EXHIBIT 10.38

             FIRST AMENDMENT TO EXTENSION AND MODIFICATION AGREEMENT

THIS FIRST AMENDMENT TO EXTENSION AND  MODIFICATION  AGREEMENT  ("Amendment") is
made effective as of April 30, 1999, by and between UNION BANK CALIFORNIA, N.A.,
formerly known as The Bank of California,  N.A. ("Bank") and EMCON, a California
corporation.  This  Amendment  amends that certain  Extension  and  Modification
Agreement  by and  between  Bank and  borrower  dated as of March  19,  1999 (as
amended or supplemented, or renewed from time to time, the "Agreement").

RECITALS

A.  Pursuant to the  Agreement,  the parties  agreed to certain  extensions  and
modifications of the Loan documents. Each capitalized term not otherwise defined
in this Amendment shall have the meaning set forth in the Agreement.

B. The following documents evidence  Borrower's  obligations to and relationship
with Bank: this Amendment,  the Agreement,  the Replacement Line of Credit Note,
the Term Note, the Credit  Agreement,  the Security  Agreements,  the Additional
Security  Agreement,  the SLC Agreement and the UCC-1.  The documents  described
above,  together  with any other  documents  executed by or among the parties in
connection with the  Liabilities,  and any and all amendments and  modifications
thereto,  are referred to  collectively  in this Agreement as "Loan  Documents".
There are no written or oral agreements  concerning or affecting the Liabilities
between  Borrower  on the one hand and Bank on the  other,  other  than the Loan
Documents. Unless otherwise defined herein, all capitalized terms shall have the
meanings assigned to them in the Loan Documents.

C. As of April 27, 1999, the outstanding principal balance under the Replacement
Line of Credit Note was  $1,619,419.75,  plus accrued and unpaid interest in the
amount of  $16,776.59,  together  with all accruing  interest,  fees,  costs and
expenses provided in the Loan Documents.

D. The  Replacement  Line of Credit Note will mature April 30, 1999 and Borrower
will not satisfy  its  obligations  to Bank  thereunder  and  Borrower is not in
compliance  with  the   profitability   covenant  set  forth  in  the  Agreement
("Designated Defaults"). Borrower acknowledges that it has received adequate and
reasonable  notice of the  Designated  Defaults from Bank, and that Bank has not
waived any of such defaults or any of its rights with respect to the  Designated
Defaults or any other breach by Borrower of the Loan Documents.

E. Because of the  existence of the  Designated  Defaults,  Bank has the current
right to exercise  any and all of its rights and  remedies  against  Borrower or
otherwise under applicable law or in equity and the other Loan Documents.

F. Borrower has requested that Bank further extend the maturity date of the Line
of Credit.  Although  Bank is under no  obligation  to do so, Bank is willing to
modify and  extend  the Line of Credit  for the  period set forth  herein on the
terms an  condition  set forth in this  Amendment.  Bank is  entering  into this
Amendment to allow Borrower  additional time to ensure the full repayment of the
Liabilities.  Borrower has assured  Bank that its  financial  position  will not
deteriorate  during the  extension  period  requested  and that  Borrower  shall
perform in accordance  with the  Replacement  Line of Credit Note, as amended by
this Amendment.


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NOW  THEREFORE,  in  consideration  of the  foregoing  and  for  other  valuable
consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,
Bank and hereby agree as follows:

1. Incorporation of Recitals.  Each of the above recitals is incorporated herein
and deemed to be the  agreement  of the Bank and  Borrower and is relied upon by
each party to this Amendment in agreeing to the terms of this Amendment.

2.  Confirmation  of  Collateral.  Borrower  hereby grants and confirms that all
obligations  of  Borrower  to Bank  are  secured  by a duly  perfected  security
interest of first priority in the Collateral.

3. Confirmation of Representations and Warranties.  Borrower hereby confirms all
representations  and  warranties  contained in the  Agreement and the other Loan
Documents and  reaffirms  all covenants set forth therein  through and including
the date of this Amendment.  Further, Borrower certifies that, as of the date of
this  Amendment,  there  exists  no  Event of  Default  as  defined  in the Loan
Documents other than the Designated Defaults,  nor any conditions,  act or event
which with the giving of notice or the passage of time or both would  constitute
an Event of Default.

4. Borrower's  Covenants.  Unless Bank otherwise  consents in writing during the
extension period provided herein, Borrower will do the following:

          (a) Comply with all  requirements  of all Loan Documents to the extent
          not inconsistent with this Agreement.

          (b) On or before May 28,  1999,  Borrower  shall obtain or cause to be
          obtained from Charter One, in form and substance satisfactory to Bank,
          a UCC-1  Termination  Statement  terminating  Charter  One's  security
          interest in  Borrower's  accounts,  as such term is defined in Charter
          One's UCC Financing Statement.

5. Conditions  Precedent.  Borrower understands that this Amendment shall not be
effective  and Bank shall have no obligation to amend the terms of the Agreement
or the other Loan  Documents  as  provided  herein  unless and until each of the
following conditions precedent has been satisfied not later than May 5, 1999, or
waived by Bank (in Bank's sole discretion):

          (a) Borrower shall have executed and delivered to Bank this Amendment.

          (b)  Borrower  shall have taken any and all actions and  executed  and
          delivered to Bank any and all documents  necessary or  appropriate  in
          Bank's sole discretion to effectuate this Amendment.

          (c) Borrower shall have reimbursed Bank for Bank's costs and expenses,
          including, without limitation, reasonable attorneys' fees and expenses
          (including the fees of Bank's inside  counsel)  incurred in connection
          with  the   negotiation   and  drafting  of  this  Amendment  and  the
          transactions contemplated hereby.

          (d) Borrower shall have paid to Bank a non-refundable extension fee in
          the amount of $25,000.00.


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6.  Waiver of  Defaults.  Subject  to all of the terms  and  conditions  of this
Amendment,  including, without limitation, the requirements of Section 5 hereof,
Bank hereby agrees to waive its default rights in connection with the Designated
Defaults,  provided, however, that this waiver is not a waiver of any subsequent
breach of the same  provision  of the  Replacement  Line of Credit Note or other
Loan Documents,  nor is it a waiver of any current or future breach of any other
provision of the Replacement  Line of Credit Note or other Loan Documents.  Bank
is not  obligated  to provide  this or any other  waiver of its default  rights.
Further,  the Bank reserves all of the rights,  powers and remedies available to
it under  applicable law or in equity and under the  Replacement  Line of Credit
Note  and  any  other  Loan  Documents  if any  subsequent  breach  of the  same
provisions or any other provision of the Replacement  Line of Credit Note or any
other Loan Document should occur.

7. Amendment of Agreement and Loan Documents.  To induce Bank to enter into this
Amendment,  Borrower  agrees that the  Agreement  and Loan  Documents are hereby
supplemented  and amended as  follows,  which  amendments  shall  supersede  and
prevail over any conflicting provisions of the Agreement and/or Loan Documents:

         (a) The date "April 30, 1999" in the  paragraph  entitled  "Termination
         Date" in  Article  One of the  Credit  Agreement  is hereby  amended to
         "August 31, 1999".

         (b)  Section  2.1.1 of the Credit  Agreement  is hereby  deleted in its
         entirety and replacement with the following:

                  "2.1.1 Line of Credit.  Subject to the terms and conditions of
                  this  Agreement  from  time to time  prior to the  Termination
                  Date, upon request by Borrower,  Bank will provide  extensions
                  of  credit  ("Line  of  Credit")  to  Borrower  in the form of
                  Advances and Letters of Credit that, in the  aggregate,  shall
                  not  exceed  at any  time  FIVE  MILLION  AND  NO/100  DOLLARS
                  ($5,000,000.00) ("Credit Limit").

                  (a)  Advances.  Provides up to the Credit  Limit in  aggregate
                  outstanding principal amounts ("Advance Sublimit") in Advances
                  to Borrower.  Each Advance shall be payable not later than the
                  Termination  Date.  Borrower  may borrow,  repay and  reborrow
                  under the Advance Sublimit,  as Borrower may elect, in minimum
                  amounts of $10,000.00 or integral multiples thereof.  Advances
                  shall be used by Borrower  for the purpose of working  capital
                  for its own operations.

                  (b) Credit Limits. If at any time and Sublimit,  or the Credit
                  Limit,  as  a  whole,  has  been  exceeded,   Borrower  shall,
                  immediately  after demand by Bank,  repay such excess,  or, as
                  Bank might specify, cash secure such excess".

Notwithstanding  any other  provisions of this  Agreement or any Loan  Document,
upon the Termination Date, all sums of interest, principal and any other amounts
owing under any Loan Documents  shall be immediately  due and payable (with Bank
also having the immediate  right to full cash  prepayment for the unpaid amounts
of all outstanding Letters of Credit) without notice of default,  presentment or
demand for  payment,  protest or notice of  nonpayment  or dishonor or any other
notices or demands.  The Loan  Documents  are hereby  modified  to reflect  

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this change in the terms of the Facilities.

8. Release.  Borrower  hereby,  for itself,  its successors,  heirs,  executors,
administrators  and assigns  (each a  "Releasing  Party" and  collectively,  the
"Releasing  Parties"),  releases,  acquits  and  forever  discharges  Bank,  its
directors, officers, employees, agents, affiliates,  successors,  administrators
and assigns ("Released Parties") of and from any and all claims, actions, causes
of action,  demands,  rights,  damages,  costs,  loss of service,  expenses  and
compensation whatsoever which any Releasing Party might have because of anything
done,  omitted to be done, or allowed to be done by any of the Released  parties
and in any way  connected  with the Loan or this  Amendment  or the  other  Loan
Documents  as of the  date of  execution  of this  Amendment,  WHETHER  KNOWN OR
UNKNOWN, FORESEEN OR UNFORESEEN,  including,  without limitation, any settlement
negotiations and any damages and the consequences thereof resulting or to result
from the  events  described,  referred  to or  inferred  hereinabove  ("Released
Matters").  Releasing  Parties  each further  agrees  never to commence,  aid or
participate  in (except to the extent  required by order or legal process issued
by a court or governmental agency of competent jurisdiction) any legal action or
other proceeding based in whole or in part upon the foregoing. In furtherance of
this  general  release,  Releasing  Parties  each  acknowledges  and  waives the
benefits of California  Civil Code Section 1542 (and all similar  ordinances and
statutory,  regulatory,  or  judicially  created  laws  or  rules  of any  other
jurisdiction), which provides:

       A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
       NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
        THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
                         HIS SETTLEMENT WITH THE DEBTOR.

Releasing  Parties each agrees that this waiver and release is an essential  and
material term of this  Amendment and that the  agreements in this  paragraph are
intended  to be in full  satisfaction  of any  alleged  injuries  or  damages in
connection  with the Released  Matters.  Releasing  Parties each  represents and
warrants  that it has not  purported  to convey,  transfer  or assign any right,
title or interest in any Released  Matter to any other person or entity and that
the foregoing  constitutes a full and complete release of the Released  Matters.
Releasing  Parties each also  understands  that this release  shall apply to all
unknown or unanticipated  results of the transactions and occurrences  described
above,  as well as those  known  and  anticipated.  Releasing  Parties  each has
consulted  with  legal  counsel  prior  to  signing  this  release,  or  had  an
opportunity  to obtain  such  counsel  and  knowingly  chose  not to do so,  and
executes  such  release  voluntarily,  with the  intention  of fully and finally
extinguishing all Released Matters.

9. Dispute  Resolution.  This  Amendment  hereby  incorporates  any  alternative
dispute  resolution  agreement  previously,  concurrently or hereafter  executed
between Borrower and Bank.

10.  Effect of  Amendment.  Bank and  Borrower  agree that  except as  expressly
provided herein, the Agreement and the other Loan Documents shall remain in full
force and effect in accordance with their  respective  terms,  without waiver or
modification.  Borrower  acknowledges  that it is  relying on no written or oral
agreement,  representation,  warranty, or understanding of any kind made by Bank
or any  employee  or agent of Bank except for the  agreements  of Bank set forth
herein or in the  Agreement  or other Loan  Documents.  This  Amendment is not a
novation,  nor is it to be construed as a release or  modification of any of the
terms,  conditions,  covenants,  waivers and releases contained in the Agreement
and the Loan Documents,  except as expressly amended herein.  This Amendment and
the Agreement shall be read together as one document.

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IN WITNESS  WHEREOF,  Bank and Borrower have  executed this  Amendment as of the
date set forth in the preamble.

"BORROWER"                                       "BANK"

EMCON, a                                         UNION BANK OF CALIFORNIA, N.A.
California corporation

By:  /s/ R. Michael Momboisse                    By:  /s/ David Jackson
     ------------------------                        ---------------------
Title:  CFO and VP - Legal                       Title:  Vice President
        ---------------------                            -----------------

By:  /s/ Eugene M. Herson
    -------------------------
Title:  CEO and President
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