STERILE RECOVERIES INC
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>3
<FILENAME>0003.txt
<TEXT>


                                  EXHIBIT 10.38
           FIRST AMENDMENT TO PLEDGE AGREEMENT AND SECURITY AGREEMENT

         THIS FIRST AMENDMENT TO PLEDGE AGREEMENT AND SECURITY AGREEMENT (this
"AMENDMENT"), dated as of June 27, 2000, is by and among STERILE RECOVERIES,
INC., a Florida corporation (the "BORROWER"), certain Subsidiaries of the
Borrower identified on the signature pages hereto (each a "GUARANTOR", and
collectively, the "GUARANTORS"), the Lenders identified on the signature pages
hereto (the "LENDERS") and FIRST UNION NATIONAL BANK, in its capacity as
collateral agent for the Lenders and the ELLF Lender (the "AGENT").

                              W I T N E S S E T H:

         WHEREAS, the Lenders and the ELLF Lender have each required that the
Obligors secure their obligations to the Lenders and the ELLF Lender,
respectively in accordance with the terms of the Security Agreement and the
Pledge Agreement;

         WHEREAS, the parties hereto have agreed to amend the Security Agreement
and Pledge Agreement as set forth herein;

         NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereby agree as follows:

                                     PART I
                                   DEFINITIONS

                  SUBPART 1.1. CERTAIN DEFINITIONS. Unless otherwise defined
         herein or the context otherwise requires, the following terms used in
         this Amendment, including its preamble and recitals, have the following
         meanings:

                            "EFFECTIVE DATE" is defined in SUBPART 4.1.

                  SUBPART 1.2. OTHER DEFINITIONS. Unless otherwise defined
         herein or the context otherwise requires, terms used in this Amendment,
         including its preamble and recitals, have the meanings provided in the
         Security Agreement or Pledge Agreement, as applicable.

<PAGE>

                                     PART II
                         AMENDMENTS TO PLEDGE AGREEMENT

         Effective on (and subject to the occurrence of) the Effective Date, the
Pledge Agreement is hereby amended in accordance with this Part II. Except as so
amended, the Pledge Agreement shall continue in full force and effect.

                  SUBPART 2.1. SECURED OBLIGATIONS. Clause (a) of the definition
         of Secured Obligations in Section 1 of the Pledge Agreement is amended
         and restated in its entirety to read as follows:

                           "SECURED OBLIGATIONS":  means a collective reference
                           to the following:

                           (a) All unpaid principal of and interest on the Loans
                  (as defined in the Credit Agreement), all LOC Obligations (as
                  defined in the Credit Agreement) and all other obligations and
                  liabilities of the Pledgors to the Credit Agreement Agent and
                  the Lenders (including, without limitation, interest accruing
                  at the then applicable rate provided in the Credit Agreement
                  after the maturity of the Loans and interest accruing at the
                  then applicable rate provided in the Credit Agreement after
                  the filing of any petition in bankruptcy, or the commencement
                  of any insolvency, reorganization or like proceeding, relating
                  to any Pledgor, whether or not a claim for post-filing or
                  post-petition interest is allowed in such proceeding), whether
                  direct or indirect, absolute or contingent, due or to become
                  due, now existing or hereafter incurred, which may arise
                  under, out of, or in connection with, the Credit Agreement,
                  any notes issued thereunder, any Hedging Agreement with a
                  Lender or an affiliate of a Lender to the extent permitted
                  under the Credit Agreement or any other document made,
                  delivered or given in connection therewith, whether on account
                  of principal, interest, reimbursement obligations, fees,
                  indemnities, costs, expenses or otherwise (including, without
                  limitation, all fees and disbursements of counsel to the
                  Credit Agreement Agent or the Lenders that are required to be
                  paid by the Pledgors pursuant to the terms of the Credit
                  Agreement, any other Credit Document or any Hedging Agreement
                  with a Lender or an affiliate of a Lender to the extent
                  permitted under the Credit Agreement);

                  SUBPART 2.2. APPLICATION OF PROCEEDS. Section 10 of the Pledge
         Agreement is amended and restated in its entirety to read as follows:

                  10. APPLICATION OF PROCEEDS. Upon the occurrence of and during
         the continuance of an Event of Default, the Proceeds and avails of the
         Pledged Collateral at any time received by the Agent shall, when
         received by the Agent in cash or its equivalent, be applied as follows:
         FIRST, to all reasonable costs and expenses of the Agent (including
         without limitation, reasonable attorneys' fees and expenses) incurred
         in connection with the implementation and/or enforcement

<PAGE>

         of this Pledge Agreement; SECOND, to the payment of any fees owed to
         the Credit Agreement Agent; THIRD, to all costs and expenses of the
         Lenders (including without limitation reasonable attorneys' fees and
         expenses of a single counsel for the Lenders) incurred in connection
         with the implementation and/or enforcement of this Pledge Agreement
         and/or any of the other Credit Documents; FOURTH, to the Lenders,
         ratably, in accordance with the respective amounts of the Secured
         Obligations constituting the then aggregate unpaid principal amount of
         the Loans, together with all accrued and unpaid interest thereon at
         such time and LOC Obligations; FIFTH, to all other amounts payable to
         the Lenders with respect to the Secured Obligations; SIXTH, to the
         payment of any fees owed to the ELLF Lender; SEVENTH, to all costs and
         expenses of the ELLF Lenders (including without limitation reasonable
         attorneys' fees and expenses) incurred in connection with the
         implementation and/or enforcement of this Pledge Agreement and/or any
         of the Operative Agreements; EIGHT, to the ELLF Lender, ratably, in
         accordance with the respective amounts of the Secured Obligations
         constituting the then aggregate unpaid principal amount and/or advanced
         amounts owing pursuant to the ELLF Documents together with all accrued
         and unpaid interest and/or yield thereon at such time; NINTH, to all
         other amounts payable to the ELLF Lender with respect to the Secured
         Obligations; and TENTH, to the payment of the surplus, if any, to
         whoever may be lawfully entitled to receive such surplus. The Pledgors
         shall remain liable to the Agent and the Secured Parties on a joint and
         several basis for any deficiency.

                                    PART III
                        AMENDMENTS TO SECURITY AGREEMENT

         Effective on (and subject to the occurrence of) the Effective Date, the
Security Agreement is hereby amended in accordance with this Part III. Except as
so amended, the Security Agreement shall continue in full force and effect.

                  SUBPART 2.1. SECURED OBLIGATIONS. Clause (a) of the definition
         of Secured Obligations in Section 1 of the Security Agreement is
         amended and restated in its entirety to read as follows:

                           "SECURED OBLIGATIONS":  means a collective reference
                           to the following:

                           (a) All unpaid principal of and interest on the Loans
                  (as defined in the Credit Agreement), all LOC Obligations (as
                  defined in the Credit Agreement) and all other obligations and
                  liabilities of the Obligors to the Credit Agreement Agent and
                  the Lenders (including, without limitation, interest accruing
                  at the then applicable rate provided in the Credit Agreement
                  after the maturity of the Loans and interest accruing at the
                  then applicable rate provided in the Credit Agreement

<PAGE>

                  after the filing of any petition in bankruptcy, or the
                  commencement of any insolvency, reorganization or like
                  proceeding, relating to any Obligor, whether or not a claim
                  for post-filing or post-petition interest is allowed in such
                  proceeding), whether direct or indirect, absolute or
                  contingent, due or to become due, now existing or hereafter
                  incurred, which may arise under, out of, or in connection
                  with, the Credit Agreement, any notes issued thereunder, any
                  Hedging Agreement with a Lender or an affiliate of a Lender to
                  the extent permitted under the Credit Agreement or any other
                  document made, delivered or given in connection therewith,
                  whether on account of principal, interest, reimbursement
                  obligations, fees, indemnities, costs, expenses or otherwise
                  (including, without limitation, all fees and disbursements of
                  counsel to the Credit Agreement Agent or the Lenders that are
                  required to be paid by the Obligors pursuant to the terms of
                  the Credit Agreement, any other Credit Document or any Hedging
                  Agreement with a Lender or an affiliate of a Lender to the
                  extent permitted under the Credit Agreement);

                  SUBPART 2.2. SECTION 2. The last sentence of Section 2 of the
         Security Agreement is amended and restated in its entirety to read as
         follows:

Notwithstanding anything to the contrary herein, the Obligors and the Agent, on
behalf of the Secured Parties, hereby acknowledge and agree that (i) the
security interest created hereby in the Collateral (a) constitutes continuing
collateral security for all of the Secured Obligations, whether now existing or
hereafter arising and (b) is not to be construed as an assignment in the nature
of a sale of any Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks or Trademark Licenses and (ii) the Collateral shall not include any
Trust Property (as such term is defined in Security Agreement (as defined in
Appendix A of the Participation Agreement)).

                  SUBPART 2.3. APPLICATION OF PROCEEDS. Section 11 of the
         Security Agreement is amended and restated in its entirety to read as
         follows:

                           11. APPLICATION OF PROCEEDS. Upon the occurrence of
                  and during the continuance of an Event of Default, the
                  Proceeds and avails of the Collateral at any time received by
                  the Agent shall, when received by the Agent in cash or its
                  equivalent, be applied as follows: first, to all reasonable
                  costs and expenses of the Agent (including without limitation,
                  reasonable attorneys' fees and expenses) incurred in
                  connection with the implementation and/or enforcement of this
                  Security Agreement; SECOND, to the payment of any fees owed to
                  the Credit Agreement Agent; THIRD, to all costs and expenses
                  of the Lenders (including without limitation reasonable
                  attorneys' fees and expenses of a single counsel for the
                  Lenders) incurred in connection with the implementation and/or
                  enforcement of this Security Agreement and/or any of the other
                  Credit Documents; FOURTH, to the Lenders, ratably, in
                  accordance with the respective amounts of the Secured
                  Obligations constituting the then aggregate unpaid principal
                  amount of the Loans, together with all accrued and unpaid
                  interest thereon at such time and LOC

<PAGE>

                  Obligations; FIFTH, to all other amounts payable to the
                  Lenders with respect to the Secured Obligations; SIXTH, to the
                  payment of any fees owed to the ELLF Lender; SEVENTH, to all
                  costs and expenses of the ELLF Lenders (including without
                  limitation reasonable attorneys' fees and expenses) incurred
                  in connection with the implementation and/or enforcement of
                  this Security Agreement and/or any of the Operative
                  Agreements; EIGHT, to the ELLF Lender, ratably, in accordance
                  with the respective amounts of the Secured Obligations
                  constituting the then aggregate unpaid principal amount and/or
                  advanced amounts owing pursuant to the ELLF Documents together
                  with all accrued and unpaid interest and/or yield thereon at
                  such time; NINTH, to all other amounts payable to the ELLF
                  Lender with respect to the Secured Obligations; and TENTH, to
                  the payment of the surplus, if any, to whoever may be lawfully
                  entitled to receive such surplus. The Obligors shall remain
                  liable to the Agent and the Secured Parties on a joint and
                  several basis for any deficiency.

                                                      PART IV
                                             CONDITIONS TO EFFECTIVENESS

                  SUBPART 4.1. EFFECTIVE DATE. This Amendment shall be and
         become effective as of the date hereof (the "EFFECTIVE DATE") when all
         of the conditions set forth in this PART IV shall have been satisfied.

                  SUBPART 4.2. EXECUTION OF COUNTERPARTS OF AMENDMENT. The Agent
         shall have received counterparts (or other evidence of execution,
         including telephonic message, satisfactory to the Agent) of this
         Amendment, which collectively shall have been duly executed on behalf
         of each of the Borrower, the Guarantors, the Agent and the Required
         Lenders.

                                     PART V
                                  MISCELLANEOUS

                  SUBPART 5.1. CROSS-REFERENCES. References in this Amendment to
         any Part or Subpart are, unless otherwise specified, to such Part or
         Subpart of this Amendment.

                  SUBPART 5.2. ACKNOWLEDGMENT. The Guarantors (i) acknowledge
         and consent to all of the terms and conditions of this Amendment, (ii)
         affirm all of their obligations under the Pledge Agreement and Security
         Agreement and (iii) agree that this Amendment and all documents
         executed in connection herewith do not operate to reduce or discharge
         the Guarantors' obligations under the Credit Documents or the ELLF
         Documents.

<PAGE>

                  SUBPART 5.3. COUNTERPARTS. This Amendment may be executed by
         the parties hereto in several counterparts, each of which shall be
         deemed to be an original and all of which shall constitute together but
         one and the same agreement.

                  SUBPART 5.4. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO
         BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
         OF FLORIDA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
         THEREOF.

                  SUBPART 5.5. SUCCESSORS AND ASSIGNS. This Amendment shall be
         binding upon and inure to the benefit of the parties hereto and their
         respective successors and assigns.


Each of the parties hereto has caused a counterpart of this Amendment to be duly
executed and delivered as of the date first above written.

BORROWER:                                   STERILE RECOVERIES, INC.,
                                            a Florida corporation

                                            By: /s/ D. JON MCGUIRE
                                                ----------------------------
                                            Name: D. Jon McGuire
                                                  --------------------------
                                            Title: Vice President
                                                   -------------------------


GUARANTOR:                                  REPAK SURGICAL ENTERPRISES, INC.,
                                            an Ohio corporation

                                            By: /s/ D. JON MCGUIRE
                                                ----------------------------
                                            Name: D. Jon McGuire
                                                  --------------------------
                                            Title: Vice President
                                                   -------------------------


AGENT:                                      FIRST UNION NATIONAL BANK

                                            individually in its capacity as
                                            a Lender and in its
                                            capacity as Agent

                                            By: /s/ JOYCE BARRY
                                                ----------------------------
                                            Name: Joyce Barry
                                                  --------------------------
                                            Title: SVP
                                                   -------------------------

<PAGE>

Consented to as of the date hereof:         FIRST UNION NATIONAL BANK,
                                            in its capacity as ELLF Lender

                                            By: /s/ JOYCE BARRY
                                                ----------------------------
                                            Name: Joyce Barry
                                                  --------------------------
                                            Title: SVP
                                                   -------------------------
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