SEVENTH AMENDMENT
                               TO CREDIT AGREEMENT

THIS SEVENTH  AMENDMENT TO CREDIT AGREEMENT (this "Seventh  Amendment") dated as
of August 31, 1998, is made and entered into by and between  EMCON, a California
Corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A.
("Bank"), successor in interest to the Bank of California, N.A.

                                    RECITALS:

A.       Borrower and Bank are parties to that certain  Credit  Agreement  dated
         February  29,  1996 as  amended  from time to time  (the  "Agreement"),
         pursuant to which Bank agreed to extend credit to Borrower.

B.       Borrower  is  currently  indebted  to Bank under the  Agreement  in the
         aggregate  commitment  amount  of  $14,142,856  and  Borrower  has  not
         defense,  offset or  counterclaim  against  Bank or any other person or
         entity that diminishes such indebtedness.

Now,  therefore,  in  consideration  of the  above  recitals  and of the  mutual
covenants and conditions contained herein, Borrower and Bank agree as follows:

                                   AGREEMENT:

1.       Defined Terms.  Initially  capitalized  terms used herein which are not
         otherwise  defined  shall  have the  meanings  assigned  thereto in the
         Agreement.

2.       Amendments to the Agreement.

         (a)   In ARTICLE 1 - DEFINITIONS,  "Termination Date" is amended in its
               entirety to read as follows:

                  ""Termination Date" means the earlier of (a) the date Bank may
terminate  making  Advances or extending  credit  pursuant to the rights of Bank
under  Article 7; or (b) November  30, 1998 for the Line of Credit;  or (c) June
30, 2001 for the Term Loan."

3.       Effectiveness of the Seventh  amendment.  This Seventh  Amendment shall
         become  effective as of the date hereof when, and only when, Bank shall
         have received all of the following,  in form and substance satisfactory
         to Bank:

         (a)   The  counterpart  of this  Seventh  Amendment,  duly  executed by
               Borrower;

         (b)   Such  other  documents,  instruments  or  agreements  as Bank may
               reasonably deem necessary.

4.       Ratification. Except as specifically amended hereinabove, the Agreement
         shall  remain in full  force and  effect  and is  hereby  ratified  and
         confirmed.


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5. Representations and Warranties. Borrower represents and warrants as follows:

         (a)  Each  of  the  representations  and  warranties  contained  in the
         Agreement,  as  may be amended hereby,  is hereby  reaffirmed as of the
         date hereof, each as if set forth herein:

         (b) The executive,  delivery and  performance of the Seventh  Amendment
         and any other  instruments  or  documents  in  connection  herewith are
         within Borrower's power,  have been duly authorized,  are legal,  valid
         and binding  obligations of Borrower,  and are not in conflict with the
         terms of any charter,  bylaw, or other organization  papers of Borrower
         or with any law, indenture,  agreement or undertaking to which Borrower
         is a party or by which Borrower is bound or affected;

         (c) No event has occurred and is  continuing  or would result from this
         Seventh  Amendment  which  constitutes or would  constitute an Event of
         Default under the Agreement.

6.       Governing  Law.  This Seventh  Amendment and all other  instruments  or
         documents in  connection  herewith  shall be governed by and  construed
         according to the laws of the State of California.

7.       Counterparts.  This  Seventh  Amendment  may be executed in two or more
         counterparts,  each of which  shall be  deemed an  original  and all of
         which together shall constitute one and the same instrument.


WITNESS the due execution hereof as of the date first above written.

UNION BANK OF CALIFORNIA, N.A.                    EMCON


By:  /o/ Susan Cunliffe                           By:  /o/ Eugene M. Herson
-----------------------------                     ------------------------------
Title:  Vice President                            Title:  CFO & President



                                                  By:  /o/  R. Mike Momboisse
                                                  ------------------------------
                                                  Title:  CFO and VP Legal


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<PAGE>


                                 PROMISSORY NOTE
                                   (BASE RATE)


Borrower Name:  EMCON

Borrower Address:                        Office  90161
400 SOUTH EL CAMINO REAL,  STE 1200      Loan Number  259-668-752  0002-00-0-000
SAN MATEO, CA 94402                      Maturity Date AUGUST 27, 1998
                                         Amount  $10,000,000.00

$10,000,000.00                           Date  AUGUST 27, 1998
--------------                                 ---------------

FOR VALUE RECEIVED, on NOVEMBER 30, 1998, the undersigned ("Debtor") promises to
pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated below,
the principal sum of TEN MILLION AND NO/100 Dollars ($10,000,000.00), or so much
thereof as is disbursed, together with interest on the balance of such principal
from time to time  outstanding,  at the per annum rate or rates and at the times
set forth below.

1.  INTEREST  PAYMENTS.  Debtor shall pay interest on the LAST day of each MONTH
(commencing  SEPTEMBER 30, 1998). Should interest not be paid when due, it shall
become a part of the  principal  and  bear  interest  as  herein  provided.  All
computations of interest under this note shall be made on the basis of a year of
360 days, for actual days elapsed.

         a.  BASE  INTEREST  RATE.  At  Debtor's  option,   amounts  outstanding
         hereunder  in  minimum  amounts  of at  least  $100,000.00  shall  bear
         interest  at a rate,  based on an index  selected  by Debtor,  which is
         1.50% per annum in excess of Bank's  LIBOR-Rate for the Interest Period
         selected by Debtor, acceptable to Bank.

         No Base  Interest  Rate may be changed,  altered or otherwise  modified
         until the  expiration of the Interest  Period  selected by Debtor.  The
         exercise of  interest  rate  options by Debtor  shall be as recorded in
         Bank's  records,  which  records  shall be prima facie  evidence of the
         amount  borrowed  under either  interest  option and the interest rate;
         provided,  however,  that failure of Bank to make any such  notation in
         its records shall not discharge  Debtor from it obligations to repay in
         full with interest all amounts borrowed. In no event shall any Interest
         Period extend beyond the maturity date of this note.

         To exercise this option,  Debtor may, from time to time with respect to
         principal  outstanding  on which a Base  Interest Rate is not accruing,
         and on the expiration of any Interest  Period with respect to principal
         outstanding  on which a Base Interest Rate has been accruing  select an
         index  offered by Bank for a Base  Interest  Rate Loan and an  Interest
         Period by telephing an  authorized  lending  officer of Bank located at
         the banking office identified below prior to 10:00 a.m.,  Pacific time,
         on any Business Day and  advising  that officer of the selected  index,
         the  Interest   Period  and  the   Origination   Date  selected  (which
         Origination   Date,  for  a  Base  Interest  Rate  Loan  based  on  the
         LIBOR-Rate, shall follow the date of such selection by no more than two
         (2) Business Days).

         Bank will mail a written  confirmation of the terms of the selection to
         Debor  promptly  after  the  selection  is made.  Failure  to send such
         confirmation shall not affect Bank's rights to collect interest at athe
         rate selected. If, on the date of the selection,  the index selected is
         unavailable for any reason,  the selection shall be void. Bank reserves
         the   right  to  fund  the   principal   from  any   source   of  funds
         notwithstanding any Base Interst Rate selected by Debtor.

         b. VARIABLE INTEREST RATE. All principal outstanding hereunder which is
         not bearing  interest at a Base  Interest Rate shall bear interest at a
         rate per annum of equal to the Reference Rate, which rate shall vary as
         and when the Reference Rate changes.

         At any  time  piror  to the  maturity  of  this  note,  subject  to the
         provisions  of  paragraph  4, below,  of this note,  Debtor may borrow,
         repay and reborrow  hereon so long as the total  outstanding at any one
         time does not exceed the principal amount of this note. Debor shall pay
         any amounts due under this note in lawful money of the United States at
         Bank's SAN MATEO COMMERCIAL BANKING Office, or such other office as may
         be designated by Bank, from time to time.

2.       LATE PAYMENTS.  If any payment required by the terms of this note shall
         remain unpaid ten days after same is due, at the option of Bank, Debtor
         shall pay a fee of $100 to Bank.

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<PAGE>
3.       INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option
         of Bank, and, to the extend permitted by law, interest shall be payable
         on the outstanding principal under this n ote at a per annum rate equal
         to five  percent  (5%) in  excess of the  interest  rate  specified  in
         paragraph  1.b.,  above,  calculated  fromthe date of default until all
         amounts payable under this note are paid in full.

4.       PREPAYMENT.

         a. Amounts outstanding under this note bearing interest at a rate based
         on the  Reference  Rate may be prepaid in whole or in part at any time,
         without penalty or premium. Debtor may prepay amounts outstanding under
         this note bearing  interest at a Base Interest Rate in whole or in part
         provided  Debtor  has given Bank not less than five (5)  Business  Days
         prior  writtennotice of Debtor's  intention to make such prepayment and
         pays to Bank the liquidated damages due as a result. Liquidated Damages
         shall  also  be  paid,  if  Bank,  for  any  other  reason,   including
         acceleration or  foreclosure,  receives all or any portion of principal
         bearin interest at a Base Interest Rate prior to its scheduled  payment
         date.  Liquiedate Damages shall be an amount equal to the present value
         of the product of: (i) the  difference  (but not less than zero) betwen
         (a) the Base Interest Rate applicable to the principal  amount which is
         being  prepaid,  and (b) the return  which Bank could obtain if it used
         the amount of such  prepayment  of  principal  to purchase at bid price
         regularly  quoted  securities  issued  by the  United  State  having  a
         maturity  date most  closely  coinciding  with the  relevant  Base Rate
         Maturity Date and such  securities were held by Bank until the relevant
         Base Rate Maturity Date ("Yield Rate"); (ii) a fraction,  the numerator
         of  which  is the  number  of days in the  period  between  the date of
         prepayment and the relevant Base Rate Maturity Date and the denominator
         of which is 360;  and (iii)  the  amount of the  principal  so  prepaid
         (except in the event that  principal  payments are scheduled  under the
         terms of the Base  Interest  Rate Loan  being  prepaid,  then an amount
         equal to the lesser of (A) the amount  prepaid or (B) 50% of the sum of
         (1) the amount prepaid and (2) the amount of principal  scheduled under
         the  terms  of  the  Base  Interest  Rate  Loan  being  prepaid  to  be
         outstanding  at the relevant  Base Rate Maturity  Date).  Present value
         under  this note is  determined  by  discounting  the aboe  product  to
         present value using the Yield Rate as the annual discount factor.

         b. In no event shall Bank be obligated to make any payment or refund to
         Debtor,  nor shall  Debtor be  entitled  to any  setoff or other  claim
         against  bank,  should the return  which Bank could  obtain  under this
         prepayment formula exceed the interest that Bank would have received if
         no prepayment had occurred.  All  prepayments  shall include payment of
         accrued interst on the principal amount so prepaid and shall be applied
         to payment of interest before application to principal. A determination
         by Bank as to the prepayment fee amount, if any, shall be conclusive.

         c. Bank shall  provide  Debtor a  statement  of the  amount  payable on
         account of prepayment.  Debtor  ackowledges that (i) Bank establishes a
         Base  Interest  Rate upon the  understanding  that it apply to the Base
         Interest  Rate  Loan  for the  entire  Interest  Period,  and  (ii) any
         prepaymen tmay result in Bank incurring  additional costs,  expenses or
         liabilities;  and Debtor agrees to pay these  liquiedated  damages as a
         reasonable  estimate of the costs,  expenses  and  liabilities  of Bank
         associated with such prepayment.

5.       DEFAULT AND  ACCELERATION  OF TIME FOR PAYMENT.  Default shall include,
         but not be limited to, any of the following:  (a) the failure of Debtor
         to make any payment  required under this note when due; (b) any breach,
         misrepresentation  or other default by Debtor, any guarantor,  co-maker
         endorser,  or any person or entity other than Debtor providing security
         for this note (hereinafter individually and collectively referred to as
         the  "Obligor")  under  any  security  oagreement,  guaranty  or  other
         agreement  between  Bank and any  obligor;  (c) the  insolvency  of any
         Obligor or the failure of any Obligor  generally to pay such  Obligor's
         debts as such debts become due; (d) the  commencement as to any Obligor
         of any voluntary or involuntary  proceeding  under any laws relating to
         bankruptcy, insolvency, reorganization, arrangement, debt adjustment or
         debtor  relief;  (e) the  assignment  by any Obligor for the benefit of
         such Obligor's creditors;  (f) the appointment,  or commencement of any
         proceeding  for the  appointment of a receiver,  trustee,  custodian or
         similar  official  for  all  or  substantially  all  of  any  Obligor's
         property; (g) the commencement of any proceeding for the dissolution or
         liquidation of any Obligor;  (h) the  termination of existence or death
         of any Obligor;  (i) the  revocation  of any guaranty or  subordination
         agreement  given in connection  with this note;  (j) the failure of any
         Obligor to comply with any order, judgement,  injunction,  decree, writ
         or demand of any court or other  public  authority;  (k) the  filing or
         recording against any Obligor,  or the property of any Obligor,  of any
         notice or levy,  notice to withhold,  or other legal  process for tazes
         other than property  tazes;  (l) the default by any obligor  personally
         liable for amonts  owed  hereunder  on any  obligation  concerning  the
         borrowing  of money;  (m) the  issuance  against  any  Obligor,  or the
         property of any Obligor, of any writ of attachment, execution, or other
         judicial lien; or (n) the  deterioration of the financial  condition of
         any  Obligor  which  results  in Bank  deeming  itself  in good  faith,
         insecure.  Upon  the  occurrence  of any  such  default,  Bank,  in its
         discretion, may cease to advance funds hereunder and may declare
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<PAGE>


         all obligations  under this note  immediately due and payble;  however,
         upon the  occurrence  of an event of  default  under d, e, f, or g, all
         principal and interest shall  automatically  become immediately due and
         payable.

6.       ADDITIONAL  AGREEMENTS OF DEBTOR.  If any amounts owing under this note
         are not paid when due,  Debtor  promises to pay all costs and expenses,
         including   reasonable   attorneys'  fees,  incurred  by  Bank  in  the
         collection  or  enforcement  of this note.  Debtor and any endorsers of
         this note for the maximum period of time and the full extent  permitted
         by  law,  (a)  waive  diligence,   presentment,   demand,   notice  oof
         nonpayment,  protest,  notice of protest, and notice of every kind; (b)
         waive the right to assert the defense of any statute of  limitations to
         any debt or  obligation  hereunder;  and (c)  consent to  renewals  and
         extensions  of time for the payment of any amounts due under this note.
         If this  note is  signed  by more  than one  party,  the term  "Debtor"
         includes  each  of the  undersigned  and  any  successors  in  interest
         thereof; all of whose liability shall be joint and several. Any married
         person who signs this note agrees that  recourse may be had against the
         separate  property of that person for any  obligations  hereunder.  The
         receipt of any check or other item of payment by Bank,  at its  option,
         shall not be  considered a payment on account until such check or other
         item of payment is honored  when  presented  for  payment at the drawee
         bank.  Bank may delay the  credit of such  payment  based  upon  Bank's
         schedule  of funds  availablity,  and  interest  under  this note shall
         accrue  until the funds are deemed  collected.  In any  action  brought
         under or arising out of this note,  Debtor and any  Obligor,  including
         their  successors and assigns,  hereby consent to the  jurisdication of
         any competent court within the State of California,  as provided in any
         alternative  dispute  resolution  agreement executed between Debtor and
         Bank, and consent to service of process by any means authorized by said
         state's law. The term "Bank" includes,  without limitation,  any holder
         of this  note.  This note shall be  construed  in  accordance  with and
         governed  by the laws of the  State of  California.  This  note  hereby
         incorporates any alternative dispute resolution  agreement  previously,
         concurrently or hereafter executed between Debtor and Bank.

7.       DEFINITIONS.  As used  herein,  the  following  terms  shall  have  the
         meanings  respectively  set forth below:  "Base  Interest Rate" means a
         rate of interest  based on the  LIBOR-Rate.  "Base  Interest Rate Loan"
         means amounts  outstanding under this note that bear interest at a Base
         Interest  Rate.  "Base Rate  Maturity  Date"  means the last day of the
         Interest  Period with  respect to  principal  outstanding  under a Base
         Interest  Rate Loan.  "Business  Day" means a day on which Bank is open
         for business for the funding of corporate  loans,  and, with respect to
         the rate of interest based on the LIBOR Rate, on which dealings in U.S.
         dollar deposits outside of the United States may be carried on by Bank.
         "Interest  Period"  means with respect to funds  bearing  interest at a
         rate based on the LIBOR Rate, any calendar period of one,  three,  six,
         nine or twelve months. In determining an Interest Period, a month means
         a period  that  starts on one  Business  Day in a month and ends on and
         includes the day preceding thenumerically corresponding day in the next
         month.   For  any  month  in  which   there  is  no  such   numerically
         corresponding  day, then as to that month,  such day shall be deemed to
         be the last calendar day of such month. Any Interest Period which would
         otherwise  an on a  non-Business  Day shall end on the next  succeeding
         Business  Day unless  that is the first day of a month,  in which event
         such  Interest  Period  shall end onthe next  preceding  Business  Day.
         "LIBOR  Rate" means a per annum rate of interest  (rounded  upward,  if
         necessary,  to the nearest  1/100 of 1%) at whcih dollar  deposits,  in
         immediately  available  funds and in lawful  money of the United  Sates
         would be offered  to Bank,  outside  of the  United  Sates,  for a term
         coinciding  with the  Interest  Period  delected  by Debtor  and for an
         amount  equal to the amount of principal  covered by Debtors'  interest
         rate  selection,  plus Bank's costs,  including  the costs,  if any, of
         reserve  requirements.  "Origination  Date"  means the first day of the
         Interest Period. "reference Rate" means the rate announced by Bank from
         time to time at its corporate  headquarters  as its Reference Rate. The
         Reference Rate is an index rate determined by Bank from time to time as
         a means of pricing certain extensions of credit and is neither directly
         tied to any  external  rate of  interest or index nor  necessarily  the
         lowest  rate of interest  or index nor  necessarily  the lowest rate of
         interest charged by Bank at any given time.

EMCON

By:  /o/  Eugene M. Herson
     -----------------------------
Title:  CFO and President

By:  /o/ R. Michael Momboisse
     -----------------------------
Title:  CFO and VP Legal

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