INVESTMENT AGREEMENT


                         DATED AS OF DECEMBER 11, 1995


                                  BY AND AMONG


                              FLUOR DANIEL, INC.,

                   FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.,

                          GROUNDWATER TECHNOLOGY, INC.


                                      AND


                          GTI ACQUISITION CORPORATION

<PAGE>

                               TABLE OF CONTENTS

                                                                            Page
ARTICLE I - THE PLAN OF RECAPITALIZATION                                      2
        Section 1.1     The Recapitalization                                  2
        Section 1.2     Filing                                                2
        Section 1.3     Conversion                                            3
        Section 1.4     No Post-Closing Transfers                             3
        Section 1.5     Surrender of Certificates                             3
        Section 1.6     Exchange Agent                                        4
ARTICLE II - THE MERGER                                                       5
        Section 2.1     The Merger                                            5
        Section 2.2     Effective Time                                        6
        Section 2.3     Effects of the Merger                                 6
        Section 2.4     Obligation to Transfer Funds to the Company           7
        Section 2.5     Further Assurances                                    7
        Section 2.6     Articles of Incorporation and By-laws                 7
        Section 2.7     Directors                                             8
        Section 2.8     Officers                                              8
        Section 2.9     Closing; Closing Date                                 8

ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY                   8
        Section 3.1     Corporate Existence and Power                         9
        Section 3.2     Corporate Authorization                               9
        Section 3.3     Governmental Authorization                           11
        Section 3.4     Non-Contravention                                    11
        Section 3.5     Capitalization                                       12
        Section 3.6     Joint Ventures; Subsidiaries                         13
        Section 3.7     SEC Filings                                          14
        Section 3.8     Financial Statements                                 14
        Section 3.9     Disclosure Documents                                 15
        Section 3.10    Operations of the Company                            16
        Section 3.11    Litigation                                           17
        Section 3.12    Taxes                                                18
        Section 3.13    Employee Benefit Plans                               20
        Section 3.15    Opinion of Financial Advisor                         21
        Section 3.16    Intellectual Property                                21
        Section 3.17    Contracts and Other Agreements                       21
        Section 3.18    Properties                                           22
        Section 3.19    Environmental Matters                                23
        Section 3.20    Confidentiality Agreements                           24
        Section 3.21    Disclosure                                           24

ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF HOLDINGS                      24
        Section 4.1     Corporate Existence and Power                        25
        Section 4.2     Corporate Authorization                              25
        Section 4.3     Governmental Authorization                           26
        Section 4.4     Non-Contravention                                    26
        Section 4.5     Capitalization of FDESI                              26
        Section 4.6     FDESI Joint Ventures                                 27
        
                                       i

<PAGE>

        Section 4.7     FDESI Financial Statements                           27
        Section 4.8     Disclosure Documents                                 28
        Section 4.9     Operations of FDESI                                  28
        Section 4.10    Litigation of FDESI                                  30
        Section 4.11    Taxes of FDESI                                       30
        Section 4.12    Properties of FDESI                                  30
        Section 4.13    FDESI Contract List                                  31
        Section 4.14    Purchase for Investment; Legend                      32
        Section 4.15    Employees and Employee Benefit Plans                 33
        Section 4.16    Compliance with Laws                                 35
        Section 4.17    Intellectual Property                                35
        Section 4.18    Contracts and Other Agreements                       35
        Section 4.19    Properties                                           36
        Section 4.20    Confidentiality Agreements                           37
        Section 4.21    FDESI Disclosure                                     37
                                                                             
ARTICLE V - COVENANTS OF THE COMPANY                                         37
        Section 5.1     Conduct of the Business                              37
        Section 5.2     Stockholder Meeting; Proxy Material                  40
        Section 5.3     Access to Information                                40
        Section 5.4     No Solicitation of Other Offers                      41
        Section 5.5     Board of Directors and Officers                      43
        Section 5.6     Amendments to Certificate of 
                         Incorporation and By-laws                           43
        Section 5.7     Stock Options                                        43
        Section 5.8     Update to Opinion of Financial Advisor               44
                                                                             
ARTICLE VI - COVENANTS OF HOLDINGS AND FDESI                                 44
        Section 6.1     Conduct of FDESI Business                            44
        Section 6.2     Access to Information                                47
        Section 6.3     Certain Additional Agreements of Holdings            47
        Section 6.4     Holdings Debt                                        49
        Section 6.5     Tax Indemnification                                  49
        Section 6.6     Termination of Tax-Sharing Agreements                49
        Section 6.7     Contract Indemnification                             50

ARTICLE VII - COVENANTS OF HOLDINGS AND THE COMPANY                          50
        Section 7.1     Reasonable Efforts                                   50
        Section 7.2     Certain Filings                                      50
        Section 7.3     Public Announcements                                 50
        Section 7.4     Marketing Agreement                                  51
        Section 7.5     Brokers or Finders                                   51
        Section 7.6     Notices of Certain Events                            51
        Section 7.7     Post-Closing Tax Matters                             51
        Section 7.8     FDESI Employee Benefits                              52
        Section 7.9     Use of Fluor Daniel Name                             52
        Section 7.10    Non-Permitted Actions                                53
                                                        
ARTICLE VIII  - CONDITIONS TO THE CLOSING                                    53
        Section 8.1     Conditions to the Obligations of Each Party          53
        Section 8.2     Conditions to the Obligations of Holdings            54
        Section 8.3     Conditions to the Obligations of the Company         55

                                       ii

<PAGE>


ARTICLE IX - TERMINATION                                                     57
        Section 9.1     Termination                                          57
        Section 9.2     Effect of Termination                                58
                                                                             
ARTICLE X - MISCELLANEOUS                                                    58
        Section 10.1    Notices                                              58
        Section 10.2    Non-Survival of Representations, Warranties
                         and Covenants; Indemnification                      60
        Section 10.3    Amendments; No Waivers                               60
        Section 10.4    Fees and Expenses                                    60
        Section 10.5    Successor and Assigns                                61
        Section 10.6    Entire Agreement                                     62
        Section 10.7    Governing Law                                        62
        Section 10.8    Counterparts; Effectiveness                          62
        Section 10.9    Severability                                         62
        Section 10.10   "To Knowledge"                                       62

Exhibit A - Amended and Restated Certificate of Incorporation
Exhibit B - Amendments to the By-laws
Exhibit C - Marketing Agreement

                                      iii

<PAGE>

                             TABLE OF DEFINED TERMS


Term                                  Section                               Page

Acquired Shares                       Recitals                                1
Acquisition Proposal                  5.4(b)                                 38
Acquisition Transaction               5.4(b)                                 38
Adjusted Option                       5.7                                    43
Adjustment Fraction                   5.7                                    43
Affiliate                             3.17(c)                                21
Agreement                             Recitals                                1
Agreement of Merger                   2.2                                     6
                                                                            
Balance Sheet                         3.8                                    15
Balance Sheet Date                    3.8                                    15
Board of Directors                    3.1                                     9
By-law Amendments                     Recitals                                2
                                                                            
California Code                       2.1                                     5
Charter Amendments                    Recitals                                2
Closing                               2.8                                     8
Closing Date                          2.8                                     8
Code                                  3.12                                   15
Commonly Controlled Entity            3.13(a)                                16
Company                               Recitals                                1
Company 8-K's                         3.7(a)                                 14
Company 10-K's                        3.7(a)                                 14
Company 10-Q                          3.7(a)                                 14
Company Contract Backlog              3.22                                   23
Company Deposit                       1.6                                     4
Company Disclosure Documents          3.9(a)                                 15
Company Disclosure Letter             Article III                             8
Company Material Adverse Change       3.10(a)                                16
Company Material Adverse Effect       3.1                                     9
Company Proxy Statement               3.9(a)                                 15
Company Securities                    3.5                                    12
Company Stockholder Meeting           5.2(a)                                  6
Constituent Corporations              2.3(d)                                  4
Control                               3.17(c)                                21
Current Market Price                  5.7                                    43
                                                     
Delaware Law                          1.1                                     2
Director Stock Options                3.5                                    12
Director Stock Option Plan            3.5                                    12
                                                                             
Effective Time of the Merger          2.2                                     6
Employee Stock Options                3.5                                    12
Employee Stock Option Plans           3.5                                    12
Environmental Laws                    3.19(a)                                22
ERISA                                 3.13(a)                                16
Exchange Act                          3.2                                     9
Exchange Agent                        1.5(a)                                  3
                                              
                                       iv
<PAGE>

Term                                  Section                              Page

FDESI                                 Recitals                                1
FDESI Balance Sheet                   4.7                                    27
FDESI Balance Sheet Date              4.7                                    27
FDESI Common Stock                    2.3                                     6
FDESI Contract Backlog                4.13                                   31
FDESI Customer Contract               4.13                                   32
FDESI Deposit                         1.6                                     4
FDESI Disclosure Letter               Article IV                             24
FDESI Employees                       4.15(i)                                33 
FDESI Financials                      4.7                                    27 
FDESI Joint Venture                   4.6                                    26 
FDESI Joint Venture Agreements        4.6                                    26 
FDESI Material Adverse Change         4.9(a)                                 28
FDESI Material Adverse Effect         4.1                                    25
FDESI Securities                      4.5                                    26
Financials                            3.8                                    15
                                                                             
GAAP                                  3.8                                    15
Governmental Entity                   3.8                                    15
Governmental Entity                   3.3                                    11
                                               
Hazardous Substance                   3.19(a)                                24
Holdings                              Recitals                                1
Holdings Percentage                   6.3                                    47
HSR Act                               3.3                                    11
                                               
Indebtedness                          3.17(b)                                20
Independent Director                  6.3                                    
Intellectual Property Rights          3.16(a)                                18
Interim Balance Sheet                 3.8                                    15
Interim Balance Sheet Date            3.8                                    15
Interim Financials                    3.8                                    15
                                                                             
Joint Venture                         3.6                                    13
Joint Venture Agreements              3.6                                    13
                                                                             
License Rights                        3.16(a)                                18
Lien                                  3.4                                    11
                                                                             
Marketing Agreement                   3.2                                     9
Merger                                Recitals                                1
Merger Consideration                  2.3(c)                                  6
Multiple Employer Plan                3.13(d)                                19
                                                
Name Change                           Recitals                                1
Newco                                 Recitals                                1
New Common Stock                      Recitals                                1
NLRA                                  3.13(h)                                17


                                       v
<PAGE>
                                                   
Term                                  Section                              Page

Old Common Stock                      Recitals                                1
Option                                Recitals                                2
Option Agreement                      Recitals                                1
Option Shares                         Recitals                                2
Outstanding Old Common Stock          1.6                                     4
                                                                             
Parachute Payment                     3.13(f)                                17
Patents                               3.16(a)                                18
Payment Agreement                     1.6                                     4
Payment Fund                          1.6                                     4
Pension Plan                          3.13(d)                                16
Permit                                3.4                                    11
Plan                                  3.13(a)                                16
Prohibited Transaction                3.13(b)                                16
                                                                             
Recapitalization                      Recitals                                1
Recapitalization Consideration        1.3(a)                                  3
Recapitalization Payment              1.3(a)                                  3
Recapitalization Shares               1.3(a)                                  3
                                                                             
SEC                                   3.7(a)                                 14
SEC Reports                           3.7(a)                                 14
Securities Act                        3.7(a)                                 14
Standstill Period                     6.3                                    47
Subsidiary                            3.1                                     9
Surviving Corporation                 2.1                                     5
                                                     
Tasks                                 4.13                                   32
Tax                                   3.12                                   15
Termination Fee                       10.4(b)                                51
Trademarks                            3.16(a)                                18
Transactions                          Recitals                                2
                                                                             
WARN                                  3.13(g)                                17
Welfare Plan                          3.13(e)                                17
                                                

                                       vi
<PAGE>


                              INVESTMENT AGREEMENT

        THIS  INVESTMENT  AGREEMENT,   dated  as  of  December  11,  1995  (this
"Agreement"),  is made and  entered  into by and among  Groundwater  Technology,
Inc., a Delaware  corporation (the "Company"),  GTI Acquisition  Corporation,  a
California  corporation and a wholly owned subsidiary of the Company  ("Newco"),
Fluor  Daniel,  Inc., a California  corporation  ("Holdings"),  and Fluor Daniel
Environmental  Services,  Inc.,  a  California  corporation  and a wholly  owned
subsidiary of Holdings ("FDESI").

        WHEREAS,  Holdings  desires to make an equity  investment in the Company
and the parties desire to enter into other  arrangements to further  cooperation
between the Company and Holdings in certain business matters;

        WHEREAS,  in furtherance of the foregoing,  Holdings  desires to acquire
from the Company, and the Company desires to issue to Holdings,  4,400,000 newly
issued  shares  (the  "Acquired  Shares")  of a newly  authorized  class  of the
Company's common stock, par value $.001 per share (the "New Common Stock");

        WHEREAS,  the  acquisition  of the Acquired  Shares by Holdings  will be
accomplished  by the merger of FDESI  with  Newco,  with  FDESI to survive  such
merger as a wholly owned subsidiary of the Company (the "Merger"),  and Holdings
to  receive  the  Acquired  Shares as a result of the  Merger;  on the terms and
subject to the conditions contained herein;

        WHEREAS, the Board of Directors of the Company deems it advisable and in
the best interests of its  stockholders  to implement,  in conjunction  with the
Merger, a plan of recapitalization  (the  "Recapitalization")  pursuant to which
each share of common stock,  par value $.01 per share,  of the Company (the "Old
Common Stock")  outstanding on the Closing Date (as defined in Section 2.9) will
be reclassified,  cancelled and converted into the right to receive .5274 shares
of New  Common  Stock  and  $8.62 in cash,  all as more  specifically  set forth
herein;

        WHEREAS, to emphasize the close relationship of Holdings and the Company
after the Merger,  at the completion of the  transactions  contemplated  hereby,
upon the consummation of such transactions,  the Company will change its name to
"Fluor Daniel/GTI, Inc." (the "Name Change");


                                       1
<PAGE>

        WHEREAS, concurrently with the execution and delivery of this Agreement,
Holdings and the Company are entering into a stock option agreement (the "Option
Agreement"),  pursuant to which  Holdings  will  purchase from the Company for a
cash  payment of  $1,650,000,  and the Company will sell to Holdings on the date
hereof,  an option (the  "Option")  to purchase  up to an  additional  1,366,000
shares of New Common Stock, as adjusted pursuant to the Option Agreement, or, if
exercised  before the Closing in certain  circumstances,  Old Common  Stock (the
"Option Shares"), on the terms and conditions set forth in the Option Agreement;

        WHEREAS,  the  Board of  Directors  of the  Company  has  approved  this
Investment  Agreement and the transactions  contemplated  hereby and resolved to
recommend  that  the  stockholders  of  the  Company  approve  the  Merger,  the
Recapitalization and the other transactions  contemplated hereby,  including the
adoption of the Amended and Restated  Certificate of Incorporation (the "Charter
Amendments"),  and  amendments to the By-laws (the "By-law  Amendments")  of the
Company set forth in Exhibit "A" and  Exhibit  "B"  hereof,  (collectively,  the
"Transactions").

        NOW,  THEREFORE,  in  consideration  of the  foregoing  and  the  mutual
covenants and agreements contained herein, the parties hereto agree as follows:


                                   ARTICLE I
                          THE PLAN OF RECAPITALIZATION

        Section  1.1  The  Recapitalization.   Upon  the  terms  and  conditions
hereinafter set forth and in accordance with the General  Corporation Law of the
State of Delaware (the  "Delaware  Law"),  as of the Closing Date (as defined in
Section  2.9),  (i) the  outstanding  capital  stock  of the  Company  shall  be
reclassified in accordance with the Charter  Amendments and the  stockholders of
record of the  Company on the  Closing  Date shall be  entitled  to receive  the
Recapitalization Consideration (as defined in Section 1.3); and (ii) the name of
the Company will be changed to "Fluor Daniel/GTI, Inc."

        Section 1.2 Filing. On the Closing Date,  subject to the satisfaction or
waiver of the conditions set forth in Article VIII, other than the condition set
forth in Section 8.1,  paragraph (a) which may not be waived, and conditions set
forth in Section 8.2,  paragraph (f) and Section 8.3, paragraph (b), the Company
shall cause the Charter  Amendments  to be executed and filed with the Secretary
of State of Delaware in  accordance  with  Sections  242 and 103 of the Delaware
Law.


                                       2
<PAGE>

        Section  1.3  Conversion.   At  the  Closing  Date,  by  virtue  of  the
Recapitalization and without any action on the part of the holders thereof:

                (a) Each issued and  outstanding  share of the Old Common Stock,
other than shares of Old Common Stock held in the treasury of the Company, shall
be  reclassified  and   automatically   converted  into  the  right  to  receive
consideration  per share  consisting of .5274 of a share of the New Common Stock
(the  "Recapitalization  Shares")  and  $8.62  in  cash  without  interest  (the
"Recapitalization  Payment," and collectively with the Recapitalization  Shares,
the "Recapitalization Consideration").

                (b) All shares of Old Common Stock which are held by the Company
as treasury shares shall be canceled and retired and cease to exist, without any
conversion thereof or payment with respect thereto.

                (c) No fraction of a share of New Common Stock will be issued in
the Recapitalization,  but, in lieu thereof, each holder of Old Common Stock who
would  otherwise be entitled to a fraction of a share of New Common Stock (after
aggregating  all  fractional  shares of New Common Stock received by the holder)
will be entitled to receive  from the Company an amount of cash  (rounded to the
nearest whole cent) equal to the product of (i) the fraction  multiplied by (ii)
the average of the closing price of the Old Common Stock on the NASDAQ  National
Market for the five days immediately prior to the Closing Date.

        Section  1.4 No  Post-Closing  Transfers.  No  transfer of shares of Old
Common Stock of the Company shall be made from and after the Closing.  If, after
the Closing  Date,  certificates  previously  representing  shares of Old Common
Stock are presented to the Company or the Exchange  Agent (as defined in Section
1.5),   they  shall  be  canceled  and   exchanged   for  the   Recapitalization
Consideration as provided in Section 1.3.

        Section 1.5 Surrender of Certificates.  From and after the Closing Date,
Boston  EquiServ or such other bank and trust  company as the Company,  at least
five days prior to the mailing of the  Company  Proxy  Statement  (as defined in
Section 3.9),  shall  designate and Holdings shall approve (which approval shall
not be  unreasonably  withheld),  shall act as  exchange  agent  (the  "Exchange
Agent") in  effecting  the  reclassification  by the  exchange  for cash and New
Common Stock of certificates that, prior to the Closing Date, represented shares
of Old Common Stock entitled to payment in cash and New Common Stock pursuant to
Section  1.3(a).  As soon as  practicable  after the Closing Date,  the Exchange
Agent shall send a notice and  transmittal  form to each holder of record of Old
Common

                                       3
<PAGE>

Stock  immediately  prior  to the  Closing  Date  advising  such  holder  of the
effectiveness of the  Recapitalization and the procedure for surrendering to the
Exchange  Agent (who may  appoint  forwarding  agents  with the  approval of the
Company)  the  certificate  or  certificates  to be  exchanged  pursuant  to the
Recapitalization.  Upon  the  surrender  for  exchange  of  such a  certificate,
together with such letter of transmittal duly completed and properly executed in
accordance with instructions thereto and such other documents as may be required
pursuant  to such  instructions,  the  holder  shall be paid  promptly,  without
interest thereon and subject to any required withholding of taxes, the amount of
cash and New Common Stock to which such holder is entitled  hereunder,  and such
certificate  shall  forthwith be canceled.  Until so surrendered  and exchanged,
each  certificate  which  immediately  prior  to the  Closing  Date  represented
outstanding  shares of the Old Common Stock shall represent  solely the right to
receive  the cash and New  Common  Stock  into  which  the Old  Common  Stock it
theretofore  represented  shall have been converted  pursuant to Section 1.3(a),
subject to any  required  withholding  of taxes.  If any  payment for Old Common
Stock  is to be made to a  person  other  than  the  person  in  whose  name the
certificates for such shares surrendered is registered,  it shall be a condition
of the  exchange  that the  person  requesting  such  exchange  shall pay to the
Exchange Agent any transfer or other taxes required by reason of the delivery of
such  check  to a person  other  than the  registered  owner of the  certificate
surrendered or shall  establish to the  satisfaction  of the Exchange Agent that
such tax has been paid or is not applicable.

        Section 1.6 Exchange  Agent.  Prior to the Closing Date, the Company and
FDESI shall enter into an agreement (the "Payment  Agreement") with the Exchange
Agent. Immediately prior to the filing of the Charter Amendments, Holdings shall
deposit or cause  FDESI to be  deposited  with the  Exchange  Agent (the  "FDESI
Deposit") in trust for the benefit of stockholders  of the Company,  cash in the
amount of  $33,350,000,  and the Company  shall deposit or cause to be deposited
with the Exchange Agent (the "Company  Deposit") in trust for the benefit of the
stockholders  of the Company  cash in an  aggregate  amount  equal to the amount
determined  by  subtracting  the FDESI  Deposit  from the  product  obtained  by
multiplying (i) the number of shares of Old Common Stock outstanding immediately
prior to the  Closing  Date (the  "Outstanding  Old  Common  Stock") by (ii) the
Recapitalization Payment. The deposits made by FDESI and the Company pursuant to
the preceding  sentence is  hereinafter  referred to as the "Payment  Fund." The
Payment Agreement shall provide, among other things, that (a) the Exchange Agent
shall maintain the Payment Fund as a separate fund to be held for the benefit of
the  holders of the Old Common  Stock of the  Company,  which  shall be promptly
applied by the  Exchange  Agent to making the  payments  provided for in Section
1.5,  (b) any portion of the  Payment  Fund that has not been paid to holders of
the Old Common  Stock  pursuant  to Section  1.5 prior to that date which is six
months from the Closing  Date shall be paid to the

                                       4
<PAGE>

Company,  and any  holders  of Old Common  Stock who shall not have  theretofore
complied with Section 1.5 shall  thereafter look only to the Company for payment
of the  amount of cash and  securities  to which  they are  entitled  under this
Agreement,  (c) the Payment  Fund shall not be used for any purpose  that is not
provided for herein,  (d) the Exchange  Agent may invest,  if so directed by the
Company,  the cash  portion of the  Payment  Fund in  obligations  of the United
States government or any agency or  instrumentality  thereof,  or in obligations
that are guaranteed or insured by the United States  government or any agency or
instrumentality  thereof,  (e) any net profit  resulting  from,  or  interest or
income produced by, such investments  shall be payable to the Company on demand,
(f) the Exchange Agent shall make payment of the Recapitalization Consideration,
to any holder who validly  delivers at least 100,000  shares of Old Common Stock
in the  Recapitalization  on or after the Closing  Date, by wire transfer of the
Recapitalization  Payment to such holder within one business day of the later of
the  Closing  Date or the  date  of such  delivery,  and by  transmittal  of the
Recapitalization Shares by overnight courier,  insured, on the next business day
after the later of the  Closing  Date or the date of such  delivery  and (g) all
expenses of the Exchange  Agent shall be paid directly by the Company.  Promptly
following the date which is six months from the Closing Date, the Exchange Agent
shall return to the Company all cash,  securities  and any other  instruments in
its possession relating to the transactions described in this Agreement, and the
Exchange  Agent's  duties  shall  terminate.   Thereafter,   each  holder  of  a
certificate   formerly   representing   Old  Common  Stock  may  surrender  such
certificate  to the  Company  and  (subject to  applicable  abandoned  property,
escheat and similar laws) receive in exchange therefor the consideration payable
in respect  thereto  pursuant to Section 1.3(a) hereof,  without  interest,  but
shall have no greater rights against the Company than may be accorded to general
creditors of the Company under the Delaware Law.


                                   ARTICLE II
                                   THE MERGER

        Section 2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the California Corporations Code
(the  "California  Code"),  Newco  shall be  merged  with and into  FDESI at the
Effective Time of the Merger (as defined in Section 2.2).  Following the Merger,
the separate  corporate  existence of Newco shall cease and FDESI shall continue
as the surviving corporation (the "Surviving  Corporation") and shall succeed to
and  assume  all the  rights and  obligations  of Newco in  accordance  with the
California Code.


                                       5
<PAGE>

        Section 2.2 Effective Time. As soon as practicable  following the filing
of Charter Amendments and the satisfaction or waiver of the conditions set forth
in Article VIII,  except the condition set forth in Section 8.3,  paragraph (b),
the parties shall file an agreement of merger or other appropriate documents (in
any such case,  the  "Agreement  of  Merger")  executed in  accordance  with the
relevant  provisions of the California  Code and shall make all other filings or
recordings required under the California Code. The Merger shall become effective
at such  time as the  Agreement  of  Merger is duly  filed  with the  California
Secretary of State,  notwithstanding  that  evidence of the  acceptance  of such
filing might not have been received on the filing date, or at such other time as
Newco and FDESI shall agree should be specified in the  Agreement of Merger (the
time the Merger becomes effective being the "Effective Time of the Merger").

        Section 2.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 1107 of the  California  Code. As of the Effective  Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of the shares of common stock,  no par value, of FDESI ("FDESI Common Stock") or
any shares of capital stock of Newco:

                (a) Capital Stock of Newco. Each issued and outstanding share of
the capital stock of Newco shall be converted into and become one fully paid and
nonassessable   shares  of  common  stock,   no  par  value,  of  the  Surviving
Corporation.

                (b) Treasury Stock. No shares of FDESI Common Stock are owned by
FDESI.

                (c)  Conversion of FDESI Common Stock.  Each of the 1,000 issued
and  outstanding  shares of FDESI Common Stock shall be converted into the right
to receive from the Company 4,400 shares of New Common Stock of the Company (the
"Merger  Consideration"),  which shall be payable promptly upon the surrender of
the certificate  representing such share at the Closing (as hereinafter defined)
against   delivery  of  a  certificate   representing   the   aggregate   Merger
Consideration.  As of the Effective Time of the Merger, all such shares of FDESI
Common Stock shall no longer be outstanding and shall  automatically be canceled
and  retired  and  shall  cease to  exist,  and the  holder  of the  certificate
representing  such shares of FDESI  Common  Stock shall cease to have any rights
with  respect  thereto,  except the right to receive  the Merger  Consideration,
without interest.

                (d) Rights and Duties Survive.  The Surviving  Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature,  and be subject to all the  restriction,  disabilities  and
duties   of  each  of  FDESI   and   Newco   (collectively,   the   "Constituent

                                       6
<PAGE>

Corporations");  and all and singular rights, privileges,  powers and franchises
of each of the Constituent  Corporations on whatever account,  as well for stock
subscriptions  as all  other  things  in  action  or  belonging  to  each of the
Constituent Corporations,  shall be vested in the Surviving Corporation; and all
property,  rights,  privileges,  powers and franchises,  and all and every other
interest  shall be  thereafter  as  effectually  the  property of the  Surviving
Corporation as they were of the  Constituent  Corporation,  and the title to any
real  estate  vested  by  deed  or  otherwise,  in  either  of  the  Constituent
Corporations  shall not revert or be in any way impaired;  but all rights of the
creditors  and  all  liens  upon  any  property  of  either  of the  Constituent
Corporations  shall be  preserved  unimpaired,  and all debts,  liabilities  and
duties  of  the  Constituent  Corporations  shall  thence  forth  attach  to the
Surviving  Corporation  and may be enforced  against it to the same extent as if
such debts, liabilities and dues had been incurred or contracted by it.

        Section 2.4 Obligation to Transfer  Funds to the Company.  Each of FDESI
and Newco  acknowledges and agrees that at the Effective Time of the Merger, the
Surviving  Corporation shall be obligated to irrevocably  authorize the Exchange
Agent to allow the FDESI  Deposit  to be held on behalf of the  Company  for the
benefit of the  stockholders  of the Company,  in accordance  with the Company's
instructions under the Payment Agreement (the "Transfer Authorization").

        Section 2.5 Further Assurances.  If at any time after the Effective Time
of the Merger the Surviving  Corporation  shall  consider or be advised that any
further deeds, assignments or assurances in law or any other acts are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise,  in
the Surviving Corporation, the title to any property or right of the Constituent
Corporations  acquired  or to be  acquired  by reason of, or as a result of, the
Merger,  or (ii)  otherwise  to carry out the  purposes of this  Agreement,  the
Constituent  Corporations  agree that the Surviving  Corporation  and its proper
officers  and  directors  shall and will  execute  and  deliver  all such deeds,
assignments and assurances in law and do all acts necessary, desirable or proper
to vest,  perfect or confirm  title to such  property or right in the  Surviving
Corporation and otherwise to carry out the purposes of this Agreement,  and that
the proper officers and directors of the Constituent Corporations and the proper
officers and directors of the Surviving  Corporation are fully authorized in the
name of the  Constituent  Corporations  or  otherwise  to take  any and all such
action.

        Section 2.6 Articles of Incorporation  and By-laws.  (a) The Articles of
Incorporation of FDESI, as in effect  immediately prior to the Effective Time of
the Merger, shall be the Articles of Incorporation of the Surviving  Corporation
until thereafter changed or amended as provided therein or by applicable law.

                                       7
<PAGE>

                  (b) The By-laws of FDESI as in effect at the Effective Time of
the Merger shall be the By-laws of the Surviving  Corporation  until  thereafter
changed or amended as provided therein or by applicable law.

        Section 2.7  Directors.  The directors of FDESI at the Effective Time of
the  Merger  shall be the  directors  of the  Surviving  Corporation,  until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

        Section 2.8 Officers. The officers of FDESI at the Effective Time of the
Merger shall be the officers of the Surviving Corporation,  until the earlier of
their  resignation  or removal or until  their  respective  successors  are duly
elected and qualified, as the case may be.

        Section 2.9 Closing;  Closing Date. The closing of the sale and purchase
of the Shares and the Merger  contemplated  hereby  (the  "Closing")  shall take
place at the  offices  of  Fluor  Corporation,  3333  Michelson  Drive,  Irvine,
California 92730, at 8:00 a.m. Los Angeles time, on a date to be mutually agreed
upon by the parties,  which date shall, subject to the satisfaction,  or, to the
extent  permitted  hereby,  waiver,  at or  prior  to the  Closing,  of all  the
conditions set forth in Article VIII hereof, be no later than the third business
day after the satisfaction,  or, to the extent permitted hereby,  waiver, of the
conditions set forth in Sections 8.1(a),  (b), (c) and (e). The time and date on
which the Closing occurs is herein called the "Closing Date."


                                  ARTICLE III
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        The Company  represents  and  warrants to Holdings  that the  statements
contained  in this  Article III are correct and  complete as of the date of this
Agreement  and will be correct and  complete  as of the Closing  Date (as though
made then and as though the Closing Date were  substituted  for the date of this
Agreement  throughout  this Article III),  except as set forth in the disclosure
letter delivered by the Company to the Holdings on the date hereof and initialed
by the  parties  (the  "Company  Disclosure  Letter").  Nothing  in the  Company
Disclosure  Letter  shall be deemed  adequate  to  disclose  an  exception  to a
representation or warranty made herein,  however,  unless the Company Disclosure
Letter  identities the exception with  particularity  and describes the relevant
facts in reasonable  detail.  Without  limiting the generality of the foregoing,
the mere listing (or  inclusion of a copy) of a document or other item shall not
be deemed adequate to disclose an exception to a

                                       8
<PAGE>

representation  or warranty made herein (unless the  representation  or warranty
has to do with the existence of the document or other items itself). The Company
Disclosure  Letter will be arranged in paragraphs  corresponding to the lettered
and numbered paragraphs contained in this Article III.

        Section 3.1 Corporate  Existence and Power. Each of the Company and each
of its  Subsidiaries  (as  defined  herein),  including,  without  limiting  the
generality of the foregoing, Newco, is a corporation duly incorporated,  validly
existing and in good standing under the laws of the  jurisdiction in which it is
incorporated,  and has all requisite  corporate  power and authority to carry on
its business as now or currently  proposed to be conducted.  Each of the Company
and each of its  Subsidiaries  is duly  qualified  to do  business  as a foreign
corporation and is in good standing in each jurisdiction  where the character of
the property  owned or leased by it or the nature of its  activities  makes such
qualification necessary,  except for those jurisdictions where the failure to be
so  qualified  would  not,  individually  or in the  aggregate,  have a material
adverse effect on the business, properties,  condition (financial or otherwise),
results of operations or prospects of the Company and its Subsidiaries  taken as
a whole (a "Company  Material  Adverse  Effect").  The  Company  has  heretofore
delivered to Holdings true and complete  copies of the Company's  Certificate of
Incorporation  and By-laws and the certificates of incorporation  and by-laws of
the Subsidiaries, in each case as in effect on the date hereof. The minute books
of the Company contain true and complete records of all meetings and consents in
lieu of meeting of its Board of Directors  (the "Board of  Directors")  (and any
committees thereof),  and of its stockholders.  The term "Subsidiary" as used in
this  Agreement  shall mean any  corporation  or other legal entity of which the
Company  or FDESI,  as the case may be,  (either  alone or  together  with other
Subsidiaries  of the  Company or FDESI,  as the case may be) owns,  directly  or
indirectly,  more than 50% of the stock or other equity interests the holders of
which  are  ordinarily  and  generally,  in  the  absence  of  contingencies  or
understandings,  entitled to vote for the election of a majority of the board of
directors or governing body.

        Section 3.2  Corporate  Authorization.  The  Company  has all  requisite
corporate  power and  authority  to execute  and  deliver  this  Agreement,  the
Agreement  of Merger,  the Option  Agreement  and the  Marketing  Agreement  (as
defined  herein) and to perform its  obligations  under such  agreements  and to
consummate  the  transactions  contemplated  hereby and  thereby.  Newco has all
requisite  corporate  power and authority to execute and deliver this Agreement,
to  perform  its  obligations  hereunder  and  to  consummate  the  transactions
contemplated  hereby. The execution,  delivery and performance by the Company of
this Agreement,  the Agreement of Merger, the Option Agreement and the Marketing
Agreement, and the consummation by the Company of the transactions  contemplated
hereby  and  thereby  have been duly  authorized  and  approved  by the Board


                                       9
<PAGE>

of Directors and no further  corporate action on the part of the Company (except
for the  approval by the  Company's  stockholders  of the  Transactions  and the
filing of a  Certificate  of Amendment  with the  Secretary of State of Delaware
with respect to the Charter Amendments as required by Delaware Law) is necessary
to authorize  the  execution,  delivery and  performance  by the Company of such
agreements or the consummation by the Company of the  transactions  contemplated
hereby or thereby.  The  execution,  delivery and  performance  by Newco of this
Agreement  and the  Agreement of Merger,  and the  consummation  by Newco of the
transactions  contemplated  hereby and  thereby  have been duly  authorized  and
approved by the Board of  Directors  of Newco,  and by the sole  shareholder  of
Newco,  and no  further  corporate  action  on the part of Newco or  shareholder
action on the part of Newco's sole  shareholder  (except for the approval by the
Company's  stockholders  of the  Transactions)  is necessary  to  authorize  the
execution   delivery  and  performance  by  Newco  of  such  agreements  or  the
consummation  by Newco  of the  transactions  contemplated  hereby  or  thereby.
Assuming  Holdings is not and has not been the  beneficial  owner (as defined in
Section 13(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act") of 15% or more of the  outstanding New Common Stock prior to its execution
and delivery of this Agreement,  the foregoing authorization and approval by the
Board of Directors  constitutes  prior approval by the Board of Directors of the
transaction  which  resulted in Holdings  becoming an  "interested  stockholder"
within the meaning of paragraph  (a)(1) of Section 203 of the Delaware Law. This
Agreement, the Agreement of Merger, and the Option Agreement have been, and upon
execution and delivery by the Company and, in the case of this Agreement and the
Agreement of Merger,  Newco,  at the Closing,  the Marketing  Agreement will be,
duly  executed and delivered by the Company and  constitute  (or, in the case of
the  Marketing  Agreement,  will  constitute  at the Closing)  valid and binding
obligations  of the Company and, in the case of this Agreement and the Agreement
of Merger,  Newco,  enforceable  against  the  Company  and, in the case of this
Agreement  and  the  Agreement  of  Merger,  Newco,  in  accordance  with  their
respective terms, subject to applicable bankruptcy, insolvency,  reorganization,
equity or  redemption,  moratorium  or similar  laws now or  hereafter in effect
affecting  the  enforcement  of  creditors'  rights  generally  and  to  general
principles  of  equity  (regardless  of  whether  enforcement  is  sought  in  a
proceeding at law or in equity). The Acquired Shares received by Holdings in the
Merger,  and the shares to be issued upon  exercise of the  Option,  will,  when
issued  and  delivered  in  accordance  with the  terms  hereof,  or the  Option
Agreement,  as the case may be, be validly issued,  fully paid and nonassessable
and  free  and  clear  of any  claim,  lien,  encumbrance,  preemptive  right or
agreement.   The  term  "Marketing   Agreement"  means  that  certain  Marketing
Agreement,  dated the date hereof,  between the Company and Holdings,  a copy of
which is attached hereto as Exhibit "C".


                                       10

<PAGE>

        Section 3.3  Governmental  Authorization.  The  execution,  delivery and
performance  by each of the  Company  and  Newco of this  Agreement,  and by the
Company  of  the  Option  Agreement  and  the  Marketing   Agreement,   and  the
consummation by the Company and Newco of the  transactions  contemplated  hereby
and  thereby  require no action by or in respect of, or filing by the Company or
Newco with, any Federal, state or local government or any court,  administrative
or regulatory  agency or commission or other  governmental  authority or agency,
domestic or foreign (a  "Governmental  Entity") other than: (i) compliance  with
any applicable requirements of the Hart-Scott-Rodino  Antitrust Improvements Act
of 1976,  as  amended  (the "HSR  Act");  (ii)  compliance  with any  applicable
requirements  of the  Exchange  Act, and the rules and  regulations  promulgated
thereunder; and (iii) compliance with any applicable federal or state securities
laws.

        Section 3.4 Non-Contravention.  The execution,  delivery and performance
by each of the  Company and Newco of this  Agreement,  and by the Company of the
Option Agreement and the Marketing Agreement and the consummation by the Company
and Newco of the  transactions  contemplated  hereby and thereby do not and will
not: (i) contravene or conflict with the Certificate of Incorporation or By-laws
of the  Company or the  Articles  of  Incorporation  or  By-laws of Newco;  (ii)
violate, conflict with or result in the breach of any of the terms of, otherwise
give any other contracting party the right to terminate,  or constitute (or with
notice or lapse of time or both  constitute) a default (by way of  substitution,
novation or  otherwise)  under,  any  contract or other  agreement  to which the
Company or any of the  Subsidiaries  is a party or by which any of its assets or
properties  may be  bound  or  affected;  (iii)  violate  any  order,  judgment,
injunction,  award or  decree  of any  United  States  federal  or state  court,
domestic arbitrator or United States federal or state governmental or regulatory
body  against,  or binding  upon,  the Company or its  Subsidiaries  or upon the
properties  or  business of the Company or its  Subsidiaries;  (iv)  violate any
statute,  law or regulation  of the United  States or any of the several  states
thereof  as such  statute,  law or  regulation  relates  to the  Company  or its
Subsidiaries   or  to  the   properties  or  business  of  the  Company  or  its
Subsidiaries;  (v) result in the creation or  imposition of any Lien (as defined
herein) on any asset of the  Company or its  Subsidiaries;  or (vi)  violate any
Permit (as defined herein),  except,  with respect to clauses (ii), (iv), (v) or
(vi) of this Section 3.4, for violations or Liens, which, individually or in the
aggregate,  would not have a Company  Material  Adverse Effect.  For purposes of
this Agreement,  "Lien" means,  with respect to any asset,  any mortgage,  lien,
pledge, charge,  security interest or encumbrance of any kind in respect of such
asset. For purposes of this Agreement, "Permit" means any license, permit, order
or approval of any federal, state, or local regulatory body.


                                       11
<PAGE>

        Section 3.5  Capitalization.  (a) As of the date hereof,  the authorized
capital stock of the Company consists of 25,000,000  shares of Old Common Stock,
and 1,000,000 shares of preferred stock, par value $.01 per share, none of which
preferred  stock is issued and  outstanding.  As of the date  hereof,  there are
outstanding (a) 6,962,196 shares of Old Common Stock, (b) Employee Stock Options
(as defined  herein) to purchase an aggregate of 1,234,706  shares of Old Common
Stock,  and (c)  Director  Stock  Options  (as  defined  herein) to  purchase an
aggregate  of 22,500  shares of Old Common  Stock  (Employee  Stock  Options and
Director  Stock Options to purchase an aggregate of 304,916 shares of Old Common
Stock were vested and exercisable as of the date hereof). As of the date hereof,
1,459,600 shares of Old Common Stock were reserved for issuance  pursuant to the
Employee  Stock  Option Plans (as defined  herein) and 100,000  shares of Common
Stock were reserved for issuance  pursuant to the Director Stock Option Plan (as
defined  herein).  The 1988  Non-Employee  Director  Stock  Option Plan has been
terminated  and no options  are  outstanding  under such plan.  All  outstanding
shares of capital  stock of the Company  have been duly  authorized  and validly
issued and are fully paid,  nonassessable and free of preemptive rights.  Except
as contemplated  by this Agreement and the Option  Agreement and as set forth in
this  Section  3.5, as of the date  hereof  there are,  and,  except for changes
occurring  after the date  hereof  resulting  from (x) the  exercise of Employee
Stock  Options or Director  Stock  Options  outstanding  on such date or (y) the
grant of Employee  Stock  Options in the  ordinary  course of  business  and the
exercise of such Employee Stock  Options,  on the Closing Date there will be, no
outstanding (i) shares of capital stock or other securities of the Company, (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock  or  other   securities   of  the  Company  or  (iii)   options,   rights,
subscriptions,   warrants,   calls,  unsatisfied  preemptive  rights,  or  other
agreements to acquire or otherwise receive from the Company any capital stock or
other securities of, or securities  convertible into or exchangeable for capital
stock or other  securities  of, the Company (the items in clauses (i),  (ii) and
(iii) being referred to  collectively  as the "Company  Securities").  As of the
date hereof  there are,  and except for Employee  Stock  Options  granted in the
ordinary course of business after the date hereof,  as of the Closing Date there
will  be,  no  options,  grants,  stock  appreciation  rights  or  other  awards
outstanding  under any Employee  Stock Option Plan or any Director  Stock Option
Plan  other  than the  options to  purchase  the  shares of Old Common  Stock as
described in this Section 3.5.  For purposes of this  Agreement,  the  Company's
1986  Employee  Stock  Purchase  Plan and 1987 Stock Plan shall be  referred  to
individually  as an  "Employee  Stock  Option  Plan",  and  collectively  as the
"Employee Stock Option Plans";  and the 1995 Director Stock Option Plan shall be
referred to as the  "Director  Stock Option  Plan." The  outstanding  options to
purchase Old Common Stock granted under the Employee Stock Option Plans shall be
referred to as "Employee Stock Options" and under the Director Stock Option Plan
shall be referred to as "Director Stock Options".

 
                                     12
<PAGE>

       (b) As of the  date  hereof,  the  authorized  capital  stock  of  Newco
consists in its entirety of 1,000 shares of common stock, no par value, of which
1,000  shares  are  outstanding  and owned of  record  and  beneficially  by the
Company.  All  outstanding  shares  of  capital  stock of Newco  have  been duly
authorized  and  validly  issued and are fully paid,  nonassessable  and free of
preemptive  rights.  Except as set  forth in this  Section  3.5,  as of the date
hereof  there are,  and on the Closing  Date there will be, no  outstanding  (i)
shares of capital stock or other  securities of Newco,  (ii) securities of Newco
convertible into or exchangeable for shares of capital stock or other securities
of Newco or (iii) options, rights,  subscriptions,  warrants, calls, unsatisfied
preemptive  rights,  or other  agreements  to acquire or otherwise  receive from
Newco any capital stock or other  securities of, or securities  convertible into
or exchangeable for capital stock or other securities of, Newco.

        Section 3.6 Joint  Ventures;  Subsidiaries.  (a) The Company  Disclosure
Letter sets forth a list of each  entity in which the  Company  holds or has the
right to acquire one percent  (1%) or more of the equity,  partnership  or other
interests of such entity (each such entity, except Subsidiaries,  being referred
to as a "Joint Venture") and a list of all material  agreements relating thereto
to which the Company is a party ("Joint Venture  Agreements").  To the Company's
knowledge and belief,  the Company and each other party thereto is in compliance
in all  material  respects  with all of the terms,  conditions  and  obligations
binding upon it in respect of each of the Joint  Venture  Agreements,  and as of
the date hereof none of the Joint Venture  Agreements has been  terminated.  The
Company has delivered true and correct  copies of each Joint Venture  Agreement,
as amended,  modified or  supplemented,  to  Holdings  and all waivers  executed
thereunder.

        (b) The  Company's  interest  in each of the Joint  Ventures is directly
owned by the Company and, except for any  restrictions on transfer  contained in
the Joint Venture  Agreements,  free and clear of any material Lien or any other
limitation or restriction  (including any restriction on the right to vote, sell
or otherwise  dispose of such  interest).  Except as expressly  set forth in the
Joint Venture Agreements, there are no outstanding obligations of the Company to
fund or make a further investment in any Joint Venture.

        (c)  The  Company  Disclosure  Letter  also  sets  forth  a list of each
Subsidiary  of the Company.  The Company or its  Subsidiaries  are,  directly or
indirectly,  the record and  beneficial  owner of the  percentage of outstanding
shares of capital stock or other voting  securities of each of its  Subsidiaries
listed  thereon;  there are no proxies with respect to such  securities,  and no
securities of any of the  Subsidiaries  are or may become required to be issued,
transferred or sold for any reason including,  without limitation,  by reason of
any subscriptions,  options,  warrants, rights, calls, convertible securities


                                       13
<PAGE>


or other  agreements or commitments  of any character  obligating the Company or
any such Subsidiary to issue,  transfer or sell any of such  securities.  All of
such securities so owned by the Company or its  Subsidiaries are validly issued,
fully paid and  nonassessable  and are owned free and clear of any claim,  lien,
encumbrance, preemptive right or agreement with respect thereto.

        Section 3.7 SEC Filings. (a) The Company has delivered or made available
to Holdings true and complete  copies of: (i) its Annual Report on Form 10-K for
the fiscal  years ended April 29,  1995,  April 30,  1994,  and May 1, 1993 (the
"Company  10-K's"),  as filed with the Securities and Exchange  Commission  (the
"SEC"), (ii) its Quarterly Report on Form 10-Q for its fiscal quarter ended July
31, 1995, as filed with the SEC (the "Company 10-Q"),  (iii) its Current Reports
on Form 8-K filed  with the SEC since May 1,  1993 (the  "Company  8-K's,"  and,
together with the Company 10-K's and the Company 10-Q, the "SEC Reports"),  (iv)
its proxy or information  statements relating to meetings of, or actions without
a meeting by, the stockholders of the Company held since May 1, 1993 and (v) all
of its other reports,  statements,  schedules and final registration  statements
(except registration  statements filed on Form S-8) filed with the SEC since May
1,  1993.  The  Company  has  filed all  required  documents,  schedules,  form,
statements and other documents with the SEC since May 1, 1992.

        (b) As of its  filing  date,  no  such  report,  schedule  or  statement
(including  all exhibits and  schedules  thereto and documents  incorporated  by
reference   therein)  referred  to  in  clauses   (a)(i)-(iv),   as  amended  or
supplemented  if  applicable,  filed  pursuant to the Exchange Act contained any
untrue  statement  of a  material  fact or omitted  to state any  material  fact
necessary  in order to make the  statements  made  therein,  in the light of the
circumstances under which they were made, not misleading.

        (c) No such final  registration  statement  (including  all exhibits and
schedules thereto and documents  incorporated by reference  therein) referred to
in clause (a)(v), as amended or supplemented,  if applicable,  filed pursuant to
the  Securities  Act  of  1933,  as  amended,  and  the  rules  and  regulations
promulgated  thereunder (the "Securities  Act") as of the date such statement or
amendment became effective, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements  therein not misleading (in the case of any  prospectus,  in
light of the circumstances under which they were made).

        Section 3.8  Financial  Statements.  The audited  balance  sheets of the
Company as at April 29, 1995,  April 30, 1994,  and May 1, 1993, and the related
audited statements of operations, changes in

                                       14
<PAGE>

stockholders'  equity and cash flows for the fiscal  years then ended,  together
with the notes thereto certified by Ernst & Young,  independent certified public
accountants,  included  in the  Company  10-K's  which  have been  delivered  to
Holdings,  comply as to form in all material respects with applicable accounting
requirements  and the published  rules and  regulations  of the SEC with respect
thereto,  have been prepared in accordance  with generally  accepted  accounting
principles  ("GAAP")  applied on a consistent  basis through the periods covered
thereby,  and fairly present the consolidated  financial position of the Company
and its  consolidated  Subsidiaries  as of the dates  thereof and its results of
operations  and cash flows for the periods then ended.  The foregoing  financial
statements of the Company as at April 29, 1995, and for the year then ended, are
sometimes  herein called the  "Financials,"  the balance  sheet  included in the
Financials is sometimes  herein called the "Balance Sheet" and April 29, 1995 is
sometimes  herein called the "Balance  Sheet Date." The financial  statements of
the  Company  for the three  months  ended July 31,  1995 and as included in the
Company 10-Q which has been delivered to Holdings,  fairly present the financial
condition  and  results  of  operations  of the  Company as of and for the three
months  ended  (subject  to  year-end  adjustments  consisting  only  of  normal
recurring  accruals) in accordance with GAAP applied in a manner consistent with
the  principles  applied  during  the  fiscal  year ended  1995.  The  foregoing
unaudited  financial  statements of the Company as at July 31, 1995, and for the
three months then ended are sometimes  herein  called the "Interim  Financials,"
the balance sheet included in the Interim  Financials is sometimes herein called
the "Interim  Balance  Sheet" and July 31, 1995 is sometimes  herein  called the
"Interim  Balance Sheet Date."  Except as set forth in the SEC Reports,  neither
the Company nor any of its  Subsidiaries  has any  liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) required by GAAP
to be set  forth  on a  consolidated  balance  sheet  of  the  Company  and  its
consolidated  Subsidiaries  or in the  notes  thereto.  Since  the  date  of its
incorporation, Newco has had no assets other than a cash capital contribution of
$100 and no liabilities.

        Section 3.9 Disclosure Documents. (a) The proxy statement of the Company
on Schedule  14A (the  "Company  Proxy  Statement")  to be filed with the SEC in
connection with the Transactions, and any amendments or supplements thereto (the
Company Proxy Statement,  as amended or  supplemented,  being referred to as the
"Company  Disclosure  Documents")  will,  when  filed,  comply as to form in all
material respects with the applicable  requirements of the Exchange Act, and the
rules and  resolutions  promulgated  thereunder.  At the time the Company  Proxy
Statement  or  any  amendments  or  supplements  thereto  are  first  mailed  to
stockholders of the Company,  and at the time such stockholders vote on approval
of the  Transactions,  the Company Proxy  Statement  will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order

                                       15
<PAGE>

to make the statements  made therein,  in the light of the  circumstances  under
which they were made, not misleading.

        (b) The representations and warranties contained in Section 3.9(a) shall
not  apply  to  statements  or  omissions  included  in the  Company  Disclosure
Documents based upon information furnished in writing to the Company by Holdings
specifically for use therein.

        Section 3.10  Operations of the Company.  Except as contemplated by this
Agreement  or as  disclosed  in the  Interim  Balance  Sheet,  since the Interim
Balance Sheet Date,  the Company has conducted its business only in the ordinary
course and has not:

        (a) suffered or incurred any material  adverse  change in the  business,
properties,  condition  (financial  or  otherwise),  results  of  operations  or
prospects  of the  Company  and its  Subsidiaries,  taken as a whole (a "Company
Material  Adverse  Change"),  and the  Company  knows of no such  change that is
threatened;

        (b) amended its certificate of  incorporation  or by-laws or merged with
or  into  or  consolidated  with  any  other  person,  subdivided  or in any way
reclassified  any shares of its capital  stock or changed or agreed to change in
any manner the rights of its outstanding capital stock or other securities;

        (c)  incurred  any  indebtedness  for  borrowed  money other than in the
ordinary  course of  business  under the  letters of credit  referred  to in the
Company Disclosure Letter;

        (d)  declared  or paid any  dividends  or  declared  or made  any  other
distributions  or any kind to its  shareholders,  or made any direct or indirect
redemption,  retirement,  purchase  or other  acquisition  of any  shares of its
capital stock or other securities;

        (e)  reduced its cash or  short-term  investments  or their  equivalent,
other  than to meet cash  needs  arising  in the  ordinary  course or  business,
consistent with past practices;

        (f)  except as  required  by GAAP,  made any  change  in its  accounting
methods or practices or made any change in depreciation or amortization policies
or rates adopted by it;

        (g) made any payment or commitment  to pay any severance or  termination
pay to any of its officers, directors,  employees,  consultants, agents or other
representatives,  other than payments or

                                       16
<PAGE>

commitments  to pay persons other than its officers,  directors or  shareholders
made in the ordinary course of business;

        (h) made any  acquisition  of all or  substantially  all of the  assets,
properties, capital stock or business of any other person;

        (i) agreed to the sale, lease, transfer or other disposition (other than
sales  of  assets  in  the  ordinary  course  of  business),   in  one  or  more
transactions,  of the business or assets of the Company  (including  by way of a
merger,  consolidation,  tender or exchange offer, sale of stock, liquidation or
dissolution or similar transaction);

        (j) entered into any employment agreement with any executive officers of
the Company or any of its Subsidiaries,  or granted any such executive  officers
any material increase in compensation, except in the ordinary course of business
consistent with prior practice;

        (k)  adopted any stock  option or other  stock-based  employee  benefits
plans or agreed to accelerate the vesting or  exercisability  of any employee or
director stock option;

        (l) incurred any damage,  destruction or loss, whether or not covered by
insurance, that has had or could have a Company Material Adverse Effect; or

        (m) issued,  sold or otherwise disposed of any Company Securities or any
debt or equity securities of any of its Subsidiaries.

        Section 3.11 Litigation.  Except as set forth in the SEC Reports,  as of
the date hereof, there are no outstanding orders, judgments, injunctions, awards
or decrees of any court, governmental or regulatory body or arbitration tribunal
against  or  involving  the  Company  or  any of its  Subsidiaries  which  could
reasonably be expected to result in a Company Material Adverse Change. Except as
set forth in the SEC Reports, as of the date hereof, there are no actions, suits
or claims or legal,  administrative or arbitral proceedings of which the Company
or any of its  Subsidiaries  has received  notice,  or, to the  knowledge of the
Company or any of the Subsidiaries,  investigations  (whether or not the defense
thereof or liabilities in respect thereof are covered by insurance)  pending or,
to the knowledge of the Company or any of its Subsidiaries,  threatened  against
or involving the Company or any of its  Subsidiaries or any of their  respective
properties  or assets  in which the  amount in  controversy  or  damages  sought
exceeds $20,000.
        
                                       17
<PAGE>

        Section 3.12 Taxes. Each of the Company and each of its Subsidiaries has
paid all federal,  state,  county,  local,  foreign and other taxes,  including,
without  limitation,  income taxes,  estimated taxes, excise taxes, sales taxes,
gross receipts taxes,  franchise taxes,  employment and  payroll-related  taxes,
property taxes and import duties, whether or not measured in whole or in part by
net income (hereinafter,  "Taxes" or, individually, a "Tax") required to be paid
by it through the date hereof and all  deficiencies  or other  additions to tax,
interest and penalties owed by it, in connection with any such Taxes (other than
Taxes and deficiencies not material in the aggregate),  and shall timely pay any
Taxes,  including additions,  interest and penalties,  required to be paid by it
after the date hereof and on or before the Closing  Date (other than Taxes being
contested  in good  faith and the  liability  for which is  reserved  for by the
Company in accordance  with GAAP).  All reserves or other  provisions  for taxes
reflected  in the  Financials  and the  Interim  Financials  are,  or  will  be,
adequate, and there are no liens for delinquent taxes upon any property or asset
of the Company or any of its  Subsidiaries.  The Company  Disclosure Letter sets
forth the status of the audit of any income tax returns of the Company or any of
its  Subsidiaries  for each fiscal year for which the statute of limitations has
not expired,  including  the amounts of any  deficiencies  and additions to tax,
interest  and  penalties  indicated  on any  notices of proposed  deficiency  of
statutory  notices  of  deficiency  that  may have  been  issued  in  connection
therewith.  The Company  Disclosure  Letter sets forth all federal tax elections
under the  Internal  Revenue  Code of 1986,  as amended (the "Code") that are in
effect with respect to the Company for the fiscal years ended May 1, 1993, April
30, 1994,  and April 29, 1995.  No extension of time with respect to any date on
which  any  Tax  return  was  or is to be  filed  by the  Company  or any of its
Subsidiaries  is in force,  and no waiver or  agreement by the Company or any of
its  Subsidiaries  is in force for the  extension of time for the  assessment or
payment of any Tax. The Company has not made any election  under Section  341(f)
of the Code. Each of the Company and each of its  Subsidiaries  has timely filed
all tax returns required  through the date hereof,  and shall prepare and timely
file,  in  a  manner  consistent  with  prior  years  and  applicable  laws  and
regulations, all tax returns to be filed on or before the Closing Date.

        Section  3.13  Employee  Benefit  Plans.  Except as set forth in the SEC
Reports:

        (a)  There  are  no  plans,   practices,   arrangements,   policies   or
commitments,  including,  without  limitation,  any  employment,  consulting  or
deferred compensation arrangements or agreements,  executive compensation, bonus
or severance  pay plans or  practices,  health or life  insurance  arrangements,
vacation  pay  plans or any  other  fringe  benefit  plans,  including,  without
limitation,  any pension,  profit  sharing,  savings or other plans described in
Section 3(3) of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA")  (whether  or not  covered  by ERISA)  (each

                                       18
<PAGE>

individually,  a "Plan")  maintained  or  contributed  to by or on behalf of the
Company,  or with  respect to which the Company  has or could have any  material
liability  or  obligation,  whether  actual or  contingent,  direct or indirect,
through any Commonly  Controlled  Entity (as defined below or otherwise),  other
than the  Employee  Stock  Option  Plans and the  Director  Stock Option Plan. A
"Commonly  Controlled  Entity" of a person  shall  mean any other  person who is
treated as a single employer  (within the meaning of Code Section 414) with such
person.

        (b) Each  Plan is (and the  Company  is with  respect  to each  Plan) in
compliance  in all material  respects  with all  applicable  laws,  regulations,
reporting and disclosure  requirements and has been administered and operated in
all material  respects in accordance with its terms.  With respect to each Plan:
(i) no  "prohibited  transaction"  (within the meaning of Code  Section  4975 or
ERISA Section 406) or breach of fiduciary duty has occurred;  and (ii) there are
no material actions,  liens,  claims or disputes pending or, to the knowledge of
the Company, threatened.

        (c) With respect to each Plan (where applicable);  on or before the date
hereof,  the Company has delivered or made available to Holdings complete copies
of (i) each Plan document and individual agreement related thereto; and (ii) the
most recent summary plan  description,  annual report,  actuarial  valuation and
Internal Revenue Service determination letter.

        (d) No Plan is a "pension  plan"  (within the  meaning of ERISA  Section
3(2)) or a "multiple  employer plan" (as described in Code Section 413(c)).  The
Company has not incurred any actual or contingent  liability arising under Title
IV of ERISA  which is  reasonably  likely  to have a  Company  Material  Adverse
Effect.  Without limiting the foregoing,  the Company has no secondary liability
under any  agreement  described in ERISA  Section 4204, or has been a party to a
transaction  described in ERISA Section 4069, in each case,  which is reasonably
likely to have a Company Material Adverse Effect.

        (e) With  respect  to each Plan which is a "welfare  plan"  (within  the
meaning of ERISA Section 3(1)):  (i) except as required under Code Section 4980B
or Part 6 of Title I of ERISA,  no such plan provides  medical or death benefits
with respect to any  individual  beyond his or her  termination of employment or
service;  and (ii) there are no reserves,  assets,  surplus or prepaid  premiums
under any such Plan.

        (f) The  consummation of the Transactions and the exercise of the Option
will not: (i) entitle any individual to severance pay, unemployment compensation
or any  similar  payment;  (ii)  accelerate

                                       19

<PAGE>

the time of payment or vesting or increase the amount of compensation due to any
individual; or (iii) entitle any individual to a "parachute payment" (within the
meaning of Code Section 280G).

        (g) Neither the Company nor any Commonly  Controlled Entity has incurred
within the last two years or reasonably expects, as of the date hereof, to incur
any liability or obligation under the Workers Adjustment Retraining Notification
Act or any similar state law ("WARN").

        (h) Each of the Company and each of its Subsidiaries is not, and has not
been, a party to any  collective  bargaining  agreement or any agreement  with a
labor  union or  association.  There is no  pending  work  stoppage,  organizing
effort,  strike,  slowdown,  picketing or similar event affecting the Company or
any of the  Subsidiaries  or, to the  knowledge  of the  Company and each of its
Subsidiaries,  threatened,  and no application for certification of a collective
bargaining  agent is pending or, to the knowledge of the Company and each of its
Subsidiaries,  threatened.  Each of the Company and each of its Subsidiaries has
not been  cited for any  unfair  labor  practice  or other  practice  or conduct
prohibited by the National Labor Relations Act (the "NLRA"). There is no pending
or, to the  knowledge of the Company and each of its  Subsidiaries,  threatened,
complaint, charge or proceeding before the National Labor Relations Board or any
other  governmental  authority alleging any violation of the NLRA by the Company
or any of its Subsidiaries.

        Section 3.14  Compliance  with Laws.  Except as previously  disclosed in
writing in a letter to Holdings or in the SEC Reports, and except for violations
which are not reasonably likely to have a Company Material Adverse Effect,  each
of the  Company  and  each of its  Subsidiaries  is not,  to its  knowledge,  in
violation of, and to its knowledge has not violated,  (i) any federal,  state or
local law,  statute,  ordinance or  regulation or any other  requirement  of any
federal,   state  or  local   governmental   or  regulatory  body  of  competent
jurisdiction  applicable  to the  Company  or any  of  its  Subsidiaries  or the
business  of the  Company  or any of its  Subsidiaries  or (ii)  any term of any
applicable  judgment,   decree,   injunction,  law  and/or  order  issued  by  a
governmental or regulatory body of competent  jurisdiction.  Except as set forth
in the SEC  Reports,  each of the Company and each of its  Subsidiaries,  to its
knowledge, has all Permits required as of the date hereof for the conduct of the
business of the Company and each of its  Subsidiaries  as now conducted;  to the
Company's knowledge,  such Permits are in full force and effect; the Company has
not received notice of any violation in respect of any Permits and no proceeding
is pending of which the Company has received  notice or, to the knowledge of the
Company,  threatened  to  revoke  or  limit  any  Permit  which  revocations  or
limitations would have, in the aggregate, a Company Material Adverse Effect.


                                       20
<PAGE>

        Section 3.15 Opinion of Financial Advisor.  The Company has received the
opinion of Donaldson,  Lufkin & Jenrette, dated December 11, 1995, to the effect
that the  consideration  to be received  by the  Company  and its  stockholders,
pursuant to the  Transactions,  taken as a whole, is fair from a financial point
of view to the Company and its  stockholders,  a true and complete copy of which
opinion has been delivered to Holdings prior to the date hereof.

        Section  3.16  Intellectual  Property.  The  Company is not aware of any
patents held by any person or entity under which a license is reasonably  likely
to be required in connection  with the conduct of the business of the Company as
now  conducted or as  currently  proposed to be  conducted.  The Company has not
received  any written  notice of any adverse  claim of any person or entity with
respect to any intellectual  property right or asserted against or threatened to
be asserted  against,  the Company  with  respect to any  intellectual  property
right.

        Section 3.17 Contracts and Other Agreements. (a) Except as set forth the
SEC  Reports  (or  filed as an  exhibit  thereto),  there  are no  contracts  or
agreements to which the Company or any of its  Subsidiaries  is a party that are
material  to  the  business,   properties,   assets,   condition  (financial  or
otherwise),   results  of  operations  or  prospects  of  the  Company  and  its
Subsidiaries  taken  as a  whole.  Each  agreement,  contract,  lease,  license,
commitment  or  instrument  of the Company  set forth in the Company  Disclosure
Letter or the SEC Reports is in full force and effect and is a legal,  valid and
binding  agreement of the Company and, to the best knowledge of the Company,  of
each other party thereto, enforceable in accordance with its terms except to the
extent  that  its  enforceability  may  be  limited  by  applicable  bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles. Neither the Company nor any
of  its  Subsidiaries  is in  violation  of or in  default  under  (nor,  to the
knowledge of the Company,  does there exist any condition which upon the passage
of time or the  giving of notice  would  cause  such a  violation  of or default
under) any loan or credit agreement,  note, bond,  mortgage,  indenture,  lease,
permit,  concession,  franchise,  license  or  any  other  contract,  agreement,
arrangement  or  understanding,  to which it is a party or by which it or any of
its properties or assets is bound,  except for violations or defaults that could
not,  individually  or in the  aggregate,  reasonably be expected to result in a
Company Material Adverse Effect.

        (b) Set forth in the Company Disclosure Letter is (x) a list of all loan
or  credit  agreements,  notes,  bonds,  indentures,  and other  agreements  and
instruments  pursuant  to which any  Indebtedness  of the  Company or any of its
Subsidiaries  in an  aggregate  principal  amount  in excess  of  $1,000,000  is
outstanding  or may  be  incurred  and  (y)  the  respective  principal  amounts
currently outstanding

                                       21
<PAGE>

thereunder.  For purposes of this  Agreement,  "Indebtedness"  shall mean,  with
respect to any person,  without duplication,  (A) all obligations of such person
for borrowed  money, or with respect to deposits or advances of any kind to such
person, (B) all obligations of such person evidenced by bonds, debentures, notes
or similar  instruments,  (C) all obligations of such person upon which interest
charges  are  customarily  paid,  (D)  all  obligations  of  such  person  under
conditional  sale or other  title  retention  agreements  relating  to  property
purchased by such person,  (E) all  obligations of such person issued or assumed
as the deferred purchase price of property or services (excluding obligations of
such person to creditors  for raw  materials,  inventory,  services and supplies
incurred in the ordinary course of such person's business),  (F) all capitalized
lease  obligations of such person,  (G) all obligations of others secured by any
lien on property or assets owned or acquired by such person,  whether or not the
obligations  secured  thereby have been  assumed,  (H) all  obligations  of such
person  under  interest  rate or currency  hedging  transactions  (valued at the
termination value thereof),  (I) all letters of credit issued for the account of
such person and (J) all guarantees and  arrangements  having the economic effect
of a guarantee of such person of any Indebtedness of any other person.

        (c) The  Company is not a party to or bound by any  material  written or
oral (w) employment  agreement or employment  contract that is not terminable at
will by the Company, (x) covenant not to compete, or (y) agreement,  contract or
other arrangement with (A) any stockholder of the Company, (B) any Affiliate (as
defined  herein)  of the  Company  or,  to the  knowledge  of the  Company,  any
Affiliate  of any  stockholder  of the Company or (C) any  officer,  director or
employee of the Company (other than employment  agreements covered by clause (w)
above), or of any stockholder of the Company or of any Affiliate of the Company.
The term  "Affiliate"  means,  with  respect  to any  person,  any other  person
controlling,  controlled by or under direct or indirect common control with such
person (for the purposes of this definition "control," when used with respect to
any specified person, shall mean the power to direct the management and policies
of such person,  directly or  indirectly,  whether  through  ownership of voting
securities,   by  contract  or  otherwise;   and  the  terms  "controlling"  and
"controlled" shall have meanings correlative to the foregoing).

        (d) The  Company is not a party to or bound by any  material  written or
oral  mortgage,  pledge,  security  agreement,  deed of trust or other  document
granting a Lien or security interest (including,  but not limited to, Liens upon
properties  acquired  under  conditional  sales,  capital  leases or other title
retention or security devices).

        Section  3.18  Properties.  (a)  Except  as set  forth  in  the  Company
Disclosure Letter, each of the Company and each of its Subsidiaries has good and
marketable  title to, or valid  leasehold  interests

                                       22
<PAGE>

in,  all its  properties  and assets  except  for such as are no longer  used or
useful in the  conduct  of its  businesses  or as have been  disposed  of in the
ordinary  course of  business  and  except  for  defects  in  title,  easements,
restrictive  covenants  and similar  encumbrances  or  impediments  that, in the
aggregate,  do not and will not materially interfere with its ability to conduct
its  business as  currently  conducted.  

        (b) Each of the Company and each of its Subsidiaries has complied in all
material  respects with the terms of all material  leases to which it is a party
and under  which it is in  occupancy,  and all such leases are in full force and
effect.  Each of the Company and each of its  Subsidiaries  enjoys  peaceful and
undisturbed possession under all such material leases.

        Section 3.19 Environmental  Matters.  (a) Neither the Company nor any of
its  Subsidiaries   has  (x)  placed,   released,   transported,   arranged  for
transportation  of or disposed of any Hazardous  Substances (as defined  herein)
on,  under,  from  or at  any  of the  Company's  or  any  of its  Subsidiaries'
properties  or any other  properties  (which for  purposes of this  Section 3.19
includes any facility  formerly owned or operated by the Company),  in violation
of any  applicable  Environmental  Laws (as defined  herein)  except  where such
violation would not have a Company Material Adverse Effect, (y) any knowledge of
the presence of any Hazardous Substances on, under or at any of the Company's or
any of its  Subsidiaries'  properties or any other property but arising from the
Company's or any of its Subsidiaries' properties, in violation of any applicable
Environmental Laws except where such violation would not have a Company Material
Adverse Effect,  or (z) during the preceding  three years,  received any written
notice  (A)  from  a  Governmental  Entity  that  the  Company  or  any  of  its
Subsidiaries is in violation of any statute, law, ordinance,  regulation,  rule,
judgment,  decree or order of any Governmental  Entity relating to any matter of
pollution, protection of the environment, environmental regulation or control or
regarding Hazardous Substances (collectively,  "Environmental Laws") on or under
any  of the  Company's  or any of  its  Subsidiaries'  properties  or any  other
properties,  (B) of the  institution  or  pendency of any suit,  action,  claim,
proceeding or  investigation  by any  Governmental  Entity or any third party in
connection with any such violation, (C) from a Governmental Entity requiring the
response  to or  remediation  of a release or  threatened  release of  Hazardous
Substances at or arising from any of the  Company's or any of its  Subsidiaries'
properties or any other  properties,  or (D) demanding payment by the Company or
any  of  its  Subsidiaries  for  response  to or  remediation  of a  release  or
threatened  release  of  Hazardous  Substances  at or  arising  from  any of the
Company's or any of its Subsidiaries'  properties or any other  properties.  For
purposes of this Agreement,  the term "Hazardous Substance" shall mean any toxic
or  hazardous  materials,  wastes  or  substances,  including  asbestos,  buried
contaminants,    chemicals,   flammable   explosives,   radioactive   materials,
polychlorinated  biphenyls,  petroleum and petroleum products and


                                       23
<PAGE>
 
any substances defined as, or included in the definition of, "hazardous wastes",
"hazardous materials" or "toxic substances" under any Environmental Law.

        (b) To the knowledge of the Company,  no  Environmental  Law imposes any
obligation upon the Company or its Subsidiaries arising out of or as a condition
to any  transaction  contemplated  by this  Agreement  or the Option  Agreement,
including,  without  limitation,  any  requirement  to modify or to transfer any
Permit or license,  any requirement to file any notice or other  submission with
any  Governmental  Entity,  the  placement  of any  notice,  acknowledgement  or
covenant in any land  records,  or the  modification  of or  provision of notice
under any agreement,  consent order or consent  decree.  No Lien has been placed
upon any of the  Company's or its  Subsidiaries'  owned  properties,  or, to the
knowledge of the Company, leased properties under any Environmental Law.

        Section 3.20 Confidentiality Agreements. To the Company's knowledge, all
officers  and  employees  of  the  Company  who  have  access  to   confidential
information  have  entered into  confidentiality  agreements  and all  employees
providing services of a scientific nature have entered into invention agreements
in the form then utilized by the Company. To the Company's knowledge, no officer
or employee has disavowed his or her  obligations  under any such  agreement and
the Company is not aware of any facts or circumstances  which would constitute a
material breach of any such agreement.

        Section 3.21 Disclosure. No representations or warranties by the Company
in this Agreement and no statement contained in any document (including, without
limitation,  the Financials,  Interim  Financials,  Company  Disclosure  Letter,
certificates,  or other writings) furnished or to be furnished by the Company to
Holdings  or any of  its  representatives  pursuant  to  the  provisions  hereof
contains or will  contain any untrue  statement  of a material  fact or omits or
will omit to state a  material  fact  necessary,  in light of the  circumstances
under which it was made, in order to make the  statements  herein or therein not
misleading.



                                   ARTICLE IV
                   REPRESENTATIONS AND WARRANTIES OF HOLDINGS

        Holdings  represents  and  warrants to the Company  that the  statements
contained  in this  Article IV are correct  and  complete as of the date of this
Agreement  and will be correct and  complete  as 

                                       24
<PAGE>

of the Closing  Date (as though  made then and as though the  Closing  Date were
substituted  for the date of this Agreement  throughout this Article IV), except
as set forth in the disclosure  letter  delivered by FDESI to the Company on the
date hereof and  initialed  by the  parties  (the  "FDESI  Disclosure  Letter").
Nothing in the FDESI  Disclosure  Letter shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the FDESI
Disclosure Letter identities the exception with  particularity and describes the
relevant  facts in reasonable  detail.  Without  limiting the  generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed  adequate to disclose an  exception to a  representation  or
warranty made herein (unless the  representation  or warranty has to do with the
existence of the document or other items itself).  The FDESI  Disclosure  Letter
will be  arranged in  paragraphs  corresponding  to the  lettered  and  numbered
paragraphs contained in this Article IV.

        Section 4.1 Corporate Existence and Power. Each of Holdings and FDESI is
a corporation duly incorporated, validly existing and in good standing under the
laws of the  State of  California  and has all  requisite  corporate  power  and
authority to carry on its business as now conducted or currently  proposed to be
conducted.  FDESI is duly qualified to do business as a foreign  corporation and
is in good  standing in each  jurisdiction  where the  character of the property
owned or leased by it or the nature of its activities  makes such  qualification
necessary,  except for those  jurisdictions where the failure to be so qualified
would not,  individually or in the aggregate,  have a material adverse effect on
the  business,  properties,  condition  (financial  or  otherwise),  results  of
operations or prospects of FDESI (a "FDESI Material Adverse Effect").  FDESI has
heretofore  delivered to the Company true and complete  copies of the  Company's
Articles  of  Incorporation  and  By-laws  in each case as in effect on the date
hereof.  The minute  books of FDESI  contain  true and  complete  records of all
meeting  and  consents  in lieu of  meeting of its Board of  Directors  (and any
committees thereof), and of its stockholder.

        Section 4.2 Corporate Authorization.  Each of Holdings and FDESI has all
requisite  corporate  power and authority to execute and deliver this Agreement,
the Option  Agreement  and the Marketing  Agreement and perform its  obligations
under such agreements and to consummate the transactions contemplated hereby and
thereby.  The execution,  delivery and performance by Holdings and FDESI of this
Agreement, the Option Agreement and the Marketing Agreement and the consummation
by Holdings and FDESI of the transactions  contemplated  hereby and thereby have
duly  authorized  by the  board  of  directors  of  Holdings,  FDESI  and  Fluor
Corporation,  and no other corporate  action on the part of Holdings or FDESI is
necessary  to  authorize  the  execution,   delivery  and  performance  of  such
agreements and consummation of the transactions contemplated hereby and


                                       25
<PAGE>

thereby.  This  Agreement and the Option  Agreement have been, and the Marketing
Agreement  at the Closing will be, duly  executed and  delivered by Holdings and
FDESI and  constitute  valid  and  binding  obligations  of  Holdings  and FDESI
enforceable against Holdings and FDESI in accordance with their respective terms
subject to  applicable  bankruptcy,  insolvency,  moratorium  and  similar  laws
relating to or affecting creditors' rights and to general equitable principles.

        Section 4.3  Governmental  Authorization.  The  execution,  delivery and
performance by Holdings and FDESI of this  Agreement,  the Option  Agreement and
the  Marketing  Agreement  and the  consummation  by  Holdings  and FDESI of the
transactions  contemplated hereby and thereby require no action by or in respect
of, or filing by Holdings or FDESI with any  Governmental  Entity other than (i)
compliance with any applicable requirements of the HSR Act; (ii) compliance with
any applicable  requirements  of the Exchange Act, and the rules and regulations
promulgated thereunder; and (iii) compliance with any applicable requirements of
foreign or state securities laws.

        Section 4.4 Non-Contravention.  The execution,  delivery and performance
by Holdings and FDESI of this Agreement,  the Option Agreement and the Marketing
Agreement  and the  consummation  by  Holdings  and  FDESI  of the  transactions
contemplated  hereby and thereby do not and will not (i)  contravene or conflict
with their respective  certificate of  incorporation  or by-laws;  (ii) violate,
conflict  with or  result in the  breach  of any of the  terms  of,  result in a
material  modification  of the effect of,  otherwise give any other  contracting
party the right to terminate,  or constitute (or with notice or lapse of time or
both  constitute)  a default (by way of  substitution,  novation  or  otherwise)
under,  any contract or other agreement to which Holdings or FDESI is a party or
by or to which Holdings or FDESI or any of their respective assets or properties
may be bound; (iii) violate any order, judgment,  injunction, award or decree of
any court,  arbitrator or governmental  or regulatory  body against,  or binding
upon  Holdings  or FDESI or upon  the  securities,  properties  or  business  of
Holdings  or  FDESI;  (iv)  violate  any  statute,  law  or  regulation  of  any
jurisdiction as such statute,  law or regulation relates to Holdings or FDESI or
to the  securities,  properties or business of Holdings or FDESI;  (v) result in
the  creation or  imposition  of any Lien on any asset of Holdings or FDESI,  or
(vi) violate any Permit,  except,  with respect to clauses (ii),  (iv),  (v) and
(vi) of this Section 4.4, for violations,  or Liens,  which,  individually or in
the aggregate,  are not reasonably  likely to have (x) a material adverse effect
on the ability of Holdings to consummate the transactions contemplated hereby or
(y) a FDESI Material Adverse Effect.

        Section  4.5  Capitalization  of  FDESI.  As of  the  date  hereof,  the
authorized  capital  stock of FDESI  consists in its entirety of 1,000 shares of
common stock,  no par value,  of which 1,000 shares


                                       26
<PAGE>

are  outstanding  and  owned  of  record  and  beneficially  by  Holdings.   All
outstanding  shares of  capital  stock of FDESI  have been duly  authorized  and
validly issued and are fully paid,  nonassessable and free of preemptive rights.
Except as set forth in this Section 4.5, as of the date hereof there are, and on
the Closing Date there will be, no  outstanding  (i) shares of capital  stock or
other  securities  of  FDESI,  (ii)  securities  of  FDESI  convertible  into or
exchangeable  for shares of capital stock or other  securities of FDESI or (iii)
options, rights, subscriptions,  warrants, calls, unsatisfied preemptive rights,
or other agreements to acquire or otherwise receive from FDESI any capital stock
or other  securities  of, or securities  convertible  into or  exchangeable  for
capital stock or other  securities of, FDESI (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "FDESI Securities").

        Section 4.6 FDESI Joint Ventures.  (a) The FDESI Disclosure  Letter sets
forth a list of each entity in which FDESI holds or has the right to acquire one
percent  (1%) or more of the  equity,  partnership  or other  interests  of such
entity (each such entity,  except  Subsidiaries,  being referred to as an "FDESI
Joint Venture") and a list of all material  agreements relating thereto to which
FDESI is a party ("FDESI Joint Ventures  Agreements").  To FDESI's knowledge and
belief,  FDESI and each other party  thereto is in  compliance  in all  material
respects with all of the terms,  conditions and  obligations  binding upon it in
respect  of each of the  FDESI  Joint  Ventures  Agreements,  and as of the date
hereof none of the FDESI Joint Ventures  Agreements has been  terminated.  FDESI
has delivered true and correct copies of each FDESI Joint Ventures Agreement, as
amended,  modified or  supplemented,  to the  Company  and all waivers  executed
thereunder.

        (b) FDESI's  interest  in each of the FDESI  Joint  Ventures is directly
owned by FDESI and,  except for any  restrictions  on transfer  contained in the
FDESI Joint  Ventures  Agreements,  free and clear of any  material  Lien or any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise  dispose of such  interest).  Except as expressly set forth in
the FDESI Joint Ventures  Agreements,  there are no  outstanding  obligations of
FDESI to fund or make a further investment in any FDESI Joint Ventures.

        (c)  FDESI has no Subsidiaries.

        Section 4.7 FDESI Financial Statements.  The unaudited balance sheets of
FDESI as at April 30,  1995 and  October 31,  1995,  and the  related  unaudited
statements of operations for the fiscal year and six month period, respectively,
then  ended,  (except  for the  absence of  footnotes  and for  normal  year end
adjustments  and for the other matters set forth in that certain letter from Vic
L. Prechtl to Robert E. Sliney,  Jr. dated November 30, 1995) have been prepared
in  accordance  with GAAP


                                       27
<PAGE>

applied on a consistent  basis through the periods covered  thereby,  and fairly
present the consolidated  financial position of FDESI as of the date thereof and
its results of operations  for the period then ended.  The  foregoing  unaudited
financial  statements  of FDESI as at October 31, 1995,  and for the period then
ended,  are sometimes  herein called the "FDESI  Financials,"  the balance sheet
included in the FDESI  Financials is sometimes  herein called the "FDESI Balance
Sheet" and October 31, 1995 is sometimes  herein called the "FDESI Balance Sheet
Date." Except as set forth in the FDESI Disclosure  Letter,  FDESI does not have
any  liabilities  or  obligations  of any  nature  (whether  accrued,  absolute,
contingent or  otherwise)  to Holdings or any  Affiliate of Holdings  ("Holdings
Debt") or otherwise required by GAAP to be set forth on a balance sheet of FDESI
or in the notes thereto.

        Section  4.8  Disclosure  Documents.  The  information  with  respect to
Holdings  and its  Affiliates  furnished  to the  Company by Holdings in writing
specifically  for use in any Company  Disclosure  Document  will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein,  in the light of the circumstances
under which they were made,  not  misleading,  in the case of the Company  Proxy
Statement,  at the time the Company  Proxy  Statement  and or any  amendment  or
supplement  thereto is first mailed to stockholders of the Company,  and, in the
case of the  Company  Proxy  Statement,  at the  time the  stockholders  vote on
approval of the Transactions.

        Section  4.9  Operations  of  FDESI.  Except  as  contemplated  by  this
Agreement or as disclosed in the FDESI  Balance  Sheet,  since the FDESI Balance
Sheet Date, FDESI has conducted its business only in the ordinary course and has
not:

        (a) suffered or incurred any material  adverse  change in the  business,
properties,  condition  (financial  or  otherwise),  results  of  operations  or
prospects of FDESI (a "FDESI Material  Adverse  Change"),  and FDESI knows of no
such change that is threatened;

        (b) amended its certificate of  incorporation  or by-laws or merged with
or  into  or  consolidated  with  any  other  person,  subdivided  or in any way
reclassified  any shares of its capital  stock or changed or agreed to change in
any manner the rights of its outstanding capital stock or other securities;

        (c)  incurred  any  indebtedness  for  borrowed  money other than in the
ordinary course of business;


                                       28
<PAGE>

        (d)  declared  or paid any  dividends  or  declared  or made  any  other
distributions  or any kind to its  shareholder,  or made any direct or  indirect
redemption,  retirement,  purchase  or other  acquisition  of any  shares of its
capital stock or other securities;

        (e)  reduced its cash or  short-term  investments  or their  equivalent,
other  than to meet cash  needs  arising  in the  ordinary  course or  business,
consistent with past practices;

        (f)  except as  required  by GAAP,  made any  change  in its  accounting
methods or practices or made any change in depreciation or amortization policies
or rates adopted by it;

        (g) made any payment or commitment  to pay any severance or  termination
pay to any of its officers, directors,  employees,  consultants, agents or other
representatives,  other than payments or  commitments  to pay persons other than
its officers, directors or shareholders made in the ordinary course of business;

        (h) made any  acquisition  of all or  substantially  all of the  assets,
properties, capital stock or business of any other person;

        (i) agreed to the sale, lease, transfer or other disposition (other than
sales  of  assets  in  the  ordinary  course  of  business),   in  one  or  more
transactions,  of the business or assets of FDESI (including by way of a merger,
consolidation,   tender  or  exchange  offer,  sale  of  stock,  liquidation  or
dissolution or similar transaction);

        (j) entered into any employment agreement with any executive officers of
FDESI  or  granted  any  such  executive   officers  any  material  increase  in
compensation,  except in the ordinary  course of business  consistent with prior
practice;

        (k)  adopted any stock  option or other  stock-based  employee  benefits
plans or agreed to accelerate the vesting or  exercisability  of any employee or
director stock option;

        (l) incurred any damage,  destruction or loss, whether or not covered by
insurance, that has had or could have a FDESI Material Adverse Effect; or

        (m) issued, sold or otherwise disposed of any FDESI Securities.


                                       29

<PAGE>

        Section 4.10  Litigation of FDESI.  As of the date hereof,  there are no
outstanding  orders,  judgments,  injunctions,  awards or  decrees of any court,
governmental  or regulatory  body or arbitration  tribunal  against or involving
FDESI which could  reasonably be expected to result in a FDESI Material  Adverse
Change. As of the date hereof,  there are no actions,  suits or claims or legal,
administrative  or arbitral  proceedings of which Holdings or FDESI has received
notice,  or, to the knowledge of Holdings or FDESI,  investigations  (whether or
not the  defense  thereof or  liabilities  in  respect  thereof  are  covered by
insurance) pending or, to the knowledge of Holdings or FDESI, threatened against
or involving FDESI or any of its properties or assets.

        Section  4.11 Taxes of FDESI.  FDESI has paid all Taxes  required  to be
paid by it through the date hereof and all  deficiencies  or other  additions to
tax, interest and penalties owed by it, in connection with any such Taxes (other
than Taxes and deficiencies not material in the aggregate), and shall timely pay
any Taxes, including additions,  interest and penalties,  required to be paid by
it after the date  hereof and on or before the  Closing  Date  (other than Taxes
being  contested  in good faith and the  liability  for which is reserved for by
FDESI in  accordance  with GAAP).  All  reserves or other  provisions  for taxes
reflected in the FDESI  Financials are, or will be,  adequate,  and there are no
liens for  delinquent  taxes  upon any  property  or asset of  FDESI.  The FDESI
Disclosure  Letter  sets forth the status of the audit of any income tax returns
of FDESI (and of any  consolidated,  unitary or combined  returns which included
FDESI, but only insofar as such returns pertain  specifically to FDESI) for each
fiscal year for which the statute of limitations has not expired,  including the
amounts  of any  deficiencies  and  additions  to tax,  interest  and  penalties
indicated  on any  notices  of  proposed  deficiency  of  statutory  notices  of
deficiency  that may  have  been  issued  in  connection  therewith.  The  FDESI
Disclosure  Letter sets forth all federal tax elections  under the Code that are
in effect with  respect to FDESI for the fiscal  years ended May 1, 1993,  April
30, 1994,  and April 29, 1995.  No extension of time with respect to any date on
which any Tax return  was or is to be filed by FDESI is in force,  and no waiver
or agreement by FDESI is in force for the  extension of time for the  assessment
or payment of any Tax.  FDESI has not made any election  under Section 341(f) of
the Code.  FDESI has timely  filed all tax  returns  required  through  the date
hereof,  and shall  prepare and timely file, in a manner  consistent  with prior
years and  applicable  laws and  regulations,  all tax returns to be filed on or
before the Closing Date.

        Section  4.12  Environmental  Matters  of FDESI  (a)  FDESI  has not (x)
placed, released, transported, arranged for transportation of or disposed of any
Hazardous  Substances  on,  under,  from or at any of FDESI's  properties or any
other properties  (which for purposes of this Section 4.12 includes any facility
formerly   owned  or  operated  by  FDESI),   in  violation  of  any  applicable


                                       30
<PAGE>

Environmental  Laws, except where such violation would not have a FDESI Material
Adverse  Effect,  (y) any knowledge of the presence of any Hazardous  Substances
on, under or at any of FDESI's properties or any other property but arising from
FDESI's  properties,  in violation of any applicable  Environmental Laws, except
where such violation  would not have a FDESI  Material  Adverse  Effect,  or (z)
except in each case for notices set forth in the FDESI Disclosure Letter, during
the preceding  three years,  received any written notice (A) from a Governmental
Entity that FDESI is in violation of any  Environmental  Laws on or under any of
FDESI's  properties or any other properties,  (B) of the institution or pendency
of any suit,  action,  claim,  proceeding or  investigation  by any Governmental
Entity or any third  party in  connection  with any such  violation,  (C) from a
Governmental  Entity  requiring the response to or  remediation  of a release or
threatened  release of  Hazardous  Substances  at or arising from any of FDESI's
properties  or any  other  properties,  or (D)  demanding  payment  by FDESI for
response  to or  remediation  of a release or  threatened  release of  Hazardous
Substances at or arising from any of FDESI's properties or any other properties.

        (b) Except as set forth in the FDESI Disclosure Letter, to the knowledge
of  FDESI,  no  Environmental  Law  imposes  any  obligation  upon  FDESI or its
Subsidiaries arising out of or as a condition to any transaction contemplated by
this  Agreement or the Option  Agreement,  including,  without  limitation,  any
requirement to modify or to transfer any Permit or license,  any  requirement to
file any notice or other submission with any Governmental  Entity, the placement
of  any  notice,  acknowledgement  or  covenant  in  any  land  records,  or the
modification  of or provision of notice under any  agreement,  consent  order or
consent decree. No Lien has been placed upon any of FDESI's or its Subsidiaries'
owned  properties,  or, to the knowledge of FDESI,  leased  properties under any
Environmental Law.

        Section 4.13 FDESI  Contract  List. (a) Except as set forth in paragraph
4.13 of the FDESI Disclosure  Letter,  FDESI is not a party to or subject to any
contract to provide  services,  materials  or goods to third  parties (an "FDESI
Customer Contract").

        (b) The FDESI  Disclosure  Letter  sets forth with  respect to the FDESI
Customer Contracts, a summary of work performed as of the date of this Agreement
and work to be performed after the date of this Agreement not yet completed.

        (c)  Neither  FDESI  or  Holdings  has  received  notice  or  any  other
communication,  written or oral,  from any customer  terminating or not renewing
any FDESI Customer Contract or indicating the 

                                       31
<PAGE>

customer's  formal  non-acceptance  of work performed by FDESI or Holdings under
any FDESI Customer Contract.

        (d) FDESI or Holdings has completed in all material respects all work in
progress under all FDESI Customer  Contracts  pursuant to the terms of each such
contract,  including all warranty terms,  and  substantially  in accordance with
customer  specifications.  Neither  FDESI nor  Holdings has been  provided  with
written notice of any claims for material  defects in  performance  under any of
the  contracts,  and neither  FDESI nor Holdings  has  knowledge of any state of
facts or  anticipated  event which  FDESI or Holdings in good faith,  reasonably
believes may give rise to any such claim.

        Section 4.14    Purchase for Investment; Legend.  Holdings hereby:

        (a) acknowledges that Holdings has been advised that the Acquired Shares
have not been registered  under the Securities Act or under any state securities
laws;

        (b) represents and warrants that the Acquired  Shares are being acquired
by Holdings for  Holdings' own sole benefit and account for  investment  and not
with a view  to,  or for  resale  in  connection  with,  a  public  offering  or
distribution thereof;

        (c) agrees  that the Shares  will not be sold or  otherwise  disposed of
except in compliance with the registration  requirements or exemption provisions
under the Securities Act and the rules and regulations  promulgated  thereunder,
or any other applicable securities laws;

        (d) consents that stop transfer  instructions in respect of the Acquired
Shares,  relating only to the restrictions in Section 4.14 (c), may be issued to
any  transfer  agent,  transfer  clerk or other agent at any time acting for the
Company; and

        (e) consents  that the  certificate  or  certificates  representing  the
Acquired Shares not registered  under the Securities Act may be impressed with a
legend in substantially the following form:

    "THE SHARES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
    THE  SECURITIES  ACT OF 1933, AS AMENDED.  THE SHARES HAVE BEEN ACQUIRED FOR
    INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, OR TRANSFERRED IN THE
    ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE

                                       32
<PAGE>

    SHARES UNDER SUCH ACT OR AN EXEMPTION  THEREFROM.  THE SHARES REPRESENTED BY
    THIS AGREEMENT ARE ALSO SUBJECT TO CERTAIN  RESTRICTIONS ON SALE OR TRANSFER
    PURSUANT TO THE PROVISIONS OF THAT CERTAIN INVESTMENT  AGREEMENT DATED AS OF
    DECEMBER 11, 1995 AS TO WHICH THE COMPANY AND REGISTERED OWNER ARE PARTIES."

        Section 4.15 Employees and Employee  Benefit Plans.  Except as set forth
in the FDESI Disclosure Letter:

        (a) There are no Plans  maintained or  contributed to by or on behalf of
FDESI or Holdings, or with respect to which FDESI has or could have any material
liability  or  obligation,  whether  actual or  contingent,  direct or indirect,
through any Commonly Controlled Entity.

        (b) Each Plan is (and FDESI and  Holdings is with  respect to each Plan)
in compliance in all material  respects with all applicable  laws,  regulations,
reporting and disclosure  requirements and has been administered and operated in
all material  respects in accordance with its terms.  With respect to each Plan:
(i) no  "prohibited  transaction"  (within the meaning of Code  Section  4975 of
ERISA Section 406) or breach of fiduciary duty has occurred;  and (ii) there are
no material actions,  liens,  claims or disputes pending or, to the knowledge of
FDESI or Holdings, threatened.

        (c) With respect to each Plan (where  applicable),  (i) on or before the
date  hereof,  FDESI has  delivered or made  available  to the Company  complete
copies of (i) each Plan document and individual  agreement related thereto;  and
(ii)  the  most  recent  summary  plan  description,  annual  report,  actuarial
valuation and Internal Revenue Service determination letter.

        (d) No Plan is a "pension  plan"  (within the  meaning of ERISA  Section
3(2)) or a "multiple employer plan" (as described in Code Section 413(c)). FDESI
has not incurred any actual or  contingent  liability  arising under Title IV of
ERISA which is  reasonably  likely to have a Company  Material  Adverse  Effect.
Without  limiting  the  foregoing,  FDESI has no secondary  liability  under any
agreement  described in ERISA Section 4204, or has been a party to a transaction
described in ERISA  Section 4069,  in each case,  which is reasonably  likely to
have a FDESI Material Adverse Effect.


                                       33

<PAGE>

        (e) With  respect  to each Plan which is a "welfare  plan"  (within  the
meaning of ERISA Section 3(1)):  (i) except as required under Code Section 4980B
or Part 6 of Title I of ERISA,  no such plan provides  medical or death benefits
with respect to any  individual  beyond his or her  termination of employment or
service;  and (ii) there are no reserves,  assets,  surplus or prepaid  premiums
under any such Plan.

        (f) The  consummation  of the  Transactions  will not:  (i)  entitle any
individual to severance pay,  unemployment  compensation or any similar payment;
(ii)  accelerate  the time of  payment  or  vesting  or  increase  the amount of
compensation  due to any  individual;  or  (iii)  entitle  any  individual  to a
"parachute payment" (within the meaning of Code Section 280G).

        (g)  Neither  Holdings,  FDESI nor any  Commonly  Controlled  Entity has
incurred within the last two years or reasonably expects, as of the date hereof,
to incur any liability or obligation under WARN.

        (h) Each of Holdings  (with  respect to the business of FDESI) and FDESI
is not, and has not been, a party to any collective  bargaining agreement or any
agreement with a labor union or association.  There is no pending work stoppage,
organizing effort, strike, slowdown,  picketing or similar event affecting FDESI
or Holdings  (with  respect to the  business of FDESI) or, to the  knowledge  of
Holdings  and FDESI,  threatened,  and no  application  for  certification  of a
collective  bargaining agent is pending or, to the knowledge of the Holdings and
FDESI, threatened.  Neither Holdings (with respect to the business of FDESI) nor
FDESI has been cited for any unfair labor  practice or other practice or conduct
prohibited by the NLRA. There is no pending or, to the knowledge of Holdings and
FDESI,  threatened,  complaint,  charge or proceeding  before the National Labor
Relations Board or any other  governmental  authority  alleging any violation of
the NLRA by FDESI or Holdings (with respect to the business of FDESI).

        (i) Set forth in paragraph  4.15(i) of the FDESI Disclosure  Letter is a
true,  correct and  complete  list of all  employees  of FDESI (or  employees of
Holdings whose duties relate primarily to the business of FDESI and who Holdings
intends to transfer to FDESI on or before the  Closing)(the  "FDESI  Employees")
and their rates of pay. No FDESI employee has sued or threatened to sue FDESI or
Holdings, or bought or threatened to bring any administrative  complaint against
FDESI or  Holdings,  within the two years  prior to the date  hereof.  FDESI has
possession  of or access to all  personnel  files  with  respect  to each  FDESI
Employee.

                                       34

<PAGE>

        Section 4.16 Compliance with Laws.  Except for violations  which are not
reasonably  likely to have a FDESI  Material  Adverse  Effect,  each of Holdings
(with respect to the business of FDESI) and FDESI is not, to its  knowledge,  in
violation of, and to its knowledge has not violated,  (i) any federal,  state or
local law,  statute,  ordinance or  regulation or any other  requirement  of any
federal,   state  or  local   governmental   or  regulatory  body  of  competent
jurisdiction  applicable  to FDESI or Holdings  (with respect to the business of
FDESI) or the  business of FDESI or Holdings  (with  respect to the  business of
FDESI) or (ii) any term of any  applicable  judgment,  decree,  injunction,  law
and/or  order  issued  by  a  governmental   or  regulatory  body  of  competent
jurisdiction.  Except as set forth in the FDESI Disclosure  Letter,  each of the
FDESI and Holdings (with respect to the business of FDESI), to its knowledge has
all Permits  required  as of the date hereof for the conduct of the  business of
the FDESI or Holdings  (with respect to the business of FDESI) as now conducted;
to the  knowledge  of  Holdings  and FDESI,  such  Permits are in full force and
effect;  neither  FDESI nor  Holdings has  received  notice of any  violation in
respect of any Permits and no proceeding  is pending of which  Holdings or FDESI
has received  notice or, to the  knowledge of Holdings or FDESI,  threatened  to
revoke or limit any Permit which  revocations or limitations  would have, in the
aggregate, a FDESI Material Adverse Effect.

        Section  4.17  Intellectual  Property.  Except as set forth in the FDESI
Disclosure  Letter,  neither  FDESI nor Holdings is aware of any patents held by
any person or entity under which a license is  reasonably  likely to be required
in  connection  with the conduct of the business of FDESI as now conducted or as
currently proposed to be conducted.  Except as set forth in the FDESI Disclosure
Letter,  neither  Holdings  nor FDESI has  received  any  written  notice of any
adverse claim of any person or entity with respect to any intellectual  property
right relating to the business of FDESI or asserted  against or threatened to be
asserted  against FDESI or Holdings (with respect to the business of FDESI) with
respect to any intellectual property right.

        Section 4.18 Contracts and Other Agreements.  (a) Except as set forth in
the FDESI  Disclosure  Letter,  there are no  contracts or  agreements  to which
Holdings  or FDESI is a party that are  material  to the  business,  properties,
assets,  condition (financial or otherwise),  results of operations or prospects
of FDESI. Each agreement,  contract, lease, license, commitment or instrument of
FDESI set forth in the FDESI  Disclosure  Letter is in full force and effect and
is a legal,  valid and binding agreement of the FDESI and, to the best knowledge
of Holdings and FDESI,  of each other party  thereto,  enforceable in accordance
with its terms  except to the extent that its  enforceability  may be limited by
applicable  bankruptcy,  insolvency,  reorganization or other laws affecting the
enforcement of creditors' rights generally or by general  equitable  principles.
Neither  Holdings nor

                                       35
<PAGE>

FDESI is in violation of or in default  under (nor, to the knowledge of Holdings
or FDESI,  does there exist any condition  which upon the passage of time or the
giving of notice would cause such a violation  of or default  under) any loan or
credit agreement,  note, bond, mortgage,  indenture,  lease, permit, concession,
franchise,   license  or  any  other   contract,   agreement,   arrangement   or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that could not,  individually
or in the  aggregate,  reasonably  be  expected  to result  in a FDESI  Material
Adverse Effect.

        (b) Set forth in the FDESI  Disclosure  Letter is (x) a list of all loan
or  credit  agreements,  notes,  bonds,  indentures,  and other  agreements  and
instruments  pursuant  to  which  any  Indebtedness  of  FDESI  in an  aggregate
principal  amount in excess of $25,000 is outstanding or may be incurred and (y)
the respective principal amounts currently outstanding thereunder.

        (c) Except as set forth in the FDESI  Disclosure  Letter,  neither FDESI
nor  Holdings  is a party  to or  bound  by any  material  written  or oral  (w)
employment  agreement or employment  contract that is not  terminable at will by
the Company or FDESI,  (x) covenant not to compete which would limit or restrict
the Company or FDESI from  conducting  business  anywhere  in the world,  or (y)
agreement,  contract or other arrangement with (A) any stockholder of FDESI, (B)
any  Affiliate  (as defined  herein) of FDESI or, to the  knowledge  of FDESI or
Holdings, any Affiliate of any stockholder of FDESI or (C) any officer, director
or employee of FDESI  (other than  employment  agreements  covered by clause (w)
above), or of any stockholder of FDESI or of any Affiliate of FDESI.

        (d) Except as set forth in the FDESI Disclosure  Letter,  FDESI is not a
party to or bound by any material  written or oral  mortgage,  pledge,  security
agreement,  deed of trust or other document granting a Lien or security interest
(including, but not limited to, Liens upon properties acquired under conditional
sales, capital leases or other title retention or security devices).

        Section 4.19 Properties. (a) Except as set forth in the FDESI Disclosure
Letter, FDESI has good and marketable title to, or valid leasehold interests in,
all its properties and assets except for such as are no longer used or useful in
the conduct of its businesses or as have been disposed of in the ordinary course
of business and except for defects in title,  easements,  restrictive  covenants
and similar encumbrances or impediments that, in the aggregate,  do not and will
not  materially  interfere with its ability to conduct its business as currently
conducted.



                                       36
<PAGE>

        Section 4.20  Confidentiality  Agreements.  To the knowledge of Holdings
and FDESI, all FDESI Employees who have access to confidential  information have
entered into confidentiality  agreements and all employees providing services of
a  scientific  nature have entered into  invention  agreements  in the form then
utilized  by  Holdings.  The rights to all such  agreements  will be assigned by
Holdings to FDESI prior to Closing.  To the knowledge of Holdings and FDESI,  no
officer  or  employee  has  disavowed  his or her  obligations  under  any  such
agreement and neither  Holdings nor FDESI is aware of any facts or circumstances
which would constitute a material breach of any such agreement.

        Section 4.21 FDESI Disclosure. No representations or warranties by FDESI
in this Agreement and no statement contained in any document (including, without
limitation,  the  Financials,   Interim  Financials,  FDESI  Disclosure  Letter,
certificates,  or other  writings)  furnished or to be furnished by FDESI to the
Company or any of its representatives pursuant to the provisions hereof contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary,  in light of the  circumstances  under which it
was made, in order to make the statements herein or therein not misleading.


                                   ARTICLE V
                            COVENANTS OF THE COMPANY

        The Company agrees that:

        Section 5.1 Conduct of Business.  (a) Ordinary Course. During the period
from the date of this Agreement to the Closing Date, the Company shall and shall
cause its Subsidiaries  to, carry on their  respective  businesses in the usual,
regular and  ordinary  course in  substantially  the same  manner as  heretofore
conducted and, to the extent consistent therewith, use all reasonable efforts to
preserve  intact  their  current  business  organizations,  keep  available  the
services  of  their  current   officers  and   employees   and  preserve   their
relationships with customers, suppliers, licensors, licensees,  distributors and
others having  business  dealings  with them to the end that their  goodwill and
ongoing businesses shall, in all material respects, be unimpaired at the Closing
Date.  Except for the matters  listed in Section  5.1 of the Company  Disclosure
Letter, without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Closing Date, the Company shall not, and shall
not  permit  any of its  Subsidiaries,  without  the prior  written  consent  of
Holdings, to:


                                       37
<PAGE>

                (i) (x) declare,  set aside or pay any dividends on, or make any
other  distributions  in  respect  of,  any of its  capital  stock,  other  than
dividends and distributions by any direct or indirect wholly owned Subsidiary of
the Company to its parent, (y) split, combine or reclassify an its capital stock
or issue or  authorize  the issuance of any other  securities  in respect of, in
lieu of or in  substitution  for shares of its  capital  stock or (z)  purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its  Subsidiaries  or any other  securities  thereof or any rights,  warrants or
options to acquire any such shares or other securities;

                (ii) issue,  deliver,  sell,  pledge or  otherwise  encumber any
shares of its capital  stock,  any other  voting  securities  or any  securities
convertible  into,  or any  rights,  warrants  or options to  acquire,  any such
shares, voting securities or convertible securities (other than (x) the issuance
of Common Stock upon the exercise of Employee  Stock Options and Director  Stock
Options  outstanding  on the date of this  Agreement  in  accordance  with their
present  terms,  and (y) the  issuance  of Common  Stock  pursuant to the Option
Agreement);

                (iii) amend its certificate of  incorporation,  by-laws or other
comparable   charter  or  organizational   documents  or  reincorporate  in  any
jurisdiction;

                (iv) acquire or agree to acquire (x) by merging or consolidating
with, or by  purchasing a substantial  portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other  business  organization  or division  thereof,  except for such actions
undertaken in the ordinary  course of business and consistent with past practice
and  involving no more than $250,000 in the aggregate or (y) any assets that are
material,  individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole,  except  purchases  of  inventory  in the  ordinary  course of
business consistent with past practice;

                (v) sell,  lease,  mortgage or otherwise  encumber or subject to
any Lien or otherwise dispose of, any of its properties or assets,  except sales
of properties or assets no longer used by the Company or its Subsidiaries in the
conduct of its business and sales of inventory in the ordina  course of business
consistent with past practice;

                (vi) (y) incur any  Indebtedness for borrowed money or guarantee
any such  Indebtedness of another  person,  issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its  Subsidiaries,  guarantee any debt securities of another person,  enter into
any "keep well" or other agreement to maintain any financial statement condition
of

                                       38
<PAGE>

another person or enter into any  arrangement  having the economic effect of any
of the foregoing, except for short-term borrowing not in excess of $1,000,000 in
the aggregate  incurred in the ordinary course of business  consistent with past
practice,  the  endorsement  of checks in the normal  course of business and the
extension  of credit in the  normal  course of  business  or (z) make any loans,
advances or capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect  wholly  owned  Subsidiary  of the
Company;

                (vii)  make or  agree to make any new  capital  expenditures  or
commitments,  purchases of property or acquisitions of other businesses, capital
assets or properties  which,  individually,  is in excess of $250,000 or, in the
aggregate, are in excess of $1,000,000 or enter into any new real property lease
with an annual rental of more than $60,000;

                (viii) make any Tax election  (other than in the ordinary course
of preparing  and filing its Tax returns) or settle or  compromise  any material
Tax liability;

                (ix) pay,  discharge  or  satisfy  any  claims,  liabilities  or
obligations   (absolute,   accrued,   asserted  or  unasserted,   contingent  or
otherwise),  other than the payment, discharge or satisfaction,  in the ordinary
course of business  consistent  with past practice or in  accordance  with their
terms, or liabilities  reflected or reserved against in, or contemplated by, the
most recent  consolidated  financial  statements  (or the notes  thereto) of the
Company included in the SEC Reports or incurred after the date of such financial
statements in the ordinary course of business consistent with past practice,  or
waive the benefits of, or agree to modify in any manner, any  confidentiality or
similar agreement to which the Company or any of its Subsidiaries is a party;

                (x) adopt any  shareholder  rights or  similar  plan or take any
other  action  with  the  intention  of,  or  which  may  have  the  effect  of,
discriminating  against  Holdings  as a  shareholder  of  the  Company  (or  any
successor);

                (xi) adopt or amend in any material respect any Plan;

                (xii) enter into any contract,  agreement,  plan or  arrangement
covering  any  director,  officer or  employee  providing  for the making of any
payments,  the  acceleration  of  vesting  of any  benefit or right or any other
entitlement   contingent  upon  (A)  the   consummation   of  the   transactions
contemplated hereby or by the Option Agreement or any acquisition by Holdings of
securities of the Company  (whether by merger,  tender offer,  private or market
purchases  or  otherwise)  or  (B)  the

  
                                     39
<PAGE>

termination of employment  after the occurrence of any such  contingency if such
payment,  acceleration of entitlement  would not have been provided but for such
contingency;  or amend any existing contract,  agreement, plan or arrangement to
so provide; or

                (xiii)  authorize any of, or commit or agree to take any of, the
foregoing actions.

        (b) Other  Actions.  The Company  shall not, and shall not permit any of
its  Subsidiaries  to, take any action that would,  or that could  reasonably be
expected to,  result in (i) any of the  representations  and  warranties  of the
Company set forth in this Agreement or the Option Agreement becoming untrue, or,
(ii) any of the  conditions to the Merger set forth in Article  VIII,  not being
satisfied.

        (c) Advice of Changes. The Company shall promptly advise Holdings orally
and in  writing  of any  change  or  event  having,  or  which,  insofar  as can
reasonably be foreseen,  would have, a material  adverse effect on the Merger or
the Recapitalization, or a Company Material Adverse Effect.

        Section 5.2 Stockholder Meeting; Proxy Material. The Company shall cause
a meeting of its  stockholders  (the "Company  Stockholder  Meeting") to be duly
called and held as soon as practicable  for the purpose of voting on approval of
the  Transactions.  Subject  to Section  5.4(a),  the Board of  Directors  shall
unanimously  recommend  approval  and  adoption of the matters  submitted to the
Company's  stockholders,  including  the  issuance  of the  Acquired  Shares  to
Holdings pursuant to the Merger, as required pursuant to the rules of the NASDAQ
National  Market,  and the  execution  and  filing  of the  Charter  Amendments,
pursuant to the  Recapitalization.  In connection  with the Company  Stockholder
Meeting,  the  Company:  (i)  shall  promptly  prepare  and file with the SEC in
accordance  with the Exchange  Act the Company  Proxy  Statement,  shall use all
reasonable  efforts to have the Company Proxy Statement  and/or any amendment or
supplement  thereto  cleared  by  the  SEC  and  shall  thereafter  mail  to its
stockholders as promptly as practicable the Company Proxy Statement;  (ii) shall
use all reasonable efforts to obtain the necessary approvals by its stockholders
of  the   Transactions;   and  (iii)  shall  otherwise  comply  with  all  legal
requirements  applicable  to such meeting.  The Company shall make  available to
Holdings  prior to the filing  thereof  with the SEC  copies of the  preliminary
Company Proxy Statement and any amendments or supplements thereto and shall make
any changes  therein  reasonably  requested by Holdings  insofar as such changes
relate to any matters  relating to  Holdings,  FDESI or the  description  of the
Transactions.

        Section  5.3  Access  to  Information.  From the date  hereof  until the
Closing,  the Company  shall give  Holdings,  its counsel,  financial  advisors,
auditors and other authorized  representatives  reasonable

                                       40
<PAGE>

access  during  normal  business  hours to the  offices,  properties,  books and
records of the Company and its  Subsidiaries  and, to the extent the Company may
do so, its Joint  Ventures,  shall furnish to Holdings,  its counsel,  financial
advisors,  auditors and other  authorized  representatives  such  financial  and
operating data and other  information as such persons may reasonably  request to
the extent available to the Company and shall instruct the Company's  employees,
counsel and financial  advisors to cooperate with Holdings in its  investigation
of the  business  of the  Company,  its  Subsidiaries  and its  Joint  Ventures;
provided,  that no  investigation  pursuant to this Section 5.3 shall affect any
representation  or  warranty  given by the Company to  Holdings  hereunder.  All
requests for information  made pursuant to this Section 5.3 shall be directed to
the Chief  Financial  Officer of the  Company  or such  other  persons as may be
designated by him.

        Section 5.4 No  Solicitation  of Other Offers.  (a) From the date hereof
until the  earlier of the  Closing or the  termination  of this  Agreement,  the
Company shall not, nor shall it permit any of its  Subsidiaries  to, directly or
indirectly,  take (nor  shall the  Company  authorize  or permit  its  officers,
directors,   employees,   representatives,    investment   bankers,   attorneys,
accountants  or  other  agents  or  affiliates,  to take)  any  action  to:  (i)
encourage,  solicit or initiate the submission of any  Acquisition  Proposal (as
defined  below),  (ii) enter into any  agreement  with respect to or propose any
Acquisition  Proposal  or (iii)  participate  in any way in any  discussions  or
negotiations  with, or furnish any  information  to, any person or entity (other
than Holdings or its officers, directors, employees, representatives, investment
bankers,  attorneys,  accountants  or other agents or affiliates of Holdings) in
connection  with,  or take any other action to  facilitate  any inquiries or the
making of any proposal that  constitutes,  or may reasonably be expected to lead
to, any  Acquisition  Proposal;  provided,  however,  that (x) the  Company  may
participate in discussions or  negotiations  (including as a part thereof making
any counterproposal)  with or furnish information to any third party pursuant to
a  customary  confidentiality  agreement  (so long as it has  complied  with the
prohibitions of paragraph (a),  subparagraph (i) above) if (i) a majority of the
Board of Directors  determines in good faith, after receipt of written advice of
outside counsel,  that the failure to provide such information or participate in
such  discussions  or  negotiations  would be more  likely than not to cause the
members  of the Board of  Directors  to be in breach of their  fiduciary  duties
under  Delaware  Law and  (ii) a  majority  of the  Board  of  Directors,  after
consultation with the Company's  independent  financial advisors,  determines in
good faith that there is a  reasonable  possibility  that such third  party will
submit to the Company an Acquisition  Proposal which is a Superior  Proposal (as
defined below),  (y) if a majority of the Board of Directors  determines in good
faith,  after receipt of written advice of outside counsel,  that the failure to
recommend to the  Company's  stockholders  an  Acquisition  Proposal  which is a
Superior  Proposal  would cause the members of the Board of  Directors  to be in
breach of their  fiduciary  duties


                                       41
<PAGE>

under  Delaware  Law,  the  Company  may  withdraw  its  recommendation  to  the
stockholders in favor of the Transactions and recommend to its stockholders such
an Acquisition  Proposal which is a Superior  Proposal and (z) after termination
of this Agreement,  the Company may enter into an agreement with any third party
with respect to any Acquisition Proposal which is a Superior Proposal; provided,
further however,  that the Company shall not take any action described in clause
(x),  (y) or (z) of the  immediately  preceding  provision  except  after prompt
notice to Holdings of its receipt of any Acquisition  Proposal or of any inquiry
or request for information  contemplating an Acquisition  Proposal.  The Company
shall promptly notify Holdings of its receipt of any Acquisition  Proposal or of
any inquiry or request for information  contemplating  an Acquisition  Proposal.
The Company shall keep Holdings  informed,  on a current basis, of the status of
any such  proposals,  negotiations  or  discussions  except to the extent that a
majority of the Board of Directors  determines  in good faith,  after receipt of
written  advice of outside  counsel,  that the provision of such  information to
Holdings  would be more  likely than not to cause the members of the Board to be
in breach of their  fiduciary  duties under Delaware Law. Any actions  permitted
under,  and taken in  compliance  with,  this  Section 5.4 shall not be deemed a
breach of any other  covenant  or  agreement  of the Company  contained  in this
Agreement.

                (b) (i) For purposes of this Agreement,  "Acquisition  Proposal"
shall  mean  any  bona  fide  proposal  made by a third  party  to  acquire  (A)
beneficial  ownership  (as defined  under Rule 13(d) of the  Exchange  Act) of a
majority equity interest in the Company  pursuant to a merger,  consolidation or
other business  combination,  sale of shares of capital  stock,  tender offer or
exchange offer or similar transactions involving the Company including,  without
limitation,   any  single  or  multi-step   transaction  or  series  of  related
transactions  which is  structured  in good faith to permit  such third party to
acquire  beneficial  ownership of a majority or greater  equity  interest in the
Company or (B) all or substantially all of the business or assets of the Company
(other  than the  transactions  contemplated  by this  Agreement  and the Option
Agreement).  Any  transaction  described  in the  preceding  sentence  is herein
referred to as an "Acquisition Transaction."

                (ii) The  term  "Superior  Proposal"  shall  mean any bona  fide
Acquisition  Proposal  which a majority of the members of the Board of Directors
determines  in  its  good  faith  judgment  (based  on  the  written  advice  of
independent  financial  advisors)  to be more  favorable  to the Company and the
holders of Common Stock than the transactions  contemplated  hereby  (including,
without limitation,  the Marketing  Agreement),  taken as a whole, and for which
financing is then  committed or which,  in the good faith judgment of a majority
of such members (based on the written advice of independent  financial advisors)
is capable of being financed by such third party.

  
                                     42
<PAGE>
        
        Section 5.5 Board of Directors and Officers. The Company shall cause the
Board of  Directors of the Company,  effective  upon the Closing,  to consist of
seven members, and shall cause the filing of the Charter Amendments to terminate
the  classification  of the  Board  of  Directors.  Until  such  time  as  their
successors  are duly  elected or  appointed,  effective  upon the  Closing,  the
directors who shall serve shall be Walter C. Barber, Allan S. Bufferd, Robert P.
Schechter,  David L. Myers, J. Michal Conaway,  James C. Stein and an additional
Independent Director to be named by Holdings prior to the mailing of the Company
Proxy  Statement.  The Company  shall also cause the Board of  Directors  of the
Surviving  Corporation,  immediately  following the Closing, to consist of three
members, Walter C. Barber, David L. Myers and J. Michal Conaway, who shall serve
until their successors are duly elected or appointed.  The Surviving Corporation
shall cause the following  individuals to be appointed to the offices indicated,
effective upon the Closing, to serve at the pleasure of the Board of Directors:
        
        Walter Barber          President
        Robert Sliney          Vice President and CFO
        Steve Paquette         Vice President
        Keith Angell           Vice President
        Ronnie Smith           Vice President
        John Wood              Vice President
        Don Stokley            Vice President

        Section 5.6 Amendments to Certificate of Incorporation and By-laws.  The
Board of Directors  shall adopt,  subject to stockholder  approval,  the Charter
Amendments and By-law  Amendments and submit such amendments for approval by the
stockholders  of the Company at the  Company  Stockholder  Meeting.  The Charter
Amendments  shall  include a provision  changing  the name of the Company as set
forth therein.  The Board of Directors shall recommend  approval and adoption of
such amendments by the Company's stockholders, subject to Section 5.4(a).

        Section  5.7  Stock  Options.  The  Company  shall not take any steps to
accelerate  the  vesting or  exercisability  of any  Employee  Stock  Options or
Director Stock Options  outstanding on the date of this Agreement,  or otherwise
modify the terms of such  options on or before the  Closing,  without  the prior
written  consent of Holdings.  Promptly after the Closing Date (but effective as
of the Closing  Date of the  Merger),  each of the  outstanding  Employee  Stock
Options and each of the  outstanding  Director  Stock Options shall be canceled,
and the holder thereof shall receive, in exchange therefore, a substitute option
(an "Adjusted  Option") to purchase a number of shares of New Common Stock equal
to the number of shares of Old Common  Stock  subject  to such  canceled  option
multiplied  by

                                       43
<PAGE>

the Adjustment  Fraction (as defined below), at a per share exercise price equal
to the per share exercise price of such canceled option multiplied by a fraction
equal to one divided by the Adjustment  Fraction.  Any Adjusted Option issued as
described  above shall be subject to the same terms and  conditions  (other than
number of shares and  exercise  price) as the option for which it is  exchanged,
including the terms relating to vesting  (treating  such Adjusted  Options as if
they were granted at the same time as the options for which they were exchanged)
and the conditions relating to exercise.

For purposes of the  adjustments  described  in this  section,  the  "Adjustment
Fraction"  means a fraction,  the  numerator of which equals the Current  Market
Price (as defined below) of a share of Old Common Stock,  and the denominator of
which  equals  the  Current  Market  Price of a share of New Common  Stock.  The
"Current  Market  Price" of a share of Old Common Stock or a share of New Common
Stock  means the  average  per share  closing  price for the five  trading  days
immediately preceding the Closing Date, in the case of the Old Common Stock, and
the five trading days immediately following the Closing Date, in the case of the
New Common Stock, as reported on the NASDAQ National Market.

        Section 5.8 Update to Opinion of Financial  Advisor.  The Company  shall
request and thereafter  use its best efforts to obtain,  prior to the mailing of
the Company  Proxy  Statement,  an  additional  opinion of  Donaldson,  Lufkin &
Jenrette, to the effect that as of such date the consideration to be received by
the  Company and its  stockholders,  pursuant  to the  Transactions,  taken as a
whole,  is  fair  from a  financial  point  of  view  to  the  Company  and  its
stockholders.


                                   ARTICLE VI
                        COVENANTS OF HOLDINGS AND FDESI

        Section 6.1 Conduct of FDESI Business.  (a) Ordinary Course.  During the
period from the date of this  Agreement to the Closing Date,  Holdings and FDESI
covenant  that FDESI and Holdings  (with respect to the business of FDESI) shall
carry on their respective  businesses in the usual,  regular and ordinary course
in  substantially  the same manner as  heretofore  conducted  and, to the extent
consistent  therewith,  use all  reasonable  efforts to  preserve  intact  their
current  business  organizations,  keep  available the services of their current
officers  and  employees  and  preserve  their   relationships  with  customers,
suppliers,  licensors,  licensees,   distributors  and  others  having  business
dealings with them to the end that their goodwill and ongoing  businesses shall,
in all material  respects,  be

                                       44
<PAGE>

unimpaired  at  the  Closing  Date.  Without  limiting  the  generality  of  the
foregoing,  during the period  from the date of this  Agreement  to the  Closing
Date, FDESI shall not:

                (i) (x) declare,  set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (y) split,  combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other  securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any shares of capital
stock of FDESI or any  other  securities  thereof  or any  rights,  warrants  or
options to acquire any such shares or other securities;

                (ii) issue,  deliver,  sell,  pledge or  otherwise  encumber any
shares of its capital  stock,  any other  voting  securities  or any  securities
convertible  into,  or any  rights,  warrants  or options to  acquire,  any such
shares, voting securities or convertible securities;

                (iii) amend its certificate of  incorporation,  by-laws or other
comparable   charter  or  organizational   documents  or  reincorporate  in  any
jurisdiction;

                (iv) acquire or agree to acquire (x) by merging or consolidating
with, or by  purchasing a substantial  portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other  business  organization  or division  thereof,  except for such actions
undertaken in the ordinary  course of business and consistent with past practice
and  involving no more than $250,000 in the aggregate or (y) any assets that are
material, individually or in the aggregate, to FDESI;

                (v) sell,  lease,  mortgage or otherwise  encumber or subject to
any Lien or otherwise dispose of, any of its properties or assets,  except sales
of  properties  or assets no longer used by FDESI in the conduct of its business
and sales of inventory in the ordinary  course of business  consistent with past
practice;

                (vi) (y) incur any  Indebtedness for borrowed money or guarantee
any such  Indebtedness of another  person,  issue or sell any debt securities or
warrants or other rights to acquire any debt securities of FDESI,  guarantee any
debt securities of another person, enter into any "keep well" other agreement to
maintain any financial  statement  condition of another person or enter into any
arrangement  having  the  economic  effect of any of the  foregoing,  except for
short-term  borrowing on an  inter-company  basis not in excess of $1,000,000 in
the aggregate  incurred in the ordinary course of business  consistent with past
practice,  the  endorsement  of checks in the normal  course of business

                                       45
<PAGE>

and the  extension  of credit in the normal  course of  business or (z) make any
loans,  advances  or  capital  contributions  to, or  investments  in, any other
person, other than to FDESI;

                (vii)  make or  agree to make any new  capital  expenditures  or
commitments,  purchases of property or acquisitions of other businesses, capital
assets or  properties  which,  individually,  is in excess of $50,000 or, in the
aggregate, are in excess of $250,000 or enter into any new real property lease;

                (viii) make any Tax election  (other than in the ordinary course
of preparing  and filing its Tax returns) or settle or  compromise  any material
Tax liability;

                (ix) pay,  discharge  or  satisfy  any  claims,  liabilities  or
obligations   (absolute,   accrued,   asserted  or  unasserted,   contingent  or
otherwise),  other than the payment, discharge or satisfaction,  in the ordinary
course of business  consistent  with past practice or in  accordance  with their
terms, or liabilities  reflected or reserved against in, or contemplated by, the
most recent  consolidated  financial  statements (or the notes thereto) of FDESI
included  in the  FDESI  Disclosure  Letter or  incurred  after the date of such
financial  statements in the ordinary  course of business  consistent  with past
practice,  or waive the  benefits  of, or agree to  modify  in any  manner,  any
confidentiality or similar agreement to which FDESI is a party;

                (x) adopt any  shareholder  rights or  similar  plan or take any
other  action  with  the  intention  of,  or  which  may  have  the  effect  of,
discriminating against the Company as a shareholder of FDESI (or any successor);

                (xi) adopt or amend in any material respect any Plan;

                (xii) enter into any contract,  agreement,  plan or  arrangement
covering  any  director,  officer or  employee  providing  for the making of any
payments,  the  acceleration  of  vesting  of any  benefit or right or any other
entitlement   contingent  upon  (A)  the   consummation   of  the   transactions
contemplated hereby or by the Option Agreement or any acquisition by the Company
of  securities  of FDESI  (whether by merger,  tender  offer,  private or market
purchases  or  otherwise)  or  (B)  the  termination  of  employment  after  the
occurrence of any such contingency if such payment,  acceleration of entitlement
would not have been  provided  but for such  contingency;  or amend any existing
contract, agreement, plan or arrangement to so provide.


                                       46

<PAGE>

                (xiii)  authorize any of, or commit or agree to take any of, the
foregoing actions.

        (b) Other Actions. Neither FDESI nor Holdings shall take any action that
would,  or that  could  reasonably  be  expected  to,  result  in (i) any of the
representations  and warranties of Holdings or FDESI set forth in this Agreement
or the Option Agreement  becoming  untrue,  or (ii) any of the conditions to the
Merger set forth in Article VIII, not being satisfied.

        (c) Advice of Changes.  FDESI shall  promptly  advise the Company orally
and in  writing  of any  change  or  event  having,  or  which,  insofar  as can
reasonably be foreseen,  would have, a material  adverse effect on the Merger or
the Recapitalization, or a FDESI Material Adverse Effect.

        Section  6.2  Access  to  Information.  From the date  hereof  until the
Closing,  FDESI and Holdings  (with respect to the business of FDESI) shall give
the Company,  its counsel,  financial  advisors,  auditors and other  authorized
representatives  reasonable  access during normal business hours to the offices,
properties,  books  and  records  of FDESI and  Holdings  (with  respect  to the
business of FDESI) and, to the extent FDESI may do so, the FDESI Joint Ventures,
shall  furnish to the Company,  its counsel,  financial  advisors,  auditors and
other  authorized  representatives  such  financial and operating data and other
information  as such persons may reasonably  request to the extent  available to
FDESI and shall instruct FDESI's  employees,  counsel and financial  advisors to
cooperate with the Company in its investigation of the business of FDESI and the
FDESI Joint Ventures;  provided,  that no investigation pursuant to this Section
6.2 shall affect any  representation  or warranty  given by FDESI to the Company
hereunder.  All requests for information made pursuant to this Section 6.2 shall
be directed to the President of FDESI or such other persons as may be designated
by him.

        Section 6.3 Certain Additional  Agreements of Holdings.  With respect to
paragraphs (a), (b), (c), (d) and (e), until April 30, 1999, and with respect to
paragraph (f), for the periods  specified  therein (in each case the "Standstill
Period"), Holdings and the Company agree:

        (a)  Neither  Holdings  nor any of its  Affiliates  shall enter into any
contract,  agreement or  transaction  with the Company or any of its  Affiliates
after the Closing Date that is material to the  Company's  business,  taken as a
whole, without the prior approval of a majority of the Independent Directors (as
defined   herein)  except  for  (i)  any  contract,   agreement  or  transaction
contemplated  by the  Marketing  Agreement  or the  Option  Agreement,  (ii) any
contract, agreement or transaction

                                       47
<PAGE>

which is entered into  between such parties in the ordinary  course of business,
and (iii) any contract,  agreement or  transaction  governed by paragraphs  (b),
(c), (d) or (f);

        (b)  Neither  Holdings  nor any of its  Affiliates  shall,  directly  or
indirectly,  purchase or otherwise acquire, any New Common Stock,  securities of
the Company  convertible  into or exchangeable  for New Common Stock or options,
rights,  warrants  and similar  securities  issued by the Company to acquire New
Common  Stock,  without  the prior  approval  of a majority  of the  Independent
Directors, unless immediately after such purchase or acquisition, the percentage
of then  outstanding  New  Common  Stock  that  would  be  owned  of  record  or
beneficially by Holdings of its Affiliates  ("Holdings'  Percentage")  would not
exceed 65%,  provided,  however,  that the foregoing  restrictions  on purchases
shall not apply to the  exercise by Holdings of the Option;  provided,  however,
further,  that if the Option is exercised by Holdings,  the Option  Shares held,
directly or  indirectly,  by Holdings shall be counted in any  determination  of
Holdings' Percentage with respect to any purchases by Holdings or its Affiliates
after the date of such exercise of the Option;

        (c) The Company shall not,  directly or indirectly,  purchase any shares
of New Common Stock without the prior approval of a majority of the  Independent
Directors, unless immediately after such repurchase,  Holdings' Percentage would
not exceed 65%;

        (d) Holdings shall not sell, transfer,  mortgage or otherwise dispose of
any of the New Common  Stock held by Holdings  without  the prior  approval of a
majority  of the  Independent  Directors;  provided,  however,  that  the  prior
approval of the  Independent  Directors  shall not be required if there occurs a
substantial and extreme adverse change in the business,  prospects, or condition
(financial  or  otherwise)  of  the  Company  that  arises  from   corresponding
substantial  adverse  changes of expected  long term  duration in the market for
environmental services;

        (e) The Company shall not enter into any amendment or terminate or waive
any provision of this Agreement, the Option Agreement or the Marketing Agreement
without the prior approval of a majority of the Independent Directors; and

        (f) Until April 30, 1999,  Holdings  shall vote all shares of New Common
Stock owned by it in favor of fixing the size of the Board of  Directors  of the
Company at not more than  seven and in favor of not less than three  Independent
Directors.  Until the annual  stockholders'  meeting of the  Company (or written
consent in lieu  thereof)  held in 1998,  Holdings  shall vote all shares of New


                                       48
<PAGE>

Common  Stock owned by it in favor of Allan S.  Bufferd and Robert P.  Schechter
(whom  Holdings  shall also cause to be nominated) in any election of members of
the Company's Board of Directors.

        For purposes of this Agreement,  "Independent Director" means a director
of the  Company  who is not  (apart  from  such  directorship)  (i) an  officer,
Affiliate, employee, principal stockholder, consultant or partner of Holdings or
any Affiliate of Holdings or of any entity that was  dependent  upon Holdings or
any  Affiliate  of Holdings  for more than 3% of its revenues or earnings in its
most recent fiscal year, (ii) an officer, employee, consultant or partner of the
Company  or any  Affiliate  of the  Company  or an  officer,employee,  principal
stockholder,  consultant  or partner of an entity  that was  dependent  upon the
Company or any  Affiliate  of the  Company  for more than 3% of its  revenues or
earnings  in its most  recent  fiscal  year  (unless  agreed  to in  writing  by
Holdings)  or (iii)  an  officer,  director,  employee,  principal  stockholder,
consultant or partner of a person that is a competitor of Holdings or any of its
Affiliates (unless agreed to in writing by Holdings) or of the Company or any of
its  Affiliates of such  competitor for more than 3% of its revenues or earnings
in its most recent fiscal year.

        Section 6.4 Holdings  Debt. On or before the Closing  Date,  any and all
Holdings Debt shall be cancelled and forgiven.

        Section 6.5 Tax  Indemnification.  Subject to the  provisions of Section
7.7(c) from and after the Closing Date,  Holdings  shall pay or cause to be paid
and shall  indemnify and hold  harmless the Company and any  director,  officer,
employee,  advisor,  parent,  subsidiary  or Affiliate  of the Company,  and any
successor  thereof  from any  liability  for or  arising  out of,  any  Taxes of
Holdings  (including,  without  limiting the  generality of the  foregoing,  any
obligation  (including  any joint and  several  liability  pursuant  to Treasury
Regulations  Section  1.1502-6 or  otherwise)  to  contribute  to the payment of
Taxes)  determined on a combined or  consolidated  basis (x) of Holdings and any
current or former member of Holdings' group of corporations filing on a combined
or consolidated  basis for any taxable period or (y) attributable to the income,
business,  property or  operations  of Holdings for which FDESI may be liable on
any basis,  including,  but not limited to,  liability as a  transferee  or on a
joint and several basis under the consolidated return provisions in respect of a
pre-Closing  Date tax period,  or resulting  from FDESI ceasing to be affiliated
with the  affiliated  group of  corporations  (as defined in Section 1504 of the
Code) of which Holdings is a member.

        Section 6.6  Termination of Tax-Sharing  Agreements.  Before the Closing
Date,  all  agreements  between FDESI and any member of Holdings'  consolidated,
unitary or combined group of

                                       49
<PAGE>

corporations  with  respect to the  apportionment  of  consolidated,  unitary or
combined  tax  liability  imposed  by any  taxing  jurisdiction  shall have been
terminated and all payments  required to be made by FDESI to any other member of
any such group pursuant to any such agreement  shall have been made,  other than
payments  referred  to in  Section  7.7(c)  hereof  or  reflected  in the  FDESI
Disclosure Letter.

        Section 6.7  Contract  Indemnification.  From and after the Closing Date
Holdings  shall  indemnify  and hold  harmless the Company and its  Subsidiaries
(including  FDESI) from and against any and all loss,  cost and expense  arising
from or as a result of a breach by Holdings or FDESI of the  representations and
warranties contained in Section 4.13 hereof.


                                  ARTICLE VII
                     COVENANTS OF HOLDINGS AND THE COMPANY

        The parties hereto agree that:

        Section 7.1 Reasonable  Efforts.  Subject to the terms and conditions of
this Agreement,  each party will use all reasonable efforts to take, or cause to
be taken,  all  actions  and to do, or cause to be done,  all things  necessary,
proper or advisable  under  applicable  laws and  regulations  to consummate the
Transactions,  including,  without limitation,  all reasonable efforts to oppose
any judgments, decrees or orders of the type referred to in Section 8.2(c).

        Section 7.2 Certain  Filings.  The Company and Holdings shall  cooperate
with  one  another  (a) in  connection  with  the  preparation  of  the  Company
Disclosure Documents, (b) in determining whether any action by or in respect of,
or filing with,  any  governmental  body,  agency or  official,  or authority is
required,  or any  actions,  consents,  approvals  or waivers are required to be
obtained  from  parties  to any  material  contracts,  in  connection  with  the
Transactions and (c) in seeking any such actions, consents, approvals or waivers
or making  any such  filings,  furnishing  information  required  in  connection
therewith or with the Company Disclosure  Documents and seeking timely to obtain
any such actions, consents, approvals or waivers.

        Section 7.3 Public Announcements.  Holdings and the Company will consult
with each other before issuing any press release or making any public  statement
with respect to this Agreement and the transactions contemplated hereby and will
not issue any such press release or make any such

                                       50
<PAGE>

public  statement prior to such  consultation  unless required by law or a party
has not responded to reasonable efforts to effect such consultation.

        Section 7.4 Marketing  Agreement.  Holdings,  FDESI and the Company each
agree to execute and  deliver  the  Marketing  Agreement  concurrently  with the
Closing.

        Section  7.5  Brokers  or  Finders.  Each of  Holdings  and the  Company
represents,  as to itself,  its subsidiaries and its Affiliates,  that no agent,
broker,  investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other  commission  or similar
fee in connection with this Agreement or any of the transactions contemplated by
this Agreement, except Donaldson, Lufkin & Jenrette whose fees and expenses will
be paid by the Company in  accordance  with the  Company's  agreement  with such
firm, and Merrill Lynch, whose fees and expenses,  except as provided in Section
10.4, will be paid by Holdings in accordance with Holdings'  agreement with such
firm, and each of the Company and Holdings  respectively agrees to indemnify and
hold the other  harmless  from and against any and all  claims,  liabilities  or
obligations  with  respect to any other  broker's,  finder's  or  similar  fees,
commissions  or  expenses  asserted  by any  person  on the  basis of any act or
statement  alleged to have been made by such party or any of its  Affiliates  in
connection with this Agreement or any of the transactions contemplated hereby.

        Section 7.6 Notices of Certain  Events.  The parties  hereto will notify
one another of:

        (a) any notice or other communication from any third party alleging that
the consent of such third party is or may be  required  in  connection  with the
transactions contemplated by this Agreement;

        (b)  any  notice  or  other   communication  from  any  governmental  or
regulatory agency or authority in connection with the transactions  contemplated
by this Agreement; and

        (c) any actions, suits, claims,  investigations or proceedings commenced
of which  such  party has  received  notice  or, to its  knowledge,  threatened,
against  the Company or which  relate to the  consummation  of the  transactions
contemplated by this Agreement.

        Section 7.7  Post-Closing  Tax Matters.  The following  provisions shall
govern the allocation of  responsibility  for certain Tax matters  following the
Closing:

                                       51
<PAGE>

        (a) The Company  shall  prepare and file all FDESI tax returns which are
due, originally or as extended, after the Closing (other than income tax returns
with  respect to periods for which a  consolidated,  unitary or combined  return
includes Holdings and the operations of FDESI).

        (b) The Company, Holdings and FDESI shall cooperate fully, as and to the
extent  reasonably  requested,  in connection with the filing of tax returns and
any  audit,   litigation  or  other  proceeding  with  respect  to  Taxes.  Such
cooperation  shall  include the retention  and,  upon request,  the provision of
records  and  information  which are  reasonably  relevant  to the filing of tax
returns or any such audit, litigation or other proceeding and employees shall be
made  available  on a  mutually  convenient  basis to  provide  information  and
explanation of any material provided hereunder.

        (c) FDESI shall reimburse Holdings for such portion of the tax liability
on all  consolidated,  unitary and combined Tax returns  which include FDESI and
Holdings,  as is attributable  to FDESI.  This portion shall be determined as if
FDESI had filed a separate  return for such  purposes  and the highest  marginal
corporate  tax rate had  applied  to all of  FDESI's  income.  Holdings  and the
Company  shall  cooperate  to  allocate  on a  fair  and  reasonable  basis  tax
liabilities   which  are  reported  for  periods   after  the  Closing  Date  on
consolidated,  unitary or combined  returns  which  include both Holdings or its
affiliates and the Company or its affiliates.

        Section 7.8 FDESI Employee  Benefits.  Holdings agrees to provide,  on a
reimbursed  cost  basis,  continued  participation  by  FDESI  Employees  in the
Holdings  benefit  plans and  programs  listed in Schedule  4.15(a) of the FDESI
Disclosure Letter during the period from the Closing through December 31, 1996.

        Section 7.9 Use of Fluor Daniel Name.  Effective upon Closing,  Holdings
hereby  grants  to the  Company  the right and  license  to use the name  "Fluor
Daniel"  in its  corporate  name and in the  conduct  of its  business,  without
payment of any license fee or  royalty.  In the event that at any time  Holdings
holds less than 20% of the  outstanding  New  Common  Stock of the  Company  and
provided that Holdings is not in breach of any of its obligations  under Section
6.3(d)  hereof,  Holdings may by written notice to the Company revoke this right
and license; provided that the Company shall change its corporate name and cease
using the name Fluor Daniel as soon as reasonably possible but in no event later
than three months after such revocation.


                                       52
<PAGE>

        Section 7.10 Non-Permitted  Actions.  For a period of one year after the
Closing the Company  shall cause FDESI to maintain its  corporate  existence and
will not allow it to transfer any of the contracts to which it is a party.


                                  ARTICLE VIII
                           CONDITIONS TO THE CLOSING

        Section 8.1 Conditions to the Obligations of Each Party. The obligations
of each of the Company,  Newco,  Holdings and FDESI to consummate the Merger are
subject to the satisfaction of the following  conditions (which may be waived in
whole or in part by the party against whom the waiver is to be effective, unless
such a waiver is prohibited by law):

        (a)  the  Transactions,   including  the  Charter   Amendments  and  the
Recapitalization,  shall have been  approved by the holders of a majority of the
outstanding Common Stock;

        (b) any  applicable  waiting  period  under the HSR Act  relating to the
transactions contemplated hereby shall have expired or been terminated;

        (c) no provision of any  applicable  law or regulation  and no judgment,
injunction, order or decree of any court or other governmental body of competent
jurisdiction   shall  be  in  effect  which   prohibits  or  makes  illegal  the
consummation  of the Merger or the  effectiveness  as between the parties of the
Marketing Agreement;

        (d) all  consents  or actions  by or in  respect of or filings  with any
governmental  body,  agency,  official,  or  authority  required  to permit  the
consummation of the Merger and the  effectiveness  as between the parties of the
Marketing  Agreement as between the parties shall have been  obtained,  taken or
made (other than those  consents,  actions or filings  which,  if not  obtained,
taken or made prior to the  consummation of the Merger and the  effectiveness as
between  the  parties of the  Marketing  Agreement,  as would not have a Company
Material Adverse Effect); and

        (e) there shall not be in effect any banking moratorium or suspension of
payments in respect of banks in the United States.


                                       53
<PAGE>


        Section 8.2 Conditions to the Obligations of Holdings. The obligation of
Holdings and FDESI to consummate  the Merger is subject to the  satisfaction  of
the  following  further  conditions  (which may be waived in whole or in part by
Holdings, unless such a waiver is prohibited by law):

        (a) (i) the Company shall have performed,  in all material respects, all
of its obligations  hereunder  required to be performed by it at or prior to the
Closing;  (ii)  each  of the  representations  and  warranties  of  the  Company
contained in this  Agreement  shall be true in all  material  respects as of the
date hereof and as of the Closing (except to the extent such representations and
warranties  are  expressly  made as of an earlier  date) as if made at and as of
such time;  and (iii)  Holdings  shall have received a certificate  signed by an
officer of the Company to the foregoing effect;

        (b) From the Interim Balance Sheet Date to the Closing Date, there shall
have been no Company Material Adverse Change;

        (c) No  action  or  proceeding  before  any  court  or  governmental  or
regulatory  authority or body, United States federal or state or foreign,  shall
have been  constituted  (and be pending) or  threatened,  by any  government  or
governmental  authority,  that seeks,  or threatens to seek, to prevent or delay
the  consummation  of the  Transactions  or that  challenges any of the terms or
provisions of this Agreement;

        (d) No order,  judgment or decree issued by any United States federal or
state or foreign  governmental or regulatory  authority or body, or by any court
of competent  jurisdiction nor any statute,  rule, regulation or executive order
promulgated  or  enacted  by any  United  States  federal  or state  or  foreign
government or governmental  authority that (i) prevents the  consummation of the
Transactions;  (ii)  prohibits  Holdings  at any time  after  the  Closing  from
exercising all material rights and privileges pertaining to its ownership of the
Acquired Shares or the Option Shares purchasable upon exercise of the Option; or
(iii) materially and adversely  affects the condition  (financial or otherwise),
properties,  assets,  earnings,  business  or  operations  of the  Company  or a
Subsidiary shall be in effect;

        (e) The  Marketing  Agreement  shall have been executed and delivered by
the  Company  and shall be in full  force and  effect  to the  extent  set forth
therein;

        (f) The  Charter  Amendments  shall have been  filed  with the  Delaware
Secretary of State for filing in accordance with the Delaware Law;


                                       54
<PAGE>
       
        (g) The Company  shall have made the Company  Deposit  with the Exchange
Agent and furnished  Holdings  evidence,  reasonably  satisfactory  to Holdings,
thereof; and

        (h)     The Company shall have furnished Holdings with:

                (i) a copy of a resolution  or  resolutions  duly adopted by the
Board of Directors of the Company approving this Agreement, the Option Agreement
and the  Marketing  Agreement,  and the  transactions  contemplated  hereby  and
thereby and directing that a proposal to approve the Transactions submitted to a
vote of the  stockholders  of the  Company,  certified  by the  Secretary of the
Company;

                (ii) a copy of a resolution or  resolutions  duly adopted by the
holders of a majority of the  outstanding  shares of Common Stock of the Company
approving the Transactions, certified by the Secretary of the Company; and

                (iii) a favorable opinion of Testa, Hurwitz & Thibeault, counsel
for the Company,  dated the Closing Date,  with respect to the matters set forth
in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.9 and 3.11.

        Section 8.3 Conditions to the Obligations of the Company. The obligation
of the Company to consummate the Merger and the  Recapitalization  is subject to
the  satisfaction of the following  further  conditions  (which may be waived in
whole or in part by the Company, unless such waiver is prohibited by law):

        (a) (i) Each of Holdings and FDESI shall have performed, in all material
respects,  all its  obligations  hereunder  required to be performed by it at or
prior  to the  Closing;  (ii)  each of the  representations  and  warranties  of
Holdings  and FDESI  contained in this  Agreement  shall be true in all material
respects  as of the date  hereof  and at and as of the  Closing  (except  to the
extent such  representations  and warranties are expressly made as of an earlier
date) as if made at and as of such  time;  and  (iii)  the  Company  shall  have
received a certificate signed by an officer of Holdings to the foregoing effect;

        (b) The Agreement of Merger shall have been  submitted to the California
Secretary of State for filing in accordance with the California Code;

                                       55
<PAGE>


        (c) FDESI shall have made the FDESI Deposit with the Exchange  Agent and
furnished the Company evidence,  reasonably satisfactory to the Company, thereof
and  evidence,   reasonably   satisfactory  to  the  Company,  of  the  Transfer
Authorization;

        (d)  Holdings shall have furnished the Company with:

                (i) a certified copy of a resolution or resolutions duly adopted
by the Board of  Directors  of Holdings  approving  this  Agreement,  the Option
Agreement and the Marketing Agreement, and the transactions  contemplated hereby
and thereby;

                (ii) a  certified  copy  of a  resolution  or  resolutions  duly
adopted by the Board of Directors and sole  stockholder of FDESI  approving this
Agreement; and

                (iii) a favorable  opinion of  Lawrence  N.  Fisher  counsel for
Holdings,  dated the  Closing  Date with  respect  to the  matters  set forth in
Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.8 and 4.10;

        (e) from the FDESI  Balance  Sheet Date to the Closing  Date there shall
have been no FDESI Material Adverse Change;

        (f) No  action  or  proceeding  before  any  court  or  governmental  or
regulatory  authority or body, United States federal or state or foreign,  shall
have been  constituted  (and be pending) or  threatened,  by any  government  or
governmental  authority,  that seeks,  or threatens to seek, to prevent or delay
the  consummation  of the  Transactions  or that  challenges any of the terms or
provisions of this Agreement;

        (g) No order,  judgment or decree issued by any United States federal or
state or foreign  governmental or regulatory  authority or body, or by any court
of competent  jurisdiction nor any statute,  rule, regulation or executive order
promulgated  or  enacted  by any  United  States  federal  or state  or  foreign
government or governmental  authority that (i) prevents the  consummation of the
Transactions;  (ii)  prohibits  Holdings  at any time  after  the  Closing  from
exercising all material rights and privileges pertaining to its ownership of the
stock of the Surviving  Corporation;  or (iii) materially and adversely  affects
the condition (financial or otherwise),  properties,  assets, earnings, business
or operations of FDESI, shall be in effect; and

                                       56
<PAGE>


        (h) The  Marketing  Agreement  shall have been executed and delivered by
Holdings and shall be in full force and effect to the extent set forth therein.

        (i) The Company shall have received the additional opinion of Donaldson,
Luftkin & Jenrette referenced in Section 5.8.


                                   ARTICLE IX
                                  TERMINATION

        Section 9.1  Termination.  This  Agreement may be terminated at any time
prior to the Closing  (notwithstanding  any approval of the  Transactions by the
stockholders of the Company):

                (i)  by mutual written consent of the Company and Holdings;

                (ii) by the Company or Holdings,  if the Closing  shall not have
occurred  on or before  April 30,  1996;  provided,  however,  that the right to
terminate  this  Agreement  under this clause (ii) shall not be available to any
party whose failure to fulfill any obligation  under this Agreement has been the
cause of, or resulted  in, the failure of the Closing to occur on or before such
date;

                (iii) by the Company or  Holdings,  if there shall be any law or
regulation  adopted or amended after the date hereof that makes  consummation of
the Merger or the  effectiveness  as between the parties of the Option Agreement
or the  Marketing  Agreement  illegal or otherwise  prohibited  or any judgment,
injunction,  order or decree enjoining Holdings or the Company from consummating
the Merger or the  effectiveness  as between the parties of the Option Agreement
and the Marketing Agreement is entered and such judgment,  injunction,  order or
decree shall become final and nonappealable; provided, that the party seeking to
terminate  this  Agreement  pursuant  to this  clause  (iii) shall have used all
reasonable efforts to remove such judgment, injunction, order or decree;

                (iv) by  Holdings,  or by the Company so long as the Company has
complied  with Section  5.4, if the Board of  Directors of the Company  fails to
recommend,  or  modifies  or  withdraws  its  recommendation  to  the  Company's
stockholders that they vote to approve the Transactions or shall hav recommended
to the Company's stockholders an Acquisition Proposal.


                                       57
<PAGE>
 
               (v)  by  Holdings  if  it is  not  in  material  breach  of  its
obligations  under this Agreement,  and a person or group (as defined in Section
13(d)(iii) of the Exchange  Act) (other than Holdings or any of its  Affiliates)
shall have (a) made an Acquisition  Proposal and the Company shall hav commenced
discussions  with such  person or group or (b) become the  beneficial  owner (as
defined in Rule 13d-3 promulgated under the Exchange Act) of at least 20% of the
outstanding shares of Common Stock;

                (vi) (a) by Holdings or the Company,  if the Company Stockholder
Meeting  shall have been held and the  stockholders  of the  Company  shall have
failed to approve  the  Transactions  at such  meeting or (b) by Holdings if the
Company  Stockholder  Meeting  shall not have  been held on or before  April 30,
1996;

                (vii)  by   Holdings   if  there   has  been  a  breach  of  any
representation,  warranty,  covenant or agreement of the Company which breach is
incurable, or which is not cured on or prior to April 30, 1996; and/or

                (viii)  by  the  Company  if  there  has  been a  breach  of any
representation,  warranty,  covenant or agreement of Holdings  contained in this
Agreement,  which breach is incurable or has not been cured on or prior to April
30, 1996.

        Section  9.2 Effect of  Termination.  If this  Agreement  is  terminated
pursuant to Section 9.1, this Agreement  shall become void and of no effect with
no  liability  on the part of any party  hereto,  except (a) to the extent  such
termination   results  from  the  breach  by  a  party  hereto  of  any  of  its
representations, warranties, covenants or agreements set forth in this Agreement
and (b) that the agreements contained in Section 7.5, Article X and this Section
9.2 shall survive the termination hereof.

                                   ARTICLE X
                                 MISCELLANEOUS

        Section 10.1 Notices. All notices,  requests and other communications to
any party  hereunder shall be in writing and shall be given (and shall be deemed
to have been given upon  receipt) if delivered  in person or sent by  facsimile,
telegram,  telex,  by registered  or certified  mail  (postage  prepaid,  return
receipt  requested) or by reputable  overnight courier to the respective parties
at the  following  addresses  (or at such other  address for a party as shall be
specified in a notice given in accordance with this Section 10.1):

                                       58

<PAGE>


                        if to Holdings, to:
                                Fluor Daniel, Inc.
                                3333 Michelson Drive
                                Irvine, California  92730
                                Attention:  David L. Myers
                                Facsimile:  (714) 975-5545

                        with a copy to:
                                Fluor Daniel, Inc.
                                3333 Michelson Drive
                                Irvine, California  92730
                                Attention:  General Counsel
                                Facsimile:  (714) 975-4450

                        if to the Company, to:
                                Groundwater Technology, Inc.
                                100 River Ridge Drive
                                Norwood, Massachusetts  02062
                                Attention:  Walter C. Barber
                                Facsimile:  (617) 769-7992

                        with a copy to:
                                Groundwater Technology, Inc.
                                100 River Ridge Drive
                                Norwood, Massachusetts 02062
                                Attention:  Brian D. Goldstein, Esq.
                                Facsimile:  (617) 769-7992
                        and:
                                Testa, Hurwitz & Thibeault
                                125 High Street
                                Boston, Massachusetts  02110
                                Attention:  Andrew E. Taylor, Jr., Esq.
                                Facsimile:  (617) 248-7100

                                       59

<PAGE>
 
       Section 10.2 Non-Survival of Representations,  Warranties and Covenants;
Indemnification.  All  representations,  warranties and agreements  contained in
this Agreement or in any instrument delivered pursuant to this Agreement (except
the Option  Agreement) shall terminate and be extinguished at the Closing or the
earlier date of termination  of this  Agreement  pursuant to Section 9.1, as the
case may be,  except  that this  Section  10.2 shall not limit any  covenant  or
agreement of the parties which by its terms  contemplates  performance after the
Closing, (including,  without limiting the generality of the foregoing, Sections
6.3, 6.5, 6.7, 7.5, 7.7, 7.8, 7.9, 7.10 and 10.4.)

        Section 10.3 Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Closing,  if, and only if, such  amendment
or waiver is in writing and signed, in the case of an amendment,  by the Company
and Holdings or in the case of a waiver, by the party against whom the waiver is
to be  effective;  provided  that after the  authorization  and  approval of the
Transactions  by the  stockholders  of the Company,  no such amendment or waiver
shall,  without the further approval of such  stockholders,  alter or change any
term of the Charter Amendments or the By-law Amendments,  respectively,  if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.

        (b) No failure or delay by any party in exercising  any right,  power or
privilege  hereunder  shall operate as a waiver  thereof nor shall any single or
partial  exercise  thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies herein
provided  shall be  cumulative  and not  exclusive  of any  rights  or  remedies
provided by law.

        Section 10.4 Fees and Expenses. (a) Except as otherwise provided in this
Section 10.4, all costs and expenses incurred by Holdings or FDESI in connection
with this  Agreement  shall be paid by  Holdings,  and all  costs  and  expenses
incurred by the Company or Newco shall be paid by the Company.

        (b)  So  long  as  Holdings  shall  not  have  materially  breached  its
obligations under this Agreement,  the Company will pay Holdings, in immediately
available  funds,  the amounts  referred to below (x) promptly,  but in no event
later than two business days,  after the termination of this Agreement  pursuant
to clause (iv) of Section 9.1 hereof or (y) simultaneously with the consummation
of an Acquisition  Transaction  effected after the termination of this Agreement
pursuant to clause (v), or  paragraph  (a) of clause (vi) of Section 9.1 hereof,
provided  that (i)  prior to or within 60 days  after  the  termination  of this
Agreement as aforesaid,  an  Acquisition  Proposal has been received and (ii)


                                       60
<PAGE>

if the Acquisition  Transaction  involves a merger, sale of assets,  purchase of
shares from the Company or similar  business  combination,  the  agreement  with
respect thereto shall have been entered into within twelve months of the date of
termination of this  Agreement,  or if the  Acquisition  Transaction  involves a
tender or exchange offer, the tender or exchange offer shall have been commenced
within such twelve month period; and (z) simultaneously with the consummation of
an  Acquisition  Transaction  effected  after the  termination of this Agreement
pursuant  to clause  (vii) of  Section  9.1 due to a breach by the  Company of a
covenant or agreement  contained in this  Agreement  (it being  understood  that
termination pursuant to such clause (vii) due to a breach of a representation or
warranty  shall  not  give  rise to any fee  payment  or  expense  reimbursement
obligation hereunder, but without prejudice to any other rights of Holdings with
respect  to  such a  breach),  if (i)  prior  to or  within  60 days  after  the
termination of this Agreement as aforesaid, any negotiations or discussions have
been held  with,  or  information  supplied  to,  any  third  party who makes an
Acquisition  Proposal and (ii) the  agreement  with respect to such or any other
Acquisition  Transaction is entered into, or if the Acquisition Transaction is a
tender or exchange  offer,  such offer is commenced,  within twelve months after
such  termination.  In  addition,  if the  Closing  does not occur  because of a
failure by the Company to obtain the additional opinion of Donaldson, Lufkin and
Jenrette  referenced  in  Section  5.8 and such  failure  is not due to an FDESI
Material Adverse Change,  then within two business days after the termination of
the Agreement pursuant to Section 9.1 hereof, the Company shall pay Holdings, in
immediately available funds, the amounts referred to below. The amounts referred
to in  each of the two  preceding  sentences  are  (a) a  termination  fee  (the
"Termination  Fee")  of  $3,000,000  and  (b) up to an  additional  $750,000  as
reimbursement  for fees and expenses  actually incurred by Holdings and FDESI in
connection with this Agreement and the  transactions  contemplated  hereby.  For
purposes of the foregoing,  the reimbursement referred to in clause (b) shall be
payable only if and to the extent Holdings  provides a written  statement to the
Company that it or FDESI has incurred such fees and expenses.

        Section 10.5  Successor and Assigns.  The  provisions of this  Agreement
shall be binding  upon and inure to the benefit of the parties  hereto and their
respective successors and assigns;  provided that no party may assign,  delegate
or otherwise  transfer  any of its rights or  obligations  under this  Agreement
without the consent of the other party hereto.  This Agreement  shall be binding
upon and is solely  for the  benefit  of each of the  parties  hereto  and their
respective  successors and assigns, and nothing in this Agreement is intended to
confer upon any other  person any rights or  remedies  of any nature  whatsoever
under or by reason of this Agreement.


                                       61
<PAGE>

        Section 10.6 Entire  Agreement.  This Agreement  (including all Exhibits
and Disclosure  Letters hereto),  together with the  Confidentiality  Agreements
dated July 7, 1995,  and September  26, 1995,  between the Company and Holdings,
constitutes  the entire  agreement  among the parties and  supersedes  all other
prior agreements and  understandings,  both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.

        Section  10.7  Governing  Law.  This  Agreement  shall be  construed  in
accordance  with and governed by the law of the State of Delaware  applicable to
agreements made and to be performed entirely within such state.

        Section 10.8 Counterparts;  Effectiveness.  This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the  signatures  thereto and hereto were upon the same  instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.

        Section 10.9  Severability.  If any  provision of this  Agreement or the
application of any provision  hereof to any party hereto or set of circumstances
is held invalid,  the remainder of this  Agreement and the  application  of such
provision  to the other  parties  hereto or sets of  circumstances  shall not be
affected,  unless the  provisions  held invalid shall  substantially  impair the
benefits of the remaining portions of this Agreement.

        Section 10.10 "To Knowledge".  Any reference herein to the "knowledge of
the Company  (or  FDESI)" or "known to the Company (or FDESI)" or any  variation
thereof  shall  mean to the  actual  knowledge  of one or more  officers  of the
Company or FDESI, as the case may be.

        IN WITNESS WHEREOF,  the parties hereto have caused this Agreement to be
duly executed by their  respective  authorized  officers as of the date and year
first above written.

               FLUOR DANIEL, INC.
               By: /s/ D.L. Myers
               Name: D.L. Myers 
               Title: Vice President

               FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
               By: /s/ D.L. Myers
               Name: D.L. Myers 
               Title: President

               GROUNDWATER TECHNOLOGY, INC.
               By: /s/ Walter C. Barber
               Name:  Walter C. Barber
               Title: President

               GTI ACQUISITION CORPORATION
               By: /s/ Walter C. Barber
               Name:  Walter C. Barber
               Title: President


                                       63

<PAGE>

                                                                       EXHIBIT A



                              AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                          GROUNDWATER TECHNOLOGY, INC.


        GROUNDWATER    TECHNOLOGY,    INC.,   a   Delaware    corporation   (the
"Corporation"), hereby certifies and provides as follows:

        1.  The name of the Corporation is Groundwater Technology, Inc.

        2. This Amended and Restated Certificate of Incorporation (the "Restated
Certificate")  was duly adopted in  accordance  with Sections 242 and 245 of the
General Corporation Law of the State of Delaware.

        3.  Immediately upon filing this Amended and Restated  Certificate,  the
text of the present  Restated  Certificate of Incorporation is hereby amended to
read in full as set forth below:

        FIRST.  The name of the Corporation is Fluor Daniel/GTI, Inc.

        SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, County
of New  Castle.  The  name  of its  registered  agent  at  such  address  is The
Corporation Trust Company.

        THIRD.  The  nature of the  business  or  purposes  to be  conducted  or
promoted is to engage in any lawful act or activity for which  corporations  may
be organized under the General Corporation Law of Delaware.

        FOURTH.  At the time the filing of this  Restated  Certificate  with the
Secretary of State of the State of Delaware becomes effective:

        (a) Each outstanding share of Common Stock, $.01 par value per share, of
the Corporation (the "Old Common Stock"), shall be changed into and reclassified
as .5274 shares of the Common Stock,  $.001 par value per share (the "New Common
Stock"), of the Corporation.

        (b) If the  event  described  in  subsection  (a) above  results  in any
stockholder  being entitled to receive a fraction of a share, the holder thereof
shall be entitled to receive (after  aggregating  all  fractional  shares of New
Common  Stock to be received  by the  holder) an amount of cash  (rounded to


<PAGE>

the nearest  whole cent) equal to the product of (i) the fraction  multiplied by
(ii) the average of the closing  price of the Old Common  Stock as quoted on the
Nasdaq National Market for the five (5) days immediately  prior to the effective
date hereof.

        (c) All  authorized  but  unissued  shares of Old Common  Stock shall be
eliminated.

        Upon the  effective  filing  hereof,  the  conversion  of the issued and
outstanding shares of Old Common Stock into issued and outstanding shares of New
Common Stock shall occur automatically without any further action by the holders
of  such  shares  of Old  Common  Stock  and  whether  or not  the  certificates
representing  the shares of Old Common Stock are surrendered to the Corporation;
provided,  however,  that  the  Corporation  shall  not be  obligated  to  issue
certificates  evidencing  the  shares of New  Common  Stock  issuable  upon such
conversion unless certificates  evidencing such shares of Old Common Stock which
have been  converted are either  delivered to the  Corporation,  as  hereinafter
provided,  or the holder notifies the Corporation  that such  certificates  have
been lost,  stolen or destroyed  and executes an agreement  satisfactory  to the
Corporation  to  indemnify  the  Corporation  from  any loss  incurred  by it in
connection  therewith  and  upon  the  request  of  the  Corporation  gives  the
Corporation  a bond in such sum as it may direct as indemnity  against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.

        Upon the occurrence of the automatic conversion of the Old Common Stock,
the holders of Old Common Stock shall  surrender the  certificates  representing
such  shares at the  offices of the  Corporation  or such other  location as the
Corporation may direct. Thereupon,  there shall promptly be issued and delivered
to  such  holder,  in  the  name  shown  on  such  surrendered   certificate  or
certificates,  a  certificate  or  certificates  for the number of shares of New
Common  Stock,  into  which  the  shares of Old  Common  Stock  surrendered  are
convertible, dated as of the date on which such automatic conversion occurs.

        Upon the effectiveness  hereof and after giving effect to the conversion
set forth above,  the authorized  capital stock of the  Corporation  shall be as
follows:

        The total  number of shares of stock  which the  Corporation  shall have
authority to issue is  25,000,000  shares of Common  Stock,  par value $.001 per
share (the "Common  Stock"),  and 1,000,000 shares of Preferred Stock, par value
$.01 per share (the "Preferred  Stock"). A description of the respective classes
of stock and a  statement  of the  designations,  preferences,  limitations  and
relative rights of the Preferred  Stock, and Common Stock and the limitations on
or denial of the voting rights of the shares of such classes and series of stock
are as follows:

A.  PREFERRED STOCK.

        The Board of  Directors  is  expressly  authorized  to  provide  for the
issuance  of all or any  shares  of the  Preferred  Stock,  and to fix  for  the
Preferred  Stock such voting powers,  full or limited,  or no voting power,  and
such designations,  preferences and relative,  participating,  optional or other
special rights and  qualifications,  limitations and  restrictions  thereof,  as
shall be stated and expressed in the  resolution or  resolutions  adopted by the
Board of  Directors  providing  for the  issuance  of such  shares and as may be
permitted by the General  Corporation  Law of the

                                       2
<PAGE>

State of Delaware,  including, without limitation, the authority to provide that
any such shares may be (i) subject to redemption at such time or times,  at such
price or prices at such rate or rates, and with such adjustments;  (ii) entitled
to receive dividends (which may be cumulative or  non-cumulative) at such rates,
on such conditions,  and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or on any other
series of stock;  (iii) entitled to such rights upon the dissolution of, or upon
any distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock, of the Corporation at
such price or prices or at such rates of exchange and with such adjustments, all
as may be stated in such resolution or resolutions.

B.  COMMON STOCK.

        1. Relative  Rights of Preferred and Common  Stock.  All voting  powers,
designations,  preferences or relative participating,  optional or other special
rights, and such qualifications,  limitations,  or restrictions,  thereof of the
Common Stock are  expressly  made subject and  subordinate  to those that may be
fixed with respect to any shares of the Preferred Stock.

        2. Voting Rights. Except as provided by law or this Amended and Restated
Certificate of Incorporation, each holder of Common Stock shall have one vote in
respect  of each  share  of  stock  held by him of  record  on the  books of the
Corporation for the election of directors and on all matters submitted to a vote
of stockholders of the Corporation.

        3.  Dividends.  Subject  to the  preferential  rights,  if  any,  of the
Preferred  Stock,  the  holders of shares of Common  Stock  shall be entitled to
receive,  when and if declared by the Board of  Directors,  out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of capital stock.

        4.  Dissolution,   Liquidation  or  Winding-Up.  In  the  event  of  any
dissolution,  liquidation or winding-up of the affairs of the Corporation, after
distribution in full of the preferential  amounts,  if any, to be distributed to
the holders of shares of the Preferred  Stock,  holders of Common Stock shall be
entitled,  unless  otherwise  provided  herein  by law,  to  receive  all of the
remaining  assets of the Corporation of whatever kind available for distribution
to  stockholders  ratably in  proportion to the number of shares of Common Stock
held by them respectively.  The Board of Directors may distribute in kind to the
holders of Common Stock such remaining assets to any other corporation, trust or
other entity and receive payment therefore in cash, stock or obligations of such
other corporation, trust or entity or any combination so received and distribute
any balance  thereof in kind to holders of Common  Stock.  Neither the merger or
consolidation  of the  Corporation  into or with any other  corporation  nor the
merger of any other  corporation  into it, nor any  purchase  or  redemption  of
shares  of stock of the  Corporation  of any  class,  shall  be  deemed  to be a
dissolution,  liquidation or winding-up or the  Corporation  for the purposes of
this paragraph.

        FIFTH.  The Corporation is to have perpetual existence.

                                       3

<PAGE>

        SIX. In  furtherance  and not in limitation  of the powers  conferred by
statute, the Board of Directors is expressly authorized:

        To make, alter or repeal the By-laws of the Corporation.

        To authorize and cause to be executed  mortgages and liens upon the real
and personal property of the Corporation.

        To set apart out of any of the funds of the  Corporation  available  for
dividends a reserve or reserves  for any proper  purpose and to abolish any such
reserve in the manner in which it was created.

        By a majority of the whole Board,  to designate one or more  committees,
each  committee to consist of one or more of the  directors of the  Corporation.
The Board may designate one or more of the directors as alternate members of any
committee,  who may replace any absent or disqualified  member at any meeting of
the committee.  The By-laws may provide that in the absence or  disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may  unanimously  appoint another member of the Board of Directors to act at the
meeting  in the  place of any such  absence  or  disqualified  member.  Any such
committee,  to the extent  provided in the resolution of the Board of Directors,
or in the By-laws of the Corporation, shall have and may exercise all the powers
and  authority of the Board of Directors in the  management  of the business and
affairs of the Corporation,  and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the  certificate  of  incorporation,
adopting  an  agreement  of  merger  or   consolidation,   recommending  to  the
stockholders  the sale,  lease or  exchange of all or  substantially  all of the
Corporation's   property  and  assets,   recommending  to  the   stockholders  a
dissolution of the  Corporation or a revocation of a dissolution or amending the
By-laws of the Corporation;  and, unless the resolution or By-laws, expressly so
provide,  no such  committee  shall  have the power or  authority  to  declare a
dividend or to authorize the issuance of stock.

        When and as authorized by the  stockholders  in accordance with statute,
to sell, lease or exchange all or  substantially  all of the property and assets
of the Corporation,  including its good will and its corporate franchises,  upon
such terms and conditions and for such consideration, which may consist in whole
or in part of money or  property  including  shares  of stock in,  and/or  other
securities of, any other corporation or corporations,  as its Board of Directors
shall deem expedient and for the best interests of the Corporation.

        SEVENTH.  Meetings  of  stockholders  may be held  within or without the
State of Delaware,  as the By-laws may provide. The books of the Corporation may
be kept (subject to any provision  contained in the statutes)  outside the State
of  Delaware at such place or places as may be  designated  from time to time by
the Board of Directors or in the By-laws of the Corporation.

                                       4

<PAGE>


        EIGHTH. The Corporation  reserves the right to amend,  alter,  change or
repeal any  provision  contained  in this Amended and  Restated  Certificate  of
Incorporation,  in the matter now or hereafter  prescribed  by statute,  and all
rights conferred upon stockholders herein are granted subject to this revision.

        NINTH. The Corporation  eliminates the personal liability of each member
of its Board of Directors to the  Corporation or its  stockholders  for monetary
damages for breach of fiduciary duty as a director,  provided that the foregoing
shall not  eliminate  the  liability  of the director (i) for any breach of such
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions  not in good faith or which  involve  intentional  misconduct  or a
knowing  violation  of law,  (iii) under  Section 174 of Title 8 of the Delaware
Code or (iv) for any  transaction  from which such director  derived an improper
personal benefit.

        IN WITNESS  WHEREOF,  the undersigned  have hereunto set their hands and
seal this ____ day of _______________ 1996.

                                            GROUNDWATER TECHNOLOGY, INC.



                                            By:__________________________
ATTEST:_____________________                   Walter C. Barber
                                               President




                                        5




<PAGE>
                                                                       EXHIBIT B




                                    BY-LAWS

                                       OF

                             FLUOR DANIEL/GTI, INC.

                            (A Delaware Corporation)



















As amended through:  __________________

<PAGE>




                             FLUOR DANIEL/GTI, INC.

                                    BY-LAWS

                               TABLE OF CONTENTS

                                                                            Page

ARTICLE 1 CERTIFICATE OF INCORPORATION
        Section 1.1 Contents
        Section 1.2  Certificate in Effect

ARTICLE 2 MEETING OF  STOCKHOLDERS                         
        Section 2.1 Place
        Section 2.2 Annual Meeting
        Section 2.3 Special  Meeting
        Section 2.4 Notice of Meetings 
        Section 2.5 Affidavit of Notice 
        Section 2.6 Quorum
        Section 2.7 Voting  Requirements
        Section 2.8 Proxies and Voting
        Section 2.9 Stockholder List 
        Section 2.10 Record Date
        Section 2.11  Notice of Stockholder Business

ARTICLE 3  DIRECTORS
        Section 3.1  Enumeration; Election and Term of Office
        Section 3.2  Duties
        Section 3.3  Compensation
        Section 3.4  Reliance on Books

ARTICLE 4 MEETINGS  OF THE BOARD OF  DIRECTORS
        Section 4.1 Place
        Section 4.2 Annual Meeting 
        Section 4.3 Regular Meetings
        Section 4.4 Special Meetings
        Section 4.5 Quorum
        Section 4.6 Action  Without  Meeting
        Section 4.7 Telephone Meetings

ARTICLE 5  COMMITTEES OF DIRECTORS
        Section 5.1  Designation
        Section 5.2  Records of Meetings

                                       -i-
<PAGE>

ARTICLE 6  NOTICES
        Section 6.1  Method of Giving Notice
        Section 6.2  Waiver

ARTICLE 7  OFFICERS
        Section 7.1 In General                                    
        Section 7.2 Election of President, Secretary and Treasurer
        Section 7.3 Election of Other Officers
        Section 7.4 Salaries
        Section 7.5 Term of Office
        Section 7.6 Duties of President and Chairman of the Board
        Section 7.7 Duties of Vice President
        Section 7.8 Duties of Secretary
        Section 7.9 Duties of Assistant Secretary
        Section 7.10 Duties of Treasurer
        Section 7.11 Duties of Assistant Treasurer

ARTICLE 8  RESIGNATIONS, REMOVALS AND VACANCIES
        Section 8.1  Directors
        Section 8.2  Officers

ARTICLE 9  CERTIFICATE  OF STOCK 
        Section 9.1 Issuance of Stock          
        Section 9.2 Right to Certificate; Form
        Section 9.3 Facsimile Signature
        Section 9.4 Lost Certificates
        Section 9.5 Transfer of Stock
        Section 9.6 Registered Stockholders

ARTICLE 10  EXECUTION OF PAPERS

ARTICLE 11  FISCAL YEAR

ARTICLE 12  SEAL

ARTICLE 13  OFFICES

ARTICLE 14  INDEMNIFICATION
       Section 14.1 Actions other than by or in the Right of the Corporation 
       Section 14.2 Actions by or in the Right of the Corporation
       Section 14.3 Success on the Merits
       Section 14.4 Specific Authorization
       Section 14.5 Advance Payment
       Section 14.6 Non-Exclusivity
       Section 14.7 Insurance
       Section 14.8 Continuation of Indemnification and Advancement of Expenses
       Section 14.9 Severability
       Section 14.10 Intent of Article

ARTICLE 15  AMENDMENTS

                                      iii

<PAGE>

                             FLUOR DANIEL/GTI, INC.
                                    formerly
                          GROUNDWATER TECHNOLOGY, INC.

                    ARTICLE 1. CERTIFICATE OF INCORPORATION

        Section  1.1  Contents.  The name,  location  of  principal  office  and
purposes of the  Corporation  shall be as set forth in its Amended and  Restated
Certificate of Incorporation, These Bylaws, the powers of the Corporation and of
its  Directors  and  stockholders,  and all matters  concerning  the conduct and
regulation  of  the  business  of the  Corporation  shall  be  subject  to  such
provisions  in regard  thereto,  if any,  as are set forth in said  Amended  and
Restated  Certificate of Incorporation.  The Amended and Restated Certificate of
Incorporation is hereby made a part of the se Bylaws.

        Section l.2  Certificate  in Effect.  All references in these By-laws to
the Amended and Restated Certificate of Incorporation shall be construed to mean
the Amended and Restated Certificate of Incorporation of the Corporation as from
time to time amended, including (unless the context shall otherwise require) all
certificates  and any agreement of consolidation or merger filed pursuant to the
Delaware General Corporation Law, as amended.

                       ARTICLE 2. MEETING OF STOCKHOLDERS

        Section 2.1 Place.  All meetings of the stockholders may be held at such
place either within or without the State of Delaware as shall be designated from
time to time by the Board of Directors as stated in the notice of the meeting or
in any duly executed waiver of notice thereof.

        Section 2.2 Annual Meeting.  Annual  meetings of  stockholders  shall be
held either in the month of September  or October of each year at such  specific
date and time as shall be designated from time to time by the Board of Directors
and stated in the notice of the  meeting.  If such  annual  meeting has not been
held as herein  provided,  a special meeting of the  stockholders in lieu of the
annual  meeting may be held,  and any business  transacted or elections  held at
such special  meeting shall have the same effect as if transacted or held at the
annual meeting, and in such case all references in these By-laws, except in this
Section 2.2, to the annual meeting of the stockholders  shall be deemed to refer
to such special meeting.

        Section 2.3 Special Meetings. Special meetings of the stockholders,  for
any  purpose  or  purposes,  unless  otherwise  prescribed  by statute or by the
Amended and Restated Certificate of Incorporation, may be called by the Board of
Directors  and shall be called by the  President  or Secretary at the request in
writing of a majority of the Directors then in office.  Such request shall state
the purpose or purposes of the proposed meeting.

        Section  2.4 Notice of  Meetings.  A written  notice of all  meetings of
stockholders stating the place, date and hour of the meeting and, in the case of
a special  meeting,  the  purpose or purposes  for which the special  meeting is
called,  shall be given not less than ten nor more than  sixty  days  before the
date  of the  meeting  to each  stockholder  entitled  to vote at such  meeting.

<PAGE>

Business  transacted at any special meeting of stockholders  shall be limited to
the purposes stated in the notice.

        Section 2.5  Affidavit of Notice.  An  affidavit of the  Secretary or an
Assistant  Secretary or the transfer agent of the  Corporation  that notice of a
stockholders  meetings has been given shall,  in the absence of fraud,  be prima
facie evidence of the facts stated therein. Section

        2.6  Quorum.  The  holders  of  a  majority  of  the  stock  issued  and
outstanding  and entitled to vote thereat,  present in person or  represented by
proxy,  shall  constitute a quorum at all meetings of the  stockholders  for the
transaction  of  business,  except as  otherwise  provided  by statute or by the
Amended and Restated  Certificate of  Incorporation.  If,  however,  such quorum
shall not be present or  represented  by any  meeting of the  stockholders,  the
stockholders  entitled  to vote  thereat,  present in person or  represented  by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, except as hereinafter provided,  until a
quorum shall be present or  represented.  At such  adjourned  meeting at which a
quorum shall be presented or  represented  any business may be transacted  which
might have been  transacted at the original  meeting.  If the adjournment is for
more than thirty days,  or if after the  adjournment  a new record date is fixed
for the adjourned  meeting,  a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.

        Section  2.7  Voting  Requirements.  When a  quorum  is  present  at any
meeting,  the vote of the holders of a majority of the stock having voting power
present in person or  represented  by proxy shall decide any  questions  brought
before such meeting, unless the question is one upon which, by express provision
of any  applicable  statute  or of  the  Amended  and  Restated  Certificate  of
Incorporation,  a  different  vote is  required,  in  which  case  such  express
provision shall govern and control the decision of such questions.

        Section 2.8 Proxies and Voting. Unless otherwise provided in the Amended
and Restated  Certificate  of  Incorporation,  each  stockholder  shall at every
meeting of the  stockholders  be  entitled to one vote in person or by proxy for
each share of the capital  stock having  voting power held by such  stockholder,
but no proxy shall be voted on after three years from its date, unless the proxy
provides for a longer  period.  Persons  holding  stock in a fiduciary  capacity
shall be entitled to vote the shares so held, and persons whose stock is pledged
shall be  entitled  to vote the pledged  shares,  unless in the  transfer by the
pledgor on the books of the  Corporation he shall have  expressly  empowered the
pledgee to vote said shares,  in which case only the pledgee,  or his proxy, may
represent and vote such shares.  Shares of the capital stock of the  Corporation
owned by the Corporation shall not be voted, directly or indirectly.

        Section 2.9  Stockholder  List.  The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting,  arranged in  alphabetical  order,  and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any  stockholder,  for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days  Prior to the  meeting  either  at a place  within  the city  where the
meeting  is to be held,  which  place  shall be 

                                       2
<PAGE>

specified  in the notice of the  meeting or, if not so  specified,  at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and  place  of the  meeting  during  the  whole  time  thereof,  and may be
inspected by any  stockholder  who is present.  The original or duplicate  stock
ledger  shall be the only  evidence as to who are the  stockholders  entitled to
examine such list, the stock ledger or the books of the Corporation,  or to vote
in person or by proxy at any meeting of stockholders.

        Section 2.10 Record Date.  In order that the  Corporation  may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment  thereof or to express consent to corporate action in writing
without a meeting,  or  entitled  to receive  payment of any  dividend  or other
distribution  or allotment of any rights,  or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action,  the Board of Directors may fix, in advance, a record date,
which  shall not be more than  sixty nor less than ten days  before  the date of
such  meeting,   nor  more  than  sixty  days  prior  to  any  other  action.  A
determination  of  stockholders  of record entitled to notice of or to vote at a
meeting of stockholders  shall apply to any adjournment of the meeting provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

        If no record date is fixed by the Board of Directors:
        
                (a) The record  date for  determining  stockholders  entitled to
notice  of or to vote at a  meeting  of  stockholders  shall be at the  close of
business  on the day next  preceding  the day on which  notice is given,  or, if
notice is waived,  at the close of business on the day next preceding the day on
which the meeting is held.
       
                (b) The record  date for  determining  stockholders  entitled to
express consent to Corporate action in writing without a meeting,  when no prior
action by the Board of Directors is necessary,  shall be the day which the first
written consent is expressed.
        
                (c) The record date for determining  stockholders  for any other
purpose  shall be at the  close of  business  on the day on which  the  Board of
Directors adopts the resolution relating thereto.

        Section 2.11 No Stockholder Business.  (a) For a proposal to be properly
brought  before an annual  meeting  by a  stockholder  or for a  stockholder  to
nominate a person or persons for election as  directors at an annual  meeting or
any special meeting at which directors are to be elected,  the stockholder  must
give timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's  notice must be delivered to, or mailed and received at,
the principal  executive  offices of the  Corporation not less than 45 days, but
not more than 60 days, prior to the meeting; provided,  however, if less than 60
days' notice or prior public  disclosure  of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the 15th  business day following the day
on which such notice or public disclosure of the date of the meeting is made.
        
        (b) A stockholder's notice to the Secretary relating to a proposal shall
set forth as to each matter the stockholder  proposes to bring before the annual
meeting (i) a brief


                                       3
<PAGE>

description  of the proposal  desired to be brought  before the annual  meeting,
(ii) the name and address,  as they appear on the  Corporation's  books,  of the
stockholder who intends to make the proposal and any other stockholders known by
such stockholder to support such proposal,  (iii) the class and number of shares
of  the  Corporation's  capital  stock  which  are  beneficially  owned  by  the
stockholder and by any other  stockholders  known by such stockholder to support
such proposal as of the date of such stockholder  notice, and (iv) any financial
interest of the stockholder in such proposal.
        
        (c) A  stockholder's  notice to the Secretary  relating to a nominee for
election as a director shall set forth (i) the name and address,  as they appear
on  the  Corporation's  books,  of the  stockholder  who  intends  to  make  the
nomination and any other  stockholder's known by such stockholder to support the
nomination,  (ii) the class and  number of shares of the  Corporation's  capital
stock  which  are  beneficially  owned  by the  stockholder  and  by  any  other
stockholders  known by such  stockholder to support such proposal as of the date
of such stockholder  notice,  (iii) a representation  that such stockholder is a
holder of record of stock of the  Corporation  entitled to vote as such  meeting
and  intends  to appear in person or by proxy at the  meeting  to  nominate  the
person  or  persons  specified  in  the  notice,   (iv)  a  description  of  all
arrangements or understandings between such stockholder and each nominee and any
other person or persons  (naming  such person or persons)  pursuant to which the
nomination or  nominations  are to be made by such  stockholder,  (v) such other
information  regarding each nominee  proposed by such  stockholder as would have
been required to be included in a proxy  statement  filed  pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated by the Board of  Directors,  and (vi) the consent of
each nominee to serve as a director of the Corporation if elected.

        (d) The Board of  Directors,  or a  designated  committee  thereof,  may
determine  whether a notice has complied with the  requirements  of this Section
2.11, and may reject as invalid any stockholder proposal or nomination which was
not the subject of a notice timely made in accordance  with,  and containing all
information required by, the terms of this Section 2.11. If neither the Board of
Directors  nor such  committee a  determination  as to the  compliance  with the
requirements  of this Section 2.11, the presiding  officers at the meeting shall
determine and declare at the meeting whether such notice has so complied. If the
Board of Directors or a designated  committee  thereof or the presiding  officer
determines that a stockholder proposal or nomination was the subject of a notice
made in accordance  with the terms of this Section 2.11, and if the  stockholder
giving such notice shall make such proposal or nomination, the presiding officer
shall so declare at the  meeting,  and ballots  shall be provided for use at the
meeting with respect to such proposal or  nomination.  If the Board of Directors
or a designated  committee  thereof or the presiding  officer  determines that a
stockholder  proposal  or  nomination  was not the  subject of a notice  made in
accordance  with the terms of this Section 2.11, and if the  stockholder  giving
such notice shall make such proposal or nomination,  the presiding officer shall
so declare at the meeting and any such  proposal  shall not be acted upon at the
meeting.

        (e)  Notwithstanding  the  foregoing,  a  stockholder  may present at an
annual meeting any proposal which such  stockholder has caused to be included in
the Corporation's 

                                       4
<PAGE>

proxy materials  pursuant to Rule 14a-8  promulgated  pursuant to the Securities
Exchange Act of 1934, as amended.
       
        (f) This Section 2.11 shall not prevent the  consideration  and approval
or  disapproval  at the annual  meeting of reports of  officers,  directors  and
committees of the Board of Directors,  but in connection  with such reports,  no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.

                              ARTICLE 3. DIRECTORS

        Section  3.l  Enumeration;  Election  and Term of  Office.  The Board of
Directors shall consist of not more than seven  Directors,  except that whenever
there shall be only one  stockholder  the number of Directors  shall be not less
than  one.  Except  in the case of  vacancies  as set  forth in  Article  8, the
Directors  shall be chosen at the  annual  meeting of the  stockholders  by such
stockholders  as have the right to vote thereon,  and each  Director  shall hold
office until the next annual meeting of the stockholders and until his successor
is elected and  qualified,  unless he sooner resigns or is removed in accordance
with Article 8 below.

        Section 3 2 Duties.  The business of the Corporation shall be managed by
or under the  direction  of its Board of  Directors  which may exercise all such
powers of the  Corporation  and do all such lawful acts and things as are not by
statute or by the Amended and Restated  Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.

        Section 3.3 Compensation. Unless otherwise restricted by the Amended and
Restated  Certificate of Incorporation or these By-laws,  the Board of Directors
shall have the authority to fix the compensation of Directors. The Directors may
be paid their  expenses,  if any, of  attendance at each meeting of the Board of
Directors  and may be paid a fixed sum for  attendance  at each  meeting  of the
Board of  Directors  or a stated  salary  as  Director.  No such  payment  shall
preclude any Director  from serving the  Corporation  in any other  capacity and
receiving compensation therefore.  Members of special or standing committees may
be allowed like compensation for attending committee meetings.

        Section  3.4  Reliance  on Books.  A member of Board of  Directors  or a
member of any  committee  designated  by the Board of  Directors  shall,  in the
performance  of his duties,  be duly protected in relying in good faith upon the
books of account or reports made to the  Corporation by any of its officers,  or
by an independent certified public accountant,  or by an appraiser selected with
reasonable care by the Board of Directors or by any committee,  or in relying in
good faith upon other records of the Corporation.

                   ARTICLE 4. MEETINGS OF THE BOARD OF DIRECTORS

        Section 4.1 Place.  The Board of Directors of the  Corporation  may hold
meetings,  both  regular  and  special,  either  within or without  the State of
Delaware.


                                       5
<PAGE>

        Section  4.2 Annual  Meeting.  The first  meeting of each newly  elected
Board of Directors  shall be held  immediately  following the annual  meeting of
stockholders  or any special  meeting held in lieu thereof and no notice of such
meeting  shall be necessary to the newly  elected  Directors in order legally to
constitute the meeting. 

        Section 4.3 Regular Meetings. Regular meetings of the Board of Directors
may be held without  notice at such time and at such place as shall from time to
time be determined by the Board.

        Section  4.4  Special  Meetings.  Special  meetings  of the Board may be
called by the Chairman or President on two days' notice to each Director  either
personally or by mail or by telegram;  special  meetings  shall be called by the
President or Secretary in like manner and on like notice on the written  request
of two Directors  unless the Board consists of only one Director,  in which case
special  meetings  shall be called by the  President or Secretary in like manner
and on like notice on the written request of the sole Director.

        Section  4.5  Quorum.  At all  meetings  of the Board a majority  of the
Directors  then in office  shall  constitute  a quorum  for the  transaction  of
business  and,  except  as  otherwise  provided  in  the  Amended  and  Restated
Certificate  of  Incorporation  or these  By-laws,  the act of a majority of the
Directors  present at any meeting at which there is a quorum shall be the act of
the Board of  Directors,  except as may be  otherwise  specifically  provided by
statute or by the Amended and Restated Certificate of Incorporation. If a quorum
shall not be present at any  meeting of the Board of  Directors,  the  Directors
present thereat may adjourn the meeting from time to time,  without notice other
than announcement at the meeting, until a quorum shall be present.

        Section 4.6 Action Without Meeting.  Unless otherwise  restricted by the
Amended and Restated  Certificate of Incorporation or these By-laws,  any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.

        Section 4.7  Telephone  Meetings.  Unless  otherwise  restricted  by the
Amended and Restated  Certificate of Incorporation or these By-laws,  members of
the Board of Directors,  or any committee  designated by the Board of Directors,
may  participate in a meeting of the Board of Directors,  or any  committee,  by
means of conference  telephone or similar  communications  equipment by means of
which all persons  participating  in the  meeting can hear each other,  and such
participation in a meeting shall constitute presence in person at the meeting.

                       ARTICLE 5. COMMITTEES OF DIRECTORS

        Section 5.1  Designation.  (a) The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,  each
committee  to consist of one or more of the  Directors of the  Corporation.  The
Board may designate one or more Directors as alternate members of any committee,
who may  replace  any  absent  or  disqualified  member  at any  meeting  of the
committee.


                                       6

<PAGE>
       
        (b) In the absence or disqualification  of a member of a committee,  the
member or members  thereof  present at any  meeting  and not  disqualified  from
voting,  whether or not he or they constitute a quorum, may unanimously  appoint
another  member of the Board of  Directors to act at the meeting in the place of
any such absent or disqualified member.
       
        (c) Any such committee,  to the extent provided in the resolution of the
Board of Directors  designating  the committee,  shall have and may exercise all
the powers and  authority  of the Board of Directors  in the  management  of the
business  and  affairs of the  Corporation,  and may  authorize  the seal of the
Corporation  to be  affixed  to all  papers  which may  require  it; but no such
committee shall have the power or authority in reference to amending the Amended
and Restated  Certificate of  Incorporation,  adopting an agreement of merger or
consolidation,  recommending to the  stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,  recommending
to the  stockholders  a  dissolution  of the  Corporation  or a revocation  of a
dissolution,  or  amending  the  By-laws  of the  Corporation  and,  unless  the
resolution or the Amended and Restated  Certificate of Incorporation so provide,
no such committee  shall have the power or authority to declare a dividend or to
authorize the issuance of stock.  Such  committee or committees  shall have such
name or names as may be determined  from time to time by  resolution  adopted by
the Board of Directors.

        Section 5.2  Records of  Meetings.  Each  committee  shall keep  regular
minutes  of its  meetings  and report  the same to the Board of  Directors  when
required.

                               ARTICLE 6. NOTICES
 
        Section 6.1 Method of Giving  Notice.  Whenever,  under any provision of
the law or of the Amended and Restated  Certificate of Incorporation or of these
By-laws,  notice is required to be given to any  Director or  stockholder,  such
notice  shall be given in  writing  by the  Secretary  or the  person or persons
calling the meeting by leaving such notice with such Director or  stockholder at
his  residence  or usual place of business  or by mailing it  addressed  to such
Director  or  stockholder  at his  address as it  appears on the  records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be  deposited  in the United  States mail.
Notice to Directors may also be given by telegram.

        Section  6.2 Waiver.  Whenever  any notice is required to be given under
any provision of law or of the Amended and Restated Certificate of Incorporation
or of these  By-laws,  a waiver  thereof  in  writing,  signed by the  person or
persons  entitled  to said  notice,  whether  before  or after  the time  stated
therein, shall be deemed equivalent thereto. Attendance of a person at a meeting
shall  constitute  a waiver of notice of such  meeting,  except  when the person
attends the meeting for express  purpose of  objecting  at the  beginning of the
meeting to the  transaction of any business  because the meeting is not lawfully
called or convened.

                               ARTICLE 7. OFFICERS

        Section 7.1 In General.  The officers of the Corporation shall be chosen
by the Board of  Directors  and shall  include a  President,  a Secretary  and a
Treasurer.  The Board of Directors may also choose a Chairman of the Board,  one
or more Vice Presidents,  Assistant  Secretaries and 


                                       7
<PAGE>

Assistant  Treasurers.  Any  number of offices  may be held by the same  person,
unless the Amended and Restated  Certificate of  Incorporation  or these By-laws
otherwise  provide.  In  addition,  the  President  may  designate  one or  more
employees  of the  Corporation  having the title of vice  president or assistant
vice president, but who shall not be officers of the Corporation, who shall hold
such titles at the pleasure of the  President and who shall have such powers and
duties as the President may from time to time designate

        Section 7.2 Election of President, Secretary and Treasurer. The Board of
Directors at its first meeting after each annual meeting of  stockholders  shall
choose a President, a Secretary and a Treasurer.

        Section  7.3  Election of Other  Officers.  The Board of  Directors  may
appoint such other  officers and agents as it shall deem  appropriate  who shall
hold their  offices  for such terms and shall  exercise  such powers and perform
such duties as shall be determined from time to time by the Board.

        Section 7.4  Salaries.  The  salaries of all  officers and agents of the
Corporation may be fixed by the Board of Directors.

        Section 7.5 Term of Office.  The officers of the Corporation  shall hold
office until their  successors  are chosen and qualify.  Any officer  elected or
appointed  by the Board of  Directors  may be  removed at any time in the manner
specified in Section 8.2.

        Section 7.6 Duties of  President  and  Chairman of the Board.  The Board
shall  have a  Chairman  of the Board  who  shall  preside  at all  meetings  of
stockholders and at all meetings of the Board of Directors.  The President shall
be the chief executive officer of the Corporation,  shall preside at meetings of
the Board of Directors  in the absence of the Chairman of the Board,  shall have
general and active  management of the business of the  Corporation and shall see
that all orders and  resolutions  of the Board of  Directors  are  carried  into
effect.  The  President  shall  execute  bonds,  mortgages  and other  contracts
requiring a seal,  under the seal of the  Corporation  except where  required or
permitted  by law to be  otherwise  signed and  executed  and  except  where the
signing and  execution  thereof  shall be  expressly  delegated  by the Board of
Directors to some other officer or agent of the Corporation. The Chairman of the
Board,  if any,  shall make his counsel  available to the other  officers of the
Corporation,  shall be  authorized to sign stock  certificates  on behalf of the
Corporation,  shall  preside at all  meetings  of the  Directors  at which he is
present,  and,  in  the  absence  of  the  President  at  all  meetings  of  the
stockholders,  and shall have such  other  duties and powers as may from time to
time be conferred upon him by the Directors.

        Section 7.7 Duties of Vice President. In the absence of the President or
in the event of his  inability or refusal to act, the Vice  President (or in the
event there be more than one Vice  President,  the Vice  Presidents in the order
designated by the Directors,  or in the absence of any designation,  then in the
order of their election) shall perform the duties of the President not otherwise
conferred upon the Chairman of the Board, if any, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President. The
Vice  Presidents  shall  perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.


                                       8
<PAGE>

        Section 7.8 Duties of Secretary. The Secretary shall attend all meetings
of the Board of Directors  and all meetings of the  stockholders  and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that  purpose  and shall  perform  like  duties for the
standing  committees when required.  He shall give, or cause to be given, notice
of all  meetings  of the  stockholders  and  special  meetings  of the  Board of
Directors, except as otherwise provided in these By-laws, and shall perform such
other duties as may be prescribed by the Board of Directors or President,  under
whose  supervision  he shall be. He shall have charge of the stock ledger (which
may,  however,  be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.

        Section 7.9 Duties of Assistant Secretary.  The Assistant Secretary,  or
if there be more than one, the Assistant  Secretaries in the order determined by
the Board of Directors (or if there be no such determination,  then in the order
of their election) shall, in the absence of the Secretary or in the event of his
inability  or refusal to act,  perform the duties and exercise the powers of the
Secretary  and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.

        Section 7.10 Duties of Treasurer.  The Treasurer  shall have the custody
of the corporate funds and securities and shall keep full and accurate  accounts
of receipts and  disbursements  in books  belonging to the Corporation and shall
deposit all moneys and other  valuable  effects in the name and to the credit of
the  Corporation  in such  depositories  as may be  designated  by the  Board of
Directors.  The Treasurer  shall disburse the funds of the Corporation as may be
ordered  by  the  Board  of  Directors,   taking   proper   vouchers  from  such
disbursements, and shall render the President and the Board of Directors, at its
regular meetings,  or when the Board of Directors so requires, an account of all
of  his  transactions  as  Treasurer  and  of  the  financial  condition  of the
Corporation.  If  required  by  the  Board  of  Directors,  he  shall  give  the
Corporation  a bond in such sum and with  such  surety or  sureties  as shall be
satisfactory  to the Board of  Directors  for the  faithful  performance  of the
duties of this office and for the restoration to the Corporation, in case of his
death,  resignation,  retirement or removal from office,  of all books,  papers,
vouchers,  money and other  property of whatever kind in his possession or under
his control belonging to the Corporation.


        Section 7.11 Duties of Assistant Treasurer.  The Assistant Treasurer, or
if  there  shall  be more  than  one,  the  Assistant  Treasurers  in the  order
determined by the Board of Directors (if there be no such determination, then in
the order of their  election),  shall, in the absence of the Treasurer or in the
event of his  inability  or refusal to act,  perform the duties and exercise the
powers of the  Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.

                ARTICLE 8. RESIGNATIONS, REMOVALS AND VACANCIES

        Section 8.1 Directors. (a) Resignations.  Any Director may resign at any
time by giving  written notice to the Board of Directors or the President or the
Secretary. Such resignation shall take effect at the time specified therein; and
unless,  otherwise  specified therein,  the acceptance of such resignation shall
not be necessary to make it effective.
  

                                       9

<PAGE>
    
        (b)  Removals.  Any  Director  may be removed  from office or the entire
Board of Directors may be removed,  with or without  cause,  by the holders of a
majority of the shares then entitled to vote at an election of directors, unless
otherwise  specified  by  law  or  the  Amended  and  Restated   Certificate  of
Incorporation.
              
        The  Directors  may  terminate  or modify the  authority of any agent or
employee.  The  Directors  may remove any  officer  from  office with or without
assignment of cause by vote of a majority of the Directors then in office.

        If cause is  assigned  for  removal of any  Director  or  officer,  such
Director  or  officer  may  be  removed  only  after  a  reasonable  notice  and
opportunity to be heard before the body proposing to remove him.

        No Director or officer who resigns or is removed shall have any right to
any  compensation  as such  Director  or officer  for any period  following  his
resignation  or  removal,  or any right to damages  on  account of such  removal
whether his compensation be by the month or by the year or otherwise,  provided,
however, that the foregoing provision shall not prevent such Director or officer
from obtaining damages for breach of any contract of employment  legally binding
upon the Corporation.
     
        (c) Vacancies.  Vacancies  resulting from any increase in the authorized
number of Directors or any  vacancies in the Board of Directors  resulting  from
death, resignation, retirement,  disqualification,  removal from office or other
cause may he filled  only by a majority  vote of the  Directors  then in office,
though less than a quorum.
 
        If the office of any officer becomes vacant, the Directors may choose or
appoint a  successor  by vote of a  majority  of the  Directors  present  at the
meeting at which such choice or appointment is made.

        Each  successor  director or officer shall hold office for the unexpired
term of his  predecessor  and until his successor shall be elected or appointed,
as the case may be, and qualified,  or until he sooner dies, resigns, is removed
or becomes disqualified.

        Section 8.2 Officers.  The Board of Directors may, at any meeting called
for the  purpose,  by vote of a majority  of their  entire  number,  remove from
office any  officer of the  Corporation,  with or  without  cause.  The Board of
Directors may, at any meeting, by vote of a majority of the Directors present at
such meeting, accept the resignation of any officer of the Corporation or remove
or  accept  the  resignation  of any  employee  or  agent or any  member  of any
committee regardless of how appointed,  and any officer, agent or employee other
than an  executive  officer may also be removed  with or without  cause,  or his
resignation  accepted by the committee or officer which  appointed  such person.
Any vacancy  occurring in the office of President,  Secretary or Treasurer shall
be filled by the Board of Directors and the officers so chosen shall hold office
subject to the  By-laws for the  unexpired  term in respect of which the vacancy
occurred and until their successors shall be elected and qualify.


                                       10

<PAGE>

                        ARTICLE 9. CERTIFICATES OF STOCK

        Section 9.1 Issuance of Stock.  The Directors  may, at any time and from
time to time,  if all of the shares of capital  stock which the  Corporation  is
authorized by its Amended and Restated  Certificate  of  Incorporation  to issue
have not been issued, subscribed for, or otherwise committed to be issued, issue
or take  subscriptions  for  additional  shares of its  capital  stock up to the
amount authorized in its Amended and Restated Certificate of Incorporation. Such
stock  shall  be  issued  and the  consideration  paid  therefor  in the  manner
prescribed by law.

        Section 9.2 Right to  Certificate;  Form.  Every  holder of stock in the
Corporation  shall be entitled to have a certificate,  signed by, or in the name
of the  Corporation  by, the  Chairman  of the Board,  the  President  or a Vice
President  and the Treasurer or an Assistant  Treasurer,  or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation. Certificates may be issued for partly paid shares and in
such case upon the face or back of the certificates issued to represent any such
partly paid shares,  the total amount of the  consideration to be paid therefor,
and the amount paid thereon shall be specified.

        Section 9.3  Facsimile  Signature.  Any of or all the  signatures on the
certificate may be facsimile.  In case any officer,  transfer agent or registrar
who has signed or whose  facsimile  signature has been placed upon a certificate
shall have ceased to be such officer,  transfer  agent or registrar  before such
certificate is issued,  it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.

        Section 9.4 Lost  Certificates.  The Board of Directors may direct a new
certificate  or  certificates  to be  issued  in  place  of any  certificate  or
certificates  theretofore  issued by the Corporation  alleged to have been lost,
stolen or destroyed,  upon the making of an affidavit of that fact by the person
claiming  the  certificate  of stock  to be  lost,  stolen  or  destroyed.  When
authorizing  such  issue of a new  certificate  or  certificates.  The  Board of
Directors may, in its  discretion  and as a condition  precedent to the issuance
thereof,  require the owner of such lost,  stolen or  destroyed  certificate  or
certificates, or his legal representative,  to advertise the same in such manner
as it shall require and/or to give the  Corporation a bond in such sum as it may
direct as indemnity  against any claim that may be made against the  Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.

        Section 9.5 Transfer of Stock.  Upon surrender to the Corporation or the
transfer agent of the  Corporation of a certificate  for shares duly endorsed or
accompanied  by proper  evidence of  succession,  assignation  or  authority  to
transfer,  it shall be the duty of the Corporation to issue a new certificate to
the  person  entitled  thereto,  cancel  the  old  certificate  and  record  the
transaction upon its books.

        Section 9.6 Registered  Stockholders.  The Corporation shall be entitled
to recognize  the  exclusive  right of a person  registered  on its books as the
owner of shares to receive  dividends,  and to vote as such  owner,  and to hold
liable for calls and  assessments a person  registered on its books as the owner
of shares,  and shall not be bound to recognize  any equitable or other claim to
or interest in such share or shares on the part of any other person,  whether or
not it shall have express or other notice thereof  except as otherwise  provided
by the laws of Delaware.



                                       11
<PAGE>

                         ARTICLE 10. EXECUTION OF PAPERS

        Except  as  otherwise  provided  in  these  By-laws  or as the  Board of
Directors may generally or in particular cases otherwise  determine,  all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation  shall be executed by the
President or the Treasurer.

                             ARTICLE 11. FISCAL YEAR

        Except  as  from  time  to  time  otherwise  provided  by the  Board  of
Directors,  the fiscal year of the Corporation  shall be the twelve month period
ending on the Saturday closest to April 30.


                                ARTICLE 12. SEAL

        The  Corporate  seal  shall  have  inscribed  thereon  the  name  of the
Corporation,  the year of its organization and the word "Delaware." The seal may
be used by  causing it or a  facsimile  thereof  to be  impressed  or affixed or
reproduced or otherwise.

                               ARTICLE 13. OFFICES

        In addition to its principal office, the Corporation may have offices at
such other  places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

                           ARTICLE 14. INDEMNIFICATION

        Section 14.1 Actions  other than by or in the Right of the  Corporation.
The  Corporation  shall  indemnify  any  person  who  was  or is a  party  or is
threatened to be made a party to any  threatened,  pending or completed  action,
suit or proceeding,  whether civil,  criminal,  administrative  or investigative
(other  than an action by or in the right of the  Corporation)  by reason of the
fact  that  he  is or  was  a  director,  officer,  employee  or  agent  of  the
Corporation,  or is or was  serving  at the  request  of  the  Corporation  as a
director, officer, employee or agent of another corporation,  partnership, joint
venture,  trust or other  enterprise,  against  expenses  (including  attorneys'
fees),  judgments,  fines and amounts paid in settlement actually and reasonably
incurred by him in connection  with such action,  suit or proceeding if he acted
in good faith and in a manner he reasonably  believed to be in or not opposed to
the best interests of the Corporation,  and, with respect to any criminal action
or proceedings, had no reasonable cause to believe his conduct was unlawful. The
termination of any action,  suit or proceeding by judgment,  order,  settlement,
conviction,  or upon a plea of nolo  contendere or its equivalent  shall not, of
itself,  create a presumption that the person did not act in good faith and in a
manner  which  be  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 reasonable cause to believe that his conduct was unlawful.

        Section  14.2  Actions  by or in  the  Right  of  the  Corporation.  The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened,


                                       12
<PAGE>

pending or  completed  action or suit by or in the right of the  Corporation  to
procure  a  judgment  in its  favor by  reason  of the fact  that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the  request of the  Corporation  as a director,  officer,  employee or agent of
another  corporation,  partnership,  joint  venture,  trust or other  enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in  connection  with the defense or  settlement of such action or suit if he
acted in good  faith  and in a manner  he  reasonably  believed  to be in or not
opposed  to  the  best  interests  of  the   Corporation   and  except  that  no
indemnification  shall be made in respect  of any  claim,  issue or matter as to
which such person shall have been  adjudged to be liable  unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application  that,  despite
the adjudication of liability but in view of all the  circumstances of the case,
such person is fairly and  reasonably  entitled to indemnity  for such  exereses
which the Court of  Chancery  of the State of Delaware or such other court shall
deem proper.

        Section  14.3  Success  on the  Merits.  To the  extent  that any person
described  in  Sections  14.1 or 14.2  has  been  successful  on the  merits  or
otherwise  in defense of any  action,  suit or  proceeding  referred  to in said
Sections,  or in  defense  of any claim,  issue or matter  therein,  he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

        Section 14.4 Specific Authorization.  Any indemnification under Sections
14.1 or 14.2 (unless ordered by a court) shall be made by the  Corporation  only
as authorized in the specific case upon a determination that  indemnification of
any person described in said Sections is proper in the circumstances  because he
has met the  applicable  standard  of conduct set forth in said  Sections.  Such
determination  shall be made (1) by the Board of Directors by a majority vote of
a quorum  consisting of directors  who were not parties to such action,  suit or
proceeding,  or (2) if such a quorum is not obtainable,  or even if obtainable a
quorum of disinterested  directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders of the Corporation.

        Section 14.5 Advance Payment.  Expenses incurred in defending a civil or
criminal action,  suit or proceeding shall be paid by the Corporation in advance
of the final  disposition  of such action suit or proceeding  upon receipt of an
undertaking  by or on behalf of any person  described  in said  Section to repay
such amount if it shall  ultimately  be  determined  that he is not  entitled to
indemnification by the Corporation as authorized in this Article 14.

        Section 14.6  Non-Exclusivity.  The  indemnification  and advancement of
expenses provided by, or granted pursuant to, the other Sections of this Article
14 shall not be deemed  exclusive  of any other  rights to which those  provided
indemnification  or  advancement  of expenses may be entitled  under any By-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official  capacity and as to action in another  capacity  while
holding such office.

                                       13
<PAGE>


        Section 14.7 Insurance.  The Board of Directors may authorize, by a vote
of the  majority of the full board,  the  Corporation  to purchase  and maintain
insurance on behalf of any person who is or was a director, officers employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director,  officer, employee or agent of another corporation,  partnership,
joint venture,  trust or other enterprise against any liability asserted against
him and  incurred by him in any such  capacity,  or arising out of his status as
such,  whether  or not the  Corporation  would have the power to  indemnify  him
against such liability under the provisions of this Article 14.

        Section  14.8  Continuation  of   Indemnification   and  Advancement  of
Expenses.  The  indemnification  and  advancement  of expenses  provided  by, or
granted  pursuant  to,  this  Article 14 shall  continue  as to a person who has
ceased to be a  director,  officer  employee  or agent  and  shall  inure to the
benefit of the heirs, executors and administrators of such a person.

        Section  14.9  Severability.  If any word,  clause or  provision of this
Article 14 or any award made hereunder  shall for any reason be determined to be
invalid, the provisions hereof shall not otherwise be affected thereby but shall
remain in full force and effect.

        Section  14.10  Intent of Article.  The intent of this  Article 14 is to
provide for  indemnification  and  advancement of expenses to the fullest extent
permitted by Section  14.5 of the General  Corporation  Law of Delaware.  To the
extent that such Section or any successor section may be amended or supplemented
from time to time, this Article 14 shall be amended  automatically and construed
so as to permit  indemnification  and  advancement  of  expenses  to the fullest
extent from time to time permitted by law.

                             ARTICLE 15. AMENDMENTS

        These By-laws may be altered,  amended or repealed or new By-laws may be
adopted by the stockholders or by a majority of the full Board of Directors when
such power is conferred  upon the Board of Directors by the Amended and Restated
Certificate of  Incorporation,  at any regular meeting of the stockholders or of
the Board of Directors,  or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration,  amendment,  repeal or adoption
of new By-laws is  contained in the notice of such  special  meeting,  or by the
unanimous  written  consent of the  Directors.  If the power to adopt,  amend or
repeal  By-laws is conferred  upon the Board of Directors by the  Certificate of
Incorporation,  it shall not  divest or limit the power of the  stockholders  to
adopt amend or repeal By-laws.


                                       14

<PAGE>

                                                                       EXHIBIT C

                              MARKETING AGREEMENT

                                    BETWEEN
                          GROUNDWATER TECHNOLOGY, INC.
                                      AND
                               FLUOR DANIEL, INC.




                              _____________, 1996


<PAGE>


THIS  MARKETING  AGREEMENT  is  entered  into  effective  as of the ___ day of ,
_____________, 1996.

BETWEEN: GROUNDWATER TECHNOLOGY, INC., a corporation organized under the laws of
       the State of  Delaware,  having its  principal  office at 100 River Ridge
       Drive, Norwood, Massachusetts. ("GTI")

AND    FLUOR DANIEL, INC. a corporation organized under the laws of the State of
       California,  having its principal office at 3333 Michelson Drive, Irvine,
       California, ("FLUOR DANIEL")

WHEREAS,  prior to the execution and delivery of this  Agreement,  GTI and FLUOR
DANIEL (both  directly  and through its  wholly-owned  subsidiary,  Fluor Daniel
Environmental  Services,  Inc.  ("FDESI"))  were each engaged in the business of
providing investigation, evaluation, project management and remediation services
with regard to the restoration of environmentally impacted sites and facilities;
and

WHEREAS,  concurrently  with the execution of this  Agreement,  Fluor Daniel has
acquired a majority ownership interest in GTI and in connection  therewith Fluor
Daniel has transferred to GTI all of the issued and outstanding shares of FDESI.


                                       2

<PAGE>

WHEREAS,  the Parties wish to enter into this  Marketing  Agreement to set forth
the basis upon  which such  Parties  shall  engage in the global  conduct of the
environmental  services  business and the basis for providing mutual support and
assistance in conducting their own respective businesses.

NOW,  THEREFORE,  in  consideration  of the above premises and mutual  covenants
contained herein, the Parties have agreed as follows:

1.      DEFINITIONS
        
        The following  terms as used in this  Agreement  shall have the meanings
set out below:

        1.1  "Affiliate"  shall mean any  corporation  or other legal  entity of
which a Party  (either  alone or together  with other  Affiliates of that Party)
owns,  directly  or  indirectly,  more  than 50% of the  stock  or other  equity
interests the holders of which are ordinarily  and generally,  in the absence of
contingencies  or other  understandings,  entitled to vote for the election of a
majority of the board of directors or governing body.

        1.2 "Contract  Support  Services"  shall mean  services  provided by one
Party to or on behalf of the other Party,  in  connection  with a project  being
performed for a client,  but which by  themselves  do not  constitute a scope of
work   within  the   project   being   performed.  

                                       3

<PAGE>

        1.3 "DOE Management and Operations/Operating and  Maintenance/Management
and  Integration  (M&O/O&M/M&I)  Projects"  shall mean  projects  involving  the
management and operation,  and/or management integration of sites and facilities
and environmental engineering services for the U.S. Department of Energy.

        1.4 "Duality"  shall mean the joint  resolution of issues by the Parties
to the overall best combined market approach of the Parties  balancing short and
long term considerations, and consistent with the spirit of this Agreement.

        1.5  "Engineering  and  Construction   Business"  and  "Engineering  and
Construction   Services"  shall  mean  the  providing  of  feasibility  studies,
conceptual   design,   engineering,   procurement,   project  and   construction
management,  construction,  maintenance,  plant operations,  technical,  project
finance, quality control,  start-up assistance,  site evaluation,  licensing and
consulting  with  respect to actual or proposed  sites or  facilities  provided,
however,  that  "Engineering  and  Construction  Business" and  "Engineering and
Construction  Services" does not include services that are typically provided in
connection with Environmental Services.

        1.6 "Environmental  Business" or "Environmental Services" shall mean the
providing of investigation,  evaluation, design, feasibility studies, management
and pollution prevention, project management,  remediation,  permitting, quality
control,  start-up  assistance,  licensing and  consulting  services  (including
incidental project finance

                                       4
<PAGE>

procurement,  construction  and  maintenance)  relating to (a) the  treatment of
groundwater,  wastewater,  soil  and  hazardous  waste,  or  (b)  air  emissions
controls; provided, however, that such terms shall not include:
 
a). the Excluded Projects.
 
b). DOE  Management and  Operations/Operating  and  Maintenance/  Management and
    Integration (M&O/O&M/M&I) Projects.
  
c). Substantial  Infrastructure  projects  related to  government  or industrial
    water supply,  water treatment,  wastewater  treatment or pollution  control
    facilities.  Industrial  wastewater  facilities  may be  performed by either
    Party, and shall be a subject of Duality.
 
d). Molten Metal Technology and M4 (and successor) Projects.

e). Facilities that are built due to  environmental  drivers but that are mainly
    capital  plant  investments  by a client,  such as  waste-to-energy  and oil
    refinery clean air emission process upgrades.  The Parties shall use Duality
    where  there  is  uncertainty  as to where  services  wou  fall  under  this
    agreement.
        
        1.8 "Excluded Projects" shall mean the Fernald environmental remediation
management contract and the contract with Ciba-Geigy for construction management
for remediation activities at their Toms River, New Jersey facility.


                                       5

<PAGE>

        1.9  "Fluor  Daniel  Group"  shall  mean  Fluor  Daniel  and each of its
Affiliates, excluding members of the GTI Group.

        1.10 "GTI Group"  shall mean GTI and each of its  Affiliates,  including
without limitation, FDESI.

        1.11 "Investment Agreement" shall mean that certain Investment Agreement
dated as of  December  11, 1995 by and among Fluor  Daniel,  FDESI,  GTI and GTI
Acquisition Corporation.

        1.12  "Marketing  Agreement"  or  "Agreement"  shall  mean  the  present
Agreement together with its Exhibits, Schedules and any amendments thereof.

        1.13  "Party"  means  either GTI on the one hand or FLUOR  DANIEL on the
other hand, depending on the context. "Parties" means both of them.


        1.14 "Project  Services" shall mean services provided by one Party to or
on behalf of the other Party which  constitute  a scope of work within a project
being performed for a client.


                                       6
<PAGE>

        1.15  "TBS  Opportunities"  shall  mean  the  pursuit  of  environmental
opportunities   with   clients   to  provide   total   business   solutions   to
environmentally   impacted   real  estate  and   operating   facilities,   which
opportunities are differentiated  from  Environmental  Business or Environmental
Services in that they (a) include providing,  in the context of a single project
or program,  substantial  non-environmental  services to a client in addition to
investigation,   assessment,   remediation  and  monitoring  services  currently
provided by GTI, or (b)  involve a  substantial  increase in the scale and scope
of,  and  the  integration  of,  solutions  to be  provided,  including,  in the
aggregate,  the potential for high value of work (greater than $5 million),  the
complexity of the financing  arrangement with the client and the strategic value
of  the  services  to  the  client  in  connection  with  solving  the  client's
environmental issues.

        1.16 The Exhibits to this Marketing Agreement are the following:
               
                Exhibit A   Terms and Conditions - Overhead Support Services
                Exhibit B   Intercompany Services Agreement
                Exhibit C   Contract Support Services - Billing Terms
                Exhibit D   Project Services - Billing Terms

2.      BUSINESS PURPOSE/EXCLUSIVITY
      
        2.1 The Parties agree that the purpose of this Marketing Agreement is to
establish the respective rights,  roles and  responsibilities of the Parties and
their  Affiliates with regard to the pursuit of the  Environmental  Business and
TBS  Opportunities on a

                                       7
<PAGE>


worldwide  basis.  The Parties  acknowledge  that, in their opinion,  the future
environmental   services   market  will  favor   service   providers   that  can
differentiate  themselves from other providers by offering creative solutions to
environmental  problems.  These  creative  solutions  may  involve  the  service
provider  becoming a  "stakeholder"  in the  client's  solution  and may include
accepting  more risk in  exchange  for more reward  (beyond  accepting a fee for
services rendered on a time and materials basis).  The Parties  acknowledge that
these creative  solutions will be applicable to both the Environmental  Business
and to TBS  Opportunities,  and the  Parties  have  agreed  to enter  into  this
Marketing Agreement and to work together in Duality to provide services to their
respective  clients.  The Parties  also agree to operate in Duality for areas of
potential  overlap,  including  where such overlap is created by agreements with
other parties.

        2.2 The Parties agree that,  subject to the terms of this Agreement,  as
between  the Fluor  Daniel  Group and the GTI  Group,  the GTI Group  shall have
primary  responsibility  for the marketing  and  execution of the  Environmental
Business and the Fluor Daniel  Group shall have primary  responsibility  for the
marketing and execution of TBS  Opportunities.  Fluor Daniel , on its behalf and
on behalf of the Fluor Daniel  Group,  will promote the use of the GTI Group for
Environmental  Services that are related or incidental  to its  Engineering  and
Construction Business or its TBS Opportunities,  provided that the use of GTI is
acceptable to the client,  that GTI has adequate  available  personnel and other
resources  to  timely  and


                                       8
<PAGE>

satisfactorily   perform  the  work  and  its  proposed   commercial  terms  are
competitive  with the  market.  GTI shall  commit in good faith to perform  such
Environmental  Services as may be  requested by Fluor  Daniel,  but shall not be
obligated to provide  such  Environmental  Services if there's a valid  business
reason for its refusal to perform such services. For purposes of this Agreement,
Fluor Daniel will  evaluate the  competitiveness  of GTI's  commercial  terms by
comparing  them to terms and  conditions  of other  providers  of  Environmental
Services of the same quality and scope in the location of where the services are
to be provided, and reviewing them with GTI.

        2.3 Within 30 days of the date of this  Agreement,  Fluor  Daniel  shall
notify its  management  and the  management  of its  Affiliates of the marketing
relationship  formed  between the Parties  and of the  obligations  of the Fluor
Daniel Group under this  Agreement.  Periodically  throughout  the terms of this
Agreement,  Fluor Daniel will communicate with its management and the management
of its  Affiliates to remind them of the marketing  relationship  formed between
the  Parties  and of the  obligations  of the  Fluor  Daniel  Group  under  this
Agreement.

        2.4 Within 30 days of the date of this  Agreement,  GTI shall notify its
management and the  management of its  Affiliates of the marketing  relationship
formed  between the Parties and of the  obligations  of the GTI Group under this
Agreement.  Periodically  throughout  the  term  of  this  Agreement,  GTI  will
communicate  with its 


                                       9
<PAGE>

management  and the management of its Affiliates to remind them of the marketing
relationship  formed between the Parties and of the obligations of the GTI Group
under this Agreement.

        2.5 Prior to either Party  forwarding a written  communication  to their
respective  management  pursuant  to  Sections  2.3 and  2.4  above,  the  Party
preparing to forward the  communication  shall give the other Party a reasonable
opportunity to review and comment on the communication.

3.      INTERCOMPANY SERVICES

        3.1 Overhead  Support  Services.  Subject to  availability  of qualified
personnel,  each Party agrees to provide to the other Party, the services of its
employees (including technical,  financial and administrative  personnel) as may
be reasonably  requested by the other Party in connection  with  activities of a
general  nature which are not related to a specific  contract upon the terms and
conditions set forth in Exhibit A attached,  which terms and conditions shall be
reviewed by the Parties bi-annually.

        3.2 Contract  Support.  All Contract  Support Services to be provided by
one Party to the other  Party,  shall be  performed  pursuant  to Work  Releases
issued pursuant to the terms of the  Intercompany  Services  Agreement  attached
hereto as Exhibit B, and  containing  the  commercial  terms and  conditions set
forth in Exhibit C, which terms and conditions  shall be reviewed by the Parties
bi-annually.


                                       10
<PAGE>

     
        3.3 Project  Services.  All Project Services to be provided by one Party
to the other Party shall be performed  pursuant to Work Releases issued pursuant
to the terms of the Intercompany Services Agreement attached hereto as Exhibit B
and  containing  commercial  terms and  conditions set forth in Exhibit D, which
terms and conditions shall be reviewed by the Parties bi-annually.

        3.4  Facilities.  If and to the extent that Fluor Daniel provides office
space to GTI or a member of the GTI Group, applicable costs shall be charged for
such office space on the same basis as Fluor Daniel charges its other  operating
subsidiaries.  Fluor  Daniel  agrees to maintain  appropriate  health and safety
programs and  procedures  for the benefit of Fluor  Daniel and GTI  employees at
such office locations.

        3.5 Each Party  understands  that the other  Party will be  involved  in
other  activities  and  undertakings  not  within  the  scope of this  Marketing
Agreement.  The  Parties  hereby  agree  that the  execution  of this  Marketing
Agreement  and the  assumption  by each of the  Parties of its duties  hereunder
shall be  without  prejudice  to its  rights to have such  other  interests  and
activities  and to  receive  and enjoy the  profits or  compensation  therefrom.
Except as otherwise  provided  herein,  the Parties may engage in or possess any
interest  in any  other  business,  undertaking,  or  venture  of any  nature or
description  independently or with others and neither Party shall have any right
by virtue of this Marketing  Agreement in and to such  business,  undertaking or
venture  of the other  Party or the  income or profits  derived


                                       11
<PAGE>

therefrom.  The Parties agree to meet  periodically  to discuss joint  marketing
opportunities  and  initiatives,  to use  reasonable  efforts to keep each other
fully advised of its own marketing efforts with common clients and, with respect
to the foregoing,  to establish mutually acceptable  communications  procedures.
With any such common  clients it is understood  that GTI will have the marketing
lead for projects that primarily involve  Environmental  Services and that Fluor
Daniel will have the marketing lead for TBS  Opportunities and for projects that
primarily involve Engineering and Construction Services.

4.      LIABILITIES

        4.1   Neither   Party   shall  hold  itself  out  as  being  the  agent,
representative,  employee or the  principal of the other Party.  This  Marketing
Agreement does not constitute  either Party the agent of the other,  nor does it
create a partnership, a consortium, an association, a joint venture, or any form
of juristic person or entity. Neither Party shall have any authority or right to
assume or create  obligations  of any kind or  nature,  express or  implied,  on
behalf of, or in the name of the other Party, not to accept service of any legal
process of any kind  addressed to or intended  for the other Party,  nor to bind
the other Party in any respect, without the specific prior written authorization
of the other Party.  If either Party acts in  violation of the  foregoing,  said
Party hereby  covenants to indemnify  and hold harmless the other Party from and
against any and all claims, demands,  losses, damages,  liabilities,  law suits,
and other proceedings,  judgments and awards, and costs and expenses


                                       12
<PAGE>

(including,  but not limited to, reasonable attorneys' fees) arising directly or
indirectly  in whole or in part out of the breach of this  Section by such Party
or out of the breach of  Section  4.1,  whether  committed  by the  indemnifying
Party, its employees, agents, successors, assigns, or its Affiliates.

        4.2 Each Party shall  indemnify  and hold  harmless the other Party from
and against any and all claims, demands, losses, damages, liabilities,  lawsuits
and  other  proceedings,  judgments  and  awards,  and the  costs  and  expenses
(including,  but not  limited  to,  reasonable  attorneys'  fees) of any  action
resulting  from  the  death of any  person,  or for  damage  or  destruction  of
property,  but only to the extent  resulting  solely from the negligent  acts or
omissions of such Party.

        4.3 In no event  shall  either  Party ever be liable to, or  required to
provide indemnity to, the other Party for any incidental, special, consequential
or punitive  damages of the other Party,  or its Affiliates,  including  without
limitation, liability for loss of profits or business interruption,  however the
same may be caused.

        4.4  Each  Party  shall  be  solely  responsible  for the  accuracy  and
completeness  of  information  and  representations  supplied  by each Party and
incorporated in any proposal, prime or sub contract,  including, but not limited
to, cost or pricing data,  materials,  specifications,  and certifications,  and
each Party agrees to release defend,  indemnify and hold the other harmless from
and against any and all claims, 


                                       13
<PAGE>

liabilities  and causes of action arising out of or relating to the provision of
such information and/or representations.

        4.5  Indemnities  against,  releases  from and  limitation  on liability
expressed  in  Sections  4.1 and 4.4 shall apply even in the event of the fault,
negligence  or strict  liability of the Party  indemnified  or released or whose
liability is limited.

        4.6 The Parties make no other representations,  covenants, warranties or
guarantees,  express or  implied,  other than those set forth in this  Marketing
Agreement,  the  Intercompany  Services  Agreement  or in a  Work  Release.  The
Parties' rights, and  responsibilities  with respect to the matters set forth in
this Marketing Agreement, shall be exclusively those set forth in this Marketing
Agreement, the Intercompany Services Agreement or in a Work Release.

5.      CONFIDENTIALITY
     
        5.1 Restrictions on Use and Disclosure.  Each Party covenants and agrees
it will not, and it will not permit its Affiliates  to,  directly or indirectly,
or in any capacity whatsoever, divulge or disclose the Confidential Information,
in whole or in part,  to any  person  or entity  (including  its  Affiliates  or
shareholders),   except  to  the  extent  such   divulgence   or  disclosure  is
specifically  permitted by the Party disclosing the Confidential  Information or
is  required  by  law.  The  Recipient  (as   hereinafter   defined)  shall  use
Confidential Information for the purpose of carrying 


                                       14
<PAGE>

out the activities that are the subject of this Agreement,  and the Intercompany
Services Agreement, and for no other purpose.

        5.2  Confidential   Information   Defined.  As  used  herein,  the  term
"Confidential  Information"  shall mean: all technical,  economic or descriptive
information,  data,  concepts,  or know-how disclosed to a Party,  including any
officers,  directors,  managers,  partners or  employees of such Party or any of
such Party's  Affiliates (the "Recipient") by the other Party (the "Originator")
(1) in  written  or  documentary  form  marked  "Confidential"  or with words of
similar  import,  or (2) in an oral  presentation  or visual  demonstration  and
identified as confidential at the time of such disclosure,  and then, within ten
(10) days, confirmed in written or tangible form marked "Confidential",  or with
words of similar import, except any portion of such information which:

(i)    the  Recipient  can show  was in its  possession  prior  to the  earliest
       disclosure by the  Originator,  provided that the Recipient has the right
       of free and unlimited disclosure thereof; or

(ii)   is  presently  or  hereafter  becomes a part of the public  knowledge  or
       literature  without default by the Recipient of its obligations  pursuant
       to this Agreement; or

(iii)  the Recipient can show was  developed by the Recipient  from  independent
       information not subject to restrictions of confidentiality; or



                                       15
<PAGE>

(iv)   is or has been  disclosed to the  Recipient by a third Party,  so long as
       Recipient  does not know or have reason to know such third Party acquired
       that  information  directly or indirectly  from the  Originator  under an
       obligation  of   confidentiality,   provided   Recipient's   use  of  suc
       information is in accordance with the terms under which it is received.

        5.3  Disclosure to Employees.  The  Recipient  shall use all  reasonable
efforts  to  (1)  limit  disclosure  of  Confidential   Information  within  its
organization  to  only  those  employees  who  need  to  use  such  Confidential
Information for the purpose  authorized in Section 5.3, and who are obligated to
the Recipient by a secrecy agreement with terms concerning disclosure and use at
least as  restrictive  as those herein in a form  acceptable  to the  disclosing
Party, and (2) advise each of those employees of Recipient's  obligations  under
this Agreement.

        5.4 No License.  Nothing  contained  herein  shall be construed to grant
Recipient  any  immunity  or  license  under any  patent  or other  intellectual
property right.

        5.5 Term. The Parties' obligations concerning non-disclosure and the use
of Confidential  Information contained in this Section 6 shall continue for five
(5) years from the termination of this Agreement and shall then terminate.


                                       16

<PAGE>

6.  USE OF FLUOR DANIEL NAME
 
        Fluor  Daniel's name and logo are  proprietary  to Fluor  Daniel.  Fluor
Daniel hereby authorizes the use of the corporate name "Fluor Daniel/GTI,  Inc."
by GTI until such right is  terminated  as set forth below.  In addition,  Fluor
Daniel will not  unreasonably  withhold  its consent to the use of similar  name
configurations  by other Affiliates of GTI on the same terms and conditions.  In
the event  this  Agreement  is  terminated  pursuant  to Article 8, or GTI or an
Affiliate of GTI that is using the Fluor Daniel name (or any derivation thereof)
discontinues business operations or is otherwise  liquidated,  then the right of
GTI or any such member of the GTI Group to continue to use the Fluor Daniel name
(or any derivation thereof) shall cease and the respective name shall be removed
from all company documents (including without limitation,  its corporate name as
reflected  in its charter  documents)  promptly  and in any event  within  three
months after notice thereof and all future use is hereby prohibited.  No further
notice of Fluor Daniel's rights pursuant to this Article is required.

7.  TERM, TERMINATION
      
        7.1 This Marketing Agreement shall commence on the date set forth on the
first page hereof and,  subject to earlier  termination  pursuant to Section 7.2
hereof, the term of this Marketing Agreement shall be ten (10) years,  whereupon
it shall lapse and terminate  without  formality  unless it has been extended by
mutual written agreement.


                                       17
<PAGE>

        7.2 If at any time during the ten year period referred to in Section 7.1
hereof,  Fluor Daniel shall cease to own at least  twenty  percent  (20%) of the
then issued and  outstanding  common shares of GTI or any successor to GTI, then
either  Fluor  Daniel,  provided  that  Fluor  Daniel  is not in  breach  of its
obligations pursuant to Section 6.3(d) of the Investment Agreement, or GTI may ,
elect to terminate this  Agreement.  For such  termination to be effective Fluor
Daniel or GTI, as the case may be, must give the other Party  written  notice of
its election to so  terminate  within 90 days after Fluor Daniel first ceased to
maintain  such  level  of  ownership.  Upon  the  giving  of  such  notice,  the
termination shall be effective 30 days after the receipt of such notice.

8.   ASSIGNMENT, SUBCONTRACTING

        8.1 Neither Party shall sell,  assign or in any manner transfer,  convey
or alienate  its interest or part thereof in this  Marketing  Agreement  without
first obtaining the written consent of the other Party.

        8.2  This  Marketing  Agreement  shall  inure to the  benefit  of and be
binding  upon  the  Parties,  their  successors,  trustees,  permitted  assigns,
receivers and legal  representatives,  but shall not inure to the benefit of any
other person or entity.


                                       18

<PAGE>

9.   AMENDMENTS
    
        No  amendment of this  Marketing  Agreement or its Exhibits or Schedules
shall be of any force or effect  unless  reduced to writing and  executed in the
same manner as the present agreement.

10. NOTICES
 
        All notices under this Marketing Agreement shall be given in writing and
shall be delivered by (i) certified or registered mail, postage prepaid,  return
receipt requested,  or (ii) reputable  overnight  commercial courier or delivery
service, or (iii) by facsimile transmission confirmed by certified or registered
mail or commercial courier or delivery service as follows:

        a)      To:     FLUOR DANIEL, INC.
                        3333 Michelson Drive
                        Irvine, California 92730
                        Attention:  David L. Myers
                        Facsimile number:  714-975-5545

        b)      To:     GROUNDWATER TECHNOLOGY, INC.
                        100 River Ridge Drive
                        Norwood, MA 02062
                        Attention:  Walter C. Barber

                                       19
<PAGE>


                        Facsimile number:  617-769-7992
       
or to such other  address of which either  Party shall have  notified the other.
All notices shall be effective only upon receipt by the receiving Party.

11.     GOVERNING LAW
       
        11.1 This Marketing Agreement shall be governed by the laws of the State
of Delaware  without  regard to conflict of law rules,  whose  courts,  state or
federal, shall have sole and exclusive jurisdiction.

12.     FORCE MAJEURE
       
        A Party shall not be liable for  non-performance or delay in performance
caused by any event reasonably  beyond the control of such Party including,  but
not limited to,  hostilities,  revolutions,  riots,  civil  commotion,  national
emergency,  strikes,  work  stoppages,   slowdowns,  labor  disputes,  lockouts,
unavailability of supplies, epidemics, fire, flood, earthquake, force of nature,
explosion,  embargo,  or  any  other  Act of  God,  or  any  law,  proclamation,
regulation,  ordinance,  or  other  act or order of any  court,  government,  or
governmental agency;  provided,  however, that this Article shall not affect the
liability of any Party for its failure to pay any sum of money  required by this
Marketing Agreement.

13.     SEVERABILITY
       
        In the event that any of the provisions of this Marketing  Agreement are
held to be invalid,  illegal or unenforceable  in any respect,  such invalidity,
illegality or unenforceability  shall

  
                                     20
 
<PAGE>

not affect any other  provision  thereof and this Marketing  Agreement  shall be
construed as if such invalid,  illegal or unenforceable provision had never been
contained herein and the Parties shall to the fullest extent possible modify any
such provision to the extent required to carry out the general intention of this
Marketing Agreement and to impart validity thereto.

14.     EFFECT OF WAIVERS
       
        No  forbearance,  indulgence,  or relaxation or inaction by any Party at
any time to require  performance of any  provisions of this Marketing  Agreement
shall in any way affect,  diminish or prejudice  the right of a Party to require
performance of that provision and any waiver or  acquiescence by either Party in
any breach of any provision of this Marketing  Agreement  shall not be construed
as a waiver or  acquiescence  in any  continuing  or  succeeding  breach of such
provision,  a waiver or an amendment of the provision  itself or a waiver of any
right under or arising out of this  Marketing  Agreement or  acquiescence  in or
recognition  of rights and/or  positions  other than as expressly  stipulated in
this Marketing Agreement.

15.     COUNTERPARTS
       
        This Marketing  Agreement may be executed in any number of  counterparts
each  of  which  shall  be  deemed  to be an  original  and all of  which  shall
constitute one and the same Marketing Agreement.

                                       21


<PAGE>

IN WITNESS WHEREOF the Parties have signed this Marketing Agreement effective on
the date first above written.


GROUNDWATER TECHNOLOGY, INC.            FLUOR DANIEL, INC.


By      _______________________         By      _______________________

Title   _______________________         Title   _______________________