee

The principal duties of the Audit Committee are as follows:

. to nominate the firm of independent outside auditors for appointment by
the board;

. to meet with New Fluor's financial management, internal audit management
and independent outside auditors to review matters relating to New
Fluor's internal accounting controls, internal audit program, accounting
practices and procedures, the scope and procedures of the outside audit,
the independence of the outside auditors and other matters relating to
the financial condition of New Fluor;

. to review New Fluor's annual report to shareholders, proxy materials and
annual report on Form 10-K for filing with the Securities and Exchange
Commission; and

. to report to the board periodically any recommendations the Audit
Committee may have with respect to the foregoing matters.

The Audit Committee has the power to investigate any matter brought to its
attention within the scope of its duties and to retain counsel for this purpose
where appropriate.

The members of the Audit Committee are expected to be Carroll A. Campbell,
Jr., Peter J. Fluor, Vilma S. Martinez and Dean R. O'Hare, none of whom is a
current or former officer or employee of New Fluor or any of its subsidiaries.

Executive Committee

When the New Fluor board is not in session, the Executive Committee will
have all of the power and authority of the board except with respect to:

. amending New Fluor's Restated Certificate of Incorporation and Bylaws;

95
<PAGE>

. adopting an agreement of merger or consolidation;

. recommending to the shareholders the sale, lease or exchange of all or
substantially all of New Fluor's property and assets;

. recommending to the shareholders a dissolution of New Fluor or a
revocation of such dissolution;

. declaring a dividend; or

. issuing stock.

The members of the Executive Committee are expected to be Philip J. Carroll,
Peter J. Fluor, David P. Gardner, Bobby R. Inman, Vilma S. Martinez and Martha
R. Seger.

Finance Committee

The function of the Finance Committee is as follows:

. to review and make recommendations to the board regarding New Fluor's
financing needs and plans and dividend policy;

. to review and, where delegated by the board, approve new debt
financings, acquisitions and dispositions of business units and major
capital assets;

. to review the financial performance of acquisitions and equity
investments and to monitor the investment policy and performance of New
Fluor's employment and other benefit trust funds; and

. to review New Fluor's risk management activities, including insurance
coverage.

The members of the Finance Committee are expected to be Martha R. Seger,
Carroll A. Campbell, Thomas L. Gossage and Robin W. Renwick.

Governance Committee

The function of the Governance Committee is as follows:

. to seek out, evaluate and recommend to the board qualified nominees for
election as directors of New Fluor;

. to recommend directors of New Fluor for election as members of
committees of the board; and

. to consider other matters including the size and composition of the
board and committees and other issues of corporate governance.

The members of the Governance Committee are expected to be David P. Gardner,
Carroll A. Campbell, Peter J. Fluor, Thomas L. Gossage, Bobby R. Inman, Vilma
S. Martinez, Dean R. O'Hare, Robin W. Renwick and Martha R. Seger.

Organization and Compensation Committee

The principal duties of the Organization and Compensation Committee are as
follows:

. to review corporate organizational structures;

. to review key employee compensation policies, plans and programs;

. to monitor performance and compensation of employee-directors and
officers of New Fluor and other key employees;

. to prepare recommendations and periodic reports to the board concerning
such matters; and

. to function as the committee which administers the long-term incentive
programs referred to in "--Compensation of New Fluor Executive Officers"
below.

96
<PAGE>

The members of the Organization and Compensation Committee are expected to
be Bobby R. Inman, Peter J. Fluor, David P. Gardner, Thomas L. Gossage and Dean
R. O'Hare, none of whom is a current or former officer or employee of New Fluor
or its subsidiaries.

Public Policy Committee

The Public Policy Committee will review and make recommendations regarding
domestic and international policies, programs, positions and strategies in
relation to:

. significant public issues;

. political, social and environmental trends;

. business, charitable, educational and political organizations; and

. employment and workplace policies and practices relating to
nondiscrimination, diversity and occupational health and safety.

The members of the Public Policy Committee are expected to be Vilma S.
Martinez, David P. Gardner, Bobby R. Inman, Robin W. Renwick and Martha R.
Seger.

Compensation Committee Interlocks and Insider Participation

None of New Fluor's executive officers has served as a director or member of
the compensation committee, or other committee serving an equivalent function,
of any entity of which an executive officer is expected to serve as a member of
New Fluor's Organization and Compensation Committee.

Compensation of New Fluor Directors

Following the Distribution, New Fluor will implement director compensation
programs as described in this section. Nine of the twelve persons expected to
serve as directors of New Fluor will not be salaried employees of New Fluor or
its subsidiaries. For their services, these non-employee directors will be paid
a retainer at the annual rate of $30,000 or, in the case of directors also
serving as chairman of board committees, $34,000, plus a fee of $2,000 per day
for each day upon which one or more board or board committee meetings are
attended. Each director will receive a $2,000 annual California tax allowance.
Salaried employees will receive no additional compensation for their services
as directors. Directors are permitted to defer receipt of directors' fees until
their retirement or other termination of status as a director. Amounts deferred
at the election of the director either accrue interest at rates fixed from time
to time by the Executive Committee or are valued as if invested in New Fluor
Common Stock.

Under the New Fluor Stock Plan for Non-Employee Directors, referred to as
the New Fluor Director Stock Plan, directors who are not, and have never been,
employees of New Fluor or its subsidiaries will be eligible to receive, when
they become directors, 1,500 shares of restricted common stock and restricted
units in an amount determined by the Organization and Compensation Committee
which are payable in cash to assist in satisfying related income tax
liabilities. Awards are made on a date determined by the Organization and
Compensation Committee following appointment. Restrictions lapse on 20% of the
shares on March 14 next following the date of the initial award. Restrictions
lapse on the balance of the shares in four equal increments on each succeeding
March 14. In addition, under the New Fluor Director Stock Plan, directors who
are not, and have never been, employees of New Fluor or its subsidiaries will
be eligible to receive annual grants of 750 shares of restricted common stock.
Restrictions on these shares of restricted stock lapse once such stock has been
held for at least six months, the applicable director has served on the board
of Fluor Corporation or New Fluor for at least six years and the director
either retires from the board, dies or becomes permanently and totally disabled
or a change of control occurs.

97
<PAGE>

Description of New Fluor Director Stock Plan

Prior to the Distribution, Fluor Corporation, as sole shareholder of New
Fluor, will approve the adoption by New Fluor of the New Fluor Director Stock
Plan. The New Fluor Director Stock Plan will be used to provide for restricted
stock and restricted unit awards that were granted under the Fluor Corporation
Stock Plan for Non-Employee Directors and the Fluor Corporation Restricted
Stock Plan for Non-Employee Directors (including restricted stock awards
authorized by Fluor Corporation in satisfaction and discharge of accrued
benefits following termination of the Fluor Corporation Retirement Plan for
Outside Directors) and assumed by New Fluor upon the Distribution, as well as
for new restricted stock and restricted unit grants following the Distribution.
The aggregate number of shares of New Fluor Common Stock that can be issued
under the New Fluor Director Stock Plan may not exceed 120,000. Any director
who is not and has never been an employee of Fluor Corporation, New Fluor or
any of their subsidiaries is eligible to receive grants under the plan. Upon
first joining the board of New Fluor, an eligible director may receive a grant
of 1,500 shares of restricted New Fluor stock, and each year thereafter may
receive a grant of 750 shares of restricted New Fluor stock. The board's
Organization and Compensation Committee (or any other committee designated by
the board), will administer the New Fluor Director Stock Plan, and may
authorize the grant of restricted units in connection with grants of restricted
stock in order to assist in satisfying income tax liabilities that arise under
the restricted stock grants. The New Fluor Director Stock Plan provides that,
unless established otherwise by the Committee, restricted stock that is granted
when an eligible director first joins the board will vest in five equal annual
installments, and annual restricted stock grants that have been held for at
least six months will vest when a director has served on the board of Fluor
Corporation or New Fluor for at least six years and either the director retires
from the board under terms established by the Committee, dies or becomes
permanently and totally disabled or a change of control occurs. The Committee
may reduce the number of shares subject to grants under the plan, and may
reduce the vesting requirements applicable to grants, except that the Committee
may not provide for full vesting of grants for less than three (3) years
service as a non-employee director, other than upon the director's retirement,
death or disability or upon a change of control. The Board may amend the plan
from time to time, but unless approved by shareholders, no amendment may
increase the number of shares subject to grants or reduce the vesting
requirement for grants.

New Fluor Executive Officers

The following table lists the seven persons who are expected to serve as
executive officers of New Fluor immediately following the Distribution. Each
person named below is currently an executive officer of Fluor Corporation and
is expected to resign his position with Fluor Corporation as of the effective
date of the Distribution.

<TABLE>
<CAPTION>
Name Age Expected Position
---- --- -------------------------------------------------
<S> <C> <C>
Philip J. Carroll, Jr... 62 Chairman of the Board and Chief Executive Officer

Alan L. Boeckmann....... 52 President and Chief Executive Officer of Fluor
Daniel

Lawrence N. Fisher...... 56 Senior Vice President, Law and Secretary

Ralph F. Hake........... 51 Executive Vice President and Chief Financial
Officer

James O. Rollans........ 58 President and Chief Executive Officer of Fluor
Signature Services

James C. Stein.......... 57 President and Chief Executive Officer of Fluor
Global Services

Stephen M. Johnson...... 49 Senior Vice President, Global Development,
Marketing & Strategy
</TABLE>

Set forth below is information concerning each person expected to serve as
an executive officer of New Fluor after the Distribution.

98
<PAGE>

Philip J. Carroll, Jr. has been a director and Chairman of the Board and
Chief Executive Officer of Fluor Corporation since July 1998. Mr. Carroll was
formerly President and Chief Executive Officer of Shell Oil Company from 1993,
and held other positions with Shell Oil Company for more than 37 years. Mr.
Carroll is also a director of Boise Cascade Corporation and Vulcan Materials
Company.

Alan L. Boeckmann has been President and Chief Executive Officer of Fluor
Daniel since March 1999. Mr. Boeckmann was formerly Group President, Energy and
Chemicals of Fluor Daniel from January 1996 and President, Plastics and Fibers
of Fluor Daniel from 1994. Mr. Boeckmann joined Fluor Corporation in 1979 with
previous service from 1974 to 1977.

Lawrence N. Fisher has been Senior Vice President, Law and Secretary of
Fluor Corporation since 1996. Mr. Fisher was formerly Vice President, Corporate
Law from 1984. Mr. Fisher joined Fluor Corporation in 1974.

Ralph F. Hake has been Executive Vice President and Chief Financial Officer
of Fluor Corporation since June 1999. Mr. Hake was formerly Senior Executive
Vice President and Chief Financial Officer of Whirlpool Corporation from 1997;
Senior Executive Vice President of Global Operations from 1996; and Executive
Vice President, North American Appliance Group from 1992. Mr. Hake joined Fluor
Corporation in 1999.

James O. Rollans has been a director of Fluor Corporation since December
1997 and President and Chief Executive Officer of Fluor Signature Services
since March 1999. Mr. Rollans was formerly Senior Vice President and Chief
Financial Officer of Fluor Corporation from 1998 to June 1999 and 1992 to 1994;
Senior Vice President and Chief Administrative Officer of Fluor Corporation
from 1994 to 1998; and Vice President, Corporate Communications of Fluor
Corporation 1982 to 1992. Mr. Rollans joined Fluor Corporation in 1982. Mr.
Rollans is also a director of Flowserve Corporation.

James C. Stein has been a director of Fluor Corporation since December 1997
and President and Chief Executive Officer of Fluor Global Services since March
1999. Mr. Stein was formerly President and Chief Operating Officer of Fluor
Daniel from 1997 to March 1999; Group President, Diversified Services of Fluor
Daniel from 1994; President, Business Units, of Fluor Daniel from 1993; and
President, Industrial Sector, of Fluor Daniel from 1986. Mr. Stein joined Fluor
Corporation in 1964.

Stephen M. Johnson has been Senior Vice President, Global Development,
Marketing and Strategy of Fluor Corporation since March 2000. Mr. Johnson was
formerly Vice President, Global Development from November 1999 to March 2000;
and Vice President, Sales of Fluor Daniel from 1995 to November 1999.

Compensation of New Fluor Executive Officers

The following table provides information concerning aggregate cash
compensation, stock-based compensation and other compensation paid by Fluor
Corporation for services rendered to it in the fiscal year ended October 31,
1999 by New Fluor's Chief Executive Officer and each of the persons who are
anticipated to be one of New Fluor's four other most highly compensated
executive officers following the Distribution, collectively referred to as the
named executive officers. During the period presented, the named executive
officers were compensated in accordance with Fluor Corporation's plans and
policies. Stock-based compensation described in the following table is
expressed in shares of Fluor Corporation Common Stock. Upon consummation of the
Distribution, each outstanding Fluor Corporation stock-based item of
compensation held by the named executive officers will be converted into a New
Fluor stock-based item of compensation of a similar nature. See "--New Fluor
Treatment of Outstanding Fluor Corporation Compensatory Stock Awards" below.

99
<PAGE>

Summary Compensation Table for Services Rendered to Fluor Corporation

James C. Stein.......... 1999 565,021 300,000 48,968 247,389 30,000 0 249,856
President and Chief
Executive Officer,
Fluor Global Services

Alan L. Boeckmann....... 1999 456,278 375,000 20,097 94,325 11,500 0 199,223
President and Chief
Executive Officer,
Fluor Daniel

James O. Rollans........ 1999 490,000 300,000 61,878 154,779 18,800 0 196,871
President and Chief
Executive Officer,
Fluor Signature
Services

Ralph F. Hake........... 1999 159,628 175,000 70,656 423,938 58,000 0 47,119
Executive Vice
President and Chief
Financial Officer
</TABLE>
--------
(1) Amounts shown include cash compensation earned and received by the named
executive officers as well as amounts earned but deferred at the election
of those officers.

(2) Amounts shown in this column represent restricted unit payments for the
benefit of each named executive officer to compensate for federal and state
withholding taxes arising from the lapse of restrictions on restricted
stock held by such officer.

(3) The amount reported in the table includes restricted stock and shadow
stock, and represents the market value at the date of grant, without giving
effect to the diminution in value attributable to the restrictions on such
stock. In fiscal year 1999, Fluor Corporation awarded 33,380 shares of
restricted stock and 0 shares of shadow stock to all named executive
officers as a group. With respect to shares of restricted stock granted in
fiscal year 1999, 33,380 shares of restricted stock vest at the rate of 10%
per year. As of the end of fiscal year 1999, the aggregate restricted and
shadow stock holdings for each of the named executive officers consisted of
the following: Mr. Carroll, 158,804 shares with a value of $6,302,534; Mr.
Stein, 14,091 shares with a value of $559,237; Mr. Boeckmann, 5,569 shares
with a value of $221,020; Mr. Rollans, 17,782 shares with a value of
$705,723; Mr. Hake, 7,875 shares with a value of $312,539. Holders of
restricted stock are entitled to receive dividends paid on common stock.

(4) The total amount shown in this column for Mr. Carroll consists of the
following: $141,791--Fluor Corporation contributions and allocations to
defined contribution plans and related excess benefit plans; $610,000--
benefit attributable to Fluor Corporation-owned life insurance policy;
$200,000--non-discretionary bonus; $108,210--personal use of chartered
aircraft and related tax gross up. The total amount shown for Mr. Stein
consists of the following: $109,686--Fluor Corporation contributions and
other allocations to defined contribution plans and related excess benefit
plans; $80,256--benefit attributable to Fluor Corporation-owned life
insurance policy; $10,532--reimbursement under home buy/sale policy;
$25,000--relocation expenses; $24,200--personal use of chartered aircraft
and related tax gross up. The total amount shown for Mr. Boeckmann consists
of the following: $71,061--Fluor Corporation contributions and other
allocations to defined contribution plans and related excess benefit plans;
$43,664--benefit attributable to Fluor Corporation-owned life insurance
policy; $72,999--reimbursement under home buy/sale policy; $11,499--
personal use of chartered aircraft and related tax gross up. The total
amount shown for Mr. Rollans consists of the following: $129,000--Fluor
Corporation contributions and other allocations to defined contribution
plans and related excess benefit plans; $63,374--benefit attributable to
Fluor Corporation-owned life insurance policy; $4,497--personal use of
chartered aircraft and related tax gross up. The total amount shown for Mr.
Hake consists of the following: $35,766--reimbursement under home buy/sale
policy; $11,353-- miscellaneous relocation.

100
<PAGE>

Option Grants in Last Fiscal Year to Purchase Fluor Corporation Common Stock

The following table provides information concerning fiscal year 1999 grants
of stock options and stock appreciation rights, or SARs, to purchase shares of
Fluor Corporation Common Stock to New Fluor's named executive officers under
Fluor Corporation's long-term incentive program. Options to purchase Fluor
Corporation Common Stock will be converted into options to purchase New Fluor
Common Stock. See "--New Fluor Treatment of Outstanding Fluor Corporation
Compensatory Stock Awards" below.

<TABLE>
<CAPTION>
Individual Grants (1) (2)
--------------------------------------------
Number of % of Total Grant
Securities Options/SARs Exercise Date
Underlying Granted to Price(s) Present
Options Employees in ($/SH) Expiration Value
Name Granted (1) Fiscal Year (2) Date ($) (3)
---- ----------- ------------ -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Philip J. Carroll, Jr..... 57,940 4.8 42.875 12/08/08 805,945
James C. Stein............ 30,000 2.5 42.875 12/08/08 417,300
Alan L. Boeckmann......... 11,500 1.0 42.875 12/08/08 159,965
James O. Rollans.......... 18,800 1.6 42.875 12/08/08 261,508
Ralph F. Hake............. 58,000 4.8 40.375 6/16/09 856,422
</TABLE>
--------
(1) The named executive officers received only grants of options in fiscal year
1999; SARs were granted to other members of Fluor Corporation's management.

(2) Options were granted with an exercise price equal to the fair market value
of the underlying common stock on the date of grant. All options were
granted for a term of ten years, subject to earlier termination in certain
events related to termination of employment, and vest in four equal annual
installments commencing 12 months after the date of grant. The exercise
price and tax withholding obligations related to exercise may be paid by
delivery of already owned shares or by offset of the underlying shares,
subject to certain conditions. The vesting of these options may accelerate
upon termination of employment following a change of control of Fluor
Corporation.

(3) The Grant Date Present Value is computed using the Black-Scholes option
pricing model based on the following general assumptions: (a) an expected
option term of six years for options that expire ten years from the date of
grant which reflects a reduction of the actual 10-year life of the option
based on historical data regarding the average length of time an executive
officer holds an option before exercising; (b) a risk-free interest rate
that represents the interest rate on a U.S. Treasury Strip with a maturity
date corresponding to that of the expected option term; (c) stock price
volatility which is calculated using daily stock prices over a three-year
period preceding the grant date; and (d) a dividend yield which is
calculated using yields over a three-year period preceding the grant date.
The specific option pricing model assumptions for the grants were as
follows: $42.875 exercise price; 4.43% risk-free interest rate; 33.4% stock
price volatility; and 1.37% dividend yield. For Mr. Hake, an expected
option term of five years was assumed, and the specific option pricing
model assumptions were as follows: $40.38 exercise price; 6.50% risk-free
interest rate; 39.41% stock price volatility; and 1.72% dividend yield.
Notwithstanding the fact that these options are non-transferable, no
discount for lack of marketability was taken. The option value was
discounted by approximately 3% for risk of forfeiture during the vesting
period. The actual value, if any, an executive officer may realize will
depend upon the excess of the stock price over the exercise price on the
date the option is exercised, so there is no assurance that the value
realized by the executive officer will be at or near the amount shown.

101
<PAGE>

Aggregate Fluor Corporation Option Exercises in Last Fiscal Year and Fiscal
Year
End Option/SAR Values

The following table provides information concerning the exercise of Fluor
Corporation options by New Fluor's named executive officers during fiscal year
1999 and the number and value of securities underlying unexercised Fluor
Corporation options and SARs held by New Fluor's named executive officers as of
the end of fiscal year 1999. Options to purchase Fluor Corporation Common Stock
will be converted into options to purchase New Fluor Common Stock. See "--New
Fluor Treatment of Outstanding Fluor Corporation Compensatory Stock Awards"
below.

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options/SARs at Fiscal the-Money Options/SARs at
Acquired on Value Year End (#) Fiscal Year End ($) (1)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Carroll, Jr... 0 0 80,000 177,940 0 0
James C. Stein.......... 10,872 77,655 100,657 84,573 258,541 240,621
Alan L. Boeckmann....... 0 0 47,192 44,078 139,581 139,581
James O. Rollans........ 0 0 128,770 66,745 227,395 201,574
Ralph F. Hake........... 0 0 14,500 43,500 0 0
</TABLE>
--------
(1) Market value of underlying securities at fiscal year-end, minus the
exercise price.

Long-Term Fluor Corporation Incentive Plan Awards in Last Fiscal Year

The following table provides information concerning cash incentive awards
made to New Fluor's named executive officers during fiscal year 1999 under
Fluor Corporation's Long-Term Incentive Award Program. Each award under the
Long-Term Incentive Award Program represents the right to receive an amount in
cash if earnings targets for a specified period, as established by Fluor
Corporation's Organization and Compensation Committee, are achieved. If
earnings fall below the threshold amount, no award is payable. If earnings fall
between the threshold amount and the target amount or between the target amount
and the maximum amount then the amount of the award is prorated accordingly.
Following the Distribution, these earnings goals will be adjusted to exclude
the Massey Business. Payments made under the Long-Term Incentive Program are
reported in the Summary Compensation Table in the year of payout, if any.

<TABLE>
<CAPTION>
Performance Estimated Future Payouts
or Other Under Non-Stock Price
Period Based Plans ($)
Until -------------------------
Maturation Middle
Name or Payout Threshold Target Maximum
---- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
Philip J. Carroll, Jr.................... 3 years 0 240,000 480,000
James C. Stein........................... 3 years 0 105,000 210,000
Alan L. Boeckmann........................ 3 years 0 110,000 220,000
James O. Rollans......................... 3 years 0 68,000 136,000
Ralph F. Hake............................ N/A N/A N/A N/A
</TABLE>

New Fluor Treatment of Outstanding Fluor Corporation Compensatory Stock Awards

Upon consummation of the Distribution, each outstanding Fluor Corporation
stock-based element of incentive compensation, such as options, restricted
shares and units, SARs and shadow stock, which are held by current or former
directors (except for Mr. Inman and Ms. Seger), executive officers and key
employees of New Fluor will be assumed by New Fluor and converted into New
Fluor options, restricted shares and units, SARs and shadow stock,
respectively. The methodology to be used in making the conversion will be based
on the opening per share price of the New Fluor Common Stock on the first day
of trading after the Distribution

102
<PAGE>

relative to the closing per share price of Fluor Corporation stock on the last
trading day before the Distribution. For example, if the closing per share
price of Fluor Corporation stock was $31 and the opening per share price for
New Fluor Common Stock was $25.25, then the conversion ratio would be 1.2272.
For options, the number of New Fluor shares covered by each option grant would
be increased by this ratio, the per share purchase price for each share of the
grant would be decreased by the same ratio and the aggregate purchase price for
the grant would remain the same. For restricted shares and units, SARs and
shadow stock, the number of shares, units, rights or shadow shares covered by
each grant will be adjusted by the same ratio. Stock-based elements of
compensation held by Mr. Inman and Ms. Seger will be adjusted and converted
into separate New Fluor and Massey arrangements representing an equivalent
number of shares.

Following the Distribution, New Fluor intends to offer each of its
optionholders, other than its directors, Chief Executive Officer and other four
most highly compensated executive officers identified in the Summary
Compensation table above, the ability to elect to surrender all of the options
he or she holds in return for a company cash payment obligation. The cash
payment obligation offered to each optionholder will be for an amount equal to
one-third of the present value of that person's options, as calculated by New
Fluor using the Black-Scholes option valuation methodology. Any shares that are
subject to options surrendered under this program will be available for future
grants under the New Fluor 2000 Executive Performance Incentive Plan described
below. The cash payment obligation, if accepted by an optionholder, is payable
over three equal annual installments, with the first installment paid on the
first anniversary of the Distribution, and in certain cases may be deferred.
All or a portion of the payments will be forfeited if the optionholder ceases
to be employed by New Fluor other than on account of retirement, death or
permanent disability. New Fluor believes that this program will reduce its
option overhang, help to provide a fresh-start motivation for New Fluor
employees and provide it with a source for future stock-based incentive
compensation awards.

Description of New Fluor Stock Plan

Prior to the Distribution, Fluor Corporation, as sole shareholder of New
Fluor, will approve the adoption by New Fluor of the New Fluor 2000 Executive
Performance Incentive Plan, referred to as the Incentive Plan. The Incentive
Plan is identical to the Fluor Corporation 1999 Executive Performance Incentive
Plan, which was approved by the shareholders of Fluor Corporation at its 1999
Annual Meeting of Shareholders, except that (1) the number of shares of New
Fluor Common Stock issuable under the Incentive Plan and under various types of
Incentive Plan awards is as set forth below under "--Stock Subject to the
Incentive Plan" and "--Qualifying Performance Criteria and Section 162(m)
Limits," and (2) the Incentive Plan provides that the terms of stock options,
restricted stock and other stock-based arrangements that were issued under
Fluor Corporation plans and converted into New Fluor awards upon the
Distribution will remain applicable to the New Fluor awards notwithstanding any
provision to the contrary in the Incentive Plan. Any new awards granted by New
Fluor following the Distribution will be subject to the terms of the Incentive
Plan. New Fluor will not assume any of the stock option or restricted stock
plans that are maintained by Fluor Corporation.

The Incentive Plan is designed to enable New Fluor to attract, retain and
motivate its management and other key employees, and to further align the
interests of such employees with those of the shareholders of New Fluor, by
providing for or increasing the proprietary interest of such employees in New
Fluor. The Incentive Plan also will be used for stock options, restricted stock
and other stock-based arrangements that were issued under Fluor Corporation
plans and assumed by New Fluor upon the Distribution. The Incentive Plan
authorizes the grant and issuance of awards that may take the form of stock
options, restricted stock, incentive awards and stock units. The Incentive Plan
has various provisions so that awards granted under it may, but need not,
qualify for an exemption from the "short swing liability" provisions of Section
16(b) of the Exchange Act pursuant to Rule 16b-3 and/or qualify as
"performance-based compensation" that is exempt from the $1 million limitation
on the deductibility of compensation under Section 162(m) of the Code.

Eligibility. Any person who is an employee and an officer, key employee or
member of New Fluor's executive management team, or a prospective employee who
is to be an officer, key employee or member of the executive management team,
or a consultant or advisor of New Fluor or any of its affiliates is eligible to
be selected as a recipient of an award under the Incentive Plan. Following the
Distribution, New Fluor expects that

103
<PAGE>

there will be approximately 400 members of the executive management team who
will be covered under the Incentive Plan.

Administration. The Incentive Plan will be administered by the Organization
and Compensation Committee and/or one or more other committees of New Fluor's
board of directors. With respect to any award that is not intended to satisfy
the conditions of Rule 16b-3 of the Exchange Act or Section 162(m)(4)(C) of the
Code, the committee may delegate all or any of its responsibilities to one or
more directors or officers of New Fluor, including individuals who participate
in the Incentive Plan.

Subject to the express provisions of the Incentive Plan, the Committee has
broad authority to administer and interpret the Incentive Plan, including,
without limitation, authority to:

. determine who is eligible to participate in the Incentive Plan;

. determine to whom and when awards are granted under the Incentive Plan;

. make and determine the terms of awards;

. determine the number of shares of common stock subject to awards and the
exercise or purchase price of such shares under an award;

. establish and verify the extent of satisfaction of any performance goals
applicable to awards;

. prescribe and amend the terms of the agreements or other documents
evidencing awards made under the Incentive Plan; and

. make all other determinations deemed necessary or advisable for the
administration of the Incentive Plan.

Stock Subject to the Incentive Plan. The aggregate number of shares of New
Fluor Common Stock that can be issued under the Incentive Plan may not exceed
12,000,000. Of the 12,000,000 shares authorized under the Incentive Plan, the
aggregate number of shares that can be issued pursuant to all incentive awards,
restricted stock awards and stock units (other than stock units issued upon
exercise of options) under the Incentive Plan may not exceed 4,500,000. The
number of shares subject to the Incentive Plan and to outstanding awards under
the Incentive Plan will be appropriately adjusted by the board of directors if,
after the Distribution, the New Fluor Common Stock is affected through a
reorganization, merger, consolidation, recapitalization, restructuring,
reclassification, dividend (other than quarterly cash dividends) or other
distribution, stock split, spin-off or sale of substantially all of New Fluor's
assets. For purposes of calculating the aggregate number of shares issued under
the Incentive Plan, only the number of shares actually issued upon exercise or
settlement of an award and not returned to New Fluor upon cancellation,
expiration or forfeiture of an award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an award will
be counted.

Awards. The Incentive Plan authorizes the grant and issuance of the
following types of awards: stock options, restricted stock, incentive awards
and stock units.

Stock Option Awards. Subject to the express provisions of the Incentive Plan
and as discussed in this paragraph, the Committee has discretion to grant
options and to determine:

. the vesting schedule of options;

. the events causing an option to expire;

. the number of shares subject to any option;

. the restrictions on transferability of an option; and

. such further terms and conditions, in each case not inconsistent with
the Incentive Plan, as may be determined from time to time by the
Committee.

Options granted under the Incentive Plan may be either incentive stock
options qualifying under Section 422 of the Code, referred to as incentive
stock options, or options which are not intended to qualify as incentive stock
options, referred to as non-qualified stock options. The exercise price for
options may not be less than 100% of the fair market value of New Fluor's stock
on the date the option is granted, except that the exercise price of such
options may be above or below the fair market value of New Fluor's stock on the
date

104
<PAGE>

the option is granted if the options are granted in assumption and substitution
of options held by employees of a company acquired by New Fluor or to the
extent that an optionee foregoes current cash compensation in exchange for an
option grant. The exercise price of an option may be paid through various means
specified by the Committee, including in cash or check, by delivery to New
Fluor of shares of New Fluor stock, by a reduction in the number of shares
issuable pursuant to such option, or by a promissory note or other commitment
to pay (including such a commitment by a stock broker). The Committee may, but
need not, provide that the holder of an award has a right (such as a SAR) to
receive a number of shares or cash, or a combination thereof, the amount of
which is determined by reference to the value of the award. Unless approved by
shareholders, outstanding options may not be amended to reduce the exercise
price.

Restricted Stock Awards. Restricted stock is an award of shares, the grant,
issuance, retention and/or vesting of which is subject to such performance and
other conditions as are specified by the Committee. Subject to the express
provisions of the Incentive Plan and as discussed in this paragraph, the
Committee has discretion to determine the terms of any restricted stock award,
including:

. the number of shares subject to a restricted stock award or a formula
for determining such;

. the performance criteria and level of achievement versus these criteria
which determine the number of shares granted, issued, retainable and/or
vested;

. the period as to which performance will be measured for determining
achievement of performance;

. forfeiture provisions;

. the effect of termination of employment for various reasons; and

. such further terms and conditions, in each case not inconsistent with
the Incentive Plan, as may be determined from time to time by the
Committee.

The performance criteria upon which restricted stock is granted, issued,
retained and/or vested may be based on financial performance, personal
performance evaluations and/or completion of service by the participant.
However, no restricted stock award will first vest within one year from its
date of grant, other than upon death, disability, a change of control or upon
satisfaction of such performance requirements deemed appropriate by the
Committee. Notwithstanding the foregoing, for any restricted stock that is
intended by the Committee to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code, the performance criteria will
be a measure based on one or more "qualifying performance criteria," as
described below. Notwithstanding satisfaction of any completion of service or
performance goals, the number of shares granted, issued, retainable and/or
vested under a restricted stock award may be reduced by the Committee on the
basis of such further considerations as the Committee in its sole discretion
will determine.

Incentive Awards. The Incentive Plan authorizes the grant of incentive
awards pursuant to which a participant may become entitled to receive an
amount, which may be paid in cash, stock or stock units, based on satisfaction
of such performance criteria as are specified by the Committee. Subject to the
express provisions of the Incentive Plan and as discussed in this paragraph,
the Committee has discretion to determine the terms of any incentive award,
including:

. the target;

. minimum and maximum amount payable to a participant as an incentive
award;

. the performance criteria (which may be based on financial performance
and/or personal performance evaluations) and level of achievement versus
these criteria which determines the amount payable under an incentive
award;

. the fiscal year(s) as to which performance will be measured for
determining the amount of any payment;

. the timing of any payment earned by virtue of performance;

105
<PAGE>

. restrictions on the alienation or transfer of an incentive award prior
to actual payment;

. forfeiture provisions; and

. such further terms and conditions, in each case not inconsistent with
the Incentive Plan, as the Committee may determine from time to time.

All or any portion of an incentive award may be designed to qualify as
"performance-based compensation" that is exempt from the $1 million limit on
deductible compensation under Section 162(m) of the Code. The performance
criteria for any portion of an incentive award that is intended to satisfy the
requirements for "performance-based compensation" will be a measure based on
one or more "qualifying performance criteria," as described below.
Notwithstanding satisfaction of any performance goals, the amount paid under an
incentive award may be reduced by the Committee on the basis of such further
considerations as the Committee in its sole discretion will determine.

Stock Unit Awards. A "stock unit" is a bookkeeping entry representing an
amount equivalent to the fair market value of one share of common stock, also
referred to as "restricted units" or "shadow stock." Stock units may be settled
in common stock or cash. The grant, issuance, retention and/or vesting of stock
units will be subject to such performance conditions and to such further terms
and conditions as the Committee deems appropriate. Each stock unit award will
reflect:

. the number of stock units subject to such award or a formula for
determining such;

. the performance criteria and level of achievement versus these criteria
which will determine the number of stock units granted, issued,
retainable and/or vested;

. the period as to which performance will be measured for determining
achievement of performance;

. forfeiture provisions; and

. such further terms and conditions, in each case not inconsistent with
the Plan as may be determined from time to time by the Committee.

Stock units may also be issued upon exercise of stock options, may be
granted in payment and satisfaction of incentive awards and may be issued in
lieu of any other compensation that the Committee elects to be paid in the form
of stock units.

The grant, issuance, retention and or vesting of each stock unit will be
subject to such performance criteria and level of achievement versus these
criteria as the Committee may determine, which criteria may be based on
financial performance, personal performance evaluations and/or completion of
service by the participant. However, no stock unit will first vest within one
year from its date of grant, other than upon death, disability, a change of
control or upon satisfaction of such performance requirements as deemed
appropriate by the Committee. Notwithstanding anything to the contrary in this
paragraph, the performance criteria for any stock unit that is intended by the
Committee to satisfy the requirements for "performance-based compensation"
under Section 162(m) of the Code will be a measure based on one or more
"qualifying performance criteria" selected by the Committee and specified at
the time the stock unit is granted.

The Committee will determine the timing of award of any stock unit. The
Committee may provide for or, subject to such terms and conditions as the
Committee may specify, may permit a participant to elect for the award or
vesting of any stock unit to be deferred to a specified date or event. The
Committee may provide for a participant to have the option for his or her stock
unit, or such portion thereof as the Committee may specify, to be granted in
whole or in part in shares. The Committee may provide for stock units to be
settled in cash or shares (at the election of New Fluor or the participant, as
specified by the Committee) and to be made at such other times as it determines
appropriate or as it permits a participant to choose. Notwithstanding
satisfaction of any completion of service or performance goals, the number of
stock units granted, issued, retainable and/or vested under a stock unit award
may be reduced by the Committee on the basis of such further considerations as
the Committee in its sole discretion will determine.

106
<PAGE>

Qualifying Performance Criteria and Section 162(m) Limits. The performance
criteria for any restricted stock, incentive award or stock unit that is
intended to satisfy the requirements for "performance-based compensation" under
Section 162(m) of the Code will be any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied to
either New Fluor as a whole or to a business unit or subsidiary, and measured
either annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years' results or to a
designated comparison group, in each case as specified by the Committee in the
award:

. cash flow;
. earnings (including gross margin, earnings before interest and taxes, or
EBIT, earnings before taxes, or EBT, and net earnings);
. earnings per share;
. growth in earnings or earnings per share;
. stock price;
. return on equity or average stockholders' equity;
. total stockholder return;
. return on capital;
. return on assets or net assets;
. return on investment;
. revenue;
. income or net income;
. operating income or net operating income;
. operating profit or net operating profit;
. operating margin;
. return on operating revenue;
. market share;
. contract awards or backlog;
. overhead or other expense reduction;
. growth in stockholder value relative to the two-year moving average of
the S&P 500 Index;
. growth in stockholder value relative to the two-year moving average of
the Dow Jones Heavy Construction Index;
. credit rating;
. strategic plan development and implementation;
. succession plan development and implementation;
. retention of executive talent;
. improvement in workforce diversity;
. return on average stockholders' equity relative to the ten-year Treasury
yield;
. improvement in safety records;
. capital resource management plan development and implementation;
. improved financial controls plan development and implementation;
. corporate tax savings;
. corporate cost of capital reduction;
. investor relations program development and implementation;
. corporate relations program development and implementation;
. executive performance plan development and implementation; and
. tax provision rate for financial statement purposes.

The Committee will appropriately adjust any evaluation of performance under
a qualifying performance criteria to exclude any of the following events that
occurs during a performance period:

. asset write-downs;

. litigation or claim judgments or settlements;

107
<PAGE>

. the effect of changes in tax law, accounting principles or other laws or
provisions affecting reported results;

. accruals for reorganization and restructuring programs; and

. any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operations appearing in
New Fluor's annual report to stockholders for the applicable year.

The aggregate number of shares subject to options granted under the
Incentive Plan during any calendar year to any one participant may not exceed
750,000. The aggregate number of shares issued or issuable under any incentive
awards, restricted stock awards or stock unit awards (other than stock units
issued or issuable upon exercise of options) granted under the Incentive Plan
during any calendar year to any one participant may not exceed 150,000. The
maximum amount payable pursuant to that portion of an incentive award granted
for any fiscal year to any person that is intended to satisfy the requirements
for "performance-based compensation" under Section 162(m) of the Code may not
exceed $3 million. However, the foregoing limits do not apply to and are not
affected by awards granted in assumption of those that are issued prior to the
Distribution under Fluor Corporation plans and converted into New Fluor awards
upon the Distribution.

Change of Control. The Committee may provide that in connection with a
change of control, awards will become exercisable, payable, vested, paid or
canceled, and may provide for an absolute or conditional exercise, payment or
lapse of conditions or restrictions on an award which would be effective only
if, upon the announcement of a transaction intended or reasonably expected to
result in a change of control, no provision is made under the terms of such
transaction for the holder of an award to realize the full benefit of the
award.

A change of control of New Fluor shall be deemed to have occurred if (1) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, acquires shares of New Fluor having twenty-
five percent or more of the total number of votes that may be cast for the
election of directors of New Fluor or (2) as a result of any cash tender or
exchange offer, merger or other business combination, or any combination of the
foregoing transactions, the persons who were directors of New Fluor before such
transaction shall cease to constitute a majority of the board of directors of
New Fluor or any successor to New Fluor.

Transferability of Awards. Generally, awards granted under the Incentive
Plan may not be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner prior to the vesting or lapse of any and
all restrictions applicable to the award, other than by will or the laws of
descent and distribution, except that the Committee may permit an award to be
transferable to a member or members of the participant's family or to entities
owned or established for the benefit of a participant's family.

Amendments and Termination. The board may amend, alter or discontinue the
Incentive Plan or any agreement evidencing an award made under the Incentive
Plan, but no such amendment may, without the approval of the shareholders of
New Fluor:

. materially increase the maximum number of shares of common stock for
which awards may be granted under the Incentive Plan;

. reduce the price at which stock options may be granted below the price
specified in the Incentive Plan;

. take any action to reduce or adjust downward the exercise price of
outstanding stock options;

. after the date of a change of control, impair the rights of any award
holder, without such holder's consent, under any award granted prior to
the date of any change of control;

. extend the term of the Incentive Plan; or

. change the class of persons eligible to be participants.

108
<PAGE>

No stock option award, restricted stock award or incentive award granted
under the Incentive Plan may be granted pursuant to the Incentive Plan more
than ten years after the date of the board's adoption of the Incentive Plan.

Federal Income Tax Consequences. The following discussion of the federal
income tax consequences of the Incentive Plan is intended to be a summary of
applicable federal law as currently in effect. State and local tax consequences
may differ and may be amended or interpreted differently during the term of the
Incentive Plan or of options granted under the Incentive Plan. Because the
federal income tax rules governing options and related payments are complex and
subject to frequent change, optionees are advised to consult their tax advisors
prior to exercise of options or dispositions of stock acquired pursuant to
option exercise.

Incentive stock options and non-qualified stock options are treated
differently for federal income tax purposes. Incentive stock options are
intended to comply with the requirements of Section 422 of the Code. Non-
qualified stock options need not comply with such requirements.

An optionee is not taxed on the grant or exercise of an incentive stock
option. The difference between the exercise price and the fair market value of
the shares on the exercise date will, however, be taken into account for
purposes of the alternative minimum tax. If an optionee holds the shares
acquired upon exercise of an incentive stock option for at least two years
following the option grant date and at least one year following exercise, the
optionee's gain, if any, upon a subsequent disposition of such shares is long-
term capital gain. The measure of the gain is the difference between the
proceeds received on disposition and the optionee's basis in the shares (which
generally equals the exercise price). If an optionee disposes of stock acquired
pursuant to exercise of an incentive stock option before satisfying the one-
and two-year holding periods described above, the optionee may recognize both
ordinary income and capital gain in the year of disposition. The amount of the
ordinary income will be the lesser of the amount realized on disposition or the
fair market value of the stock on the exercise date reduced in both instances
by the exercise price. The excess of the consideration received on such a
disposition over the lesser of the amount realized on disposition or the fair
market value of the stock on the exercise date will generally be long-term
capital gain if the stock had been held for more than one year following
exercise of the incentive stock option. New Fluor is not entitled to an income
tax deduction on the grant or exercise of an incentive stock option or on the
optionee's disposition of the shares after satisfying the holding period
requirement described above. If the holding periods are not satisfied, New
Fluor will be entitled to a deduction in the year the optionee disposes of the
shares in an amount equal to the ordinary income recognized by the optionee.

An optionee is not taxed on the grant of a non-qualified stock option. On
exercise, however, the optionee recognizes ordinary income equal to the excess
of the fair market value of the shares acquired on the date of exercise over
the exercise price. New Fluor is entitled to an income tax deduction in the
year of exercise in the amount recognized by the optionee as ordinary income.
Any gain on subsequent disposition of the shares is long-term capital gain if
the shares are held for more than one year following exercise. New Fluor does
not receive a deduction for this gain.

An employee who receives restricted stock subject to restrictions which
create a "substantial risk of forfeiture" (within the meaning of Section 83 of
the Code) will normally realize taxable income on the date the shares become
transferable or no longer subject to substantial risk of forfeiture or on the
date of their earlier disposition. The amount of such taxable income will be
equal to the amount by which the fair market value of the shares of common
stock on the date such restrictions lapse (or any earlier date on which the
shares become transferable or are disposed of) exceeds their purchase price, if
any.

An employee may elect, however, to include in income in the year of grant
the excess of the fair market value of the shares of common stock (without
regard to any restrictions) over their purchase price, if any, on the date of
grant.

109
<PAGE>

Upon accelerated exercisability of options and accelerated lapsing of
restrictions upon restricted stock in connection with a change of control of
New Fluor, certain amounts associated with such awards could, depending upon
the individual circumstances of the recipient participant, constitute "excess
parachute payments" under the golden parachute provisions of the Code. Pursuant
to these provisions a participant will be subject to a 20% excise tax on any
excess parachute payment and New Fluor will be denied any deduction with
respect to such excess parachute payment. The limit on the deductibility of
compensation under Section 162(m) of the Code is also reduced by the amount of
any excess parachute payments. Whether amounts constitute excess parachute
payments depends upon, among other things, the value of the awards accelerated
and the past compensation of the participant.

As described above, options granted under the Incentive Plan may qualify as
"performance-based compensation" under Section 162(m) of the Code in order to
preserve federal income tax deductions by New Fluor with respect to annual
compensation required to be taken into account under Section 162 of the Code
that is in excess of $1 million and paid to a "covered employee" (as defined
under the Section 162 regulations). To so qualify, options must have an
exercise price at least equal to the fair market value of the underlying shares
on the date of grant, be awarded by a committee consisting solely of two or
more "outside directors" (as defined under the Section 162 regulations) and
satisfy the Incentive Plan's limit on the total number of shares subject to
options that may be awarded to any one participant during any calendar year.

Initial Grants. To date, no awards have been granted under the Incentive
Plan. As indicated above, upon consummation of the Distribution, each
outstanding Fluor Corporation stock-based element of incentive compensation,
such as options, restricted shares and units, SARs and shadow stock, which are
held by current or former executive officers and key employees of New Fluor
will be assumed by New Fluor and converted into New Fluor awards issued under
the Incentive Plan. The Committee has full discretion to determine the timing
and recipients of any stock option grants under the Incentive Plan and the
number of shares subject to any such options which may be granted under the
Incentive Plan, subject to an annual limitation on the total number of options
that may be granted to any optionee. Therefore, the benefits and amounts that
will be received by each of the named executive officers, the executive
officers as a group, the non-employee directors as a group and all other key
employees under the Incentive Plan are not presently determinable. It is not
possible to determine the benefits that participants would have received had
the Incentive Plan been in effect in the last fiscal year.

Change of Control Provisions in New Fluor Stock Awards

Upon consummation of the Distribution, New Fluor will assume the stock
options, restricted shares and units, SARs and shadow stock awards which were
originally granted under Fluor Corporation's stock plans. These awards contain
restrictions on exercisability and transferability which are premised on
continued service with New Fluor or its subsidiaries and which lapse if the
holder's employment is terminated for any reason within two years following a
change of control of New Fluor. A change of control of New Fluor shall be
deemed to have occurred if (1) a third person, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, acquires shares of
New Fluor having twenty-five percent of more of the total number of votes that
may be cast for the election of directors of New Fluor or (2) as a result of
any cash tender or exchange offer, merger or other business combination, or any
combination of the foregoing transactions, the persons who were directors of
New Fluor before such transaction shall cease to constitute a majority of the
board of directors of New Fluor or any successor to New Fluor. New Fluor does
not intend to treat the Distribution as a change of control under these awards.

Employment Contracts and Termination of Employment Arrangements for New Fluor
Executive Officers

Following the Distribution, New Fluor will assume the employment agreements
and retention arrangements between Fluor Corporation and New Fluor's named
executive officers as described below. In addition, following the Distribution,
it is the intention of New Fluor to implement executive compensation programs
which mirror the executive compensation programs of Fluor Corporation. The
descriptions of the employment agreements and retention arrangements in this
section give effect to the assumption and

110
<PAGE>

implementation by New Fluor of these employment agreements, retention
arrangements and executive compensation programs.

Employment Contracts

Effective as of July 1, 1998, Fluor Corporation entered into an employment
agreement with Mr. Carroll, which New Fluor will assume, as Chairman and Chief
Executive Officer for a term commencing July 15, 1998 and ending July 14, 2003.
Mr. Carroll's employment agreement provides for a starting base salary of
$900,000 per year, subject to adjustment in accordance with compensation
practice for senior management employees to be established by New Fluor. Mr.
Carroll is eligible for an annual bonus with a target level of not less than
$825,000, prorated for partial years of employment. Consistent with the annual
bonus program to be established by New Fluor, the bonus may range from zero up
to two times the target level, based on performance measured against specific
criteria established by New Fluor's Organization and Compensation Committee.
Mr. Carroll received a bonus of $1,000,000 in fiscal year 1999 from Fluor
Corporation.

In addition, Mr. Carroll is to receive a non-discretionary annual incentive
bonus of $100,000, which Fluor Corporation's Organization and Compensation
Committee decided to increase to $200,000 for fiscal year 1999, prorated for
partial years of employment, and which was deferred under Fluor Corporation's
Executive Deferred Compensation Program. New Fluor will assume the Executive
Deferred Compensation Program following the Distribution.

Mr. Carroll is eligible for a cash long-term incentive award for the 1999-
2001 three-year performance cycle at a target level of not less than $240,000.
Under the Long-Term Incentive Program to be established by New Fluor, this
award may range from zero up to two times the target level, based on New
Fluor's performance over the performance cycle.

Upon commencement of his duties, Mr. Carroll was granted an option to
purchase 200,000 shares of Fluor Corporation Common Stock which became
exercisable with respect to 20% of the shares on the date of grant and becomes
exercisable with respect to 20% of the shares on each of the next four
anniversaries of the grant date. A portion of this grant, 10,925 shares, was
granted as an incentive stock option within the meaning of Section 422 of the
Code. The agreement also provided for an additional grant of stock options,
restricted stock and restricted units, which was made on December 8, 1998, for
57,940 options, 11,300 shares of restricted stock and 6,500 restricted units.
The additional options will vest 25% on each of the next four anniversaries of
the date of grant, and the restricted stock and units vest 10% on each of the
next ten anniversaries of the grant date.

At the same time Mr. Carroll was also granted 148,634 shadow stock units
which become exercisable if Mr. Carroll remains continuously employed through
the full term of the agreement, or if Mr. Carroll's employment terminates due
to death or disability, is terminated by New Fluor without "cause," is
terminated by Mr. Carroll for "good reason," or is terminated following a
"change of control" (as such terms are defined in the agreement). In the event
Mr. Carroll's employment terminates prior to the expiration of the term for any
reason other than the foregoing, the units will become exercisable as of the
date of termination as to a pro rata amount, prorated daily during the term.
All items of Fluor Corporation stock-based compensation granted to Mr. Carroll
described in this paragraph and the preceding paragraph will be converted into
similar items of New Fluor stock-based compensation as described in "--New
Fluor Treatment of Outstanding Fluor Corporation Compensatory Stock Awards."

Mr. Carroll has also been provided with a loan in the principal amount of
$5,000,000 to facilitate the purchase of a residence in the Southern California
area in connection with his relocation from Houston, Texas. The loan, which
will be transferred from Fluor Corporation to New Fluor upon the Distribution,
and which is secured by a first trust deed on the residence, provides for an
interest rate of 5.68%, payable annually, with a balloon payment of the entire
amount due on January 15, 2004. The loan is subject to acceleration in the
event of Mr. Carroll's termination of employment for any reason prior to the
expiration of the term of the agreement.

111
<PAGE>

The agreement also confirms Mr. Carroll's participation in various incentive
and employee benefit plans and programs as may be in effect from time to time
with respect to executives employed by Fluor Corporation, including, but not
limited to, automobile use and expense reimbursement, reimbursement of
relocation expenses, and participation in Fluor Corporation's deferred
compensation program, retirement plans, group health insurance plans and
executive health care plan. New Fluor will assume these executive compensation
programs or implement similar programs. Mr. Carroll is also entitled to
reimbursement for certain legal, accounting and tax preparation services as
well as reimbursement of certain country club expenses. In addition, the
agreement provides Mr. Carroll a death benefit under Fluor Corporation's
Executive Supplemental Benefit Plan, which has been set at $5,000,000 and which
will be assumed by New Fluor. For purposes of the plan, termination of Mr.
Carroll's employment by New Fluor without "cause" or by Mr. Carroll for "good
reason" shall constitute an approved early retirement.

New Fluor may terminate Mr. Carroll's employment at any time for "cause" if
a majority of the non-employee members of the New Fluor Board vote in favor of
such termination or without "cause" on 30 days notice by New Fluor. Mr. Carroll
may terminate his employment at any time for "good reason." "Good reason"
includes, among other things, a reduction in Mr. Carroll's base salary or other
benefit levels, a significant diminution in Mr. Carroll's duties and
responsibilities and the assignment to Mr. Carroll of duties and
responsibilities inconsistent with his position as Chairman and Chief Executive
Officer. Mr. Carroll may also terminate his employment at any time on 30 days
notice, but such termination would not be considered for "good reason" unless
the specific requirements for "good reason" were met.

The agreement also provides for stipulated payments in connection with the
termination of Mr. Carroll's employment. Upon termination for any reason, New
Fluor will be obligated to pay Mr. Carroll as a minimum amount all accrued and
unpaid base salary, any unpaid bonus and certain other unpaid amounts, and will
provide Mr. Carroll title to the automobile provided under the agreement,
provided that Mr. Carroll was employed for at least two years prior to the
termination of his employment.

In the event of Mr. Carroll's termination of employment upon disability, New
Fluor will be obligated to pay Mr. Carroll, in addition to the minimum amount:

. his base salary for a period of one year following such termination;

. a prorated portion of the target bonus for the year in which the
termination occurs;

. a prorated portion of the long-term incentive award for each performance
cycle in which such termination of employment occurs; and

. long-term disability payments equal to 60% of his base salary beginning
one year after such termination and continuing for two years, or until
his death or attainment of age 65, whichever occurs first.

Mr. Carroll's reduced base salary payments and long-term disability payments
will be reduced by any long-term disability payments he receives from any
disability plan or programs contributed to by New Fluor.

If Mr. Carroll's employment is terminated by New Fluor without "cause" or by
Mr. Carroll for "good reason," New Fluor will be obligated to pay Mr. Carroll,
in addition to the minimum amount:

. his base salary for the lesser of three years or the remaining term of
the agreement;

. annual bonuses equal to the target bonus for the year of his termination
for the lesser of three years or the remaining term of the agreement,
including a prorated bonus for any partial year;

. long-term incentive awards equal to the target award for each
performance cycle for the lesser of three years or the remaining term of
the agreement, also prorated; and

112
<PAGE>

. a lump-sum cash payment amount equal to the excess, if any, of (1) a
pro-rata amount, prorated daily during the term, of Mr. Carroll's
$5,000,000 residence loan, over (2) the value at the date of termination
of the 148,634 shadow stock units awarded to Mr. Carroll at the
commencement of his employment.

This conditional amount is only payable in the event of termination by New
Fluor without "cause" or termination by the executive for "good reason." In
addition, if a "change of control" occurs within two years after such a
termination, Mr. Carroll will be entitled to receive a lump-sum payment of the
foregoing amounts.

Retention Arrangements

In order to strengthen the retention of the services of Mr. Stein, currently
the President and Chief Executive Officer of Fluor Global Services, Mr.
Rollans, currently the President and Chief Executive Officer of Fluor Signature
Services, and Mr. Boeckmann, currently the President and Chief Executive
Officer of Fluor Daniel, Messrs. Stein, Rollans and Boeckmann were provided
with retention arrangements whereby each officer can earn $1,743,159,
$1,122,424 and $2,500,000, respectively (plus investment return on amounts
conditionally credited to him on a pro rata basis during the term of his
arrangement), if he remains continuously employed until October 31, 2001, or
January 1, 2004 in the case of Mr. Boeckmann. These retention arrangements will
be assumed by New Fluor following the Distribution. The amounts under the
arrangements will be credited into the officers' accounts in New Fluor's
Deferred Compensation Program if they remain continuously employed until
October 31, 2001, or January 1, 2004 in the case of Mr. Boeckmann, or their
employment terminates prior to that date due to death or disability or a
company-initiated reduction in force, or following a change of control. In the
event their employment terminates prior to such vesting date for any reason
other than the foregoing, then all of the amount will be forfeited.

Under the retention arrangements, Messrs. Stein and Rollans were also
provided with loans in the amount of $1,006,841 and $1,627,576, respectively.
The loans, which will be assumed by New Fluor and which are secured by deeds of
trust on their residences, each provide for an interest rate of 4.52%,
compounded annually with a balloon payment of the entire amount due on
termination of employment. The loans are subject to acceleration in the event
of the officers' termination of employment for any reason prior to October 31,
2001. The loans will be forgiven upon their termination of employment on or
after October 31, 2001, or if their employment terminates prior to that date
due to death or disability or any termination by New Fluor other than for
cause, or following a change of control.

Mr. Boeckmann's retention arrangement also includes an incentive portion,
pursuant to which Mr. Boeckmann has been granted 60,600 shares of restricted
stock and 40,400 tandem-restricted units. The earnings of these shares and
units will be based upon the achievement of pre-established annual performance
objectives to be determined annually by the Organization and Compensation
Committee of the New Fluor board. The award will be earned in 25% increments if
established objectives for each of the four fiscal years beginning October 31,
2000 are achieved. If the annual objective is not achieved in any fiscal year,
then that portion of the award is forfeited. The earned restricted stock and
units will vest at the end of the four-year performance period on January 1,
2004. The entire award, both earned and unearned portions, will be forfeited if
Mr. Boeckmann voluntarily terminates his employment or is terminated for cause
prior to January 1, 2004. All items of Fluor Corporation stock-based
compensation granted to Mr. Boeckmann described in this paragraph will be
converted into similar items of New Fluor stock-based compensation as described
in "--New Fluor Treatment of Outstanding Fluor Corporation Compensatory Stock
Awards."

Loans

In December 1997, Mr. Stein received an interest-free loan in the amount of
$1,000,000 which Mr. Stein used to purchase his new residence in connection
with Mr. Stein's relocation to Fluor Corporation's California headquarters. The
loan requires payment of principal in yearly installments equal to 50% of Mr.
Stein's after-tax proceeds from his annual incentive compensation award
commencing February 1, 2000, with the remaining balance due February 1, 2006.
The loan is secured by a deed of trust on Mr. Stein's residence. New Fluor will
assume this loan in connection with the Distribution.

113
<PAGE>

NEW FLUOR CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS

Since the beginning of the fiscal year ended October 31, 1997, Fluor
Corporation has engaged in the following transactions with persons expected to
serve as New Fluor's directors and executive officers after the Distribution.

In addition to the loans described above in "Management of New Fluor--
Employment Contracts and Termination of Employment Arrangements for New Fluor
Executive Officers," Fluor Corporation has made interest-free housing loans to
the following persons expected to be executive officers of New Fluor in the
amounts indicated: Mr. Ralph F. Hake, Executive Vice President and Chief
Financial Officer of New Fluor--$2,000,000; and Mr. Alan L. Boeckmann,
President and Chief Executive Officer of Fluor Daniel--$350,000. The loan
advanced to Mr. Hake is payable in five equal annual installments commencing in
2000; and the loan advanced to Mr. Boeckmann is payable in four equal annual
installments commencing in 2000. New Fluor will assume both loans in connection
with the Distribution.

114
<PAGE>

MANAGEMENT OF MASSEY

Massey Board of Directors

The business of Massey will be managed under the direction of its board of
directors. The six persons listed in the table below are expected to serve as
the directors of Massey after the Distribution. Massey may add additional
directors in the months following the Distribution. Similar to the current
Fluor Corporation board of directors, the Massey board of directors will be
divided into three classes. Directors for each class will be elected at the
annual meeting of shareholders held in the year in which the term for such
class expires and will serve thereafter for three years.

<TABLE>
<CAPTION>
Name Age Class Initial Term Expires
---- --- ----- --------------------
<S> <C> <C> <C>
Don L. Blankenship.............................. 49 III 2002
James L. Gardner................................ 49 I 2003
E. Gordon Gee................................... 56 I 2003
William R. Grant................................ 75 II 2001
Admiral Bobby R. Inman.......................... 69 III 2002
Dr. Martha R. Seger............................. 68 II 2001
</TABLE>

Set forth below is information concerning each person expected to serve as a
director of Massey after the Distribution. For information concerning Mr.
Blankenship, see "--Massey Executive Officers" below.

James L. Gardner is an attorney in private practice. Mr. Gardner previously
served as Senior Vice President and General Counsel of A.T. Massey Coal
Company, Inc. from 1994 to February 2000.

E. Gordon Gee is the Chancellor of Vanderbilt University. Mr. Gee also
serves as a director of Dollar General Corporation, The Ullman Fund, Allmerica
Financial Services, Hasbro, Inc., Intimate Brands, Inc., Glimcher Realty Trust
and The Limited.

William R. Grant is the co-founder of Galen Partners. Mr. Grant also serves
as a director of Allergan, Inc., MiniMed, Inc., Ocular Sciences, Inc. and
Westegaard.com. He is a member of the General Electric Advisory Board, Trustee
for the Center of Blood Research (Harvard) and Trustee, Emeritus, Mary Flager
Cary Charitable Trust.

Committees of Massey Board

The standing committees of the Massey board of directors will consist of an
Audit Committee, a Compensation Committee and an Executive Committee.

Audit Committee

The principal duties of the Audit Committee are as follows:

. to nominate the firm of independent outside auditors for appointment by
the board;

. to meet with Massey's financial management, internal audit management
and independent outside auditors to review matters relating to Massey's
internal accounting controls, internal audit program,

115
<PAGE>

accounting practices and procedures, the scope and procedures of the
outside audit, the independence of the outside auditors and other
matters relating to the financial condition of Massey;

. to review Massey's annual report to shareholders, proxy materials and
annual report on Form 10-K for filing with the Securities and Exchange
Commission; and

. to report to the board periodically any recommendations the Audit
Committee may have with respect to the foregoing matters.

The Audit Committee has the power to investigate any matter brought to its
attention within the scope of its duties and to retain counsel for this
purpose where appropriate.

The members of the Audit Committee are expected to be William R. Grant,
Martha R. Seger and E. Gordon Gee, none of whom is a current or former officer
or employee of Massey or any of its subsidiaries.

Compensation Committee

The principal duties of the Compensation Committee are as follows:

. to review corporate organizational structures;

. to review key employee compensation policies, plans and programs;

. to monitor performance and compensation of employee-directors and
officers of Massey and other key employees;

. to prepare recommendations and periodic reports to the board concerning
such matters; and

. to function as the committee which administers the long-term incentive
programs referred to in "--Compensation of Massey Executive Officers"
below.

The members of the Compensation Committee are expected to be Bobby R.
Inman, William R. Grant and Martha R. Seger, none of whom is a current or
former officer or employee of Massey or its subsidiaries.

Governance Committee

The function of the Governance Committee is as follows:

. to seek out, evaluate and recommend to the board qualified nominees for
election as directors of Massey;

. to recommend directors of Massey for election as members of committees
of the board; and

. to consider other matters including the size and composition of the
board and committees and other issues of corporate governance.

The members of the Governance Committee are expected to be James L.
Gardner, E. Gordon Gee, William R. Grant and Bobby R. Inman.

Executive Committee

When the Massey board is not in session, the Executive Committee will have
all of the power and authority of the board except with respect to:

. amending Massey's Restated Certificate of Incorporation and Bylaws;

. adopting an agreement of merger or consolidation;

. recommending to the shareholders the sale, lease or exchange of all or
substantially all of Massey's property and assets;

116
<PAGE>

. recommending to the shareholders a dissolution of Massey or a revocation
of such dissolution;

. declaring a dividend; or

. issuing stock.

The members of the Executive Committee are expected to be Don L.
Blankenship, James L. Gardner, William R. Grant and Bobby R. Inman.

Compensation Committee Interlocks and Insider Participation

None of Massey's executive officers has served as a director or member of
the compensation committee, or other committee serving an equivalent function,
of any entity of which an executive officer is expected to serve as a member of
Massey's Compensation Committee.

Compensation of Massey Directors

Following the Distribution, Massey will implement director compensation
programs as described in this section. Five of the six persons expected to
serve as directors of Massey will not be salaried employees of Massey or its
subsidiaries. For their services, these non-employee directors will be paid a
retainer at the annual rate of $30,000 or, in the case of directors also
serving as chairman of board committees, $34,000, plus a fee of $2,000 per day
for each day upon which one or more board or board committee meetings are
attended. Salaried employees will receive no additional compensation for their
services as directors. Directors are permitted to defer receipt of directors'
fees until their retirement or other termination of status as a director.
Amounts deferred at the election of the director either accrue interest at
rates fixed from time to time by the Executive Committee or are valued as if
having been invested in Massey Common Stock.

After the Distribution, Massey will maintain and continue the Fluor
Corporation Stock Plan for Non-Employee Directors, referred to as the Director
Stock Plan, and the Fluor Corporation Restricted Stock Plan for Non-Employee
Directors, referred to as the Director Restricted Stock Plan. Directors who are
not employees of Massey or its subsidiaries will be eligible to participate in
the Director Stock Plan and the Director Restricted Stock Plan.

The Director Stock Plan provides that participants are eligible to receive,
when they become directors, 1,000 shares of restricted common stock and
restricted units, subject to adjustment for the adjustment ratio described in
"--Massey Treatment of Outstanding Fluor Compensatory Stock Awards" below, in
an amount determined by the Compensation Committee which are payable in cash to
assist in satisfying related income tax liabilities. After the Distribution,
the number of shares subject to each of these grants will be adjusted according
to the same methodology applied to Fluor Corporation restricted shares and
units, as described below under "--Massey Treatment of Outstanding Fluor
Corporation Compensatory Stock Awards." Awards are made on a date determined by
the Compensation Committee following appointment. Restrictions lapse on 20% of
the shares on March 14 next following the date of the initial award.
Restrictions lapse on the balance of the shares in four equal increments on
each succeeding March 14.

In addition to benefits available under the Director Stock Plan, directors
who are not employees of Massey or its subsidiaries will be eligible to receive
grants of restricted common stock under the Massey Restricted Stock Plan for
Non-Employee Directors, referred to as the Director Restricted Stock Plan. The
Director Restricted Stock Plan provides for annual grants of 500 shares of
restricted stock, subject to adjustment for the adjustment ratio described in
"--Massey Treatment of Outstanding Fluor Compensatory Stock Awards" below, to
each eligible director, which grants are made as of the first board meeting in
any calendar year during which such director serves as a member of the board.
After the Distribution, the number of shares subject to each of these grants
will be adjusted according to the same methodology applied to Fluor Corporation
restricted shares and units, as described below under "--Massey Treatment of
Outstanding Fluor Corporation Compensatory Stock Awards." Restrictions on all
stock granted under the plan lapse once such stock has been held for at least
six months, the applicable director has served on the board for at least six
years and the director either retires from the board, dies or becomes
permanently and totally disabled or a change of control occurs.

117
<PAGE>

Massey Executive Officers

The following table lists the seven persons who are expected to serve as
executive officers of Massey immediately following the Distribution.

<TABLE>
<CAPTION>
Name Age Expected Position
---- --- -----------------
<S> <C> <C>
Don L. Blankenship...... 50 Chairman, Chief Executive Officer and President
Bennett K. Hatfield..... 43 Executive Vice President and Chief Operating Officer
H. Drexel Short......... 44 Senior Vice President, Group Operations
Roger L. Nicholson...... 40 Vice President, Secretary and General Counsel
Jeffrey M. Jarosinski... 40 Vice President, Finance and Chief Financial Officer
Baxter F. Phillips,
Jr..................... 53 Vice President and Treasurer
Madeleine M. Curle...... 41 Vice President, Human Resources
</TABLE>

Set forth below is information concerning each person expected to serve as
an executive officer of Massey after the Distribution.

Don L. Blankenship has been a director of Fluor Corporation since 1996 and
the President and Chief Executive Officer of A.T. Massey Coal Company,
Inc.(/1/) since 1992. Mr. Blankenship was formerly the President and Chief
Operating Officer of A.T. Massey Coal Company from 1990 and President of Massey
Coal Services, Inc.(/2/) from 1989. Mr. Blankenship joined Rawl Sales &
Processing Co.(/3/) in 1982. Mr. Blankenship also serves as a director of the
National Mining Association, the Governor's Mission West Virginia Board and the
Norfolk Southern Advisory Board.

Bennett K. Hatfield has been Executive Vice President and Chief Operating
Officer of A.T. Massey Coal Company, Inc.(/1/) since June 1998. Mr. Hatfield
was formerly Senior Vice President and Chief Administrative Officer of A.T.
Massey from December 1997 to May 1998, Vice President--Planning of A.T. Massey
from November 1994 to November 1997, and Executive Vice President and Chief
Coordinating Officer, NS Region of Massey Coal Services, Inc.(/2/) from 1991.
Mr. Hatfield joined A.T. Massey in 1979.

H. Drexel Short has been Senior Vice President, Group Operations of A.T.
Massey since May 1995. Mr. Short was formerly Chairman of the Board and Chief
Coordinating Officer of Massey Coal Services from April 1991 to April 1995. Mr.
Short joined A.T. Massey in 1981.

Roger L. Nicholson has been Vice President and General Counsel of A.T.
Massey since February 2000. Mr. Nicholson joined A.T. Massey in 1995 as
Assistant General Counsel. Prior to joining A.T. Massey, Mr. Nicholson was
associated with the law firm of Robinson & McElwee in Lexington, Kentucky.
Prior to that, Mr. Nicholson served as chief real estate counsel for Arch
Mineral Corporation and as vice president, secretary and general counsel of its
land-holding subsidiary, Ark Land Company.

Jeffrey M. Jarosinski has been Vice President, Finance and Chief Financial
Officer of A.T. Massey since September 1998. Mr. Jarosinski was formerly Vice
President, Taxation of A.T. Massey from 1997 to August 1998 and Assistant Vice
President, Taxation of A.T. Massey from 1993 to 1997. Mr. Jarosinski joined
A.T. Massey in 1988. Prior to joining A.T. Massey, Mr. Jarosinski held various
positions in accounting, most recently as Manager at Womack, Burke &
Associates, CPAs in Richmond, Virginia.

Baxter F. Phillips, Jr. has been Vice President and Treasurer of A.T. Massey
since October 2000. Mr. Phillips joined A.T. Massey in 1981 and has served in
various capacities with A.T. Massey, including Corporate Treasurer, Manager of
Export Sales, Corporate Human Resources Manager, Vice President of Benefits and
Vice President, Purchasing and Administration. Prior to joining A.T. Massey,
Mr. Phillips held various positions in banking and investments.

Madeleine M. Curle has been Vice President, Human Resources of A.T. Massey
since May 2000. Ms. Curle was formerly Vice President, Benefits from December
1995 to April 2000, Assistant Vice President, Benefits Planning and
Administration from May 1995 to November 1995, and Director, Medical and

118
<PAGE>

Retirement Programs from January 1995 to April 1995. Ms. Curle joined A.T.
Massey in October 1993. Prior to joining A.T. Massey, Ms. Curle served as an
employee benefits consultant at Foster Higgins, a national consulting firm
(recently merged with William M. Mercer, Inc.).
--------
(1) A.T. Massey Coal Company, Inc., or A.T. Massey, is an indirectly wholly-
owned subsidiary of Fluor Corporation, which, along with A.T. Massey's
subsidiaries, conducts A.T. Massey's coal-related businesses.
(2) Massey Coal Services, Inc. is a wholly-owned subsidiary of A.T. Massey.
(3) Rawl Sales & Processing Co. is a wholly-owned subsidiary of A.T. Massey.

Compensation of Massey Executive Officers

The following table provides information concerning aggregate cash
compensation, stock-based compensation and other compensation paid by Fluor
Corporation for services rendered to it in the fiscal year ended October 31,
1999 by Massey's Chief Executive Officer and each of the persons who are
anticipated to be one of Massey's four other most highly compensated executive
officers following the Distribution, collectively referred to as the named
executive officers. During the period presented, the named executive officers
were compensated in accordance with Fluor Corporation's plans and policies.
Stock-based compensation described in the following table is expressed in
shares of Fluor Corporation Common Stock. Upon consummation of the
Distribution, each outstanding Fluor Corporation stock-based item of
compensation held by the named executive officers will be converted into a
Massey stock-based item of compensation of a similar nature. See "--Massey
Treatment of Outstanding Fluor Corporation Compensatory Stock Awards" below.

119
<PAGE>

Summary Compensation Table for Services Rendered to Fluor Corporation

<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
----------------------- --------------------- ---------
Other
Annual Restricted Securities Long-Term
Compen- Stock Underlying Incentive All Other
Name and Principal Fiscal Salary Bonus sation Awards ($) Options/ Payouts Compensation
Position with New Fluor Year ($) (1) ($) (1) ($) (2) (3) SARs (#) ($) ($) (4)
----------------------- ------ ------- ------- ------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don L. Blankenship...... 1999 691,690 625,000 58,060 3,404,729 16,260 134,700 178,476
President and Chief
Executive Officer, A.T.
Massey Coal Company,
Inc.
Bennett K. Hatfield..... 1999 275,000 270,000 17,047 22,724 2,800 126,000 24,640
Executive Vice
President and Chief
Operating Officer, A.T.
Massey Coal Company,
Inc.
H. Drexel Short......... 1999 205,920 192,300 16,671 22,724 2,800 126,000 20,408
Senior Vice President,
Group Operations, A.T.
Massey Coal Company,
Inc.
Jeffrey M. Jarosinski... 1999 141,667 93,000 4,512 22,724 2,800 67,500 9,878
Vice President, Finance
and Chief Financial
Officer, A.T. Massey
Coal Company, Inc.
Baxter F. Phillips, Jr.. 1999 134,167 92,000 8,607 20,151 2,500 114,000 11,200
Vice President and
Treasurer, A.T. Massey
Coal Company, Inc.
</TABLE>
--------
(1) Amounts shown include cash compensation earned and received by the named
executive officers as well as amounts earned but deferred at the election
of those officers.

(3) The amount reported in the table includes restricted stock and shadow
stock, and represents the market value at the date of grant, without giving
effect to the diminution in value attributable to the restrictions on such
stock. In fiscal year 1999, Fluor Corporation awarded 23,972 shares of
restricted stock and 60,000 shares of shadow stock to all named executive
officers as a group. With respect to shares of restricted stock granted in
fiscal year 1999, 2,605 shares of restricted stock vest at the rate of 10%
per year and 21,367 shares of restricted stock vest at the rate of 33 1/3%
per year. With respect to shares of shadow stock granted in fiscal year
1999, all 60,000 shares granted to Mr. Blankenship will vest upon
completion of the term of his employment agreement or sooner in certain
events related to termination of his employment. As of the end of fiscal
year 1999, the aggregate restricted and shadow stock holdings for each of
the named executive officers consisted of the following: Mr. Blankenship,
148,501 shares with a value of $5,893,633; Mr. Hatfield, 3,620 shares with
a value of $144,348; Mr. Short, 3,564 shares with a value of $142,115; Mr.
Jarosinski, 1,327 shares with a value of $52,914; Mr. Phillips, 2,100
shares with a value of $83,738. Holders of restricted stock are entitled to
receive dividends paid on common stock.

(4) The total amount shown for Mr. Blankenship consists of the following:
$27,619--benefit attributable to Fluor Corporation-owned life insurance
policy; $101,068--Fluor Corporation contributions and other allocations to
defined contribution plans and related excess benefit plans; $2,557--
childcare expenses; $36,343--personal use of Fluor Corporation plane and
related tax gross up; $11,071--miscellaneous expenses. The total amounts
shown for Messrs. Hatfield, Short, Jarosinski and Phillips consist of Fluor
Corporation contributions and other allocations to defined contribution
plans and related excess benefit plans.

120
<PAGE>

Option Grants in Last Fiscal Year to Purchase Fluor Corporation
Common Stock

The following table provides information concerning fiscal year 1999 grants
of stock options and stock appreciation right, or SARs, to purchase shares of
Fluor Corporation Common Stock to Massey's named executive officers under Fluor
Corporation's long-term incentive program. Options to purchase Fluor
Corporation Common Stock will be converted into options to purchase Massey
Common Stock. See "--Massey Treatment of Outstanding Fluor Corporation
Compensatory Stock Awards" below.

<TABLE>
<CAPTION>
Individual Grants (1)(2)
---------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise Grant Date
Options Employees in Price(s) Expiration Present
Name Granted (1) Fiscal Year ($/SH)(2) Date Value ($)(3)
---- ----------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Don L. Blankenship...... 16,260 1.4 42.875 12/08/08 226,177
Bennett K. Hatfield..... 2,800 0.2 42.875 12/08/08 38,948
H. Drexel Short......... 2,800 0.2 42.875 12/08/08 38,948
Jeffrey M. Jarosinski... 2,800 0.2 42.875 12/08/08 38,948
Baxter F. Phillips,
Jr..................... 2,500 0.2 42.875 12/08/08 34,775
</TABLE>
--------
(1) The named executive officers received only grants of options in fiscal year
1999; SARs were granted to other members of Fluor Corporation's management.

(3) The Grant Date Present Value is computed using the Black-Scholes option
pricing model based on the following general assumptions: (a) an expected
option term of six years for options that expire ten years from the date of
grant which reflects a reduction of the actual 10-year life of the option
based on historical data regarding the average length of time an executive
officer holds an option before exercising; (b) a risk-free interest rate
that represents the interest rate on a U.S. Treasury Strip with a maturity
date corresponding to that of the expected option term; (c) stock price
volatility which is calculated using daily stock prices over a three-year
period preceding the grant date; and (d) a dividend yield which is
calculated using yields over a three-year period preceding the grant date.
The specific option pricing model assumptions for the grants were as
follows: $42.875 exercise price; 4.43% risk-free interest rate; 33.4% stock
price volatility; and 1.37% dividend yield. Notwithstanding the fact that
these options are non-transferable, no discount for lack of marketability
was taken. The option value was discounted by approximately 3% for risk of
forfeiture during the vesting period. The actual value, if any, an
executive officer may realize will depend upon the excess of the stock
price over the exercise price on the date the option is exercised, so there
is no assurance that the value realized by the executive officer will be at
or near the amount shown.

121
<PAGE>

Aggregate Fluor Corporation Option Exercises in Last Fiscal Year and Fiscal
Year
End Option/SAR Values

The following table provides information concerning the exercise of Fluor
Corporation options by Massey's named executive officers during fiscal year
1999 and the number and value of securities underlying unexercised Fluor
Corporation options and SARs held by Massey's named executive officers as of
the end of fiscal 1999. Options to purchase Fluor Corporation Common Stock will
be converted into options to purchase Massey Common Stock. See "--Massey
Treatment of Outstanding Fluor Corporation Compensatory Stock Awards" below.

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options/SARs at Fiscal the-Money Options/SARs at
Acquired on Value Year End (#) Fiscal Year End ($)(1)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Don L. Blankenship...... 0 0 77,965 352,205 146,449 146,449
Bennett K. Hatfield..... 0 0 12,500 4,810 6,414 6,414
H. Drexel Short......... 0 0 7,308 4,810 6,414 6,414
Jeffrey M. Jarosinski... 0 0 3,365 4,373 0 5,815
Baxter F. Phillips,
Jr..................... 0 0 6,617 4,323 5,815 5,815
</TABLE>
--------
(1) Market value of underlying securities at fiscal year-end, minus the
exercise price.

Long-Term Fluor Corporation Incentive Plan Awards in Last Fiscal Year

The following table provides information concerning cash incentive awards
made to Massey's named executive officers during fiscal year 1999 under Fluor
Corporation's Long-Term Incentive Award Program. Each award under the Long-Term
Incentive Award Program represents the right to receive an amount in cash if
earnings targets for a specified period, as established by Fluor Corporation's
Organization and Compensation Committee, are achieved. If earnings fall below
the threshold amount, no award is payable. If earnings fall between the
threshold amount and the target amount or between the target amount and the
maximum amount then the amount of the award is prorated accordingly. Following
the Distribution, these earnings goals will be adjusted to exclude the New
Fluor Business. Payments made under the Long-Term Incentive Program are
reported in the Summary Compensation Table in the year of payout, if any.

<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price
Performance or Other Based Plans ($)(1)
Period Until Maturation -------------------------------
Name or Payout Threshold Middle Target Maximum
---- ----------------------- --------- ------------- -------
<S> <C> <C> <C> <C>
Don L. Blankenship...... 3 years 0 67,400 134,800
Bennett K. Hatfield..... 3 years 0 63,000 126,000
H. Drexel Short......... 3 years 0 63,000 126,000
Jeffrey M. Jarosinski... 3 years 0 57,000 114,000
Baxter F. Phillips,
Jr..................... 3 years 0 57,000 114,000
</TABLE>
--------
(1) Awards are payable if certain thresholds are met based on consolidated
earnings before interest, taxes, depreciation and amortization of A.T.
Massey rather than Fluor Corporation earnings.

122
<PAGE>

Pension Plans

The following table shows the estimated annual pension benefits payable to a
covered participant at normal retirement age under the A.T. Massey Coal
Company, Inc. defined benefit pension plans, or the A.T. Massey Pension Plans,
as well as a non-qualified supplemental pension that provides benefits that
would otherwise be denied participants by reason of certain Code limitations on
qualified plan benefits, based on remuneration that is covered under the plans
and years of service with A.T. Massey and its subsidiaries.

<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------
Remuneration 10 15 20 25 30 35 or More
------------ -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$200,000................ $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $105,000
$250,000................ $ 37,500 $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250
$300,000................ $ 45,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500
$350,000................ $ 52,500 $ 78,750 $105,000 $131,250 $157,500 $183,750
$400,000................ $ 60,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
$450,000................ $ 67,500 $101,250 $135,000 $168,750 $202,500 $236,250
$500,000................ $ 75,000 $112,500 $150,000 $187,500 $225,000 $262,500
$550,000................ $ 82,500 $123,750 $165,000 $206,250 $247,500 $288,750
$600,000................ $ 90,000 $135,000 $180,000 $225,000 $270,000 $315,000
$650,000................ $ 97,500 $146,250 $195,000 $243,750 $292,500 $341,250
$700,000................ $105,000 $157,500 $210,000 $262,500 $315,000 $367,500
$750,000................ $112,500 $168,750 $225,000 $281,250 $337,500 $393,750
$800,000................ $120,000 $180,000 $240,000 $300,000 $360,000 $420,000
$850,000................ $127,500 $191,250 $255,000 $318,750 $382,500 $446,250
$900,000................ $135,000 $202,500 $270,000 $337,500 $405,000 $472,500
$950,000................ $142,500 $213,750 $285,000 $356,250 $427,500 $498,750
</TABLE>

A participant's remuneration covered by the A.T. Massey Pension Plans is his
average salary and bonus (as reported in the Summary Compensation Table) for
the highest 60 consecutive months prior to the determination date. As of the
end of the last calendar year, Mr. Blankenship's covered compensation under the
A.T. Massey Pension Plans was $160,000, and his covered compensation under the
non-qualified supplemental pension was $781,774 for a combined covered
compensation amount of $941,774; he had been credited with seventeen years of
service. As of the end of the last calendar year, Mr. Hatfield's covered
compensation under the A.T. Massey Pension Plans was $160,000, and his covered
compensation under the non-qualified supplemental pension was $229,361 for a
combined covered compensation amount of $389,361; he had been credited with
twenty years of service. As of the end of the last calendar year, Mr. Short's
covered compensation under the A.T. Massey Pension Plans was $160,000, and his
covered compensation under the non-qualified supplemental pension was $192,541
for a combined covered compensation amount of $352,541; he had been credited
with eighteen years of service. As of the end of the last calendar year, Mr.
Jarosinski's covered compensation under the A.T. Massey Pension Plans was
$156,935, and his covered compensation under the non-qualified supplemental
pension was $0 for a combined covered compensation amount of $156,935; he had
been credited with eleven years of service. As of the end of the last calendar
year, Mr. Phillips's covered compensation under the A.T. Massey Pension Plans
was $160,000, and his covered compensation under the non-qualified supplemental
pension was $39,170 for a combined covered compensation amount of $199,170; he
had been credited with eighteen years of service. Benefits shown are computed
as a ten year certain and life annuity beginning at age 65 with no deduction
for Social Security or other offset amounts.

123
<PAGE>

Change of Control Provisions in Fluor Corporation Stock Plans

Under Fluor Corporation's stock plans which will be retained by Massey
following the Distribution, restrictions on exercisability and transferability
which are premised on continued service with Fluor Corporation or its
subsidiaries lapse if the holder's employment is terminated for any reason
within two years following a change of control of Fluor Corporation. A change
of control of Fluor Corporation shall be deemed to have occurred if (1) a third
person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, acquires shares of Fluor Corporation having twenty-five
percent or more of the total number of votes that may be cast for the election
of directors of Fluor Corporation or (2) as a result of any cash tender or
exchange offer, merger or other business combination, or any combination of the
foregoing transactions, the persons who were directors of Fluor Corporation
before such transaction shall cease to constitute a majority of the board of
directors of Fluor Corporation or any successor to Fluor Corporation.

Massey Treatment of Outstanding Fluor Corporation Compensatory Stock Awards

Except as described below with respect to certain stock-based benefits
provided to Mr. Blankenship, upon consummation of the Distribution, each
outstanding Fluor Corporation stock-based element of incentive compensation,
such as options, restricted shares and units, SARs and shadow stock, which are
held by current or former executive officers and other key employees of Massey
will be adjusted to represent Massey options, restricted shares and units, SARs
and shadow stock, respectively. The methodology to be used in making the
adjustment will be based on the opening per share price of the Massey Common
Stock on the first day of trading after the Distribution relative to the
closing per share price of Fluor Corporation stock on the last trading day
before the Distribution. For example, if the closing per share price of Fluor
Corporation stock was $31 and the opening per share price for Massey Common
Stock was $10.25, then the adjustment ratio would be 3.0244. For options, the
number of Massey shares covered by each option grant would be increased by this
ratio, the per share purchase price for each share of the grant would be
decreased by the same ratio and the aggregate purchase price for the grant
would remain the same. For restricted shares and units, SARs and shadow stock,
the number of shares, units, rights or shadow shares covered by each grant will
be adjusted by the same ratio.

Following the Distribution, Massey intends to offer each of its
optionholders, other than its directors and Chief Executive Officer, the
ability to elect to surrender all of the options he or she holds in return for
a company cash payment obligation. The cash payment obligation offered to each
optionholder will be for an amount equal to one-third of the present value of
that person's options, as calculated by Massey using the Black-Scholes option
valuation methodology. Any shares that are subject to options surrendered under
this program will be available for future grants under the Fluor Corporation
1999 Executive Performance Incentive Plan which will be retained by Massey
following the Distribution. The cash payment obligation, if accepted by an
optionholder, is payable over three equal annual installments, with the first
installment paid on the first anniversary of the Distribution, and in certain
cases may be deferred. All or a portion of the payments will be forfeited if
the optionholder ceases to be employed with Massey other than on account of
retirement, death or permanent disability. Massey believes that this program
will reduce its option overhang, help to provide a fresh-start motivation for
Massey employees and provide it with a source for future stock-based incentive
compensation awards.

Employment Contracts and Termination of Employment Arrangements for Massey
Executive Officers

To strengthen the retention of the services of Mr. Blankenship as President
and Chief Executive Officer of A.T. Massey Coal Company, Inc., or A.T. Massey,
Fluor Corporation entered into an employment agreement with Mr. Blankenship,
effective October 1, 1998, for a term ending October 31, 2001.

Mr. Blankenship is entitled to receive a base salary of $650,000 per year,
with adjustments to $700,000 per year on January 1, 1999, $800,000 per year on
January 1, 2000, and $900,000 per year on January 1, 2001.

Mr. Blankenship's agreement provides for annual bonuses in fiscal years
1998, 1999, 2000 and 2001 with target amounts of not less than $540,000,
$625,000, $650,000 and $700,000, respectively, which are based on meeting
predetermined performance goals and objectives established and mutually agreed
to by the Chairman

124
<PAGE>

and Chief Executive Officer of Fluor Corporation and Mr. Blankenship. For 1998
and 1999, Mr. Blankenship received the target bonus. Award payments are made in
accordance with standard practices of A.T. Massey.

Mr. Blankenship is also eligible for a long-term incentive award under Fluor
Corporation's Long-Term Incentive Program. Mr. Blankenship's award for each
three-year performance cycle which commences during the term will have a target
value of $450,000, consisting of a cash element which will have a target value
of $67,350, 16,260 stock options, 3,170 shares of restricted stock and 1,820
restricted units.

Mr. Blankenship was granted 60,000 shadow stock units on October 1, 1998,
1999 and 2000, respectively, and will be granted 60,000 units on October 1,
2001. The units become vested if Mr. Blankenship remains continuously employed
by A.T. Massey through the expiration of the term, or his employment terminates
due to termination by Fluor Corporation without "cause" or terminates following
a "change of control" (as such terms are defined in the agreement).

Upon vesting, the value of these units will be credited to Mr. Blankenship's
account under Fluor Corporation's Executive Deferred Compensation Program. In
the event Mr. Blankenship's employment terminates prior to the expiration of
the term due to death or disability, then any previously granted units will
become vested and the units not yet granted would be forfeited. In the event
Mr. Blankenship's employment terminates prior to the expiration of the term for
any reason other than the foregoing, then all of the units terminate and are
forfeited.

Mr. Blankenship was also granted 300,000 SARs which will vest if
Mr. Blankenship remains continuously employed by A.T. Massey through the
expiration of the term, or if his employment with A.T. Massey terminates either
due to termination by Fluor Corporation without "cause" or following a "change
of control." In each of these cases, the value of the SARs upon vesting will be
credited to Mr. Blankenship's account in Fluor Corporation's Executive Deferred
Compensation Program. In the event Mr. Blankenship's employment terminates
prior to the expiration of the term due to death or disability, then a portion
of the SARs (25% upon grant and an additional 25% on each of the next three
anniversaries of the grant) will vest and be credited to Mr. Blankenship's
account in Fluor Corporation's Executive Deferred Compensation Program and the
unvested SARs would be forfeited. In the event Mr. Blankenship's employment
terminates prior to the expiration of the term for any reason other than the
foregoing, then all of the SARs terminate and are forfeited.

Fluor Corporation will also provide Mr. Blankenship with an after-tax
reimbursement of up to $360,000 of certain home construction costs which become
earned and payable upon the occurrence of the same events which would cause the
vesting of the SARs. In the event that Mr. Blankenship's employment with A.T.
Massey terminates prior to the expiration of the term due to death or
disability, then payment of a portion (25% upon award and an additional 25% on
each of the next three anniversaries of the award) of the amount will be made.

The agreement also provides for certain payments in connection with the
termination of Mr. Blankenship's employment. Upon termination, Fluor
Corporation will be obligated to pay Mr. Blankenship as a minimum amount all
accrued and unpaid base salary, any unpaid bonus, any benefits to which he is
entitled under Fluor Corporation's Executive Deferred Compensation Program and
Long-Term Incentive Award Program. Under the Long-Term Incentive Award Program,
if Mr. Blankenship's employment with A.T. Massey is terminated due to death or
disability, or within two years following a "change of control" as defined in
the program, the stock options, restricted stock and restricted units will
become fully vested, and a pro rata portion of the cash component will become
payable. In the event Mr. Blankenship's employment terminates for any reason
other than the foregoing, then such stock-based awards will be forfeited to the
extent they are unvested and the cash component will be forfeited entirely.

If Mr. Blankenship's employment is terminated by A.T. Massey without cause,
A.T. Massey and/or Fluor Corporation will be obligated to pay Mr. Blankenship,
in addition to the minimum amount, base salary for the remaining term of the
agreement, annual bonuses for the remaining term (including a pro rata bonus
for any partial year) and the house construction cost reimbursement amount.

Mr. Blankenship is also a party to the Special Successor Development and
Retention Program adopted by Fluor Corporation in September 1998. Pursuant to
the program, Mr. Blankenship can earn up to $1,000,000

125
<PAGE>

(plus investment return on amounts conditionally credited to Mr. Blankenship on
a pro rata basis during the term of the program), if he remains continuously
employed by A.T. Massey until July 1, 2001 and if A.T. Massey achieves certain
financial objectives and Mr. Blankenship develops an acceptable successor and
senior executive management team. Fifty percent of the award is related to the
financial objective and 25% of the award is related to each of the acceptable
successor and acceptable senior executive management team. Pursuant to the
program, Mr. Blankenship was also granted 11,829 shares of restricted stock and
6,861 restricted units in December 1998 and 9,538 shares of restricted stock
and 5,365 restricted units in March 1999. The restricted shares and the
restricted units will vest 33% on each of the next three anniversaries of the
grant dates.

The cash amount under the program will be credited into Mr. Blankenship's
account in Fluor Corporation's Executive Deferred Compensation Program if Mr.
Blankenship remains continuously employed until July 1, 2001, or Mr.
Blankenship's employment terminates due to death or disability, or following a
change of control. In the event Mr. Blankenship's employment terminates prior
to such vesting dates for any reason other than the foregoing, then all of the
cash amount and the unvested restricted stock and units will be forfeited.

Also, Fluor Corporation is obligated upon Mr. Blankenship's retirement to
provide Mr. Blankenship with title to a company-owned residence and associated
property in Sprigg, West Virginia, and to pay an amount to reimburse him for
any income taxes owed by him as a result of such title transfer. The residence
was valued at approximately $250,000 in 1998. Upon the recommendation of the
Chief Executive Officer of Fluor Corporation, Fluor Corporation's Organization
and Compensation Committee may authorize such transfer before retirement so
long as it is after July 1, 2001. Also under the program, Fluor Corporation's
Organization and Compensation Committee agreed to approve Mr. Blankenship's
early retirement at age 55 for the purposes of Fluor Corporation's Executive
Supplemental Benefit Plan.

Mr. Blankenship, Fluor Corporation, Massey and New Fluor have entered into
an agreement (the "Amendment Agreement") addressing the treatment of certain
benefits under the arrangements discussed above in connection with the
Distribution. Under the Amendment Agreement, Mr. Blankenship confirms that his
employment agreement is not affected by the Distribution, except as
specifically provided in the Amendment Agreement, and that the Distribution is
not deemed to constitute a termination of his employment. The Amendment
Agreement further provides that in connection with the Distribution (1) Mr.
Blankenship's stock options shall be adjusted to represent Massey options
according to a methodology similar to that described above under "--Massey
Treatment of Outstanding Fluor Corporation Compensatory Stock Awards," except
that the adjustment ratio will be fixed at 3.4, so that his options will be
exercisable for a total of 497,862 shares of Massey Common Stock without
changing the aggregate exercise price of the options, (2) Mr. Blankenship's
stock appreciation rights will continue to represent an equivalent number of
stock appreciation rights on Massey shares but will have their strike price
reduced according to a prescribed ratio calculated under the methodology
described above under "--Massey Treatment of Outstanding Fluor Corporation
Compensatory Awards," (3) Mr. Blankenship's shadow stock units, restricted
stock and restricted units will continue to represent an equivalent number of
shadow stock units, restricted stock and restricted units on Massey shares, and
(4) after the Distribution, Massey will pay Mr. Blankenship $5,520,000 plus an
amount equal to the difference between $719,072 and the closing market price on
the first day after the Distribution of 31,264 shares of New Fluor Common
Stock, plus an additional $403,857, and will credit $2,778,700 to Mr.
Blankenship's deferred compensation account. The $5,520,000, the amount, if
any, of the stock price differential payment, and a corresponding percentage of
the $403,857 payment will not be deductible to Massey under Section 162(m) of
the Code, and it is likely that the treatment of Mr. Blankenship's stock
options will result in variable accounting charges to Massey in years during
which the options remain outstanding based upon the extent to which Massey's
stock price appreciates above the options' adjusted exercise prices. The
payment and deferred compensation credit described in this paragraph are
designed to compensate Mr. Blankenship for the value of his stock-based
incentives attributable to the value of New Fluor Common Stock. In the
Amendment Agreement, Mr. Blankenship and New Fluor also agree to release one
another from any claims arising on or prior to the date of the Amendment
Agreement.

126
<PAGE>

MASSEY CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS

Since the beginning of the fiscal year ended October 31, 1999, Fluor
Corporation has engaged the following transactions with persons expected to
serve as Massey's directors and executive officers after the Distribution.

In February 1995, Massey loaned $175,000 to Mr. Bennett K. Hatfield in
connection with Mr. Hatfield's relocation from Williamson, West Virginia to
Richmond, Virginia. The loan bore interest at a rate of 6% per annum. Mr.
Hatfield repaid $135,000 of the loan and accrued interest in January 2000. The
remainder of the loan was settled by treating the balance as reimbursed moving
expenses which will be included in Mr. Hatfield's 2000 compensation.

127
<PAGE>

SECURITY OWNERSHIP OF NEW FLUOR

Stock Ownership and Stock-Based Holdings of Executive Officers and Directors

All of the outstanding shares of New Fluor Common Stock are currently held
by Fluor Corporation. The following table sets forth as of October 26, 2000 the
number of shares of New Fluor Common Stock that are expected to be beneficially
owned after the Distribution by:

. each of New Fluor's directors;

. each of New Fluor's named executive officers; and

. all New Fluor directors and executive officers as a group.

Stock ownership information is based on (1) the number of shares of Fluor
Corporation Common Stock held as of October 26, 2000 and (2) a distribution
ratio of one share of New Fluor Common Stock for every share of Fluor
Corporation Common Stock. The number of shares of Fluor Corporation Common
Stock includes Fluor Corporation stock-based elements of compensation currently
held by the following individuals, but not additional elements issuable upon
conversion into similar New Fluor stock-based elements of compensation as
described in "Management of New Fluor--New Fluor Treatment of Outstanding Fluor
Corporation Compensatory Stock Awards." Except as otherwise noted, each
individual or his or her family members will have sole voting and investment
power with respect to such shares.

<TABLE>
<CAPTION>
New Fluor Shares
Name of Beneficial Owner Beneficially Owned(1)
------------------------ ---------------------
<S> <C>
New Fluor Class I Directors:
Phillip J. Carroll, Jr.(2) ............................. 282,070
Thomas L. Gossage....................................... 4,000
Vilma S. Martinez....................................... 3,534
Dean R. O'Hare.......................................... 5,000
New Fluor Class II Directors:
Carroll A. Campbell, Jr................................. 3,377
Robin W. Renwick........................................ 3,500
Martha R. Seger......................................... 4,519
James C. Stein(2)....................................... 193,876
New Fluor Class III Directors:
Peter J. Fluor.......................................... 24,312
David P. Gardner........................................ 6,715
Bobby R. Inman.......................................... 6,060
James O. Rollans(2)..................................... 204,577
Other New Fluor Named Executive Officers:
Alan L. Boeckmann....................................... 161,833
Ralph F. Hake........................................... 41,500

All New Fluor directors and executive officers as a
group (16 persons)..................................... 1,058,987
</TABLE>
--------
(1) Each individual will own less than 0.4% and the group will own
approximately 1.4% of the outstanding shares of New Fluor Common Stock.
Included in the number of shares beneficially owned by Messrs. Carroll,
Stein, Rollans, Boeckmann and Hake and all directors and executive officers
as a group are 148,970, 160,755, 174,255, 83,328 and 29,000 shares,
respectively, which such persons have the right to acquire within 60 days
of October 26, 2000 pursuant to the exercise of stock options, all of which
will be converted into options to purchase New Fluor Common Stock as
described in "Management of New Fluor--New Fluor Treatment of Outstanding
Fluor Corporation Compensatory Stock Awards."

(2) This individual is also a named executive officer.

128
<PAGE>

Stock Ownership of Certain Beneficial Owners

Management of Fluor Corporation knows of no person, except as set forth
below, who is projected to be the beneficial owner of more than 5% of New Fluor
Common Stock. The following table sets forth information known to New Fluor as
of October 26, 2000, with percentage of ownership calculated using the number
of outstanding Fluor Corporation shares on October 26, 2000.

<TABLE>
<CAPTION>
New Fluor
Shares Beneficially
Name of Beneficial Owner Owned Percent of Class
------------------------ ------------------- ----------------
<S> <C> <C>
Fidelity International Limited........... 9,285,647 (1) 12.3
FMR Corp. and related entities........... 9,285,647 (1) 12.3
Capital Research and Management Company.. 9,268,300 (2) 12.2
Morgan Stanley Dean Witter & Co.......... 4,596,874 (3) 6.1
Dodge & Cox, Inc......................... 4,459,500 (4) 5.9
Morgan Stanley Dean Witter Advisors
Inc. ................................... 4,286,747 (5) 5.7
</TABLE>
--------
(1) Based the Schedule 13G amendment jointly filed by FMR Corp. ("FMR"), Edward
C. Johnson 3d ("Mr. Johnson"), Abigail P. Johnson ("Mrs. Johnson") and
Fidelity International Limited ("FIL") on May 10, 2000 with the Securities
and Exchange Commission. The Schedule 13G amendment indicates that Fidelity
Management & Research Company ("Fidelity") is the beneficial owner of
7,766,658 shares as the result of acting as investment advisor to various
investment companies (the "funds"), and that Mr. Johnson, FMR and the funds
each has sole power to dispose of the 7,766,658 shares, but that neither
FMR nor Mr. Johnson has sole power to vote or direct the voting of the
shares owned directly by the funds, which power resides with the funds'
boards of trustees and is carried out by Fidelity. The Schedule 13G
amendment further indicates that Fidelity Management Trust Company ("FMTC")
is the beneficial owner of 742,019 shares as a result of its serving as
investment manager of institutional accounts, and that Mr. Johnson and FMR
each has sole dispositive power over the 742,019 shares and sole power to
vote 271,119 shares. The Schedule 13G amendment indicates that FIL is the
beneficial owner of 776,970 shares and has sole power to vote and dispose
of such shares. The Schedule 13G amendment further indicates that although
FMR Corp. and FIL are separate and independent corporate entities, each
entity may be deemed to have beneficial ownership of the shares held by the
other entity. The address of FMR, Mr. Johnson, Mrs. Johnson, Fidelity and
FMTC is 82 Devonshire Street, Boston, Massachusetts 02109. The address of
FIL is Pembroke Hall, 42 Crowlane, Hamilton, Bermuda.

(2) Based on information contained in the Schedule 13G amendment filed by
Capital Research and Management Company on October 10, 2000. The Schedule
13G amendment indicates that Capital Research and Management Company is a
registered investment advisor having sole power to dispose of the 9,268,300
shares and no voting power relative to the 9,268,300 shares. The address of
Capital Research and Management Company is 333 South Hope Street, Los
Angeles, California 90071.

(3) Based on information contained in the Schedule 13G jointly filed by Morgan
Stanley Dean Witter & Co. and Morgan Stanley Dean Witter Advisors Inc. with
the Securities and Exchange Commission on February 4, 2000. The Schedule
13G indicates that Morgan Stanley Dean Witter & Co. is a registered
investment advisor having shared voting power relative to 4,570,844 shares
and shared dispositive power relative to 4,596,874 shares. The address of
Morgan Stanley Dean Witter & Co. is 1585 Broadway, New York, New York
10036.

129
<PAGE>

(5) Based on information contained in the Schedule 13G jointly filed by Morgan
Stanley Dean Witter & Co. and Morgan Stanley Dean Witter Advisors Inc. with
the Securities and Exchange Commission on February 4, 2000. The Schedule
13G indicates that Morgan Stanley Dean Witter Advisors Inc. is a registered
investment advisor having shared voting power relative to 4,273,917 shares
and shared dispositive power relative to 4,286,747 shares. The address of
Morgan Stanley Dean Witter Advisors Inc. is Two World Trade Center, New
York, New York 10048.

130
<PAGE>

SECURITY OWNERSHIP OF MASSEY

Stock Ownership and Stock-Based Holdings of Executive Officers and Directors

After the Distribution, shares of Fluor Corporation Common Stock will be
shares of Massey Common Stock. The following table sets forth as of October 26,
2000 the number of shares of Massey Common Stock that are expected to be
beneficially owned after the Distribution by:

. each of Massey's directors;

. each of Massey's named executive officers; and

. all Massey directors and executive officers as a group.

Stock ownership information is based on (1) the number of shares of Fluor
Corporation Common Stock held as of October 26, 2000 and (2) a retention ratio
of one share of Massey Common Stock for every share of Fluor Corporation Common
Stock. The number of shares of Fluor Corporation Common Stock includes Fluor
Corporation stock-based elements of compensation currently held by the
following individuals, but not additional elements issuable upon adjustment to
represent similar Massey stock-based elements of compensation as described in
"Management of Massey--Massey Treatment of Outstanding Fluor Corporation
Compensatory Stock Awards." Except as otherwise noted, each individual or his
or her family members will have sole voting and investment power with respect
to such shares.

<TABLE>
<CAPTION>
Massey Shares Beneficially
Name of Beneficial Owner Owned (1)
------------------------ --------------------------
<S> <C>
Massey Class I Directors:
E. Gordon Gee...................................... 0
James L. Gardner................................... 0
Massey Class II Directors:
William R. Grant................................... 11,081
Martha R. Seger.................................... 4,519
Massey Class III Directors:
Don L. Blankenship(2).............................. 153,704
Bobby R. Inman..................................... 6,060
Other Massey Named Executive Officers:
Bennett K. Hatfield ............................... 23,660
H. Drexel Short.................................... 13,232
Jeffrey M. Jarosinski.............................. 8,471
Baxter F. Phillips, Jr. ........................... 13,153
All Massey directors and executive officers as a
group (12 persons)................................ 246,790
</TABLE>
--------
(1) Each individual will own less than 0.2% and the group will own
approximately 0.3% of the outstanding shares of Massey Common Stock.
Included in the number of shares beneficially owned by Messrs. Blankenship,
Hatfield, Short, Jarosinski and Phillips and all directors and executive
officers as a group are 122,040, 15,240, 8,708, 5,731 and 9,083 shares,
respectively, which such persons have the right to acquire within 60 days
of October 26, 2000 pursuant to the exercise of stock options, all of which
will be adjusted to represent options to purchase Massey Common Stock as
described in "Management of Massey--Massey Treatment of Outstanding Fluor
Corporation Compensatory Stock Awards" except for Mr. Blankenship's
options, which will be treated as described in "Management of Massey--
Employment Contracts and Termination of Employment Arrangements for Massey
Executive Officers."

(2) This individual is also a Massey named executive officer.

131
<PAGE>

Stock Ownership of Certain Beneficial Owners

Management of Fluor Corporation knows of no person, except as set forth
below, who is projected to be the beneficial owner of more than 5% of Massey
Common Stock. The following table sets forth information known to Fluor
Corporation as of October 26, 2000, with percentage of ownership calculated
using the number of outstanding Fluor Corporation shares on October 26, 2000.

<TABLE>
<CAPTION>
Massey Shares
Name of Beneficial Owner Beneficially Owned Percent of Class
------------------------ ------------------ ----------------
<S> <C> <C>
Fidelity International Limited............. 9,285,647 (1) 12.3
FMR Corp. and related entities............. 9,285,647 (1) 12.3
Capital Research and Management Company.... 9,268,300 (2) 12.2
Morgan Stanley Dean Witter & Co. .......... 4,596,874 (3) 6.1
Dodge & Cox, Inc. ......................... 4,459,500 (4) 5.9
Morgan Stanley Dean Witter Advisors Inc.... 4,286,747 (5) 5.7
</TABLE>
--------
(1) Based the Schedule 13G amendment jointly filed by FMR Corp. ("FMR"), Edward
C. Johnson 3d ("Mr. Johnson"), Abigail P. Johnson ("Mrs. Johnson") and
Fidelity International Limited ("FIL") on May 10, 2000 with the Securities
and Exchange Commission. The Schedule 13G amendment indicates that Fidelity
Management & Research Company ("Fidelity") is the beneficial owner of
7,766,658 shares as the result of acting as investment advisor to various
investment companies (the "funds"), and that Mr. Johnson, FMR and the funds
each has sole power to dispose of the 7,766,658 shares, but that neither
FMR nor Mr. Johnson has sole power to vote or direct the voting of the
shares owned directly by the funds, which power resides with the funds'
boards of trustees and is carried out by Fidelity. The Schedule 13G
amendment further indicates that Fidelity Management Trust Company ("FMTC")
is the beneficial owner of 742,019 shares as a result of its serving as
investment manager of institutional accounts, and that Mr. Johnson and FMR
each has sole dispositive power over the 742,019 shares and sole power to
vote 271,119 shares. The Schedule 13G amendment indicates that FIL is the
beneficial owner of 776,970 shares and has sole power to vote and dispose
of such shares. The Schedule 13G amendment further indicates that although
FMR Corp. and FIL are separate and independent corporate entities, each
entity may be deemed to have beneficial ownership of the shares held by the
other entity. The address of FMR, Mr. Johnson, Mrs. Johnson, Fidelity and
FMTC is 82 Devonshire Street, Boston, Massachusetts 02109. The address of
FIL is Pembroke Hall, 42 Crowlane, Hamilton, Bermuda.
(2) Based on information contained in the Schedule 13G amendment filed by
Capital Research and Management Company on October 10, 2000. The Schedule
13G amendment indicates that Capital Research and Management Company is a
registered investment advisor having sole power to dispose of the 9,268,300
shares and no voting power relative to the 9,268,300 shares. The address of
Capital Research and Management Company is 333 South Hope Street, Los
Angeles, California 90071.
(3) Based on information contained in the Schedule 13G jointly filed by Morgan
Stanley Dean Witter & Co. and Morgan Stanley Dean Witter Advisors Inc. with
the Securities and Exchange Commission on February 4, 2000. The Schedule
13G indicates that Morgan Stanley Dean Witter & Co. is a registered
investment advisor having shared voting power relative to 4,570,844 shares
and shared dispositive power relative to 4,596,874 shares. The address of
Morgan Stanley Dean Witter & Co. is 1585 Broadway, New York, New York
10036.
(4) Based on the Schedule 13G amendment filed by Dodge & Cox, Inc. with the
Securities and Exchange Commission on February 14, 2000. The Schedule 13G
amendment indicates that Dodge & Cox is a registered investment advisor
having sole power to vote 4,077,900 shares, shared voting power relative to
37,500 shares and sole power to dispose of 4,459,500 shares. The address of
Dodge & Cox is One Sansome Street, 35th Floor, San Francisco, California
94104.
(5) Based on information contained in the Schedule 13G jointly filed by Morgan
Stanley Dean Witter & Co. and Morgan Stanley Dean Witter Advisors Inc. with
the Securities and Exchange Commission on February 4, 2000. The Schedule
13G indicates that Morgan Stanley Dean Witter Advisors Inc. is a registered
investment advisor having shared voting power relative to 4,273,917 shares
and shared dispositive power relative to 4,286,747 shares. The address of
Morgan Stanley Dean Witter Advisors Inc. is Two World Trade Center, New
York, New York 10048.

132
<PAGE>

SECURITY OWNERSHIP OF FLUOR CORPORATION

Stock Ownership and Stock-Based Holdings of Executive Officers and Directors

The following table sets forth as of October 26, 2000 the number of shares
of Fluor Corporation Common Stock that were beneficially owned (including
restricted shares, shares which may be acquired within 60 days of October 26,
2000 pursuant to the exercise of stock options and interests in shares held as
of August 31, 2000 in Fluor Corporation's Savings Investment Plan, Retirement
Plan and Performance Plan by executive officers, with respect to which such
officers have sole voting and investment power) by:

. each of Fluor Corporation's directors;

. each of Fluor Corporation's named executive officers; and

. all Fluor Corporation directors and executive officers as a group.

Except as otherwise noted, each individual or his or her family members will
have sole voting and investment power with respect to such shares. The second
column of the table combines beneficial ownership of shares of Fluor
Corporation Common Stock with holdings of:

. deferred directors' fees (which are payable in cash, held in an account
economically equivalent to Fluor Corporation Common Stock as of October
26, 2000 by certain non-employee directors);

. restricted stock units held by directors and executive officers (which
are payable in cash upon vesting of tandem restricted stock); and

. shadow stock units held by certain named executive officers (which are
payable in cash).

This column indicates the alignment of the named individuals and group with
the interests of Fluor Corporation's shareholders because the value of their
total holdings will increase or decrease correspondingly with the price of
Fluor Corporation Common Stock.

<TABLE>
<CAPTION>
Fluor Corporation Fluor Corporation
Shares Beneficially Stock-Based
Name of Beneficial Owner Owned (1) Holdings
------------------------ ------------------- -----------------
<S> <C> <C>
Fluor Corporation Class I Directors:
Philip J. Carroll, Jr.(2)............... 282,070 447,104
David P. Gardner........................ 6,715 15,636
Thomas L. Gossage....................... 4,000 4,114
Vilma S. Martinez....................... 3,534 9,911
Dean R. O'Hare.......................... 5,000 7,955
Fluor Corporation Class II Directors:
Carroll A. Campbell, Jr................. 3,377 9,000
Robin W. Renwick........................ 3,500 6,878
Martha R. Seger......................... 4,519 5,123
James C. Stein(2)....................... 193,876 202,189
Fluor Corporation Class III Directors:
Don L. Blankenship...................... 153,704 289,777
Peter J. Fluor.......................... 24,312 58,568
Bobby R. Inman.......................... 6,060 6,060
James O. Rollans(2)..................... 204,577 212,985
Other Fluor Corporation Named Executive
Officers:
Alan L. Boeckmann....................... 161,833 207,288
All Fluor Corporation directors and
executive officers as a group
(17 persons)........................... 1,212,691 1,660,431
</TABLE>

133
<PAGE>

--------
(1) Each individual owns less than 0.4% and the group owns approximately 1.6%
of the outstanding shares of Fluor Corporation Common Stock. Included in
the number of shares beneficially owned by Messrs. Carroll, Stein,
Blankenship, Rollans and Boeckmann and all directors and executive officers
as a group are 148,970, 160,755, 122,040, 174,255 and 83,328 shares,
respectively, which such persons have the right to acquire within 60 days
of October 26, 2000 pursuant to the exercise of stock options.
(2) This individual is also a named executive officer of Fluor Corporation.

Stock Ownership of Certain Beneficial Owners

Management of Fluor Corporation knows of no person, except as set forth
below, who is the beneficial owner of more than 5% of Fluor Corporation's
common stock. The following table sets forth information known to New Fluor as
of October 26, 2000, with percentage of ownership calculated using the number
of outstanding shares on October 26, 2000.

<TABLE>
<CAPTION>
Fluor Corporation
Shares Beneficially
Name of Beneficial Owner Owned Percent of Class
------------------------ ------------------- ----------------
<S> <C> <C>
Fidelity International
Limited................ 9,285,647 (1) 12.3
FMR Corp. and related
entities............... 9,285,647 (1) 12.3
Capital Research and
Management Company..... 9,268,300 (2) 12.2
Morgan Stanley Dean
Witter & Co............ 4,596,874 (3) 6.1
Dodge & Cox, Inc........ 4,459,500 (4) 5.9
Morgan Stanley Dean
Witter Advisors Inc.... 4,286,747 (5) 5.7
</TABLE>
--------
(1) Based the Schedule 13G amendment jointly filed by FMR Corp. ("FMR"), Edward
C. Johnson 3d ("Mr. Johnson"), Abigail P. Johnson ("Mrs. Johnson") and
Fidelity International Limited ("FIL") on May 10, 2000 with the Securities
and Exchange Commission. The Schedule 13G amendment indicates that Fidelity
Management & Research Company ("Fidelity") is the beneficial owner of
7,766,658 shares as the result of acting as investment advisor to various
investment companies (the "funds"), and that Mr. Johnson, FMR and the funds
each has sole power to dispose of the 7,766,658 shares, but that neither
FMR nor Mr. Johnson has sole power to vote or direct the voting of the
shares owned directly by the funds, which power resides with the funds'
boards of trustees and is carried out by Fidelity. The Schedule 13G
amendment further indicates that Fidelity Management Trust Company ("FMTC")
is the beneficial owner of 742,019 shares as a result of its serving as
investment manager of institutional accounts, and that Mr. Johnson and FMR
each has sole dispositive power over the 742,019 shares and sole power to
vote 271,119 shares. The Schedule 13G amendment indicates that FIL is the
beneficial owner of 776,970 shares and has sole power to vote and dispose
of such shares. The Schedule 13G amendment further indicates that although
FMR Corp. and FIL are separate and independent corporate entities, each
entity may be deemed to have beneficial ownership of the shares held by the
other entity. The address of FMR, Mr. Johnson, Mrs. Johnson, Fidelity and
FMTC is 82 Devonshire Street, Boston, Massachusetts 02109. The address of
FIL is Pembroke Hall, 42 Crowlane, Hamilton, Bermuda.
(2) Based on information contained in the Schedule 13G amendment filed by
Capital Research and Management Company on October 10, 2000. The Schedule
13G amendment indicates that Capital Research and Management Company is a
registered investment advisor having sole power to dispose of the 9,268,300
shares and no voting power relative to the 9,268,300 shares. The address of
Capital Research and Management Company is 333 South Hope Street, Los
Angeles, California 90071.
(3) Based on information contained in the Schedule 13G jointly filed by Morgan
Stanley Dean Witter & Co. and Morgan Stanley Dean Witter Advisors Inc. with
the Securities and Exchange Commission on February 4, 2000. The Schedule
13G indicates that Morgan Stanley Dean Witter & Co. is a registered
investment advisor having shared voting power relative to 4,570,844 shares
and shared dispositive power relative to 4,596,874 shares. The address of
Morgan Stanley Dean Witter & Co. is 1585 Broadway, New York, New York
10036.

134
<PAGE>

(4) Based on the Schedule 13G amendment filed by Dodge & Cox, Inc. with the
Securities and Exchange Commission on February 14, 2000. The Schedule 13G
amendment indicates that Dodge & Cox is a registered investment advisor
having sole power to vote 4,077,900 shares, shared voting power relative to
37,500 shares and sole power to dispose of 4,459,500 shares. The address of
Dodge & Cox is One Sansome Street, 35th Floor, San Francisco, California
94104.
(5) Based on information contained in the Schedule 13G jointly filed by Morgan
Stanley Dean Witter & Co. and Morgan Stanley Dean Witter Advisors Inc. with
the Securities and Exchange Commission on February 4, 2000. The Schedule
13G indicates that Morgan Stanley Dean Witter Advisors Inc. is a registered
investment advisor having shared voting power relative to 4,273,917 shares
and shared dispositive power relative to 4,286,747 shares. The address of
Morgan Stanley Dean Witter Advisors Inc. is Two World Trade Center, New
York, New York 10048.

135
<PAGE>

DESCRIPTION OF NEW FLUOR CAPITAL STOCK

The following description of New Fluor capital stock is based on the Amended
and Restated Certificate of Incorporation of New Fluor, or the New Fluor
Charter, and the Amended and Restated Bylaws of New Fluor, or the New Fluor
Bylaws, which are to take effect as of the effective date of the Distribution.
The following description is qualified in its entirety by reference to the New
Fluor Charter and the New Fluor Bylaws.

General

As of the effective date of the Distribution, the New Fluor Charter will
authorize the issuance of 150 million shares of New Fluor Common Stock and 20
million shares of New Fluor preferred stock. Based on approximately 75,744,873
shares of Fluor Corporation Common Stock outstanding as of October 26, 2000 and
a distribution ratio of one share of New Fluor Common Stock for each share of
Fluor Corporation Common Stock, assuming the purchase prior to the Distribution
by Fluor Corporation of 1,850,000 shares of Fluor Corporation Common Stock
pursuant to a forward purchase contract, approximately 73,894,873 shares of New
Fluor Common Stock will be distributed to Fluor Corporation shareholders on the
effective date of the Distribution. Based on approximately 11,862 holders of
record of Fluor Corporation Common Stock as of October 26, 2000, there will be
approximately 11,862 holders of record of New Fluor Common Stock on the
effective date of the Distribution.

Common Stock

Voting Rights

Holders of New Fluor Common Stock will be entitled to one vote per share on
all matters voted on generally by shareholders. Except as otherwise required by
law or with respect to any outstanding series of New Fluor preferred stock, the
holders of common stock will possess all voting power. Pursuant to the New
Fluor Bylaws, shareholder action is effective upon majority vote. However, an
affirmative vote of the holders of at least 80% of the voting power of
outstanding shares will be required to:

. amend or repeal the bylaws;

. merge or consolidate with another corporation or entity, which together
with its affiliates, beneficially owns more than 15% of the outstanding
shares of New Fluor, such other corporation and its affiliates referred
to as a related corporation;

. sell or exchange substantially all of its assets or business to or with
a related corporation; or

. issue or deliver any stock or securities in exchange or payment for any
assets or property of or securities issued by a related corporation;

unless such actions are approved by New Fluor's board of directors.

Furthermore, the affirmative vote of the holders of 80% of the voting power
of outstanding shares must approve changes to provisions in the New Fluor
Charter relating to:

. amendment of the New Fluor Charter or Bylaws;

. classification of New Fluor's board of directors; and

. prohibition of shareholder action without a meeting.

Dividend Rights; Rights Upon Liquidation

Subject to any preferential rights of holders of any New Fluor preferred
stock that may be outstanding, holders of shares of New Fluor Common Stock will
be entitled to receive dividends on such stock out of assets legally available
for distribution when, as and if authorized and declared by the New Fluor board
and to share ratably in the assets of New Fluor legally available for
distribution to its shareholders in the event of its liquidation, dissolution
or winding-up.

136
<PAGE>

Classification of the New Fluor Board

The New Fluor board will be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the
directors will be elected each year. New Fluor believes that a classified board
will help to assure the continuity and stability of its board, and its business
strategies and policies as determined by its board, because a majority of the
directors at any given time will have prior experience as directors at New
Fluor. This provision should also help to ensure that New Fluor, if confronted
with an unsolicited proposal from a third party that has acquired a block of
New Fluor's voting stock, will have sufficient time to review the proposal and
appropriate alternatives and to seek the best available result for all
shareholders.

A classified board could prevent a third party who acquires control of a
majority of the outstanding voting stock from obtaining control of the New
Fluor board until the second annual shareholders meeting following the date the
third party obtains the controlling stock interest. This could have the effect
of discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of New Fluor and could thus increase the
likelihood that incumbent directors will retain their positions.

Miscellaneous

Holders of New Fluor Common Stock will have no preferences or preemptive,
conversion or exchange rights. Shares of New Fluor Common Stock will not be
liable for further calls or assessments by New Fluor, and the holders of New
Fluor Common Stock will not be liable for any liabilities of New Fluor.

Preferred Stock

The New Fluor Charter will authorize the New Fluor board to provide for the
issuance, from time to time, of New Fluor preferred stock in series, and to fix
the voting rights, designations, powers, preferences and the relative
participating, optional or other rights of the shares, if any, of each such
series and any qualifications, limitations or restrictions with respect to such
series. Because the New Fluor board will have the power to establish the
preferences and rights of the shares of any such series of New Fluor preferred
stock, holders of any New Fluor preferred stock may be afforded voting rights
and preferences, powers and rights senior to the rights of holders of New Fluor
Common Stock in a way which could adversely affect the rights of holders of New
Fluor Common Stock. No shares of New Fluor preferred stock will be outstanding
immediately following the effective date of the Distribution.

Anti-Takeover Provisions of the New Fluor Charter and Bylaws and Delaware Law

General

Certain provisions of the New Fluor Charter, the New Fluor Bylaws and
Section 203 of the Delaware General Corporation Law may have the effect of
impeding the acquisition of control of New Fluor by means of a tender offer, a
proxy fight, open market purchases or otherwise in a transaction not approved
by the New Fluor board. These provisions are designed to reduce, or have the
effect of reducing, the vulnerability of New Fluor to an unsolicited proposal
for the restructuring or sale of all or substantially all the assets of New
Fluor or an unsolicited takeover attempt which is unfair to New Fluor
shareholders.

Charter and Bylaw Provisions

Under the New Fluor Charter, the New Fluor board will have the authority,
without further shareholder approval, to issue New Fluor preferred stock in
series, and to fix the designations, voting powers, preferences and rights of
the shares of each such series and any qualifications, limitations or
restrictions with respect to such series. Pursuant to this authority, the New
Fluor board could create and issue a series of New Fluor preferred stock with
rights, preferences or restrictions which have the effect of discriminating
against an

137
<PAGE>

existing or prospective holder of capital stock of New Fluor as a result of
such holder beneficially owning or commencing a tender offer for a substantial
amount of New Fluor Common Stock. One of the effects of authorized but unissued
and unreserved shares of preferred stock may be to render more difficult for,
or discourage an attempt by, a potential acquiror to obtain control of New
Fluor by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of New Fluor's management. The issuance of such
shares of preferred stock may have the effect of delaying, deferring or
preventing a change in control of New Fluor without any further action by the
shareholders of New Fluor.

Other provisions of the New Fluor Charter and New Fluor Bylaws that may make
replacing the New Fluor board more difficult include:

. 80% supermajority voting requirements to approve certain extraordinary
corporate transactions or certain amendments to the New Fluor Charter and
New Fluor Bylaws as described under "--Common Stock--Voting Rights";

. classification of the New Fluor Board as described under "--Common
Stock--Classification of the New Fluor Board";

. prohibition on shareholders calling a meeting or acting by written
consent;

. requirements for advance notice for raising business or making
nominations at shareholder meetings; and

. the ability of the New Fluor board to increase the size of the board and
fill vacancies on the board.

Section 203 of the Delaware General Corporation Law

New Fluor will be subject to Section 203 of the Delaware General Corporation
Law. The provisions of Section 203 prohibit New Fluor from engaging in certain
"business combinations" with an "interested shareholder" for a period of three
years after the date that the person became an interested shareholder, unless
one of the following conditions is satisfied:

. Prior to the date that the person became an interested shareholder, the
transaction or business combination that resulted in the person becoming
an interested shareholder is approved by the board of directors;

. Upon consummation of the transaction that resulted in the shareholder
becoming an interested shareholder, the interested shareholder owns at
least 85% of New Fluor's outstanding voting stock; or

. On or after the date that the person became an interested shareholder,
the business combination is approved by New Fluor's board of directors
and by the holders of at least two-thirds of New Fluor's outstanding
voting stock, excluding voting stock owned by the interested shareholder.

Generally, a "business combination" includes a merger, asset or stock sale
or other transaction resulting in a financial benefit to the interested
shareholder. Subject to certain exceptions, an "interested shareholder" is a
person who together with that person's affiliates and associates owns, or
within the previous three years did own, 15% or more of New Fluor's voting
stock.

Transfer Agent and Registrar

ChaseMellon Shareholder Services, L.L.C. will act as transfer agent and
registrar for the New Fluor Common Stock.

138
<PAGE>

DESCRIPTION OF MASSEY CAPITAL STOCK

Since after the Distribution the capital stock of Fluor Corporation held by
Fluor Corporation shareholders will represent a continuing ownership interest
in the Massey business, the following description of Fluor Corporation's
capital stock describes the capital stock of Massey from and after the
Distribution. The following description of Massey capital stock is based on the
Amended and Restated Certificate of Incorporation and the Amended and Restated
Bylaws of Fluor Corporation, both of which will remain in effect for Massey
following the Distribution and which are referred to as the Massey Charter and
the Massey Bylaws, respectively. The following description is qualified in its
entirety by reference to the Massey Charter and the Massey Bylaws.

General

As of the effective date of the Distribution, the Massey Charter will
authorize the issuance of 150 million shares of Massey Common Stock and 20
million shares of Massey preferred stock. Based on approximately 75,744,873
shares of Fluor Corporation Common Stock outstanding as of October 26, 2000,
assuming the purchase prior to the Distribution by Fluor Corporation of
1,850,000 shares of Fluor Corporation Common Stock pursuant to a forward
purchase contract, approximately 73,894,873 shares of Fluor Corporation Common
Stock will be retained by Fluor Corporation shareholders as Massey Common Stock
following the Distribution. Based on approximately 11,862 holders of record of
Fluor Corporation Common Stock as of October 26, 2000, there will be
approximately 11,862 holders of record of Massey Common Stock following the
Distribution.

Common Stock

Voting Rights

Holders of Massey Common Stock will be entitled to one vote per share on all
matters voted on generally by shareholders, except the election of directors as
to which the Massey Charter will grant cumulative voting rights to
shareholders. Except as otherwise required by law or with respect to any
outstanding series of Massey preferred stock, the holders of common stock will
possess all voting power.

Pursuant to the Massey Bylaws, shareholder action is effective upon majority
vote. However, an affirmative vote of the holders of at least 80% of the voting
power of outstanding shares will be required to:

. amend or repeal the bylaws;

. merge or consolidate with another corporation, which together with its
affiliates, beneficially owns more than 5% of the outstanding shares of
Massey, such other corporation and its affiliates referred to as a
related corporation;

. sell or exchange substantially all of its assets or business to or with
a related corporation; or

. issue or deliver any stock or securities in exchange or payment for any
assets or property of or securities issued by a related corporation;

unless such actions are approved by Massey's board of directors.

Furthermore, the affirmative vote of the holders of 80% of the voting power
of outstanding shares must approve changes to provisions in the Massey Charter
relating to:

. amendment of the Massey Charter or Bylaws;

. classification of Massey's board of directors;

. prohibition of shareholder action without a meeting;

. cumulative voting; and

. appraisal rights.

139
<PAGE>

Dividend Rights; Rights Upon Liquidation

Subject to any preferential rights of holders of any Massey preferred stock
that may be outstanding, holders of shares of Massey Common Stock will be
entitled to receive dividends on such stock out of assets legally available for
distribution when, as and if authorized and declared by the Massey board and to
share ratably in the assets of Massey legally available for distribution to its
shareholders in the event of its liquidation, dissolution or winding-up.

Classification of the Massey Board

The Massey board will be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the
directors will be elected each year. Massey believes that a classified board
will help to assure the continuity and stability of its board, and its business
strategies and policies as determined by its board, because a majority of the
directors at any given time will have prior experience as directors at Massey.
This provision should also help to ensure that Massey, if confronted with an
unsolicited proposal from a third party that has acquired a block of Massey's
voting stock, will have sufficient time to review the proposal and appropriate
alternatives and to seek the best available result for all shareholders.

A classified board could prevent a third party who acquires control of a
majority of the outstanding voting stock from obtaining control of the Massey
board until the second annual shareholders meeting following the date the third
party obtains the controlling stock interest. This could have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of Massey and could thus increase the likelihood
that incumbent directors will retain their positions.

Miscellaneous

Holders of Massey Common Stock will have no preferences or preemptive,
conversion or exchange rights. Shares of Massey Common Stock will not be liable
for further calls or assessments by Massey, and the holders of Massey Common
Stock will not be liable for any liabilities of Massey.

Preferred Stock

The Massey Charter will authorize the Massey board to provide for the
issuance, from time to time, of Massey preferred stock in series, and to fix
the voting rights, designations, powers, preferences and the relative
participating, optional or other rights of the shares, if any, of each such
series and any qualifications, limitations or restrictions with respect to such
series. Because the Massey board will have the power to establish the
preferences and rights of the shares of any such series of Massey preferred
stock, holders of any Massey preferred stock may be afforded voting rights and
preferences, powers and rights senior to the rights of holders of Massey Common
Stock in a way which could adversely affect the rights of holders of Massey
Common Stock. No shares of Massey preferred stock will be outstanding
immediately following the effective date of the Distribution.

Anti-Takeover Provisions of the Massey Charter and Bylaws and Delaware Law

General

Certain provisions of the Massey Charter, the Massey Bylaws and Section 203
of the Delaware General Corporation Law may have the effect of impeding the
acquisition of control of Massey by means of a tender offer, a proxy fight,
open market purchases or otherwise in a transaction not approved by the Massey
board. These provisions are designed to reduce, or have the effect of reducing,
the vulnerability of Massey to an unsolicited proposal for the restructuring or
sale of all or substantially all the assets of Massey or an unsolicited
takeover attempt which is unfair to Massey shareholders.

140
<PAGE>

Charter and Bylaw Provisions

Under the Massey Charter, the Massey board will have the authority, without
further shareholder approval, to issue Massey preferred stock in series, and to
fix the designations, voting powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions with
respect to such series. Pursuant to this authority, the Massey board could
create and issue a series of Massey preferred stock with rights, preferences or
restrictions which have the effect of discriminating against an existing or
prospective holder of capital stock of Massey as a result of such holder
beneficially owning or commencing a tender offer for a substantial amount of
Massey Common Stock. One of the effects of authorized but unissued and
unreserved shares of preferred stock may be to render more difficult for, or
discourage an attempt by, a potential acquiror to obtain control of Massey by
means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of Massey's management. The issuance of such shares of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of Massey without any further action by the shareholders of
Massey.

Other provisions of the Massey Charter and Massey Bylaws that may make
replacing the Massey board more difficult include:

. 80% supermajority voting requirements to approve certain extraordinary
corporate transactions or certain amendments to the Massey Charter and
Massey Bylaws as described under "--Common Stock--Voting Rights";

. classification of the Massey Board as described under "--Common Stock--
Classification of the Massey Board";

. prohibition on shareholders calling a meeting or acting by written
consent;

. requirements for advance notice for raising business or making
nominations at shareholder meetings; and

. the ability of the Massey board to increase the size of the board and
fill vacancies on the board.

Section 203 of the Delaware General Corporation Law

Massey will be subject to Section 203 of the Delaware General Corporation
Law. The provisions of Section 203 prohibit Massey from engaging in certain
"business combinations" with an "interested shareholder" for a period of three
years after the date that the person became an interested shareholder, unless
one of the following conditions is satisfied:

. Upon consummation of the transaction that resulted in the shareholder
becoming an interested shareholder, the interested shareholder owns at
least 85% of Massey's outstanding voting stock; or

. On or after the date that the person became an interested shareholder,
the business combination is approved by Massey's board of directors and
by the holders of at least two-thirds of Massey's outstanding voting
stock, excluding voting stock owned by the interested shareholder.

Transfer Agent and Registrar

ChaseMellon Shareholder Services, L.L.C. will continue to act as transfer
agent and registrar for the Massey Common Stock.

141
<PAGE>

INDEMNIFICATION AND LIMITATION OF LIABILITY FOR NEW FLUOR
DIRECTORS AND OFFICERS

Set forth below is a description of provisions of the New Fluor Charter and
Delaware law that serve to indemnify or limit the liability of New Fluor's
officers and directors for monetary damages to New Fluor. Such description is
intended as a summary only and is qualified in its entirety by reference to the
New Fluor Charter and the New Fluor Bylaws.

Indemnification of Liability for Directors & Officers

New Fluor is a Delaware corporation. The New Fluor Charter provides that New
Fluor shall indemnify and hold harmless its officers, directors and others
serving the corporation in various capacities to the fullest extent permitted
by the Delaware General Corporation Law. Section 145 of the Delaware General
Corporation Law provides that a Delaware corporation has the power to indemnify
officers and directors in certain circumstances.

Under Section 145, a corporation may indemnify its directors and officers as
well as other employees and individuals against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with
specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation, referred to as a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of conduct is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys'
fees) incurred in connection with defense or settlement of such an action, and
Section 145 requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable to the
corporation.

Section 145 further provides that to the extent that a director or officer
has been successful on the merits or otherwise in the defense of any action,
suit or proceeding referred to above or in the defense of any claim, issue or
matter within such action, suit or proceeding, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with such defense. The New Fluor Charter provides
that the indemnification rights described above shall be contract rights and
shall include the right to be paid expenses incurred in defending any
proceeding in advance of its final disposition subject to any undertakings
required under the Delaware General Corporation Law. Section 145 requires an
undertaking to repay any such amount advanced if the director or officer
receiving such amount is ultimately determined not to be entitled to
indemnification.

Indemnification provided for by Section 145 and the New Fluor Charter is not
to be deemed exclusive of any other rights to which the indemnified party may
be entitled. Both Section 145 and the New Fluor Charter permit New Fluor to
maintain insurance on behalf of a director, officer or others against any
liability asserted against such person and incurred by such person, whether or
not New Fluor would have the power to indemnify such person against such
liabilities under Section 145.

Anyone claiming rights to indemnification under the New Fluor Charter may
bring suit if such indemnification is not paid within thirty days. The New
Fluor Charter further provides that New Fluor bears the burden of proving that
the claimant has not met the standards of conduct required for indemnification
under Section 145 if New Fluor elects to defend any such action.

Limitation of Liability of Directors

The New Fluor Charter provides that, to the fullest extent permitted under
the Delaware General Corporation Law, a director of New Fluor shall not be
personally liable to New Fluor or its shareholders for monetary damages for
breach of fiduciary duty as a director. Section 102(b)(7) of the Delaware

142
<PAGE>

General Corporation Law permits a corporation to include in its certificate of
incorporation provisions limiting the personal liability of its directors for
monetary damages to the corporation except that directors shall remain
personally liable for:

. acts or omissions not in good faith which involve intentional misconduct
or a knowing violation of law;

. the payment of dividends or the redemption of purchase of stock in
violation of Delaware law;

. any breach of the director's duty of loyalty to the corporation or its
shareholders; or

. any transaction from which the director derived an improper personal
benefit.

143
<PAGE>

SUBMISSION OF SHAREHOLDER PROPOSALS

Subject to consummation of the Distribution, it is expected that New Fluor's
2001 annual meeting of shareholders will be held on March 14, 2001. Any
proposal of a shareholder intended to be presented at New Fluor's 2001 annual
meeting of shareholders must be received by New Fluor no later than October 13,
2000 for inclusion in the proxy statement and form of proxy/voting instruction
card for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934. Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, New
Fluor may exercise discretionary voting authority at the 2001 annual meeting
under proxies it solicits to vote on a proposal made by a shareholder that the
shareholder does not seek to include in New Fluor's proxy statement pursuant to
Rule 14a-8, unless New Fluor is notified about the proposal prior to December
8, 2000, and the shareholder satisfies the other requirements of Rule 14a-4(c).

Subject to consummation of the Distribution, it is expected that Massey's
2001 annual meeting of shareholders will be held on March 14, 2001. Any
proposal of a shareholder intended to be presented at Massey's 2001 annual
meeting of shareholders must be received by Massey no later than October 13,
2000 for inclusion in the proxy statement and form of proxy/voting instruction
card for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934. Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934,
Massey may exercise discretionary voting authority at the 2001 annual meeting
under proxies it solicits to vote on a proposal made by a shareholder that the
shareholder does not seek to include in Massey's proxy statement pursuant to
Rule 14a-8, unless Massey is notified about the proposal between December 14,
2000, and January 13, 2001, and the shareholder satisfies the other
requirements of Rule 14a-4(c).

AVAILABLE INFORMATION

Fluor Corporation is, and Massey will continue to be, subject to the
information and reporting requirements of the Securities Exchange Act of 1934
and, in accordance with the Exchange Act, files annual, quarterly and special
reports, proxy statements and other information with the Securities and
Exchange Commission. Copies of these reports, proxy statements and other
information may be examined without charge in the Public Reference Room
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's regional offices located
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Please call the Commission
at 1-800-SEC-0330 for further information about the operation of the Public
Reference Room. Copies of all or a portion of this proxy statement can be
obtained from the Public Reference Room upon payment of prescribed fees. Fluor
Corporation's filings with the Commission are also available to the public from
commercial document retrieval services and at the Commission's web site at the
address http://www.sec.gov. Reports and other information concerning Fluor
Corporation can also be read and copied at the offices of the New York Stock
Exchange, 20 Broad Street, New York 10005.

This Proxy Statement constitutes a part of the Registration Statement on
Form 10, together with all amendments, supplements, schedules and exhibits to
the Registration Statement, referred to as the Registration Statement, which
New Fluor has filed with the Commission covering the shares of New Fluor Common
Stock to be distributed in connection with the Distribution. This Proxy
Statement does not contain all of the information in the Registration
Statement. Reference is made to the Registration Statement for further
information about New Fluor and New Fluor's common stock. Each statement
contained in this Proxy Statement as to the contents of any contract, agreement
or other document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a more complete
description of the matter involved. The Registration Statement can be examined
at the Commission's Public Reference Room.

After the Distribution, New Fluor will become subject to the information and
reporting requirements of the Exchange Act and will be required to file
periodic reports, proxy statements and other information with the Commission.
New Fluor will send an annual report to shareholders, containing audited
financial statements, and any additional reports or statements required by the
Commission.

144
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
FLUOR CORPORATION CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Statement of Earnings for the Nine Months Ended
July 31, 2000 and 1999................................................. F-2

Condensed Consolidated Balance Sheet at July 31, 2000 and October 31,
1999................................................................... F-3

Condensed Consolidated Statement of Cash Flows for the Nine Months Ended
July 31, 2000 and 1999................................................. F-4

Notes to Unaudited Condensed Consolidated Financial Statements.......... F-5

Independent Auditors' Report.............................................. F-8

Consolidated Financial Statements:

Consolidated Statement of Earnings for the Three Years Ended October 31,
1999................................................................... F-9

Consolidated Balance Sheet at October 31, 1999 and 1998................. F-10

Consolidated Statement of Cash Flows for the Three Years Ended October
31, 1999............................................................... F-11

Consolidated Statement of Shareholders' Equity for the Three Years Ended
October 31, 1999....................................................... F-12

Notes to Consolidated Financial Statements.............................. F-13

Quarterly Results of Operations........................................... F-33

MASSEY ENERGY COMPANY COMBINED FINANCIAL STATEMENTS

Report of Independent Auditors............................................ F-34

Combined Financial Statements:

Combined Statement of Earnings for the Nine Months Ended July 31, 2000
and 1999 (Unaudited) and the Three Years Ended October 31, 1999........ F-35

Combined Balance Sheet July 31, 2000 (Unaudited) and October 31, 1999
and 1998............................................................... F-36

Combined Statement of Cash Flows for the Nine Months Ended July 31, 2000
and 1999 (Unaudited) and the Three Years Ended October 31, 1999........ F-37

Combined Statement of Shareholder's Equity for the Nine Months Ended
July 31, 2000 (Unaudited) and the Three Years Ended October 31, 1999... F-38

Notes to Combined Financial Statements.................................. F-39
</TABLE>

F-1
<PAGE>

FLUOR CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

Nine Months Ended July 31, 2000 and 1999
(Unaudited)

<TABLE>
<CAPTION>
2000 1999
---------- ----------
($ in thousands,
except per share
amounts)
<S> <C> <C>
REVENUES................................................ $8,458,938 $9,544,816
COSTS AND EXPENSES
Cost of revenues........................................ 8,207,817 9,259,978
Special provision....................................... (17,919) 136,500
Corporate administrative and general expense............ 45,278 40,504
Interest expense........................................ 43,910 38,451
Interest income......................................... (14,512) (14,530)
---------- ----------
Total Costs and Expenses.............................. 8,264,574 9,460,903
---------- ----------
EARNINGS BEFORE INCOME TAXES............................ 194,364 83,913
INCOME TAX EXPENSE...................................... 57,732 55,575
---------- ----------
NET EARNINGS............................................ $ 136,632 $ 28,338
========== ==========
EARNINGS PER SHARE
Basic................................................... $ 1.81 $ 0.38
========== ==========
Diluted................................................. $ 1.79 $ 0.37
========== ==========
DIVIDENDS PER COMMON SHARE.............................. $ 0.75 $ 0.60
========== ==========
SHARES USED TO CALCULATE
Basic earnings per share................................ 75,340 75,158
========== ==========
Diluted earnings per share.............................. 76,345 75,884
========== ==========
</TABLE>

See Accompanying Notes.

F-2
<PAGE>

FLUOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

July 31, 2000 and October 31, 1999
(Unaudited)

<TABLE>
<CAPTION>
July 31, October
2000 31, 1999*
---------- ----------
($ in thousands)
<S> <C> <C>
ASSETS
------

Current assets
Cash and cash equivalents............................ $ 105,638 $ 209,614
Accounts and notes receivable........................ 826,664 850,557
Contract work in progress............................ 449,486 416,285
Deferred taxes....................................... 126,142 105,502
Inventory and other current assets................... 315,240 328,213
---------- ----------
Total current assets............................... 1,823,170 1,910,171
---------- ----------
Property, plant and equipment (net of accumulated
depreciation, depletion and amortization of $1,371,957
and $1,245,644, respectively)......................... 2,314,773 2,222,953
Investments and goodwill, net.......................... 238,454 283,936
Other.................................................. 500,186 469,057
---------- ----------
$4,876,583 $4,886,117
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current liabilities
Trade accounts payable............................... $ 709,824 $ 793,465
Short-term debt...................................... 425,529 247,911
Advance billings on contracts........................ 443,861 565,373
Accrued salaries, wages and benefit plans............ 274,816 321,148
Other accrued liabilities............................ 240,789 276,413
---------- ----------
Total current liabilities.......................... 2,094,819 2,204,310
---------- ----------
Long-term debt due after one year...................... 317,569 317,555
Deferred taxes......................................... 182,263 162,210
Other noncurrent liabilities........................... 636,003 620,670

Contingencies and commitments

Shareholders' equity
Capital stock
Preferred--authorized 20,000,000 shares without par
value; none issued.................................
Common--authorized 150,000,000 shares of $0.625 par
value; issued and outstanding--75,669,076 shares
and 76,034,296 shares, respectively................ 47,293 47,521
Additional capital................................... 210,144 217,844
Retained earnings.................................... 1,454,924 1,375,338
Unamortized executive stock plan expense............. (26,062) (21,579)
Accumulated other comprehensive income............... (40,370) (37,752)
---------- ----------
Total shareholders' equity......................... 1,645,929 1,581,372
---------- ----------
$4,876,583 $4,886,117
========== ==========
</TABLE>
--------
* Amounts at October 31, 1999 have been derived from audited financial
statements.

See Accompanying Notes.

F-3
<PAGE>

FLUOR CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Nine Months Ended July 31, 2000 and 1999
(Unaudited)

<TABLE>
<CAPTION>
2000 1999
--------- ---------
($ in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings............................................... $ 136,632 $ 28,338
Adjustments to reconcile net earnings to cash provided by
operating activities:
Depreciation, depletion and amortization................. 229,365 236,712
Deferred taxes........................................... 4,560 13,497
Special provision, net of cash paid...................... (33,719) 118,261
Asset write-off.......................................... 17,762 --
Changes in operating assets and liabilities, excluding
effects of business acquisitions/dispositions........... (251,364) (47,478)
Other, net............................................... (12,887) (44,815)
--------- ---------
Cash provided by operating activities.................. 90,349 304,515
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures....................................... (385,653) (362,437)
Proceeds from sale of subsidiary........................... -- 36,300
Proceeds from sale of property, plant and equipment........ 70,956 92,295
Investments, net........................................... 27,039 (13,441)
Other, net................................................. (11,755) (17,360)
--------- ---------
Cash utilized by investing activities.................. (299,413) (264,643)
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings............... 171,809 (185,156)
Proceeds from issuance of note payable to affiliate........ 8,959 50,479
Proceeds from issuance of long-term debt................... -- 17,550
Cash dividends paid........................................ (57,046) (45,484)
Stock options exercised.................................... 5,829 4,161
Purchases of common stock.................................. (23,003) --
Other, net................................................. (1,460) (2,080)
--------- ---------
Cash provided (utilized) by financing activities........... 105,088 (160,530)
--------- ---------
Decrease in cash and cash equivalents...................... (103,976) (120,658)
Cash and cash equivalents at beginning of period........... 209,614 340,544
--------- ---------
Cash and cash equivalents at end of period............. $ 105,638 $ 207,871
========= =========
</TABLE>

See Accompanying Notes.

F-4
<PAGE>

FLUOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) The condensed consolidated financial statements do not include footnotes
and certain financial information normally presented annually under generally
accepted accounting principles and, therefore, should be read in conjunction
with the Company's October 31, 1999 annual report on Form 10-K. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year-end. The results of operations for the nine months ended July 31,
2000 are not necessarily indicative of results that can be expected for the
full year.

The condensed consolidated financial statements included herein are
unaudited; however, they contain all adjustments (consisting of normal
recurring accruals) which, in the opinion of the Company, are necessary to
present fairly its consolidated financial position at July 31, 2000 and its
consolidated results of operations and cash flows for the nine months ended
July 31, 2000 and 1999.

Certain 1999 amounts have been reclassified to conform with the 2000
presentation.

(2) Inventories comprise the following:

<TABLE>
<CAPTION>
July 31, October 31,
2000 1999
-------- -----------
($ in thousands)
<S> <C> <C>
Equipment for sale/rental............................. $ 75,008 $131,781
Coal.................................................. 73,005 72,070
Supplies and other.................................... 56,727 44,267
-------- --------
$204,740 $248,118
======== ========
</TABLE>

(3) Short-term debt comprises the following:

<TABLE>
<CAPTION>
July 31, October 31,
2000 1999
-------- -----------
($ in thousands)
<S> <C> <C>
Commercial paper...................................... $273,527 $113,746
Note payable to affiliate............................. 122,338 113,379
Notes payable to banks................................ 27,528 15,500
Trade notes payable................................... 2,136 5,286
-------- --------
$425,529 $247,911
======== ========
</TABLE>

(4) Total comprehensive income represents the net change in shareholders'
equity during a period from sources other than transactions with shareholders
and as such, includes net earnings. For the Company, the only other component
of total comprehensive income is the change in the cumulative foreign currency
translation adjustments recorded in shareholders' equity.

The components of comprehensive income, net of related tax, are as follows:

<TABLE>
<CAPTION>
Nine Months
Ended
July 31,
-----------------
2000 1999
-------- -------
($ in thousands)
<S> <C> <C>
Net earnings............................................ $136,632 $28,338
Foreign currency translation adjustment................. (2,618) (4,542)
-------- -------
Comprehensive income.................................. $134,014 $23,796
======== =======
</TABLE>

F-5
<PAGE>

FLUOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(5) Cash paid for interest was $40.8 million and $33.6 million for the nine
month periods ended July 31, 2000 and 1999, respectively. Income tax payments,
net of receipts, were $49.2 million and $46.4 million during the nine month
periods ended July 31, 2000 and 1999, respectively.

(6) The Company has a forward purchase contract for 1,850,000 shares of its
common stock. The contract matures in October 2000 and gives the Company the
ultimate choice of settlement option, either physical settlement or net share
settlement. As of July 31, 2000, the contract settlement cost per share
exceeded the current market price per share by $23.70.

If during the term of the contract, the price of the Company's stock falls
to certain levels, as defined in the contract, the holder of the contract has
the right to require the Company to register the shares or, if the price
declines beyond a stated level, to settle the contract at the Company's choice
of settlement option.

(7) In March 1999, the Company announced a new strategic direction,
including a reorganization of the operating units and administrative functions
of its engineering and construction segment. In connection with this
reorganization, the Company recorded in the nine months ended July 31, 1999 a
special provision of $136.5 million pretax to cover direct and other
reorganization related costs, primarily for personnel, facilities and asset
impairment adjustments. During the nine months ended July 31, 2000, $17.9
million of the special provision was reversed into earnings as a result of the
Company's decision to retain ownership and remain in its current office
location in Camberley, U.K.

To date, the Company has eliminated slightly more than 5,000 jobs with
additional separations to be completed by the end of the fiscal year. Two
offices were closed during the nine months ended July 31, 2000. These closures
and the decision to retain facilities in Camberley, bring total offices closed
to 15 thus completing the office utilization initiatives under the
reorganization plan.

The following table summarizes the status of the Company's reorganization
plan as of July 31, 2000:

<TABLE>
<CAPTION>
Lease
Personnel Asset Termination
Costs Impairments Costs Other Total
--------- ----------- ----------- ----- ------
($ in millions)
<S> <C> <C> <C> <C> <C>
Balance at October 31,
1999.................... $ 25.2 $ 23.4 $ 9.7 $ 0.2 $ 58.5
Cash expenditures........ (10.7) -- (5.1) -- (15.8)
Non-cash activities...... (2.1) (5.5) -- (0.2) (7.8)
Provision reversal....... -- (17.9) -- -- (17.9)
------ ------ ----- ----- ------
Balance at July 31,
2000.................... $ 12.4 $ -- $ 4.6 $ -- $ 17.0
====== ====== ===== ===== ======
</TABLE>

The special provision liability as of July 31, 2000 is included in other
accrued liabilities. The liability for personnel costs will be substantially
utilized by year-end. The liability associated with abandoned lease space will
be amortized as an offset to lease expense over the remaining life of the
respective leases starting on the date of abandonment.

(8) In the fourth quarter of 1999, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). The statement establishes
new standards for the way that business enterprises report information about
operating segments as well as the related disclosures about products and
services, geographical areas and major customers. The adoption of SFAS No. 131
did not affect the consolidated results of operations or financial position of
the Company, but it did affect the business segments that are disclosed. Prior
year disclosures have been restated to conform to the new basis of reporting.

F-6
<PAGE>

FLUOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Operating Information by Segment--For the nine months ended July 31, 2000
and 1999:

<TABLE>
<CAPTION>
Fluor Fluor
Fluor Global Massey Signature
Daniel Services Coal Services Total
-------- -------- ------ --------- --------
($ in millions)
<S> <C> <C> <C> <C> <C>
2000
External revenues.............. $5,444.2 $2,203.6 $797.3 $13.8 $8,458.9
Operating profit............... $ 82.4 $ 71.4 $101.5 $ 0.7 $ 256.0

1999
External revenues.............. $6,598.2 $2,152.3 $794.3 -- $9,544.8
Operating profit............... $ 128.2 $ 56.4 $104.1 -- $ 288.7
</TABLE>

Reconciliation of Segment Information to Consolidated Amounts--For the nine
months ended July 31, 2000 and 1999:

<TABLE>
<CAPTION>
2000 1999
------ -------
($ in
millions)
<S> <C> <C>
Total segment operating profit.............................. $256.0 $ 288.7
Special provision........................................... 17.9 (136.5)
Corporate administrative and general expense................ (45.3) (40.5)
Interest (expense) income, net.............................. (29.4) (23.9)
Other items, net............................................ (4.8) (3.9)
------ -------
Earnings before taxes..................................... $194.4 $ 83.9
====== =======
</TABLE>

(9) On June 7, 2000, the Company's Board of Directors approved a transaction
that will separate the Company into two independent entities--Fluor and Massey
Energy. This action will enable the management teams of Fluor and Massey Energy
to focus more closely on their respective businesses and will provide each of
the companies with the flexibility to grow in a way that is best suited to its
industry. The transaction will be structured as a spin-off, resulting in the
creation of two publicly held companies. At the time of the spin-off, Fluor
shareholders will retain their existing Fluor stock, which will become Massey
Energy shares, and will be issued an equal number of shares of "New" Fluor
stock through a tax-free distribution. The "Old" Fluor's name will be changed
to Massey Energy Company. The proposed transaction, which is expected to be
completed by the end of the calendar year, is subject to shareholder approval,
establishment of new capital structures, and a favorable ruling by the Internal
Revenue Service.

F-7
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders Fluor Corporation

We have audited the accompanying consolidated balance sheet of Fluor
Corporation as of October 31, 1999 and 1998, and the related consolidated
statements of earnings, cash flows, and shareholders' equity for each of the
three years in the period ended October 31, 1999. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 audits provide 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 Fluor
Corporation at October 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1999, in conformity with accounting principles generally accepted
in the United States.

/s/ ERNST & YOUNG LLP

Orange County, California
November 19, 1999

F-8
<PAGE>

FLUOR CORPORATION

CONSOLIDATED STATEMENT OF EARNINGS

<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
(in thousands, except per share
amounts)
<S> <C> <C> <C>
REVENUES
Engineering and construction services.. $11,334,355 $12,377,476 $13,217,515
Coal................................... 1,083,030 1,127,297 1,081,026
----------- ----------- -----------
Total revenues....................... 12,417,385 13,504,773 14,298,541
----------- ----------- -----------

COST OF REVENUES
Engineering and construction services.. 11,090,520 12,140,901 13,096,310
Coal................................... 936,173 954,535 926,260
----------- ----------- -----------
Total cost of revenues............... 12,026,693 13,095,436 14,022,570

OTHER (INCOME) AND EXPENSES
Special provision...................... 117,200 -- --
Corporate administrative and general
expense............................... 55,350 22,598 13,230
Interest expense....................... 50,918 45,277 30,758
Interest income........................ (18,429) (21,164) (23,286)
----------- ----------- -----------
Total cost and expenses.............. 12,231,732 13,142,147 14,043,272
----------- ----------- -----------

EARNINGS BEFORE TAXES.................. 185,653 362,626 255,269
INCOME TAX EXPENSE..................... 81,466 127,282 109,082
----------- ----------- -----------
NET EARNINGS........................... $ 104,187 $ 235,344 $ 146,187
=========== =========== ===========

EARNINGS PER SHARE
Basic.................................. $ 1.38 $ 2.99 $ 1.76
Diluted................................ $ 1.37 $ 2.97 $ 1.75
=========== =========== ===========

SHARES USED TO CALCULATE EARNINGS PER
SHARE
Basic.................................. 75,228 78,801 83,091
Diluted................................ 75,929 79,135 83,478
=========== =========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-9
<PAGE>

FLUOR CORPORATION

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
At October 31,
----------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
ASSETS
------

Current Assets
Cash and cash equivalents............................. $ 209,614 $ 340,544
Accounts and notes receivable......................... 850,557 959,416
Contract work in progress............................. 416,285 596,983
Inventories........................................... 248,118 198,645
Deferred taxes........................................ 105,502 81,155
Other current assets.................................. 80,095 64,108
Net assets held for sale.............................. -- 36,300
---------- ----------
Total current assets................................ 1,910,171 2,277,151
---------- ----------
Property, Plant and Equipment
Land.................................................. 71,664 69,779
Buildings and improvements............................ 352,883 352,653
Machinery and equipment............................... 2,103,663 2,012,539
Mining properties and mineral rights.................. 858,965 788,978
Construction in progress.............................. 81,422 56,282
---------- ----------
3,468,597 3,280,231
Less accumulated depreciation, depletion and
amortization.......................................... 1,245,644 1,132,923
---------- ----------
Net property, plant and equipment...................... 2,222,953 2,147,308
---------- ----------
Other Assets
Goodwill, net of accumulated amortization of $32,458
and $33,766, respectively............................ 116,045 139,091
Investments........................................... 167,891 137,562
Other................................................. 469,057 318,096
---------- ----------
Total other assets.................................. 752,993 594,749
---------- ----------
$4,886,117 $5,019,208
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Current Liabilities
Trade accounts and notes payable...................... $ 798,751 $ 972,096
Commercial paper, loan notes and a note payable to
affiliate of $113,379 in 1999........................ 242,625 428,458
Advance billings on contracts......................... 565,373 546,816
Accrued salaries, wages and benefit plan
liabilities.......................................... 321,148 324,412
Other accrued liabilities............................. 276,413 223,596
Current portion of long-term debt..................... -- 176
---------- ----------
Total current liabilities........................... 2,204,310 2,495,554
---------- ----------
Long-Term Debt Due After One Year................... 317,555 300,428

Noncurrent Liabilities
Deferred taxes........................................ 162,210 105,515
Other................................................. 620,670 592,102
---------- ----------
Total noncurrent liabilities........................ 782,880 697,617
---------- ----------

Contingencies and Commitments

Shareholders' Equity
Capital stock
Preferred--authorized 20,000,000 shares without par
value, none issued
Common--authorized 150,000,000 shares of $.625 par
value; issued and outstanding in 1999--76,034,296
shares and in 1998--75,572,537 shares............... 47,521 47,233
Additional capital.................................... 217,844 199,077
Retained earnings..................................... 1,375,338 1,331,843
Unamortized executive stock plan expense.............. (21,579) (22,633)
Accumulated other comprehensive income................ (37,752) (29,911)
---------- ----------
Total shareholders' equity.......................... 1,581,372 1,525,609
---------- ----------
$4,886,117 $5,019,208
========== ==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-10
<PAGE>

FLUOR CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings................................... $ 104,187 $ 235,344 $ 146,187
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation, depletion and amortization..... 318,204 288,870 248,353
Deferred taxes............................... 29,268 28,780 25,428
Special provision, net of cash payments...... 85,410 -- --
Provisions for impairment/abandonment of
joint ventures and investments.............. -- -- 22,962
Gain on sale of business..................... -- -- (7,222)
Changes in operating assets and liabilities,
excluding effects of business
acquisitions/dispositions................... (22,551) 168,576 (67,224)
Other, net................................... (49,642) (19,051) (39,860)
--------- --------- ---------
Cash provided by operating activities...... 464,876 702,519 328,624
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................... (504,334) (600,933) (466,202)
E&C businesses acquired........................ -- -- (141,718)
Coal businesses and reserves acquired.......... -- (12,004) (39,482)
Proceeds from sales and maturities of
marketable securities......................... -- 10,089 59,289
Investments, net............................... (4,688) (20,745) (9,275)
Proceeds from sale of property, plant and
equipment..................................... 105,154 125,493 50,996
Collection of notes receivable................. -- -- 77,496
Contributions to deferred compensation trusts.. (8,160) (21,365) (43,026)
Net assets held for sale, including cash....... 36,300 (26,375) --
Proceeds from sale of business................. -- -- 11,992
Other, net..................................... 549 (17,477) (12,041)
--------- --------- ---------
Cash utilized by investing activities...... (375,179) (563,317) (511,971)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid............................ (60,692) (63,497) (63,750)
(Decrease) increase in short-term borrowings,
net........................................... (299,212) 341,809 21,692
Proceeds from issuance of note payable to
affiliate..................................... 113,379 -- --
Proceeds from (payments on) long-term debt,
net........................................... 16,951 (285) 295,719
Stock options exercised........................ 10,760 9,935 16,007
Purchases of common stock...................... -- (378,979) (33,924)
Other, net..................................... (1,813) (6,965) (37)
--------- --------- ---------
Cash (utilized) provided by financing
activities................................ (220,627) (97,982) 235,707
--------- --------- ---------
(Decrease) increase in cash and cash
equivalents................................... (130,930) 41,220 52,360
Cash and cash equivalents at beginning of
year.......................................... 340,544 299,324 246,964
--------- --------- ---------
Cash and cash equivalents at end of year... $ 209,614 $ 340,544 $ 299,324
========= ========= =========
</TABLE>

See Notes to Consolidated Financial Statements.

F-11
<PAGE>

FLUOR CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Unamortized Accumulated
Common Stock Executive Other
--------------- Additional Stock Plan Comprehensive Retained
Shares Amount Capital Expense Income Earnings Total
------ ------- ---------- ----------- ------------- ---------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1996.. 83,791 $52,369 $573,037 $(32,538) $ (701) $1,077,559 $1,669,726
------ ------- -------- -------- -------- ---------- ----------
Comprehensive income
Net earnings............... -- -- -- -- -- 146,187 146,187
Foreign currency
translation adjustment
(net of deferred taxes of
$3,867)................... -- -- -- -- (6,503) -- (6,503)
----------
Comprehensive income...... -- -- -- -- -- -- 139,684
Cash dividends ($0.76 per
share)...................... -- -- -- -- -- (63,750) (63,750)
Exercise of stock options,
net......................... 415 260 15,747 -- -- -- 16,007
Stock option tax benefit..... -- -- 3,528 -- -- -- 3,528
Amortization of executive
stock plan expense.......... -- -- -- 8,183 -- -- 8,183
Issuance of restricted stock,
net......................... 161 101 9,006 (9,086) -- -- 21
Purchases of common stock.... (619) (387) (33,537) -- -- -- (33,924)
Tax benefit from reduction of
valuation allowance for
deferred tax assets......... -- -- 1,575 -- -- -- 1,575
------ ------- -------- -------- -------- ---------- ----------
BALANCE AT OCTOBER 31, 1997.. 83,748 52,343 569,356 (33,441) (7,204) 1,159,996 1,741,050
------ ------- -------- -------- -------- ---------- ----------
Comprehensive income
Net earnings............... -- -- -- -- -- 235,344 235,344
Foreign currency
translation adjustment
(net of deferred taxes of
$14,439).................. -- -- -- -- (22,707) -- (22,707)
----------
Comprehensive income...... -- -- -- -- -- -- 212,637
Cash dividends ($0.80 per
share)...................... -- -- -- -- -- (63,497) (63,497)
Exercise of stock options,
net......................... 268 167 9,768 -- -- -- 9,935
Stock option tax benefit..... -- -- 2,425 -- -- -- 2,425
Amortization of executive
stock plan expense.......... -- -- -- 7,343 -- -- 7,343
Issuance of restricted stock,
net......................... (144) (90) (8,680) 3,465 -- -- (5,305)
Purchases of common stock.... (8,299) (5,187) (373,792) -- -- -- (378,979)
------ ------- -------- -------- -------- ---------- ----------
BALANCE AT OCTOBER 31, 1998.. 75,573 47,233 199,077 (22,633) (29,911) 1,331,843 1,525,609
------ ------- -------- -------- -------- ---------- ----------
Comprehensive income
Net earnings............... -- -- -- -- -- 104,187 104,187
Foreign currency
translation adjustment
(net of deferred taxes of
$4,910)................... -- -- -- -- (7,841) -- (7,841)
----------
Comprehensive income...... -- -- -- -- -- -- 96,346
Cash dividends ($0.80 per
share)...................... -- -- -- -- -- (60,692) (60,692)
Exercise of stock options,
net......................... 304 190 10,570 -- -- -- 10,760
Stock option tax benefit..... -- -- 1,989 -- -- -- 1,989
Amortization of executive
stock plan expense.......... -- -- -- 7,517 -- -- 7,517
Issuance of restricted stock,
net......................... 157 98 6,208 (6,463) -- -- (157)
------ ------- -------- -------- -------- ---------- ----------
BALANCE AT OCTOBER 31, 1999.. 76,034 $47,521 $217,844 $(21,579) $(37,752) $1,375,338 $1,581,372
====== ======= ======== ======== ======== ========== ==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-12
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Major Accounting Policies

Principles of Consolidation

The financial statements include the accounts of the company and its
subsidiaries. The equity method of accounting is used for investment ownership
ranging from 20 percent to 50 percent. Investment ownership of less than 20
percent is accounted for on the cost method. All significant intercompany
transactions of consolidated subsidiaries are eliminated. Certain 1998 and 1997
amounts have been reclassified to conform with the 1999 presentation.

Use of Estimates

The preparation of the financial statements of the company requires
management to make estimates and assumptions that affect reported amounts.
These estimates are based on information available as of the date of the
financial statements. Therefore, actual results could differ from those
estimates.

Engineering and Construction Contracts

The company recognizes engineering and construction contract revenues using
the percentage-of-completion method, based primarily on contract costs incurred
to date compared with total estimated contract costs. Customer-furnished
materials, labor and equipment, and in certain cases subcontractor materials,
labor and equipment, are included in revenues and cost of revenues when
management believes that the company is responsible for the ultimate
acceptability of the project. Contracts are segmented between types of
services, such as engineering and construction, and accordingly, gross margin
related to each activity is recognized as those separate services are rendered.
Changes to total estimated contract costs or losses, if any, are recognized in
the period in which they are determined. Revenues recognized in excess of
amounts billed are classified as current assets under contract work in
progress. Amounts billed to clients in excess of revenues recognized to date
are classified as current liabilities under advance billings on contracts. The
company anticipates that substantially all incurred costs associated with
contract work in progress at October 31, 1999 will be billed and collected in
2000.

Depreciation, Depletion and Amortization

Additions to property, plant and equipment are recorded at cost. Assets
other than mining properties and mineral rights are depreciated principally
using the straight-line method over the following estimated useful lives:
buildings and improvements--three to 50 years and machinery and equipment--two
to 30 years. Mining properties and mineral rights are depleted on the units-of-
production method. Leasehold improvements are amortized over the lives of the
respective leases. Goodwill is amortized on the straight-line method over
periods not longer than 40 years.

Exploration, Development and Reclamation

Coal exploration costs are expensed as incurred. Development and acquisition
costs of coal properties, when significant, are capitalized in mining
properties and depleted. The company accrues for post-mining reclamation costs
as coal is mined. Reclamation of disturbed surface acreage is performed as a
normal part of the mining process.

Income Taxes

Deferred tax assets and liabilities are recognized for the expected future
tax consequences of events that have been recognized in the company's financial
statements or tax returns.

F-13
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Earnings per Share

Basic earnings per share (EPS) is calculated by dividing net earnings by the
weighted average number of common shares outstanding for the period. Diluted
EPS reflects the assumed conversion of all dilutive securities, consisting of
employee stock options and restricted stock, and equity forward contracts.

The impact of dilutive securities on the company's EPS calculation is as
follows:

<TABLE>
<CAPTION>
Year ended October 31,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Employee stock options/ restricted stock........... 107,000 231,000 387,000
Equity forward contracts........................... 594,000 103,000 --
------- ------- -------
701,000 334,000 387,000
======= ======= =======
</TABLE>

Inventories

Inventories are stated at the lower of cost or market using specific
identification or the average cost method. Inventories comprise:

<TABLE>
<CAPTION>
At October 31,
-----------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Equipment for sale/rental............................... $131,781 $ 94,179
Coal.................................................... 72,070 52,628
Supplies and other...................................... 44,267 51,838
-------- --------
$248,118 $198,645
======== ========
</TABLE>

Internal Use Software

Effective for fiscal year 1999, the company adopted the American Institute
of Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use." The
statement requires capitalization of certain costs incurred in the development
of internal-use software, including external direct material and service costs,
employee payroll and payroll-related costs. Prior to the adoption of SOP 98-1,
the company capitalized only purchased software which was ready for service;
all other costs were expensed as incurred. The adoption of this statement did
not have a material effect on the company's financial statements.

Foreign Currency

The company uses forward exchange contracts to hedge certain foreign
currency transactions entered into in the ordinary course of business. The
company does not engage in currency speculation. The company's forward exchange
contracts do not subject the company to significant risk from exchange rate
movements because gains and losses on such contracts offset losses and gains,
respectively, on the assets, liabilities or transactions being hedged.
Accordingly, the unrealized gains and losses are deferred and included in the
measurement of the related foreign currency transaction. At October 31, 1999,
the company had approximately $124 million of foreign exchange contracts
outstanding relating to lease commitments and contract obligations. The forward
exchange contracts generally require the company to exchange U.S. Dollars for
foreign currencies at maturity, at rates agreed to at inception of the
contracts. If the counterparties to the exchange contracts (AA rated banks) do
not fulfill their obligations to deliver the contracted currencies, the company
could be at

F-14
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

risk for any currency related fluctuations. The amount of any gain or loss on
these contracts in 1999, 1998 and 1997 was immaterial. The contracts are of
varying duration, none of which extend beyond December 2000. The company limits
exposure to foreign currency fluctuations in most of its engineering and
construction contracts through provisions that require client payments in U.S.
Dollars or other currencies corresponding to the currency in which costs are
incurred. As a result, the company generally does not need to hedge foreign
currency cash flows for contract work performed. The functional currency of all
significant foreign operations is the local currency.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes new standards
for recording derivatives in interim and annual financial statements. This
statement, as amended, is effective for the company's fiscal year 2001.
Management does not anticipate that the adoption of the new statement will have
a significant impact on the results of operations or the financial position of
the company.

Concentrations of Credit Risk

The majority of accounts receivable and all contract work in progress are
from engineering and construction clients in various industries and locations
throughout the world. Most contracts require payments as the projects progress
or in certain cases advance payments. The company generally does not require
collateral, but in most cases can place liens against the property, plant or
equipment constructed or terminate the contract if a material default occurs.
Accounts receivable from customers of the company's coal operations are
primarily concentrated in the steel and utility industries. The company
maintains adequate reserves for potential credit losses and such losses have
been minimal and within management's estimates.

Stock Plans

The company accounts for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. Compensation cost
for stock appreciation rights and performance equity units is recorded based on
the quoted market price of the company's stock at the end of the period.

Comprehensive Income

Effective November 1, 1998, the company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
establishes standards for the reporting and display of total comprehensive
income and its components in financial statements. The adoption of this
statement had no effect on the company's net earnings or total shareholders'
equity.

Total comprehensive income represents the net change in shareholders' equity
during a period from sources other than transactions with shareholders and as
such, includes net earnings. For the company, the only other component of total
comprehensive income is the change in the cumulative foreign currency
translation adjustments recorded in shareholders' equity. Prior period
financial statements have been reclassified to conform with the provisions of
the new standard.

F-15
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Consolidated Statement of Cash Flows

Securities with maturities of 90 days or less at the date of purchase are
classified as cash equivalents. Securities with maturities beyond 90 days, when
present, are classified as marketable securities and are carried at fair value.
The changes in operating assets and liabilities as shown in the Consolidated
Statement of Cash Flows comprise:

<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1999 1998 1997
--------- -------- ---------
(in thousands)
<S> <C> <C> <C>
Decrease (increase) in:
Accounts and notes receivable........... $ 25,972 $(84,394) $(113,454)
Contract work in progress............... 180,698 73,575 (130,257)
Inventories............................. (49,473) (23,197) (40,303)
Other current assets.................... (16,054) (192) (17,028)
(Decrease) increase in:
Accounts payable........................ (173,345) 127,229 130,992
Advance billings on contracts........... 18,557 21,298 79,510
Accrued liabilities..................... (8,906) 54,257 23,316
--------- -------- ---------
(Increase) decrease in operating
assets and liabilities............... $ (22,551) $168,576 $ (67,224)
========= ======== =========
Cash paid during the year for:
Interest expense........................ $ 47,558 $ 44,057 $ 25,491
Income tax payments, net................ $ 52,025 $ 52,346 $ 75,967
</TABLE>

Business Acquisitions

The following summarizes major engineering and construction related
acquisitions completed during 1997. All of these acquisitions were in the Fluor
Global Services segment. There were no major engineering and construction
related acquisitions in 1999 and 1998.

. ConSol Group, a privately held U.S. company headquartered in New
Hampshire, that provides staffing personnel in the fields of information
technology and allied health.

. J.W. Burress, Inc., a privately held U.S. company headquartered in
Virginia, that provides product support services and sells, rents and
services new and used construction and industrial machinery.

. SMA Companies, privately held U.S. companies headquartered in California
and Georgia. These companies sell, rent and service heavy construction
and industrial equipment and provide proprietary software to other
equipment distributors throughout the U.S.

These businesses and other smaller acquisitions were purchased for a total
of $142 million. The fair value of assets acquired, including working capital
of $42 million and goodwill of $67 million, was $196 million, and liabilities
assumed totaled $54 million.

In 1998, the company's coal segment, through its Massey Coal Company
("Massey"), acquired coal reserves for an aggregate cost of $12 million. Massey
purchased two coal mining companies during 1997. The aggregate purchase price
was $39 million and included the fair value of assets acquired, consisting of
$55 million of property, plant and equipment, and mining rights, $13 million of
working capital and other assets, net of other liabilities assumed of $29
million. These acquisitions, along with capital expenditures, have

F-16
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

been directed primarily towards acquiring additional coal reserves. There were
no coal related acquisitions in 1999.

All of the above acquisitions have been accounted for under the purchase
method of accounting and their results of operations have been included in the
company's consolidated financial statements from the respective acquisition
dates. If these acquisitions had been made at the beginning of the respective
year acquired, pro forma results of operations would not have differed
materially from actual results.

From time to time, the company enters into investment arrangements,
including joint ventures, that are related to its engineering and construction
business. During 1997 through 1999, the majority of these expenditures related
to ongoing investments in an equity fund that focuses on energy related
projects and a number of smaller, diversified ventures.

Business Dispositions

On October 28, 1998, the company entered into an agreement to sell its
ownership interest in Fluor Daniel GTI, Inc. (FD/GTI). Under terms of the
agreement, the company sold its 4,400,000 shares in FD/GTI for $8.25 per share,
or $36.3 million in cash, on December 3, 1998. The net assets of FD/GTI were
reflected on the 1998 consolidated balance sheet at net realizable value and
included $26.4 million in cash and cash equivalents. This transaction did not
have a material impact on the company's results of operations or financial
position.

During 1997, the company completed the sale of ACQUION, a global provider of
supply chain management services, for $12 million in cash, resulting in a pre-
tax gain of $7 million.

Special Provision and Cost Reduction Initiatives

In March 1999, the company announced a new strategic direction, including a
reorganization of the operating units and administrative functions of its
engineering and construction segment. In connection with this reorganization,
the company recorded in the second quarter a special provision of $136.5
million pre-tax to cover direct and other reorganization related costs,
primarily for personnel, facilities and asset impairment adjustments.

Under the reorganization plan, approximately 5,000 jobs are expected to be
eliminated. The provision includes amounts for personnel costs for certain
affected employees that are entitled to receive severance benefits under
established severance policies or by government regulations. Additionally,
outplacement services may be provided on a limited basis to some affected
employees. The provision also reflects amounts for asset impairment, primarily
for property, plant and equipment; intangible assets (goodwill); and certain
investments. The asset impairments were recorded primarily because of the
company's decision to exit certain non-strategic geographic locations and
businesses. The carrying values of impaired assets were adjusted to their
current market values based on estimated sale proceeds, using either discounted
cash flows or contractual amounts. Lease termination costs were also included
in the special provision. The company anticipates closing 15 non-strategic
offices worldwide as well as consolidating and downsizing other office
locations. The closure or rationalization of these facilities is expected to be
substantially completed by the end of fiscal year 2000.

As of October 31, 1999, the company has reduced headcount by approximately
5,000 employees and has closed 13 offices. The company anticipates closing two
additional offices within the next six months. In October 1999, $19.3 million
of the special provision was reversed into earnings as a result of lower than
anticipated severance costs for personnel reductions in certain overseas
offices. Both the actual number of employee terminations as well as the cost
per employee termination were lower than originally estimated.

F-17
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table summarizes the status of the company's reorganization
plan as of October 31, 1999:

<TABLE>
<CAPTION>
Lease
Personnel Asset Termination
Costs Impairments Costs Other Total
--------- ----------- ----------- ------ --------
<S> <C> <C> <C> <C> <C>
Special provision....... $ 72,200 $ 48,800 $14,500 $1,000 $136,500
Cash expenditures....... (25,089) (1,094) (4,793) (814) (31,790)
Non-cash activities..... (2,576) (24,360) -- -- (26,936)
Provision reversal...... (19,300) -- -- -- (19,300)
-------- -------- ------- ------ --------
Balance at October 31,
1999................. $ 25,235 $ 23,346 $ 9,707 $ 186 $ 58,474
======== ======== ======= ====== ========
</TABLE>

The special provision liability as of October 31, 1999 is included in other
accrued liabilities. The liability for personnel costs and asset impairments
will be substantially utilized by April 30, 2000. The liability associated
with abandoned lease space will be amortized as an offset to lease expense
over the remaining life of the respective leases starting on the date of
abandonment.

During 1997, the company recorded $25.4 million in charges related to the
implementation of certain cost reduction initiatives. These charges provided
for personnel and facility related costs. As of October 31, 1999,
substantially all of these costs had been incurred.

Income Taxes

The income tax expense (benefit) included in the Consolidated Statement of
Earnings is as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------
1999 1998 1997
------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current:
Federal..................................... $ 5,931 $ 38,700 $ 50,906
Foreign..................................... 43,012 52,021 25,801
State and local............................. 3,255 7,781 6,947
------- -------- --------
Total current............................. 52,198 98,502 83,654
------- -------- --------
Deferred:
Federal..................................... 26,872 43,369 19,972
Foreign..................................... (2,641) (19,295) 3,908
State and local............................. 5,037 4,706 1,548
------- -------- --------
Total deferred............................ 29,268 28,780 25,428
------- -------- --------
Total income tax expense.................. $81,466 $127,282 $109,082
======= ======== ========
</TABLE>

F-18
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A reconciliation of U.S. statutory federal income tax expense to the
company's income tax expense on earnings is as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------
1999 1998 1997
------- -------- --------
(in thousands)
<S> <C> <C> <C>
U.S. statutory federal tax expense........... $64,979 $126,919 $ 89,344
Increase (decrease) in taxes resulting from:
Items without tax effect, net.............. 26,158 888 13,307
State and local income taxes............... 5,048 7,868 5,337
Depletion.................................. (9,625) (12,273) (10,051)
Effect of non-U.S. tax rates............... (396) 3,433 10,620
Other, net................................. (4,698) 447 525
------- -------- --------
Total income tax expense................. $81,466 $127,282 $109,082
======= ======== ========
</TABLE>

Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
amounts recorded for income tax purposes. The tax effects of significant
temporary differences giving rise to deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
At October 31,
--------------------
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not currently deductible....... $ 249,987 $ 224,319
Alternative minimum tax credit carryforwards....... 44,287 32,505
Net operating loss carryforwards of non-U.S.
companies......................................... 29,133 22,441
Translation adjustments............................ 23,955 19,045
Tax basis of building in excess of book basis...... 16,408 16,187
Net operating loss carryforwards of acquired
companies......................................... 6,503 7,177
Other.............................................. 71,926 73,599
--------- ---------
Total deferred tax assets........................ 442,199 395,273
Valuation allowance for deferred tax assets.......... (127,085) (100,007)
--------- ---------
Deferred tax assets, net............................. 315,114 295,266
--------- ---------
Deferred tax liabilities:
Book basis of property, equipment and other capital
costs in excess of tax basis...................... (294,628) (254,008)
Tax on unremitted non-U.S. earnings................ (16,361) (15,806)
Other.............................................. (60,833) (49,812)
--------- ---------
Total deferred tax liabilities................... (371,822) (319,626)
--------- ---------
Net deferred tax liabilities..................... $ (56,708) $ (24,360)
========= =========
</TABLE>

The company has net operating loss carryforwards from non-U.S. operations of
approximately $80 million which can be carried forward indefinitely until fully
utilized. These losses primarily relate to the company's operations in
Australia, Chile, Germany and the United Kingdom. Deferred tax assets
established for these losses aggregate $29 million and $22 million at October
31, 1999 and 1998, respectively.

In 1997, the company acquired the SMA Companies which had net operating loss
carryforwards of approximately $47 million. The company has utilized
approximately $5 million of the loss carryforwards, and

F-19
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

made an election in its 1998 consolidated federal tax return to waive
approximately $23 million of losses which otherwise would have expired without
future tax benefit. The remaining loss carryforwards of approximately $19
million expire in the years 2004 through 2008. The utilization of such loss
carryforwards is subject to stringent limitations under the Internal Revenue
Code. Deferred tax assets established for these losses aggregate $7 million for
both 1999 and 1998.

Substantially all of the company's alternative minimum tax credits are
associated with the coal business operated by Massey. These credits can be
carried forward indefinitely until fully utilized.

The company maintains a valuation allowance to reduce certain deferred tax
assets to amounts that are more likely than not to be realized. This allowance
primarily relates to the deferred tax assets established for the special
provision, net operating loss carryforwards and alternative minimum tax
credits. In 1999, increases in the valuation allowance are principally the
result of the company's special provision which did not receive full tax
benefit. Any reductions in the allowance resulting from realization of the loss
carryforwards of acquired companies will result in a reduction of goodwill.

Residual income taxes of approximately $8 million have not been provided on
approximately $20 million of undistributed earnings of certain foreign
subsidiaries at October 31, 1999, because the company intends to keep those
earnings reinvested indefinitely.

United States and foreign earnings before taxes are as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
United States................................... $168,698 $240,645 $231,921
Foreign......................................... 16,955 121,981 23,348
-------- -------- --------
Total......................................... $185,653 $362,626 $255,269
======== ======== ========
</TABLE>

Retirement Benefits

The company sponsors contributory and non-contributory defined contribution
retirement and defined benefit pension plans for eligible employees.
Contributions to defined contribution retirement plans are based on a
percentage of the employee's compensation. Expense recognized for these plans
of approximately $56 million in 1999, $79 million in 1998, and $84 million in
1997, is primarily related to domestic engineering and construction operations.
Effective January 1, 1999, the company replaced its domestic defined
contribution retirement plan with a defined benefit cash balance plan.
Contributions to defined benefit pension plans are generally at the minimum
annual amount required by applicable regulations. Payments to retired employees
under these plans are generally based upon length of service, age and/or a
percentage of qualifying compensation. The defined benefit pension plans are
primarily related to international engineering and construction operations,
U.S. craft employees and coal operations.

F-20
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Net periodic pension expense (income) for defined benefit pension plans
includes the following components:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Service cost............................... $ 35,370 $ 15,792 $ 15,301
Interest cost.............................. 25,088 24,220 23,743
Expected return on assets.................. (49,032) (48,236) (44,334)
Amortization of transition asset........... (2,132) (2,196) (2,296)
Amortization of prior service cost......... 337 355 347
Recognized net actuarial loss (gain)....... 58 (1,444) (1,288)
-------- -------- --------
Net periodic pension expense (income).... $ 9,689 $(11,509) $ (8,527)
======== ======== ========
</TABLE>

The ranges of assumptions indicated below cover defined benefit pension
plans in Australia, Germany, the United Kingdom, The Netherlands and the United
States. These assumptions are as of each respective fiscal year-end based on
the then current economic environment in each host country.

<TABLE>
<CAPTION>
At October 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Discount rates......................................... 6.0-7.75% 5.0-6.75%
Rates of increase in compensation levels............... 3.5-4.00% 2.5-4.00%
Expected long-term rates of return on assets........... 5.0-9.50% 5.0-9.50%
</TABLE>

F-21
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table sets forth the change in benefit obligation, plan assets
and funded status of the company's defined benefit pension plans:

<TABLE>
<CAPTION>
At October 31,
------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Change in pension benefit obligation
Benefit obligation at beginning of year.............. $438,866 $358,539
Service cost......................................... 35,370 15,792
Interest cost........................................ 25,088 24,220
Employee contributions............................... 1,626 1,775
Currency translation................................. (19,068) 12,454
Actuarial (gain) loss................................ (22,808) 52,498
Benefits paid........................................ (27,319) (26,412)
-------- --------
Benefit obligation at end of year.................. $431,755 $438,866
======== ========
Change in plan assets
Fair value at beginning of year...................... $576,019 $539,814
Actual return on plan assets......................... 103,938 42,324
Company contributions................................ 5,646 4,711
Employee contributions............................... 1,626 1,775
Currency translation................................. (17,154) 13,999
Benefits paid........................................ (27,319) (26,412)
Plan amendments...................................... (3,945) (192)
-------- --------
Fair value at end of year.......................... $638,811 $576,019
======== ========
Funded status.......................................... $207,056 $137,153
Unrecognized net actuarial (gain) loss................. (61,372) 16,579
Unrecognized prior service cost........................ 170 601
Unrecognized net asset................................. (8,002) (11,737)
-------- --------
Pension assets..................................... $137,852 $142,596
======== ========
</TABLE>

Amounts shown above at October 31, 1999 and 1998 exclude the projected
benefit obligation of approximately $101 million and $113 million,
respectively, and an equal amount of associated plan assets relating to
discontinued operations.

Massey participates in multiemployer defined benefit pension plans for its
union employees. Pension expense was less than $1 million in each of the years
ended October 31, 1999, 1998 and 1997. Under the Coal Industry Retiree Health
Benefits Act of 1992, Massey is required to fund medical and death benefits of
certain beneficiaries. Massey's obligation under the Act is estimated to
aggregate approximately $56 million at October 31, 1999, which will be
recognized as expense as payments are assessed. The expense recorded for such
benefits was $4 million in 1999 and 1998 and $7 million in 1997.

In addition to the company's defined benefit pension plans, the company and
certain of its subsidiaries provide health care and life insurance benefits for
certain retired employees. The health care and life insurance plans are
generally contributory, with retiree contributions adjusted annually. Service
costs are accrued currently. The accumulated postretirement benefit obligation
at October 31, 1999 and 1998 was determined in accordance with the current
terms of the company's health care plans, together with relevant actuarial
assumptions and health care cost trend rates projected at annual rates ranging
from 7.8 percent in 2000 down to

F-22
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5 percent in 2004 and beyond. The effect of a one percent annual increase in
these assumed cost trend rates would increase the accumulated postretirement
benefit obligation and the aggregate of the annual service and interest costs
by approximately $11.8 million and $1.7 million, respectively. The effect of a
one percent annual decrease in these assumed cost trend rates would decrease
the accumulated postretirement benefit obligation and the aggregate of the
annual service and interest costs by approximately $8.9 million and $2.5
million, respectively.

Net periodic postretirement benefit cost includes the following components:

<TABLE>
<CAPTION>
Year Ended
October 31,
----------------------
1999 1998 1997
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Service cost........................................ $3,850 $3,506 $3,107
Interest cost....................................... 5,724 5,820 6,338
Expected return on assets........................... -- -- --
Amortization of prior service cost.................. 140 124 --
Recognized net actuarial (gain) loss................ (458) (595) 142
------ ------ ------
Net periodic postretirement benefit cost.......... $9,256 $8,855 $9,587
====== ====== ======
</TABLE>

The following table sets forth the change in benefit obligation of the
company's postretirement benefit plans:

<TABLE>
<CAPTION>
At October 31,
------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Change in postretirement benefit obligation
Benefit obligation at beginning of year............. $ 93,975 $ 86,187
Service cost........................................ 3,850 3,506
Interest cost....................................... 5,724 5,820
Employee contributions.............................. 270 269
Actuarial (gain) loss............................... (15,303) 2,473
Benefits paid....................................... (4,655) (4,280)
-------- --------
Benefit obligation at end of year................. $ 83,861 $ 93,975
======== ========
Funded status......................................... $(83,861) $(93,975)
Unrecognized net actuarial (gain) loss................ (11,650) 3,195
Unrecognized prior service cost....................... 1,776 1,916
-------- --------
Accrued postretirement benefit obligation......... $(93,735) $(88,864)
======== ========
</TABLE>

The discount rate used in determining the postretirement benefit obligation
was 7.75 percent and 6.75 percent at October 31, 1999 and 1998, respectively.

The preceding information does not include amounts related to benefit plans
applicable to employees associated with certain contracts with the U.S.
Department of Energy because the company is not responsible for the current or
future funded status of these plans.

F-23
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Fair Value of Financial Instruments

The estimated fair value of the company's financial instruments are as
follows:

<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------
1999 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents........ $209,614 $209,614 $340,544 $340,544
Notes receivable including
noncurrent portion.............. 47,444 54,387 41,854 48,953
Long-term investments............ 60,609 72,667 59,734 76,064
Liabilities:
Commercial paper, loan notes and
notes payable................... 247,911 247,911 430,508 430,508
Long-term debt including current
portion......................... 317,555 312,580 300,604 319,654
Other noncurrent financial
liabilities..................... 9,789 9,789 8,486 8,486
Off-balance sheet financial
instruments:
Forward contracts to purchase
common stock.................... -- (21,170) -- (18,793)
Foreign currency contract
obligations..................... -- (1,311) -- 1,964
Letters of credit................ -- 546 -- 720
Lines of credit.................. -- 965 -- 1,077
</TABLE>

Fair values were determined as follows:

The carrying amounts of cash and cash equivalents, short-term notes
receivable, commercial paper, loan notes and notes payable approximate fair
value because of the short-term maturity of these instruments.

Long-term investments are based on quoted market prices for these or similar
instruments. Long-term notes receivable are estimated by discounting future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings.

The fair value of long-term debt, including current portion, is estimated
based on quoted market prices for the same or similar issues or on the current
rates offered to the company for debt of the same maturities.

Other noncurrent financial liabilities consist primarily of deferred
payments, for which cost approximates fair value.

Forward contracts to purchase common stock are based on the estimated cost
to terminate or settle the obligation.

Foreign currency contract obligations are estimated by obtaining quotes from
brokers.

Letters of credit and lines of credit amounts are based on fees currently
charged for similar agreements or on the estimated cost to terminate or settle
the obligations.

F-24
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Financing Arrangements

The company has unsecured committed revolving short- and long-term lines of
credit with banks from which it may borrow for general corporate purposes up to
a maximum of $600 million. Commitment and facility fees are paid on these
lines. In addition, the company has $1.0 billion in short-term uncommitted
lines of credit to support letters of credit, foreign currency contracts and
loan notes. Borrowings under both committed and uncommitted lines of credit
bear interest at prime or rates based on the London Interbank Offered Rate
("LIBOR"), domestic certificates of deposit or other rates which are mutually
acceptable to the banks and the company. At October 31, 1999, no amounts were
outstanding under the committed lines of credit. As of that date, $235 million
of the short-term uncommitted lines of credit were used to support undrawn
letters of credit and foreign currency contracts issued in the ordinary course
of business and $16 million were used for outstanding loan notes.

The company had $114 million and $245 million in unsecured commercial paper
outstanding at October 31, 1999 and 1998, respectively. The commercial paper
was issued at a discount with a weighted-average effective interest rate of 5.9
percent at October 31, 1999 and 5.3 percent at October 31, 1998.

At October 31, 1999 the company had a $113 million note payable to an
affiliated entity. The note is due on demand and bears interest at the rate of
5.41 percent as of October 31, 1999.

Long-term debt comprises:

<TABLE>
<CAPTION>
At October 31,
-----------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
6.95% Senior Notes due March 1, 2007................... $300,000 $300,000
Other bonds and notes.................................. 17,555 604
-------- --------
317,555 300,604
Less: Current portion.................................. -- 176
-------- --------
Long-term debt due after one year...................... $317,555 $300,428
======== ========
</TABLE>

In March 1997, the company issued $300 million of 6.95% Senior Notes (the
Notes) due March 1, 2007 with interest payable semiannually on March 1 and
September 1 of each year, commencing September 1, 1997. The Notes were sold at
a discount for an aggregate price of $296.7 million. The Notes are redeemable,
in whole or in part, at the option of the company at any time at a redemption
price equal to the greater of (i) 100 percent of the principal amount of the
Notes or (ii) as determined by a Quotation Agent as defined in the offering
prospectus.

Included in other bonds and notes are $18 million of 5.625% municipal bonds
issued in July 1999. The bonds are due June 1, 2019 with interest payable
semiannually on June 1 and December 1 of each year, commencing December 1,
1999. The bonds are redeemable, in whole or in part, at the option of the
company at a redemption price ranging from 100 percent to 102 percent of the
principal amount of the bonds on or after June 1, 2009. In addition, the bonds
are subject to other redemption clauses, at the option of the holder, should
certain events occur, as defined in the offering prospectus.

Other Noncurrent Liabilities

The company maintains appropriate levels of insurance for business risks.
Insurance coverages contain various deductible amounts for which the company
provides accruals based on the aggregate of the liability for

F-25
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

reported claims and an actuarially determined estimated liability for claims
incurred but not reported. Other noncurrent liabilities include $61 million and
$64 million at October 31, 1999 and 1998, respectively, relating to these
liabilities.

Stock Plans

The company's executive stock plans, approved by the shareholders, provide
for grants of nonqualified or incentive stock options, restricted stock awards
and stock appreciation rights ("SARS"). All executive stock plans are
administered by the Organization and Compensation Committee of the Board of
Directors ("Committee") comprised of outside directors, none of whom are
eligible to participate in the plans. Option grant prices are determined by the
Committee and are established at the fair value of the company's common stock
at the date of grant. Options and SARS normally extend for 10 years and become
exercisable over a vesting period determined by the Committee, which can
include accelerated vesting for achievement of performance or stock price
objectives. During 1998, the company issued 1,696,420 options and
1,502,910 SARS that vest over three to four year periods and expire in five
years. The majority of these awards have accelerated vesting provisions based
on the price of the company's stock. Additionally, 58,000 and 189,075
nonqualified stock options were issued during 1999 and 1998, respectively, and
10,925 incentive stock options were issued during 1998, with 20 percent to 25
percent vesting upon issuance and the remaining awards vesting in installments
of 20 percent to 25 percent per year commencing one year from the date of
grant.

Restricted stock awards issued under the plans provide that shares awarded
may not be sold or otherwise transferred until restrictions have lapsed or
performance objectives have been attained as established by the Committee. Upon
termination of employment, shares upon which restrictions have not lapsed must
be returned to the company. Restricted stock issued under the plans totaled
197,257 shares, 4,500 shares and 186,390 shares in 1999, 1998 and 1997,
respectively.

As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123), the company has
elected to continue following the guidance of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," for measurement and recognition of stock-based
transactions with employees. Recorded compensation cost for these plans totaled
$8 million in 1999. During 1998, the company recognized a net credit of $9
million for performance-based stock plans. This amount includes $10 million of
expenses accrued in prior years which were reversed in 1998 as a result of not
achieving prescribed performance targets. Compensation cost recognized for such
plans totaled less than $1 million in 1997. Under APB Opinion No. 25, no
compensation cost is recognized for the option plans where vesting provisions
are based only on the passage of time. Had the company recorded compensation
expense using the accounting method recommended by SFAS No. 123, net earnings
and diluted earnings per share would have been reduced to the pro forma amounts
as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------
1999 1998 1997
-------- -------- --------
(in thousands,
except per share amounts)
<S> <C> <C> <C>
Net earnings
As Reported.................................. $104,187 $235,344 $146,187
Pro Forma.................................... 95,297 218,958 143,663
Diluted earnings per share
As Reported.................................. $ 1.37 $ 2.97 $ 1.75
Pro Forma.................................... 1.26 2.77 1.72
</TABLE>

F-26
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of each option grant is estimated on the date of grant by
using the Black-Scholes option-pricing model. The following weighted-average
assumptions were used for new grants:

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Expected option lives (years)......................... 6 5 6
Risk-free interest rates.............................. 4.51% 5.83% 6.30%
Expected dividend yield............................... 1.38% 1.19% 1.15%
Expected volatility................................... 33.76% 29.85% 24.58%
</TABLE>

The weighted-average fair value of options granted during 1999, 1998 and
1997 was $15, $12 and $17, respectively.

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
Weighted Average
Stock Exercise Price
Options Per Share
--------- ----------------
<S> <C> <C>
Outstanding at October 31, 1996................ 4,339,378 $50
--------- ---
Granted........................................ 114,060 61
Expired or canceled............................ (117,404) 53
Exercised...................................... (414,731) 39
--------- ---
Outstanding at October 31, 1997................ 3,921,303 51
--------- ---
Granted........................................ 1,898,420 36
Expired or canceled............................ (844,664) 47
Exercised...................................... (267,602) 37
--------- ---
Outstanding at October 31, 1998................ 4,707,457 47
--------- ---
Granted........................................ 1,079,810 43
Expired or canceled............................ (256,145) 47
Exercised...................................... (303,736) 35
--------- ---
Outstanding at October 31, 1999................ 5,227,386 $47
========= ===
</TABLE>

Exercisable at:

<TABLE>
<S> <C>
October 31, 1999................................................. 3,407,398
October 31, 1998................................................. 3,210,580
October 31, 1997................................................. 1,964,137
</TABLE>

At October 31, 1999, there are 1,089,902 shares available for future grant.
Available for grant includes shares which may be granted as either stock
options or restricted stock, as determined by the Committee under the 1996 and
1988 Fluor Executive Stock Plans.

At October 31, 1999, there are 5,227,386 options outstanding with exercise
prices between $35 and $68, with a weighted-average exercise price of $47 and a
weighted-average remaining contractual life of 5.7 years; 3,407,398 of these
options are exercisable with a weighted-average exercise price of $49.

At October 31, 1999, 3,674,875 of the 5,227,386 options outstanding have
exercise prices between $35 and $49, with a weighted-average exercise price of
$40 and a weighted-average remaining contractual life of 5.3 years; 2,010,480
of these options are exercisable with a weighted-average exercise price of $41.
The

F-27
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

remaining 1,552,511 outstanding options have exercise prices between $50 and
$68, with a weighted-average exercise price of $61 and a weighted-average
remaining contractual life of 6.4 years; 1,396,918 of these options are
exercisable with a weighted-average exercise price of $61.

Lease Obligations

Net rental expense amounted to approximately $98 million, $92 million and
$93 million in 1999, 1998 and 1997, respectively. The company's lease
obligations relate primarily to office facilities, equipment used in connection
with long-term construction contracts and other personal property.

During 1998, the company entered into a $100 million operating lease
facility to fund the construction cost of its corporate headquarters and
engineering center. The facility expires in 2004. Lease payments are calculated
based on LIBOR plus approximately 0.35 percent. The lease contains an option to
purchase these properties during the term of the lease and contains a residual
value guarantee of $82 million. In addition, during 1999 the company entered
into a similar transaction to fund construction of its Calgary office. The
total commitment under this transaction is approximately $25 million.

The company's obligations for minimum rentals under noncancelable leases are
as follows:

<TABLE>
<CAPTION>
At October 31,
-------------- (in thousands)
<S> <C>
2000........................................................ $46,358
2001........................................................ 43,531
2002........................................................ 38,140
2003........................................................ 34,595
2004........................................................ 22,264
Thereafter.................................................. 62,067
</TABLE>

Contingencies and Commitments

The company and certain of its subsidiaries are involved in litigation in
the ordinary course of business. The company and certain of its engineering and
construction subsidiaries are contingently liable for commitments and
performance guarantees arising in the ordinary course of business. Claims
arising from engineering and construction contracts have been made against the
company by clients, and the company has made certain claims against clients for
costs incurred in excess of the current contract provisions. The company does
not expect that the foregoing matters will have a material adverse effect on
its consolidated financial position or results of operations.

Disputes have arisen between a Fluor Daniel subsidiary and its client,
Anaconda Nickel, which primarily relate to the process design of the Murrin
Murrin Nickel Cobalt project located in Western Australia. Both parties have
initiated the dispute resolution process under the contract. Results for the
year ended October 31, 1999 for the Fluor Daniel segment include a provision
totaling $84 million for the alleged process design problems. If and to the
extent that these problems are ultimately determined to be the responsibility
of the company, the company anticipates recovering a substantial portion of
this amount from available insurance and, accordingly, has also recorded $64
million in expected insurance recoveries. The company vigorously disputes and
denies Anaconda's allegations of inadequate process design.

Financial guarantees, made in the ordinary course of business on behalf of
clients and others in certain limited circumstances, are entered into with
financial institutions and other credit grantors and generally obligate the
company to make payment in the event of a default by the borrower. Most
arrangements require the borrower to pledge collateral in the form of property,
plant and equipment which is deemed adequate to

F-28
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

recover amounts the company might be required to pay. As of October 31, 1999,
the company had extended financial guarantees on behalf of certain clients and
other unrelated third parties totaling approximately $29 million.

In connection with its 1997/1998 share repurchase program, the company
entered into a forward purchase contract for 1,850,000 shares of its common
stock at a price of $49 per share. The contract matures in October 2000 and
gives the company the ultimate choice of settlement option, either physical
settlement or net share settlement. As of October 31, 1999, the contract
settlement cost per share exceeded the current market price per share by
$11.44.

Although the ultimate choice of settlement option resides with the company,
if the price of the company's common stock falls to certain levels, as defined
in the contract, the holder of the contract has the right to require the
company to settle the contract.

The company's operations are subject to and affected by federal, state and
local laws and regulations regarding the protection of the environment. The
company maintains reserves for potential future environmental costs where such
obligations are either known or considered probable, and can be reasonably
estimated.

On October 20, 1999, the U.S. District Court for the Southern District of
West Virginia issued an injunction which prohibits the construction of valley
fills over both intermittent and perennial stream segments as a part of mining
operations. While Massey is not a party to this litigation, virtually all
mining operations, including Massey, utilize valley fills to dispose of excess
materials. This decision is now under appeal to the Fourth Circuit Court of
Appeals and the District Court has issued a stay of its decision pending the
outcome of the appeal. Based upon the current state of the appeal, the company
does not believe that Massey mining operations will be materially affected
during the pendency of the appeal. If and to the extent that the District
Court's decision is upheld and legislation is not passed which limits the
impact of the decision, then all or a portion of Massey's mining operations
could be affected. The potential impact to Massey arising from this proceeding
is not currently estimable.

The company believes, based upon present information available to it, that
its reserves with respect to future environmental costs are adequate and such
future costs will not have a material effect on the company's consolidated
financial position, results of operations or liquidity. However, the imposition
of more stringent requirements under environmental laws or regulations, new
developments or changes regarding site cleanup costs or the allocation of such
costs among potentially responsible parties, or a determination that the
company is potentially responsible for the release of hazardous substances at
sites other than those currently identified, could result in additional
expenditures, or the provision of additional reserves in expectation of such
expenditures.

Operations by Business Segment and Geographical Area

In the fourth quarter of 1999, the company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131). The statement establishes new standards
for the way that business enterprises report information about operating
segments as well as the related disclosures about products and services,
geographical areas and major customers. The adoption of SFAS No. 131 did not
affect the consolidated results of operations or financial position of the
company, but did affect the business segments that are disclosed. Prior year
disclosures have been restated to conform to the new basis of reporting.

Fluor Daniel consists of five business units: Chemicals & Life Sciences;
Oil, Gas and Power; Mining; Manufacturing; and Infrastructure. These units
provide design, engineering, procurement and construction

F-29
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

services on a worldwide basis to an extensive range of industrial, commercial,
utility, natural resources and energy clients. The types of services provided
by Fluor Daniel include: feasibility studies, conceptual design, detail
engineering, procurement, project and construction management and construction.

Fluor Global Services consists of six business units: American Equipment
Company; TRS Staffing Solutions; Fluor Federal Services; Telecommunications;
Operations & Maintenance; and Consulting Services. These units provide a
variety of services to clients in a wide range of industries. The types of
services provided by Fluor Global Services include: equipment sales, leasing,
services and outsourcing for construction and industrial needs; temporary
technical and non-technical staffing specializing in technical, professional
and administrative personnel; services to the United States government; repair,
renovation, replacement, predictive and preventative services to commercial and
industrial facilities; and productivity consulting services and maintenance
management to the manufacturing and process industries.

Massey Coal is a single business unit which produces, processes and sells
high-quality, low-sulfur steam coal to the utility industry as well as
industrial customers, and metallurgical coal for the steel industry.

Fluor Signature Services is a single business unit established primarily to
provide traditional business services and business infrastructure support to
the company. Ultimately, such services may be marketed to external customers.
Although operations for this segment did not start until November 1, 1999,
historical total asset data has been presented for information purposes only.

The reportable segments follow the same accounting policies as those
described in the summary of major accounting policies. Management evaluates a
segment's performance based upon operating profit and operating return on
assets. Intersegment revenues are insignificant. The company incurs costs and
expenses and holds certain assets at the corporate level which relate to its
business as a whole. Certain of these amounts have been charged to the
company's business segments by various methods, largely on the basis of usage.

Engineering services for international projects are often performed within
the United States or a country other than where the project is located.
Revenues associated with these services have been classified within the
geographic area where the work was performed.

F-30
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Operating Information by Segment

<TABLE>
<CAPTION>
Fluor Fluor
Fluor Global Massey Signature
Daniel Services Coal Services Total
------- -------- ------ --------- -------
(in millions)
<S> <C> <C> <C> <C> <C>
1999
External revenues.............. $ 8,403 $2,931 $1,083 $ -- $12,417
Depreciation, depletion and
amortization.................. 61 90 167 -- 318
Operating profit before special
provision..................... 160 92 147 -- 399
Total assets................... 1,017 1,041 1,956 454 4,468
Capital expenditures........... $ 51 $ 226 $ 227 $ -- $ 504

1998
External revenues.............. $ 9,736 $2,642 $1,127 $ -- $13,505
Depreciation, depletion and
amortization.................. 67 72 150 -- 289
Operating profit............... 161 81 173 -- 415
Total assets................... 1,270 968 1,801 465 4,504
Capital expenditures........... $ 91 $ 214 $ 296 $ -- $ 601

1997
External revenues.............. $10,180 $3,038 $1,081 $ -- $14,299
Depreciation, depletion and
amortization.................. 68 49 131 -- 248
Operating profit............... 70 52 155 -- 277
Total assets................... 1,259 894 1,619 509 4,281
Capital expenditures........... $ 83 $ 116 $ 267 $ -- $ 466
</TABLE>

Reconciliation of Segment Information to Consolidated Amounts

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(in millions)
<S> <C> <C> <C>
OPERATING PROFIT
Total segment operating profit before special
provision....................................... $ 399 $ 415 $ 277
Special provision................................ (117) -- --
Corporate administrative and general expense..... (55) (23) (13)
Interest (expense) income, net................... (33) (24) (8)
Other items, net................................. (8) (5) (1)
------ ------ ------
Earnings before taxes.......................... $ 186 $ 363 $ 255
====== ====== ======

<CAPTION>
1999 1998 1997
------ ------ ------
(in millions)
<S> <C> <C> <C>
TOTAL ASSETS
Total assets for reportable segments............. $4,468 $4,504 $4,281
Cash, cash equivalents and marketable
securities...................................... 210 341 309
Other items, net................................. 208 174 95
------ ------ ------
Total assets................................... $4,886 $5,019 $4,685
====== ====== ======
</TABLE>

F-31
<PAGE>

FLUOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Enterprise-Wide Disclosures

<TABLE>
<CAPTION>
Revenues Total Assets
----------------------- --------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------ ------ ------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
United States*.............. $ 7,139 $ 8,324 $ 9,347 $3,995 $4,082 $3,789
Europe...................... 1,228 1,196 1,420 196 255 225
Central and South America... 825 1,242 1,110 221 256 210
Asia Pacific (includes
Australia)................. 1,575 1,435 1,545 265 252 315
Middle East and Africa...... 795 993 549 68 77 78
Canada...................... 855 315 328 141 97 68
------- ------- ------- ------ ------ ------
$12,417 $13,505 $14,299 $4,886 $5,019 $4,685
======= ======= ======= ====== ====== ======
</TABLE>
--------
* Includes export revenues to unaffiliated customers of $1.6 billion in 1999,
$1.5 billion in 1998 and $1.8 billion in 1997.

F-32
<PAGE>

FLUOR CORPORATION

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth unaudited quarterly results for the 11
quarters ended July 31, 2000. The data set forth below have been derived from
unaudited consolidated financial statements of Fluor Corporation and have been
prepared on the same basis as Fluor Corporation's audited Consolidated
Financial Statements and Notes thereto contained in this Proxy Statement, and,
in the opinion of management, include all adjustments necessary for a fair
presentation of such data for the periods presented. The data should be read in
conjunction with the audited Consolidated Financial Statements and notes
appearing elsewhere in this Proxy Statement. The operating results for any
quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
Fiscal Quarter Ended
------------------------------------------------------------------------------------------------------------
January 31, April 30, July 31, October 31, January 31, April 30, July 31, October 31, January 31, April 30,
1998 1998 1998 1998 1999 1999(1) 1999 1999(1) 2000 2000(1)
----------- --------- -------- ----------- ----------- --------- -------- ----------- ----------- ---------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $3,399.0 $3,282.1 $3,528.9 $3,294.8 $3,384.1 $3,091.3 $3,069.4 $2,872.6 $2,998.5 $2,557.8
Cost of
revenues........ 3,309.3 3,184.9 3,422.0 3,179.3 3,291.2 3,001.2 2,967.6 2,766.7 2,897.8 2,480.0
Special
provision....... -- -- -- -- -- 136.5 -- (19.3) -- (17.9)
Earnings (loss)
before taxes.... 84.5 83.7 96.2 98.3 74.9 (64.5) 73.5 101.7 74.1 73.0
Net earnings
(loss).......... 54.8 54.3 62.4 63.8 51.1 (72.9) 50.2 75.8 52.3 51.0
Earnings (loss)
per share
Basic........... 0.66 0.67 0.81 0.85 0.68 (0.97) 0.67 1.01 0.69 0.68
Diluted......... $ 0.66 $ 0.67 $ 0.81 $ 0.84 $ 0.68 $ (0.97) $ 0.66 $ 1.00 $ 0.69 $ 0.66
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
July 31,
2000
--------
<S> <C>
Revenues......... $2,902.7
Cost of
revenues........ 2,830.1
Special
provision....... --
Earnings (loss)
before taxes.... 47.3
Net earnings
(loss).......... 33.3
Earnings (loss)
per share
Basic........... 0.44
Diluted......... $ 0.44
========
</TABLE>
--------
(1) In March 1999, Fluor Corporation announced a new strategic direction,
including a reorganization of the operating units and administrative
functions of its engineering and construction segment. In connection with
this reorganization, Fluor Corporation recorded a pre-tax charge of $136.5
million to cover direct and other reorganization related costs. In October
1999 and April 2000, Fluor Corporation reversed into earnings $19.3 million
and $17.9 million, respectively, due to changes in Fluor Corporation's
reorganization plans.

F-33
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholder of Massey Energy Company

We have audited the accompanying combined balance sheets of Massey Energy
Company (see Note 1) as of October 31, 1999 and 1998, and the related combined
statements of earnings, cash flows, and shareholder's equity for each of the
three years in the period ended October 31, 1999. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Massey Energy
Company at October 31, 1999 and 1998, and the combined results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1999, in conformity with accounting principles generally accepted
in the United States.

/s/ Ernst & Young LLP

Richmond, Virginia
August 21, 2000

F-34
<PAGE>

MASSEY ENERGY COMPANY

COMBINED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
Nine Months Ended
July 31, Year Ended October 31,
----------------------- ----------------------------------
2000 1999 1999 1998 1997
----------- ----------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales............... $792,461 $790,121 $1,076,059 $1,121,136 $1,077,928
Other revenue........... 51,603 31,470 38,393 32,818 31,870
-------- -------- ---------- ---------- ----------
Total revenue....... 844,064 821,591 1,114,452 1,153,954 1,109,798
-------- -------- ---------- ---------- ----------
Costs and expenses
Cost of sales......... 600,456 572,770 774,820 805,771 801,350
Depreciation,
depletion and
amortization......... 126,043 124,863 167,558 150,459 131,294
Selling, general and
administrative....... 21,944 24,584 32,696 27,584 22,388
-------- -------- ---------- ---------- ----------
Total costs and
expenses........... 748,443 722,217 975,074 983,814 955,032
-------- -------- ---------- ---------- ----------
Income from operations.. 95,621 99,374 139,378 170,140 154,766
Interest income......... 19,768 10,449 14,426 16,073 17,522
Interest expense........ (192) (703) (803) (514) (534)
-------- -------- ---------- ---------- ----------
Earnings before taxes... 115,197 109,120 153,001 185,699 171,754
Income tax expense...... 38,122 34,633 49,561 57,403 52,761
-------- -------- ---------- ---------- ----------
Net earnings........ $ 77,075 $ 74,487 $ 103,440 $ 128,296 $ 118,993
======== ======== ========== ========== ==========
Pro forma earnings per
share (unaudited)
Basic................. $ 1.04 $ 1.01 $ 1.40 $ 1.74 $ 1.61
======== ======== ========== ========== ==========
Diluted............... $ 1.04 $ 1.01 $ 1.40 $ 1.74 $ 1.61
======== ======== ========== ========== ==========
Shares used to calculate
pro forma earnings per
share
Basic................. 73,819 73,819 73,819 73,819 73,819
======== ======== ========== ========== ==========
Diluted............... 73,820 73,825 73,826 73,826 73,829
======== ======== ========== ========== ==========
</TABLE>

See Notes to Combined Financial Statements.

F-35
<PAGE>

MASSEY ENERGY COMPANY

COMBINED BALANCE SHEETS
(In Thousands of Dollars)

<TABLE>
<CAPTION>
At October 31,
At July 31, ----------------------
2000 1999 1998
----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents................ $ 5,065 $ 8,051 $ 3,651
Trade and other accounts receivable...... 168,232 141,480 134,827
Inventories.............................. 92,131 91,723 71,634
Deferred taxes........................... 7,468 8,666 9,673
Prepaid expenses and other............... 53,073 36,724 29,146
---------- ---------- ----------
Total current assets................... 325,969 286,644 248,931
Net Property, Plant and Equipment.......... 1,548,601 1,508,728 1,448,836
Noncurrent Assets
Pension assets........................... 63,677 55,908 48,729
Other.................................... 148,494 128,717 90,441
---------- ---------- ----------
Total noncurrent assets................ 212,171 184,625 139,170
---------- ---------- ----------
Total assets........................... $2,086,741 $1,979,997 $1,836,937
========== ========== ==========

LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------

Current Liabilities
Accounts payable, principally trade...... $ 95,412 $ 109,826 $ 74,505
Notes payable and bank overdrafts........ 16,317 50,360 65,831
Payroll and employee benefits............ 22,914 29,115 31,937
Income taxes payable..................... 12,848 10,025 21,365
Other current liabilities................ 50,165 43,393 51,272
---------- ---------- ----------
Total current liabilities.............. 197,656 242,719 244,910
Noncurrent Liabilities
Deferred taxes........................... 247,386 226,062 184,660
Other.................................... 250,572 233,823 226,141
---------- ---------- ----------
Total noncurrent liabilities........... 497,958 459,885 410,801

Contingencies and Commitments

Shareholder's Equity
Net investment by Fluor Corporation...... 1,646,048 1,557,809 1,446,630
Due from Fluor Corporation............... (254,921) (280,416) (265,404)
---------- ---------- ----------
Total shareholder's equity............. 1,391,127 1,277,393 1,181,226
---------- ---------- ----------
Total liabilities and shareholder's
equity................................ $2,086,741 $1,979,997 $1,836,937
========== ========== ==========
</TABLE>

See Notes to Combined Financial Statements.

F-36
<PAGE>

MASSEY ENERGY COMPANY

COMBINED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)

<TABLE>
<CAPTION>
Nine Months Ended
July 31, Year Ended October 31,
----------------------- -------------------------------
2000 1999 1999 1998 1997
----------- ----------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities
Net earnings........... $ 77,075 $ 74,487 $ 103,440 $ 128,296 $ 118,993
Adjustments to
reconcile net earnings
to cash provided by
operating activities:
Depreciation,
depletion and
amortization........ 126,043 124,863 167,558 150,459 131,294
Deferred taxes....... 22,522 24,586 42,409 32,683 20,326
Gain on disposal of
assets.............. (26,108) (11,178) (8,982) (4,555) (15,865)
Changes in operating
assets and
liabilities,
excluding effects of
business
(Increase) decrease
in accounts
receivable......... (26,752) 1,662 (6,653) 7,941 1,362
(Increase) decrease
in inventories..... (408) (14,223) (20,089) 1,858 (22,764)
Increase in prepaid
expenses and other
current assets..... (16,349) (1,831) (7,578) (10,374) (2,818)
Increase in pension
and other assets... (27,546) (27,883) (36,733) (23,841) (17,011)
Increase (decrease)
in accounts payable
and bank
overdrafts......... (48,733) (55,639) 19,850 (4,588) 31,095
Increase (decrease)
in accrued income
taxes.............. 2,823 (7,723) (11,340) 1,722 77
Increase (decrease)
in other accrued
liabilities........ 1,031 (9,002) (10,007) 3,035 1,565
Increase in other
non-current
liabilities........ 17,027 7,560 4,609 2,873 9,417
--------- --------- --------- --------- ---------
Cash provided by
operating
activities....... 100,625 105,679 236,484 285,509 255,671
--------- --------- --------- --------- ---------
Cash Flows From
Investing Activities
Capital
expenditures........ (169,168) (175,386) (230,001) (307,898) (305,220)
Proceeds from sale of
assets.............. 29,360 6,800 6,437 25,549 20,291
--------- --------- --------- --------- ---------
Cash utilized by
investing
activities....... (139,808) (168,586) (223,564) (282,349) (284,929)
--------- --------- --------- --------- ---------
Cash Flows From
Financing Activities
Decrease (increase)
in amount due from
Fluor............... 25,495 65,802 (15,012) (14,238) 30,618
Equity contributions
from Fluor.......... 11,164 5,278 7,739 12,335 --
Other, net........... (462) (801) (1,247) (1,189) (1,057)
--------- --------- --------- --------- ---------
Cash provided
(utilized) by
financing
activities....... 36,197 70,279 (8,520) (3,092) 29,561
--------- --------- --------- --------- ---------
(Decrease) increase in
cash and cash
equivalents........... (2,986) 7,372 4,400 68 303
Cash and cash
equivalents at
beginning of period... 8,051 3,651 3,651 3,583 3,280
--------- --------- --------- --------- ---------
Cash and cash
equivalents at end of
period................ $ 5,065 $ 11,023 $ 8,051 $ 3,651 $ 3,583
========= ========= ========= ========= =========
Supplemental disclosure
of cash flow
information
Cash paid during the
period for income
taxes............... $ 12,730 $ 17,769 $ 18,492 $ 21,736 $ 27,654
========= ========= ========= ========= =========
</TABLE>

See Notes to Combined Financial Statements.

F-37
<PAGE>

MASSEY ENERGY COMPANY

COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
(In Thousands of Dollars)

<TABLE>
<CAPTION>
Net
Investment Due From Total
by Fluor Fluor Shareholder's
Corporation Corporation Equity
----------- ----------- -------------
<S> <C> <C> <C>
Balance at October 31, 1996.......... $1,187,006 $(281,784) $ 905,222
Net earnings......................... 118,993 118,993
Net change in amount due from Fluor
Corporation......................... 30,618 30,618
---------- --------- ----------
Balance at October 31, 1997.......... 1,305,999 (251,166) 1,054,833
Net earnings......................... 128,296 128,296
Capital contributions................ 12,335 12,335
Net change in amount due from Fluor
Corporation......................... (14,238) (14,238)
---------- --------- ----------
Balance at October 31, 1998.......... 1,446,630 (265,404) 1,181,226
Net earnings......................... 103,440 103,440
Capital contributions................ 7,739 7,739
Net change in amount due from Fluor
Corporation......................... (15,012) (15,012)
---------- --------- ----------
Balance at October 31, 1999.......... 1,557,809 (280,416) 1,277,393
Net earnings (unaudited)............. 77,075 77,075
Capital contributions (unaudited).... 11,164 11,164
Net change in amount due from Fluor
Corporation (unaudited)............. 25,495 25,495
---------- --------- ----------
Balance at July 31, 2000
(unaudited)......................... $1,646,048 $(254,921) $1,391,127
========== ========= ==========
</TABLE>

See Notes to Combined Financial Statements.

F-38
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Major Accounting Policies

Basis of Presentation

The accompanying combined financial statements of Massey Energy Company
(Massey Energy or the Company) include the accounts of A. T. Massey Coal
Company Inc. (A. T. Massey) and its subsidiaries, and Appalachian Synfuel LLC
(Appalachian). A. T. Massey and Appalachian are 100% controlled by Fluor
Corporation (Fluor) through wholly owned subsidiaries and partnership
interests. All significant intercompany transactions and accounts have been
eliminated.

On June 7, 2000, the Board of Directors of Fluor approved a transaction to
separate Fluor into two independent entities--"new" Fluor and Massey Energy.
The transaction will be effected by a spin-off to Fluor shareholders through a
tax-free distribution. At the time of the spin-off Fluor shareholders will
retain their existing Fluor stock, which will become Massey Energy shares, and
will be issued an equal number of shares of "new" Fluor. The transaction is
subject to shareholder approval, ability to obtain expected capital structure
and a favorable ruling from the IRS.

These Combined Financial Statements may not necessarily be indicative of the
results of operations, financial position and cash flows of Massey Energy in
the future or had it operated as a separate independent company during the
periods presented. The Combined Financial Statements do not reflect any changes
that may occur in the financing and operations of Massey Energy as a result of
the above transaction.

Use of Estimates

The preparation of the financial statements of the Company in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect reported amounts.
These estimates are based on information available as of the date of the
financial statements. Therefore, actual results could differ from those
estimates.

Cash and Cash Equivalents

Securities with maturities of 90 days or less at the date of purchase are
classified as cash equivalents.

Revenue Recognition

Coal sales are generally recognized when coal is loaded onto transportation
vehicles for shipment to customers. For domestic sales, this generally occurs
when coal is loaded at the mine or at off-site storage locations. For export
sales, this generally occurs when coal is loaded onto marine vessels at
terminal locations.

Property, Plant and Equipment

Property, plant and equipment is carried at cost and comprises:

<TABLE>
<CAPTION>
At October 31,
At July 31, ----------------------
2000 1999 1998
----------- ---------- ----------
(Unaudited)
(in thousands)
<S> <C> <C> <C>
Land, buildings and equipment......... $1,548,331 $1,479,784 $1,373,427
Mining properties and mineral rights.. 581,157 566,492 553,333
Mine development...................... 349,678 292,473 235,645
---------- ---------- ----------
2,479,166 2,338,749 2,162,405
Less accumulated depreciation,
depletion and amortization........... (930,565) (830,021) (713,569)
---------- ---------- ----------
Net property, plant and equipment... $1,548,601 $1,508,728 $1,448,836
========== ========== ==========
</TABLE>

F-39
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Expenditures which extend the useful lives of existing building and
equipment are capitalized. Maintenance, repairs and minor renewals are expensed
as incurred. Coal exploration costs are expensed as incurred. Development costs
applicable to the opening of new coal mines and certain mine expansion projects
are capitalized. When properties are retired or otherwise disposed, the related
cost and accumulated depreciation are removed from the respective accounts and
any profit or loss on disposition is credited or charged to income.

Depreciation of buildings and equipment, including assets leased under
capital leases, is calculated on the straight-line method over their estimated
useful lives or lease terms, generally ranging from 3 to 50 years. Depletion of
mining properties and mineral rights and amortization of mine development costs
are computed using the units-of-production method over the estimated
recoverable tons.

Reclamation

The Company accrues for post-mining reclamation costs, as coal is mined, on
a unit of production basis over the estimated recoverable tons. Accrued
reclamation costs are regularly reviewed by management and are revised for
changes in future estimated costs and regulatory requirements. Reclamation of
disturbed acreage is performed as a normal part of the mining process.

Impairment of Long-Lived Assets

Impairment of long-lived assets is recorded when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying value. The carrying value of the
assets is then reduced to their estimated fair value which is usually measured
based on an estimate of future discounted cash flows.

Advance Mining Royalties

Leases which require minimum annual or advance payments and are recoverable
from future production are generally deferred and charged to expense as the
coal is subsequently produced.

Black Lung Benefits

Coal mining subsidiaries are obligated to pay coal workers' pneumoconiosis
(black lung) benefits to eligible recipients with respect to claims awarded on
or after July 1, 1973. Charges are being made to operations as determined by
independent actuaries.

Income Taxes

Income tax expense was calculated as if Massey Energy filed separate tax
returns. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns.

Pro Forma Earnings per Share (Unaudited)

Shares used to calculate basic pro forma earnings per share is based on the
number of shares expected to be outstanding at the date of the Distribution
(assumed to be equal to the 75,669,076 shares of Fluor Corporation common stock
outstanding on July 31, 2000). Shares used to calculate diluted earnings per
share is based on the number of shares expected to be issued in the
Distribution and the dilutive effect stock option and other stock-based
instruments of Fluor Corporation, held by Massey employees, that will be
converted to equivalent instruments in Massey Energy Company.

F-40
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Inventories

Purchased coal inventories are stated at the lower of cost, computed on the
first-in, first-out method, or market value. Produced coal and supplies
generally are stated at the lower of average cost or net realizable value.

Inventories are comprised of:

<TABLE>
<CAPTION>
At October 31,
At July 31, ---------------
2000 1999 1998
----------- ------- -------
(Unaudited)
(in thousands)
<S> <C> <C> <C>
Coal............................................. $73,005 $72,070 $53,206
Other............................................ 19,126 19,653 18,428
------- ------- -------
$92,131 $91,723 $71,634
======= ======= =======
</TABLE>

Internal Use Software

Effective for fiscal year 1999, the Company adopted the American Institute
of Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed for or Obtained for Internal Use."
The statement requires capitalization of certain costs incurred in the
development of internal-use software, including external direct material and
service costs, employee payroll and payroll-related costs. All costs
capitalized are amortized using the straight-line method over the estimated
useful life not to exceed 7 years. Prior to the adoption of SOP 98-1, the
Company capitalized only purchased software which was ready for service; all
other costs were expensed as incurred. The adoption of this statement did not
have a material effect on the Company's financial statements.

Concentrations of Credit Risk and Major Customers

A. T. Massey is engaged in the production of high-quality low sulfur steam
coal for the electric generating industry, as well as industrial customers and
metallurgical coal for the steel industry. Steam coal sales accounted for
approximately 55%, 46% and 50% of combined net sales during 1999, 1998 and
1997, respectively. Metallurgical coal sales accounted for approximately 45%,
54% and 50% of combined net sales during 1999, 1998 and 1997, respectively.
During the nine month period ended July 31, 2000 steam and metallurgical coal
sales accounted for approximately 60% and 40% of combined net sales,
respectively, compared with 54% and 46% respectively, during the nine month
period ended July 31, 1999 (unaudited).

A. T. Massey's mining operations are conducted in eastern Kentucky, West
Virginia, Virginia and Tennessee and the coal is marketed primarily in the
United States.

For the years ended October 31, 1999, 1998 and 1997, approximately 12%, 13%
and 13%, respectively, of combined net sales were made to one utility customer,
Duke Energy. At October 31, 1999, approximately 49% and 42% of combined trade
receivables represent amounts due from utility customers and steel-producing
customers, respectively, compared with 37% and 49%, respectively, as of October
31, 1998 and 36% and 53%, respectively, as of October 31, 1997. Credit is
extended based on an evaluation of the customer's financial condition and
generally collateral is not required.

Derivatives

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133).

F-41
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

SFAS No. 133 establishes new standards for recording derivatives in interim and
annual financial statements. This statement, as amended, is effective for the
Company's fiscal year 2001. Management does not anticipate that the adoption of
the new statement will have a significant impact on the results of operations
or the financial position of the Company.

Stock Plans

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for Fluor stock options granted to Massey Energy
employees is measured as the excess, if any, of the quoted market price of
Fluor stock at the date of grant over the amount an employee must pay to
acquire the stock. Compensation cost for stock appreciation rights and
performance equity units is recorded based on the quoted market price of
Fluor's stock at the end of the period.

2. Income Taxes

Income tax expense (benefit) included in the Combined Statement of Earnings
is as follows:

<TABLE>
<CAPTION>
Nine Months Ended
July 31, Year Ended October 31,
----------------------- ------------------------
2000 1999 1999 1998 1997
----------- ----------- ------- ------- -------
(Unaudited) (Unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Current:
Federal................. $14,645 $10,211 $ 9,048 $22,518 $31,522
State and local......... 955 (164) (1,896) 2,202 913
------- ------- ------- ------- -------
Total current......... 15,600 10,047 7,152 24,720 32,435
------- ------- ------- ------- -------
Deferred:
Federal................. 20,112 22,064 36,912 29,751 16,860
State and local......... 2,410 2,522 5,497 2,932 3,466
------- ------- ------- ------- -------
Total deferred........ 22,522 24,586 42,409 32,683 20,326
------- ------- ------- ------- -------
Total income tax
expense.............. $38,122 $34,633 $49,561 $57,403 $52,761
======= ======= ======= ======= =======
</TABLE>

A reconciliation of U.S. statutory federal income tax expense to the
Company's income tax expense on earnings is as follows:

<TABLE>
<CAPTION>
Nine Months Ended
July 31, Year Ended October 31,
----------------------- ---------------------------
2000 1999 1999 1998 1997
----------- ----------- ------- -------- --------
(Unaudited) (Unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
U.S. statutory federal
tax expense............ $40,319 $38,192 $53,550 $ 64,995 $ 60,114
Increase (decrease) in
taxes resulting from:
State taxes........... 2,187 1,533 2,341 3,337 2,846
Items without tax
effect............... 1,941 1,656 2,487 871 --
Depletion............. (6,785) (7,175) (9,625) (12,273) (10,051)
Other, net............ 460 427 808 473 (148)
------- ------- ------- -------- --------
Total income tax
expense............ $38,122 $34,633 $49,561 $ 57,403 $ 52,761
======= ======= ======= ======== ========
</TABLE>

F-42
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
October 31,
July 31, --------------------
2000 1999 1998
----------- --------- ---------
(Unaudited)
(in thousands)
<S> <C> <C> <C>
Deferred tax assets:
Accrued liabilities not currently
deductible................................ $ 42,574 $ 43,959 $ 47,680
Alternative minimum tax credit
carryforwards............................. 43,361 42,386 31,060
Other...................................... 30,313 34,299 41,866
--------- --------- ---------
Total deferred tax assets................ 116,248 120,644 120,606
Valuation allowance for deferred tax assets.. (37,683) (38,199) (39,751)
--------- --------- ---------
Deferred tax assets, net..................... 78,565 82,445 80,855
--------- --------- ---------
Deferred tax liabilities:
Book basis of property, equipment and other
capital costs in excess of tax basis...... (262,300) (247,919) (223,991)
Other...................................... (56,183) (51,922) (31,851)
--------- --------- ---------
Total deferred tax liabilities........... (318,483) (299,841) (255,842)
--------- --------- ---------
Net deferred tax liabilities............. $(239,918) $(217,396) $(174,987)
========= ========= =========
</TABLE>

The Company maintains a valuation allowance to reduce certain deferred tax
assets to amounts that are more likely than not to be realized. This allowance
primarily relates to the deferred tax assets established for the alternative
minimum tax credits. These credits can be carried forward indefinitely until
fully utilized.

3. Retirement Benefits

A. T. Massey and its subsidiaries sponsor a number of noncontributory
defined benefit pension plans covering substantially all administrative and
non-union employees hired prior to September 1, 1994. These plans generally
provide pension benefits based on each employee's compensation during the
highest five of the last ten years before retirement and years of service.
Funding for such plans is generally at the minimum annual contribution level
required by applicable regulations.

Plan assets are held by an independent trustee or, in certain circumstances,
by insurance carriers. The plans' assets include cash and cash equivalents,
corporate and government bonds, preferred and common stocks, investments in
mutual funds and annuity contracts. The fair market value of investments in the
Fluor Master Trust and Fluor common stock were $206 million and $6.9 million,
respectively, at October 31, 1999, and $180 million and $7 million,
respectively, at October 31, 1998. The fair market value of investments in the
Fluor Master Trust was 232.1 million at July 31, 2000 (unaudited).

F-43
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Net periodic pension income for defined benefit pension plans includes the
following components:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Service cost................................. $ 3,451 $ 3,372 $ 3,141
Interest cost................................ 8,987 8,470 8,047
Expected return on plan assets............... (18,281) (17,797) (26,072)
Amortization of unrecognized net asset....... (872) (2,024) (1,063)
Amortization of prior service cost........... 56 56 9,516
-------- -------- --------
Net periodic pension income.................. $ (6,659) $ (7,923) $ (6,431)
======== ======== ========
</TABLE>

The weighted average assumptions used in determining pension obligations are
as follows:

<TABLE>
<CAPTION>
At October 31,
----------------
1999 1998
------- -------
<S> <C> <C>
Discount rate.............................................. 7.75% 6.75%
Rate of increase in compensation levels.................... 4.50% 4.00%
Expected long-term rate of return on plan assets........... 9.50% 9.50%
</TABLE>

The following table sets forth the change in benefit obligation, plan assets
and funded status of the Company's defined benefit pension plans:

<TABLE>
<CAPTION>
At October 31,
------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year................ $136,028 $121,432
Service cost........................................... 3,451 3,372
Interest cost.......................................... 8,987 8,470
Actuarial (gain) loss.................................. (19,576) 7,529
Benefits paid.......................................... (5,025) (4,775)
-------- --------
Benefit obligation at end of year.................... $123,865 $136,028
======== ========
Change in plan assets
Fair value at beginning of year........................ $195,136 $189,789
Actual return on assets................................ 31,108 10,119
Company contributions.................................. 4 3
Benefits paid.......................................... (5,025) (4,775)
-------- --------
Fair value at end of year............................ $221,223 $195,136
======== ========
Funded status............................................ $ 97,358 $ 59,109
Unrecognized net actuarial (gain) loss................... (43,886) (11,426)
Unrecognized prior service cost.......................... 571 627
Unrecognized net asset................................... -- (913)
-------- --------
Pension assets........................................... 54,043 47,397
Amount included in current liabilities................... 1,865 1,332
-------- --------
Noncurrent asset......................................... $ 55,908 $ 48,729
======== ========
</TABLE>

F-44
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Under labor contracts with the United Mine Workers of America Benefit Funds,
certain operations make payments into two multi-employer defined benefit
pension plan trusts established for the benefit of union employees. The
contributions are based on tons of coal produced and hours worked. Such
payments aggregated approximately, $0.1 million in 1999, $0.4 million in 1998
and $0.6 million in 1997.

Under the Coal Industry Retiree Health Benefits Act of 1992, coal producers
are required to fund medical and death benefits of certain retired union coal
workers based on premiums assessed by the United Mine Workers of America. Based
on available information at October 31, 1999, the Company's obligation
(discounted at 7.75%) under the Act is estimated at approximately $56.4
million. This cost will be recognized as expense as payments are assessed and
for the nine months ended July 31, 2000 and the years ended October 31, 1999,
1998 and 1997 totaled $2.8 million (unaudited), $3.5 million, $4.1 million and
$7.3 million, respectively.

The Company sponsors three noncontributory defined contribution pension
plans for eligible employees. Contributions to defined contribution retirement
plans are based on hours worked. For the nine months ended July 31, 2000 and
the years ended October 31, 1999, 1998 and 1997, contributions to these plans
aggregated approximately $4.1 million (unaudited), $5.4 million, $4.9 million
and $4.6 million, respectively.

The Company also sponsors a salary deferral and profit sharing plan covering
substantially all administrative and non-union employees. Eligible employees
may elect to contribute up to 10% of their compensation, as defined by the
plan. The Company may contribute to the plan at its discretion. Such
contributions aggregated approximately $2.6 million, $4.1 million and $3.5
million in 1999, 1998 and 1997, respectively.

The Company also sponsors a defined benefit health care plan that provides
post-retirement medical benefits to eligible union and non-union members. To be
eligible, retirees must meet certain age and service requirements. Depending on
year of retirement, benefits may be subject to annual deductibles, coinsurance
requirements, lifetime limits, and retiree contributions. Service costs are
accrued currently. The accumulated postretirement benefit obligation at October
31, 1999 and 1998 was determined in accordance with the current terms of the
Company's health care plans, together with relevant actuarial assumptions and
health care cost trend rates projected at annual rates ranging from 6.7 percent
(5.7 percent for participants age 65 or older) in 2000 (6.4 percent and 5.7
percent, respectively in 1999) down to 5 percent in 2002 and beyond. The effect
of a one percent annual increase in the assumed cost trend rates would increase
the accumulated postretirement benefit obligation and the aggregate of the
annual service and interest costs by approximately $10.5 million and $1.6
million, respectively. The effect of a one percent annual decrease in these
assumed cost trend rates would decrease the accumulated postretirement benefit
obligation and the aggregate of the annual service and interest costs by
approximately $8.8 million and $1.3 million, respectively.

Net periodic postretirement benefit cost includes the following components:

<TABLE>
<CAPTION>
Year Ended
October 31,
--------------------
1999 1998 1997
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Service cost........................................... $3,850 $3,506 $3,107
Interest cost.......................................... 4,092 4,055 3,745
Amortization of prior service cost..................... 140 140 140
------ ------ ------
Net periodic postretirement benefit cost............... $8,082 $7,701 $6,992
====== ====== ======
</TABLE>

F-45
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

The following table sets forth the change in benefit obligation of the
Company's postretirement benefit plan:

<TABLE>
<CAPTION>
At October 31,
------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year............... $ 68,421 $ 59,025
Service cost.......................................... 3,850 3,506
Interest cost......................................... 4,092 4,055
Acquisition........................................... -- 808
Actuarial (gain) loss................................. (16,515) 2,384
Benefits paid......................................... (1,645) (1,357)
-------- --------
Benefit obligation at end of year................... $ 58,203 $ 68,421
======== ========
Funded status........................................... $(58,203) $(68,421)
Unrecognized net actuarial (gain) loss.................. (6,296) 10,219
Unrecognized prior service cost......................... 1,776 1,916
-------- --------
Accrued postretirement benefit obligation............... (62,723) (56,286)
Amount included in other current liabilities............ 2,186 1,982
-------- --------
Noncurrent liability................................ $(60,537) $(54,304)
======== ========
</TABLE>

The discount rate used in determining the postretirement benefit obligation
was 7.75 percent and 6.75 percent at October 31, 1999 and 1998, respectively.

4. Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, trade receivables and
accounts payable approximate fair value because of the short-term maturity of
these instruments.

Certain subsidiaries provide loans to West Virginia businesses at prevailing
interest rates as part of an economic development program which provides tax
credits as incentives. Outstanding loans at July 31, 2000 and October 31, 1999
and 1998 amounted to $11.7 million (unaudited), $12.2 million and $15.4
million, respectively, of which $3.6 million (unaudited), $4.0 million and $5.0
million, respectively, is unsecured. These loans are estimated to be at fair
value, after recording an allowance for loan losses of $2.9 million (unaudited)
at July 31, 2000 and 2.7 million at October 31, 1999 and 1998, based on future
cash flows and related credit risk. The current portion of these notes is
included in trade and other accounts receivable. The noncurrent portion is
included in other noncurrent assets.

The Company loans funds in excess of its operating and capital needs to
Fluor and receives interest on the average daily balance at 130% of the federal
short-term rate determined in accordance with the Internal Revenue Code of
1986. Fluor repays these loans to the Company as the needs arise. The Company
believes these financial practices to be a fair arrangement with its parent and
has concluded that any further assessment to determine fair market value of
amounts due from Fluor would not be cost beneficial. Interest income for the
nine month periods ended July 31, 2000 and 1999 related to these loans amounted
to $11.7 million and $7.9 million, respectively (unaudited). Interest income
for 1999, 1998 and 1997 related to these loans amounted to $11.7 million, $13.3
million and $14.9 million, respectively. These loans have been classified as a
reduction to shareholder's equity in the combined balance sheet.

F-46
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Included in other noncurrent assets is $25.5 million (unaudited), $26.7
million and $24.9 million, respectively, as of July 31, 2000 and October 31,
1999 and 1998, of Fluor commercial paper acquired in the open market at
prevailing interest rates. Interest income associated with commercial paper
amounted to $1.2 million (unaudited) and $0.9 million (unaudited) during the
nine month periods ended July 31, 2000 and 1999, $1.1 million during the years
ended October 31, 1999 and 1998, and $0.8 million during the year ended October
31, 1997. The commercial paper is classified as an available-for-sale security,
and is carried at cost which approximates fair value. Unrealized gains or
losses are insignificant. Due to restrictions on the use of the commercial
paper, it has been classified as a noncurrent asset.

5. Other Noncurrent Liabilities

Other noncurrent liabilities comprise the following:

<TABLE>
<CAPTION>
At At October 31,
July 31, -----------------
2000 1999 1998
----------- -------- --------
(Unaudited)
(in thousands)
<S> <C> <C> <C>
Black lung obligation......................... $ 27,889 $ 25,616 $ 25,779
Reclamation................................... 112,189 98,677 96,575
Other post-employment benefits (Note 3)....... 65,097 60,537 54,304
Workers' compensation......................... 19,829 20,329 22,776
Other......................................... 25,567 28,664 26,707
-------- -------- --------
$250,571 $233,823 $226,141
======== ======== ========
</TABLE>

Coal mining companies are subject to the Federal Coal Mine Health and Safety
Act of 1969, as amended, and various states' statutes for the payment of
medical and disability benefits to eligible recipients with respect to black
lung claims awarded on or after July 1, 1973. The Company provides for these
claims principally through a self-insurance program. Black lung costs for West
Virginia operations are funded through trusts. The West Virginia trusts are
irrevocable grantor trusts which have been funded at a level such that no
contributions will be required in the foreseeable future. Trusteed assets of
approximately $28.9 million (unaudited), $26.6 million and $29.7 million are
applied to reduce the balance sheet amount of black lung obligations at
July 31, 2000 and October 31, 1999 and 1998, respectively. Subsidiaries in
other states pay awarded claims on a current basis. Charges are being made to
operations as determined by independent actuaries. The expense was determined
using a discount rate of 6.75%.

Black lung expense includes the following components:

<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Service cost..................................... $ 767 $ 980 $(1,447)
Interest cost.................................... 1,960 2,129 1,869
Amortization of actuarial gain................... (1,163) (2,191) (1,028)
Interest on actuarial gain....................... (314) (498) (159)
------- ------- -------
Total black lung expense....................... $ 1,250 $ 420 $ (765)
======= ======= =======
</TABLE>

Under the Federal Surface Mining Control and Reclamation Act of 1977 and
similar state statutes, mine property is required to be restored in accordance
with regulated standards. The Company performs a certain amount of required
reclamation of disturbed acreage as an integral part of its normal mining
process. All such costs are expensed as incurred.

F-47
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Reclamation costs to be incurred upon final mine closure are estimated and
accrued as mining progresses over the estimated useful mining life of the
property. The costs relate to reclaiming the pit and support acreage of surface
mines and sealing portals of deep mines. Other costs common to both types of
mining are related to reclaiming refuse and slurry ponds. The establishment of
the reclamation liability is based on permit requirements and requires various
estimates and assumptions, principally associated with costs and
productivities. For the nine month periods ended July 31, 2000 and 1999 and the
years ended October 31, 1999, 1998 and 1997, the Company accrued approximately
$3.6 million (unaudited) and $4.3 million (unaudited) and $6 million, $6
million and $4 million, respectively, towards final mine closure reclamation,
excluding reclamation recosting adjustments identified below. The Company
reviews its entire environmental liability annually and makes necessary
adjustments, including permit changes and revisions to costs and productivities
to reflect current experience. These recosting adjustments are recorded as a
decrease in cost of sales and totaled $0.8 million, $7.2 million and $3.4
million for the years ended October 31, 1999, 1998 and 1997, respectively and
$2.7 million (unaudited) and $0.8 million (unaudited), respectively, for the
nine month periods ended July 31, 2000 and 1999. The Company's management
believes it is making adequate provision for all expected future reclamation
costs. Final reclamation costs for all operations as of October 31, 1999 are
estimated to be approximately $144.6 million.

6. Stock Plans

Certain Massey Energy employees participate in stock plans of Fluor. These
stock plans provide for grants of non-qualified or incentive stock options,
restricted stock awards and stock appreciation rights ("SARS"). Awards to
employees of the Company will be converted to equivalent instruments in Massey
Energy following its separation from Fluor.

Restricted stock awards issued under the Fluor plans provide that shares
awarded may not be sold or otherwise transferred until restrictions have lapsed
or performance objectives have been attained. Upon termination of employment,
shares upon which restrictions have not lapsed must be returned to Fluor.
Restricted stock issued to Massey Energy employees totaled 42,647 shares in
1999 and 18,400 in 1997. No restricted stock was issued to Massey Energy
employees in 1998.

A grant of 300,000 SARS was made to one Massey Energy employee during 1998.
These SARS vest at the end of fiscal year 2001. No other grants of SARS were
made to Massey Energy employees during the period 1997 through 1999.

During 1999 and 1998, 113,860 and 135,675 options, respectively, were
awarded to Massey Energy employees. The 1998 awards vest over four year periods
and expire in five years and the 1999 awards vest over four years and expire in
ten years. The 1998 awards have accelerated vesting provisions based on the
price of Fluor's stock. No awards were made during 1997.

The estimated fair value as of the date of grant for options granted to
Massey Energy employees in 1999 and 1998 was determined, using the Black-
Scholes option-pricing model based on the following weighted average
assumptions:

<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Assumptions:
Expected option lives (years)................................ 6 5
Risk-free interest rates..................................... 4.43% 5.86%
Expected dividend yield...................................... 1.37% 1.18%
Expected volatility.......................................... 33.40% 29.60%
</TABLE>

F-48
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

The weighted average fair value of options granted during 1999 and 1998 was
$15 and $11, respectively.

Option grant prices are established at the fair value of Fluor's common
stock at the date of grant. As the Company measures compensation cost using the
intrinsic value method, no compensation cost for stock options has been
recognized. If compensation cost had been determined based on the estimated
fair value of options granted as prescribed by Statement of Financial
Accounting Standards No. 123, the pro forma effects on Massey Energy's net
income would not have been material.

7. Lease Obligations

Certain mining and other equipment is leased under operating leases. Certain
of these leases provide options for the purchase of the property at the end of
the initial lease term, generally at its then fair market value, or to extend
the terms at its then fair rental value. Rental expense for the nine month
periods ended July 31, 2000 and 1999 was $19.9 million (unaudited) and $15.4
million (unaudited), respectively. Rental expense for the years ended October
31, 1999, 1998 and 1997 was $22.0 million, $8.9 million and $10.4 million,
respectively.

The following presents future minimum rental payments, by year, required
under operating leases with initial terms greater than one year, in effect at
October 31, 1999:

<TABLE>
<CAPTION>
Minimum
Year Rentals
---- -------
<S> <C>
2000............................................................. $15,387
2001............................................................. 15,222
2002............................................................. 15,010
2003............................................................. 14,617
2004 and later................................................... 24,666
-------
$84,902
=======
</TABLE>

8. Contingencies and Commitments

The Company is the subject of, or a party to, various suits and pending or
threatened litigation involving governmental agencies or private interests.
Also, the Company's operations are affected by federal, state and local laws
and regulations regarding environmental matters and other aspects of its
business. On October 20, 1999, the U.S. District Court for the Southern
District of West Virginia issued an injunction which prohibits the construction
of valley fills over both intermittent and perennial stream segments as part of
mining operations. While the Company is not a party to this litigation,
virtually all mining operations, including Massey Energy, utilize valley fills
to dispose of excess materials. This decision is now under appeal to the Fourth
Circuit Court of Appeals and the District Court has issued a stay of its
decision pending the outcome of the appeal. Based upon the current state of the
appeal, the Company does not believe that their mining operations will be
materially affected during the pendency of the appeal. If and to the extent
that the District Court's decision is upheld and legislation is not passed
which limits the impact of the decision, then all or a portion of the Company's
mining operations could be affected. The potential impact to the Company
arising from this proceeding is not currently estimable.

The outcome or timing of current legal or environmental matters or the
impact, if any, of pending legislation or regulatory developments (including
the matter noted above) on future operations is not currently estimable.
Management does not currently anticipate that such activity will result in
amounts which in the aggregate would have a material effect on the Company's
combined financial position.

F-49
<PAGE>

MASSEY ENERGY COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

The Company believes, based upon present information available to it, that
its reserves with respect to future environmental costs are adequate and such
future costs will not have a material effect on the Company's combined
financial position, results of operations or liquidity. However, the imposition
of more stringent requirement under environmental laws or regulations, new
developments or changes regarding site cleanup costs or the allocation of such
costs among potentially responsible parties, or a determination that the
Company is potentially responsible for the release of hazardous substances at
sites other than those currently identified, could result in additional
expenditures, or the provision of additional reserves in expectations of such
expenditures.

F-50
<PAGE>

APPENDIX A
DISTRIBUTION AGREEMENT

dated as of

, 2000

between

FLUOR CORPORATION,
a Delaware corporation
incorporated in 2000

and

FLUOR CORPORATION,
a Delaware corporation
incorporated in 1978
(to be renamed Massey Energy Company
on the Distribution Date described herein)
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS...................................................... 1

Section 1.01. Definitions............................................... 1

ARTICLE II THE DISTRIBUTION................................................ 5

Section 2.01. The Distribution.......................................... 5

Section 2.02. Securities Filings........................................ 5

ARTICLE III CROSS INDEMNIFICATION.......................................... 5

Section 3.01. Indemnification by New Fluor.............................. 5

Section 3.02. Indemnification by Massey................................. 6

Section 3.03. Overriding Provisions..................................... 7

ARTICLE IV INDEMNIFICATION PROCEDURES...................................... 7

Section 4.01. Notice and Payment of Claims.............................. 7

Section 4.02. Defense of Third-Party Claims............................. 8

Section 4.03. Dispute Resolution........................................ 8

ARTICLE V OTHER AGREEMENTS................................................. 8

Section 5.01. Asset Transfers........................................... 8

Section 5.02. Further Assurances and Consents........................... 9

Section 5.03. No Representation or Warranty............................. 9

Section 5.04. Registration and Listing.................................. 9

Section 5.05. Conduct of Businesses Pending Distribution................ 10

Section 5.06. Intercompany Accounts..................................... 10

Section 5.07. Intellectual Property..................................... 10

Section 5.08. Insurance................................................. 10

Section 5.09. Retained Liabilities...................................... 11

Section 5.10. Composition of Boards..................................... 11

Section 5.11. Capital Structure......................................... 11

Section 5.12. Additional Settlement Matters............................. 12

Section 5.13. Cooperation with SEC Filings.............................. 12

Section 5.14. Agreement to Close Books.................................. 12

ARTICLE VI INFORMATION AND SERVICES........................................ 12

Section 6.01. Provision of Corporate Records............................ 12

Section 6.02. Access to Information..................................... 13

Section 6.03. Production of Witnesses................................... 13

Section 6.04. Reimbursement............................................. 13

Section 6.05. Retention of Records...................................... 13

Section 6.06. Confidentiality........................................... 13

Section 6.07. Information and Services Relating to Taxes................ 13
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
Page
----

<S> <C>
ARTICLE VII EMPLOYEE BENEFITS.............................................. 13

Section 7.01. Fluor Employee Benefit Plans.............................. 13

Section 7.02. Massey Employee Benefit Plans............................. 14

Section 7.03. Fluor Plans--Change of Sponsorship........................ 14

Section 7.04. Master Trust Changes...................................... 14

Section 7.05. Indemnification by New Fluor.............................. 15

Section 7.06. Indemnification by Massey................................. 15

ARTICLE VIII INTERCOMPANY AGREEMENTS....................................... 16

Section 8.01. Termination............................................... 16

ARTICLE IX TERMINATION; SURVIVAL........................................... 16

Section 9.01. Termination............................................... 16

Section 9.02. Survival.................................................. 16

ARTICLE X MISCELLANEOUS.................................................... 16

Section 10.01 Expenses.................................................. 16

Section 10.02 Notices................................................... 17

Section 10.03 Amendment and Waiver...................................... 17

Section 10.04 Counterparts.............................................. 17

Section 10.05 Governing Law............................................. 17

Section 10.06 Consent to Jurisdiction................................... 17

Section 10.07 Entire Agreement.......................................... 17

Section 10.08 Parties in Interest....................................... 17

Section 10.09 Attorneys' Fees........................................... 17
</TABLE>

<TABLE>
<C> <S>
SCHEDULE 1 NEW FLUOR GROUP

SCHEDULE 2 OLD FLUOR/MASSEY GROUP
</TABLE>

ii
<PAGE>

DISTRIBUTION AGREEMENT

DISTRIBUTION AGREEMENT (the "Agreement") dated as of , 2000 between
Fluor Corporation, a Delaware corporation, which shall be renamed Massey Energy
Company in connection with the transactions contemplated herein (together with
its successors and permitted assigns, "Parent"), and Fluor Corporation, a
Delaware corporation (together with its successors and permitted assigns, "New
Fluor").

W I T N E S S E T H

WHEREAS, Parent acting through its direct and indirect subsidiaries
currently conducts a number of businesses, including, without limitation, (i)
provision of engineering, procurement and construction services, outsourcing
and asset management solutions and business administration and support services
(together with all other businesses now or formerly conducted by Parent and any
of its subsidiaries, but excluding the Massey Business as defined below, the
"Fluor Business") and (ii) mining, processing, brokering and selling coal
(together with all other businesses now or formerly conducted by A.T. Massey
Coal Company, Inc. or any of its subsidiaries, including, without limitation,
Appalachian Synfuel, LLC, the "Massey Business");

WHEREAS, the board of directors of Parent has determined that it is in the
best interest of Parent's shareholders, as well as of Parent and its
businesses, to reorganize Parent by separating from Parent all businesses
currently conducted by Parent other than the Massey Business and to cause such
businesses to be owned and conducted, directly or indirectly, by New Fluor;

WHEREAS, in order to effect such separation, the Board of Directors of
Parent has determined that it is appropriate, desirable and in the best
interests of Parent's shareholders, as well as of Parent and its businesses,
for Parent (i) to take certain steps to reorganize Parent's subsidiaries and
businesses and (ii) to distribute to the holders of Parent's common stock, par
value $0.625 per share all of the outstanding shares of common stock of New
Fluor as set forth herein in what the parties intend to be a tax-free
distribution pursuant to Section 355 of the Internal Revenue Code;

WHEREAS, each of Parent and New Fluor has determined that it is necessary
and desirable, on or prior to the Distribution Date (as defined herein), to
allocate and transfer those assets and allocate and assign responsibility for
those liabilities in respect of activities of the businesses of such entities;

WHEREAS, each of Parent and New Fluor has determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect such distribution and to set forth other agreements that will govern
certain other matters following such distribution; and

WHEREAS, in connection with such distribution, Parent is concurrently
herewith entering into a Tax Sharing Agreement dated as of the date hereof with
New Fluor,

NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions. As used herein, the following terms shall have
the following meanings:

"Affiliate" means, with respect to any person, another person directly or
indirectly controlling, controlled by or under common control with such person;
provided, however, that for the purposes of this Agreement, no member of the
Massey Group shall be deemed an Affiliate of any member of the New Fluor Group
and vice versa.

A-1
<PAGE>

"Agent" means ChaseMellon Shareholder Services, LLC, as distribution agent
hereunder.

"Agreement" is defined in the preamble to this Agreement.

"Assets" means all assets of any nature whatsoever that would be reflected
on a balance sheet of Parent as of the Distribution Date prepared in accordance
with generally accepted accounting principles consistently applied and in
accordance with existing management practices including, without limitation:
all cash equivalents; accounts receivable; notes receivable; contract work in
progress (costs and earnings in excess of billings); inventories; pre-paid
taxes (current and non-current); property, plant and equipment; pension assets;
goodwill (excess of cost over net assets of acquired companies); investments;
and other current and non-current assets.

"Cumulative Cash Flow" is defined in Section 5.11 of this Agreement.

"Distribution" means the distribution contemplated by Section 2.02 of this
Agreement.

"Distribution Date" means such date as shall be agreed upon by Parent and
New Fluor on which the Distribution shall occur.

"Distribution Record Date" means the date set by the Board of Directors of
Parent for the determination of holders of record of Parent Common Stock
entitled to participate in the Distribution.

"DRIH Grid Note" means that certain note defined and described in Paragraph
2 of Schedule 5.06 to this Agreement.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Fluor Business" is defined in the recitals to this Agreement.

"Fluor Executive Plans" means certain plans, funds and programs maintained
by Parent and certain members of the New Fluor Group which are aimed at
providing additional compensation, equity participation and other benefits for
a select group of highly compensated management, executive employees and non-
employee directors.

"Fluor Master Trust" means the Fluor Corporation and Subsidiary Employees'
Master Trust, trusteed by Bankers Trust of California, N.A.

"Fluor Insurance Policies" means certain insurance policies which provide
property, workers compensation and employer liability, professional liability,
builders risk, automobile liability, commercial general liability, directors
and officers liability, fiduciary and political action committee liability and
crime coverage for the benefit of the New Fluor Group and the Parent.

"Fluor Payroll Practices" means certain plans, funds and programs maintained
by Parent and certain members of the New Fluor Group in the nature of payroll
practices including, but not limited to, time off with pay, jury duty, family
leave and other programs.

"Fluor Pension Benefit Plans" means certain "employee pension benefit plans"
maintained by Parent and certain members of the New Fluor Group as defined in
Title 29 U.S.C. Section 1002(2)(A).

"Fluor Plans" means collectively the Fluor Welfare Benefits Plans, the Fluor
Pension Benefit Plans, the Fluor Executive Plans and the Fluor Payroll
Practices.

"Fluor Welfare Benefit Plans" means certain "employee welfare benefit plans"
maintained by Parent and certain members of the New Fluor Group as defined in
Title 29 U.S.C. Section 1002(1).

A-2
<PAGE>

"Grid Note" shall mean that note defined and described in paragraph 3 of
Schedule 5.06 to this Agreement.

"Grid Note Accounts" means the Grid Note and the HQ Account existing as of
the date hereof between the parties.

"Group" means either of the New Fluor Group and the Massey Group.

"HQ Account" shall mean that certain intercompany account defined and
described in paragraph 1 of Schedule 5.06 of this Agreement.

"Indemnified Party" has the meaning ascribed to such term in Section 4.01
of this Agreement.

"Indemnifying Party" has the meaning ascribed to such term in Section 4.01
of this Agreement.

"Industry Standards" has the meaning set forth in Section 5.07 below.

"Liabilities" means all liabilities of any nature whatsoever that would be
reflected on a balance sheet of Parent as of the Distribution Date prepared in
accordance with generally accepted accounting principles consistently applied
and in accordance with existing management practices including, without
limitation: all trade accounts and notes payable; short-term debt; advance
billings on contracts (billings and earnings in excess of costs); accrued
salaries, wages and benefit plans; other accrued liabilities; income taxes
payable; deferred taxes; long-term debt (other than the Public Debt); deferred
taxes; minority interests and other current and non-current liabilities.

"Loss" (individually) or "Losses" (collectively) means all losses, damages,
injuries, harm, detriment, declines in value, liabilities, exposures, claims,
demands, proceedings, settlements, judgments, awards, punitive damage awards,
fines, penalties, fees, charges, costs or expenses (including, without
limitation, reasonable costs of attempting to avoid or in opposing the
imposition thereof, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors).

"Massey" means Parent, as it is renamed Massey Energy Company, following
the Distribution.

"Massey Business" is defined in the recitals to this Agreement.

"Massey Debt Position" is defined in Section 5.11.

"Massey Executive Plans" means certain plans, funds and programs maintained
by members of the Massey Group which are aimed at providing additional
compensation, equity participation and other benefits for a select group of
highly compensated management, executive employees and non-employee directors.

"Massey Group" means Massey and its subsidiaries as of the Distribution
Date (including, without limitation, the entities listed on Schedule 2
hereto).

"Massey Indemnified Parties" has the meaning ascribed to such term in
Section 3.01 of this Agreement.

"Massey Master Trust" means a master trust maintained by Massey Energy
Company and Subsidiaries to be created with a reputable and financially sound
institutional trustee to receive the assets of the Massey Pension Benefit
Plans which are currently held by the Fluor Master Trust.

"Massey Payroll Practices" means certain plans, funds and programs
maintained by members of the Massey Group in the nature of payroll practices
including, but not limited to, time off with pay, jury duty, family leave and
other programs.

A-3
<PAGE>

"Massey Pension Benefit Plans" means certain "employee pension benefit
plans" maintained by certain members of the Massey Group as defined in Title 29
U.S.C. Section 1002(2)(A).

"Massey Plans" means collectively the Massey Welfare Benefits Plans, the
Massey Pension Benefit Plans, the Massey Executive Plans and the Massey Payroll
Practices.

"Massey Welfare Benefits Plans" means certain "employee welfare benefit
plans" maintained by members of the Massey Group as defined in Title 29 U.S.C.
Section 1002(1).

"MPPAA" means the Multi-Employer Pension Plan Amendments Act of 1980, as
amended.

"Net Cash Received" means actual cash received by Parent for whatever
purpose in excess of actual cash paid by Parent as evidenced by transactions
appropriately recorded in the respective Grid Note Accounts by both the Parent
and the Massey Group in accordance with existing cash management practices.

"Net Cash Paid" means actual cash paid by Parent for whatever purpose in
excess of actual cash received by Parent as evidenced by transactions
appropriately recorded in the respective Grid Note Accounts by both the Parent
and the Massey Group in accordance with existing cash management practices.

"New Fluor" is defined in the preamble to this Agreement.

"New Fluor Common Stock" means the shares of common stock, par value $0.01
per share, of New Fluor.

"New Fluor Group" means New Fluor and its subsidiaries as of the
Distribution Date (including, without limitation, the entities listed on
Schedule 1 hereto).

"New Fluor Indemnified Parties" has the meaning ascribed to such term in
Section 3.02 of this Agreement.

"Options" means those certain stock options, in the form of NQSOs, ISOs and
SARs granted to officers and other key employees of Fluor pursuant to the Fluor
Executive Plans.

"Parent" is defined in the preamble to this Agreement.

"Parent Common Stock" means the issued and outstanding shares of common
stock, par value $0.625 per share, of Parent.

"Proxy Statement" means the definitive proxy statement (and any amendments
thereof or supplements thereto) to be distributed in connection with Parent's
meeting of its stockholders to vote on the transactions contemplated hereby.

"Public Debt" means the $300 million of outstanding 6.95% Senior Notes of
Parent issued on March 7, 1997.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Spinoff Registration Documents" means the registration statement on Form
10, together with all exhibits, amendments and supplements thereto, filed with
the SEC for the registration of the New Fluor Common Stock pursuant to the
Exchange Act.

"Tax" means any income, gross income, gross receipts, profits, capital
stock, franchise, withholding, payroll, social security, workers compensation,
unemployment, disability, property, ad valorem, stamp, excise,

A-4
<PAGE>

severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or similar tax (including
any fee, assessment, or other charge in the nature of or in lieu of any tax)
imposed by any governmental entity or political subdivision thereof, and any
interest, penalties, additions to tax, or additional amounts in respect of or
related to the foregoing.

"Tax Sharing Agreement" means the tax sharing agreement between Parent and
New Fluor entered into concurrently herewith.

"Transaction Expenses" are defined in Section 10.01 of this Agreement.

"Transfer Date" means the date upon which the transfer of the assets of the
Massey Plans to be transferred from the Fluor Master Trust occurs as described
in Section 7.04 below.

"Valuation Date" means the date upon which the value of the assets of the
Massey Plans to be transferred from the Fluor Master to the Massey Master Trust
occurs as described in Section 7.04 below.

ARTICLE II

THE DISTRIBUTION

Section 2.01. The Distribution. (a) On the terms and subject to the
conditions of this Agreement and applicable law, Parent shall distribute to its
shareholders of record as of the Distribution Record Date, one share of New
Fluor Common Stock for each share of Parent Common Stock held by the
shareholders. All such distributed shares of New Fluor Common Stock shall be
fully paid, non-assessable and free of preemptive rights.

(b) On the Distribution Date, Parent will deliver to the Agent a global
certificate, representing the aggregate number of shares of New Fluor Common
Stock to be distributed to the shareholders of Parent based upon the latest
information from Agent. Such certificate shall be registered in the name of the
Agent as agent for the shareholders of record of Parent common stock on the
Distribution Record Date. As soon as Agent and Parent agree on the final list
of shareholders of record as of the Distribution Record Date, Agent will
deliver to shareholders stock certificates representing shares of New Fluor
Common Stock . Shares represented by the global certificate in excess of the
final number of shares to be distributed to shareholders of record will be
cancelled.

Section 2.02. Securities Filings. (a) Prior to the Distribution, Parent and
New Fluor shall file with the SEC the Spinoff Registration Documents to effect
the registration of the New Fluor Common Stock pursuant to the Exchange Act.
Parent and New Fluor shall use commercially reasonable efforts to cause the
Spinoff Registration Documents to be declared effective under the Exchange Act
as promptly as practicable.

(b) Parent and New Fluor shall take all such actions as may be necessary or
appropriate under any applicable state securities or blue sky laws to effect
the Distribution.

ARTICLE III

CROSS INDEMNIFICATION

Section 3.01. Indemnification by New Fluor. Subject to Section 3.03, on and
after the Distribution Date, New Fluor shall indemnify and hold harmless the
Massey Group and each of its directors, officers and Affiliates (the "Massey
Indemnified Parties") from and against:

(a) all Losses of the Massey Indemnified Parties relating to, arising
out of or due to, directly or indirectly, any breach of any provisions of
this Agreement by New Fluor.

A-5
<PAGE>

(b) all Losses of the Massey Indemnified Parties relating to, arising
out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the New Fluor Group contained in the Spinoff
Registration Documents or the Proxy Statement or any omission or alleged
omission to state therein a material fact concerning the New Fluor Group
required to be stated therein or necessary in order to make the statements
therein not misleading.

(c) all Losses of the Massey Indemnified Parties relating to, arising
out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the New Fluor Group contained in any report of
Parent filed prior to the Distribution Date under the Exchange Act, or in
any filing made prior to the Distribution Date under the Securities Act by
Parent, or the omission or alleged omission to state in any such report or
filing a material fact concerning the New Fluor Group required to be stated
therein or necessary in order to make the statements therein not
misleading.

(d) all Loss of the Massey Indemnified Parties relating to, arising out
of or due to any untrue statement of a material fact concerning the New
Fluor Group contained in any report of Massey filed after the Distribution
Date under the Exchange Act, or in any filing made after the Distribution
Date under the Securities Act by Massey, or the omission or alleged
omission to state in any such report or filing a material fact concerning
the New Fluor Group required to be stated therein or necessary in order to
make the statements therein not misleading; provided, however, that New
Fluor shall be liable in any such case only to the extent that any such
Losses arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in any such report or
filing in reliance upon and in conformity with written information
furnished to Massey, its Affiliates or any of their respective
representatives by or on behalf of New Fluor, its Affiliates or any of
their respective representatives specifically for use in preparing such
report or filing by Massey.

(e) all Losses of the Massey Indemnified Parties relating to, arising
out of or due to, directly or indirectly, the Fluor Business, the
operations and activities of DRIH Corporation or any other business
conducted by the New Fluor Group, whether relating to, arising out of or
due to occurrences or conditions prior to, on or after the Distribution
Date, including, without limitation, those set forth on Schedule 3.01(d).

Section 3.02. Indemnification by Massey. Subject to Section 3.03, on and
after the Distribution Date, Massey shall indemnify and hold harmless the New
Fluor Group and each of its directors, officers and Affiliates (the "New Fluor
Indemnified Parties") from and against:

(a) all Losses of the New Fluor Indemnified Parties relating to, arising
out of or due to, directly or indirectly, any breach of any provisions of
this Agreement by Massey.

(b) all Losses of the New Fluor Indemnified Parties relating to, arising
out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the Massey Group contained in the Spinoff
Registration Documents or the Proxy Statement or any omission or alleged
omission to state therein a material fact concerning the Massey Group
required to be stated therein or necessary in order to make the statements
therein not misleading.

(c) all Losses of the New Fluor Indemnified Parties relating to, arising
out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the Massey Group contained in any report of New
Fluor filed prior to the Distribution Date under the Exchange Act, or in
any filing made prior to the Distribution Date under the Securities Act by
New Fluor, or the omission or alleged omission to state in any such report
or filing a material fact concerning the Massey Group required to be stated
therein or necessary in order to make the statements therein not
misleading.

(d) all Loss of the New Fluor Indemnified Parties relating to, arising
out of or due to any untrue statement of a material fact concerning the
Massey Group contained in any report of New Fluor filed after the
Distribution Date under the Exchange Act, or in any filing made after the
Distribution Date under the Securities Act by New Fluor, or the omission or
alleged omission to state in any such report or filing a material fact
concerning the Massey Group required to be stated therein or necessary in
order to make the

A-6
<PAGE>

statements therein not misleading; provided, however, that Massey shall be
liable in any such case only to the extent that any such Losses arise out
of or are based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in any such report or filing in reliance
upon and in conformity with written information furnished to New Fluor, its
Affiliates or any of their respective representatives by or on behalf of
Massey, its Affiliates or any of their respective representatives
specifically for use in preparing such report or filing by New Fluor.

(e) All Losses of the New Fluor Indemnified Parties relating to, arising
out of or due to, directly or indirectly, the Massey Business or any other
business conducted by the Massey Group, whether relating to, arising out of
or due to occurrences or conditions prior to, on or after the Distribution
Date.

Section 3.03. Overriding Provisions. Notwithstanding anything to the
contrary in this Agreement, this Article III and Article VII hereof shall be
subject to the following provisions:

(a) This Article III shall not govern any Tax, and any and all Losses
relating to foreign, federal, state and local Taxes, including the payment
of Taxes, and all Losses relating to breach of any representation, warranty
or covenant under the Tax Sharing Agreement, shall be exclusively governed
by the Tax Sharing Agreement.

(b) Except as otherwise expressly set forth below, this Article III
shall not govern any employee benefits matters, or any and all Losses
relating to the establishment, maintenance and administration of employee
benefit plans and programs, which shall be exclusively governed by the
provisions of Article VII hereof.

(c) The indemnification provisions of this Article III and Article VII
hereof shall not inure to the benefit of any third party or parties other
than the directors, officers and Affiliates of a Group as expressly
provided in Sections 3.01, 3.02, 7.05 and 7.06. By way of illustration
only, an insurer who would otherwise be obligated to pay any claim shall
not be relieved of the responsibility with respect thereto, or, solely by
virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that
no insurer or any other third party shall be entitled to a "windfall"
(i.e., a benefit they would not be entitled to receive in the absence of
the indemnification provisions) by virtue of the indemnification
provisions. Accordingly, any indemnification shall be paid net of the
amount of any insurance paid to the indemnified party.

(d) In the case of any Loss with respect to which an indemnification
payment is required under this Article III or Article VII hereof (an
"Indemnification Payment"), the amount of such Indemnification Payment
shall be adjusted in accordance with the applicable provisions of the Tax
Sharing Agreement.

ARTICLE IV

INDEMNIFICATION PROCEDURES

Section 4.01. Notice and Payment of Claims. If either Group (the
"Indemnified Party") determines that it is or may be entitled to
indemnification by the other Group (the "Indemnifying Party") under Article III
or Article VII hereof, the Indemnified Party shall promptly deliver to the
Indemnifying Party a written notice and demand therefor, specifying, to the
extent reasonably practicable, the basis for its claim for indemnification, the
nature of the claim and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. Unless such claim is subject to the
provisions of Section 4.02 below, the Indemnifying Party shall pay the
Indemnified Party the amount set forth in such notice, in cash or other
immediately available funds, within thirty (30) days after receipt of such
notice. However, the Indemnifying Party may object to the claim for
indemnification set forth in such notice; provided, however, that if the
Indemnifying Party does not give the Indemnified Party written notice setting
forth its objection to such claim and the grounds therefor within the same
thirty (30) day period, the Indemnifying Party shall be deemed to have
acknowledged its liability for the amount of such claim and the Indemnified
Party may exercise any and all of its rights under applicable law to

A-7
<PAGE>

collect such amount. Any such objection to a claim for indemnification shall be
resolved in accordance with Section 4.03.

Section 4.02. Defense of Third-Party Claims. If the Indemnified Party's
claim for indemnification is based on a claim, demand, action or proceeding,
judicial or otherwise, brought by a third party, within the thirty (30) day
period referred to in Section 4.01 above, (a) the Indemnified Party may, by
giving written notice thereof to the Indemnifying Party, require the
Indemnifying Party to assume, or (b) the Indemnifying Party may at its option
and by giving written notice thereof to the Indemnified Party elect to assume,
the defense of such third-party claim at its sole cost and expense. Any such
contest shall be conducted by attorneys employed by the Indemnifying Party, but
the Indemnified Party shall have the right to participate in such proceedings
and to be represented by attorneys of its own choosing at the Indemnified
Party's sole cost and expense. If the Indemnifying Party assumes the defense of
any such third-party claim, the Indemnifying Party may settle or compromise the
claim without prior written consent of the Indemnified Party so long as such
settlement does not impose any obligation or restriction of any nature on the
Indemnified Party. The Indemnifying Party shall pay to the Indemnified Party in
cash the amount for which the Indemnified Party is entitled to be indemnified
within fifteen (15) days after the settlement or compromise of such third-party
claim or the final unappealable judgment of a court of competent jurisdiction.
If the Indemnified Party does not require the Indemnifying Party, and the
Indemnifying Party does not elect, to assume the defense of any such third-
party claim, the Indemnifying Party shall be bound by the result obtained with
respect thereto by the Indemnified Party.

Section 4.03. Dispute Resolution. In an effort to resolve informally and
amicably any claim or controversy arising out of or related to the
interpretation or performance of this Agreement without resorting to
litigation, each party shall notify the other party to the dispute in writing
of any difference or dispute hereunder that requires resolution. Each party in
dispute shall designate an employee to investigate, discuss and seek to settle
the matter between them. If the two are unable to settle the matter within
thirty (30) days after such notification, the matter shall be submitted to a
senior officer of each such party for consideration. If settlement cannot be
reached through their efforts within an additional thirty (30) days, or such
longer time period as they shall agree upon, such parties shall consider
arbitration or other alternative means to resolve the dispute. If they are
unable to agree to an alternative dispute resolution mechanism, either party
may initiate legal proceedings to resolve such matter.
ARTICLE V

OTHER AGREEMENTS

Section 5.01. Asset Transfers. (a) Prior to the Distribution Date, Parent
shall transfer, assign and convey any and all rights and/or obligations it may
have to New Fluor with respect to (a) all Parent Assets and Parent Liabilities
except (i) Parent's investments in any Massey Group entity, (ii) all
intercompany accounts described in Section 5.06 to be retained by Parent, (iii)
all historical equity accounts of Parent, (iv) the Massey Group's share of all
assets and liabilities under any Fluor Plans as described and allocated in
accordance with Section 7.03; (b) all intellectual property rights of Parent as
described in Section 5.07; (c) all investments in any subsidiary or affiliate
which are part of the New Fluor Group; (d) all liabilities arising primarily
from the Fluor Business or DRIH Corporation, whether fixed, contingent or
otherwise (other than the DRIH Grid Note); and (e) all other assets not
otherwise used primarily in the conduct of the Massey Business including,
without in any way limiting the preceding, those assets to be assigned to New
Fluor as described in Paragraph B of Schedule 5.01. In addition, prior to the
Distribution Date, Fluor Enterprises, Inc. (a New Fluor subsidiary) shall
transfer, convey and assign to a Massey Group subsidiary (to be designated)
those assets described in Paragraph A of Schedule 5.01. The parties acknowledge
and agree that the transfers set forth herein shall be completed prior to the
Distribution Date or as soon as reasonably practicable following the
Distribution.

(b) To the extent that a Group owns any other asset which is used primarily
in the business conducted by the other Group, the first-mentioned Group shall
use its commercially reasonable efforts, subject to receipt of any necessary
consents of third parties, to cause such asset to be conveyed, assigned and
transferred to such other Group.

A-8
<PAGE>

(c) If any transfer contemplated by subsection (a) shall not have been
consummated prior to the Distribution Date, the parties shall cooperate to
effect such transfer as promptly thereafter as shall be reasonably practicable,
it nonetheless being agreed and understood that no party shall be liable to any
other party for any delay in making any transfer contemplated by this Section.
Notwithstanding the provisions of Article III, upon such transfer, the
transferee of any such asset shall assume any liability (other than any
liability relating to any Tax, which liabilities are exclusively governed by
the Tax Sharing Agreement) relating to such asset and shall indemnify and hold
harmless the transferor and its directors, officers and Affiliates against all
claims relating thereto. The cost (other than any cost relating to any Tax,
which costs are exclusively governed by the Tax Sharing Agreement) of effecting
any such transfer of assets and assumption of related liabilities shall be
borne by the person to whom such asset is transferred.

Section 5.02. Further Assurances and Consents. (a) Each of the parties
hereto will execute and deliver such further instruments of conveyance and
assignment and will take such other actions as any other party may reasonably
request in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.

(b) In addition to the actions specifically provided for elsewhere in this
Agreement, each of the parties hereto shall use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using
commercially reasonable efforts to obtain any consents and approvals and to
make the filings and applications necessary or desirable in order to consummate
the transactions contemplated by this Agreement; provided, however, that no
party hereto shall be obligated to pay any consideration therefor (except for
filing fees and other administrative charges) to any third party from whom such
consents, approvals and amendments are requested or to take any action or omit
to take any action if the taking of such action or such omission would be
unreasonably burdensome to the party, its Group or its Group's business.

Section 5.03. No Representation or Warranty. The parties hereto understand
and agree that no party is representing or warranting in any way (i) as to the
nature or value of, freedom from encumbrance or fitness for purpose of, or as
to any other matter concerning, any assets or liabilities referred to in
Section 5.01 (it being agreed and understood that all such assets are being
transferred "as is, where is"), (ii) as to the legal sufficiency of any
conveyance or assignment contemplated by Sections 5.01 and 5.02 (iii) as to the
execution, delivery and filing of the instruments pertaining thereto or (iv) as
to the obtaining of any consents or approvals, the making of any filings or
applications or the compliance with the requirements of any applicable laws or
judgments necessary to comply with Sections 5.01 and 5.02.

Section 5.04. Registration and Listing. (a) Each party shall cooperate in
the preparation of the Spinoff Registration Documents and the Proxy Statement
and any amendments or supplements thereto. The parties shall use commercially
reasonable efforts to cause the New Fluor Common Stock to be distributed
hereunder to be registered pursuant to the Exchange Act and thereafter to
effect the Distribution in accordance with the terms of this Agreement,
including, without limitation, by preparing and filing the Spinoff Registration
Documents under the Exchange Act covering the New Fluor Common Stock and using
commercially reasonable efforts to cause the Spinoff Registration Documents to
be declared and remain effective.

(b) The parties shall cooperate in preparing and filing with the SEC and
causing to become and remain effective any registration statements, and any
amendments or supplements thereto, which are appropriate to reflect the
establishment of, or amendment to, any employee benefit and other plan
contemplated by Article VII hereof.

(c) The parties shall take all such commercially reasonable actions as may
be necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement.

A-9
<PAGE>

(d) The parties shall take all such commercially reasonable actions to
prepare, and shall file and pursue, applications to permit listing of the new
Fluor Common Stock and Massey Common Stock on the New York Stock Exchange.

Section 5.05. Conduct of Businesses Pending Distribution. (a) The parties
agree that from the date hereof until the Distribution Date, except as
otherwise contemplated by this Agreement, they will use commercially reasonable
efforts to cause the businesses of New Fluor and Parent to be conducted
diligently in the ordinary course and substantially in the same manner as
heretofore conducted and to preserve intact the business organization and
goodwill of each such business; provided, however, that notwithstanding the
foregoing, (i) Parent shall, at New Fluor's request, (A) authorize one or more
contributions from Parent to New Fluor on the Distribution Date, in the form of
cash, securities and/or property, in such amount and on such terms and subject
to such conditions as the board of directors of Parent may determine, (B)
determine Cumulative Cash Flow in order to determine the final level of Massey
Debt Position (as defined below) in accordance with Section 5.11, and (C) enter
into commercial paper or other financing arrangements to pay such contributions
and for other purposes and (ii) New Fluor shall adopt a charter and by-laws
reasonably satisfactory to New Fluor and Parent, for approval by Parent as sole
stockholder of New Fluor.

(b) The parties agree that on or before the Distribution Date, Parent shall
settle and terminate that certain Forward Equity Acquisition Transaction
between Parent and Citibank, N.A. dated as of October 30, 1998 for the purchase
of 1,850,000 shares of Parent common stock.

(c) Prior to the Distribution Date, the Massey Group shall not, without the
prior consent in writing of Parent, make any public announcement or issue any
press release with respect to the Distribution or with respect to any material
event, and, subject to Article IX, each Group shall use commercially reasonable
efforts not to take any action which may prejudice or delay the consummation of
the Distribution.

Section 5.06. Intercompany Accounts. All intercompany accounts, receivables
and payables between the parties hereto shall be settled and resolved in
accordance with the provisions of Schedule 5.06 attached hereto, except those
related to Appalachian Synfuel, LLC which shall be addressed in the agreement
transferring ownership to the Massey Group.

Section 5.07. Intellectual Property. On or prior to the Distribution Date,
Parent shall transfer to New Fluor all intellectual property held by Parent,
other than intellectual property that relates to the Massey Business,
including, without limitation, the intellectual property listed on Schedule
5.07.

Section 5.08. Insurance. With respect to the Fluor Insurance Policies
currently maintained by Parent, Parent shall continue to maintain the status of
the members of the Massey Group as "insureds" under the layers of the combined
aggregate protection portion of the Fluor Insurance Policies up to the
Distribution Date, and Parent and New Fluor will take such action as is
necessary and appropriate to cause, effective as of the Distribution Date: (a)
New Fluor (and with respect to directors and officers liability insurance, the
directors and officers of New Fluor) to become the sole "named insured" on each
of the Fluor Insurance Policies whose policy term shall not have expired prior
to the Distribution Date and the transfer by Parent to New Fluor of all assets
and liabilities related to the Fluor Insurance Policies; (b) the termination of
the excess coverage of all members of the Massey Group under the Fluor
Insurance Policies and the discontinuation of all members of the Massey Group
as an "insured" under any of the Fluor Insurance Policies; (c) to provide
Parent with additional insured status under the combined aggregate protection
portions of its coverage with respect to claims (other than those arising from
the Massey Business) for occurrences arising before the Distribution Date; and
(d) to provide the directors and officers of Parent with additional insured
status under the directors and officers policy of Parent with respect to claims
for occurrences arising on or before the Distribution Date. Notwithstanding the

A-10
<PAGE>

foregoing, with respect to aircraft liability coverage currently being
maintained by Parent (ACE; Policy No. S00387149) (the "Aircraft Policy"),
Parent agrees that it shall use commercially reasonable efforts to permit the
assignment of such Aircraft Policy to the Massey Group, such assignment to
occur, if at all, concurrently with the Distribution Date. On and after the
Distribution Date, New Fluor shall refrain from taking any action which
adversely impacts the coverage of the Massey Group for claims based upon their
status as an "insured" up to the Distribution Date. Parent represents and
warrants that it has provided notice to the primary layer of its combined
aggregate protection policy concerning the coal slurry release, Martin County,
Kentucky, which commenced on or about October 11, 2000. After the Distribution
Date, New Fluor shall not take any action to cancel, amend or modify, or cause
to be cancelled, amended or modified, the insurance coverage to be provided to
the Massey Group under the Fluor Insurance Policies up to the Distribution
Date.

From and after the Distribution Date, New Fluor shall cause the New Fluor
Group to maintain, and Massey shall cause the Massey Group to maintain, with
financially sound and reputable insurance companies, property damage,
commercial general liability, professional liability and directors and
officer's liability insurance in at least such amounts and against such risks
as are usually insured against by companies of established repute engaged in
the same or similar business as the New Fluor Group or Massey Group, as
applicable, and owning similar assets ("Industry Standards"), except where such
risks are covered by self-insurance so long as the amount of such self-
insurance and the risks covered thereby are consistent with Industry Standards.
Each party will promptly furnish the other, subject to appropriate
confidentiality protection, such information as to insurance carried or self-
insurance maintained as may be reasonably requested in writing by such party.

Parent hereby represents and warrants, on behalf of and with respect to the
Massey Group, and New Fluor hereby represents and warrants on behalf of and
with respect to the New Fluor Group, that except as previously disclosed in
writing to the other party, there are no outstanding claims or notices, or, to
its best knowledge, facts and circumstances which could reasonably be expected
to result in a claim or notice, under any of the combined aggregate protection
portions of the Fluor Insurance Policies.

Section 5.09. Retained Liabilities. Without limiting any other provision of
this Agreement, the Massey Group acknowledges that the obligations and
liabilities set forth on Schedule 5.09, and to the extent applicable, the
Massey Group agrees to honor and properly discharge all such obligations and
liabilities following the Distribution Date. Notwithstanding anything to the
contrary contained herein, the New Fluor indemnity provisions described in
Section 3.01 of this Agreement shall not apply to the extent that the Massey
Indemnified Parties are the cause, either directly or indirectly, of any
matter, activity or omission resulting in Losses due to breach of the
obligations and liabilities set forth in Schedule 5.09.

Section 5.10. Composition of Boards. The initial members of the boards of
directors of Massey and New Fluor following the Distribution shall be as set
forth on Schedule 5.10.

Section 5.11. Capital Structure. Parent will retain the Public Debt, will
incur additional borrowing in the commercial paper market and will enter into a
new bank credit facility to support its commercial paper program. The Massey
Group's debt position as of the Distribution Date, composed of the Public Debt
and commercial paper, will be $530 million (the "Massey Debt Position"),
adjusted as follows: (i) If for the period beginning August 1, 2000 and ending
on the Distribution Date, the Cumulative Cash Flow of A.T. Massey Coal Company,
Inc. and its subsidiaries is positive, then the Massey Debt Position will be
decreased by such amount unless the Massey Group retains such excess cash in
its cash accounts in accordance with the provisions hereof and (ii) if such
Cumulative Cash Flow for such period is negative, then the Massey Debt Position
will be increased by such amount. For purposes of this Section 5.11, the term
"Cumulative Cash Flow" shall be determined as follows:

(a) if on the Distribution Date, the net cumulative cash transactions
reflected through the Grid Note results in Net Cash Received by Parent from
the Massey Group, such amount shall be deducted from the Massey Debt
Position;

A-11
<PAGE>

(b) if on the Distribution Date, the net cumulative cash transactions
reflected through the Grid Note results in Net Cash Paid by the Parent to
the Massey Group, such amount shall be added to the Massey Debt Position.

(c) Notwithstanding the preceding, interest on the Grid Note, and the
purchase or redemption price paid along with related settlement costs
associated with the transfer of interests of Appalachian Synfuel, LLC, as
described in Schedule 5.01, shall be excluded from the determination of
Cumulative Cash Flow.

(d) Attached hereto as Schedule 5.11 solely for explanatory purposes is
a pro forma statement demonstrating how Cumulative Cash Flow would be
calculated using sample numbers and reflecting the amount of commercial
paper or other borrowings that would be deliverable from Parent to New
Fluor in the form of contributions but whose repayment responsibility shall
be retained by the Massey Group following the closing of the Distribution,
such contributions to occur in accordance with Section 5.05.

Section 5.12. Additional Settlement Matters. The following additional costs,
expenses and matters shall be settled as follows, and shall not impact the
determination of Cumulative Cash Flow:

(a) Transaction Expenses shall be determined in accordance with Section
10.01.

(b) With respect to the Public Debt, the next interest payment
thereunder is due on March 1, 2001. New Fluor shall be responsible for its
share of interest payments due on the Public Debt between the last date
interest was paid on the Public Debt, September 1, 2000 through and
including the Distribution Date (the "New Fluor Share"). Massey shall be
responsible for interest payments due on the Public Debt following the
Distribution Date and thereafter. Massey will be responsible for the
interest payment due on the Public Debt on March 1, 2001, provided New
Fluor shall reimburse Massey for the New Fluor Share. New Fluor shall pay
the New Fluor Share within 10 days following receipt of an invoice therefor
from Massey, such invoice not due and payable earlier than February 28,
2001.

(c) To the extent that the Massey Group had any cash balances as of July
31, 2000, such balances shall be retained by Massey following the
Distribution and shall not impact the determination of Cumulative Cash
Flow.

(d) As a further settlement matter, within five (5) days following the
Distribution Date, New Fluor shall deliver to the Massey Group the sum of
$2,000,000.

Section 5.13. Cooperation with SEC Filings. Each party shall cooperate in
providing to the other party information as may be reasonably requested in
order to comply with applicable filing requirements under the Securities Act or
the Exchange Act. The party providing such information shall ensure that such
information is correct and complete in all material respects.

Section 5.14. Agreement to Close Books. The Massey Group agrees that it
shall close its financial books and records on the Distribution Date, and
within fifteen (15) days thereafter report to New Fluor the financial
statements for the Massey Group from the day after the last day of the last
financial reporting period through the Distribution Date, such financial
statements to be prepared in accordance with generally accepted accounting
principles consistently applied and in accordance with existing management
practices. Such financial statement shall be subject to audit by Ernst & Young.

ARTICLE VI

INFORMATION AND SERVICES

Section 6.01. Provision of Corporate Records. Each Group shall arrange as
soon as reasonably practicable following the Distribution Date for the
provision to the other Group of existing corporate governance documents (e.g.
minute books, stock registers, stock certificates, documents of title, etc.) in
its possession, if any, relating to such other Group or its business and
affairs.

A-12
<PAGE>

Section 6.02. Access to Information. From and after the Distribution Date,
each Group shall afford the other Group and its accountants, counsel and other
designated representatives reasonable access (including using reasonable
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to all records, books,
contacts, instruments, computer data and other data and information in such
Group's possession relating to the business and affairs of the other Group,
insofar as such access is reasonably required by the other Group including,
without limitation, for audit, accounting, litigation and tax purposes, as well
as for purposes of fulfilling disclosure and reporting obligations.

Section 6.03. Production of Witnesses. Each Group shall use reasonable
efforts to make available to the other Group, upon written request, its
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any legal, administrative
or other proceedings in which the requesting party may from time to time be
involved.

Section 6.04. Reimbursement. A Group providing information or witnesses
under this Article VI to the other Group shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all costs
and expenses (including the allocable portion of any overhead expenses
attributable thereto) as may be reasonably incurred in providing such
information or witnesses.

Section 6.05. Retention of Records. Except as otherwise required by law or
agreed to in writing, each party shall, and shall cause the members of its
Group to, retain all information relating to the other Group's business in
accordance with the record retention policies of such party as may be in effect
from time to time. Notwithstanding the foregoing, any party may destroy or
otherwise dispose of any information at any time, provided that, prior to such
destruction or disposal, (i) such party shall provide no less than 90 days
prior written notice to the other party, specifying the information proposed to
be destroyed or disposed of and (ii) if a recipient of such notice shall
request in writing prior to the scheduled date for such destruction or disposal
that any of the information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the information as
was requested at the expense of the requesting party.

Section 6.06. Confidentiality. Each party shall hold and shall cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than any such
information relating solely to the business or affairs of such party)
concerning the other party hereto furnished it by such other party or its
representatives pursuant to this Agreement or otherwise (except to the extent
that such information can be shown to have been (i) previously known by the
party to which it was furnished, (ii) in the public domain through no fault of
such party or (iii) later lawfully acquired from other sources by the party to
which it was furnished), and each party shall not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors who shall be advised of
the provisions of this Section 6.06. Each party shall be deemed to have
satisfied its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.

Section 6.07. Information and Services Relating to Taxes. The provisions of
Sections 6.02, 6.04 and 6.05 hereof shall not apply to the extent any matter
addressed therein is addressed by any provision of the Tax Sharing Agreement,
and such provision of the Tax Sharing Agreement shall govern such matters
exclusively for all purposes.

ARTICLE VII

EMPLOYEE BENEFITS

Section 7.01. Fluor Employee Benefit Plans. Schedule 7.01 attached contains
a complete listing of the Fluor Welfare Benefit Plans, Fluor Pension Benefit
Plans, Fluor Executive Plans and Fluor Payroll Practices.

A-13
<PAGE>

Section 7.02. Massey Employee Benefit Plans. Schedule 7.02 attached contains
a complete listing of the Massey Welfare Benefit Plans, Massey Pension Benefit
Plans, Massey Executive Plans and Massey Payroll Practices.

Section 7.03(a). Fluor Plans--Change of Sponsorship. On and after the
Distribution Date, the sponsorship of all Fluor Welfare Benefit Plans and all
Fluor Pension Benefit Plans which are currently sponsored by Parent shall be
transferred from Parent to New Fluor, such change in sponsorship to include a
full transfer of all Plan assets and liabilities including any plan
underfunding or overfunding and such change in sponsorship shall be reflected
by corporate resolutions, amendments to such plans where appropriate and
changes to any required filings with any governmental agency reflecting New
Fluor as plan sponsor. With regard to the Fluor Executive Plans, those Fluor
Executive Plans listed on Schedule 7.03(a)(i), together with all related assets
and liabilities, will be assigned from Parent to New Fluor. Those Fluor
Executive Plans listed on Schedule 7.03(a)(ii), which include Parent stock as a
form of benefit, will remain with the Parent. Those Fluor Executive Plans
listed on Schedule 7.03(a)(iii) which cover executives of both the New Fluor
Group and the Massey Group will be partitioned into two plans, with the assets
and liabilities attributable to current and former Fluor executives being
transferred to New Fluor and the assets and liabilities attributable to current
and former Massey Group executives remaining with the Parent. The grantor trust
established by Parent and any insurance policy(ies) funded by Parent to provide
for payment of benefits to current or former Parent executives shall be
transferred to New Fluor. Any insurance policy(ies) funded by Parent or any of
its subsidiaries to provide for payment of benefits to current or former Massey
Group executives shall be retained by Parent. The indemnification provisions
set forth in Sections 7.05 and 7.06 shall apply to the Fluor Plans whether such
Fluor Plans are assigned to New Fluor or remain with the Parent.

(b) Except as provided otherwise in Section 10.01(b), any stock options on
Parent stock held by persons currently or formerly employed by the Massey Group
shall remain subject to the applicable plan under which such options were
granted, and shall be adjusted in a manner consistent with FASB Emerging Issues
Task Force Issue 90-9 to constitute solely options for Parent's Common Stock.
Stock options to Parent stock held by persons currently or formerly employed by
the New Fluor Group shall be assumed by New Fluor and shall be adjusted in a
manner consistent with FASB Emerging Issues Task Force Issue 90-9 to constitute
solely options for New Fluor Common Stock, and New Fluor shall adopt the Fluor
2000 Executive Incentive Performance Plan to provide options in new Fluor
Common Stock. Except as otherwise provided in Section 10.01(b), any unvested
restricted stock, stock appreciation rights, phantom stock, shadow stock, and
other forms of equity-based compensation held by a current or former employee
of Parent shall be adjusted in the same manner described in the preceding two
sentences.

(c) Parent held restricted stock and restricted units by non-employee
directors of Parent who are directors of New Fluor on the Distribution Date,
but who are no longer directors of Parent immediately following the
Distribution Date, shall be assumed by New Fluor and shall be adjusted in a
manner consistent with FASB Emerging Issues Task Force Issue 90-9 to constitute
solely restricted stock and restricted units for New Fluor Common Stock, and
New Fluor shall adopt the Fluor Stock Plan for Non-Employee Directors. Parent
restricted stock and restricted units held by non-employee directors who are
directors of both Parent and New Fluor immediately following the Distribution
Date shall be adjusted in a manner consistent with FASB Emerging Issues Task
Force Issue 90-9 so that a director has a corresponding number of shares of
Parent restricted stock and New Fluor restricted stock and a corresponding
number of share equivalents of Parent restricted units and New Fluor restricted
units.

(d) Prior to the Distribution Date, Parent shall cause New Fluor to adopt
the Fluor 2000 Executive Incentive Performance Plan and the Fluor Stock Plan
for Non-Employee Directors, and Parent shall approve such plans as sole
stockholder of New Fluor.

Section 7.04. Master Trust Changes. Schedule 7.04(a) lists the Fluor Pension
Benefit Plans and the Massey Pension Benefit Plans (the "Massey Defined Benefit
Plans") whose assets constitute the corpus of the Fluor Master Trust. It is the
intention of Parent and New Fluor to continue to maintain such qualified plans

A-14
<PAGE>

after the Distribution Date although this representation shall not bind either
Parent or New Fluor with respect to the continuation of any such plans
subsequent to the Distribution Date. Not later than the Distribution Date, the
Massey Group shall establish the Massey Master Trust. The assets of the Massey
Defined Benefit Plans to be transferred from the Fluor Master Trust to the
Massey Master Trust shall be determined in accordance with and based upon the
current asset allocation and the valuation policies and practices currently
being used by the Fluor Master Trust, with the value being determined as of the
end of the month immediately preceding or coinciding with the Distribution
Date. To the extent reasonably practicable, the assets shall be transferred in
kind and the transfer shall be completed within sixty (60) days following the
Distribution Date. Any increase or decrease during the period between the
Valuation Date and the Transfer Date in the value of the assets to be
transferred as described above, including any income or loss derived from such
assets during such period, shall be for the account of the Massey Master Trust.
New Fluor and Parent shall each use diligent efforts to cause the transfers
contemplated above to be accomplished on an expeditious basis. On and after the
Distribution Date, Parent shall cease to be the grantor of the Fluor Master
Trust and New Fluor shall be substituted in its place in accordance with the
terms of the Fluor Master Trust.

Section 7.05. Indemnification by New Fluor. New Fluor shall indemnify and
hold harmless the Massey Indemnified Parties from and against:

(a) All Losses relating to, or arising out of, or due to, directly or
indirectly, (i) the management or investment of assets of any of the Fluor
Plans with respect to all periods prior to and after the Distribution Date;
excluding losses relating to the management or investment, after the
Distribution Date, of assets relating to Massey Group participants or
beneficiaries or (ii) claims by Massey Group participants or beneficiaries
regarding the management or investment of the Massey Defined Benefit Plans
prior to the Transfer Date for the period of time in which such plans were
part of the Fluor Master Trust.

(b) All Losses from assessments, fines or penalties imposed with respect
to any of the Fluor Plans, by any governmental agency, federal or state,
with jurisdiction in the premises with respect to all periods prior to and
after the Distribution Date; excluding Losses arising from the
administration of such Fluor Plans by or on behalf of the Massey Group
following the Distribution Date.

(c) All Losses relating to or arising out of any claims of whatever
nature made by or on behalf of New Fluor Group participants or
beneficiaries in any of the Plans, including but not limited to, claims
under applicable federal or state law with respect to all periods prior to
and after the Distribution Date.

(d) All Losses which may be incurred with respect to Fluor Pension
Benefit Plans with respect to all periods prior to and after the
Distribution Date as a result of any withdrawal or any other liability
under ERISA and/or Losses which may be incurred with respect to multi-
employer plans contributed to by the New Fluor Group or, prior to the
Distribution Date contributed to by Parent, under the MPPAA.

Section 7.06. Indemnification by Massey. Massey shall indemnify and hold
harmless the New Fluor Indemnified Parties from and against:

(a) All Losses relating to, or arising out of, or due to, directly or
indirectly, (i) the management or investment of assets of any of the Massey
Plans with respect to all periods prior to and after the Distribution Date
(other than the Massey Defined Benefit Plans with respect to periods prior
to the Transfer Date for the period in which they were part of the Fluor
Master Trust), or (ii) the management and investment, after the
Distribution Date of Fluor Plan assets held by the Massey Group that are
attributable to Massey Group participants and beneficiaries.

(b) All Losses from assessments, fines or penalties imposed, with
respect to any of the Massey Plans with respect to all periods prior to and
after the Distribution Date or imposed after the Distribution Date with
respect to the Fluor Plans, or any portions thereof, which are administered
by or on behalf of the Massey Group on and after the Distribution Date and
which are based upon acts, errors or omissions of the Massey Group.

A-15
<PAGE>

(c) All Losses relating to or arising out of any claims of whatever
nature, including but not limited to, claims under applicable federal or
state law, made by or on behalf of participants or beneficiaries in any of
the Massey Plans with respect to all periods prior to and after the
Distribution Date, or any claims made by or on behalf of Massey Group
Participants in any of the Fluor Plans, which are administered by or on
behalf of the Massey Group after the Distribution Date and which Losses are
based on acts, errors or omissions occurring after the Distribution Date.

(d) All Losses which may be incurred with respect to any Massey Pension
Benefit Plan with respect to all periods prior to and after the
Distribution Date as a result of any withdrawal or any other potential
liability under ERISA and/or, with respect to multi-employer plans
contributed to by the Massey Group (excluding Parent) or after the
Distribution Date, contributed to by Parent under the MPPAA.

ARTICLE VIII

INTERCOMPANY AGREEMENTS

Section 8.01. Termination. Without prejudice to any claims thereunder based
upon occurrences prior to the Distribution Date or any confidentiality
obligations thereunder, Parent and New Fluor hereby agree that each the
agreements described in Schedule 8.01 will, effective as of the Distribution
Date, be terminated and of no effect thereafter (it being acknowledged by
Parent and New Fluor that, except as specified herein and as may have been
entered into in the ordinary course of business, there are no other material
agreements between Parent and New Fluor).

ARTICLE IX

TERMINATION; SURVIVAL

Section 9.01. Termination. This Agreement may be terminated at any time
prior to the Distribution upon a resolution to such effect passed by the board
of directors of Parent.

Section 9.02. Survival. The respective obligations of the parties hereto
shall survive the Distribution Date.

ARTICLE X

MISCELLANEOUS

Section 10.01. Expenses. Except as otherwise specifically set forth below,
all costs and expenses incurred in connection with the preparation, execution
and delivery of this Agreement and with the consummation of the transactions
contemplated hereby (collectively, the "Transaction Expenses") are described on
and shall be borne in accordance with Schedule 10.01 to this Agreement.

(a) Within ten (10) days following the Distribution, and as more
particularly described in the Proxy Statement, Massey intends to offer its
employees (other than Don L. Blankenship) who hold Options the opportunity to
surrender their Options in exchange for a cash payment. In the event that a
holder of an Option elects to surrender his or her Options, such Option holder
will be entitled to an amount equal to one-third of the present value of that
person's Options as calculated using the Black-Scholes option value methodology
(the "Cash Payment"). If accepted by an Option holder, the Cash Payment
obligation would be payable over three equal annual installments with the first
installment of the Cash Payment paid on the first anniversary of the
Distribution Date, subject to forfeiture to the extent the option holder's
employment with Parent terminates for a reason other than retirement or
permanent disability prior to the date an installment is to be paid. New Fluor
agrees that it shall be responsible for the Cash Payment to any Massey Option
holders who elect to surrender

A-16
<PAGE>

their Options as described above subject to the following: (i) within sixty
(60) days following the Distribution Date, Massey shall deliver to New Fluor a
list of its Option holders who have elected to surrender their Options, the
amount of Options surrendered and, subject to New Fluor's reasonable approval,
the Black Scholes value of the Options surrendered; (ii) Massey's Option
surrender program shall be identical to that which is described in the Proxy
and to the extent of any deviation therefrom which results in increased or
accelerated liability to New Fluor, Massey shall bear any such liability; and
(iii) as and when a portion of the Cash Payment is due to Massey employees who
elected to surrender Options, Massey will invoice New Fluor for the amounts so
due, such invoice not due and payable earlier than the payment date for the
applicable portion of the Cash Payment.

(b) Pursuant to that certain Amendment to Employment Agreement (the
"Blankenship Amendment"), Fluor, Massey, New Fluor and Don L. Blankenship
("Blankenship") have agreed to modify the terms of Blankenship's existing
Employment Agreement and Special Successor Development and Retention Program
Agreement. New Fluor agrees that to the extent that under the Blankenship
Amendment cash payments are due to Blankenship following the Distribution,
Massey will make all such cash payments provided that within ten (10) days
following receipt of invoice from Massey indicating that such cash payments
have been paid to Blankenship, New Fluor will reimburse Massey for such cash
payments made to Blankenship. Notwithstanding the preceding, in the event that
Blankenship elects to defer any such cash payments due under the Blankenship
Amendment by electing to place such cash payments in a deferred compensation
program maintained by Massey ("Deferred Amounts"), and to the extent that such
Deferred Amounts are placed in a Rabbi Trust maintained by Massey, within ten
(10) days following New Fluor's receipt of a statement that Massey has funded
the Rabbi Trust with the Deferred Amounts (which invoice shall specify the
amount so funded, not to exceed $2,778,700), New Fluor shall pay to Massey the
amounts set forth in such invoice.

Section 10.02. Notices. All notices and communications under this Agreement
shall be in writing and any communication or delivery hereunder shall be deemed
to have been duly given (i) when delivered, if delivered in person, or (ii) two
days following the date on which the notice or communication is sent, if sent
by first class mail or by other commercially reasonable means of written
communication (including delivery by an internationally recognized courier
service) addressed as follows:

If to Massey, to:

Massey Energy Company
Four North 4th Street
Richmond, Virginia 23219
Attention: General Counsel

If to New Fluor, to:

Fluor Corporation
One Enterprise Drive
Aliso Viejo, California 92656-2606
Attention: General Counsel

Any party may, by written notice so delivered to the other party, change the
address to which delivery of any notice shall thereafter be made.

Section 10.03. Amendment and Waiver. This Agreement may not be altered or
amended, nor may rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
No waiver of any terms, provision or condition of this Agreement, in any one or
more instances, shall be deemed to be, or construed as a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.

A-17
<PAGE>

Section 10.04. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together. shall constitute but one and the same Agreement.

Section 10.05. Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of New York without reference to choice of law principles.

Section 10.06. Consent to Jurisdiction. Each of the parties hereto hereby
irrevocably submits to the nonexclusive jurisdiction of any United States
Federal or New York State court sitting in New York County in any action or
proceeding arising out of or relating to this Agreement, and irrevocably agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such United States Federal or New York State court. Each of
the parties hereto agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Southern District of
New York or, if for jurisdictional reasons such suit, action or other
proceeding may not be brought in such court, in the Supreme Court of the State
of New York, New York County. Each of the parties hereto further agrees that
service of any process, summons, notice or document by United States registered
mail to such party's respective address set forth in Section 10.02 shall be
effective service of process for any action, suit or proceeding in the State of
New York with respect to any matters to which it has submitted to jurisdiction
as set forth above in the immediately preceding sentence. Each of the parties
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (a) the Supreme Court of the State of New
York, New York County or (b) the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.

Section 10.07. Entire Agreement. This Agreement and the Tax Sharing
Agreement constitute the entire understanding of the parties hereto with
respect to the subject matter hereof, superseding all negotiations, prior
discussions and prior agreements and understandings. To the extent that the
provisions of this Agreement are inconsistent with the provisions of the Tax
Sharing Agreement, the provisions of the Tax Sharing Agreement shall prevail.

Section 10.08. Parties in Interest. Neither party hereto may assign its
rights or delegate any of its duties under this Agreement without the prior
written consent of the other party. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Except as set forth in Section 3.03, nothing
contained in this Agreement, express or implied, is intended to confer any
benefits, rights or remedies upon any person or entity other than the parties
hereto.

Section 10.09. Attorneys' Fees. Subject to Section 4.03, in the event any
party to this Agreement brings an action or proceeding for the breach or
enforcement of this Agreement, the prevailing party in such action or
proceeding, whether or not such action or proceeding proceeds to final
judgment, shall be entitled to recover as an element of its costs, and not as
damages, such reasonable attorneys' fees as may be awarded in the action,
proceeding or appeal in addition to whatever other relief the prevailing party
may be entitled. For purposes of this Section, the "prevailing party" shall be
the party who is entitled to recover its costs; a party not entitled to recover
its costs shall not recover attorneys' fees.

A-18
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Distribution
Agreement to be duly executed and delivered as of the date and year first
written above.

FLUOR CORPORATION,
a Delaware corporation incorporated
in 1978
(to be renamed Massey Energy Company
on the Distribution Date)

By: _________________________________
Name:
Title:

FLUOR CORPORATION
a Delaware corporation incorporated
in 2000

By: _________________________________
Name:
Title:

A-19
<PAGE>

APPENDIX B

TAX SHARING AGREEMENT

This TAX SHARING AGREEMENT ("Agreement") is entered into as of , 2000,
by and between Fluor Corporation, a Delaware corporation, which shall be
renamed "Massey Energy Company" in connection with the transactions
contemplated herein (together with its successors and permitted assigns,
"Parent"), Fluor Corporation, a newly organized Delaware corporation (together
with its successors and permitted assigns, "New Fluor"), and A.T. Massey Coal
Company, Inc., a Virginia corporation ("A.T. Massey").

WITNESSETH

WHEREAS, as of the date hereof, Parent is the common parent of an affiliated
group of corporations which has elected to file consolidated Federal Income Tax
Returns;

WHEREAS, Parent and New Fluor have entered into a Distribution Agreement
setting forth the corporate transactions pursuant to which Parent will
distribute all of the outstanding shares of common stock of New Fluor to Parent
shareholders in a transaction intended to qualify as a tax-free distribution
under section 355 of the Code (as defined below);

WHEREAS, as a result of the Transactions (as defined below), members of the
New Fluor Group and members of the Massey Group will become members of the same
affiliated group and will be members of the same affiliated group for a portion
of Parent's taxable year that includes the Distribution Date;

WHEREAS, as a result of the Distribution, New Fluor and its subsidiaries
will cease, effective as of the day after the Distribution Date, to be members
of the affiliated group of which Parent is the common parent; and

WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes (as defined below) arising prior
to, as a result of, and subsequent to the Transactions, and to provide for and
agree upon other matters relating to Taxes.

NOW THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereby agree as follows:

Section 1. Definition of Terms.

(a) General. For purposes of this Agreement (including the recitals hereof),
the following terms have the following meanings:

"Accounting Cutoff Date" means, with respect to any entity, any date as
of the end of which there is a closing of the financial accounting records
for such entity.

"Accounting Firm" shall have the meaning provided in Section 15.

"Adjustment Request" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes including (i) any amended Tax Return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, or (ii) any claim for refund or credit
of Taxes previously paid, including any Carryback Adjustment Request (as
defined in Section 5.04(a) hereof), any Carryover Adjustment Request (as
defined in Section 5.04(b) hereof), and any Audit Adjustment Request (as
defined in Section 5.04(c) hereof).

B-1
<PAGE>

"Affiliate" means any entity (and its predecessors) that, directly or
indirectly, is "controlled" by the person or entity in question. "Control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person, whether
through ownership of voting securities, by contract or otherwise. Except as
otherwise provided herein, the term "Affiliate" shall refer to Affiliates
of a person as determined immediately after the Distribution.

"Agreement" shall mean this Tax Sharing Agreement.

"Audit Adjustment" means any change to a Tax Item or the Tax liability
as previously reported or reflected on a Tax Return that is required or
otherwise results from or is attributable to an audit, examination or other
review of such Tax Return by a Tax Authority, whether such audit,
examination or other review is initiated by a Tax Authority or a member of
a Group.

"Base Rate" means one-month LIBOR, as in effect from time to time and
quoted in the Wall Street Journal, Eastern Edition (or, if the Wall Street
Journal ceases to be published or ceases to publish one-month LIBOR, such
other reliable source as the parties shall mutually select), compounded
quarterly on the basis of a year of 365 or 366 (as applicable) days and
actual days elapsed.

"Carryback" means any net operating loss, net capital loss, foreign tax,
excess tax credit, or other Tax Item which may or must be carried back from
one Tax Period to another Tax Period under the Code or other applicable Tax
Law.

"Carryover" means any net operating loss, net capital loss, foreign tax,
excess tax credit or other Tax Item which may or must be carried forward
from one Tax Period to another Tax Period under the Code or other
applicable Tax Law.

"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor Law.

"Companies" means Parent and New Fluor, collectively, and "Company"
means any one of Parent and New Fluor.

"Consolidated or Combined Tax" means any Tax which applies on a basis
whereby one or more members of both Groups are consolidated or combined
into a single group (including through a unitary Tax Return), other than a
consolidation or combination in which the members of one Group are subject
to the Tax only because members of the other Group are so subject.

"Consolidated or Combined Tax Return" means any Tax Return which relates
to a Consolidated or Combined Tax.

"Consolidated Tax Liability" means, (i) with respect to any consolidated
Federal Income Tax Return, the "tax liability of the group" as that term is
used in Treasury Regulation Section 1.1552-1(b), including any applicable
alternative minimum tax, interest, penalties, additions to tax and
additional amounts as provided under the Code, and (ii) with respect to any
Consolidated or Combined Tax Return other than a Tax Return described in
the foregoing clause (i), the consolidated or combined tax liability of the
group, including any applicable interest, penalties, additions to tax and
additional amounts, as determined under applicable Tax Laws.

"Distribution" means the distribution to Parent shareholders on the
Distribution Date of all of the outstanding stock of New Fluor owned by
Parent.

"Distribution Agreement" means the agreement, dated as of the date
hereof, as amended from time to time, setting forth the corporate
transactions required to effect the distribution to Parent shareholders of
New Fluor Common Shares, and to which this Tax Sharing Agreement is
attached as an exhibit.

"Distribution Date" means the "Distribution Date" as that term is
defined in the Distribution Agreement.

"Federal Income Tax" means any Income Tax imposed on corporations under
the Code.

B-2
<PAGE>

"Foreign Income Tax" means any Income Tax imposed on corporations by any
foreign country or any possession of the United States, or by any political
subdivision of any foreign country or United States possession.

"Group" means the Parent Group, the Massey Group or the New Fluor Group,
as the context requires.

"Income Tax" means any Tax based upon, measured by, or calculated with
respect to (i) net income or profits (including any capital gains Tax,
minimum Tax and any Tax on items of tax preference, but not including
sales, use, real or personal property, gross or net receipts, transfer or
similar Taxes) or (ii) multiple bases, if one or more of the bases upon
which such Tax may be based, measured by, or calculated with respect to, is
described in the foregoing clause (i), in each case inclusive of any
interest, penalties, additions to tax or additional amounts in respect of
or related to the foregoing.

"Joint Adjustment" means any adjustment proposed by a Tax Authority or
any claim for refund asserted in a Tax Contest which is neither a New Fluor
Adjustment nor a Parent Adjustment.

"Law" means any Federal, state, local or other law or governmental
requirement of any kind and the rules, regulations and orders
(administrative or judicial) promulgated thereunder.

"Massey Group" means A.T. Massey and its direct and indirect
subsidiaries which would be included in its affiliated group pursuant to
Code Section 1504 if A.T. Massey were the parent of such group, provided,
however, for purposes of this Agreement said Code Section 1504 shall be
applied by (i) substituting "50 percent" for "80 percent" at each place
where the words "80 percent" appear in Code Section 1504(a)(2), and (ii)
treating as an "includible corporation" any corporation which otherwise
would not constitute an includible corporation pursuant to Code Section
1504(b).

"New Fluor Adjustment" means any adjustment to a Tax Item or Tax
liability proposed by a Tax Authority or any claim for refund asserted in a
Tax Contest to the extent New Fluor would be exclusively liable for any
resulting Tax under this Agreement and exclusively entitled to receive any
resulting Tax Benefit under this Agreement.

"New Fluor Group" means (i) for periods up to and including the
Distribution Date, Parent and its direct and indirect subsidiaries which
are included in its affiliated group pursuant to Code Section 1504, but
excluding members of the Massey Group and (ii) for periods after the
Distribution Date, New Fluor and its direct and indirect subsidiaries which
are included in its affiliated group pursuant to section 1504 of the Code,
provided, however, for purposes of this Agreement said Code Section 1504
shall be applied by (i) substituting "50 percent" for "80 percent" at each
place where the words "80 percent" appear in Code Section 1504(a)(2), and
(ii) treating as an "includible corporation" any corporation which
otherwise would not constitute an includible corporation pursuant to Code
Section 1504(b).

"Other Company" means, with respect to a Tax Return, the Company which
is not the Responsible Company with respect to that Tax Return.

"Parent Adjustment" means any adjustment to a Tax Item or Tax liability
proposed by a Tax Authority or any claim for refund asserted in a Tax
Contest to the extent Parent would be exclusively liable for any resulting
Tax under this Agreement and exclusively entitled to receive any resulting
Tax Benefit under this Agreement.

"Parent Group" means (a) for periods up to and including the
Distribution Date, the Massey Group and (b) for periods after the
Distribution Date, Parent and the Massey Group.

"Payment Date" means (i) with respect to any consolidated Federal Income
Tax Return which includes members of both the Parent Group and the New
Fluor Group, the due date for any required installment of estimated taxes
determined under Code Section 6655, the due date (determined without regard
to extensions) for filing the return determined under Code Section 6072,
and the date the return is filed, and (ii) with respect to any other
Consolidated or Combined Tax Return, the corresponding dates determined
under the applicable Tax Law.

B-3
<PAGE>

"Responsible Company" means, with respect to any Tax Return, the Company
which is responsible for preparing and filing the Tax Return under this
Agreement.

"Restructuring Tax" means any Tax described in Sections 2.04(a)(ii)
relating to Taxes imposed on or with respect to any income or gain
recognized as a result of any one or more of the Transactions.

"Ruling" means the private letter ruling issued by the Internal Revenue
Service in response to the Ruling Request, including any amendments or
supplements to such private letter ruling.

"Ruling Request" means the letter filed by Parent with the Internal
Revenue Service requesting a ruling from the Internal Revenue Service
regarding certain tax consequences of the Transactions (including all
attachments, exhibits, and other materials submitted with such ruling
request letter) and any amendments or supplements to such ruling request
letter.

"Section" means Sections of this Agreement, except where otherwise
indicated.

"Separate Company Tax" means any Tax applicable only to a member or
members of a single Group.

"Separate Company Tax Return" means any Tax Return which relates to a
Separate Company Tax.

"State Income Tax" means any Income Tax imposed on corporations by any
State of the United States or by any political subdivision of any such
State.

"Straddle Period" means any Tax Period which includes one or more
members of the New Fluor Group or the Parent Group for the entire Tax
Period and which includes one or more members of the other Group for only a
portion of such Tax Period.

"Tax" or "Taxes" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem,
stamp, excise, severance, occupation, service, sales, use, license, lease,
transfer, import, export, value added, alternative minimum, estimated or
similar tax (including any fee, assessment, or other charge in the nature
of or in lieu of any tax) imposed by any governmental entity or political
subdivision thereof, and any interest, penalties, additions to tax, or
additional amounts in respect of or related to the foregoing.

"Tax Authority" means, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax, and the agency (if
any) charged with the collection of such Tax for such entity or
subdivision.

"Tax Benefit" means any refund, credit, or other reduction in otherwise
required Tax payments (including any reduction in estimated Tax payments),
including, without limitation, any reduction in a Tax liability
attributable to deductions resulting from expenses, depreciation,
amortization or other sources.

"Tax Contest" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including
any administrative or judicial review of any claim for refund) for any Tax
Period ending on or before, or including, the Distribution Date and any
Straddle Period.

"Tax Item" means, with respect to any Income Tax, any item of income,
gain, loss, deduction, or credit.

"Tax Law" means the Law of any governmental entity or political
subdivision thereof relating to any Tax.

"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under the Code or other applicable Tax Law.

B-4
<PAGE>

"Tax Records" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records
required to be maintained under the Code or other applicable Tax Laws or
under any record retention agreement with any Tax Authority.

"Tax Return" means any report of Taxes due, any claims for refund of
Taxes paid, any information return with respect to Taxes, or any other
similar report, statement, declaration, or document required to be filed
under the Code or other Tax Law, including any attachments, exhibits or
other materials submitted with any of the foregoing, and including any
amendments or supplements to any of the foregoing.

"Transactions" means the transactions contemplated by the Distribution
Agreement.

"Treasury Regulations" means the regulations promulgated from time to
time under the Code as in effect for the relevant Tax Period.

"With/Without Allocation Method" means, with respect to any Consolidated
or Combined Tax, the methodology for allocating the liability for such Tax
among and between the Parent Group and the New Fluor Group in accordance
with the principles and provisions of Section 2.01 or Section 2.02,
whichever may be applicable.

(b) Other Definitional Provisions.

(i) Any term not defined above shall have the meaning ascribed thereto
in the text of this Agreement where such term is first used.

(ii) The words "hereof", "herein", and "hereunder"and words of similar
import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.

(iii) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.

(iv) The words "includes" and "including" shall be construed as though
followed by "without limitation" or words of similar import, unless the
context clearly requires otherwise.

Section 2. Allocation of Tax Liabilities.

2.01 Allocation of United States Federal Income Tax. Except as provided in
Section 2.04 and subject to Section 3:

(a) Separate Tax Periods. Insofar as the New Fluor Group and/or the
Parent Group file Federal Income Tax Returns for any Tax Periods which do
not include any member of the other Group, the filing Group shall be liable
for (and shall indemnify and hold the other Group harmless from) any
Federal Income Tax that is attributable to such Tax Periods .

(b) Combined Taxable Years. If one or more members of the New Fluor
Group and one or more members of the Parent Group are included in the same
consolidated Federal Income Tax Return:

(i) Allocation of Tax. For any relevant taxable year beginning after
October 31, 2000, (1) the Consolidated Tax Liability for the entire
taxable year shall be computed by excluding the New Fluor Group (the
"Federal Without Amount") and (2) the Consolidated Tax Liability for
the entire taxable year shall be computed by including the New Fluor
Group (but only for the portion of such taxable year during which the
New Fluor Group is included in the consolidated Federal Income Tax
Return) but (A) without taking into account losses or other deductions
or credits of the Parent Group not used in calculating the Federal
Without Amount and (B) taking into account losses or other deductions
or credits of the New Fluor Group which are not used in the
consolidated Federal Income Tax Return as a result of the use on such
Return of losses, deductions or credits of the Parent Group not used in
calculating the Without Amount, whether any such losses, deductions or
credits of the New Fluor Group or the Parent Group arise in such
taxable year or are carried forward or back from another

B-5
<PAGE>

taxable year (the "Federal With Amount"). The Parent Group shall be
allocated and liable for the Federal Without Amount. The New Fluor
Group shall be allocated and liable for the excess, if any, of the
Federal With Amount over the Federal Without Amount. If the Federal
With Amount exceeds the Federal Without Amount, New Fluor shall pay the
excess amount to Parent in accordance with the applicable provisions of
Section 5. If the Federal With Amount is less than the Federal Without
Amount, Parent shall pay the amount of the difference to New Fluor in
accordance with the applicable provisions of Section 5. For the taxable
year ending on October 31, 2000 (if relevant), the preceding provisions
of this Section 2.01(b)(i) shall be applied by substituting "Parent"
and "Parent Group" for "New Fluor" and "New Fluor Group" and vice
versa. The allocation of Tax liabilities under this Section 2.01(b)(i)
is the "Federal Allocation Method".

(ii) Allocation of Consolidated Federal Tax Adjustments. If there is
any Audit Adjustment to any Tax Item for any relevant Tax Period
beginning after October 31, 2000, the Federal With Amount and the
Federal Without Amount shall be recalculated, in accordance with the
principles of Section 2.01(b)(i), to reflect such Audit Adjustment. New
Fluor shall be allocated and liable for, and shall pay to Parent in
accordance with the provisions of Section 5, the amount described in
whichever one (but not more than one) of the following three clauses is
applicable: (1) the amount by which the excess of the Federal With
Amount over the Federal Without Amount as recalculated is greater than
such excess as previously (and most recently) calculated under this
Section 2.01(b), (2) the amount by which the excess of the Federal
Without Amount over the Federal With Amount as recalculated is less
than such excess as previously (and most recently) calculated, or (3)
the sum of the excess of the Federal With Amount over the Federal
Without Amount as recalculated plus the excess of the Federal Without
Amount over the Federal With Amount as previously (and most recently)
calculated. Parent shall be allocated and liable for, and shall pay to
New Fluor in accordance with the provisions of Section 5, the amount
described in whichever one (but not more than one) of the following
three clauses is applicable: (1) the amount by which the excess of the
Federal With Amount over the Federal Without Amount as recalculated is
less than such excess as previously (and most recently) calculated
under this Section 2.01(b), (2) the amount by which the excess of the
Federal Without Amount over the Federal With Amount as recalculated is
greater than such excess as previously (and most recently) calculated,
or (3) the sum of the excess of the Federal Without Amount over the
Federal With Amount as recalculated plus the excess of the Federal With
Amount over the Federal Without Amount as previously (and most
recently) calculated. The parties agree and understand that their
respective obligations to make payments hereunder resulting from Audit
Adjustments shall apply in circumstances wherein there is no additional
net Tax liability payable to a Tax Authority attributable to the
adjustment of one or more Tax Items on the applicable Tax Return but
the adjustments result in changes to the Federal With Amount and/or
Federal Without Amount as recalculated to reflect all such Audit
Adjustments. In the case of any Tax Period ending on October 31, 2000
(if relevant), the preceding provisions of this Section 2.01(b)(ii)
shall be applied by substituting "Parent" for "New Fluor" and vice
versa.

(iii) Compensation for Loss of Tax Credits. This paragraph applies
if, as a result of including members of the Parent Group and members of
the New Fluor Group in a consolidated Federal Income Tax Return for a
Tax Period (such Tax Period, an "Applicable Tax Period," and such
return, an "Applicable Consolidated Return"), (A) the minimum tax
credits or other Federal Income Tax credits generated by the Parent
Group and available as a carryover to a subsequent Tax Period are less
than such carryover credits would be if such members of the New Fluor
Group had not been included in such Applicable Consolidated Return (the
excess of (1) the amount of credits that would have been generated and
available as a carryover if the New Fluor Group had not been included
in the Applicable Consolidated Return, over (2) the amount of such
credits generated and available as a carryover by the Parent Group is
referred to herein as the "Displaced Credits"); (B) the portion of the
Federal Income Tax liability for such Applicable Tax Period that is
allocated to the New Fluor Group under this Section 2.01 is less than
the Federal Income Tax that the New Fluor Group would have incurred, if
it had not been included in such Applicable Consolidated Return, for
the portion of

B-6
<PAGE>

the Applicable Tax Period during which the New Fluor Group is included
in the Applicable Consolidated Return (the excess of (1) the amount of
Federal Income Tax liability that would have been incurred by the New
Fluor Group had it not been included in the Applicable Consolidated
Return over (2) the amount of such Federal Income Tax liability
allocated to the New Fluor Group under this Section 2.01 is referred to
herein as the "New Fluor Group Tax Savings"); and (C) in a subsequent
Tax year (a "Credit Deficiency Year") the Parent Group incurs a Federal
Income Tax liability that it would not have incurred if it had
available to it all or any portion of the Displaced Credits, with such
availability to be determined after giving effect to any limitation on
the Displaced Credits, including any limitation on the number of Tax
Periods to which the Displaced Credits would have been carried under
applicable Federal Income Tax Law (such Tax liability is referred to
herein as the "Parent Group Additional Tax Liability"). For each such
Credit Deficiency Year, New Fluor shall pay to Parent the amount of
such Parent Group Additional Tax Liability, provided, however, that in
no event shall New Fluor be obligated hereunder to make payments to
Parent in excess of the aggregate New Fluor Group Tax Savings, provided
further, however, for purposes of this Section 2.01(b)(iii), the amount
of such New Fluor Group Tax Savings shall be adjusted, and New Fluor's
payment obligation hereunder may be subject to a letter of credit
security arrangement, in accordance with the provisions of Section
2.01(b)(iv). New Fluor's payment to Parent will be due within 20
business days following Parent's written demand therefor, which shall
not be made earlier than the due date, determined without regard to
extensions, for the Parent Group's Federal Income Tax Return for the
Credit Deficiency Year. When making its demand for payment, Parent
shall provide New Fluor with Parent's computation, in reasonable
detail, of the amount payable by New Fluor pursuant to the provisions
of this Section 2.01(b)(iii) together with such other information
reasonably necessary to allow New Fluor to verify that a payment is due
hereunder and the amount thereof. In addition to such payment, if New
Fluor does not make the payment due hereunder to Parent within 3
business days after New Fluor's receipt of such written demand
containing such computation and other necessary information, then New
Fluor shall also pay to Parent interest on such payment amount at the
Base Rate from the due date of such Tax Return to the date of payment
by New Fluor of the payment required hereunder. By way of illustration
(and not limitation) of the foregoing provisions, assume: (1) the
Distribution Date is November 30, 2000, and Parent files an Applicable
Consolidated Return for the Tax Period ending October 31, 2001 (the
"2001 Period"); (2) the Parent Group has $40 Million of minimum tax
credits available for carryover into the 2001 Period; (3) but for the
inclusion of the New Fluor Group in the Applicable Consolidated Return
for the 2001 Period, Parent would have generated in the 2001 Period an
additional $4 Million of minimum tax credits available for carryover to
subsequent Tax Periods; (4) as a result of the inclusion of the New
Fluor Group in the Applicable Consolidated Return for the 2001 Period,
the minimum tax credits generated by the Parent Group in the 2001
Period and available for carryover are reduced to $2 Million, thereby
resulting in an aggregate minimum tax credit of $42 Million available
for carryover to Tax Periods after the 2001 Period; (5) the Federal
Income Tax liability allocated to the New Fluor Group for the 2001
Period under this Section 2.01 is $2 million less than the Federal
Income Tax the New Fluor Group would have incurred for the period
November 1 through November 30, 2000 if it had not been included in the
Applicable Consolidated Return; (6) in the subsequent two Tax Periods
of the Parent Group (ending October 31 in the years 2002 and 2003), the
Parent Group generates an additional $8 Million of minimum tax credits
available for carryover to subsequent Tax Periods, thereby resulting in
an aggregate minimum tax credit of $50 Million available for carryover
to Tax Periods ending after October 31, 2003; (7) in the 3 subsequent
Tax Periods of the Parent Group (ending October 31 in the years 2004,
2005 and 2006), the Parent Group uses $50 Million of minimum tax
credits to reduce its Federal Income Tax liability in such Tax Periods
and does not generate any further minimum tax credits in such Tax
Periods which are available for carryover to Tax Periods after the Tax
Period ending October 31, 2006; and (8) in the Tax Period ending
October 31, 2007 (the "2007 Period"), the Parent Group incurs a Federal
Income Tax liability of $2 Million which it would not have incurred if
it had use of the Displaced Credits. Under the circumstances described
in the preceding sentence, the New Fluor Group Tax Savings amount is $2
Million, the 2007 Period is a Credit

B-7
<PAGE>

Deficiency Year, and, upon receipt of the Parent Group's written demand
on or after the due date (without extension) for the Parent Group's
Federal Income Tax Return for the 2007 Period, New Fluor shall be
obligated to pay $2 Million to Parent within 20 business days following
New Fluor's receipt of such written demand. This paragraph shall also
apply, and New Fluor shall have identical rights and Parent shall have
identical obligations, inclusive of rights and obligations comparable
to those provided under Section 2.01(b)(iv), in the event that, as a
result of the inclusion of members of the New Fluor Group and members
of the Parent Group in a consolidated Federal Income Tax Return, the
carryover credits otherwise generated by the New Fluor Group and
available as a carryover are reduced and the Parent Group realizes a
reduction in its Federal Income Tax liability for the applicable Tax
Period on such consolidated Federal Income Tax Return.

(iv) Further Provisions Regarding Compensation for Lost Tax Credits.

(A) This subparagraph (iv)(A) applies if (1), as a result of the
inclusion of the New Fluor Group in an Applicable Consolidated
Return, (x) the amount of Federal Income Tax credits that are
available to the New Fluor Group as a carryover to Tax Periods
following the Applicable Tax Period exceeds (y) the amount of such
credits that would have been available to the New Fluor Group as a
carryover to such subsequent Tax Periods had it not been included in
the Applicable Consolidated Return (the excess of the amount
described in the foregoing clause (x) over the amount described in
the foregoing clause (y) is referred to herein as the "Excess
Credits"), and (2) in a subsequent Tax year (an "Excess Credit
Recovery Year") the Federal Income Tax liability incurred by the New
Fluor Group is reduced as a result of its use of all or any portion
of such Excess Credits, provided, however, for such purposes such
Excess Credits shall not be deemed to have been used until all other
Federal Income Tax credits available to the New Fluor Group in such
Excess Credit Recovery Year have been used (the amount of any such
Federal Tax reduction is referred to herein as an "Excess Credit
Reduction"). Effective as of the due date (determined without regard
to extensions) for the New Fluor Group's Federal Income Tax Return
for such Excess Credit Recovery Year, the amount of such Excess
Credit Reduction shall be added to the then remaining New Fluor
Group Tax Savings (as previously adjusted under this Section
2.01(b)(iv), if applicable), with such adjusted New Fluor Group Tax
Savings to be the limitation on New Fluor Group's payment
obligations under Section 2.01(b)(iii). Promptly after filing such
Federal Income Tax Return, New Fluor shall notify Parent of the
amount added to the New Fluor Group Tax Savings, and shall provide
to Parent New Fluor's computation thereof (in reasonable detail) and
such other information reasonably necessary to allow Parent to
verify such amount.

(B) This subparagraph (iv)(B) applies if (1) as a result of the
inclusion of the New Fluor Group in an Applicable Consolidated
Return, (x) the amount of Federal Income Tax credits that are
available to the New Fluor Group as a carryover to Tax Periods
following the Applicable Tax Period is less than (y) the amount of
such credits that would have been available to the New Fluor Group
as a carryover to such subsequent Tax Periods had it not been
included in the Applicable Consolidated Return (the excess of the
amount described in the foregoing clause (y) over the amount
described in the foregoing clause (x) is referred to herein as the
"Displaced NFG Tax Credits"), and (2) in a subsequent Tax year (an
"NFG Tax Credit Deficiency Year") (x) the Federal Income Tax
liability incurred by the New Fluor Group exceeds (y) the amount of
such Tax liability that the New Fluor Group would have incurred if
it had available to it as a carryover all or any portion of the
Displaced NFG Tax Credits, with such availability to be determined
after giving effect to any limitation on the use of alternative
minimum tax foreign tax credits, including without limitation the
number of Tax Periods to which the Displaced NFG Tax Credits could
have been carried under applicable Federal Income Tax Law (the
excess of the amount described in the foregoing clause (x) over the
amount described in the foregoing clause (y) is referred to herein
as the "NFG Additional Tax Amount"). Effective as of the due date

B-8
<PAGE>

(determined without regard to extensions) for the New Fluor Group's
Federal Income Tax Return for such NFG Tax Credit Deficiency Year,
the amount of the then remaining New Fluor Group Tax Savings (as
previously adjusted under this Section 2.01(b)(iv), if applicable)
shall be reduced by such NFG Additional Tax Amount, with such
adjusted New Fluor Group Tax Savings to be the limitation on New
Fluor Group's payment obligations under Section 2.01(b)(iii).
Promptly after filing such Federal Income Tax Return, New Fluor
shall notify Parent of the amount subtracted from the New Fluor
Group Tax Savings, and shall provide to Parent New Fluor's
computation thereof (in reasonable detail) and such other
information reasonably necessary to allow Parent to verify such
amount.

(C) This subparagraph (iv)(C) applies with respect to any period
during which (1) the New Fluor Group Tax Savings, as adjusted under
this Section 2.01(b)(iv), exceeds $3,500,000, and (2) New Fluor does
not have an investment grade credit rating as determined by either
Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's
Ratings Services, a division of McGraw-Hill Company ("S&P"), or any
successor to either of them. For this purpose, investment grade
means a rating of Baa-2 or higher by Moody's and BBB or higher by
S&P. Within 20 business days after the first day as of which both
conditions described in the foregoing clauses (1) and (2) are
satisfied, New Fluor, unless affirmatively waived by Parent, shall
secure its obligation to make payments to Parent pursuant to the
provisions of Section 2.01(b)(iii) through a letter of credit in
favor of Parent issued by a bank or other financial institution
having reported assets of at least $10 billion and approved by
Parent, with such letter of credit to have a face amount equal to
100% of the New Fluor Group Tax Savings, provided, however, such
face amount shall be reduced to the extent that the amount of the
remaining balance of the New Fluor Group Tax Savings is reduced by
reason of payments pursuant to Section 2.01(b)(iii) or reduction
adjustments under Section 2.01(b)(iv)(B), and such face amount shall
be increased to the extent the New Fluor Group Tax Savings is
increased under Section 2.01(b)(iv)(A). Such letter of credit shall
remain in effect or be renewed by New Fluor until the earlier of (x)
the date as of which the remaining balance of the New Fluor Group
Tax Savings is less than $3,500,000 or (y) the effective date as of
which New Fluor regains an investment grade credit rating, at which
time such letter of credit shall no longer be required and may be
revoked, subject to reinstatement or replacement if and when the two
conditions described in the first sentence of this paragraph again
exist.

(D) The parties agree and acknowledge that the provisions of
Section 2.01(b)(iii) and this Section 2.01(b)(iv) shall be applied
after giving effect to any adjustments resulting from any Adjustment
Requests or Audit Adjustments.

2.02 Allocation of State Income Taxes and Foreign Income Taxes. Except as
provided in Section 2.04 and subject to Section 3, State Income Taxes and
Foreign Income Taxes shall be allocated as follow:

(a) Separate Company Taxes. In the case of any State Income Tax or
Foreign Income Tax which is a Separate Company Tax, the Parent Group and
the New Fluor Group shall be allocated and liable for such Tax imposed on
any member or members of their respective Groups, but only for such periods
as such membership existed. For such purposes, the parties agree that New
Fluor shall be allocated and liable for all State Income Taxes and Foreign
Income Taxes of Parent with respect to all Tax Periods (or portions
thereof) through the Distribution Date, provided further, however, for such
purposes any Tax Period of Parent that includes but does not end on the
Distribution Date shall be treated as ending on the Distribution Date, with
New Fluor to be allocated and liable for only the State Income Tax
liability or Foreign Income Tax liability (as applicable) with respect to
the Tax Items apportioned to the portion of such Tax Period through the
Distribution Date in accordance with the principles of Section 3. All such
Separate Company Taxes shall be paid by the party to whom they are
allocated hereunder in accordance with the provisions of Section 5.

B-9
<PAGE>

(b) Consolidated or Combined Taxes. In the case of any State Income Tax
or Foreign Income Tax which is a Consolidated or Combined Tax, the
liability of the parties with respect to such Tax for any Tax Period shall
be computed and allocated as follows:

(i) Allocation of Tax. For any relevant taxable year beginning after
October 31, 2000, (1) the Consolidated or Combined State Income Tax or
Foreign Income Tax (whichever may be applicable) for the entire taxable
year shall be computed by excluding the New Fluor Group (the
"State/Foreign Without Amount") and (2) the Consolidated or Combined
State Income Tax or Foreign Income Tax (whichever may be applicable)
for the entire taxable year shall be computed by including the New
Fluor Group (but only for the portion of such taxable year during which
the New Fluor Group is included in the Consolidated or Combined Tax
Return) but (A) without taking into account losses or other deductions
or credits of the Parent Group not used in calculating the
State/Foreign Without Amount and (B) taking into account losses or
other deductions or credits of the New Fluor Group which are not used
in the Consolidated or Combined Tax Return as a result of the use on
such Return of losses, deductions or credits of the Parent Group not
used in calculating the Without Amount, whether any such losses,
deductions or credits of the New Fluor Group or the Parent Group arise
in such taxable year or are carried forward or back from another
taxable year (the "State/Foreign With Amount"). The Parent Group shall
be allocated and liable for the State/Foreign Without Amount. New Fluor
shall be allocated and liable for the excess, if any, of the
State/Foreign With Amount over the State/Foreign Without Amount. If the
State/Foreign With Amount exceeds the State/Foreign Without Amount, New
Fluor shall pay the excess amount to Parent in accordance with the
provisions of Section 5. If the State/Foreign With Amount is less than
the State/Foreign Without Amount, Parent shall pay the amount of the
difference to New Fluor in accordance with the provisions of Section 5.
For the taxable year ending on October 31, 2000 (if relevant), the
preceding provisions of this Section 2.02(b)(i) shall be applied by
substituting "Parent" and "Parent Group" for "New Fluor" and "New Fluor
Group" and vice versa. Notwithstanding the foregoing, with respect to
any Tax Period ending after October 31, 2000 and on or before October
31, 2001, (i) the amount of Consolidated or Combined State Income Tax
or Foreign Income Tax allocated to, and payable by, the Parent Group
shall be zero in the case of any jurisdiction where no member of the
Massey Group would be subject to State Income Tax or Foreign Income
Tax, as applicable, but for (A) affiliation with one or more members of
the New Fluor Group prior to the Distribution, or (B) affiliation with
Parent following the Distribution, provided, however, this clause (B)
shall not apply if and to the extent that such State Income Tax or
Foreign Income Tax is attributable to operations or activities in which
Parent engages following the Distribution, and (ii) the amount of
Consolidated or Combined State Income Tax or Foreign Income Tax
allocated to, and payable by, the New Fluor Group shall be zero in the
case of any jurisdiction where no member of the New Fluor Group would
be subject to State Income Tax or Foreign Income Tax, as applicable,
but for affiliation with one or more members of the Massey Group prior
to the Distribution..

(ii) Allocation of Combined or Consolidated State Income Tax and
Foreign Income Tax Adjustments. If there is any Audit Adjustment to any
Tax Item for any relevant Tax Period beginning after October 31, 2000,
the State/Foreign With Amount and the State/Foreign Without Amount
shall be recalculated, in accordance with the principles of Section
2.02(b)(i), to reflect such Audit Adjustment. With respect to each such
recalculation, New Fluor shall be allocated and liable for, and shall
pay to Parent in accordance with the provisions of Section 5, the
amount described in whichever one of the following three clauses is
applicable: (1) the amount by which the excess of the State/Foreign
With Amount over the State/Foreign Without Amount as recalculated is
greater than such excess as previously (and most recently) calculated
under this Section 2.02(b), (2) the amount by which the excess of the
State/Foreign Without Amount over the State/Foreign With Amount as
recalculated is less than such excess as previously (and most recently)
calculated or (3) the sum of the excess of the State/Foreign With
Amount over the State/Foreign Without Amount as recalculated plus the
excess of the State/Foreign Without Amount over the State/Foreign With
Amount as previously

B-10
<PAGE>

(and most recently) calculated. With respect to each such
recalculation, Parent shall be allocated and liable for, and shall pay
to New Fluor in accordance with the provisions of Section 5, the amount
described in whichever one of the following three clauses is
applicable: (1) the amount by which the excess of the State/Foreign
With Amount over the State/Foreign Without Amount as recalculated is
less than such excess as previously (and most recently) calculated
under this Section 2.02(b), (2) the amount by which the excess of the
State/Foreign Without Amount over the State/Foreign With Amount as
recalculated is greater than such excess as previously (and most
recently) calculated, or (3) the sum of the excess of the State/Foreign
Without Amount over the State/Foreign With Amount as recalculated plus
the excess of the State/Foreign With Amount over the State/Foreign
Without Amount as previously (and most recently) calculated. The
parties agree and understand that their respective obligations to make
payments hereunder resulting from Audit Adjustments shall apply in
circumstances wherein there is no additional net Tax liability payable
to a Tax Authority attributable to the adjustment of one or more Tax
Items on the applicable Tax Return but the Audit Adjustments result in
changes to the State/Foreign With Amount and/or State/Foreign Without
Amount as recalculated to reflect such Audit Adjustments. In the case
of any relevant Tax Period ending on October 31, 2000 (if relevant),
the preceding provisions of this Section 2.02(b)(ii) shall be applied
by substituting "Parent" for "New Fluor" and vice versa.
Notwithstanding the foregoing, with respect to any Tax Period ending
after October 31, 2000 and on or before October 31, 2001, (i) the
amount of Consolidated or Combined State Income Tax or Foreign Income
Tax allocated to, and payable by, the Parent Group shall be zero in the
case of any jurisdiction where no member of the Massey Group would be
subject to State Income Tax or Foreign Income Tax, as applicable, but
for (A) affiliation with one or more members of the New Fluor Group
prior to the Distribution, or (B) affiliation with Parent following the
Distribution, provided, however, this clause (B) shall not apply if and
to the extent that such State Income Tax or Foreign Income Tax is
attributable to operations or activities in which Parent engages
following the Distribution, and (ii) the amount of Consolidated or
Combined State Income Tax or Foreign Income Tax allocated to, and
payable by, the New Fluor Group shall be zero in the case of any
jurisdiction where no member of the New Fluor Group would be subject to
State Income Tax or Foreign Income Tax, as applicable, but for
affiliation with one or more members of the Massey Group prior to the
Distribution.

2.03 Allocation of Other Taxes. Except as provided in Section 2.04, all
Taxes other than those allocated pursuant to Sections 2.01 and 2.02, (herein
"Other Taxes") shall be allocated to the legal entity on which the legal
incidence of the Other Tax is imposed. For such purposes, the parties agree
that New Fluor shall be allocated and liable for all such Other Taxes imposed
on Parent with respect to all Tax Periods (or portions thereof) through the
Distribution Date, provided further, however, for such purposes any Tax Period
of Parent that includes but does not end on the Distribution Date shall be
treated as ending on the Distribution Date, with New Fluor to be allocated and
liable for only (1) the Other Tax liability with respect to the Tax Items
apportioned to the portion of such Period through the Distribution Date in
accordance with the principles of Section 3, and (2) the Other Tax liability
with respect to Tax Items apportioned to the portion of the Period after the
Distribution Date to the extent that such Other Tax liability would not have
been incurred absent the activities or existence of Parent during such portion
of the Period through the Distribution Date. As between the parties to this
Agreement, New Fluor shall be allocated and liable for all Other Taxes imposed
on any member of the New Fluor Group and, except as expressly provided
otherwise in the immediately preceding sentence with respect to Other Taxes
imposed on Parent with respect to portions of a Tax Period through the
Distribution Date, Parent shall be allocated and liable for all Other Taxes
imposed on any member of the Parent Group. The Companies believe that there is
no Other Tax not allocated pursuant to this Section 2.03 which is legally
imposed on more than one legal entity (e.g., joint and several liability);
provided, however, if there is any such Other Tax, it shall be allocated in
accordance with past practices as reasonably determined by the affected
Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies, it being agreed that
"with and without" principles comparable to those described in Sections 2.01
and 2.02 will be applied unless to do so would be clearly inequitable. All such
Other Taxes shall be paid by the party to whom they are allocated hereunder in
accordance with the provisions of Section 5.

B-11
<PAGE>

2.04 Transaction Taxes and Certain Other Taxes.

(a) General Allocations of Tax Liabilities.

(i) Except as otherwise provided in this Section 2.04, New Fluor shall
be liable for and obligated hereunder to pay 60%, and Parent shall be
liable for and obligated hereunder to pay 40%, of any liability for Taxes
imposed on any member of the Parent Group or the New Fluor group as a
result of or with respect to any of the Transactions, including, without
limitation, any Tax resulting from any income or gain recognized as a
result of any of the Transactions, but excluding any Tax resulting from any
income or gain recognized under Treasury Regulation Sections 1.1502-13 or
1.1502-19 (or any corresponding provisions of other applicable Tax Laws) as
a result of, but not generated by, the Transactions.

(ii) Except to the extent provided otherwise under Sections 2.04(b) and
2.04(d), if, pursuant to applicable Federal Income Tax Laws or State Income
Tax Laws, the Distribution does not qualify for tax-free treatment under
Code Section 355 and/or comparable State Income Tax Laws and as a result
the Distribution is treated for Income Tax purposes as a taxable
transaction with respect to which Parent is required to recognize taxable
income, the resulting Tax liability shall be allocated 40% to Parent and
60% to New Fluor.

(iii) Notwithstanding the provisions of Section 2.04(a)(i), New Fluor
shall be liable for and obligated hereunder to pay 100% of any sales, use,
gross receipts or other transfer Taxes imposed on or with respect to any
transfers occurring pursuant to the Transactions.

(iv) Notwithstanding the provisions of Section 2.04(a)(i), there shall
be allocated to New Fluor, and New Fluor shall be liable to the Parent
Group for, any Other State Taxes (as defined herein) that otherwise would
be allocable under Sections 2.02 and/or 2.03 of this Agreement to the
Parent Group (including Other State Taxes arising in Tax Periods beginning
after the Distribution Date) to the extent that the aggregate amount of
such Other State Taxes exceeds the aggregate amount of such Other State
Taxes that members of the Massey Group would have incurred if the
Transactions had not occurred (such excess, the "Incremental Taxes"),
provided, however, that (i) the liability of New Fluor under this Section
2.04(a)(iv) shall be limited to the first $1 Million of Incremental Taxes
plus 50% of the next $2 Million of Incremental Taxes, for a total potential
liability of $2 Million of Incremental Taxes, and (ii) New Fluor shall not
be liable under this Section 2.04(a)(iv) for Incremental Taxes attributable
to or imposed as a result of operations or activities in which Parent
engages following the Distribution. As used herein the term "Other State
Taxes" shall mean State Taxes other than any Sate Taxes the allocation and
liability for which is determined pursuant to the provisions of Section
2.04(a)(ii), Section 2.04(a)(iii), Section 2.04(b), Section 2.04(c) or
Section 2.04(d). The parties intend and agree that the provisions of this
Section 2.04(a)(iv) shall govern their respective liabilities for
Incremental Taxes and that the provisions of Section 2.04(a)(i) shall not
apply to such Incremental Taxes.

(b) Certain Other Allocations.

(i) New Fluor shall be allocated, and shall be solely liable and
obligated hereunder to pay, any liability for any Restructuring Tax to the
extent that such liability arises from: (A) any breach of New Fluor's
covenants under Section 11 or under the Distribution Agreement, or (B) the
material inaccuracy of factual statements or representations made with
respect to members of the New Fluor Group in the Ruling Request, but only
to the extent that (1) such inaccuracy arises from facts in existence prior
to the Distribution Date and (2) Parent has actual knowledge of such
inaccuracy as of the Distribution Date.

(ii) Parent shall be allocated, and shall be solely liable and obligated
hereunder to pay, any liability for any Restructuring Tax to the extent
that such liability arises from: (A) any breach of Parent's covenants under
Section 11 or under the Distribution Agreement; or (B) the material
inaccuracy of factual statements or representations made with respect to
members of the Massey Group in the Ruling Request, but only to the extent
that (1) such inaccuracy arises from facts in existence prior to the
Distribution Date and (2) A.T. Massey has actual knowledge of such
inaccuracy as of the Distribution Date.

B-12
<PAGE>

(c) Tax Liability in Connection with Appalachian Synfuel, LLC. Parent shall
be allocated and shall be solely liable hereunder for all Taxes which arise in
connection with, or as a result of (i) the transfer (by sale, dividend or
otherwise) by Fluor Enterprises, Inc., a member of the New Fluor Group ("FEI"),
of all or part of its ownership interest in Appalachian Synfuel, LLC to Parent
or a member or members of the Parent Group or to an entity in which Parent or a
member or members of the Parent Group have an equity interest, as directed by
Parent or (ii) a liquidation or redemption of FEI's interest in Appalachian
Synfuel, LLC. Such Taxes shall include, without limitation, Taxes resulting
from FEI's deferred intercompany gain which arises in connection with such
transfer, liquidation or redemption. For purposes of implementing the foregoing
provisions of this Section 11(c), the parties agree that the gain or income to
which such Taxes are attributable shall be treated as the gain or income of the
Parent Group (and not of the New Fluor Group) for purposes of calculating the
Federal With and Without Amounts and the State/Foreign With and Without Amounts
under Section 2.01(b)(i) and Section 2.02(b)(i), respectively.

(d) Allocation of Tax Incurred Pursuant to Code Section 355(e). If Parent
incurs a Restructuring Tax liability as a result of the application of the
provisions of Code Section 355(e) and/or a comparable State Income Tax Law (or
comparable provisions of successor Federal or State Income Tax Laws), Parent
shall be allocated and solely liable hereunder to pay 100% of such
Restructuring Tax liability if it is incurred because of a plan (or series of
related transactions) pursuant to which one or more persons acquire, directly
or indirectly, stock or assets representing a 50% or greater interest (within
the meaning of Code Section 355(e) or such comparable or successor Tax Laws) in
Parent. New Fluor shall be allocated and solely liable hereunder to pay 100% of
such Restructuring Tax liability if it is incurred because of a plan (or series
of related transactions) pursuant to which one or more persons acquire,
directly or indirectly, stock or assets representing a 50% or greater interest
(within the meaning of Code Section 355(e) or such comparable or successor Tax
Laws) in New Fluor. For purposes of this Section 2.04(d), the value of any Tax
Benefits used or lost by reason of Parent's recognition of gain under Code
Section 355(e) or such comparable or successor Tax Laws will be treated as a
Restructuring Tax liability.

(e) Payment. All Tax liabilities allocated pursuant to the foregoing
provisions of this Section 2.04 shall be paid by the party to whom they are
allocated in accordance with the provisions of Section 5.

Section 3. Proration of Taxes for Straddle Periods. In the case of any
Straddle Period for which a Consolidated or Combined Tax Return is filed (a
"Straddle Period Consolidated or Combined Tax Return"), Tax Items of the
members of the Group which are included for only a portion of the Straddle
Period (the "Short Period Group") shall be apportioned between (i) the portion
of such Straddle Period during which such Short Period Group members are so
included and (ii) the portion of such Straddle Period during which such Short
Period Group members are not so included. This apportionment shall be in
accordance with the principles of Treasury Regulation Section 1.1502-76(b) as
reasonably interpreted and applied by the Companies. In the case of any Federal
or State Income Tax Return which is a Straddle Period Consolidated or Combined
Tax Return as to which the New Fluor Group is the Short Period Group, if so
requested by New Fluor, Parent (and to the extent required, other members of
the Parent Group) shall make or, if applicable, join with any necessary or
appropriate members of the New Fluor Group in making, an election under
Treasury Regulation Section 1.1502-76(b)(2)(ii)(D), or comparable State Tax
Law, to have the Tax Items (other than extraordinary items) of the New Fluor
Group ratably allocated. If the Distribution date is not an Accounting Cutoff
Date, the provisions of Treasury Regulations Section 1.1502-76(b)(2)(iii) and
comparable State Tax Law shall be applied to ratably allocate the items (other
than extraordinary items) for the month which includes the Distribution Date.

Section 4. Preparation and Filing of Tax Returns.

4.01 General. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax Law. Each
Company shall assist and cooperate (and shall cause its Affiliates to do
likewise) with the other Company in accordance with Section 7 with respect to
the preparation and filing of Tax Returns, including

B-13
<PAGE>

providing information required to be provided in Section 7. Except as
otherwise provided herein, neither Company shall amend a Tax Return for which
the other Company has responsibility pursuant to this Section 4 unless written
consent (which shall not be unreasonably withheld) to such amended return is
secured from the other Company before the amended return is filed.

4.02 New Fluor's Responsibility. New Fluor has the exclusive obligation and
right to prepare and file the following Tax Returns (including original and
amended returns and refund claims) or to cause such Tax Returns to be prepared
and filed:

(a) Consolidated or Combined Tax Returns for all Tax Periods ending on
or before October 31, 2000;

(b) Separate Company Tax Returns for any member or members of the New
Fluor Group; and

(c) All Tax Returns, for periods ending on or after October 31, 2000,
for Massey Coal Company, a Delaware limited partnership that will be
wholly-owned by members of the New Fluor Group following the Distribution.

In preparing any such Consolidated or Combined Tax Returns described in
Section 4.02(a), New Fluor shall accept the pro forma Tax returns, Tax
workpapers and other Tax Item positions and calculations that pertain
exclusively to the Massey Group as prepared and furnished to New Fluor by A.T.
Massey or (after the Distribution Date) by Parent, provided that such
materials are prepared in accordance with the requirements of Sections 4.04
and 4.05, and provided further, that New Fluor shall not be obligated to
report any Tax Item as proposed by A.T. Massey or Parent (whichever is
applicable) if New Fluor believes in good faith that there is no reasonable
basis for the tax treatment of such Tax Item as proposed by A.T. Massey or by
Parent (whichever is applicable), provided, however, if such Tax Item relates
to a tax shelter as defined in section 6662(d)(2)(C) of the Code, New Fluor
shall not be obligated to report such Tax Item as proposed by A.T. Massey or
Parent (whichever is applicable) if New Fluor reasonably concludes that it is
more likely than not that the tax treatment of such Tax Item as proposed by
A.T. Massey or Parent (whichever is applicable) does not comply with
applicable Tax Laws.

4.03 Parent's Responsibility. Parent has the exclusive obligation and right
to prepare and file the following Tax Returns (including original and amended
returns and refund claims) or to cause such Tax Returns to be prepared and
filed:

(a) Consolidated or Combined Tax Returns for all Tax Periods beginning
on or after November 1, 2000; and

(b) Separate Company Tax Returns for any member or members of the Parent
Group.

In preparing any such Consolidated or Combined Tax Returns described in
Section 4.03(a), Parent shall accept the pro forma Tax Returns, Tax workpapers
and other Tax Item positions and calculations that pertain exclusively to the
New Fluor Group as prepared and furnished to Parent by New Fluor, provided
that such materials are prepared in accordance with the requirements of
Sections 4.04 and 4.05, and provided further, that Parent shall not be
obligated to report any Tax Item as proposed by New Fluor if Parent believes
in good faith that there is no reasonable basis for the tax treatment of such
Tax Item as proposed by New Fluor, provided, however, if such Tax Item relates
to a tax shelter as defined in section 6662(d)(2)(C) of the Code, Parent shall
not be obligated to report such Tax Item as proposed by New Fluor if Parent
reasonably concludes that it is more likely than not that the tax treatment of
such Tax Item as proposed by New Fluor does not comply with applicable Tax
Laws.

4.04 Tax Accounting Practices and Tax Elections.

(a) General Rule. Except as otherwise provided in this Section 4.04,
Consolidated or Combined Tax Returns shall be prepared in accordance with past
Tax accounting practices used and past Tax elections made with respect to such
Tax Returns (unless such past practices or elections are no longer permissible
under the

B-14
<PAGE>

Code or other applicable Tax Law) and, to the extent any items are not covered
by past practices or elections (or, in the event such past practices or
elections are no longer permissible under the Code or other applicable Tax
Law), in accordance with reasonable Tax accounting practices and elections
selected by (i) New Fluor, to the extent such election applies solely to
members of the New Fluor Group, (ii) Parent, to the extent such election
applies solely to members of the Parent Group, or (iii) in the case of any
election not described in the foregoing clause (i) or clause (ii), the
agreement of Parent and New Fluor (or pursuant to Section 15 if no such
agreement is reached). Without limitation on the foregoing, the parties agree
that, for purposes of the consolidated Federal Income Tax Return to be filed by
Parent for the Tax Period ending October 31, 2001 (A) Parent shall, at the
request of New Fluor, make any election that does not adversely affect to a
material degree any member of the Parent Group (as determined by Parent), and
(B) Parent shall be entitled to make any other election that does not adversely
affect to a material degree any member of the New Fluor Group (as determined by
New Fluor).

(b) Reporting Transaction Tax Items. The Tax treatment reported on Tax
Returns of Tax Items relating to the Transactions shall be consistent with the
treatment of such items in the Ruling (or, if no Ruling is issued, consistent
with the tax opinion letter issued by Ernst & Young LLP with respect to the
Transactions), unless such treatment is not permissible under the Code. To the
extent there is a Tax Item relating to the Transactions which is not covered by
the IRS Ruling (or, if no such Ruling is issued, by the Ernst & Young LLP tax
opinion letter), the Companies shall agree on the Tax treatment of any such Tax
Item reported on any Tax Return. For this purpose, the Tax treatment of such
Tax Items on a Tax Return shall be determined by the Responsible Company with
respect to such Tax Return and shall be agreed to by the other Company unless
either (i) there is no reasonable basis for such Tax treatment, or (ii) such
Tax treatment is inconsistent with the Tax treatment contemplated in the Ruling
Request or the Ruling (or, if applicable, the opinion letter). Such Tax Return
shall be submitted for review pursuant to Section 4.06(a), and any dispute
regarding such proper Tax treatment shall be referred for resolution pursuant
to Section 15 sufficiently in advance of the filing date of such Tax Return
(including extensions) to permit the timely filing of the Tax Return.

4.05 Consolidated or Combined Tax Returns. Neither Company shall elect or
join, and shall cause their respective Affiliates not to elect or join, in
filing consolidated, unitary, combined, or other similar joint Tax Returns with
any member of the other Group, except to the extent that the filing of such Tax
Returns is consistent with past reporting practices or, in the absence of
applicable past practices, is required by Tax Law; provided, however, that the
Companies shall (to the extent permitted by Law) elect or join, or cause their
respective Affiliates to elect or join, in filing consolidated, combined or
unitary Tax Returns in Virginia, West Virginia, and Kentucky if and to the
extent necessary to permit members of the Massey Group who previously have
filed consolidated or unitary returns in such states to continue to do so,
provided further, however, that the Parent Group shall pay to the New Fluor
Group, and shall indemnify and hold the New Fluor Group harmless form, any Tax
liability or other cost incurred by any member of the New Fluor Group as a
result of joining in any such consolidated, combined or unitary Tax Returns.

4.06 Right to Review Tax Returns.

(a) General. In the case of any Tax Return which relates to any extent to
(i) Taxes for which the Other Company may be liable in whole or in part or (ii)
a Tax Benefit to which the Other Company may be entitled in whole or in part,
the Responsible Company shall, at least 30 days prior to the filing of any such
Tax Return, make such Tax Return and related work papers available for review
by the Other Company. The Other Company shall be entitled to provide written
comments to the Responsible Company with respect to any items covered by any
such Tax Return which the Other Company determines are not being properly
reported in whole or in part and/or are not being reported in a manner
consistent with the provisions of this Agreement, and, in any such case, the
Companies shall attempt in good faith to resolve any disagreement with respect
to any such items prior to the filing of such Tax Return. If the parties are
not able to reach an agreement with respect to any such item prior to the
filing of such Tax Return, such dispute shall be subject to the provisions of
Section 15, provided, however, that the Responsible Company shall be entitled
to file such Tax Return

B-15
<PAGE>

reflecting such item as reasonably determined by the Responsible Company,
provided further, however, such determination must be consistent with the
provisions of this Agreement, and if, following the filing of such Tax Return,
the Accounting Firm shall determine that the item in dispute was not reflected
in such Tax Return in a manner consistent with applicable Tax Law and the
provisions of this Agreement, the Responsible Company shall be obligated,
unless agreed otherwise by the Other Company in writing, to file an amended Tax
Return reflecting the items as determined by the Accounting Firm.

(b) Execution of Returns Prepared by Other Party. In the case of any Tax
Return which is required to be prepared and filed by one Company under this
Agreement and which is required by law to be signed by another Company or a
member of such Other Company's Group (or by an authorized representative
thereof), the Company (or such member) which is legally required to sign such
Tax Return shall not be required under this Agreement to sign such Tax Return
if, with respect to any material Tax Item, such Company believes in good faith
that there is no reasonable basis for the tax treatment of such Tax Item as
proposed to be reported on the Tax Return.

4.07 Section 732(f) Elections. The parties agree and acknowledge that as of
October 31, 2000, all of the stock of A.T. Massey is to be distributed by Fluor
Management Company, a Delaware general partnership ("FMC"), to Allegheny Coal
Corporation, a Delaware corporation ("Allegheny") and St. Joe Carbon Fuels
Corporation, a Delaware corporation ("SJCF"), each of which will be a member of
the New Fluor Group and a partner of FMC at the time of such distribution of
the A.T. Massey stock. The parties further agree that New Fluor and Parent
shall make and take, and each of them shall cause their respective Affiliates
to make and take, such elections and actions as may be reasonably necessary to
cause the provisions of Section 732(f) of the Code (and any corresponding
provision of state Tax Law) to be inapplicable with respect to or as a result
of such distribution of the A.T. Massey stock. Without limitation on the
foregoing, the parties agree as follows:

(a) On the consolidated Federal Income Tax Return of Parent for the Tax
year ending October 31, 2000, Parent and, to the extent required by
applicable Tax Law, Allegheny and SJCF or their successors in interest,
shall make an election to have the transitional rule of Section 538(b)(2)
of Public Law 106-170 apply to FMC's distribution of the A.T. Massey stock
(such election, a "Section 732(f) Election"); and

(b) Parent and, to the extent required by applicable Tax Law, Allegheny
and SJCF or their successors in interest, also shall make a Section 732(f)
Election on the consolidated Federal Income Tax Return filed by Parent for
the Tax year ending October 31, 2001.

4.08 Section 382 Items. At the request of New Fluor, Parent shall make (or,
to the extent applicable, join with members of the New Fluor Group in making)
an election, under Treasury Regulation Section 1.1502-95(c)(1) and any
comparable State Tax Law, to apportion to New Fluor, or to such subsidiary or
subsidiaries of New Fluor as New Fluor may direct, the consolidated section 382
limitation (or subgroup section 382 limitation) and net unrealized built-in
gain (or subgroup net unrealized built-in gain) as of the Distribution Date for
the consolidated Federal Income Tax Return group which has Parent as its common
parent, but only to the extent any such limitation and built-in gain resulted
from an "ownership change" (within the meaning of Code Section 382) of one or
more members of the New Fluor Group (including any predecessor of such a
member). New Fluor shall furnish, or cause to be furnished, to Parent such
information as is required by Parent for purposes of making this election.

Section 5. Tax Liability Payments and Tax Benefit Payments.

5.01 Payment of Taxes With Respect to Consolidated or Combined Tax Returns
Filed After the Distribution Date. In the case of any Consolidated or Combined
Tax Returns for which the due date (including extensions) is after the
Distribution Date:

(a) Computation and Payment of Tax Due. Subject to the provisions of
Section 4.06, at least three business days prior to any Payment Date
pertaining to such a Tax Return the Responsible Company shall compute the
amount of Tax required to be paid on such Payment Date to the applicable
Tax Authority

B-16
<PAGE>

with respect to such Tax Return (whether for estimated Tax, a request for
an extension of the time to file or the original Tax Return for the Tax
Period) and shall notify the Other Company of its allocable share of such
Tax as determined in accordance with the provisions of this Agreement,
including, without limitation, the provisions of Sections 4.04 and 4.05. On
or before such Payment Date, the Responsible Company shall pay such Tax to
the applicable Tax Authority (whether or not it has theretofore received,
pursuant to Section 5.01(b), payment from the Other Company of its
allocable share of such Tax payment).

(b) Payments With Respect to Allocations of Tax Liabilities. Within five
business days following the applicable Payment Date, the Other Company
shall pay to the Responsible Company the excess (if any) of (i) the portion
of the Tax liability determined as of such Payment Date with respect to the
applicable Tax Period that is allocable to the Other Company as determined
by the Responsible Company in accordance with the provisions of this
Agreement (the "Allocated Tax Liability"), over (ii) the cumulative net
payment with respect to such Tax Period made prior to such Payment Date by
the Other Company (the "Cumulative Tax Payment"). The Other Company also
shall pay to the Responsible Company, together with the Tax liability
payment required hereunder, interest thereon at the Base Rate calculated
from the Payment Date to the date of the Other Company's payment hereunder
to the Responsible Company. If the Other Company's Cumulative Tax Payment
is in excess of the Other Company's Allocated Tax Liability for such Tax
Period as of such Payment Date (such excess, the "Other Company
Overpayment"), then within 20 business days following each date (herein the
"Overpayment Tax Benefit Date") as of which the Responsible Company
receives any Tax refund and/or is credited with or otherwise receives any
Tax reduction which is attributable to all or any portion of the Other
Company Overpayment, the Responsible Company shall pay to the Other Company
the amount of such tax refund, credit or reduction that is attributable to
the Other Company Overpayment. If the Responsible Company does not make the
foregoing payment within 3 business days following the Overpayment Tax
Benefit Date, then the Responsible Company also shall pay to the Other
Company, together with the foregoing payment required hereunder, interest
thereon calculated at the Base Rate from the Overpayment Tax Benefit Date
to the date of the Responsible Company's payment hereunder to the Other
Company.

5.02 Payments Resulting From Audit Adjustments. In the event that, as a
result of an audit or examination by any Tax Authority, there are Audit
Adjustments of one or more Tax Items on a Consolidated or Combined Tax Return,
whether or not such Audit Adjustments result in an additional Consolidated or
Combined Tax liability being imposed, assessed or agreed to with respect to the
Tax Period covered by such Tax Return (a "Tax Underpayment Liability"), the
parties agree that the allocation of each party's share of the liability for
such Consolidated or Combined Tax liability as so adjusted, including any Tax
Underpayment Liability and the Consolidated or Combined Tax liability as
previously (and most recently) adjusted and allocated (collectively, the
"Adjusted Consolidated or Combined Tax Liability"), shall be redetermined and
reallocated in accordance with the With/Without Allocation Method of Section
2.01 or Section 2.02 and subject to the provisions of Section 2.04 and Section
3 (whichever of such Sections may be applicable and to the extent thereof) and
giving effect to such Audit Adjustments. The Company which is the Responsible
Company with respect to such Tax Return (i) shall, if there is a Tax
Underpayment Liability, pay such Tax Underpayment Liability to the applicable
Tax Authority on or before the applicable payment date therefor, and (ii) shall
compute and determine the allocation or reallocation of the Adjusted
Consolidated or Combined Tax Liability as hereinabove provided. As soon as
practicable after the earliest of (1) such payment date, and (2) any other date
on which a Tax Underpayment Liability is paid, the Responsible Company shall
give written notice (a "Tax Liability Reallocation Notice") to the Other
Company specifying (v) each Company's allocable share of the Adjusted
Consolidated or Combined Tax Liability, including all relevant calculations and
data required to reasonably inform the Other Company of the manner in which the
Tax liability has been reallocated, (w) the amount, if any (a "Reallocation
Deficit"), which is payable by New Fluor to Parent, or Parent to New Fluor, in
accordance with the provisions of Section 2.01(b) or Section 2.02(b) and/or
subject to the provisions of Section 2.04 and Section 3 (whichever of such
Sections may be applicable and to the extent thereof), and (x) if applicable,
evidence of payment by the Responsible Company of any Tax Underpayment
Liability. Within 20 business days following the date of such Tax Liability
Reallocation Notice, New Fluor shall pay to Parent, or Parent shall pay to New
Fluor (whichever may be applicable), the full amount of the Reallocation
Deficit. The

B-17
<PAGE>

Company required to make such payment (the "First Company") shall, together
with its payment of the Reallocation Deficit amount, pay to the other Company
(the "Second Company") (y) to the extent the Reallocation Deficit involves a
shifting or reallocation of Tax liabilities from that as previously (and most
recently) allocated, interest on such portion of the Reallocation Deficit
calculated at the Base Rate from the due date (determined without regard to
extensions) for the Tax Return to which the Audit Adjustments apply to the date
of payment of the payment required hereunder, and (z) to the extent the
Reallocation Deficit involves a Tax Underpayment Liability paid by the Second
Company, interest on such portion of the Reallocation Deficit calculated at the
Base Rate from the date of such payment of the Tax Underpayment Liability to
the date of payment of the payment required hereunder. By way of illustration
(and not limitation) of the foregoing provisions, if: (1) on the original
Consolidated or Combined Tax Return there was a Consolidated or Combined Tax
Liability of $50,000,000 consisting of a $30,000,000 Federal Without Amount
allocated to Parent and a balance of $20,000,000 allocated to New Fluor; (2) in
connection with a Tax audit, the New Fluor Group has increased income items
and/or decreased deduction items of $1,000,000 which are offset by decreased
income items and/or increased deduction items of the Parent Group in the amount
of $1,000,000; and (3) as a result of giving effect to all of such increases
and decreases, the Federal With Amount remains at $50,000,000, the Federal
Without Amount is reduced to $29,650,000 and the balance of $20,350,000 is
allocated to the New Fluor Group, then New Fluor shall be obligated to pay a
Reallocation Deficit to Parent in the amount of $350,000, plus interest at the
Base Rate on $350,000 from the due date (determined without regard to
extensions) of the Tax Return to which the Audit Adjustments apply to the date
of payment of the Reallocation Deficit hereunder.

5.03 Payment of Separate Company Taxes. On or before the required payment
date therefore, each Company shall pay, or shall cause to be paid, to the
applicable Tax Authority all Separate Company Taxes which are allocable to and
payable by such Company or a member of such Company's Group in accordance with
the provisions of this Agreement, including any Separate Company Taxes which
are assessed or imposed by a Tax Authority as a result of any audit or
examination of a Separate Company Tax Return.

5.04 Carrybacks, Carryovers and Audit Adjustment Benefits.

(a) Carrybacks. If any member of the New Fluor Group incurs a Carryback item
which may be carried back to (i) a Tax Period ending on or before, or which
includes, the Distribution Date with respect to which a Separate Company Tax
Return was filed by or on behalf of the New Fluor Group or any member thereof,
or (ii) a Tax Period with respect to which a Consolidated or Combined Tax
Return was filed, the New Fluor Group (or such member thereof) shall be
entitled, to the extent permitted or required by Law, to carry back such
Carryback item to the Tax Period covered by such Tax Return. Such member's
right hereunder shall include, but not be limited to, the filing of a refund
claim pursuant to Code Section 6411, the filing of amended Tax Returns, and the
filing of refund claims based on the applicable Carryback item, in each case to
the extent such a filing is permissible (any such filing, a "Carryback
Adjustment Request"). In the event that any such filing of a Carryback
Adjustment Request or other action with respect to the Carryback item must be
filed or taken by Parent to be effective, Parent shall effect such filing or
take such action as reasonably requested by New Fluor, and Parent shall
otherwise cooperate with the New Fluor Group in seeking from the appropriate
Tax Authority any Tax refund or other Tax Benefit that may reasonably be
attributable to the Carryback item. Tax refunds or other Tax Benefits resulting
from Carrybacks with respect to Separate Company Returns, and Tax refunds, Tax
Benefits and reallocations of Consolidated or Combined Tax liabilities
resulting from Carrybacks to Consolidated or Combined Tax Returns, shall be
paid, credited and/or allocated in accordance with, and otherwise shall be
subject to, the provisions of Section 5.04(d). The New Fluor Group (or
applicable members thereof) may, at its sole discretion, choose not to carry
back any one or more Carryback items as to which it is entitled hereunder to
file a Carryback Adjustment Request. Parent and the members of the Parent Group
shall have identical rights, and New Fluor shall have identical obligations,
with respect to Carryback items incurred by Parent or any other member of the
Parent Group which may be carried back to (i) a Tax Period ending on or before,
or which includes, the Distribution Date with respect to which a Separate
Company Tax Return was filed by or on behalf of the Parent Group or any member
thereof, or (ii) a Tax Period covered by a Consolidated or Combined Tax Return.

B-18
<PAGE>

(b) Carryovers. The New Fluor Group and its members shall be entitled to the
benefit, following the Distribution, of any Carryover item incurred by any such
member in (i) any Tax Period ending on or before, or which includes, the
Distribution Date with respect to which a Separate Company Tax Return was filed
by or on behalf of the New Fluor Group or any member thereof, and (ii) any Tax
Period covered by a Consolidated or Combined Return. Any such member which
incurred any such Carryover item shall be entitled, to the extent permitted or
required by Law, to obtain the benefit of such Carryover item by filing, if
necessary, amended returns or refund claims based on the applicable Carryover
item with the appropriate Tax Authority (any such filing, a "Carryover
Adjustment Request"). Any Carryover item of Parent for any Tax Period including
the Distribution Date will be treated as incurred by a member of the New Fluor
Group only to the extent such Carryover item is apportioned hereunder to the
portion of such Tax Period through the Distribution Date. In the event that any
such filing of such a Carryover Adjustment Request or other action must be
filed or taken by Parent to be effective, Parent shall effect such filing or
take such action as is reasonably requested by New Fluor, and Parent shall
otherwise cooperate with the New Fluor Group in seeking from the appropriate
Tax Authority any Tax refund or other Tax Benefits that may reasonably be
attributable to the Carryover item. Tax refunds or other Tax Benefits resulting
from Carryovers to Separate Company Returns, and Tax refunds, Tax Benefits and
reallocations of Consolidated or Combined Tax liabilities resulting from
Carryovers to Consolidated or Combined Tax Returns, shall be paid, credited
and/or allocated in accordance with, and shall be otherwise subject to, the
provisions of Section 5.04(d). Parent and the members of the Parent Group shall
have identical rights, and New Fluor shall have identical obligations, with
respect to Carryover items incurred by Parent or any other member of the Parent
Group in (i) any Tax Period ending on or before, or which includes, the
Distribution Date with respect to which a Separate Company Tax Return was filed
by or on behalf of the Parent Group or any member thereof, or (ii) any Tax
Period covered by a Consolidated or Combined Tax Return. The parties agree that
the Tax Benefits attributable to any Carryover items which Parent has as of the
Distribution Date with respect to any Tax Periods (or portions thereof) through
the Distribution Date shall be allocable to New Fluor, and the provisions of
this Section 5.04(b) shall apply to such Carryover items as if incurred by
members of the New Fluor Group.

(c) Other Audit Adjustment Requests. In the case of Tax Items other than
Carrybacks and Carryovers, in the event that any member of the New Fluor Group
determines that it is entitled to a Tax refund or other Tax Benefit pertaining
to (i) a Tax Period ending on or before, or which includes, the Distribution
Date with respect to which a Separate Company Tax Return was filed by or on
behalf of the New Fluor Group or any member thereof, or (ii) a Tax Period with
respect to which a Consolidated or Combined Tax Return was filed, whether such
determination results from an audit or examination of any such Tax Return by
any Tax Authority or from a determination by the applicable New Fluor Group
member that one or more Tax Items were not properly reported and treated on any
such Tax Return, then the New Fluor Group or the applicable member thereof
shall be entitled, to the extent permitted or required by Law, to obtain the
benefit of such Tax refund or other Tax Benefit by filing amended returns or
refund claims based on the applicable adjusted Tax Items with the appropriate
Tax Authority (any such filing, an "Audit Adjustment Request"). It is intended
that the provisions of this Section 5.04(c) shall apply (but not be limited) to
an Audit Adjustment Request that results from and corresponds to an adjustment
made by a Tax Authority in connection with any such Tax Return. By way of
illustration, and without limitation, if, as a result of an examination of New
Fluor Group's consolidated Federal income tax return for its 1997 taxable year,
the Internal Revenue Services requires the New Fluor Group to capitalize an
item that had been deducted on such return, the New Fluor Group shall be
entitled hereunder to require the Parent to file an Adjustment Request for the
1998 taxable year (and later years, if applicable) to obtain a Tax refund or
other Tax Benefit attributable to depreciation or amortization deductions in
such years related to such items capitalized in 1997. In the event that any
such filing of an Audit Adjustment Request or other action must be filed or
taken by Parent to be effective, Parent shall effect such filing or take such
action as is reasonably requested by New Fluor, and Parent shall otherwise
cooperate with the New Fluor Group in seeking from the appropriate Tax
Authority any such Tax refund or other Tax Benefits. Tax refunds or other Tax
Benefits resulting from such Audit Adjustment Requests with respect to Separate
Company Returns, and Tax refunds, Tax Benefits and reallocations of
Consolidated or Combined Tax liabilities resulting from such Audit Adjustment
Requests with respect to Consolidated or Combined Tax Returns, shall be paid,
credited

B-19
<PAGE>

and/or allocated in accordance with, and shall be otherwise subject to, the
provisions of Section 5.04(d). Parent and the members of the Parent Group shall
have identical rights, and New Fluor shall have identical obligations, with
respect to Audit Adjustment Requests by any member of the Parent Group related
to (i) any Tax Period ending on or before, or which includes, the Distribution
Date with respect to which a Separate Company Tax Return was filed by or on
behalf of the Parent Group or any member thereof, and (ii) any Tax Period
covered by a Consolidated or Combined Return.

(d) Audit Adjustment Reallocations and Payments.

(i) General.

(A) The parties agree that any Tax refund or other Tax Benefit
resulting from or attributable to an Audit Adjustment of a Separate
Company Tax Return of the New Fluor Group shall be payable or otherwise
allocable to New Fluor or other applicable members of the New Fluor
Group, and any Tax refund or other Tax Benefit resulting from or
attributable to an Audit Adjustment of a Separate Company Tax Return of
the Parent Group shall be payable or otherwise allocable to Parent or
other applicable member of the Parent Group, provided, however, such
Tax refund or Tax Benefit shall be allocated to New Fluor to the extent
it relates to a Separate Company Tax of the Parent with respect to a
Tax Period ending on or before the Distribution Date (or any portion
thereof treated as ending on the Distribution Date pursuant to Section
2.02(a) or Section 2.03) for which New Fluor is liable pursuant to the
provisions of Section 2. In the case of any Audit Adjustments with
respect to a Consolidated or Combined Tax Return resulting from a
Carryback Adjustment Request, Carryforward Adjustment Request or Audit
Adjustment Request, the following provisions shall apply: (A) the
Responsible Company shall recompute and reallocate the Consolidated or
Combined Tax liability, as adjusted, and issue a Tax Liability
Reallocation Notice, in accordance with the principles and provisions
of Section 5.02; (B) any Reallocation Deficit, together with interest
thereon, shall be paid by New Fluor or Parent, as the case may be, in
accordance with the provisions of Section 5.02; (C) in applying the
With/Without Allocation Method, the Tax Benefits attributable to any
Audit Adjustment shall be those which result from the application of
the Audit Adjustment to a Tax Return as previously (and most recently)
adjusted, if applicable; for example, if one Company (the "First
Company") incurs a Carryback to a Consolidated or Combined Tax Return
that absorbs the full Tax Benefit available on such Tax Return with
respect to that type of Carryback, and in a subsequent Tax Period the
second Company (the "Second Company") incurs a similar Carryback which
would have generated a Tax Benefit on such Consolidated or Combined Tax
Return had the First Company's Carryback not occurred, such Second
Company's Carryback shall not be deemed to result in any Tax Benefit on
such Consolidated or Combined Tax Return that is not realized under
applicable Law, and there shall be no reallocation or apportionment
required (by reason of such unrealized Tax Benefit) with respect to the
Tax Benefit derived by the First Company from its prior Carryback
adjustment; and (D) if, as a result of such Audit Adjustments, a member
of one Group (the "First Group Member") receives a Tax refund or Tax
reduction which, under the foregoing principles, is payable or
allocable to a member of the other Group (the "Second Group Member"),
the First Group Member shall pay the amount thereof to the Second Group
Member in accordance with the following provisions of Section 5.04(d).

(B) For purposes of applying the provisions of the foregoing Section
5.04(d)(i)(A) and other provisions of this Agreement involving Audit
Adjustments, the parties' priority of entitlement to Audit Adjustments
shall be determined, to the extent applicable, in accordance with
statutory priorities, including priorities based on the Tax Periods in
which the relevant Tax Items arise.

(ii) Tax Refunds. If a member of the Parent Group receives from a Tax
Authority a Tax refund payment, including but not limited to a payment of
interest with respect to a Tax refund or other Tax adjustment, (any such
refund or interest payment, a "Tax Adjustment Payment") and a member of the
New Fluor Group is entitled to such Tax Adjustment Payment pursuant to the
provisions of Section 5.04(d)(i) and other applicable provisions of this
Agreement, Parent shall pay, or cause to be paid, to New

B-20
<PAGE>

Fluor the amount of such Tax Adjustment Payment within 20 business days
following receipt of the Tax Adjustment Payment by Parent or other member
of the Parent Group (the "TAP Receipt Date"). If Parent does not pay such
amount within 3 business days following such TAP Receipt Date, then Parent
also shall pay to New Fluor, together with its payment to New Fluor of such
Tax Adjustment Payment, interest on the amount of such Tax Adjustment
Payment calculated at the Base Rate from the TAP Receipt Date to the date
of Parent's payment hereunder to New Fluor. New Fluor shall have an
identical obligation to pay to Parent any Tax Adjustment Payment, together
with interest thereon, to which any member of the Parent Company is
entitled pursuant to the provisions of Section 5.04(d)(i) and other
applicable provisions of this Agreement.

(iii) Tax Reductions. If, in lieu of a Tax Adjustment Payment that, if
paid, would be payable to New Fluor pursuant to Section 5.04(d)(ii), a
member of the Parent Group receives a reduction of Taxes otherwise payable
by such member, including but not limited to a reduction of an interest
obligation or other credit against interest obligations otherwise payable
by such member (any such reduction or credit, a "Tax Adjustment Credit"),
Parent shall pay to New Fluor, within 20 business days following the date
on which the applicable Tax Authority gives effect to such Tax Adjustment
Credit (the "TAC Adjustment Date"), the full amount of such Tax Adjustment
Credit. If Parent does not pay such amount within 3 business days following
the TAC Adjustment Date, then Parent also shall pay to New Fluor, together
with its payment to New Fluor of the amount of such Tax Adjustment Credit,
interest on the amount of such Tax Adjustment Credit calculated at the Base
Rate from the TAC Adjustment Date to the date of Parent's payment hereunder
to New Fluor. New Fluor shall have an identical obligation to pay to Parent
the amount of any Tax Adjustment Credit, together with interest thereon,
which any member of the New Fluor Group receives in lieu of a Tax
Adjustment Payment that, if paid to a member of the New Fluor Group, would
be payable by New Fluor to Parent pursuant to Section 4.07(d)(ii).

(iv) Future Tax Benefits. If any member of the Parent Group receives or
is credited with any Tax item that will or may result in a Tax Benefit to
such Parent Group member in future Tax Periods and which is allocable to a
member of the New Fluor Group pursuant to the provisions of Section
5.04(d)(i) and other applicable provisions of this Agreement, Parent shall
pay to New Fluor, within 20 business days following the due date (excluding
extensions) of the Tax Return (the "TR Due Date") for any Tax Period in
which the Parent Group (or any member thereof) realizes any portion of such
Tax Benefit, the amount of such Tax Benefit realized in such Tax Period. If
Parent does not pay such amount within 3 business days following such TR
Due Date, then Parent also shall pay to New Fluor, together with its
payment to New Fluor of such Tax Benefit amount, interest thereon
calculated at the Base Rate from such TR Due Date to the date of Parent's
payment to New Fluor of the payment required hereunder. New Fluor shall
have an identical obligation to pay to Parent the amount of any future Tax
Benefits realized by a member of the New Fluor Group which are allocable to
members of the Parent Group pursuant to the provisions of Section
5.04(d)(i) and other applicable provisions of this Agreement.

(v) Certain Transferred Obligation Tax Benefits. The parties agree as
follows:

(A) In connection with the Transactions and pursuant to the
provisions of the Distribution Agreement and/or its related agreements
among the parties, certain fixed or contingent obligations of Parent
and Massey relating to periods prior to the Distribution Date,
including, without limitation, compensation and benefit related
obligations other than obligations related to Substituted Equity
Incentives as provided for under Section 5.04(d)(vi), are being paid by
(or reimbursed to Parent by), or assigned to and assumed by, New Fluor
and/or other members of the New Fluor Group (collectively, the
"Transferred Obligations"). Any Tax deduction or other Tax Benefit
resulting from or attributable to the payment, reimbursement,
assumption or other satisfaction of all or any portion of any such
Transferred Obligation shall be allocable to the New Fluor Group member
which pays, reimburses, assumes or otherwise satisfies such Transferred
Obligation. Unless required otherwise by applicable Tax Law or the
actions of a Tax Authority, the parties agree that the New Fluor Group
shall be entitled to claim such Tax Benefit on the appropriate New
Fluor Group Tax Return filed after the Distribution Date, and, except
as provided under Section 5.04(d)(v)(B) below, the Parent Group shall
not claim any such Tax Benefit on any Tax Return of the Parent Group.

B-21
<PAGE>

(B) If, pursuant to applicable Tax Law or the actions of a Tax
Authority, a member of the Parent Group is required to, or if New Fluor
and Parent mutually agree that Parent shall, claim a deduction or other
Tax Benefit attributable to the payment or other satisfaction by a New
Fluor Group member of a Transferred Obligation, Parent shall pay to New
Fluor the amount of any Tax refund or Tax reduction which the Parent
Group obtains as a result of, or which is otherwise attributable to,
claiming such deduction or other Tax Benefit on its Tax Returns (any
such Tax Benefit amount, the "Transferred Obligation Tax Benefit
Amount"). Such Transferred Obligation Tax Benefit Amount shall be paid
by Parent to New Fluor within 20 business days following the date
(herein the "Transferred Obligation Tax Benefit Date") as of which the
Parent Group receives any such Tax refund and/or is credited with or
otherwise receives the benefit of any such Tax reduction (which Date,
in the case of a Parent Tax Return on which Parent originally claims a
deduction or other Tax Benefit attributable to the payment or other
satisfaction of a Transferred Obligation, shall be the due date
(determined without regard to extensions) for the filing of such
Return). If Parent does not make such payment within 3 business days
following the Transferred Obligation Tax Benefit Date, then Parent also
shall pay to New Fluor, together with such payment to New Fluor,
interest on such Transferred Obligation Tax Benefit Amount calculated
at the Base Rate from the Transferred Obligation Tax Benefit Date to
the date of the payment hereunder. If, pursuant to an Audit Adjustment,
a Tax Authority disallows a Tax Benefit claimed by the New Fluor Group
on its Tax Returns with respect to the payment or other satisfaction of
such a Transferred Obligation, New Fluor shall be entitled to require
Parent to seek to obtain the Tax Benefits attributable thereto pursuant
to the provisions of Section 5.04(c), in which case Parent shall be
obligated to pay to New Fluor the amount of any Tax Benefits obtained,
together with interest, in accordance with the provisions of this
Section 5.04(d)(v)(B) and the foregoing provisions of this Section
5.04(d).

(C) In connection with its payment or other satisfaction of all or
any portion of a Transferred Obligation, New Fluor shall pay, make,
withhold and/or deposit all employment and payroll Taxes and Tax
withholdings as required under applicable Tax Laws. If, pursuant to
applicable Tax Law or the actions of a Tax Authority, a member of the
Parent Group is required to, or if New Fluor and Parent mutually agree
that Parent shall, claim a deduction or other Tax Benefit attributable
to the payment or other satisfaction of all or any portion of a
Transferred Obligation, or if a member of the Parent Group is otherwise
required to pay employment or payroll Taxes with respect to the payment
or other satisfaction of all or any portion of a Transferred
Obligation, then New Fluor shall reimburse Parent for the full amount
of such employment and payroll Taxes paid by Parent, with such
reimbursement to be made within three business days following New
Fluor's receipt of demand therefor from Parent.

(vi) Certain Equity Incentive Tax Benefits. The parties agree as
follows:

(A) In connection with the Transactions and pursuant to the
provisions of the Distribution Agreement and/or its related agreements
among the parties, certain Pre-Distribution Equity Incentives (as
defined herein) will be cancelled and in lieu thereof New Fluor will,
effective as of the Distribution, issue or grant New Fluor Substituted
Equity Incentives (as defined herein) to the parties holding such
cancelled Pre-Distribution Equity Incentives immediately prior to the
Distribution. Any Tax deduction or other Tax Benefit resulting from or
attributable to the vesting, exercise, purchase, cancellation, payment
or other disposition or satisfaction of all or any portion of a New
Fluor Substituted Equity Incentive, including, without limitation, a
payment of cash in lieu of issuing a New Fluor Substituted Equity
Incentive (any such action or event, a "Satisfying" or "Satisfaction")
shall be allocable to the New Fluor Group member which Satisfies such
New Fluor Substituted Equity Incentive. Without limitation on the
foregoing, the parties agree that if New Fluor pays cash to, or pays
cash into a fund or account for the benefit of, a Pre-Distribution
Massey Employee (as defined below) in consideration for the sale or
cancellation of, or in lieu of the issuance of, a New Fluor Substituted
Equity Incentive issued or otherwise issuable (as applicable) to such
Employee

B-22
<PAGE>

(whether or not the vesting thereof is accelerated as a result of the
Distribution), such payment by New Fluor shall be deemed a Satisfaction
to which the provisions of this section 5.04(d)(vi) apply. Also in
connection with the Transactions, New Fluor will be making payments to,
or into an account on behalf of, Pre-Distribution Massey Employees
(including reimbursements to Parent for such payments) in cancellation
or other Satisfaction of Parent Substituted Equity Incentives (as
defined herein), and the parties agree that any Tax deduction or other
Tax Benefit resulting from or attributable to the purchase or other
Satisfaction of any such Parent Substituted Equity Incentive shall be
allocated to the New Fluor Group member which Satisfies such Parent
Substituted Equity Incentive. Unless required otherwise by applicable
Tax Law or the actions of a Tax Authority, the parties agree that the
New Fluor Group shall be entitled to claim such deduction or other Tax
Benefit on the appropriate New Fluor Group Tax Return filed after the
Distribution Date, and, except as provided under Section 5.04(d)(vi)(B)
below, the Parent Group shall not claim any such deduction or other Tax
Benefit on any Tax Return of the Parent Group.

(B) If, pursuant to applicable Tax Law or the actions of a Tax
Authority, a member of the Parent Group is required to, or if New Fluor
and Parent mutually agree that Parent shall, claim a deduction or other
Tax Benefit attributable to the Satisfaction by a New Fluor Group
member of a New Fluor Substituted Equity Incentive, Parent shall pay to
New Fluor the amount of any Tax refund or Tax reduction which the
Parent Group obtains as a result of, or which is otherwise attributable
to, claiming such deduction or other Tax Benefit on its Tax Returns
(any such Tax Benefit amount, the "Substituted Incentive Tax Benefit
Amount"). Such Substituted Incentive Tax Benefit Amount shall be paid
by Parent to New Fluor within 20 business days following the date
(herein the "Substituted Incentive Tax Benefit Date") as of which the
Parent Group receives any such Tax refund and/or is credited with or
otherwise receives the benefit of any such Tax reduction (which Date,
in the case of a Parent Tax Return on which Parent originally claims a
deduction or other Tax Benefit attributable to the Satisfaction of a
New Fluor Substituted Equity Incentive, shall be the due date
(determined without regard to extensions) for the filing of such
Return). If Parent does not make such payment within 3 business days
following the Substituted Incentive Tax Benefit Date, then Parent also
shall pay to New Fluor, together with such payment to New Fluor,
interest on such Substituted Incentive Tax Benefit Amount calculated at
the Base Rate from the Substituted Incentive Tax Benefit Date to the
date of the payment hereunder. If, pursuant to an Audit Adjustment, a
Tax Authority disallows a Tax Benefit claimed by the New Fluor Group on
its Tax Returns with respect to the Satisfaction of such a New Fluor
Substituted Equity Incentive, New Fluor shall be entitled to require
Parent to seek to obtain the Tax Benefits attributable thereto pursuant
to the provisions of Section 5.04(c), in which case Parent shall be
obligated to pay to New Fluor the amount or value of any Tax Benefits
obtained, together with interest, in accordance with the provisions of
this Section 5.04(d)(vi)(B) and the foregoing provisions of this
Section 5.04(d). The parties agree that if, pursuant to the foregoing
provisions, Parent claims a Tax Benefit on behalf of New Fluor with
respect to an unvested New Fluor Substituted Equity Incentive (or if
Parent claimed a Tax Benefit with respect to a Pre-Distribution Equity
Incentive) and such Tax Benefit is disallowed and recaptured to any
extent by reason of a failure to satisfy (including but not limited to
termination of employment by the holder of such Incentive prior to
satisfaction) all or any portion of the applicable vesting requirement,
the recaptured Tax Benefit shall be a Disallowed Tax Benefit subject to
the provisions of Section 5.04(f)(i)(B).

(C) In connection with its Satisfaction of any New Fluor Substituted
Equity Incentive, New Fluor shall pay, make, withhold and/or deposit
all employment and payroll Taxes and Tax withholdings as required under
applicable Tax Laws. If, pursuant to applicable Tax Law or the actions
of a Tax Authority, a member of the Parent Group is required to, or if
New Fluor and Parent mutually agree that Parent shall, claim a
deduction or other Tax Benefit attributable to the Satisfaction of a
New Fluor Substituted Equity Incentive, or if a member of the Parent
Group is otherwise required to pay employment or payroll Taxes with
respect to a Satisfaction of a New Fluor Substituted Equity Incentive,
then New Fluor shall reimburse Parent for the full amount of such
employment and payroll

B-23
<PAGE>

Taxes paid by Parent, with such reimbursement to be made within three
business days following New Fluor's receipt of demand therefor from
Parent.

(D) For purposes of this Section 5.04(d)(vi), the following
definitions shall apply:

(1) The term "Equity Incentive" shall mean any restricted stock
(or related unit), stock appreciation right, stock option, shadow
stock or other equity-based compensation which is issued, granted or
otherwise transferred by a corporation to its (or its Affiliate's)
employees, directors or consultants.

(2) The term "New Fluor Substituted Equity Incentive" shall mean
an Equity Incentive which was issued or granted by New Fluor in
exchange or substitution for a Pre-Distribution Equity Incentive.

(3) The term "Parent Substituted Equity Incentive" shall mean an
Equity Incentive which was issued or granted by Parent in exchange
or substitution for a Pre-Distribution Equity Incentive.

(4) The term "Pre-Distribution Equity Incentive" shall mean an
Equity Incentive which was issued or granted by Parent and which is
outstanding immediately prior to the Distribution.

(5) The term "Pre-Distribution Massey Employee" shall mean an
individual who was employed by one or more members of the Massey
Group immediately prior to the Distribution.

(6) The term "Substituted Equity Incentives" shall mean,
collectively, New Fluor Substituted Equity Incentives and Parent
Substituted Equity Incentives.

(vii) Other Tax Benefits. If any member of one group (the "First Group
Member") receives any Tax Benefit not described in the foregoing clauses
(i), (ii), (iii), (iv), (v) and (vi) but which is payable or allocable to a
member of the other Group (the "Second Group Member") in accordance with
the principles underlying the Tax liability and Tax Benefit allocation
provisions of Section 2 and the foregoing provisions of this Section 5,
such First Group Member shall pay the amount of such Tax Benefit to the
Second Group Member within 20 business days following the date on which the
First Group Member receives such Tax Benefit through a refund of or
reduction in Tax (the "Other Tax Benefit Date"). If the First Group Member
does not make such payment within 3 business days following the Other Tax
Benefit Date, such First Group Member shall also pay to the Second Group
Member, together with such payment, interest thereon calculated at the Base
Rate from such Other Tax Benefit Date to the date of the First Group
Member's payment hereunder to the Second Group Member.

(e) Offset For Federal Income Tax Burdens. Notwithstanding the provisions of
Section 5.04 specifying the amount of payment to be made by one Group (the
"First Group") to a member of the other Group (the "Second Group") by reason of
the receipt or accrual by the First Group of a Tax refund, Tax reduction or
other Tax Benefit that under this Agreement is allocable to the Second Group
(any such refund, reduction or other benefit, the "Reallocable Tax Benefit"),
if (i) the First Group is required, for Federal Income Tax purposes, to
recognize income with respect to its receipt or accrual of all or any portion
of such Reallocable Tax Benefit (any such portion, the "Taxable Portion"), and
(ii) such Taxable Portion exceeds the amount of the Federal Income Tax
deduction to which the First Group is entitled by reason of its payment of (or
accrual of the obligation to pay) the Reallocable Tax Benefit to the Second
Group (such excess, the "Taxable Excess"), then (iii) the amount of the
Reallocable Tax Benefit shall be reduced by the First Group's Federal Income
Tax liability attributable to such Taxable Excess.

(f) Additional Audit Adjustment Rules. Notwithstanding the foregoing
provisions of this Section 5.04, the parties agree as follows:

(i) If a member of one Group (the "First Group Member") is required,
pursuant to the provisions of subsection (a), (b), (c), (d)(v)(B) or
(d)(vi)B) of this Section 5.04, to file amended returns or refund claims

B-24
<PAGE>

or to take other actions to obtain a Tax refund or other Tax Benefit on
behalf of a member of the other Group (the "Second Group Member"), the
following provisions shall apply:

(A) The reasonable costs and expenses incurred by such First Group
Member in connection with such filing or other action shall be paid by
the Second Group Member, and to the extent such costs and expenses have
not been paid at the time of any payment pursuant to Section 5.04(d),
the amount of such costs and expenses may be offset against such
payment; and

(B) If, pursuant to the actions of any Tax Authority, all or any
portion of the Tax Benefit obtained by the First Group Member on behalf
of the Second Group Member is disallowed or otherwise reversed (such
portion, the "Disallowed Tax Benefit"), then (1) if the relevant Tax
Benefit payment has not yet been paid by the First Group Member to the
Second Group Member, such Tax Benefit payment shall be reduced by the
amount of the Federal Income Tax liability incurred by the First Group
Member as a result of the disallowance or other reversal of the
Disallowed Tax Benefit (such liability, the "Disallowed Tax Benefit Tax
Liability"), or (2) if such Tax Benefit payment has been paid, the
Second Group Member shall pay to the First Group Member an amount equal
to the Disallowed Tax Benefit Tax Liability plus interest at the Base
Rate on the amount of such Disallowed Tax Benefit Tax Liability from
the date of the payment of the Tax Benefit by the First Group Member to
the Second Group Member to the date of payment hereunder of said
Disallowed Tax Benefit Tax Liability to the First Group Member.

(ii) If a member of the Parent Group or a member of the New Fluor Group,
as the case may be, receives a Carryback Adjustment Request, Carryforward
Adjustment Request or an Audit Adjustment Request from a member of the
other Group, the party receiving such request may, in lieu of filing or
otherwise processing the amended return or refund claim or taking any other
action so requested, pay to the requesting party the amount of the Tax
refund, interest payment or other Tax Benefit which the requesting party
wishes to obtain pursuant to the applicable Adjustment Request.

(iii) Notwithstanding the foregoing provisions of this Section 5.04,
neither Company shall be obligated to take any action with respect to any
Carryback Adjustment Request, Carryforward Adjustment Request or Audit
Adjustment Request if the amount of Tax Benefit to be obtained through such
Request does not exceed $10,000 (any such Request, a "Nonmandatory
Request"), provided, however, at such time as the aggregate amount of all
such Nonmandatory Requests made by a Group and which are not barred by an
applicable statute of limitations exceeds $50,000, then all such
Nonmandatory Requests must be acted on without regard to the $10,000
threshold provided for hereunder, provided, however, no action shall be
required with respect to subsequent Nonmandatory Requests until such time
as such subsequent Nonmandatory Requests not barred by the statute of
limitations exceed $50,000 (with the foregoing provisions to apply to
ongoing series of Nonmandatory Requests).

5.05 Treatment of Payments; Tax Gross-Up; Certain Tax Offsets.

(a) General. The parties agree that, except as otherwise contemplated under
Section 5.05(b) or as otherwise required pursuant to a change in applicable Tax
Laws or an action of a Tax Authority following the Distribution Date, any
payment by a member of one Group to a member of the other Group pursuant to
Section 5.01, Section 5.02 or Section 5.04 shall be treated for income tax
purposes by the payor and the recipient as a non-taxable capital contribution
or non-taxable distribution, as appropriate, occurring prior to the
Distribution, but only to the extent such payment does not relate to a Tax
allocated to the payor in accordance with Treasury Regulation 1.1502-33(d) or
under comparable principles of other applicable Tax Laws.

(b) Interest Payments. The parties agree as follows:

(i) To the extent that any payment pursuant to Section 5.04 by a member
of one Group to a member of the other Group is attributable to interest
received by or credited to the payor from a Tax Authority, then to the
extent permitted by Law the parties shall either (A) treat the payor as
receiving such interest portion as agent for the recipient, in which case
the recipient shall treat such interest portion as interest

B-25
<PAGE>

income to the recipient (includable in income to the extent provided by
Law), or (B) both payor and recipient shall treat such interest portion of
the payment as an expense paid by the payor (deductible to the extent
provided by Law) and income to the recipient (includable in income to the
extent provided by Law).

(ii) To the extent that any payment pursuant to Section 5.02 by a member
of one Group to a member of the other Group is attributable to interest
paid by the recipient to a Tax Authority, then to the extent permitted by
Law the parties shall either (A) treat the recipient as paying such
interest portion to the Tax Authority as agent for the payor, in which case
the recipient shall not treat such interest portion as interest income to
or interest expense of the recipient and the payor shall treat such
interest portion as interest expense of the payor (deductible to the extent
provided by Law), or (B) both payor and recipient shall treat such interest
portion of the payment as an expense paid by the payor (deductible to the
extent provided by Law) and income to the recipient (includable in income
to the extent provided by Law).

(iii) To the extent that any payment pursuant to Section 5.01 or Section
5.02 or Section 5.04 constitutes (A) a payment of interest by the payor
under Section 5.01 or Section 5.02 with respect to the period from the date
the recipient paid a Tax liability allocable to the payor until the date of
the payment under Section 5.01 or Section 5.02, or (B) a payment of
interest by the payor under Section 5.04 with respect to the period from
the date the payor received a Tax Benefit allocable to the recipient until
the date of the payment under Section 5.04, both payor and recipient shall
treat such interest portion of the payment as interest expense paid by the
payor (deductible to the extent provided by Law) and interest income to the
recipient (includible in income to the extent provided by Law).

(c) Gross-Up. If, notwithstanding the tax treatment contemplated under
Section 5.05(a) with respect to payments made by a member of one Group (the
"First Group Member") to a member of the other Group (the "Second Group
Member"), the Second Group Member is required to treat as taxable income any
portion of the payment from the First Group Member other than any interest
portion thereof as described in Section 5.05(b) (such taxable portion, the
"Taxable Intercompany Payment"), then the First Group Member shall be obligated
to pay to the Second Group Member an additional payment in an amount such that
(x) the sum of such additional payment plus the Taxable Intercompany Payment,
less (y) the amount of Income Taxes payable by the recipient with respect to
the accrual or receipt of such additional payment and the Taxable Intercompany
Payment, equals the amount of the Taxable Intercompany Payment.

(d) Offset For Certain Federal Tax Benefits. Notwithstanding the provisions
of Section 5.01 through 5.04 specifying the amount of payments (inclusive of
interest, penalties and additions) from one Group to the other Group related to
State Income Taxes, Foreign Income Taxes or other Taxes other than Federal
Income Taxes (any such payment, an "Intergroup Non-Federal Tax Payment"), if
(i) the Group receiving such Intergroup Non-Federal Tax Payment (the "Recipient
Group") is entitled to claim a Tax deduction or Tax credit for Federal Income
Tax purposes with respect to its payment or accrual of all or any portion of
the Tax to which such Intergroup Non-Federal Tax Payment pertains (any such
portion of such Tax, the "Federal Tax Benefited Amount"), and (ii) all or any
portion of such Federal Tax Benefited Amount is not deductible for Federal
Income Tax purposes by the paying Group and is not includible in income of the
Recipient Group for Federal Income Tax purposes (such portion not deductible
and not includable, the "Nontaxable Portion"), then (iii) the amount of such
Intergroup Non-Federal Tax Payment shall be reduced by the value of the
Recipient Group's Federal Income Tax Benefit attributable to such Nontaxable
Portion. By way of illustration of the foregoing, if New Fluor is otherwise
obligated under this Agreement to make a payment of $1,000,000 to Parent
related to a State Income Tax that is allocable under this Agreement to the New
Fluor Group but as to which (x) Parent will be entitled to claim a Federal
Income Tax deduction, and (y) in accordance with the principles of Section
5.05(a), such payment from New Fluor to Parent is neither deductible by New
Fluor nor includible in income by Parent, then (y) the amount of the payment
from New Fluor to Parent shall be reduced to $650,000 if New Fluor's applicable
Federal Income Tax rate is 35%.

5.06 Method of Payment. All payments made by one Company (or its Affiliates)
to the other Company (or its Affiliates) under this Agreement shall be made in
immediately available funds.

B-26
<PAGE>

5.07 Late Payments. Any amount payable by one party (the "first party") to
another party (the "second party") under this Agreement which is not paid on or
before expiration of the period within which such payment is required to be
made pursuant to this Agreement shall bear interest from such expiration date
until such payment is made at the Base Rate plus two percentage points,
provided, however, such interest rate shall not exceed the rate permissible
under applicable usury laws (if such laws are applicable). To the extent
interest required to be paid under this Section 5.07 duplicates interest
required to be paid under any other provision of this Agreement, interest shall
be computed at the higher of the interest rate provided under this Section 5.07
or the interest rate provided under such other provision.

Section 6. Intentionally Omitted.

Section 7. Assistance and Cooperation.

7.01 General. After the Distribution Date, each Company shall cooperate (and
cause its respective Affiliates to cooperate) with the other Company and with
the other Company's agents, including accounting firms and legal counsel, in
connection with Tax matters relating to the other Company and its Affiliates,
including, without limitation, (i) the preparation and filing of Tax Returns,
(ii) determining the liability for and amount of any Taxes due (including
estimated Taxes) or the right to and amount of any refund of Taxes, (iii)
examinations of Tax Returns, (iv) any administrative or judicial proceeding in
respect of Taxes assessed or proposed to be assessed, and (v) establishing the
tax basis of any asset held by either Company. Such cooperation shall include
but not be limited to (1) making all information and documents in their
possession relating to the other Company and its Affiliates available to such
other Company as provided in Section 8.02 and (2) promptly notifying and
forwarding to the appropriate Company any notice or other correspondence from
any Tax Authority that is received by one Company but intended for the other
Company. Each Company shall also make available to the other Company, as
reasonably requested and available, personnel (including officers, directors,
employees and agents of the Company or its Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with items (i) through (iv) in
the first sentence of this Section 7.01. Any information or documents provided
under this Section 7 shall be kept confidential by the Company receiving the
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any administrative or
judicial proceedings relating to Taxes.

7.02 Income Tax Return Information. Each of the Companies will provide
information and documents relating to its Group to the other Company as
required for Tax Return preparation purposes. New Fluor and Parent shall cause
the members of their respective Groups to provide Tax Return information to the
Responsible Company in a form suitable for filing (except for consolidating and
other adjustments which would normally be made by the Responsible Company) at
least seventy-five days prior to the due date (including extensions) of the
particular Tax Return.

Section 8. Tax Records.

8.01 Retention of Tax Records. The Companies shall preserve and keep all Tax
Records and supporting information and documentation relating to their
respective Groups for Tax Periods ending before, on or including the
Distribution Date for so long as the contents thereof may become material in
the administration of any matter under the Code or other applicable Tax Law,
but in any event until the later of (i) the expiration of any applicable
statute of limitation (including extensions thereof) or (ii) seven years after
the Distribution Date. If, prior to the expiration of the applicable statute of
limitation (including extensions thereof) and such seven-year period, a Company
reasonably determines that any Tax Records which it is required to preserve and
keep under this Section 8 are no longer material in the administration of any
matter under the Code or other applicable Tax Law, such Company may dispose of
such records upon 90 days prior notice to the other Company. Such notice shall
include a list of the records to be disposed of describing in reasonable detail
each

B-27
<PAGE>

file, book, or other record accumulation which is to be disposed of. The
notified Company shall have the opportunity, at its cost and expense, to copy
or remove, within such 90-day period, all or any part of such Tax Records.

8.02 Access to Tax Records. The Companies and their respective Affiliates
shall make available to each other for inspection and copying, during normal
business hours and upon reasonable notice, all Tax Records in their possession
to the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, refund claims, audits, litigation, or the
resolution of any matter under this Agreement. Without limitation on the
foregoing, each Company (the "First Company") shall provide the other Company
(the "Second Company") with reasonable access to Tax Returns (including the
workpapers related thereto) filed by the First Company or members of its Group
following the Distribution Date for the purpose of enabling the Second Company
to determine whether, when and to what extent a Tax Benefit allocable hereunder
to the Second Company results in a Tax refund or Tax reduction for the First
Company.

8.03 Copies of Consolidated or Combined Tax Returns. Within ten days after
filing any Consolidated or Combined Tax Return, the Responsible Company shall
provide a true and correct copy of such Tax Return to the Other Company.

Section 9. Tax Contests.

9.01 Notice Requirement. A party to this Agreement (the "First Party") shall
provide, within 15 business days after such First Party (or any member of the
First Party's Group) actually receives official written notification thereof,
notice to the other party (the "Second Party") of any pending or threatened Tax
audit, assessment or proceeding or other Tax Contest related to Taxes which
are, or may reasonably be expected to be, allocable to and payable by such
Second Party pursuant to the provisions of this Agreement. Such notice shall
contain factual information (to the extent known by the First Party) describing
any asserted Tax liability in reasonable detail and shall be accompanied by
copies of any notices or other documents received from any Tax Authority in
respect of any such matters. If the First Party fails to give the Second Party
such notice of such asserted Tax liability, then (i) if the Second Party is
precluded from contesting the asserted Tax liability in all otherwise available
forums as a result of the failure to give such notice, the Second Party shall
have no obligation to pay to the First Party any Taxes arising out of such
asserted Tax liability which are otherwise allocable to the Second Party under
this Agreement, unless the Tax Contest Committee (as defined in Section
9.02(b)) determines that it is highly unlikely that contesting the Tax
liability would have materially reduced the amount of the Tax liability
allocable to the Second Party, and (ii) if the Second Party is not precluded
from contesting the asserted Tax liability in all otherwise available forums,
but such failure to give such notice results in a monetary detriment to the
Second Party, then any amount which the Second Party is otherwise required to
pay to the First Party pursuant to this Agreement shall be reduced by the
amount of such detriment, as established to the reasonable satisfaction of the
Tax Contest Committee.

9.02 Control of Tax Contests.

(a) Separate Company Taxes. In the case of any Tax Contest with respect to
any Separate Company Tax, the Company having liability for the Tax shall have
exclusive control over the Tax Contest, including exclusive authority with
respect to any settlement of any matters involved in such Tax Contest.

(b) Consolidated or Combined Taxes. In the case of any Tax Contest with
respect to any Consolidated or Combined Tax, (i) Parent shall control the
defense or prosecution of the portion of the Tax Contest directly and
exclusively related to any Parent Adjustment, including settlement of any such
Parent Adjustment and (ii) New Fluor shall control the defense or prosecution
of the portion of the Tax Contest directly and exclusively related to any New
Fluor Adjustment, including settlement of any such New Fluor Adjustment, and
(iii) a committee constituted as provided herein (the "Tax Contest Committee")
shall control the defense or prosecution of Joint Adjustments and any and all
administrative matters not directly and exclusively related to any Parent
Adjustment or New Fluor Adjustment. The Tax Contest Committee shall be
comprised of two persons, one

B-28
<PAGE>

person selected by Parent (as designated in writing to New Fluor) and one
person selected by New Fluor (as designated in writing to Parent). Each person
serving on the Tax Contest Committee shall continue to serve unless and until
he or she is replaced by the party designating such person. Any and all matters
to be decided by the Tax Contest Committee shall require the agreement of both
persons serving on the Tax Contest Committee. In the event the Tax Contest
Committee shall be deadlocked on any matter, the provisions of Section 15 of
this Agreement shall apply.

(c) Cooperation with Controlling Party. In the event that one or more
members of a Group (the "First Group Members") have the responsibility and
authority, pursuant to applicable Tax Law, to file or amend Tax Returns and to
take and/or do other actions related to a Tax Contest that, pursuant to this
Section 9.02, are subject to the control of a member of the other Group (the
"Second Group Member"), such First Group Members shall execute all such
documents and take all such actions as may be reasonably requested by the
Second Group Member for the purpose of implementing and effecting the Second
Group Member's defense and prosecution of such Tax Contest.

(d) Powers of Attorney. Each member of the Parent Group shall execute and
deliver to New Fluor and/or the members of the Tax Contest Committee, and each
member of the New Fluor Group shall execute and deliver to Parent and/or to the
members of the Tax Contest Committee, any power of attorney reasonably
requested by any such party or person as necessary to allow it/them to control
the defense or prosecution of a Tax Contest in accordance with the provisions
of Section 9.02(a) or Section 9.02(b), provided, however, that such power of
attorney shall not expand the rights of such controlling party or person beyond
that provided for under Section 9.02(a) or Section 9.02(b).

(e) Agreements Affecting Other Company. Notwithstanding the foregoing
provisions of this Section 9.02, a Company shall not agree to any Tax liability
for which the other Company may be liable under this Agreement, or compromise
any claim for any Tax Benefit to which another Company may be entitled under
this Agreement, without such other Company's written consent (which consent may
not be unreasonably withheld).

Section 10. Effective Date. This Agreement shall be effective on the
Distribution Date.

Section 11. Certain Representations and Covenants.

(a) No Inconsistent Plan or Intent. Each of A.T. Massey and New Fluor hereby
represents and warrants to the other that:

(i) neither it nor any member of its Group (which, in the case of New
Fluor, includes Parent through the Distribution Date) has taken, and as of
the Distribution Date neither it nor any member of its Group (which, in the
case of New Fluor, includes Parent through the Distribution Date) has a
plan or intention to take, any action that would result in any Tax
liability being imposed with respect to the Distribution pursuant to the
application of the provisions of Code Section 355(e); and

(ii) neither it nor any member of its Group (which in the case of New
Fluor, includes Parent through the Distribution Date), has taken, nor as of
the Distribution Date has any plan or intention to take, any other action
which is inconsistent with any material factual statements or
representations in the Ruling Request.

(b) Restriction on Prohibited Actions. Each of Parent and New Fluor hereby
covenants and agrees that following the Distribution it will not take any
action, and it will cause its Affiliates to refrain from taking any action,
which would result in a Tax treatment of the Transactions that is inconsistent
in any material respect with the Tax treatment of the Transactions as
contemplated in the Ruling Request or, if different, in the Ruling (any such
action, a "Prohibited Action"), unless such Prohibited Action is required by
Law or the person taking the action has obtained the prior written consent of
the other parties to this Agreement. Without limitation on the foregoing, the
parties intend that the restrictions on Prohibited Actions provided for herein
shall apply during and following the two-year restriction period described in
Section 11(c).

B-29
<PAGE>

(c) Restriction on Certain Other Actions. Each of New Fluor and Parent
hereby covenants and agrees that prior to the second anniversary of the
Distribution it will not take, and it will cause its Affiliates to refrain from
taking, any action that would be inconsistent with any representations under
Section 11(a) if such party had planned or intended (as of the Distribution
Date) to take such action, provided, however, such an action may be taken
during such two-year period if such action is required by Law or the person
taking the action has obtained the prior written consent of the other parties
to this Agreement.

(d) Restriction on Amending or Supplementing Ruling Request. Each of Parent
and New Fluor hereby covenants and agrees that it will not file, and it will
cause its Affiliates to refrain from filing, any amendment or supplement to the
Ruling Request subsequent to the Distribution Date without the written consent
of the other parties to this Agreement.

Section 12. Survival of Obligations. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.

Section 13. Employee Matters. Each of the Companies agrees to utilize, or
cause its Affiliates to utilize, the alternative procedure set forth in Revenue
Procedure 96-60, 1996-2 C.B. 399 (if such Revenue Procedure is applicable),
with respect to wage reporting for employees who transfer from a member of one
Group to a member of the other Group in connection with the Transactions.

Section 14. Mutual Covenants and Indemnifications.

(a) New Fluor. New Fluor hereby covenants and agrees that it will (i)
perform or cause to be performed all obligations of the members of the New
Fluor Group under his Agreement, including, without limitation, the obligations
of the members of the New Fluor Group to pay, when due, Tax liability payments
to Tax Authorities and payments to members of the Parent Group in accordance
with the provisions of Section 5, and (ii) indemnify and hold harmless Parent
and all other members of the Parent Group from and against any Losses (as
defined hereinbelow) incurred by any member of the Parent Group as a result of
any breach of any covenant, representation or warranty of New Fluor under this
Agreement or any failure by any member of the New Fluor Group to fully perform
its obligations under this Agreement.

(b) Parent. Parent hereby covenants and agrees that it will

(i) perform or cause to be performed all obligations of the members of
the Parent Group under this Agreement, including, without limitation, the
obligations of the members of the Parent Group to pay, when due, Tax
liability payments to Tax Authorities and payments to members of the New
Fluor Group in accordance with the provisions of Section 5, and (ii)
indemnify and hold harmless New Fluor and all other members of the New
Fluor Group from and against any Losses incurred by any member of the New
Fluor Group as a result of any breach of any covenant, representation or
warranty of Parent and/or A.T. Massey under this Agreement or any failure
by any member of the Parent Group to fully perform its obligations under
this Agreement.

(c) Losses. For purposes of this Section 14, the term "Losses" means any and
all damages, liabilities, claims, demands, proceedings, settlements, judgments,
awards, fees, charges, Taxes, costs or other expenses (including, without
limitation, reasonable costs of attempting to avoid or in opposing the
imposition thereof, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors, but not including the
cost of "in-house" attorneys, accountants and other employees of a party.)

(d) Tax Adjustments.

(i) The amount of any indemnification payment otherwise payable under
this Agreement or under the Distribution Agreement shall be (i) decreased
by the amount of any federal or state income tax benefit

B-30
<PAGE>

actually realized by the indemnified party as a result of the Loss giving
rise to the indemnification, and (ii) increased by (A) the amount of any
federal or state income tax required to be paid by the indemnified party as
a result of its accrual or receipt of the indemnification payment, plus (B)
the amount of any federal or state income tax required to be paid by the
indemnified party as a result of its accrual or receipt of any payments
payable pursuant to this Section 14(d)(i). For all purposes of this Section
14(d), (i) the amount of any state income tax benefit or cost shall be
based on a rate, which is deemed to take into account the federal income
tax effect of such benefit or cost, of 4%; (ii) a tax benefit is a
reduction in the amount of income tax paid or due and payable, whether
realized as a refund or as a credit or other reduction in tax liability;
(iii) the amount of any tax benefit or cost for any taxable period will be
the difference between (A) the amount of the indemnified party's tax
liability taking into account the amount of Loss or indemnity payment, as
appropriate, actually included in computing taxable income for the current
or any prior taxable period and (B) the amount that would be the
indemnified party's tax liability for the current or any prior taxable
period (as applicable) if such amount of Loss or indemnity payment were not
taken into account in computing taxable income; (iv) if the indemnified
party files or is included in a consolidated, combined, unitary or similar
income tax return for a taxable period, the preceding amounts will be
computed on the appropriate consolidated, combined, unitary or similar
basis for that taxable period; and (v) the term "Loss" shall have the
meaning specified in this Agreement or the Distribution Agreement depending
on whether the indemnification payment arises under this Agreement or the
Distribution Agreement. In the year an indemnification payment is made, the
parties shall cooperate to determine the amount of adjustment (if any) to
be made pursuant to this Section 14(d). In doing so, the amount of any
federal income tax benefit or cost for the taxable period in which the
payment is to be made will be based on the indemnified party's best
estimate of such amount, which estimate shall be in writing (an "Adjustment
Estimate Notice") and shall include an explanation, in reasonable detail,
of the facts and assumptions underlying such estimate. Any increased
payment required pursuant to this Section 14(d)(i) shall be made on or
before the later of (x) the date on which the applicable indemnification
payment is made pursuant to this Agreement or the Distribution Agreement
(as applicable), or (y) 10 business days following the date on which the
indemnified party receives the Adjustment Estimate Notice.

(ii) Promptly after the indemnified party files its federal income tax
return for the taxable period as to which an Adjustment Estimate Notice is
given pursuant to Section 14(d)(i), the indemnified party shall notify the
indemnifying party in writing of the actual amount of the federal income
tax benefit or cost that was previously estimated and shall provide to the
indemnifying party the computation, in reasonable detail, of such actual
amount and such supporting documentation as the indemnifying party
reasonably requests to verify the computation. The parties shall cooperate
in good faith to determine the amount of any difference (the "True-Up
Amount") between (i) the amount that was paid by the indemnifying party
based on the prior estimate (the "Prior Payment") and (ii) the amount that
would have been payable by the indemnifying party if the parties had known
the actual amount of such benefit or cost. Within 3 business days following
determination of the True-Up Amount, the indemnifying party shall pay to
the indemnified party or the indemnified party shall pay to the
indemnifying party, as appropriate, the True-Up Amount, plus interest on
the True-Up Amount at the Base Rate from the date of the Prior Payment to
the date the True-Up Amount is paid. In addition, if the True-Up Amount is
payable by the indemnifying party, the indemnifying party also shall pay to
the indemnified party the amount necessary to reimburse the indemnified
party for any federal or state income tax cost incurred as a result of its
accrual or receipt of the True-Up Amount and any amounts payable pursuant
to this sentence. For this purpose, the federal income tax rate applicable
to any taxable portion of the True-Up Amount and the amount payable
pursuant to the preceding sentence shall be deemed to be the same as the
marginal rate applicable to the indemnified party for the taxable period in
which the Prior Payment was made.

(iii) No adjustment in the amount of an indemnification payment shall be
made at the time of payment of such indemnification payment to take into
account any federal or state income tax benefit not actually realized in,
or any federal or state income tax cost not actually paid or payable for,
the taxable period in which the indemnification payment is made or an
earlier period, whether or not any such benefit or cost may, under
applicable Tax law, be taken into account and realized or incurred in a
future tax

B-31
<PAGE>

period. However, if a federal or state income tax benefit or cost described
in this Section 14(d) is actually realized in or becomes payable for one or
more taxable periods (each, a "Subsequent Period") after the taxable period
in which an indemnification payment has been made, then (i) the indemnified
party shall pay to the indemnifying party an amount equal to the excess for
such Subsequent Period of such tax benefit over such tax cost, or (ii) the
indemnifying party shall pay to the indemnified party an amount equal to
the excess for such Subsequent Period of such tax cost over such tax
benefit, plus the amount of any federal or state income tax required to be
paid by the indemnified party as a result of its accrual or receipt of any
amounts payable by the indemnifying party pursuant to this Section
14(d)(iii). For each Subsequent Period, the indemnified party shall notify
the indemnifying party in writing of the amount of any such tax benefit or
tax cost no later than the date on which the indemnified party files its
federal income tax return for the Subsequent Period, with such notice (a
"Subsequent Period Adjustment Notice") to include an explanation, in
reasonable detail, of the facts and assumptions underlying the indemnifying
party's calculation of the payments required hereunder. Any payment made
more than 60 calendar days after (i) the date the indemnified party gives
such Subsequent Period Adjustment Notice to the indemnifying party, in the
case of a payment to the indemnified party, or (ii) the date the
indemnified party files its federal income tax return for the Subsequent
Period, in the case of a payment by the indemnified party, shall include
interest at the Base Rate from the expiration of such 60-day period to the
date of payment. A Subsequent Period includes, without limitation, any
taxable period in which the indemnified party would have been able to use a
loss or credit if such loss or credit had not been used (or was prevented
from being generated) as a result of the inclusion of all or any portion of
an indemnification payment in the indemnified party's income.

(iv) The purpose of this Section 14(d) is to make the indemnified party
whole on an actual after-tax basis, and this Section is to be construed
accordingly (including making such adjustments as may be necessary to take
into account changes resulting from amended tax returns, tax audits and
similar proceedings). The parties shall at all times cooperate with each
other in good faith to determine the amounts of any payments required under
this Section 14(d). The indemnified party may at any time request copies of
the Tax Returns (and underlying work papers) for any Tax Period which is
relevant to the determination of adjustments to indemnification payments
under this Section 14(d) or other payments made pursuant to this Section
14(d). If an indemnified party fails or refuses to give any notice or take
any other action required hereunder with respect to the determination of
any decrease to an indemnification payment or any payment required to be
made hereunder by the indemnified party to the indemnifying party, such
failure or refusal shall not adversely affect the indemnifying party's
rights hereunder, and appropriate action may be brought by the indemnifying
party to determine and/or enforce its rights hereunder.

Section 15. Disputes; Governing Law; Consent to Jurisdiction; Attorneys' Fees.

(a) Referral to Accounting Firm. If the parties cannot agree on the
application of this Agreement to any matter in dispute (a "Dispute"), then,
subject to the rights of the parties to seek a judicial resolution or remedy,
the Dispute shall be referred for resolution to Ernst & Young LLP or, if Ernst
& Young LLP is not then engaged by each Company as its certified public
accounting firm for purposes of auditing its financial statements, such other
"Big Five" accounting firm as the Tax Contest Committee shall select by lot
(the "Accounting Firm"). The Accounting Firm shall furnish written notice (the
"Accounting Firm Notice") to the parties of its resolution of any such Dispute
as soon as practical, but in any event no later than 45 days after its
acceptance of the matter for resolution, with such notice to set forth in
writing the grounds and reasoning underlying the Accounting Firm's decision.
Each party shall pay its own fees and expenses (including the fees and expenses
of its representatives) incurred in connection with the referral of the matter
to the Accounting Firm. All fees and expenses of the Accounting Firm in
connection with such referral shall be shared equally by the New Fluor Group
and the Parent Group. Notwithstanding any decision of the Accounting Firm, each
party shall retain its rights to seek a judicial resolution of (and/or any
available judicial remedies with respect to) any Dispute or any other matter
under this Agreement, it being understood that any party may seek such judicial
resolution or remedies at any time, whether before or after submission of a
Dispute to the Accounting Firm. If

B-32
<PAGE>

any such judicial action with respect to a Dispute is commenced prior to the
submission of the matter for resolution by the Accounting Firm, or if
submitted, prior to the Accounting Firm rendering its decision, the Dispute
shall not be submitted to the Accounting Firm or the Accounting Firm shall
cease activity on the Dispute without rendering a decision (whichever may be
applicable). All offers, promises, conduct and statements, whether oral or
written, made in the course of any submission of the Dispute to the Accounting
Firm by either party or the Accounting Firm or their respective agents,
members, managers, directors, officers, employees, experts or attorneys, will
be confidential, privileged and inadmissible for any purpose, including
impeachment, in any judicial proceedings related to the Dispute, provided,
however, that otherwise admissible or discoverable evidence will not be
rendered inadmissible or non-discoverable as a result of its use in any such
submission to the Accounting Firm.

(b) Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with, and governed by, the Laws of the State
of New York without reference to choice of Law principles.

(c) Consent to Jurisdiction. Each of the parties hereto hereby irrevocably
submits to the nonexclusive jurisdiction of any United States Federal or New
York State court sitting in New York County in any action or proceeding arising
out of or relating to this Agreement, and irrevocably agrees that all claims in
respect of any such action or proceeding may be heard and determined in any
such United States Federal or New York State court. Each of the parties hereto
agrees to commence any action, suit or proceeding relating hereto either in the
United States District Court for the Southern District of New York or, if for
jurisdictional reasons such suit, action or other proceeding may not be brought
in such court, in the Supreme Court of the State of New York, New York County.
Each of the parties hereto further agrees that service of any process, summons,
notice or document by United States registered mail to such party's respective
address set forth in Section 18.01 shall be effective service of process for
any action, suit or proceeding in the State of New York with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of the State of New York, New York County or
(ii) the United States District Court for the Southern District of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.

(d) Attorneys' Fees. In the event any party to this Agreement brings an
action or proceeding for the breach or enforcement of this Agreement, the
prevailing party in such action or proceeding, whether or not such action or
proceeding proceeds to final judgment, shall be entitled to recover as an
element of its costs, and not as damages, such reasonable attorneys' fees as
may be awarded in the action, proceeding or appeal in addition to whatever
other relief the prevailing party may be entitled. For purposes of this
Section, the "prevailing party" shall be the party who is entitled to recover
its costs; a party not entitled to recover its costs shall not recover
attorneys' fees. As used herein the term "attorneys' fees" shall not include
the cost of "in-house" attorneys of any party.

Section 16. Intentionally Omitted.

Section 17. Expenses. Except as otherwise provided herein, each party and
its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement, provided, however, that (i) Parent
shall bear all expenses reasonably incurred by New Fluor or its Affiliates with
respect to the portion of any Tax Contest that is directly and exclusively
related to any Parent Adjustment and (ii) New Fluor shall bear all expenses
reasonably incurred by Parent or its Affiliates with respect to the portion of
any Tax Contest that is directly and exclusively related to any New Fluor
Adjustment. For purposes of this Agreement, expenses shall include out-of-
pocket expenses, but shall not include employee and other "in-house" resource
costs.

B-33
<PAGE>

Section 18. General Provisions.

18.01 Addresses and Notices. Any notice, demand, request or report
(collectively, a "Notice") required or permitted to be given or made to any
party under this Agreement to another party shall be in writing and shall be
deemed given or made (i) on the date of delivery, if delivered in person to a
party at such party's address as specified hereunder by Federal Express, United
Parcel Service or other nationally recognized courier service; or (ii) two days
following the date on which the Notice is sent, if sent by first class mail
return receipt requested, postage prepaid and properly addressed to the party's
address as specified hereunder; or (iii) upon receipt of confirmation of
transmission if transmitted by facsimile to the facsimile number specified
hereunder, in each case to the relevant party's address and to the attention of
the General Counsel and the Chief Financial Officer (one copy to each) as
follows:

If to Parent orMassey Energy Company
A.T. Massey: 4 North 4th Street
Richmond, VA 23219

Att'n: General Counsel
Facsimile: (804) 788-1804

Att'n: Chief Financial Officer
Facsimile (804) 788-1853

If to New Fluor: Fluor Corporation
One Enterprise Drive
Aliso Viejo, CA 92656-2606

Att'n: General Counsel
Facsimile: (949) 349-5454

Att'n: Chief Financial Officer
Facsimile: (949) 349-5525

A party may change the address and/or facsimile number for receiving Notices
under this Agreement by providing written notice of the change of address to
the other party.

18.02 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither party may assign all or any part of its rights or interests
under this Agreement or delegate all or any part of its duties under this
Agreement without the express prior written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person or entity, other than the parties hereto, their Affiliates and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.

18.03 Waiver. No failure by any party to insist upon the strict performance
of any obligation under this Agreement or to exercise any right or remedy under
this Agreement shall constitute a waiver of any such obligation, right, or
remedy or of any other obligations, rights, or remedies under this Agreement.

18.04 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.

18.05 Further Action. The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.

18.06 Integration. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any
other agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.

B-34
<PAGE>

18.07 Construction. The language in all parts of this Agreement shall in all
cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.

18.08 No Double Recovery; Subrogation. No provision of this Agreement shall
be construed to provide an indemnity or other recovery for any costs, damages,
or other amounts for which the damaged party has been fully compensated under
any other provision of this Agreement or under any other agreement or action at
Law or equity. A party shall not be required to exhaust all remedies available
under other agreements or at Law or equity before recovering under the remedies
provided in this Agreement. Subject to any limitations provided in this
Agreement, a party making a payment hereunder to or for the benefit of another
party shall be subrogated to all rights of the other party for recovery from
any third party.

18.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which,
taken together, shall constitute one and the same instrument.

18.10 Amendments. This Agreement may be amended, modified or supplemented
only by a written agreement signed by the parties hereto.

[SIGNATURE PAGE FOLLOWS]

B-35
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers as of the date set forth above.

Fluor Corporation
(to be named "Massey Energy Company"
following the Distribution)

By: _________________________________
Name:
Title:

Fluor Corporation

By: _________________________________
Name:
Title:

A.T. Massey Coal Company, Inc.

By: _________________________________
Name:
Title:

B-36
<PAGE>

APPENDIX C

October 27, 2000

Board of Directors
Fluor Corporation
New Fluor Corporation
Massey Energy Company
One Enterprise Drive
Aliso Viejo, CA 92656-2606

This letter is furnished at the request of Fluor Corporation ("Fluor"), a
Delaware corporation, in connection with the proposed Distribution described
below.

OVERVIEW

Fluor, directly and through its subsidiaries, currently engages in:

. a diverse range of value-added, knowledge-based services, from
traditional engineering, procurement and construction to total asset
management ("New Fluor"), and

. the production of high-quality, low sulfur coal for electric-generation,
steel-making and a variety of industrial applications ("Massey").

We understand that the board of directors of Fluor has decided to distribute
to Fluor's shareholders all of the outstanding stock of a newly formed entity,
New Fluor. After the consummation of the Distribution, Fluor will conduct the
New Fluor business, and Fluor will be renamed "Massey Energy Company" and will
conduct the Massey business.

DISTRIBUTION

On June 7, 2000, the board of directors of Fluor announced a plan to
separate the New Fluor and Massey businesses in a tax free distribution of New
Fluor to the shareholders of Fluor. It is anticipated on November 30, 2000,
Fluor's board of directors will formally approve the Distribution and declare a
dividend payable to each holder of record at the close of business on November
30, 2000 of one share of New Fluor Common Stock for every share of Fluor Common
Stock held by such holder at the close of business on the Distribution Record
Date. Fluor has applied for a tax ruling from the IRS that the receipt by Fluor
shareholders of the New Fluor Common Stock in the Distribution will be tax-free
to such shareholders and Fluor for federal income tax purposes. On or before
the Distribution Date, Fluor will deliver a global certificate representing all
of the outstanding shares of New Fluor Common Stock to the Transfer Agent for
transfer and distribution will be made on November 30, 2000.

C-1
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 2

The Distribution is the method by which Fluor will be separated into two
publicly traded companies, New Fluor and Massey. In the Distribution, Fluor
will distribute to its shareholders shares of New Fluor Common Stock, which
will represent a continuing interest in the New Fluor business to be conducted
by New Fluor. After the Distribution, Fluor's only business will be the Massey
business, and the shares of Fluor Corporation Common Stock held by Fluor
shareholders will represent a continuing ownership interest only in that
business. In connection with the Distribution, Fluor will change its name to
"Massey Energy Company" (and therefore from and after the Distribution, Fluor
Corporation Common Stock will be "Massey Common Stock").

New Fluor. In connection with the Distribution, it is expected that New
Fluor will put in place a commercial paper program supported by a bank credit
agreement. Borrowings under the new commercial paper program are expected to be
approximately $230 million at the time of the Distribution.

Massey. Massey expects to retain the $300 million of outstanding 6.95%
Senior Notes. In addition, Massey expects to incur approximately $230 million
of borrowings in the commercial paper market and to enter into a customary new
bank credit facility to support its commercial paper program. The proceeds of
the commercial paper program will be transferred to New Fluor.

SOLVENCY OPINION AND DEFINITIONS

In connection with the Distribution, you have requested that we render a
written opinion (the "Opinion") addressed to The Board of Directors of Fluor,
New Fluor and Massey, as to whether, assuming the Distribution has been
consummated substantially as proposed after, and giving effect to, the
consummation of the Distribution:

A. The fair value of the aggregate assets of Fluor before consummation of
the Distribution, and of each of New Fluor and Massey after
consummation of the Distribution, will exceed their respective total
liabilities (including contingent liabilities);

B. The present fair saleable value of the aggregate assets of Fluor before
consummation of the Distribution, and of each of New Fluor and Massey
after consummation of the Distribution, will be greater than their
respective probable liabilities on their debts as such debts become
absolute and mature;

C. Each of New Fluor and Massey, after consummation of the Distribution,
will be able to pay their respective debts and other liabilities
(including contingent liabilities and other commitments) as they
mature;

D. Each of New Fluor and Massey, after consummation of the Distribution,
will not have unreasonably small capital for the business in which they
are engaged, as management of Fluor has indicated such businesses are
now conducted and as management of New Fluor and Massey have indicated
their businesses are proposed to be conducted following consummation of
the Distribution; and

E. The excess of the fair value of aggregate assets of Fluor over the
total identified liabilities including contingent liabilities,
immediately prior to the Distribution, exceeds the value of the
Distribution to stockholders plus the stated capital of Fluor, as
adjusted after the Distribution.

In rendering our opinion, we valued the aggregate assets of Fluor, before
consummation of the Distribution, and the aggregate assets of New Fluor and
Massey, after consummation of the Distribution each on a consolidated basis and
as a going concern. The valuation included the aggregate assets of Fluor's
business enterprise (total invested capital excluding cash and equivalents)
represented by the total net working capital,

C-2
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 3

tangible plant, property and equipment, and intangible assets of the business
enterprise before consummation of the Distribution, and that of New Fluor and
Massey after consummation of the Distribution, each on a consolidated basis.
For purposes of our opinion, the following terms have the meanings set forth
below:

(2) "Present fair saleable value" means the amount that may be realized if
the aggregate assets are sold with reasonable promptness in an arm's-
length transaction under present conditions in a current market for the
sale of assets of a comparable business enterprise;

(3) "Contingent liabilities" means the maximum estimated amount of
contingent liabilities, of a specified entity and time, which
contingent liabilities were identified to AAA by responsible officers
and employees of Fluor, their respective accountants and financial
advisors, and such other experts as AAA deemed necessary to consult,
and valued by AAA after consultation with responsible officers and
employees of Fluor and/or industry, economic and other experts as AAA
deemed necessary to consult (the valuation of contingent liabilities to
be computed in light of all the facts and circumstances existing at the
time of such valuation as the maximum amount that can reasonably be
expected to become an actual or matured liability), which contingent
liabilities may not meet the criteria for accrual under Statement of
Financial Accounting Standards No. 5 and therefore may not be recorded
as liabilities under GAAP;

(4) "Able to pay its debts and other liabilities including contingent
liabilities and other commitments, as they mature" means that assuming
the Distribution has been consummated as proposed (and taking into
consideration additional borrowing capacity under New Fluor's and
Massey's borrowing facilities) during the six year period ending
October 31, 2005 as covered by management's financial projections (the
"Financial Projections") prepared by the managements of New Fluor and
Massey, respectively, each of New Fluor and Massey will have positive
cash flow after paying its scheduled anticipated indebtedness; the
realization of current assets in the ordinary course of business will
be sufficient to pay recurring current debt, short-term debt, long-term
debt service and other contractual obligations, including contingent
liabilities, as such obligations mature; and the cash flow will be
sufficient to provide cash necessary to repay long-term indebtedness as
such debt matures; and

METHODOLOGY

In rendering our Opinion, we have valued the aggregate assets of Fluor
before the consummation of the Distribution, and the aggregate assets of each
of New Fluor and Massey after consummation of the Distribution and the
associated indebtedness incurred or remaining outstanding in connection
therewith. The valuation included the aggregate assets of the businesses of
each of Fluor, New Fluor and Massey or their respective total invested capital
as represented by the total net working capital, tangible plant, property, and
equipment and intangible assets of the business enterprise. We believe that
this is a reasonable basis to value these businesses. Nothing has come to our
attention that causes us to believe that Massey and/or New Fluor, after the
Distribution, are not going concerns.

C-3
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 4

The determination of fair value and present fair saleable value was based on
the generally accepted valuation principles used in the market and discounted
cash flow approaches, described as follows:

Market Approach--Based on correlation of: (a) current stock market prices of
publicly held companies whose businesses are similar to that of Fluor, New
Fluor and Massey (as a going concern) and premiums paid over market price by
acquirors of total or controlling ownership in such businesses; and (b)
acquisition prices paid for total ownership positions in business whose lines
of business are similar to that of Fluor, New Fluor and Massey.

Discounted Cash Flow Approach--Based on the present value of Fluor's, New
Fluor's and Massey's future debt-free operating cash flow as estimated by the
respective managements of Fluor, New Fluor and Massey contained in the
Financial Projections. The present value is determined by discounting the
projected operating cash flow at a rate of return that reflects the financial
and business risks of Fluor, New Fluor and Massey.

Our Opinion of fair value and present fair saleable value is subject to the
following conditions:

(i) Any sale of Fluor, New Fluor and/or Massey including the underlying
assets thereof, will be completed as the sale of an ongoing business
entity;

(ii) A "commercially reasonable period" of time means at least twelve
months for a willing buyer and a willing seller to agree on price and
terms, plus the time necessary to complete the sale of Fluor, New
Fluor and/or Massey;

(iii) "Reasonable promptness" means a period of time of nine to twelve
months for a willing buyer and a willing seller to agree on price
and terms, plus the time necessary to complete the sale of Fluor,
New Fluor and/or Massey; and

(iv) In determining the fair value and present fair saleable value of the
assets of Fluor, New Fluor and/or Massey, any taxes or transaction
costs which may be owed by these entities as a result of the
transaction, other than those specifically identified in the
Financial Projections were not considered.

While we believe that New Fluor and Massey would be marketable as separate
business enterprises, we have not been requested to identify, and have not
identified, potential purchasers or to ascertain the actual prices and terms of
which these business entities can currently be sold. Furthermore, because the
sale of any business enterprise involves numerous assumptions and
uncertainties, not all of which can be quantified or ascertained prior to
engaging in an actual selling effort, we express no opinion as to whether New
Fluor or Massey could actually be sold for amounts we believe to be equivalent
to the fair value and present fair saleable values.

FINANCIAL RESULTS AND PROJECTIONS

In connection with the analysis underlying the Opinion, we were provided
historical and projected operating results (the Financial Projections as
previously defined). In addition to this information, we were provided other
operating data and information all of which has been accepted, without
independent verification, as representing a fair statement of historical and
projected results of Fluor, New Fluor or Massey, in the opinion of their
management. However, in the course of our investigation, nothing has led us to
believe that our acceptance and reliance on such operating data and information
was unreasonable.

Although we have not independently verified the accuracy and completeness of
the Financial Projections and forecasts, or any of the assumptions, estimates,
or judgments referred to therein, or the basis therefore, and

C-4
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 5

although no assurances can be given that such Financial Projections and
forecasts can be realized or that actual results will not vary materially from
those projected, nothing has come to our attention during the course of our
engagement which led us to believe that any information reviewed by us or
presented to us in connection with our rendering of the Opinion is unreasonable
in any material respect or that it was unreasonable for us to utilize and rely
upon the financial projections, financial statements, assumptions, description
of the business and liabilities, estimates and judgments of the management of
Fluor, New Fluor and Massey, and their respective counsels, accountants and
financial advisors. Our Opinion is necessarily based on business, economic,
market and other conditions as they currently exist and as they can be
evaluated by us at the date of this Opinion.

Our opinion is intended for use by the Board of Directors of Fluor, New
Fluor and Massey and is intended to supplement, not to substitute for the due
diligence of any other party.

CONTINGENT LIABILITIES

In determining the amount that would be required to pay the total
liabilities of Fluor, New Fluor and Massey, as such liabilities become absolute
and mature for purposes of the Opinion below, we have applied valuation
techniques, including present value analysis, using appropriate rates over
appropriate periods, to the amounts that will be required from time to time to
pay such liabilities and contingent liabilities as they become absolute and
mature based on their scheduled maturities.

In the course of our investigation of identified contingent liabilities, the
areas brought to our attention by the management of Fluor included: (1)
contracts and commitments; (2) consents and approvals; (3) tax audit exposure;
(4) environmental exposure; (5) employee benefits programs; and (6) various
lawsuits and claims filed and/or pending.

We have determined that reserves for the contingent liabilities have been
made in the pro forma consolidated balance sheet (the "Pro Forma Balance
Sheet") prepared and furnished to us by the management of Fluor, and provisions
for the ongoing expenses related to these issues have been included with the
projection of income and expenses presented in the Financial Projections, and
are considered in our valuation study as ongoing business operating expenses.
We have taken these identified contingent liabilities into account in rendering
our Opinion and have concluded that such liabilities and ongoing expenses do
not require any qualification of our Opinion. Our conclusion is based on, among
other things, (i) our review of various acquisition transactions, including
leveraged transactions and significant debt-financed recapitalization
transactions, involving corporations engaged in businesses similar to those of
Fluor, (ii) the opinion of the management of Fluor that the issues concerning
various lawsuits, claims and other identified contingent liabilities will not
have a material adverse effect on the financial position of Fluor, New Fluor
and Massey; and (iii) our discussions with the management of Fluor, their
accountants, consultants and counsel concerning, and our investigation of, the
various lawsuits, claims and other contingent liabilities identified to us.

We have assumed that as of the effective date of the Distribution, the total
identified liabilities of New Fluor and Massey will be only those liabilities
set forth in their respective unaudited Pro Forma Balance Sheets and
incorporated in the Financial Projections that were prepared by Fluor and its
financial advisors. In the course of our investigation, nothing came to our
attention which caused us to believe such assumptions to be unreasonable. The
Pro Forma Balance Sheet is the unaudited Pro Forma Opening Balance Sheet for
New Fluor and Massey after the Distribution, as reflected in the Financial
Projections and adjusted to give effect to (a) the planned financing of the
Distribution; and (b) the application of the proceeds of the financing and
restated by us to reflect the fair value and present fair saleable value of New
Fluor and Massey.

C-5
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 6

Fluor's management has represented to us, and we have relied on the
management of Fluor's representation that no adverse changes have occurred
since their preparation which would materially impact the content of New Fluor
and/or Massey's Pro Forma Balance Sheet and Financial Projections. Nothing has
come to our attention which would lead us to believe our reliance on such
representations to be unreasonable.

OPINION CONDITIONS AND ASSUMPTIONS

We have assumed, without independent verification, that the Pro Forma
Balance Sheet and Financial Projections provided to us have been reasonably
prepared and reflect the best currently available estimates, after the
consummation of the Distribution, of the future financial results and
conditions of New Fluor and Massey, and that there has been no material adverse
change in the assets, financial condition, business or prospects of Fluor, New
Fluor or Massey, since the date of the most recent financial statements made
available to us. In the course of our investigation, nothing has come to our
attention which caused us to believe that the foregoing assumptions are
unreasonable. Further our Opinion is subject to the following assumptions:

(i) The Distribution is consummated as described herein;

(ii) Pursuant to the terms and conditions of the various financing
documents, the operating cash flow of New Fluor and Massey will be
made available and used to satisfy their obligations as they mature;

(iii) Our opinion of New Fluor and Massey's ability to be able to pay its
debts and other liabilities including contingent liabilities and
commitments, as they mature, is limited to the period of time of the
Financial Projections;

(iv) Any indebtedness of New Fluor and Massey is permitted to be
refinanced in conformity with common business practice to the extent
consistent with covenants in the various Financing documents;

(v) Martin County Coal Corporation, a subsidiary of Massey, announced a
sudden and unexpected underground mine collapse adjacent to its
refuse impoundment on October 11, 2000, which resulted in the release
of a large quantity of water and fine coal refuse into two local
streams, Wolf Creek and Coldwater Fork, near Inez, Kentucky. Massey,
Fluor and its insurance carriers have retained clean up specialists
to coordinate containment and remediation efforts. As of the date of
this Opinion, total damage or exposure could not be accurately
estimated. However, Massey has pollution insurance policies in
effect. Based on our discussions with the executives of Fluor and
Massey, it is the representation of Fluor and Massey that the damage
would be covered by the insurance policies, except for a deductible
of approximately $100,000 and except for certain non-covered costs,
fines and penalties which are impracticable to estimate, but for
which Fluor will nevertheless take a reserve of $3,000,000 in the 4th
quarter of Fluor's fiscal year 1999-2000. Based on our discussions
with Fluor and Massey executives, our Opinion assumes (a) Fluor and
Massey will not incur any costs other than the $100,000 insurance
deductible and fines, penalties or remediation costs related to this
incident materially in excess of the $3,000,000 estimate, which is
based upon present information as represented by Fluor and Massey
managements, and (b) the operations of Martin County Coal Corporation
and the subject collapsed mine will not be materially impacted.

C-6
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 7

OPINION DUE DILIGENCE

In connection with our Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:

(i) Reviewed the Distribution documents and any reports and/or filings
with the SEC and state(s) including but not limited to the
following:

(a) Fluor Corporation Form 10 (preliminary copy)

(b) Fluor Corporation Schedule 14A (preliminary copy)

(d) Fluor Corporation 1999 Annual Report

(e) Fluor Corporation Form 10K405--Annual Report (January 22, 1999)

(f) Fluor Corporation Form 10K--Annual Report (January 28, 1997)

(g) Fluor Corporation Form S-3/A (February 14, 1997)

(h) Fluor Corporation Form S-3 (December 20, 1996)

(ii) Reviewed the Financial Projections prepared by Fluor, New Fluor and
Massey, and inquired of management of Fluor, New Fluor and Massey as
to the foundation for any such projections and the basic assumptions
made in the preparation of projections relating to the type of
business, geographic markets, economic conditions, and capital
facilities and working capital requirements;

(iii) Reviewed the audited and unaudited historical income statements of
Fluor, New Fluor and Massey, balance sheets and statements of
sources and uses of funds of Fluor, New Fluor and Massey as provided
by management and their accountants;

(iv) Visited the headquarters of Fluor and had teleconference with the
management of Massey to discuss historical and projected operating
results and industry data, including the impact of future trends on
the industry, Fluor, New Fluor and Massey, as well as the effects of
the Distribution;

(v) Reviewed internal financial analyses and other internally generated
data;

(vi) Inquired of management of Fluor, New Fluor and Massey as to
estimated levels of cash and working capital required by Fluor, New
Fluor and Massey;

(vii) Reviewed certain publicly available economic, financial and market
information as it relates to the business operations of Fluor, New
Fluor and Massey;

(viii) Reviewed information regarding businesses similar to Fluor, New
Fluor and Massey and investigated the financial terms and post-
Distribution performance of those business in similar situations;

(ix) Discussed all the foregoing information, where appropriate, with
management of Fluor and their employees, agents, accountants and
financial advisors;

(x) Discussed with members of the senior management of Fluor the
business, properties, past history, results of operations and
prospects of New Fluor and Massey, including discussions of the
competitive environment in which New Fluor and Massey will operate;

C-7
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 8

(xi) Held discussions with Fluor's general counsel, two outside counsels,
and independent accounting firm to discuss certain matters;

(xii) Conducted such other studies, analyses and investigations as we
deemed relevant or necessary for purposes of the Opinion.

OPINION

Based on the foregoing, and in reliance thereon, it is our opinion as of
this date that, assuming the Distribution has been consummated as proposed,
immediately after giving effect to, the consummation of the Distribution:

(a) The fair value of the aggregate assets of Fluor before consummation of
the Distribution, and the aggregate assets of each of New Fluor and
Massey after the consummation of the Distribution, will exceed their
respective total liabilities (including contingent liabilities);

(b) The present fair saleable value of the aggregate assets of Fluor
before consummation of the Distribution, and of each of New Fluor and
Massey after consummation of the Distribution, will be greater than
their respective probable liabilities on their debts as such debts
become absolute and matures;

(c) Each of New Fluor and Massey, after consummation of the Distribution,
will be able to pay its respective debts and other liabilities
(including contingent liabilities and other commitments) as they
mature;

(d) Each of New Fluor and Massey, after consummation of the Distribution,
will not have unreasonably small capital for the business in which it
is engaged, as management of Fluor has indicated such business are now
conducted and as management of New Fluor and Massey have indicated
their businesses are proposed to be conducted following consummation
of the Distribution; and

(e) The excess of the fair value of aggregate assets of Fluor, before
consummation of the Distribution, over the total identified liabilities
(including contingent liabilities) of Fluor is equal to or exceeds the
value of the Distribution to shareholders plus the stated capital of
Fluor.

It is understood that this Opinion is solely for the information of the
above mentioned addressees, their successors, assignees and participants, and
is not to be quoted, or referred to, in whole or in part, in any written
document other than a reference in (i) the filing and disclosure of the Opinion
with the Securities and Exchange Commission and any state securities commission
of blue sky authority, or other governmental authority or agency if such filing
or disclosure is required pursuant to the rules and regulations thereof, or
required by applicable law in the opinion of Fluor's counsel, after reasonable
prior review by AAA; (ii) the use or disclosure of the Opinion by demand, order
or request of any court, administrative or governmental agency or regulatory
body (whether or not such demand, order or request has the force of law) or as
may be required or appropriate in response to any summons, subpoena, or
discovery requests; (iii) the disclosure of this Opinion in connection with (a)
the Distribution, (b) an audit of Fluor, New Fluor, or Massey by an independent
public accountant or any administrative agency or regulatory body; or (c) the
exercise of any right or remedy, defense or claim by Fluor, New Fluor or Massey
in any litigation, or any governmental proceeding or investigation to which any
of these entities are subject or purported to be subject, (iv) the disclosure
of the Opinion as may be requested, required or ordered in, or to protect
Fluor, New Fluor or Massey's interest in any litigation, governmental
proceeding, or investigation to which any of such persons or entities is
subject or purported to be subject; or (v) the disclosure of the Opinion as
otherwise required by, or as reasonably determined by Fluor,

C-8
<PAGE>

Board of Directors, Fluor Corporation
October 27, 2000
Page 9

New Fluor or Massey to be required by any law, order, regulation or ruling to
Fluor, New Fluor or Massey. In the event of (ii) above, AAA will be promptly
notified. No other use of or reference to the Opinion may be made without the
prior written consent of AAA, which consent shall not be unreasonably
withheld.

Very truly yours,

AMERICAN APPRAISAL ASSOCIATES, INC.
Richard Kelsey
Vice President and Managing Principal

C-9
<PAGE>

FLUOR CORPORATION

PROXY/VOTING INSTRUCTION CARD SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF THE COMPANY FOR THE SPECIAL MEETING NOVEMBER 30, 2000

The undersigned, a shareholder of FLUOR CORPORATION, a Delaware corporation,
acknowledges receipt of a Notice of Special Meeting of Shareholders and the
accompanying Proxy Statement/Information Statement; and, revoking any proxy
previously given, hereby constitutes and appoints L.N. Fisher, R.F. Hake and
E.P. Helm, and each of them, the true and lawful agents and proxies of the
undersigned with full power of substitution in each, to vote the shares of
Common Stock of FLUOR CORPORATION standing in the name of the undersigned at
the Special Meeting of Shareholders of FLUOR CORPORATION, on Thursday, November
30, 2000 at 9:00 a.m., and at any adjournment or postponement thereof with
respect to the proposals listed on the reverse side.

THIS PROXY/VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREBY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED FOR PROPOSAL 1. IF YOU
HAVE A BENEFICIAL INTEREST IN SHARES HELD BY A 401(K) OR OTHER RETIREMENT PLAN
SPONSORED BY FLUOR CORPORATION OR A SUBSIDIARY, SUCH AS THE FLUOR CORPORATION
SALARIED EMPLOYEES' SAVINGS INVESTMENT PLAN OR THE FLUOR CORPORATION EMPLOYEES'
PERFORMANCE PLAN (FORMERLY, THE FLUOR CORPORATION EMPLOYEES' RETIREMENT PLAN),
THEN THIS CARD ALSO CONSTITUTES YOUR VOTING INSTRUCTIONS TO THE TRUSTEE OF SUCH
PLAN AND IF YOU DO NOT SIGN AND RETURN THIS CARD, OR ATTEND THE MEETING AND
VOTE BY BALLOT, SUCH SHARES WILL BE VOTED BY THE TRUSTEE IN THE SAME MANNER AND
IN THE SAME PROPORTION AS THE SHARES FOR WHICH THE TRUSTEE RECEIVES VALID
VOTING INSTRUCTIONS.

COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE.

(continued and to be signed on reverse side)

*FOLD AND DETACH HERE*
--------------------------------------------------------------------------------

FLUOR CORPORATION
Special Meeting of Shareholders
November 30, 2000

You are cordially invited to attend a Special Meeting of Shareholders
which will be held on Thursday, November 30, 2000, beginning at 9:00 a.m. at:

The Fluor Daniel Engineering Campus,
Building C
One Fluor Daniel Drive,
Aliso Viejo, California

A map is included on the last page of the Notice of Special Meeting.

ADMITTANCE TICKET

This ticket entitles you, the shareholder, and one guest to attend the Special
Meeting. Please bring it with you. Only shareholders and their guests
will be admitted. We look forward to welcoming you on Thursday, November 30,
2000.

<PAGE>

The Board of Directors recommends that you vote FOR Proposal 1.

1. Approval of a special dividend to the holders of the outstanding shares of
Fluor Corporation Common Stock of all outstanding shares of capital stock of
New Fluor on a pro rata corresponding basis.

FOR AGAINST ABSTAIN
[_] [_] [_]

COMMENTS/ADDRESS CHANGE
Please mark the box if you have [_] I Plan to Attend Meeting [_]

written comments or an address change
on the reverse side

Signature
Signature Date

NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. Corporations and partnerships should sign in full corporate
or partnership name by an authorized officer.

*FOLD AND DETACH HERE*
--------------------------------------------------------------------------------

*VOTE BY TELEPHONE OR INTERNET*
QUICK *** EASY *** IMMEDIATE

--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!--YOU CAN VOTE IN ONE OF THREE WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24
hours a day-7 days a week.

There is NO CHARGE to you for this call.--Have your proxy card in hand.

You will be asked to enter a Control Number, which is located in the box in the
lower right hand corner of this form.

After entering your Control Number you will hear these instructions:

OPTION 1: To vote as the Board of Directors recommends on THE proposal, press 1

Proposal (1): To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.

When asked, please confirm by Pressing 1.

2. VOTE BY INTERNET: Following the instructions at our Website Address:
http://www.eproxy.com/llr

3. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in
the enclosed envelope.

NOTE: If you vote by internet or telephone, THERE IS NO NEED TO MAIL BACK your
Proxy Card.

THANK YOU FOR VOTING